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Euroxx / Greek Banking Sector – Q1’21 Results Comment

Q1’21 Results: Improved Core PPI q-o-q For All Banks; NPE Reduction Targets is Well on Track; NPE Inflows From Moratoria Loans Less Than Initially Expected; Greek Banks Poised to Turn The Corner

Q1’21 Results: Core PPI increased q-o-q for all banks, mainly on lower OpEx offsetting the headwinds on NII. In Q1’21, 

Alpha Bank posted a resilient core PPI performance, up 16.0% q-o-q while bottom line was burdened by upsized NPE portfolio sales impairments and one-off charges (i.e. VES costs, goodwill impairments, infrastructure costs); Galaxy Project to be completed by Q2’21e while the management announced “Tomorrow Project” which among other includes a growth SCI of €0.8bn and an upsized NPE cleanup of €8.1bn vs €3.3bn announced in FY’20, targeting a RoTE of c10%, solid capital level and NPE ratio at 2% in the medium term, paving the way for dividend resumption from excess capital from 2023 onwards; EGM on 15June’21 regarding the SCI which is expected to be completed by mid-July’21; The SCI will be carried out through a combined offering (i.e. a Greek Offering and an International Offering expected to open by end of June’21) and cancelation of the pre-emptive right of the existing shareholders but with a priority allocation; HFSF communicated its intension to participate in the contemplated SCI up to its current shareholding namely 10.94%. 

Eurobank reported Q1’21 profit from continued ops of €70m compared to €187m (excluding Grivalia goodwill impairment of c€160m and c€160m DTA write-off) in Q4’20, reflecting mainly lower non-core banking income and fees generation which offset the higher NII and reduced OpEx. Results in line with our call; Mexico is well on track leading to NPE ratio of 9% (including new NPEs inflows) by year end; new NPE formation substantially lower than expected; Solid CET1 at 13% and CAD at 15.5%.

 NBG reported profit after tax from continuing operations of €578m (Exx at €372m) in Q1’21 vs. losses of €11m in Q4’20 on lower impairment losses & OpEx as well as higher non-core income offsetting the lower Core Banking Income. Should we account for Disc. ops, minorities & others, profit after tax settled at €557m vs losses of €413m in Q4’20 (which was burdened by the additional impairments for Ethniki Insurance and VES costs); Results above our call across the board; NPE ratio to be shaped at 6% by 2022e including €1.5bn new securitisation (on top of Frontier Project) and €0.6bn NPEs inflows from moratoria loans. 

Piraeus reported an improved recurring PPI at €420m vs €223m in Q4’20; Bottom line landed at a loss of €401m vs losses of €514m in Q4’20 reflecting the higher non-core income due to GGB gains as well as the lower OpEx due to the absence of VES costs realised in Q4’20 offsetting the lower core banking income and the higher impairments due to partial frontloaded costs of Vega and Phoinix Projects; Pro Forma CAD for SCI stands at 17.5%; NPE reduction plan is well on track; Result Broadly in line with our call.

Overall, Q1’21 results reflected:

  • Mixed NII trends with increasing figures for Alpha (+3.0% q-o-q) and Eurobank (+1.6% 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 NBG (-6.4% q-o-q) and Piraeus Bank (-3.4% q-o-q) the deleveraging offset the lower funding costs (from lower deposit costs and TLTRO utilization) and the contribution of new loans. Seasonally lower q-o-q fee income generation for all banks (except from Alpha Bank +0.5% q-o-q) driven by lower fee generation from cards, bancassurance and asset management. Recurring OpEx trends with lower figures for all the banks (also on a total OpEx basis except from Alpha Bank) mainly due to seasonality and the benefits from the implementation of recent VES. As a result, Core PPI increased q-o-q for all banks, mainly on lower OpEx offsetting the pressure on NII. Mixed Impairments on loans trends with decreasing figures for Alpha (-31.0% q-o-q) and Eurobank (-10.0% q-o-q) while NBG’s impairments increased to €77m from €31m in Q4’20 and Piraeus Bank at €961m (o/w €829m associated with a 50% assigned probability sale scenario of Phoenix & Vega q-o-q) from €378m in Q4’20, while CoR (over average net loans) shaped at 0.8-1.4% (Piraeus at the high-end).
  • Expanded Gross Loans for all banks except from Piraeus. Deposit inflows in Greece of €0.7bn and €0.8bn for Eurobank and Piraeus, respectively, while the related figure for Alpha and NBG was down by €0.1bn and €0.3bn, respectively. Eurosystem funding reached €44.3bn in Mar’21 (c15.3% of assets vs. c14.4% in Q4’20) benefited by the ECB’s TLTRO facility and ECB’s waiver to accept GGBs as collateral in Eurosystem credit operations.
  • NPE ratio slightly increased q-o-q for all banks (except from NBG) on a modest positive formation (less than initially expected) due to the expiration of the majority of moratoria. Note the default rate on the total moratoria granted is expected below 20%, benefited from the State schemes and the expectation of an improving macro environment.
  • Finally, CET1 settled at 12.1-16.1% in Q1’21 while on B3FL basis, CET1 ratio settled at 10.1-14.2%, well above the CET1 requirements for 2021e.

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