National Bank of Greece posted profits after taxes at €465m, 90% higher yoy for H1 2020. Core operating profit was up by 21% yoy to €132m2, reflecting sharply lower personnel and G&A expenses, lower underlying credit risk charges and abating core income pressure; 2Q20 core operating profit at €65m.
NPE reduction continued in 2Q20 (-€0.3b qoq), driven by organic actions, despite the temporary stop in liquidations. Inflows into the NPE bucket abated qoq, reflecting the application of payment moratoria measures and State support schemes, while curing flows improved vs 1Q20 levels; NPE coverage at 57% provides strategic flexibility.
The agreement in June to sell a €1.6b secured portfolio of large corporates, SMEs & SBs (Project Icon) completes a series of successful NPE disposals in Greece of c.6b in total size, driving NPE stock to near the €10b mark.
Also the bank has already taken key preparatory steps for its large securitization of more than €6b GBV (Project Frontier), with the transaction expected to be completed in 1H21.
CET1 ratio at 15.9%, 13.0% on a FL basis
2Q20 CET1 of 15.93 is up by 40bps qoq and is net of the total anticipated Covid19 charge offs of €426m incurred in 1H20. On a fully loaded basis, CET1 stands at 13.0%3 , 40bps higher vs 1Q20
Total capital ratio at 16.9% provides a capital cushion of c.540bps compared to the 11.5% 2020 Covid19 revised minimum regulatory levels, without factoring in the additional capital relief of 50bps from the O-SII buffer, as per ECBs recent communication regarding supervisory response to the Covid crisis.
Commenting on the resultes Pavlos Mylonas, Chief Executive Officer of NBG, said:
"Covid19 continues to dictate the economy's movements. The enforcement of restrictive measures and heightened uncertainty led to an unprecedented drop in economic activity in 2Q20. However, with the gradual opening up of the economy with a lag the important tourism sector, and increasing fiscal and liquidity stimuli, activity in specific sectors is showing clear signs of a recovery in June and July.
In this extraordinary environment, our role in supporting our clients and the Greek economy is more critical than ever.
To this end, we have implemented targeted payment moratoria measures and Government support schemes.
Specifically, we have granted payment moratoria amounting to c€3.5b to more than 39 thousand clients. In addition, we have disbursed new loans of €2.8b, in conjunction with the Government guarantee schemes, while more than €2b of additional disbursements are currently in the pipeline for the 2nd half of the year.
Regarding asset quality, we followed a conservative approach of incurring the total anticipated provisions relating to Covid19 in 1Q20 (c.€0.4b). Later this year, we expect to launch the Project Frontier securitization. With a perimeter of over €6b, Project Frontier’s successful conclusion would reduce NBG’s current NPE stock of €10b by nearly 2/3rds. We will be leveraging our enhanced PPI capacity to absorb incremental provisions required. We target to complete the transaction in 1H21.
The core operating performance of the Group has been resilient during a very difficult environment. Core Operating Profit rose by 21% yoy to €132m for 1H20. This outcome reflects solid results in containing domestic personnel and G&A costs by -9% and -6% respectively yoy, as well as lower underlying credit risk charges reflecting surprisingly better than expected organic NPE behavior.
In this critical period and as the economy recovers, we will continue to capitalize on our established and successful Transformation Program. Building on the existing momentum, the shift to digital will be accelerated, as will the implementation of a more agile operating model so as to improve the Bank’s efficiency. I am proud of our achievements during the turbulent first half of the year; keeping our people safe, supporting our clients and the economy, thus fulfilling our historical role.”