Moody’s raises outlook for National Bank of Greece deposits

Moody’s Ratings has raised the outlook on the National Bank of Greece’s long-term deposits to positive from stable, while confirming the lender’s long-term deposit and senior unsecured debt ratings at Baa1. The ratings action, the details of which were shared by Greek business outlet Newmoney, followed an improvement in the outlook for Greece’s sovereign rating, which remains at Baa3. Moody’s also changed the outlook on the bank’s senior unsecured debt to stable from negative, while confirming its Baseline Credit Assessment and Adjusted Baseline Credit Assessment at baa3. The ratings agency also affirmed the bank’s short-term deposits at P-2, counterparty risk ratings at Baa1/P-2 and Tier 2 debt rating at Baa3. The positive outlook on the National Bank of Greece’s long-term deposits is directly linked to the recent change in the outlook for Greece’s sovereign rating from stable to positive. Moody’s said the bank’s credit profile was supported by strong recurring profitability, high capitalisation, good asset quality and a particularly strong liquidity position. At the same time, the bank’s standalone credit profile continues to be constrained by Greece’s sovereign rating because of its significant exposure to domestic sovereign risk. Strong profitability and efficiency During the first half of 2026, the National Bank of Greece recorded an annualised return on tangible equity of 15.5 per cent, while core revenue increased by 3 per cent year-on-year. The increase was supported by higher net fee and commission income. Operating expenses rose by 8 per cent during the period, with Moody’s attributing part of the increase to the bank’s continued investment in personnel, technology and digital infrastructure. Despite the higher costs, operating efficiency remained strong, with the normalised cost-to-income ratio standing at around 35 per cent in June. Capital strength was another key factor underpinning the bank’s rating. Its common equity tier 1 (CET1) ratio stood at 17.3 per cent in June 2026, significantly above the bank’s internal target of around 13 per cent. This provided a substantial buffer to absorb potential losses, support further balance-sheet growth and potentially fund strategic acquisitions. Moody’s nevertheless pointed to the continued impact of deferred tax credits on the quality of the bank’s capital. These credits accounted for approximately 38 per cent of CET1 in June, down from 46 per cent a year earlier. The ratio is now declining more rapidly following a revised framework for the amortisation of deferred tax credits. NPE ratio at 2.4 per cent Asset quality also remained strong, with the bank’s non-performing exposure (NPE) ratio at a low 2.4 per cent. NPE coverage stood at 105 per cent, which Moody’s said provided significant protection against a potential deterioration in credit quality. The cost of risk also declined to 38 basis points during the first half of the year, from 43 basis points in the same period of 2025. The decline indicated that favourable trends in the bank’s loan portfolio were continuing. The National Bank of Greece also maintained a strong liquidity position. Its loan-to-deposit ratio stood at 67 per cent, while its liquidity coverage ratio was 227 per cent and its net stable funding ratio was 143 per cent. Customer deposits accounted for approximately 91 per cent of total net funding, helping the bank maintain a low and stable funding cost. Conditions for a possible upgrade The positive outlook on the bank’s long-term deposits reflects the upward pressure created by the improved outlook for Greece’s sovereign credit profile. Moody’s said the deposit ratings could be upgraded if Greece itself were upgraded and the National Bank of Greece maintained strong profitability, high capitalisation and good asset quality over the next 12 to 18 months. An upgrade of the bank’s senior unsecured debt is considered less likely during the outlook period, even if its Baseline Credit Assessment were upgraded. The ratings agency also identified several potential downside risks. These include a material deterioration in non-performing exposures or recurring profitability, as well as a significant weakening of the bank’s capital position, funding conditions or operating environment. The current assessment therefore reflects a strong position for the National Bank of Greece, while the positive outlook creates clearer conditions for a potential further improvement in its credit profile if the favourable performance of both the bank and the Greek economy continues.