Greece is unlikely victor in bank selldown race

In 2010, it was hard to imagine the day when Greece’s banking sector would be fully privatised and thriving. That was the year the government founded the Hellenic Financial Stability Fund (HFSF) to prop up ailing lenders. Perhaps even more surprising is that Athens now looks set to reach that milestone well ahead of economies like Germany, Britain and the Netherlands. The success is down to continuous state support and a revival of Greek investment.

The HFSF, run since 2021 by former banker and government adviser Ilias Xirouhakis, said on Thursday that it had offloaded 10% of 7-billion-euro lender National Bank of Greece NBGr.AT (NBG). That leaves the old 50-billion-euro bailout fund with just an 8.4% holding, which it will transfer to a state sovereign wealth vehicle by the end of the year along with a remaining investment in minor lender Attica Bank BOAr.AT.

To all intents and purposes, then, the HFSF’s privatisation programme is almost complete. Compare that with Germany, which is holding on to its remaining 12% stake in Commerzbank CBKG.DE amid M&A interest from Italy’s UniCredit CRDI.MI. The Dutch government still owns more than two-fifths of ABN Amro ABNd.AS, while UK taxpayers have almost a fifth of NatWest NWG.L, formerly known as Royal Bank of Scotland.

The Greeks have been faster mostly because the government has made more of a concerted effort – both to get out of the holdings and to clean up the banks. The HFSF’s governing law, amended in 2022, outlines a divestment strategy and mandates that the vehicle be wound up by the end of 2025. Few other European governments have given themselves firm deadlines.

And the state continued to assist its big lenders – NBG, Alpha Services ACBr.AT, Piraeus Financial BOPr.AT and Eurobank Ergasias EURBr.AT – well after the crisis. As recently as 2018, non-performing loans accounted for a third of the total on average across the so-called Big Four, according to Visible Alpha data. A scheme known as Hercules, backed by the ministry of finance, helped move the dud exposures off banks’ balance sheets through government-guaranteed securitisations. This year, the non-performing loan ratio will be just 2% on average across the Big Four, analysts reckon.

That has left the banks free to lend into a recent Greek investment boom, helped by pandemic-era European Union funding programmes. In 2022, the last year for which Eurostat data is available, gross investment rose to 14% of Greek GDP compared with 11% before the pandemic. That’s still far below the European average of 23%, but if companies like Pfizer PFE.N and Microsoft MSFT.O keep investing that gap may narrow.

Analysts reckon the average return on tangible equity across the Big Four will exceed 15% this year. NBG trades at 90% of 2024 forecast tangible book value, compared with about two-thirds for Commerz and ABN. Greece has managed to unshackle its banks, and they now seem more likely to power the economy forward than drag it down.
Source: Reuters Breakingviews (Editing by Aimee Donnellan and Streisand Neto)