Fitch: The improvement that Greek banks have made is huge

Her Eleftherias Kourtali

A strong “message” for the Greek banking sector is sent by the rating agency Fitch, just one day before its scheduled rating for Greece. The house has noted many times that in addition to the greater confidence that the country’s public debt / GDP is returning to a steady downward trend, the main factor for upgrading its creditworthiness is the continuous improvement of the quality of the banking sector assets.

At an online conference on the prospects of the European banking industry, Fitch reiterated its assessment that the NPE index of Greek banks will move to single-digit levels this year, thus approaching European normalcy. This is therefore a signal for upgrading both the Greek economy and the Greek banks during 2022, bringing Greece closer to the “bet” of the investment grade.

Thus, with regard to Greek banks in particular, Fitch, as part of the Credit Outlook EMEA 2022 online conference and in a special panel for banks, said that their outlook for 2022 is clearly improved thanks to the economic recovery and the reduction of NPEs, with their economic recovery and consolidation, to continue to support the business environment of the industry. At the same time, the funds of the Recovery Fund will strengthen the economic activity, further helping to improve the prospects of the sector.

As the analysts of the house pointed out, Greece has recorded the highest NPEs index, however the progress that has been made is significant and the house estimates that once the transactions planned by the administrations are completed, the total NPEs index of the sector will fall this year to single digits. percentages.

More specifically, they pointed out that Greek banks showed strong momentum in reducing their non-performing assets, with Alpha Bank and Piraeus Bank following the improvement (after the EIB and Eurobank) as both had NPEs above 40% at the end of 2020, but last year they made significant reductions of € 10 billion each and reduced the NPE by close to or below 20%. The National Bank and Eurobank are leading the process, and if we take into account the closing of the transactions that were planned in the fourth quarter, the National Bank will have an NPE index of 11% and Eurobank will have single-digit percentages at the end of 2021. Thus very soon Greece will have single-digit NPEs, as they stressed.

As for European banks in general, Fitch analysts note that the strong recovery of Southern European economies, which will receive additional growth boost from the Recovery Fund, will strengthen the business environment for banks. This leads Fitch to estimate that the outlook for banks in the region is improving, while noting that the risk of a sharp deterioration in the quality of pandemic-related assets has been greatly reduced as economies emerge from the crisis, given the significant measures state support. Asset quality was better than expected in the weakest countries, where banks continued to sell troubled assets to lower NPEs toward their targets.

Banks in southern European countries are expected to see relatively better performance in 2022 compared to 2021, according to Fitch, as the recovery in those countries began later than in southern Europe. Growth rates for these economies will be well above historical averages following the sharp decline during the crisis, with the help of the NGEU, which will boost business growth. This will offer new business opportunities to the banks and support the quality of the assets.

Fitch does not expect a sharp increase in non-performing loans in 2022, as government support measures have proven effective in reducing credit losses to low levels. The NPEs, which have remained fairly stable in 2021, will rise moderately as the remaining state support measures are phased out.

As mentioned, the house forecasts for Italy, Ireland, Portugal and Greece include a further reduction in non-performing assets, which will be supported by banks’ commitments to meet their NPEs targets. Lending in vulnerable sectors (eg tourism, hotels, restaurants and transportation), especially to SMEs, could lead to increased credit losses, but these should remain manageable, in the house’s view.