International analysts present their conclusions from the presence of the four systemic banks at the conference organised by Goldman Sachs in London. Interest was high from foreign investors and funds for all the systemic banks, with Piraeus and Alpha Bank attracting attention due to lower valuations. The banks analysed their plans to offset losses from lower interest rates.
THE DIVERSIFICATION
Analysts note that investors are diversifying Greek banks based on:
- The sensitivity of NIM net interest margins to interest rate cuts
- Normalisation in organic capital generation in the medium term
- The capital allocation priorities
DEFERRED TAXES AND DIVIDENDS
Investors positively assess the business plan communicated by bank managements to accelerate the write-down of deferred tax assets, as well as their increased dividend policy and strong profitability. These three elements are in focus, making the outlook for the domestic banking system positive.
THE DBRS REPORT
At the same time, a new DBRS report highlights that the reduction in deferred tax is positive for banks' prospects and will improve the quality of their capital. "Our view is that banks will be able to absorb the impact of faster depreciation, assuming that profitability and organic capital generation remain adequate over the medium term, which we expect at this stage," the firm notes.
INTEREST RATE REDUCTION
DBRS notes that despite the ECB's rate cuts and pressure on interest income, banks can offset losses from loan growth, credit expansion, and fees. "In our view, initiatives to diversify the revenue mix towards higher fee income, coupled with continued cost discipline, will remain the key points to support profitability in a lower interest rate environment," it said.
