National Bank places stress on growth in retail banking

National Bank of Greece, the largest commercial bank in the country in assets, said yesterday it plans to strengthen its presence this year in retail banking, a fast-growing sector which is expected to see competition gear up even more after Alpha Bank’s unexpected decision to jack up interest rates. Theodoros Karatzas, governor of National Bank, said the financial institution was looking to retail banking to continue to sustain growth this year. The domestic banking sector transferred its interest to core banking activities last year to offset the sharp fall in trading and commission earnings hit by sluggish equity markets. Schroder Salomon Smith Barney in a research note last month said the retail market «should continue to drive growth this year but at a slightly lower rate than we saw last year.» «We are aiming for organic growth this year which will come from retail banking in all forms,» Karatzas said. Targeted groups include small and medium-sized enterprises and wealthy individuals as the bank puts its revamped private banking division to work. It also plans to reinforce its presence in bancassurance. Analysts said the retail sector is set to become an even more important revenue source after Alpha Bank’s decision to increase mortgage and lending interest rates between one to two percentage points, effective from February 17. Surprising the market, investors and its competitors, Alpha Bank, the second largest bank in assets, yesterday announced a one-percentage-point hike in the one-year fixed mortgage rate to 4.9 percent. Interest rates for personal loans, consumer loans and Visa and Mastercard credit cards are due to rise by 75 basis points, 120 basis points and 125 basis points respectively. Alpha justified the interest rate increases as a «rationalization of our pricing policy.» Manos Giakoumis, analyst at P&K Securities, said the rate hike suggests the bank is now more interested in boosting profitability after doubling its market share in the mortgage market with the launch of a one-year fixed interest rate product, the first in the market. «Alpha Bank saw volume in the mortgage sector doubling after it introduced the new mortgage product but it saw no results in terms of profitability,» he said. Giakoumis said the return of interest rates to more logical levels should help boost profits. Alpha Bank, due to report earnings for 2002 next week, is projected to see a 33.5 percent drop in net profits. National Bank earnings are seen falling by an even bigger margin. The country’s banks are expected to follow Alpha’s lead and raise interest rates in the coming days. Giakoumis believes the rate increases should have a minimal impact on the credit boom as the market is still at the infant stage compared with other EU countries. The Greek mortgage/GDP ratio stands at about 13 percent against the EU average of 45 percent.