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Greek Core Banks Remained Profitable-EUROXX

Q3’20 Results Review: NII & Core PPI Proved Broadly Resilient, Benefited By Lower Funding Costs and Increased Loan Disbursements.

In Q3’20, Alpha Bank posted profit from continued ops before taxes of €76m (Exx at €71m) vs. profits of €74m in Q2’20 on higher fees and lower impairments which offset the lower NII and weaker trading income

Eurobankreported Q3’20 profit from continued ops of €172m (Exx at €122m) compared to €66m in Q2’20, reflecting mainly higher non-core banking Income (above Exx estimates) which offset the lower NII due to the interest income lost post the completion of Cairo transaction. Should we account for the VRS costs, bottom line landed at €85m vs. losses of €1,223m in Q2’20 due to the negative impact from the Cairo project (c€1.3bn). 

NBG reported profits after tax from continuing operations of €137m (Exx at €113m) in Q3’20 vs. profit of €58m in Q2’20 on higher Core and Non- Core Income; Results slightly above our call on higher-than-expected NII. Should we account for discontinued ops and LEPETE costs, bottom line landed at €101m (Exx at €104m) vs. €56m in Q2’20.

Piraeus reported profits before tax of €82m vs. profit of €125m in previous quarter slightly higher than our call, mainly on higher-than-expected NII and Non-core income while bottom line was below our call due to higher-than-expected tax expenses.

Overall, Q3’20 results reflected:

  • Mixed NII trends with increasing figures for NBG (+11.7% q-o-q) and Piraeus Bank (+3.5% q-o-q) driven by the expansion of the performing loan book, as well as by the funding benefits from the increased TLTRO exposure and the repricing of time deposits, while in the case of Alpha Bank (-2.3% q-o-q) and Eurobank (-11.7% q-o-q) the lower average performing book and the deconsolidation of Cairo, respectively, weighed on NII. Higher q-o-q fee income generation for all banks driven by higher fee generation from cards, bancassurance and asset management following a weak Q2’20 due to the lockdown. Mixed OpEx trends with inflated figures for Piraeus Bank (+3% q-o-q) and Alpha Bank (+4% q-o-q) driven mainly by higher G&As, while NBG and Eurobank posted almost flattish numbers .As a result, Core PPI increased q-o-q for NBG and Piraeus by 31.0% and 2.0%, respectively, mainly on higher Core Income. Conversely, Alpha/NBG recorded deteriorating Core PPI by 3%/5% q-o-q. Higher Impairments on loans for all banks by 3%-7% q-o-q (except from Alpha Bank -35.3% q-o-q), while CoR (over average net loans) shaped at 1.0-1.7% (Alpha at the high-end) with Underlying CoR (excl. Covid-19 impact) at 0.90-1.31%.
  • Expanded Gross Loans by c0.4-0.8% q-o-q for all Greek banks aided by State Schemes. All core banks recorded deposit inflows of €0.4-1.4bn in Greece and Eurosystem funding reached €39.4bn in Sept’20 (c14.2% of assets vs. c13.7% in Q2’20) benefited by the ECB’s TLTRO facility and ECB’s waiver to accept GGBs as collateral in Eurosystem credit operations.
  • Moreover, all banks managed to reduce the stock of NPEs q-o-q on organic negative formation, benefited also by the EBA Guidelines on loan moratoria that clarify that generalised payment delays due to public or industry-wide moratoria do not lead to an automatic classification of exposures as defaulted, forborne or unlikely to pay (extended to March’21 in order for the banks to handle the 2nd wave of Covid-19). It is worth noting here that the total loans moratoria are shaped at €20.7bn in Oct’20.
  • Finally, CET1 settled at 13.2-17.2% in Q3’20 while on B3FL basis, CET1 ratio settled at 11.2-14.6%, well above the CET1 requirements for 2020.

CC Highlights – Alpha Bank: The management guided for flattish NII in FY’20e, fees to decline by 2% y-o-y and recurring OpEx at -4% leading to a Core PPI of €860m (+2% y-o-y). The management also stressed that it expects c€1.2bn NPEs total inflows in 2021e and a CoR up to 1.3% in 2020e with 87% of expired moratoria at performing status, while Galaxy Project is expected to be completed by Q1’21e. 

Eurobank: The bank gave guidance for 2020e for a low single- digit NII reduction (c-3% y-o-y) with fees up by a mid to high single digit and OpEx down by c3% – 4% y-o-y leading to a Core PPI of c€840m. CoR is seen at c150bps while the coverage ratio will return to 55% within the next year. The management also stressed that sees NPE ratio at 14%/15.5% in 2020e/21e. 

NBG: the management said that the expected gross NPEs inflows from the pool of moratoria (active moratoria loans at €3.6bn and a default range at c15%-20%) is estimated at c€1bn with net inflows at c€0.5bn post curings and liquidations etc. 

Piraeus: Both securitisations on progress aiming to be completed by Q1’21e, while CoCos conversion will lead HFSF stake to 61.3% from its current level of 26.4%. Piraeus finally presented additional capital actions which would facilitate an incremental €5bn NPE derecognition in 2021e while NPE inflows from active moratoria loans are estimated at c€1bn.

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