Banks see revenue from interest soar

Greece's four systemic banks recorded an increase in interest income between 50% and 75% in the first quarter of the year, benefiting from the rise in interest rates on their loan portfolios and the containment of interest rates on deposits.

Total interest income reached 1.9 billion euros, up from €1.2 billion (up 58%) in the same quarter of 2022, and was the main source of the boost to profitability, which stood at €788.4 million.

Based on the results of the first quarter of 2023, the net profits after taxes of the four systemic banks are reduced by 38.2% compared to those of the first quarter of 2022.

However, on an adjusted basis – i.e. without the cost of the securitizations that was in progress in the previous year and excluding extraordinary results from discontinued operations – profits are up an average of 7%.

This trend sets the stage for sustainable profitability in the current year, which in turn will enable the dividend distribution for the current year – i.e. in 2024 – and according to management announcements the dividend distribution target is put at between 10% to 30% of organic profits.

The postponement of the target by one year was the result of the intervention of the Single Supervisory Mechanism, which considered the dividend distribution for this year premature.

According to an analysis by Eurobank Equities, at industry level net interest income increased by 10% compared to the fourth quarter of 2022 and is expected to peak between the second and third quarters of 2023.

A key feature of the first quarter was the increased repayments made by businesses in highly liquid industries. Therefore, despite the fact that new loan disbursements remained at high levels (€1.7 billion for Alpha Bank, €1.5 billion for National Bank and €2 billion for Piraeus Bank), the repayments offset the new loans and outstanding loan balances in Greece remained at almost the same levels as the last quarter of 2022.

This trend is expected to moderate in the coming quarters and according to Eurobank Equities the rate of credit expansion will be in positive territory, but in the single digits for the year.