The credit rating agency Moody’s today upgraded the credit rating of National Bank and Piraeus Bank.

In particular, it upgraded the creditworthiness of National Bank’s long-term and short-term deposits to Baa2/P-2 from Baa3/P-3 and the creditworthiness of its long-term unsecured bonds by two notches to Baa2 from Ba1. The outlook for its unsecured debt and long-term deposits was changed to stable from positive.

At the same time, the bank upgraded the stand-alone Baseline Credit Assessment (BCA) and the adjusted BCA to ba1 from ba2.

Regarding Piraeus Bank, Moody’s upgraded its deposit rating to Baa3/P-3 from Ba1/NP and its unsecured bonds by two notches to Baa3 from Ba2, as well as its BCA and adjusted BCA to ba2 from ba3.

The prospects for the solvency of Piraeus Bank’s deposits and bonds remain positive after the upgrade.

Why upgrade the national team?

NBG’s upgrade reflects improved solvency and the strongest financing and deposit franchise among Greek banks, Moody’s reports.

National Bank’s BCA was upgraded to ba1 from ba2, taking into account its strongest capital ratios in the market, with CET1 at 18.6% in March 2024, providing good growth potential and the largest loss-absorbing cushion among domestic banks, it notes .

“The bank’s strong capital position is somewhat undermined by the still high stock of deferred tax credits (DTCs) on its balance sheet (€3.7bn), which represented around 55% of CET1 capital in December 2023.”

National Bank’s solvency is further strengthened by its significantly improved asset quality, with the non-performing exposures ratio having fallen to 3.7% in March 2024 (from 5.2% in March 2023), combined with very high provision rate of 86% for these exposures.

Improving profitability is also a reason for the upgrade of Ethniki’s core rating, with a 29% year-on-year increase in forecast core earnings in the first quarter of 2024 supporting its credit profile, following a strong performance in 2023, when the National achieved net profits that corresponded to 1.6% of its assets (tangible assets) and a ratio of costs (expenses) to revenues of 34%.

“We believe that National Bank has the strongest funding and deposit base and one of the lowest funding costs among Greek banks. National Bank was the first Greek bank to fully repay the loans it had taken from the ECB in the first quarter of 2024, but it keeps about 9 billion available. euros and a liquidity ratio of 249%”, the company reports.

Why was Piraeus upgraded?

Piraeus’ BCA was upgraded “taking into account the significant de-risking of its balance sheet, with the non-performing exposure (NPE) ratio falling to 3.5% in March 2024 from 6.6% in March 2023, following implementation of the restructuring program, combined with an increase in the ratio of provisions for NPEs to 60.2%.

“The upgrade reflects the bank’s successful track record in implementing its ambitious plan to improve asset quality to levels commensurate with domestic and European banks,” notes Moody’s.

Strong profitability from the banks core business in 2023-24 and favorable outlook for the future is another factor that led to Piraeus Bank’s BCA upgrade.

“The bank demonstrated its strong profitability, with Q1 2024 adjusted earnings up 37% year-on-year, which combined with tight management of operating expenses led to a core cost-to-income ratio to 29% in March 2024,” Moody’s reports.