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S&P vote of confidence for Greek banks

Of Eleftheria Kourtali

The four Greek systemic banks are expected to improve their profitability this year due to the continued strengthening of their balance sheets, S&P Global Ratings said in a report, giving a significant vote of confidence in the industry.

Piraeus, Alpha Bank, the National Bank and Eurobank are expected to use the dynamics of last year, when the non-performing exposure ratios fell to about 10% or even lower, as the house points out. Further cuts in loan loss forecasts in 2022, combined with a focus on cost control, will support profitability and likely allow NBG and Eurobank to recover dividends from this year’s profits, while Alpha Bank could follow suit. a year later, adds S&P.

S&P expects the NPEs ratio for the industry as a whole to fall to around 8% by the end of 2022. NPEs inflows are expected to be limited due to the fact that the Greek banking system has been shown to be resilient to the COVID-19 pandemic, and Reforms, including the new bankruptcy framework, have improved payment culture and recovery rates. The ECB intervention, deposit inflows and leverage have supported the financing and liquidity profiles of Greek banks, according to S&P, which expects systemic banks to maintain access to the capital markets even in a less liquid environment.

Forecasts for improved performance, however, are not without risks, he notes, and include the effects of the Russia-Ukraine conflict and the deterioration on the macroeconomic recovery front. The firm points out that stronger balance sheets will stimulate competition for new lending, putting pressure on profit margins that could be further eroded by increased financing costs. At the same time, the risks include a sharper decline in net interest income (NII) due to a larger-than-expected contraction of the loan portfolio, and the pressure of the profit margin from the increased financing costs after the completion of targeted longer-term refinancing operations. by the European Central Bank.

Also, as S&P points out, the conflict in Ukraine could also affect the recovery of the Greek banking sector, albeit to a large extent indirectly, through inflation, the suppression of tourism spending and the deterioration of investment confidence. According to the direct report of Eurobank in Russia and Ukraine reaches 130 million euros, Alpha Bank 43 million euros, Piraeus 42 million euros, while NBG is minimal. However, as S&P points out, increased market volatility and risk aversion by investors may make it difficult for Greek banks to raise capital and catch the minimum equity requirements (MREL).

Source: Capital

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