Bank analysis: National Bank of Greece

Logo of the National Bank of Greece
Logo of the National Bank of Greece (Photo credit: Wikipedia)

National Bank of Greece, that has subsidiaries and branches in most of the South Europe countries and Turkey shows sign of financial improvement and better profitability, according to the bank issued statement and press release in Athens on May 24, 2013.

“NBG Group reports profitability for the second consecutive quarter, as net profit in Q1 2013 amounted to €186 million, compared with losses of €265 million in Q1 2012”, says the press release by the bank Chief Executive Officer, Alexandros Tourkalias.

According to the press release of the Athens central office of NBG Group, the financial improvement of NBG stands on the following points:

  1. Stabilization of core income in Greeceat €385 million in Q1 2013;
  2. Strong performance by Fininsbank (Turkey) with profits up by 23% on constant currency basis to €155 million, over and above the impressive performance of the previous year;
  3. Positive input from the Group’s SE Europe subsidiaries of €13 million, vs. losses in Q1 2012;
  4. Operating costs in Greece and SE Europe cut by 10% and 3% respectively, compared with Q1 2012

Improvement on the profitable side of the bank came after the period of generated losses, readable from the financial statements of the NBG Group and the Bank. What are the financial limits for the National Bank of Greece considering the income statement for the period of January 2012 until end of December 2012?

According to the common size analysis of the income statement for NBG Group and the Bank, National Bank of Greece Group shows decrease in few of important categories of the income statement and that is decrease in total income and net interest income. Total income for the NBG Group in 2012 decrease for minus 19% compared with the total income of 2012. For the NBG Bank the percentage is even higher and goes down to the level of minus 63% difference in total income between 2012 and 2011.

In regards to net interest income, or the profit banks gets from the interest that comes from its assets and interest the bank pays on liabilities both NBG Group and NBG Bank shows decreases.

The calculation by the common size analysis shows decrease in net interest income for the Group for minus 12,34% or minus 28% when compared 2012 and 2011 data.

The NBG Group and the Bank losses before the taxation are minus 85% and minus 77% percentage. Further, the common size analysis show negative tendencies at the group of the equity shareholders. For the NBG Bank they are minus 35% of the total income for 2012, which is Euros 839.527.000, while for the NBG Group they are minus 60% of Euros 3.527.308.000.

And according to the financial data and information notes for the period from 1 January 2012 to 31 December 2012, “total equity of the Group and the Bank were negative mainly due to impairment losses recorded in 2011 and 2012, in several classes of assets like Greek government bonds and other loans in Greece as a result of the crisis in the Greek economy, although the management after recapitalization plan concluded “the Group and the Bank can continue to operate for the foreseeable future”.

Recapitalization plan for NBG takes into account financial help of the Hellenic Financial Stability Fund and European Financial Stability Facility.

In general, Standard and Poor’s New York office in their report published on April 11, 2013 affirmed its ‘CCC/C’ long- and short-term credit ratings on both National Bank of Greece (NBG) and Eurobank  Ergasias S.A. This maintaining of the rating and evaluation of the negative outlook, S&P give to the banks after they announce, “Would be recapitalized independently of each other and that the previously announced merger had been suspended”.

Although, Standard and Poor’s reflects their opinion for the further sufficient capital and liquidity of the both bank, thankfully to the financial help of the Hellenic Financial Stability, European Commission, European Central Bank and International Monetary Fund. Standard and Poor’s long-term rating on NBG and Eurobank, incorporate “€9.7 billion and €5.8 billion, in capital that the HSFS has already committed to the Banks”.

One of the parameters for the Standards and Poor’s report prepared by Aarty Sakhuja, primary lead analyst in S&P office in London, UK on Macedonia’s downgrade of long-term and short-term rating of Macedonia from BB to BB- reflects the view on less predictable growth and fiscal policy is, as SP’s analysis points out “constrained foreign parents of domestic banks”.

According the general conclusion of the report on the eventual withdrawals of the foreign banks affiliates is that the National Bank of Republic of Macedonia has “appropriate policies in place to discuss liquidity risks associated with potential withdrawals by parent banks”. Despite the lowering of the long-term and short-term rating of Macedonia, Standard and Poor’s gives stable outlook on their evaluation of the financial parameters for Macedonia.

“The stable outlook balances our view of Macedonia’s structural and monetary rigidities and vulnerabilities to external shocks against its relatively low external and fiscal indebtedness”.

The agency notifies slow down in the parts of loans and says: “loan growth in Macedonia decelerated to 5% in 2012, versus 31% on average between 2005 and 2008, contributing to weakening GDP growth”.

The analysis of S&P considers two of three banks that run in Macedonia and are mentioned in the reports as “ important in the domestic banking sector have week foreign parents, however, exposing these subsidiaries to parent-level disruptions”.

S&P mentioned, although not going to the in-depth analysis of possible concerns related to further destiny on Stopanska Banka Skopje AD’s, which parent is Greece based National Bank of Greece (NBG) and NLB Tutunska Banka with the parent in Slovenia based Nova Ljubjlanksa Banka.

The rating of NBG by Standard and Poor’s at the end of the May 2012 was for the long-term CCC and for the short term CC with negative outlook, emphasized NBG annual report of 2011.

Aside NBG, in March of 2012, according to the S&P Web page they lowered the ratings for Eurobank, Ergasias S.A. (EFG), Alpha Bank A.E. (Alpha), and Piraeus Bank S.A. (Piraeus) in the report published on March 2, 2013.

In 2013 subsidiary of NBG in Macedonia, Stopanska Banka AD Skopje changed its executive director. Gligor Bishev left the bank for the new executive job position in Macedonian affiliate of Austrian based Sparkasse Bank in the period when in general, according to the NBG press release of May 24, 213 the Group activities in South and East Europe ”posted profit of €13 million, after five consecutive loss- generating quarters”

“A key contributing factor to these results was the improved pace of new loan delinquencies, which reflects the gradual normalization of economic activity in the region”, emphasizes the press release of NBG for the first quarter of 2013. For the time being, core revenue decrease in minus four percentages in the first quarter of 2013 compared to the first quarter of 2012, although the Group notified increase of 5% in the deposits and 2% in the loans. SE’s bank operations of the NBG Group in the first quarter of 2013 were focused on the cost reduction and liquidity enhancement.

Note: Common Size Analysis for the article completed through the materials of ASU Reynolds Center For Business Journalism at Walter Cronkite School of Journalism and Mass Communication on Unlocking Financial Statements.



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