**National Bank of Greece Expected to Benefit from Higher ECB Rate Outlook**
The National Bank of Greece (NBG) has reported a robust performance in the first half of the year, surpassing initial expectations and prompting Beta Securities to revise its forecasts for the bank’s future profitability. The brokerage's updated outlook is largely influenced by the bank's impressive financial results and a more favorable interest rate environment anticipated from the European Central Bank (ECB).
In a recent report shared by the business outlet Newmoney, Beta Securities highlighted that NBG achieved an underlying net profit of €661 million for the first half of the year, excluding extraordinary items. This figure reflects a return on tangible equity (RoTE) of 15.5%, exceeding the profitability targets set by the bank's management at the start of the year.
A significant factor contributing to the upgraded forecasts is Beta Securities' revised expectations for the ECB's interest rates. The brokerage has increased its forecast for the ECB’s deposit facility rate (DFR) to 2.25%, up from a previous estimate of 2%. This adjustment suggests that interest rates are likely to remain elevated for a longer period than previously anticipated. According to Beta, a 25-basis-point change in the DFR impacts NBG's net interest income by approximately €35 million, leading to an optimistic outlook for the bank's net interest income and net interest margin, despite ongoing pressures on lending margins.
The report also noted NBG's strong lending performance during the first half of the year. The bank's performing loans rose by €2.1 billion since the start of the year, bringing the total to €39.1 billion. New loan disbursements reached €5.5 billion, marking a significant 30% increase. This growth was primarily driven by corporate financing, particularly in sectors such as energy, infrastructure, shipping, and tourism. Beta Securities reiterated that NBG remains committed to achieving net credit expansion exceeding €3 billion by 2026.
In addition to lending, the bank has experienced a notable increase in fee income, which rose by 10% during the first half of the year. This growth is attributed mainly to the rapid expansion of investment products and wealth management services. Furthermore, Beta Securities anticipates that NBG's strategic partnerships with Allianz and Dromeus Capital will significantly enhance earnings starting in 2027. These collaborations are projected to contribute around €80 million to profitability in 2027 and over €100 million in 2028, with a minimal impact on the bank's capital position.
The report emphasized NBG's strong capital base, which Beta Securities described as one of its key competitive advantages. With a Common Equity Tier 1 (CET1) ratio of 17.3%, the bank is well-capitalized, holding substantial excess capital. This strong capital position provides NBG with the flexibility needed to support further credit growth, maintain generous shareholder distributions, and pursue additional strategic initiatives.
Given this positive backdrop, Beta Securities considers it likely that NBG could announce an interim dividend in the fourth quarter, contingent upon successful discussions with supervisory authorities.
However, despite the optimistic assessment, Beta Securities cautioned investors to remain vigilant regarding several factors that could influence the bank's future performance. These factors include the trajectory of ECB interest rates, the pace of credit expansion in the latter half of the year, the effective utilization of Recovery and Resilience Facility funding, and the management's decisions regarding the deployment of excess capital—whether it be through increased shareholder distributions or new strategic investments.
In summary, the National Bank of Greece's strong first-half results and the anticipated higher interest rates from the ECB have led to a positive outlook from Beta Securities. As the bank continues to expand its lending and fee income, it remains well-positioned for future growth, although potential challenges will need to be monitored closely.