Eurobank goes from strength to strength as Greece fights back

Transcript

At the height of the financial crisis, Greek banks faced the prospect of being nationalised. World Finance speaks to Dimosthenis Arhodidis, General Manager of Wealth Management at Eurobank, to find out how the bank escaped that fate and was able to make a dramatic rebound.

World Finance: Now Dimosthenis, as you just heard me mention, the ECB was able to eventually give back control of Greek banks, can you tell me how you and your bank were able to get out of that path of darkness?
Dimosthenis Arhodidis: Eurobank went through a difficult time over the last three or four years. Essentially the turnaround of Eurobank started in June 2013. The management of the bank changed and we basically acquired the Greek postal savings bank, which gave us extra liquidity in order to get back into the market and be able to finance the Greek economy.

However, the most important event occurred last May, when we recapitalised that bank by raising €2.8bn from the international markets, especially from a group of investors comprising of Fairfax, Wilbur Ross, Capital Research, Fidelity, Mackenzie, and Brookfield. This group of anchor investors is essentially our main shareholder right now, holding half of the shares which are not owned by HFSF.

The Hellenic Financial Stability Fund still owns 35 percent of Eurobank. However, 65 percent of the shares are owned by international investors and other Greek individual investors. As a result, Eurobank is essentially the most privately owned bank in Greece and hopefully we will be able in the years to come to return the funds that the HFSF contributed to the bank.

Eurobank is essentially the most privately owned bank in Greece

World Finance: Now you talked about the foreign investors a little bit, tell me about the ambitions of your local investors, I know there was a crisis of confidence of course when the crisis hit. Tell me, how are local investors feeling?
Dimosthenis Arhodidis: A big percentage of the local investors withdrew their money from Greek banks during the crisis between 2010 and 2012. With the change of government, with the elections that occurred almost two and a half years ago now, the confidence of the Greek investors came back and they started bringing some money back to Greece, and they started feeling better about the Greek economy.

Obviously this confidence has been building over the last two and a half years. The last few weeks have not been that great because there seems to be some political instability back in Greece. However, we hope that this political instability will subside, building the confidence of Greek investors will continue.

World Finance: Now in building that confidence can you tell me what are your private banking customers that are Greek spending their money on? Is it domestic or international investments?
Dimosthenis Arhodidis: Having Been through the Greek crisis, they seem to understand now that they need to diversify their investment portfolios from the Greek markets to foreign markets, although the Greek market has given very good returns in the last two and a half years.

However, overall, private banking clients with Eurobank need to feel and need to act like global investors with access to the global market. So what we try to convince them is that, besides the Greek risk, they should also have non-Greek risk in their portfolios and the percentage of Greek risk should be smaller than what it is right now for the average private banking Greek investor.

World Finance: Speaking of risk, can you tell me, how much are they actually willing to take on for those that want to maybe push the boundaries?
Dimosthenis Arhodidis: We have seen a shift during the last twelve months. Greek investors are willing to take more risk, they feel a little bit more comfortable about the Greek situation, and the international situation. Before the middle of 2013, what they were concerned about was to preserve their capital. But after that is they started feeling more confident. They’re trying to take more risk in order to increase their returns.

However, how much risk they want to take, there’s not a blanket answer. It depends on the risk profile of each client. What we try to do at Eurobank is to actually profile as accurately as possible the risk appetite of each client and essentially guide him based on that.

Hopefully the Greek economy will start growing again

World Finance: Now your riskiest clients, has their tone become more muted since the crisis, or are they even willing to hit back hard?
Dimosthenis Arhodidis: Well the high risk clients, the risk appetite became muted, but now they’ve come back strong. Essentially those are the clients that are trying to assume more Greek risk in their portfolios because, as you know, their yield from the Greek bond markets and the Greek stock market have been quite attractive.

However, our guidance is that they need to step back, they need to understand that risk is something that they do not see, but it hits you hard when it comes. So we try to make them understand that they still need to diversify and they still need to control the percentage of their portfolio that is assuming Greek risk.

World Finance: Finally, what does the future hold for Eurobank?
Dimosthenis Arhodidis: Hopefully the Greek economy will start growing again. It’s not only for Eurobank, it’s for the entire Greek banking system, what I’m going to say. We expect a growth rate of between half and one percent for Greece for 2014, which is the first good year, the first positive year after six years of recession.

This will essentially impact positively all Greek banks, Eurobank as well. It will impact the confidence of clients positively and hopefully more assets under management will come back to Eurobank either in Greece, or in Luxembourg, where we have a subsidiary providing wealth management services as well.

World Finance: Thank you so much for joining me today.
Dimosthenis Arhodidis: Thank you very much for inviting me and it was a pleasure to be here as well.