By Alexia Sotiriou

 

 

Greek banks are gathering strong investment interest at the Bank of America's three-day conference held in London, which confirms the full recovery of the domestic sector – as reflected in their successive upgrades by international rating agencies.

 

In the three-day event entitled “29th Annual Financials CEO Conference” organized by the American giant with the participation of CEOs from the European financial sector, three of the four Greek systemic banks participate: Eurobank, Piraeus Bank and Alpha Bank.

 

The reason why National Bank does not participate is the divestment process that is underway this week and next week by the HFSF, placing restrictions on the information that management can share with the investment community.

Where attention is focused

 

Each bank has scheduled more than 30 meetings with important “players” of the international capital market, including Fidelity, Pimco, Goldman Sachs, Pictet, UBS, etc. High-ranking banking executives who participate in the meetings with the international funds conveyed to “Naftemporiki” the particularly positive climate that prevails for the sector in the wake of the strong rebound they have recorded in the last three years. Analysts’ interest, however, is focused on the following areas:

 

Credit expansion: Maintaining the organic profitability of domestic banks is the Supervisor’s biggest concern now that the consolidation of their loan portfolios has been concluded. As competent sources pointed out to “Naftemporiki”, credit expansion will depend on whether the sector will be able to compensate for the loss of income due to the reduction in ECB interest rates in the next period.

 

In the first half of the year, the domestic sector – including non-systemic institutions – recorded a net credit expansion of 4.5 billion euros, while the target is to reach 1.5 billion euros each by the end of 2024. However, there is optimism that these goals will be exceeded, with Piraeus Bank having already revised the goal of annual credit expansion to 2 billion euros against 1.7 billion euros previously.

 

Sustainability of profitability: The monetary easing in the Eurozone since last June – and which is expected to continue in the medium term – raises questions about the sustainability of the organic profitability model of Greek banks. The record gains of the past two and a half years are largely due to the widening interest rate gap as a result of monetary tightening. Even after the two interest rate reductions by the ECB, the Greek banks maintain very high interest rate margins and the question raised by the funds is how much this dynamic can continue.

 

Dividend policy: The restoration of dividends in the banking industry after 16 consecutive years is another item in the agenda of international analysts. The question concerns the next year targets, both in terms of cash dividend distribution and how it will be combined with other shareholder reward programs, such as share buybacks. Credit institutions have announced the distribution of a dividend of 40%-50% on the profits of 2024 (subject to supervisory approval), while the target rises to 50% in 2025.

 

Deferred tax: The issue of asset quality is firmly under the microscope of funds as the rate exceeds 60% overall in the domestic industry. What analysts reportedly wanted to know is whether DTC’s decline will accelerate in the coming years.