By Leonidas Stergiou
Inflation, rising energy costs and the uncertainty of war will have an impact on growth and disposable income. However, as stated by the CEO of Eurobank Mr. Fokion Karavias in presentation of the results of the first quarterthe Greek economy has characteristics that differentiate it significantly from the rest of Europe.
Despite the slowdown in growth to 3.5% in 2022 and 3.1 in 2023 from 5% initially forecast, demand for loans appears strong with signs that it will strengthen further in the coming months. These estimates, as he mentioned, these estimates are mainly based on:
First, the large € 7 billion support package announced by the government to deal with the effects of the energy crisis, following measures of more than € 40 billion during the pandemic.
Secondly, the encouraging data coming from the reduction of unemployment, industrial production, inflows of foreign direct investment, the purchase of real estate, the increase of deposits and consumption.
Thirdly, the optimistic messages from tourism, which will probably lead to higher tourist receipts this year than in 2019. The decrease in tourists from Russia and Ukraine is expected to be offset by Europeans, such as Britain, which last year was This will also have a positive effect on Cyprus, where Eurobank operates, as 25% of tourists come from Russia and Ukraine, but there is a large influx from Britain.
Fourth, from the effects of the investments that are starting to be implemented through the Recovery Fund, which premium GDP by approximately 6.9-7.7 percentage points by 2026.
Accuracy but also the preparation and implementation of large investment plans have increased the demand for loans mainly from companies. The trend of the first quarter showed a net credit expansion of 0.4 million euros, which came mainly from companies of all sizes. Demand strengthened further in April and May, mainly from energy-related (RES), shipping, tourism, construction and manufacturing sectors.
The demand so far leads to the conclusion that the annual target for loans of 2.3 billion euros will be achieved despite the negative international situation that affects our country. At the same time, Mr. Karavias added, deposits increased by 4.1 billion euros in the first quarter, while there was a decrease in red loans with the bank’s index falling further to 6%. Asked if a deterioration is expected, Mr. Karavias replied that in the second quarter there may be a marginally positive change. He reminded that the Bank’s forecast for red loans remains at 400 million euros, although the data show that in 2022 the reality will be much lower. However, as he stressed, it is better to maintain conservative forecasts.
Regarding the interest rates and the effects on the Bank’s profitability, Mr. Karavias replied that the target for 10% and for a dividend from the profits of 2022 remains. And the target has not taken into account the forthcoming interest rate hikes by the ECB, one possibility in July and one in September.
According to the analysis of Eurobank, an increase in interest rates by half a percentage point will boost interest income by 80 million euros, while another increase by 0.5 percentage points will bring additional interest income of 150 million euros. If interest rates reach 1.5%, the overall impact on profitability (from interest) will be positive by € 300 million.
At the same time, the reduction of red loans below 5% this year allows the reduction of risk costs and provisions.
Asked if there are any plans to further increase Eurobank’s stake in Hellenic Bank in Cyprus, Mr. Karavias replied that there are currently no plans to increase the current share to 22.6%.