After many 15 years of consolidation of their loan portfolio, Greek banks are at a turning point with the prospect of a significant increase in their profitability, says Goldman Sachs in its analysis of the four systemic banks.
In particular, Goldman predicts that by 2023:
1) Return on Tangible Equity (ROTE) will tend to the European average,
2) Their non-performing exposures (NPEs) will converge with the levels of the EU and the countries of Central and Eastern Europe, the Middle East and Africa (EU / CEEMEA),
3) The so-called Texas index, which measures non-performing assets to equity (tangible common equity) plus provisions for bad loans, will be reduced by half, to about 30% from 60% estimated for 2021, due to reducing NPEs and increasing capital cushions and provisions and
4) Dividend distribution will be back in the discussion.
In terms of non-performing loan ratios, Goldman estimates that they will become single digits in 2022.
Greek banks, he says, are on a path of strong recovery of their return on equity (ROTE) and specifically predicts that it will increase from 5% in 2021 to 8% in 2023. This forecast is based on: a) reducing organic costs risk from 90 basis points in 2021 at 60 bp. on average in the period 2022-24, b) the increase in the serviced loans, which had remained stable in the period 2016-21, at an average annual rate of 6.5%, and c) the increase in the ratio of revenues to their expenditures by more from 500 p.m. in the period 2021-24 thanks to cost control.
In addition, he notes, higher interest rates will boost the net interest margin, with each increase of 25 bp. to yield on bonds to increase net income by 2%, which is expected to partially offset the negative (but manageable) impact on capital from the valuation of their assets based on market prices (Mark to Market).
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