(Bloomberg) -- National Bank of Greece, the country’s biggest lender by assets, wants to pick up the pace as its moves on from the crippling legacy of the financial crisis, and its chief executive officer is planning two main initiatives to get there.
On the docket: a possible move to bring forward the securitization of bad loans currently scheduled for 2021 and the sale of the company’s insurance unit as soon as this year, CEO Paul Mylonas said.
Both moves could both help cut costs as the bank carries out a restructuring plan and seeks to move toward further digitalization.
“National Bank of Greece is changing into a faster and more productive bank,” Mylonas said in an interview in Athens. “We are trying to reduce bad loans, cut costs and address the challenges of the future, mainly digitalization,” the CEO said, adding that the lender’s survival depends on the success of the plan.
Addressing bad loans is job number one. Greek banks are struggling to reduce their non-performing exposure, a legacy of the debt crisis.
Bad loans, which impede lending to Greek businesses and households, currently run at 36.5% of total credits for National Bank. The country’s lenders have pledged to bring the figure down into the single digits by 2021.
Speeding Up
“We’ve promised to proceed with a securitization of mortgage loans in 2021, but we’re looking to bring it forward to 2020,” Mylonas said, as the bank looks to capitalize on current investment conditions and accelerate the clean-up of the bank’s balance sheet.
Yields on Greek bonds have fallen to all-time lows, while real estate prices in the second half of this year rose by the most since before the crisis. National Bank shares are up 123% year to date, compared with a 70% rise for the country’s banking industry, amid investor enthusiasm about a new government that’s seen as more business-friendly.
A government plan to help banks cut bad loans by providing state guarantees -- a system used in Italy -- could be an appealing option for National, according to the CEO. “State guarantees will permanently offset a huge risk for the bank,” he said.
If it’s able to move up securitization, National Bank may also bring forward a new Tier 2 bond sale, according to the CEO. The lender issued a Tier 2 note in July and for the moment there is no need for a new one, Mylonas said.
With a total capital ratio at 17%, or 100 basis points above requirement, there’s no need for recapitalization, according to Mylonas. Still, the CEO is looking for another capital boost through the sale of the bank’s insurance unit.
The company will begin the search for a buyer for a majority stake in the unit “in the next two weeks,” Mylonas said.
“We prefer to have one investor rather than a public offer through the stock market, but if this procedure fails, we will turn to the IPO solution next year,” the CEO said.
Wanted: Investment
While Greece will need more outside investment in order to finally leave the crisis era behind, Mylonas says the country is positioned to benefit from current conditions.
“Greece is no longer the weakest economy in Europe, we have large fiscal surpluses, and a small current account deficit,” Mylonas said. “Greece will better absorb a potential slowdown in the global economy.”
Pre-crisis, fixed capital investments stood at 20.6% of gross domestic product. The government now projects that in 2020 the figure will be 13.1% of GDP.
“There is a gap in fixed capital investments which needs to be filled if Greece wants to have growth rates higher than 2%,” Mylonas said.
©2019 Bloomberg L.P.
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