Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- National Bank of Greece SA (NBGPRA.PFD, Financial) reported a strong first-half group core profit after tax of EUR646 million, up 27% year on year.
- The bank's CET1 ratio increased by 100 basis points year to date, reaching 18.3%, which is significantly above the internal target of 14%.
- Loan disbursements reached a multiyear record quarterly high of EUR2.8 billion in the second quarter, indicating strong credit expansion.
- Net interest income (NII) showed resilience, with a 15% year-on-year increase, supported by strong credit growth and a favorable deposit mix.
- Moody's upgraded the senior rating of National Bank of Greece SA by two notches, now standing one notch above investment grade, reflecting the bank's strong financial performance.
Negative Points
- The normalization of net interest income (NII) continued at a pace similar to the first quarter, with a 3% quarter-on-quarter decline.
- The bank faces challenges from hedging costs and the full cost of MREL issuances, which impacted NII negatively.
- Despite strong loan growth, the corporate loan book's expansion is described as 'choppy,' indicating potential volatility in future loan disbursements.
- The bank's cost of risk, although declining, remains a concern at 55 basis points, with little new gross formation.
- There is uncertainty regarding the approval of potential buybacks by the regulator, which could impact capital allocation strategies.
Q & A Highlights
Q: How do you see the pipeline for performing loans in the second half of the year, and are there any updates on capital allocation, including potential buybacks?
A: Pavlos Mylonas, CEO, explained that the corporate loan book is the key driver of loan expansion, which can be choppy. The guidance has been upgraded significantly, and more details will be provided at the end of the year. Regarding capital allocation, there are no major changes, and buybacks would need regulatory approval. The bank is accruing for a 40% payout for 2025, and discussions with regulators about buybacks will continue.
Q: Can you elaborate on the dynamics driving NII profitability in the second half, including loan spreads and deposit betas?
A: Christos Christodoulou, CFO, stated that base rates are coming down slower than expected, providing a tailwind for NII. The deposit mix is better than anticipated, with core deposits at 79%, and deposit betas have stabilized at 50%. Strong credit expansion and optimized MREL costs also support NII. The hedging strategy remains dynamic, with about EUR10 billion of hedges on demand deposits.
Q: Given the excess capital, could dividend payouts increase beyond 50% by 2026, and are there any plans for buybacks or inorganic growth?
A: Pavlos Mylonas, CEO, mentioned the strategy is to gradually increase shareholder remuneration to European levels, around 70%, with a mix of dividends and buybacks. There are no regulatory hurdles currently, and the bank is open to inorganic opportunities that create shareholder value.
Q: What is the sensitivity of NII to lower Euribor rates, and what deposit beta is assumed for this year?
A: Christos Christodoulou, CFO, noted that a 25 basis point reduction in rates would impact NII by EUR30 million to EUR35 million annually. The deposit beta is expected to remain around 50% for the rest of the year, with less pressure on time deposits as benchmark rates decrease.
Q: How will headcount and branch numbers evolve in 2024 and 2025, and what impact will this have on operating costs?
A: Pavlos Mylonas, CEO, indicated that headcount has been reduced by about 40% over the past few years, nearing desired levels. Future focus will be on retraining and rejuvenation, particularly in digital banking and IT. Operating costs will remain broadly flat, with wage increases being a more significant factor.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
