SSM reviews bank dividends
Local creditors aspire to have similar profit distribution to that of their European peers
Greek banks eye dividends on a par with the European average in the coming years, pointing to the high profitability fueled by higher interest rates and clearing their balance sheets of bad loans.
This intention was first announced by the management of Piraeus Bank, in view of its complete privatization, with the sale of the 27% currently controlled by the HFSF, while the management of Eurobank is expected to move in the same direction, in the context of the publication of its annual results and its new business plan for the 2024-26 three-year period this week.
The banks’ dividend policy for 2023 starts on a conservative basis, having received the approval in principle from the supervisory authorities, who have turned a blind eye to this initiative for the first time since 2017.
Therefore, Piraeus has announced its intention to distribute 10% of the profits of 2023 (for 2024 it intends to distribute 25% and in the two years 2025-26 50%), while Alpha Bank starts from 20% for 2023, Eurobank from 25% and National Bank between 20%-30%.
The fact, however, that these targets are maximized during the three-year period is being closely monitored by the Single Supervisory Mechanism (SSM) of the European Central Bank, which will be asked to confirm its approval each year, assessing the capital adequacy of Greek banks, which is close to the eurozone average, the difference being that their supervisory capital quality includes a high rate of deferred tax.
The deferred tax credit (DTC) constitutes an offsetting of past losses that came either through the “haircut” of the Greek bonds (PSI) or through the losses caused by past bad loans, with tax liabilities. It is an obligation of the state to the banks, which, because it could not pay immediately, it is offset every year by tax dues.
Deferred taxation is not a Greek phenomenon, but what constitutes a European originality is the high percentage of DTC held by Greek banks; it represents, on average, 50% of their regulatory capital (around 13 billion euros), against less than 10% in Europe.
