National Bank of Greece Seeks Better Bids Before Selling Loans

  • Lender’s CEO Leonidas Fragkiadakis speaks in interview
  • Bank to repay more than 2 billion euros of state aid this year

National Bank of Greece SA, the country’s oldest lender, will only consider selling batches of bad loans to distressed debt managers once country risk recedes and bids improve, Chief Executive Officer Leonidas Fragkiadakis said.

“We are actively talking to people. As of now there is no closing-in of agreements I can report,” Fragkiadakis said in the interview from the lender’s headquarters in Athens. “The way risk premia are in Greece right now, and the internal rate of return that the outside managers are seeking, credibly from their part, might imply not so attractive prices for us to disengage.”

For a recording of the interview, click here

Like other Greek banks, National Bank of Greece, with assets totaling 82 billion euros ($87 billion), has to meet quarterly targets set by the central bank for the reduction in its non-performing exposures, or risk fines. Fragkiadakis said his company, which returned to profit in the first nine months of the year, plans to sell more subsidiaries in southeastern Europe, as well as repay more than 2 billion euros of state aid by the end of this year, subject to approval by the Frankfurt-based Single Supervisory Mechanism.

The bank posted a 26 million-euro profit after taxes in the nine months through September, compared with a 1.7 billion-euro shortfall a year earlier. The figure for 2016 doesn’t include a one-off loss on the sale of Turkish subsidiary Finansbank AS, which also cost it the title of Greece’s biggest bank by assets.

“We are going to embark on a divestment process centering around our Southeast European subsidiaries, basically Bulgaria, Cyprus, Romania, and Serbia,” Fragkiadakis said. “This year the bank will be marginally profitable. I believe that from next year onwards you will see further profitability improvements.”

Greek banks are struggling to contain the fallout from the deepest economic slump since World War II and the biggest sovereign debt restructuring in history. Their shares have pared some of their losses in November, amid expectations of a prompt deal between the government and bailout auditors, which may also pave the way for the inclusion of Greek government bonds in the European Central Bank’s asset purchase program.

Fragkiadakis suggested such an inclusion could act as a catalyst for a drop in the country’s risk premia.

Greek lenders have a “business model that can still make money and deliver substantial returns on equity,” he said, as the Greek economy is on track to rebound after years of recession. The “Greek bank model is one that can deliver outperformance to its investors.”

Management Debacle

Complicating matters, the board of National Bank of Greece has been at loggerheads with the state-owned Hellenic Financial Stability Fund over the appointment of Panayotis Thomopoulos as non-executive chairman. Thomopoulos was named to the role against the wishes of HFSF, the biggest shareholder with a 40.4 percent stake. HFSF has threatened to call an extraordinary meeting of shareholders to force Fragkiadakis to resign.

“We are doing all we can, and I think with good reception, to mend any potential issues with HFSF and make them feel comfortable that this board is the one that can take the bank forward,” said Fragkiadakis, a Cambridge University alumnus.

Asked whether he intends to step down following the quarrel with HFSF, the former Credit Suisse First Boston trader said “we have a lot of challenges ahead of us, and the business challenges that we are going to face will be very serious, so I think we should be focusing on that.”

— With assistance by Elena Gergen-Constantine, Vassilis Karamanis, and Marcus Bensasson

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