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For a decade, the Greek banks thought they had it all: Double digit growth in revenues and profits, returns on equity of more than 20% per year and an easy march into the Balkans. Alas, the weather changed drastically when the Greek Public Debt cyclone hit it with force.
Although almost none of the banks had given in to the sirens of toxic products, their balance sheets were robust and their capital adequacy top notch, the impact caused immeasurably damage.
The prolonged recession of the Greek economy, now in search of a new model of development, has caused NPLs to skyrocket, while deposits flee to safer banking havens or are being consumed. At the same time they have been shut off from accessing the global capital market which means that their funding options have diminished drastically.
New players influence the sector now. The European Central Bank, the European Banking Authority, the Institute of International Finance, etc. Their policies - sometimes contrasting - make it more difficult to fathom the final outcome of this game.
In this light, what is the future of the Greek banking system? Is there a way to weather the storm and sail back into calm, chartered waters?
The Greek banking system faces five interwound challenges: Preserving capital adequacy, augmenting liquidity, minimizing rising NPLs, stimulating Growth and dealing with the PSI initiative.
The whole of the banking system is perched at the edge of its seat to find out the results of the exercise that Blackrock Solutions have been assigned to complete: A full, independent assessment of the level of NPLs of each Greek bank. The report is due to be released by the end of October and is widely believed that it will be the catalyst of seismic changes in the Greek banking system.
At around the same time the market expects the finalization of the PSI initiative, which will affect banks? capital adequacy, but at the same time will fortify what will be left of their bond portfolio.
Will the Greek banking system ever be the same after the release of the Blackrock Solutions report and how will the banks rise above their many challenges?
The opening salvo of the Greek bank consolidation wars was fired by Alpha Bank and Eurobank, taking the market by surprise. It was widely believed that, while everyone was in discussions with everyone else, no deal would be struck before the release of the Blackrock Solutions report on NPLs.
All market participants are waiting for NBG?s move, which will not be made before the release of the NPL report. If they decide to move, their choice of partner will create a ripple effect in the market. Which should the factors be that weigh in on NBG?s decision and will the end result be beneficial to Greece as a whole?
Another issue of concern will be the fate of the banking subsidiaries of the Greek banks in the Balkans. Their collective market share exceeds 20% in some of those markets, but the parent banks find it difficult to finance their operations in the midst of the credit squeeze. NBG has decided to group all its banking subsidiaries outside of Greece and Turkey in a new holding company, in order to make it easier for them to be financed (or, as a preparatory move towards an eventual sale?). What options should the managers and the shareholders of the Greek banks consider?
On another note, would it be beneficial for the development of the Greek economy if the Government establishes a new state investment bank, probably with the help of the German state investment bank, KfW?
One would think that a recession of around 7% would be the biggest worry for Greek businesses. That does not even come close. Their main problem is that Greek banks are withdrawing liquidity from the market at accelerating and alarming pace. This two-headed monster threatens to engulf even relatively strong and viable businesses.
What can Greek banks do to be able to support the Greek market? How can they foretell which companies will be able to withstand the economic tsunami, at what rates should they lend and how should they tackle the issue of collateral?
Some say that a spate of merger activity which will result in fewer, stronger banks, would provide the answer to the above question. Could the best solution be the acquisition of some Greek banks by foreign ones?
The business of traditional banking is lending. In the current situation this statement remains true, but becomes more complicated. What about the niche businesses of old? Should Greek banks look for growth in wealth management, bancassurance and the issuance of debit cards?
Greek banks are starved for funding, so it is imperative that they devise strategies that let them attract deposits, at a reasonable cost. Then there is lending. Since Greek businesses have difficulty finding appropriate collateral, could the new state-guaranteed programmes be the answer?
This year?s Banking Money Conference 2011 shall focus on the following subject matters:
Panel I: The Greek Banking Sector After the Crisis: A New Model?
Panel II: Finance: New Products and Services: New Strategies to combat the crisis
Panel IÉÉ: Providing Finance to the Greek Economy
Confirmed Speakers
Markus Krall, Senior Partner, Global Head Risk Management, Roland Berger
Mark Johnson, Editor, Euromoney Conferences
Harry Kyrkos, Vice President, Hellenic Financial Stability Fund
Dr. John E. Charalambakis, Chief Economist BlackSummit Financial Group& Professor of Economics, Patterson School of Diplomacy and International Commerce, University of Kentucky
Triantafyllos Lyssimachou, General Manager of Insurance Business, Piraeus Bank
Jean Louis Turne, CEO, Piraeus Wealth Management
Dr. Anastasios Alexandridis, Executive Vice President, Greek International Business Association
Dr. Nikolaos Georgikopoulos, Research Felow at KEPE & Research Associate at NYU-Stern Business School
Vassilis Korkidis, President, National Confederation of Hellenic Commerce
Michalis Oratis, Chief Risk Officer, NBG
Andrea di Segni, Chief Operating Officer, Sodali
Nikos Myrtakis, Chairman, Association of Co-operative Banks of Greece
Perikles Konstantinides, Counsel to the Chairman, Attica Finance
George Papadimitriou, Advisory Services Leader in SouthEast Europe & Risk Management Services Leader in Central & SouthEast Europe, Ernst & Young |
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