National Bank, Greece's largest lender, expects 2010 and 2011 to be difficult because of the country's severe debt problems and a contracting economy, its chief executive told its shareholders on Friday.
Recession has added further to the country's woes increasing the cost of borrowing for major Greek banks, which hold large shares of Greek government bonds and have been downgraded by all three major rating agencies this year.
"It is expected that 2010 and 2011 will be especially difficult given the problems of the Greek economy," said CEO Apostolos Tamvakakis.
The group's priorities this year — in an economy which accounts for about 2.5 percent of the euro zone and is projected to contract by about 4 percent this year — will be to strengthen liquidity and capital adequacy, Tamvakakis said.
NBG will report first-quarter financial results on May 26. Higher provisions, slower loan growth and a one-off tax took 40 percent off its profits last year, when it reported a full year net profit of 923 million euros ($1.15 billion), below expectations.
National Bank, which is also present in Turkey, Bulgaria, Romania, Serbia, Albania, Cyprus and Ukraine, expects to see credit growth in southeast Europe, which wil help offset the downturn in its home market.
"In Southeastern Europe and Turkey we expect credit growth, in Turkey especially, above 20 percent. This growth will be financed from the strengthening of deposits in these markets," he said.
"This is why we are planning to expand our branch network in Turkey. The bank's further expansion in Southeast Europe will continue when there are safe indications that the region has entered an upward cycle."
Turkish Finansbank, NBG's biggest subsidiary outside Greece, contributed 46 percent of group profits last year.
Last month Greek banks asked the government for access to the remaining funds from a 28 billion euros state support facility launched in 2008 to address tight liquidity conditions.
The government is looking at creating an independent fund to ensure bank equity levels remain sound, as part of an EU/IMF aid package.
"I believe that Greek banks will drastically limit the chances of being forced to turn to the (EU/IMF) fund, provided they efficiently manage their balance sheets," Tamvakakis said.
"The Greek banking system will achieve the restoration of good liquidity conditions gradually, within the first half of 2011," he added.
