Vassilios Psaltis: “Proud of relaunching Galaxy” – The challenges that Banks will be facing in the post-pandemic era
Highlights from the intervention of Alpha Bank’s CEO Vassilios Psaltis at the 22nd Capital Link Invest in Greece Forum
The imminent successful completion of Project Galaxy, amidst the unprecedented challenges of the global pandemic crisis, has once again confirmed the trust of the international investment community in Alpha Bank, as well as the Bank’s operational readiness and its commitment to achieving its strategic goals, said Mr. Vassilios Psaltis, Alpha Bank’s CEO, among other things, during his intervention at today’s 22nd Capital Link Invest in Greece Forum.
“We are proud of relaunching Project Galaxy – the second largest rated NPL securitization in Europe – immediately after the first lockdown and driving the transaction throughout the second lockdown”, said Mr. Psaltis, adding that this reflects positively not only on the Bank’s operational readiness and the attraction of Cepal, but also “on the significant uplift that Greece as a brand has experienced, given the handling of the pandemic and the propensity to reforms that the Government is demonstrating”.
Mr. Psaltis pointed out that Alpha Bank has already built up credibility with US investors, starting with the setting up of Cepal – the first servicing company licenced by the Bank of Greece – with Centerbridge, then selling large business loan portfolios to Apollo and Fortress, and, now, being in discussions with Davidson Kempner to sign Galaxy, which will include taking up Cepal, one of the largest servicers in Southeastern Europe. “Clearly, these investors have taken a positive view on the recovery of the Greek real estate market”, said Mr. Psaltis.
Alpha Bank’s CEO stressed that it is a “key priority” for Greek banks to de-risk their balance-sheets by addressing legacy NPE portfolios, adding that they have made substantial progress since 2016, reducing NPEs by almost 60% and reaching Euro 68 billion by year-end 2019. He spoke about an “impressive” overall amount of NPE securitizations under way in the Greek banking market over the past two years (Euro 33 billion) and highlighted that the newly-established Greek servicing market was a vital precondition in the clean-up of the balance sheets that underpinned the sale of domestic NPEs in the secondary market.
Discussing the challenges of Covid-19 and the efforts of Greek banks to bring down their NPEs to the levels of their European peers, Mr. Psaltis highlighted the role of the loans in moratoria, which make approximately 15% of Greek banks’ performing loans.
Alpha Bank’s CEO talked about the decisive action that has already been undertaken to limit the consequences of the lockdown, including the Greek government’s fiscal and liquidity stimulus of approximately Euro 30 billion to support the economy, the state subsidized instalments for retail borrowers under the so-called “Gefyra” program and the state sponsored loan programs in order for businesses to replenish their working capital.
The Greek government’s decisive action to address the consequences of the pandemic, Mr. Psaltis said, coupled with the operational readiness of Greek banks, which have been maintaining an active dialogue with their customers and are offering new products with adequate repayment schedules, creates the certainty that the risk of the Greek banking system facing a new generation of NPLs because of the moratoria is limited.
Regarding the Eurogroup’s recent decision, which essentially puts pressure on Greek banks to meet the 5% NPL threshold by 2022, Mr. Psaltis stressed that a series of initiatives, including the government’s intention to extend the Hercules program and the European Commission’s initiatives concerning the establishment of national Asset Management Companies (AMC) which coincides nicely with an initiative from the Bank of Greece to create an AMC, provide the necessary tools that would allow for a swift takeover of newly-created NPLs.
While exchanging views with the CEOs of the other three systemic banks regarding the prospects of development for the financial sector in the post-Covid era, Mr. Psaltis said that “despite the challenges, Greek banks need to fulfill their raison d’ être by supporting the real economy”.
The timely execution of the EU financing support programs, which exceeds Euro 70 billion for Greece, is of great importance for the recovery of Greek economy, said Mr. Psaltis. He added that “banks have an important role to play, as they can quickly mobilize their business customers and help them shape up their investment propositions in a way that it will ensure their eligibility under the RRF, but at the same time also comply with the banks’ credit standards. Therefore, the banks should be involved not only as a mechanism for the optimal distribution of the society’s savings, but also as advisors. This will allow them to mobilize funds for investments towards the digital and green transitions as well as inclusive growth, export orientation, innovation and the creation of scale economies in the Greek market. In other words, banks should be involved as engines of growth through a multitude of roles – financial market intermediaries, investors and employers.”
New EIB report: Banks in Central, Eastern and Southeastern Europe revise outlook for the coming months sharply
Demand for loans by small and medium-sized companies (SMEs) and corporates might face sharply tightening credit standards.
Non-performing loans could increase for the first time since 2015 in the region.
A new EIB report published today, the CESEE Bank Lending Survey, provides insights into banking group activities and business expectations in Central, Eastern and Southeastern Europe (CESEE). The report analyses portfolios, demand and supply for financing and the development of non-performing loans. The new edition includes a special analysis on banking group expectations before and after the impact of the coronavirus pandemic.
©EIB
According to the new survey, the banking sector in Central, Eastern and Southeastern Europe is likely to face one of its worst years since the global financial crisis in 2007-2008 due to the coronavirus pandemic. From a banking sector perspective, the region entered the crisis on a strong footing, with easing credit standards and robust demand for loans in the past six months. According to the new EIB survey, however, banking groups in the region are expecting the overall demand for financing to contract sharply, credit standards to tighten significantly and loan approval rates to decline. With decreasing loan application quality, non-performing loans are expected to increase for the first time since 2015.
Read the full report
“The coronavirus pandemic is an unprecedented crisis. But coordinated action and support at a European level has and will be unprecedented as well,” said EIB Vice-President Lilyana Pavlova. “In light of the grim expectations by the banking sector in the region and an increased likelihood of declining financing opportunities, we are particularly glad to have approved the pan-European Guarantee Fund. It is a timely and targeted response to alleviate the hardship endured, especially by entrepreneurs and smaller companies. We will work closely with national institutions to make sure that businesses in need can quickly access the support provided by the EIB.”
“The COVID-19 shock has changed the expectations of banking groups in the CESEE region significantly. Higher uncertainty will persist over the coming months. For the banking sector to return to pre-crisis activity levels and to ensure financing for smaller companies and corporates, providing support through instruments like the European Guarantee Fund and others will be essential. They can support a faster and forceful rebound,” said EIB Chief Economist Debora Revoltella.
The CESEE Bank Lending Survey is part of regular reporting from the EIB, IMF, EBRD and World Bank for the European bank coordination “Vienna Initiative”, a framework for safeguarding the financial stability of emerging Europe. The survey for the new edition of the report was conducted as the COVID-19 pandemic unfolded. Previous editions are accessible here.
Demand for loans
Banking groups operating in the CESEE region reported a continued increase in demand for loans in the last six months. However, demand in the coming months is expected to drop sharply. Before the pandemic, banking groups were expecting a further increase. The contraction in demand is expected to come from households rather than from corporates or SMEs. This suggests a sustained need for finance from the latter two, to meet liquidity and short-term needs.
Supply conditions for financing
In the months before the pandemic, banks in the CESEE region were mildly easing credit standards. Expectations are now that standards will sharply tighten across the client spectrum. Many factors that positively supported an easing of standards are expected to turn negative. In addition to the local and international economic environment, non-performing loans, the quality of loan applications and local capital conditions are expected to exert significant negative pressure.
Non-performing loans
Credit quality has continued to improve over the last six months. The positive trend is expected to invert dramatically. The vast majority of banks (64%) in the region anticipate that the number of non-performing loans will increase.
Piraeus Bank among the 130 banks that signed the Principles for Responsible Banking
By signing the Principles for Responsible Banking, Piraeus Bank joins a coalition of 130 banks worldwide, representing over USD 47 trillion in assets, in committing to taking on a crucial role in helping to achieve a sustainable future.
The signing ceremony took place at the start of the UN General Assembly attended by the UN Secretary-General Antonio Guterres and the 130 Founding Signatories and over 45 of their CEOs. By signing the Principles for Responsible Banking, banks are committing to strategically align their business with the Sustainable Development Goals and the Paris Agreement on Climate Change.
Mr. Christos Megalou, the CEO of Piraeus Bank attended the ceremony and together with the other CEOs representing banks from around the world signed the Principles for Responsible Banking.
Mr. Megalou representing Europe sat on a panel with 4 other CEOs representing four continents and discussed how banks can become agents of significant changes and contribute to addressing global environmental and social challenges.
Piraeus Bank was the only Greek bank that was active along with another 29 UNEP FI banking members in drafting the six Principles for Responsible Banking.
The Principles for Responsible Banking set the framework for Sustainable Banking in the next decades. Committing to the Principles sends a strong signal that the banks will align with the Sustainable Development Goals and the Paris Climate Agreement. The Principles urge the banks to set qualitative and quantitative targets to address their most significant positive and negative impacts on society and the environment.
“The UN Principles for Responsible Banking are a guide for the global banking industry to respond to, drive and benefit from a sustainable development economy. The Principles create the accountability that can realize responsibility, and the ambition that can drive action.,” said UN Secretary-General Antonio Guterres at the launch event, attended by the 130 Founding Signatories and over 45 of their CEOs.
“A banking industry that plans for the risks associated with climate change and other environmental challenges can not only drive the transition to low-carbon and climate-resilient economies, it can benefit from it,” said Inger Andersen, Executive Director of the United Nations Environment Programme (UNEP). “When the financial system shifts its capital away from resource-hungry, brown investments to those that back nature as solution, everybody wins in the long-term.”
Mr. Megalou stressed “Just like Piraeus Bank played an active role in creating the Principles and their implementation framework, so too will it continue to lead in implementing the Principles by setting targets that increase its positive impact on the environment and society; by creating synergies with clients, investors, suppliers and other stakeholders; with the engagement of its employees; with transparency and a robust governance; and through public reporting on the progress it makes”.
Piraeus Bank, having a long-term experience in incorporating sustainability in its activities, continues with a strong and clear vision and a committed management with engaged employees to seek solutions for a just society on a livable planet. Piraeus Bank will continue supporting the Greek economy to achieve sustainable development and a thriving society.
Principles for Responsible Banking
01 Alignment
We will align our business strategy to be consistent with and contribute to individuals’ needs and society’s goals, as expressed in the Sustainable Development Goals, the Paris Climate Agreement and relevant national and regional frameworks.
02 Impact & Target Setting
We will continuously increase our positive impacts while reducing the negative impacts on, and managing the risks to, people and environment resulting from our activities, products and services. To this end, we will set and publish targets where we can have the most significant impacts.
03 Clients & Customers
We will work responsibly with our clients and our customers to encourage sustainable practices and enable economic activities that create shared prosperity for current and future generations.
04 Stakeholders
We will proactively and responsibly consult, engage and partner with relevant stakehold¬ers to achieve society’s goals.
05 Governance & Culture
We will implement our commitment to these Principles through effective governance and a culture of responsible banking.
06 Transparency & Accountability
We will periodically review our individual and collective implementation of these Princi¬ples and be transparent about and accountable for our positive and negative impacts and our contribution to society’s goals.