National Bank of Greece: back to profitability and rebuilding trust

Riches to ruin to riches again

Before the sovereign-debt crisis, Greece’s banking sector was fiercely competitive. Large-scale privatisation from the mid-1990s encouraged risky lending, as the 10 leading private banks prioritised growth over profitability.

When disaster hit in 2010, the impact was devastating. At its peak, 50% of loans were non-performing [1], bank capital eroded, and market confidence evaporated.

In 2011, Greek banks suffered losses of around €38 billion – some 170% of their strongest capital reserves (then known as Core Tier I capital, now referred to as CET1) [2]. Losses wiped out safety buffers, leaving banks insolvent and reliant on outside help.

Since then, the sector has been through a major overhaul. Consolidation reduced 10 banks to four – NBG, Alpha Bank, Eurobank and Piraeus Bank. Bad loans were sold off and profitability improved. In 2024, the Hellenic Financial Stability Fund – the body created by the Greek government to buy shares in the four largest lenders – sold its remaining stake. A significant step in the sector’s recovery. Investors have taken note. With a healthier backdrop, banks are now pricing loans appropriately and generating stronger cash flow.

Financial prudence and a return to profitability

As Greece’s oldest and largest financial institution, NBG has excelled at strengthening its capital adequacy ratio (CAR) and profitability. In the results for the first half of 2025 results, its CET1 ratio rose to 18.9%, while its CAR ratio reached 21.7%. Non-performing loan exposure remained low, reflecting prudent lending [3].

The bank has been in our portfolios since October 2024. In our conversations, senior management has stressed that the old days of growth over profitability are gone. Today, the focus is on the robust pricing of credit.

Making a loan is easy; pricing it accurately is far more challenging. It requires a deep understanding of customers and their default risk. By prioritising financial prudence and structuring loans more profitably, NBG is better positioned to return capital to shareholders through sustainable dividends – an essential consideration for us as income investors.

Mobile-first strategy helps win the trust of a new generation of customers

With greater confidence in NBG’s financial judgement, we can concentrate on other factors that make the bank stand out. The first is its digital programme.

More people are now taking up internet banking in Greece. In central Greece, the number of 16-74-year-olds using internet banking increased by nearly 30 percentage points between 2019 and 2024, one of the biggest increases in Europe [4]. NBG’s mobile app, launched in 2016, offers a full suite of digital banking without the need for a computer or branch visit. It now has over 3.1 million active users and a 31% market share in mobile banking [5].

Digitalisation improves efficiency and lowers the cost of providing banking services. By building on the strengths of existing customers and products, banks are limiting the risk of disruption from emerging fintech competitors.

More importantly, in a sector scarred by the debt crisis, the app helps strengthen trust and loyalty, ensuring NBG remains a reliable brand.  

New opportunities for lending

Greece’s economy is improving, with gross domestic product (GDP) growth forecast at 2.2% for 2025 and 2.4% for 2026 [6]. The country is now on course to repay the first of three debt-crisis bailouts by 2031 – 10 years ahead of schedule.  

This should boost lending opportunities. Mortgage demand is rebounding, helped by government-backed initiatives such as the “My Home II” programme – launched in January 2025 to support first-time buyers with favourable mortgage terms. In the first half of 2025, new mortgage and consumer loan contracts totalled €2.16 billion – close to 2014 levels [7]. As customer savings grow, demand for wealth-management products could rise.

The income opportunity

As income-focused investors, we look for companies with strong balance sheets and attractive fundamentals. NBG currently offers a dividend yield of around 10% on our initiation price, supported by profitable lending and a higher payout ratio.

A financially prudent NBG is benefiting from improved customer creditworthiness and rising income levels. As the economy grows, the bank is reducing excess reserves and seeking new areas of growth – but never at the expense of profitability.

Final thoughts…

Greece’s rebound has been remarkable. Consolidation, disciplined credit pricing and digital innovation have helped its banking sector to rise from the ashes. Leading the way is NBG – a bank that combines financial strength with a forward-thinking strategy.

For income investors, that matters. With robust capital ratios, prudent lending and a growing digital footprint, NBG is positioned to deliver sustainable dividends as Greece’s economy accelerates. That’s why we believe it’s time to take another look at Greece.