ECONOMY

NBG, darling of foreign investors, at roadshow in NY

NEW YORK – The management of the National Bank of Greece is making a presentation to foreign institutional investors in New York, now that foreign institutionals own a record 53.5 percent of the bank’s shares. Headed by the group’s president, Takis Arapoglou, the NBG representation yesterday began their contacts and will conclude tomorrow, including one-to-one meetings with representatives of dozens of institutional portfolios. NBG officials have reported major interest from foreigners, as confirmed by the increase of their share in the bank’s ownership. Foreigners continue to broaden their stakes in NBG’s share capital, mainly at the expense of domestic mutual funds and private investors who continue to sell shares. The presentations are being conducted at a sensitive time due to the worries about the size and the effects of the subprime mortgage crisis in the US. NBG officials note that at this difficult conjunction the group is showing some strong advantages: First, it has absolutely no investments in products related to subprime mortgages; secondly, the rise in interest rates has limited consequences – compared with other banks – on NBG due to its broad deposit base; and, thirdly, the group has a strong presence in the rapidly developing market of Turkey and in Southeastern Europe. These developing markets are not directly pressured by those fluctuations. Speaking to journalists on the sidelines of the presentations, Arapoglou said that the acquisition of Finansbank in Turkey is the point that makes the difference for the group and one of the most important attractions for foreign investors. «The strong profits of Finansbank give a great boost to our results. The Turkish market is very big with a huge growth potential and our strong presence gives us a strong advantage,» he stressed. The NBG president stated that the agenda for the further development of Finansbank is being rapidly implemented: «We open about two new branches every week. At the end of this year, our network in Turkey will exceed 400 points and in 2008 it will go over 500 branches,» he said. As far as the next steps of the group are concerned, he suggested that over the last two years the Ukrainian market has been looked at by the group and, if all goes according to plan, National will soon achieve the acquisition of a bank in that Eastern European country. The banks targeted are among the 10 biggest. The banking system in Ukraine is especially fragmented, with over 160 banks operating. The NBG head though noted that the group will move cautiously and will not follow prices and valuations deemed particularly high. Fitch affirms Greece’s National Bank of Greece at A- Fitch Ratings yesterday affirmed National Bank of Greece’s (NBG) ratings at Long-term Issuer Default (IDR) A- (A minus) with Stable Outlook, Short-term IDR F2, Individual B/C, Support 2 and Support Rating Floor BBB+. The ratings reflect NBG’s leading position in Greece, its good revenue generation and liquidity, its improved asset quality and its adequate capitalization, Fitch said. «They also consider its higher risk profile due to rapid loan growth and more volatile emerging markets exposure, particularly in Turkey where NBG acquired an 85 percent stake in Finansbank (FB, rated BB) in 2006 and early 2007, and the integration risk from the Turkish acquisition. NBG’s ratings would benefit from a well managed integration of FB, which should be completed on schedule by the fourth quarter of 2007, a proven record of managing the various risks in more volatile emerging markets, and the maintenance of a balance between its rising risk profile and capital. Downside risks could emerge from NBG’s inability to manage a higher risk profile and earnings volatility brought about by FB, asset quality problems arising from rapid loan growth or weaker economic conditions in key markets of Greece and Turkey that negatively affect its overall performance. While the FB acquisition has enabled NBG to diversify geographically, it also raises its risk profile and earnings vulnerability given Turkey’s volatile operating environment. Since 2003, NBG’s profitability and cost-to-income ratio have steadily improved thanks to high retail loan growth and the dynamic Greek economy, which has supported strong revenue generation. Staff cost-cutting efforts in Greece also helped to offset heavy expenses from expansion and integration. NBG’s performance has not been altered by FB, as this is a sound performing bank. NBG is challenged to manage expanded credit risks carefully as strong retail loan growth and expansion in emerging countries, which are also experiencing high loan growth, have raised NBG’s risk profile. However, good economic conditions in Greece, an enhanced risk management system and write-offs helped to improve asset quality ratios to sound levels. Market risk has increased from NBG’s unhedged exposure to the Turkish lira through FB, but this is monitored on a monthly basis. NBG’s liquidity is good, with customer deposits far exceeding its loan book, and is supported by a sizable portfolio of discountable government securities. At end-June 2007, NBG’s regulatory Tier 1 capital ratio was compatible with its risk profile, but fell to 8.7 percent from 12.4 percent at end-2006 due to goodwill and a rise in risk-weighted assets from the acquisition of FB.