Dividend payout ‘a milestone’

The return of Greek banks to distributing dividends to their shareholders is an important milestone for the sector as it confirms the full return to normality, rating agencies comment to Kathimerini.

This development is expected to strengthen the investment mood for their shares, they point out, something that is already becoming apparent on the board of the Athens Stock Exchange.

The four systemic banks are expected to distribute a total of 875 million euros in capital out of a total of €3.6 billion that were the net profits of the fiscal year 2023.

According to Nondas Nicolaides, vice president and senior credit officer, financial institutions at Moody’s, “the fact that the SSM approved their dividend plans indicates that Greek banks have fully entered a normalization phase on the back of their strong financial performance in recent years. This also improves confidence and sentiment within the capital markets, which will go some way in further improving Greek banks’ capacity to raise any new capital going forward in case of need.”

According to the relevant announcements, Alpha Bank will distribute €122 million (20% of 2023 profits), with half of this amount, or €61 million, being in the form of buybacks and the rest (€0.026 per share ) to be in the form of a dividend. Piraeus will distribute €79 million (10% of 2023 earnings) or a dividend of €0.063 per share. Eurobank will distribute €342 million (30% of 2023 earnings) or a dividend of €0.0933 per share. National will distribute a cash dividend of €332 million, or €0.36 per share, which corresponds to a percentage of 30% of the net profits of 2023. 

Pau Labro, Director and Primary Rating Analyst at Fitch Ratings, notes that the ”regulatory approval on the payment of dividends after a long period is another sign of normalization of the Greek banking sector, and reflects the banks’ materially improved earnings generation, restored capital position, and completion of the asset-quality clean-up. The restart of shareholder remuneration is another supporting factor for the sector’s investor attractiveness and its capacity to access financial markets.”

He adds that “the dividend pay-outs approved are overall moderate, in particular for those Greek banks that have smaller, albeit still adequate, capital buffers. We expect the dividend pay-outs of the four banks to gradually increase in the medium-term, without affecting the banks’ capital position thanks to the good earnings generation and continued reduction of the proportion of deferred tax credits (DTC) over capital.

For his part, Scope Ratings’ Senior Analyst for Financial Institutions Alessandro Boratti comments that “the ECB’s approval for Greek banks to resume dividend payments marks an important milestone for them. Together with the progressive disengagement of the Greek Financial Stability Fund from banks’ capital, the normalization of dividend policy signals the sector’s emergence from a decade of crisis.”

He points out that “the capital position of Greek banks is solid, and a strong outlook for profitability bodes well for organic capital generation in 2024 and 2025. DTC still represent a high proportion of capital but we do not see this as a high risk factor for the sector. From a regulatory perspective, DTC are considered CET1 capital and we see little risk of adverse developments in the DTC law (especially after regulatory approval of dividend payments). While acknowledging the long amortization of DTCs, we believe that any regulatory changes would avoid cliff effects on banks’ capital positions.

“From this position, Greek banks have the capacity to meet lending demand as the economy grows at a sustained pace, to further reduce legacy non-performing exposures, and to pursue inorganic growth (reference Eurobank’s recent takeover bid of Hellenic Bank in Cyprus).

“Some uncertainty remains regarding the evolution of credit quality, as higher interest rates may put greater pressure on borrowers, especially in the SME sector. However, the strong underlying economic performance should support repayment capacity,” concludes Boratti.