Greek banks are well shielded
The position of Greek banks in the face of the international banking crisis remains strong, Goldman Sachs points out, answering questions from its clients about the sector’s capital, liquidity and investment portfolio.
Greek systemic banks significantly improved their total capital and CET1 capital ratio levels in 2022, by an average of around 1.8% year-on-year, he notes. The CET1 ratio for National Bank, Eurobank, Alpha Bank and Piraeus Bank was at 15.6%, 15.2%, 11.9% and 11.5% respectively, while the total capital adequacy ratio was at 16.8%, 18.2%, 16.1% and 16.4% at the end of 2022, well above the minimum supervisory requirements.
At the same time, according to Goldman Sachs, their managers anticipate a further improvement in capital adequacy of 100-150 basis points in 2023 and 250-350 bps until 2025, which is not based on new issues of AT1 or Tier 2 titles.
Especially for AT1 securities, which were the biggest concern for investors internationally after the developments at Credit Suisse, Goldman Sachs points out that the contribution of CET1 capital to the total capital of Greek banks was around 80% in 2022, with limited reliance on AT1 titles. Two Greek banks, Alpha and Piraeus, had AT1 securities in their capital structure, which contributed 7% and 12% respectively to their overall capital adequacy levels.
However, Goldman Sachs emphasized that Greek banks plan to issue more senior (Tier 2 and senior) securities that are eligible for the minimum equity and eligible liabilities (MREL) requirement.
In light of the recent market volatility around AT1 issuances, he adds, the pricing of most Greek banks’ senior preferred bonds has also been affected, with their yields rising by around 60 basis points over the past two weeks (vs 160 bp broadening of AT1 yields).
This, as Goldman Sachs points out, may imply higher costs of issuing new bonds, at least temporarily, than the level of the last two weeks. However, the report says, banks expect that Greece’s return to investment grade in the second half of 2023 can support bond pricing and reduce the cost of issuing new securities.
