Moody’s: Reduction of ELA exposure credit positive for National Bank

A reduction of National Bank’s exposure to the ELA mechanism to 4.5 billion euros at the end of September, or around 5.5 pct of its assets, is credit positive for the bank, Moody’s credit rating said in a report released on Monday.

The reduction is credit positive because it improves liquidity and National Bank’s credit profile and reduces its dependence from central bank’s funding mechanism, a prior action for every positive credit rating in the next 12-18 months, Moody’s said. National Bank reduced its ELA exposure to 4.5 billion euros from 17.6 billion in June 2015, without using state guarantees as collateral, Moody’s said, adding that ELA exposure was the lowest in the Greek banking system. The bank achieved this reduction through the sale of assets such as the Turkish subsidiary Finansbank and the Astir Palace Vouliagmeni Hotel. Other positive factors were a return in deposits, a securitization of loans to SMEs and a decision by ECB to restore a waiver on Greek bonds. National Bank used more the interbank repos market, with liabilities reaching 4.8 billion euros, Moody’s said.

National Bank’s deposits grew 1.6 pct in September, on an annual basis. A partial relaxing of capital controls led to an increase in deposit by around 400 million euros in the third quarter, Moody’s said, adding that a further relaxing of capital controls could lead to capital inflows worth more than 15 billion euros in cash that households (mostly) continue holding outside the banking system. National Bank is in a good position to absorb a significan part of these new deposits, Moody’s noted.