National Bank of Greece (NBG) F4Q11 Earnings Call April 20, 2012 12:30 PM ET Executives Paul Mylonas – General Manager, Strategy and Governance Apostolos Tamvakakis – CEO Anthimos Thomopoulos – Group CFO, Deputy CEO and General Manager, Retail Banking Analysts Stefan Nedialkov – Citigroup Heiner Luz – Goldman Sachs Antonio Ramirez – KBW Paul Formanko – JP Morgan Presentation Operator
Knowing new start was clearly necessary; it is a mistake to ignore, what was achieved by the first program. Despite a software collapse in output by 14% during the past three, four years, as well as a dramatic increase in unemployment to nearly 22% from around 7.5% debt crisis, Greece implemented an unprecedented amount of fiscal measures equivalent to 14.5% of GDP and achieved a primary balance adjustment of 8% of GDP.In addition, bold and socially difficult structural changes could be in May, most notably to the public administration. These will gradually increase the country’s efficiency and competitiveness, though their effects are not get obvious to outside of service. International focus has often been on policy slip as compared with targets rather than on the abusiveness of the targets themselves. No other campaign has ever achieved so much in such a difficult environment while maintaining social cohesion. However, clearly more need to be done. The new adjustment program provides a unique opportunity for Greece to complete its task of becoming a more dynamic and more equitable and more competitive economy. I’m sure that Greek society as a whole will seize this opportunity, as failure clearly means the loss of several decades of development and the isolation of the country on the international stage. Let’s now turn to the challenges of the Greek banking season. The PSI+ related losses necessitate unprecedented capital support for the Greek banking system of several tens of billions of euros. Greece has already received €25 billion of disperse as a first tranche effectively – effective immediately. Additional resources are available if necessary, once the final recapitalization needs have been determined by the Bank of Greece. Moreover, the current trends does not cover any capital requirements arising from the BlackRock loan diagnostic exercise for which NBG will not need additional capital.
Clearly these factors can change the total recapitalization need by several billions of euros. Another important unknown is the details of the recapitalization framework. These could get to be determined and will play critical role in attracting the private resources necessary to keep the Greek banks under private sector management. This we will be clarifying soon I hope after the elections at the latest.The return to growth of the economy requires a well-functioning banking sector to provide credit efficiently to Greek firms and households. The recapitalization is a necessary first step. However, and its consequences created conditions for a significant change in the banking sector landscape. Let’s turn now to NBG. NBG has been proactive in the crisis. It has implemented a strategy whose aim has been to enhance capital inequity buffers, reinforce the balance sheet through aggressive provisioning and tighter underwriting processes and improve operational efficiency. Regulatory capital has been increased by about €3.5 billion during the past 20 months including €1.8 billion rights issued in October of 2010, €1 billion increase in preference shares issued to the Greek state December of 2011, liability management for €300 million January of 2012 and the retail placement of subordinated debt €450 million August of 2010. In addition we have reduced risk weighted assets by deleveraging both domestically as well as in South Eastern Europe i.e., loan reduction domestically by €4 billion on a net basis during the past two years by minus 9%, and by €1.5 billion in South Eastern Europe during to the same period, i.e. 16.5%. NBG has added €2.8 billion of loan provisions only increased during the last two years and €3.4 billion at the group level, bringing the total cost of provisions at 8.7% of the domestic loan book. As a result, NBG has the highest domestic provision coverage among its peers standing at 61% and 58% for the group as a whole. Read the rest of this transcript for free on seekingalpha.com