Each of the four systemic banks is expected to show one billion profits annually in the period 2024-2026 based on the business plans they will submit by the end of March. Credit expansion is expected to be strongly increased and the first indications will be seen in the 2023 results (5-6 billion euros).
More specifically, according to the estimates of banking representatives, the four systemic banks will present a profitability of around 4-5 billion euros in 2024, around 4 billion euros in 2025 and around 3-4 billion euros in 2026.
All of the above is related to the course of interest rates, which are expected to decline over the course of the three-year period, as the ECB division over the specific issue is expected to have been resolved. Despite the drop in interest rates, the increased liquidity of Greek banks will allow them to maintain high spreads and thus be the main source of profitability.
What will ICAAP and ILAAP record
The European Central Bank has asked banks to complete and submit the results of the Internal Capital Adequacy Assessment Processes (ICAAP) and the corresponding procedures of the liquidity adequacy (Internal Liquidity Adequacy Assessment Processes – ILAAP) at the end of the quarter as they constitute basic risk management procedures in the context of capital adequacy and liquidity management. ICAAP and ILAAP are respectively an important factor for the Supervisory Review and Evaluation Process (SREP) of the European Banking Supervision.
Bad loans
Through these procedures, the banks will focus on the programming of the bad loans (2024-2026) which are expected to move to EU levels. i.e. at 2% of their total portfolio.
They believe that the loan portfolio will be strengthened and that new bad loans will not exist or will be completely controlled by the banks as has been recorded so far in their balance sheets.
Credit extension – Funds
Following the data announced by the central bank in December 2023 on credit expansion (+4 billion euros in loans in one month), credit institutions estimate that the balance sheets will present 5-6 billion euros of credit expansion for 2023 and 7-8 billion euros for 2024.
The estimate for the 4 systemic banks is that their supervisory capital amounts to 25 billion euros.
Meanwhile, the banks are expected to proceed with a dividend distribution of 10%-25% for 2023, while higher distributions are expected in the next three years, as everything shows.
How liquidity will work
At the same time, the credit institutions having excess liquidity and strong funds will put forward other projects on the basis of the supervisor’s agreement.
For example, National Bank has not given up the possibility of buying 8% out of the 18% of the HFSF’s capital share, once the project for the disposal of Piraeus Bank’s share is completed.
Based on what is happening regarding Piraeus Bank, the percentage expected to be sold will not exceed 20% in the first phase, even though the Hellenic Stability Fund is under pressure from investors for a higher percentage, according to sources.
