Άρθρο – ύμνος των FT για την πολιτική του Χ.Μεγάλου στην Πειραιώς

Ex-Credit Suisse banker takes radical action to clean up troubled lender

When Christos Megalou took over as chief executive of Piraeus Bank, some analysts questioned whether a softly spoken investment banker with an international background was the right choice

Fourteen months later, the 59-year-old former Credit Suisse vice-chairman for southern Europe claims to be making steady progress towards “normalising” the bank.

Sixty senior Piraeus executives have stepped down, including the entire top management team. The departures came in the wake of a probe by the Greek central bank of irregular lending practices under the previous administration.

Central bank auditors found that Piraeus had more than once violated capital controls imposed in 2015 as Greece teetered on the edge of leaving the eurozone. A public prosecutor is conducting a separate criminal investigation of the incidents. All those involved have denied wrongdoing.

“Thorough change was needed to address the legacy issues,” said Mr Megalou. “We’ve adopted a radical action plan to restore Piraeus’s credibility, predominantly by re-establishing governance principles and risk controls.”

As a result of the bank’s former aggressive lending policies, Piraeus also carries the heaviest burden of non-performing exposures at €20.5bn out of a total €57.7bn in the sector. Another €12bn owed to Piraeus may have to be written off.

On Tuesday Piraeus announced the first sale by a Greek bank of secured loans. Bain Capital Credit has agreed to buy a €1.4bn package of corporate loans collateralised with real estate.

The deal marks a milestone in the bank’s recovery, according to Mr Megalou: “We put in a lot of effort to put this sale together and it attracted a lot of interest . . . we’re continuing to work relentlessly on de-risking the balance sheet while growing the core business at the same time.”

A second sale, of €2bn of unsecured loans, is due next month. That leaves Piraeus with a second-half target of €2bn in non-performing loans disposals, he says. If market conditions remain favourable, that could be comfortably achieved.

The Piraeus overhaul is being closely monitored by non-executive directors approved by the European Central Bank’s supervisory arm, the Single Supervisory Mechanism, with veteran international bankers heading the lender’s credit and risk committees.

Piraeus has hired a cohort of younger Greek bankers, among them several returnees from banks abroad, to help carry out a three-year restructuring project aimed at cutting NPEs by half over the next three years and restoring the confidence of depositors and investors.

“We had to get away from the paternalistic management culture of the past and focus on accountability, meritocracy and transparency,” Mr Megalou said. “We believe that making this cultural transformation is the key to our future.”

The bank’s middle management is also under scrutiny following a large scale programme of interviews and assessments by an international human resources consultancy. More departures are expected as part of a voluntary redundancy plan to reduce Piraeus’s 13,000-strong workforce by 1,200 this year.

Nondas Nicolaides, Greek analyst at Moody’s, said: “We’ve definitely seen a change in the corporate culture at Piraeus, it’s quite clear . . . this has improved internal processes, including the handling of NPE reductions.”

After two decades of rapid but unwieldy growth mainly through the acquisition of almost 20 small Greek lenders with balance sheets of varying quality Piraeus was in a more vulnerable position than its peers when the country’s debt crisis erupted in 2010.

In the ECB’s latest stress test of Greek lenders’ financial health carried out in the first quarter, Piraeus emerged as the weakest of the four systemic banks, with a core equity tier one ratio of 5.89 per cent under the adverse scenario — uncomfortably close to the unofficial 5.5 per cent threshold used by supervisors in recent tests.

Piraeus took a €1.6bn hit in March to cover the cost of increased provisions under the new IFRS9 accounting standard, which requires banks to make provisions on their balance sheets for expected future losses rather than those they have already notched up.

While supervisors made clear that no immediate capital increase was required by any of the banks following the stress tests, Mr Megalou earlier in May announced a “capital strengthening” to be completed by December, which would not be dilutive for shareholders.

After three capital raisings since 2010, Greek banks are anxious to avoid another one while the economy is still in the early stages of recovery.

Piraeus’s capital strengthening plan, which has been accepted by the SSM, would add €1bn of fresh equity, to be raised internally through sales of non-core assets and cuts in operating expenses and the issuing of subordinated debt.

Sales of banking subsidiaries in the Balkans are making progress. The first disposal in Romania to JC Flowers, the US private equity group, is close to being completed. Disposals of smaller lenders in Bulgaria and Albania would follow later this year, Mr Megalou said.