Phivos Stasopoulos reveals the sources of the increase in Hellenic Bank’s profitability

The increase in Hellenic Bank’s profitability stems from a combination of positive developments in relation to its business plan, emphasises Chief Banking Officer, Phivos Stasopoulos.

He also underlines that, in addition to income from interest, significant profitability also comes from the significant improvement in quality of the bank’s loan portfolio and the reduced impairment needs, both due to the reduction of non-performing loans and its long-term prudent lending policy.

In his interview with InBusinessNews, Stasopoulos further points out that Hellenic Bank managed to significantly increase its non-interest income, and mainly the income from its insurance operations and the use of cards, while, at the same time, it controlled and limited its expenses.

Referring to Hellenic Bank's loan portfolio, Phivos Stasopoulos notes that the bank has gotten rid of most of the non-performing loans with the completion of the Starlight project, while at the same time, the creation of new NPLs is at extremely low levels.

This, he suggests, reflects the exemplary quality of loans provided over the past few years.

Asked about the organisation's digital transformation effort, the bank's Chief Banking Officer announces the launch, soon, of an ecosystem revolving around the housing market.

Emphasising that Hellenic Bank has evolved and grown, becoming a key pillar of our banking system, but also of the economy in general, Phivos Stasopoulos notes that Eurobank's participation in its share capital is a recognition of the healthy state of Hellenic Bank and its prospects, and also a positive development for its future course.

After a long period of uncertainty, banks, and in this case Hellenic Bank, seem to be returning for good to a track of significant and sustainable profitability. Where do you attribute this development and how do you respond to those who believe that it is a result of nothing more than interest on increased interest rates? Especially for Hellenic Banking, whose loans, as we know, are mostly not linked to Euribor and therefore the increases are not comparable to other banks...

Indeed, both Hellenic Bank and other banks have finally managed to return to significant levels of profitability.

To a large extent, this profitability comes from the increase in interest rates that the European Central Bank offers on excess deposits, which today, with successive increases, amounts to 4%.

Hellenic Bank, which has, proportionally, one of the highest deposit surpluses, which confirms the long-term trust it enjoys from depositors, in relation to its loan portfolio, benefits significantly from this development.

However, it is emphasised that there were long periods of negative interest rates from the European Central Bank, which the bank avoided passing on, as far as possible, to its customers and which it itself shouldered.

Moreover, the significant profitability also came from the significant improvement in the quality of the loan portfolio and reduced impairment needs, both due to the reduction of non-performing loans and due to our long-term prudent lending policy.

We also achieved a significant increase in our non-interest income and mainly in the income from our insurance operations and the use of cards. At the same time, we controlled and limited our expenses.

So, the increase in profitability stems from a combination of positive developments in relation to our business plan.

You are right, however, that we have benefited less than other banks, as the majority of our loans are not linked to Euribor but to the Hellenic Bank base rate, with the result that our customers are also burdened less.

The other sources of income

Even though this is something you touched on earlier, besides interest, what other sources of income are you focusing on and what have the results so far been?

Non-interest income is particularly important, as it usually does not involve capital, while also contributing to profitability, as well as the ability to offer more competitive lending rates.

We place special emphasis on the income from our insurance operations, on the income from international transactions, but also on the issuance and use of credit and debit cards.

Concerns about a new wave of NPLs

One of the main concerns, however, was that the increase in interest rates would not lead to a new wave of non-performing loans in our country's banking system. Would you say, as a result, that this concern has been confirmed or disproved?

Undoubtedly, the increase in lending rates combined with inflationary trends worsens the ability to repay and is likely to lead to the creation of non-performing loans.

But banks have the tools and knowledge to effectively and proactively manage such loans, as evidenced by the volume of restructurings completed in 2023.

At Hellenic Bank especially, as I already mentioned, most of our loan portfolio is linked to our base interest rate, therefore loan interest rate increases and consequently repayment installments are at lower levels than other banks.

We constantly monitor developments and are ready to support our customers with the tools at our disposal.

The behavior of individuals and businesses

Within this aforementioned environment, how are businesses, and also households, responding? Do they turn to you, for example, for a loan, or does the psychology of uncertainty deter potential applications?

The challenges and external factors that affect our economy and therefore the demand for loans are repeated and continuous, to the extent that we should now consider them for granted e.g. pandemic, Russia-Ukraine war, inflation, war in Gaza, etc.

Uncertainty and a reduction in disposable income certainly have a negative impact on both individuals and businesses, as they worry more before making investment decisions and taking out a loan needed to support them.

But we are optimistic that the Cypriot economy will continue its healthy course.

Hellenic's loan portfolio

Regarding Hellenic's loan portfolio, how would you characterise or describe, if you prefer, its current state?

Our loan portfolio has finally shed most of its NPLs with the completion of the Starlight project, while new NPL origination is extremely low, reflecting the exemplary quality of our loans over the past few years.

Of course, conditions require constant vigilance and prompt action.

Labour and cost reduction

On the expenditure side, do you consider that you are now at a satisfactory stage, taking into account the chronic labour issue?

About half of our expenses are related to our human resources, as we are a service company.

Despite the ongoing pending situation regarding our labour issues, we continue the uninterrupted granting of both the annual increment and the Cost of Living Allowance, which are foreseen by the collective agreements.

The successful Voluntary Exit Plan about a year and a half ago has helped significantly in reducing manpower costs.

Regarding the rest of the expenses, every possible effort being is made to limit them, so that we can achieve the medium-term goal of expenses to income, which we have set.

Home buying ecosystem

We have seen in recent months how the bank is constantly introducing new digital products and services. How is the organisation's digital transformation effort progressing?

I consider digital transformation to be a long journey that we started a few years ago and which will continue, as technology is constantly evolving.

In this course we will present, on a continuous basis, new products and services with the aim of the most simplified and pleasant digital experience for all our customers.

Soon, for example, we will launch an ecosystem that revolves around buying a home, one of the most important decisions in our lives, where the bank plays a key role.

We started with the creation of "alternative service channels" beyond the traditional bank branch, i.e. ATMs, Online Banking, the Hellenic Bank Mobile App and the Customer Contact Center, which we are continuously developing, while at the same time gradually developing our branches, turning them from points of banking into points of contact with our customer base.

Our customers can now open an account online, apply for a personal loan, account with an overdraft or credit card and send money, through an application on their mobile phone, without visiting a store.

Characteristic of the shift of our customers is that 82% of transactions are now done through alternative service channels, while 97% of transfers are carried out through Online Banking.

The integration of the Co-op Bank and RCB

Are the operations you acquired from the Co-Op Banks and the assets from RCB now fully integrated so that there is real uniformity in the bank?

Integrating the operations we acquired from the former Co-Op Bank was an incredibly huge challenge due to the comparative sizes, but it was completed with complete success and in a short time.

The integration of RCB's assets, due to the experience gained, was completed in an even shorter time.

In addition to the integration of the assets, however, we also achieved the full integration and harmonisation of the staff added to the Hellenic Bank family, with the result that today we have a standardised whole.

The participation of Eurobank...

Finally, can we now safely talk about a healthy banking sector in Cyprus and where do you see the position of Hellenic Bank in this sector in the future, given the peculiarity that has to do with the stipulated acquisition of its majority share capital by Eurobank?

Going through the eleventh year since the 2013 crisis, the banking sector has managed to fully overcome the resulting problems, especially having effectively managed the non-performing loans that had been created, while high capital and liquidity ratios and low NPL ratios ensure a healthy banking sector, capable of continuing to support our economy.

Hellenic Bank evolved and grew and is a key pillar of our banking system, but also of the economy in general.

The participation of Eurobank, an established and reliable group in our share capital, is a recognition of the healthy state of the bank and its prospects, but also a positive development for its future course.

(Source: InBusinessNews)