National Bank of Greece (NBG) Swings to Profit in FY13

National Bank of Greece (NYSE: NBG) reported Q4 net profits of €547 million, from net profit of €14.8 million in the same period last year. FY13 net profit was €809 million, from a loss of €2.14 billion in 2012. Group net interest income in Q4 continued to improve both in Greece (up 5%) and SE Europe (up 6%), while displaying high resilience in Turkey (down 1% on a local currency basis). Group operating expenses appeared to stabilize (up by 1% yoy), as cost cutting continued in Greece and SE Europe, offsetting the rise in expenditure in the developing Turkish market (93 new Finansbank branches were opened in 2013). In particular, staff expenses in Greece fell by 8% yoy, backed by the implementation of the new collective labour agreement effective as of 1.7.2013. Overall, expenses in Greece posted a 5% reduction. Reductions in operating expenses were also continued in SE Europe (down 4% yoy), despite the significantly higher inflation experienced in the region. With respect to the quality of the Group’s loan book, it is particularly encouraging that the slowdown in new loan delinquencies in Greece has gained further momentum, while in Q4.2013 debt recovery in SE Europe amounted to €47 million. Specifically, new delinquencies at Group level totalled €1.5 billion, down by 57% yoy, as compared with 2012 at the peak of the crisis when they topped €3.6 billion. As a result, at Group level, provisions were reduced to €1,627 million, down by 36%, compared with €2,532 million a year earlier. That said, the Group and the Bank improved provision coverage levels to 56% vs. 54% a year earlier, the highest level in the market. In addition, the 90+ dpd Group loan ratio stood at 22.5% at the end of December 2013, vs. 19.0% a year earlier. Ongoing improvement in liquidity is another positive development. Specifically, the growth in Group deposits has led to an improvement in the liquidity ratio (loans-to-deposits) to 97% vs.108% in December 2012. In Greece the loan-to-deposit ratio stood at 90% — improved by 11 pps yoy — thereby placing NBG comfortably in the best position in the domestic market in terms of liquidity. This development comprises tangible evidence of NBG’s solid liquidity position and its improved ability to channel funding for the growth of the Greek economy. It is worth noting that the corresponding ratio for SE Europe, which stood at 99% (an improvement of 14 pps yoy), is low relative to peers in the same markets, while it has decreased by half when compared with pre-crisis levels. In Turkey, deposit growth of 16% yoy exceeded loan growth (up 13% yoy), while there was also a significant improvement in the deposit mix due to the higher share of low-cost sight deposits, which grew by 65% yoy.

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