Moody’s: Upgrade to positive outlook Eurobank and National

On Friday (13.9.2024) Moody’s also upgraded the outlook of the Greek economy. The rating house upgrades the National Bank for the strong economic performance of the Greek bank and the improvement of fundamental sizes in recent years. The results of the Bank’s six-month period indicate a stable and sustained return with 18% annual increase in the principal revenue before forecast (June 2024) and a cost-to-core ratio of 30.1%. It highlights the 15% increase in net revenue from commissions on an annual basis, which gradually helps diversify National profits. Furthermore, the house also mentions the strong capital base with a CET1 ratio of 18.3% in June 2024. It is noted that the strong capital base is being undermined to a certain extent by the high level of deferred tax credits (DTC) in its balance sheet (EUR 3.6 billion), which account for around 51% of CET1 capital. The solvency of the National, however, is further supported by improving the quality of the assets with an index of unperforming exposures (NPE) to 3.3% (reduction from 5.4% in June 2023) combined with high coverage through provisions (85.6%). The National Bank was the first Greek bank to fully repay the funds received from the ECB (TLTRO) in the first quarter of 2024 and still retains net cash reserves of around 9 billion euros and liquidity coverage index (LCR) 240%. As far as Eurobank is concerned, Moody’s has upgraded its outlook to a positive conclusion with the assessment remaining in Ba1. The move explains its strong economic performance in recent years, the geographically differentiated asset base and its profits. Eurobank was able to achieve a return on a tangible book value of 18.5% in the first half of 2024 and a cost ratio of 32.3%. The bank’s strong credit profile is reflected in the total capital adequacy ratio of 19.3%. The rating house stands particularly at the high level of deferred tax credits (DTC constituted about 38% of CET1 in June 2024) which somehow undermines the quality of the bank’s capital, a common feature among Greek banks. The bank’s credibility is further supported by the strongest quality of assets, as the bank managed to contain its pro-forma unserviced openings (NPE) to 3.1% in June 2024 by 5.2% in June 2023, combined with increasing forecast coverage for NPE 93.2% in June 2024 from 73.2% in June 2023. Finally, Moody’s argues that “we also believe that the recently acquired majority stake (about 56%) in the Greek Bank further supports Eurobank’s credit profile, strengthening geographical diversification”.