Bank battle for 100,000 business loans

By Leonidas Stergiou

The four systemic banks have taken a battle position, claiming shares of 25% -30% of the new loans that companies will need in view of the Recovery Fund and the upward cycle of the economy until 2027.

In the first phase, about 2,000-2,500 large companies have come under the microscope, which will receive the first funding from the Recovery Fund programs. This seems to be a strategic choice, as it requires the timely absorption of 37% of the funds in order to disburse the next ones. Time pressure is creating opportunities for other businesses to take advantage of the subsidies, business growth, corporate transformation and consulting services that banks have begun to provide. In this way, the four systems secure shares in the first funding and at the same time prepare the ground for increasing their potential clientele, which is currently relatively limited.

The intensity of the battle, with aggressive pricing, especially in the beginning and in large companies, is indicative of the goals announced by the four systems in terms of market share that they want to gain in business loyalty in the coming years. This percentage ranges between 25% and 30% which for the four systemic banks, the total exceeds 100% of the potential market.

Business distribution

As mentioned in a recent presentation of Eurobank, both by its CEO, Mr. Fokion Karavia, and the Deputy CEO, Mr. Costas Vassilios, the total number of companies that can be lent today is estimated at around 100,000. According to Eurobank estimates, about 2,000-2,500 are the number of companies for loans over 5 million euros, almost 18,000-20,000 for loans from 1 million to 5 million euros, while another about 80,000 for loans under 5 million million.

These estimates confirm the latest study of the ECB and the Commission (SAFE), but also of the National Bank on the mapping of small and medium-sized enterprises. Of the estimated 780,000 businesses, about 20% or almost 160,000 are companies and employ at least one additional person, in addition to the owner. The rest belong to the category of sole proprietorships and freelancers. This category, which concerns more than 600,000 companies, does not belong to the business credit, but to the retail retail.

Therefore, the first disbursements of the Recovery Fund expected in early 2022 find the four systemic banks with a dynamic clientele of 160,000 businesses. Of these, as shown by the SAFE report, but also by the estimates of banks, almost 15% -20%, ie about 25,000-30,000 companies do not want a loan because they have sufficient capital and liquidity. There are still 30,000-35,000 companies that do not want to borrow for reasons other than fear of rejection or insufficient capital.

The goals of banks

Thus, today, the perimeter of the business clientele is limited to about 100,000 companies, most – if not all – are already customers of the four systems. According to the Deputy CEO of Eurobank, Mr. Costas Vassilios, the Bank intends to increase the net credit expansion by 20% in three years, ie by 2.5 billion euros, which means new loan disbursements of 3.5 billion euros. The bank’s goal, as mentioned in presentations, is 30% of the market.

The goals of the other three systemic banks are similar, however, with Alpha Bank, Ethniki and Piraeus targeting new disbursements of more than 30 billion euros by 2024. It is noted that the amounts are not comparable, as the net credit differs expansion (loans minus repayments and securitizations) from new disbursements (new loans only), while the portfolio of business loans presents differences in terms of classification and quantitative target for the three years.

The calculation of the pie

A common basis for calculation is market shares of around 30% for a total credit expansion estimated to exceed € 30 billion by 2024, from the effects and needs of the Recovery Fund alone. Bank analyzes estimate that out of the € 32 billion of the Recovery Fund (of which loans will amount to € 13 billion), the total financing needs of businesses will amount to around € 15-18 billion in order to mobilize investments of about 30-35 billion. The funds of the Recovery Fund, acting as a multiplier, will create new financing needs in all businesses amounting to 5-6 billion euros. At the same time, growth and growth will further increase funding needs by around € 10 billion.

Therefore, the pie for new loans created by the Recovery Fund within three years exceeds 30-35 billion euros. The total amount by 2027 is expected to be even higher, as in addition to the Recovery Fund, Greece expects European and national funds totaling 50 billion euros (NGEU, NSRF, CAP, other European funds).

Preparing and creating a new clientele

But by then, the number of eligible companies will have increased and possibly doubled compared to today. This estimate is based on the following indications:

First, Many, if not all, of the companies that do not want to borrow today will need financing in order to keep up with demand and grow further.

Secondly, Many companies are going to change hands, something that has already begun, accelerating corporate transformation and changing the production model. So there will be new financing needs from new companies.

Thirdly, many of today’s ineligibles are expected to become eligible, by improving the financial data presented in their books and by drawing up modernization plans. In the latter, the banks prepare their tomorrow’s clientele through consulting and identifying the appropriate financing programs and subsidies through the Hellenic Development Bank, NSRF, but also through the Recovery Fund, as subsidies are provided mainly for smaller companies.