DBRS: Great progress of Greek banks, chances of slowing positive momentum

The improved H1 results of the four systemic banks (Alpha Bank, Eurobank, National Bank of Greece and Piraeus Bank) reflect the significant progress made in recent years in de-risking and restructuring, along with the recovery of the Greek economy since the coronavirus pandemic, as noted by the Canadian company DBRS Morningstar. However, he notes, the positive momentum is likely to slow due to the slowing economy.

Highlights of the DBRS report:

– Greek banks reported total net profits of €2.3 billion in the first half of 2022, compared to net losses of €4 billion in the corresponding period of 2021, thanks to increased revenues, lower operating expenses and reduced credit cost.

– Income remained at satisfactory levels despite continued pressure on net interest income (NII) due to de-risking, supported by net fee income, trading and other income. The rise in interest rates is expected to boost the NIIs of Greek banks due to the faster repricing of assets compared to liabilities.

– LLPs and risk costs decreased significantly in the first half of 2022, thanks to a sharp improvement in the risk profile. Asset quality indicators continued to improve, supported by negative non-performing exposure (NPE) formation and new loan originations that exceeded expectations.

– Funds started to grow in the first half of 2022.

“With most of the planned loan consolidation process already absorbed, we believe that the capitalization of Greek banks is set to benefit from an improvement in internal capital formation going forward, thanks to higher income in the context of the gradual rise in interest rates and the healthy new loan origination, as well as lower credit costs. However, spillovers due to the Russian invasion of Ukraine may contribute to a slowdown in the economy and add pressure to credit quality in the medium term, thus absorbing some of the positive momentum,” said Andrea Costanzo, vice president of DBRS.