Moody's today upgraded the credit ratings of National Bank of Greece and Piraeus Bank. Specifically, it upgraded the long-term and short-term deposit ratings of NBG to Baa2/P-2 from Baa3/P-3 and the rating of its long-term unsecured bonds by two notches to Baa2 from Ba1, as noted by the Athens News Agency.
The outlook for its unsecured debt and long-term deposits became stable and positive. At the same time, the agency upgraded the National Bank of Greece standalone baseline credit assessment (BCA) and adjusted the BCA to ba1 from ba2.
Regarding Piraeus Bank, Moody's upgraded its deposit rating to Baa3/P-3 from Ba1/NP and its unsecured bond rating by two notches to Baa3 from Ba2, as well as its BCA and adjusted BCA to ba2 from ba3. The outlook for Piraeus Bank's deposit and bond ratings remains positive following the upgrade.
The upgrade of ΝΒG reflects its improved solvency and stronger funding and deposit franchise among Greek banks, Moody's said.
NBG's BCA was upgraded to ba1 from ba2, taking into account its strongest market capital ratios, with CET1 at 18.6% in March 2024, providing good growth potential and the largest loss absorption cushion among domestic banks, it noted.
The bank's still-high stock of deferred tax credits (DTCs), which as of December 2023 accounted for about 55% of CET1 capital, somewhat undermines its strong capital position (EUR3.7 billion).
The significantly improved asset quality of NBG—the NPL ratio was down to 3.7% as of March 2024 (from 5.2% as of March 2023), along with a very high provisioning ratio of 86% for these exposures—further enhances the bank's solvency.
Improving profitability is also a reason for National Bank's core rating upgrade, with a 29% annual increase in Q1 2024 pre-provision earnings from its core business supporting its credit profile, following a strong performance in 2023, when National Bank achieved a net profit equivalent to 1.6% of its tangible assets and a 34% cost (expenses) to income ratio.
"We believe that NBG has the strongest funding and deposit base and one of the lowest funding costs among Greek banks. NBG was the first Greek bank to fully repay its ECB loans in Q1 2024, but it still maintains around EUR9 billion in available funds and a 249% liquidity ratio," the house said.
The rating for Piraeus' BCA was raised "because of the significant risk reduction from its balance sheet. The non-performing exposure (NPE) ratio fell to 3.5% in March 2024 from 6.6% in March 2023 after the resolution program was put in place, and the provisioning ratio for NPEs went up to 60.2%.
"The upgrade reflects the bank's successful track record in implementing its ambitious plan to improve asset quality to levels commensurate with domestic and European banks," Moody's noted.
Strong profitability from the bank's core business in 2023–24 and a favourable outlook for the future are another factor that led to Piraeus Bank's BCA upgrade.
"The bank has demonstrated strong profitability, with its smoothed earnings in Q1 2024 rising 37% year-on-year, which combined with tight management of operating expenses resulted in a cost-to-income ratio from its core business of 29% in March 2024," Moody's said.
