National Bank Of Greece's CEO Discusses F4Q11 Results - Earnings Call Transcript

National Bank of Greece (NBG)

F4Q11 Earnings Call

April 20, 2012 12:30 PM ET


Paul Mylonas – General Manager, Strategy and Governance

Apostolos Tamvakakis – CEO

Anthimos Thomopoulos – Group CFO, Deputy CEO and General Manager, Retail Banking


Stefan Nedialkov – Citigroup

Heiner Luz – Goldman Sachs

Antonio Ramirez – KBW

Paul Formanko – JP Morgan



Good afternoon, ladies and gentlemen, and welcome to the announcement of Full Year 2011 Results. My name is Faye and I will be your coordinator for today’s conference. For the duration of the call, you’ll be on listen-only. However, at the end of the call, you will have the opportunity to ask questions. (Operator Instructions)

I’ll now hand you over to your host to begin today’s call. Thank you.

Paul Mylonas

Good afternoon. Paul Mylonas from NBG. I’m here with our CEO Apostolos Tamvakakis, Deputy CEO, Anthimos Thomopoulos; CFO Bambis Mazarakis and from Global Markets (inaudible). We will start today with an introduction from Apostolos and then Anthimos will go through the more integrity of the results and then, we’ll have the Q&A. So start with Apostolos.

Apostolos Tamvakakis

Thanks, Paul. Good evening, ladies and gentleman. In my brief introductory remarks, I’d like to provide you with my thoughts on the challenges facing the Greek banking system in general and what NBG’s strategy is.

First few words regarding the Greek macroeconomic environment. Greece has agreed with its international partners to Europe and the IMS on the new adjustment program. Through its generous financial support, it provides Greece more time to implement a very ambitious overhaul of its economy. The aim is to return to the primary surplus and push the GDP growth from 2015 and then. The significant debt reduction achieved by the surplus is another significant milestone which provides appropriate condition for Greece to return to a sustainable growth path.

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.

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