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Moodys says that NBGs sale of Romanian subsidiary is Credit Positive

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Moody’s in its credit outlook report, published yesterday, noted that National Bank’s sale of its Romanian subsidiary is credit positive. “The transaction is credit positive for NBG because it will boost its liquidity by around 650 million euros, allowing the bank to reduce further its Emergency Liquidity Assistance (ELA) borrowing.”

 

Additionally, the sale will have a marginally positive effect on NBG’s capital ratio of around five basis points. Moody’s expects NBG to be the first bank to completely repay its ELA and to do so over the next 12-18 months, mainly with the sale of its remaining non-core assets and a return of more customer deposits as confidence returns amid a modest economic recovery in 2017-18. 

 

A reduction in ELA, which currently costs around 1.5%, also will reduce the bank’s funding cost. The lower funding cost will subsequently improve NBG’s margins and assist the bank in its effort to maintain the marginal profitability it recorded in first-quarter 2017, Moody’s noted.

 

Also, Moody’s said that the recent capital actions also will have a direct effect on NBG’s capital ratios, raising its pro forma common equity Tier 1 ratio by around 215 basis points to approximately 18.2% from an actual 16.0% as of March 2017.

 

Still, the reduction of a large stock of nonperforming exposures remains a key challenge for all Greek banks, including NBG, which had around 19 billion euros of domestic nonperforming exposures, equal to approximately 45.1% of gross loans as of March 2017.

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