Remarks on the Greek economy and the banks

Remarks on the Greek economy and the banks | TheGreekDeal.com

MOODY'S

Moody's provides a detailed documentation of its position on Greek banks and the economy, analysing the strengths and vulnerabilities that will determine the next ratings.

Newsroom

23/09/24 • 08:39

TIME TO READ

1 min

Moody's is treading in two boats for the rating of banks and the Greek economy. "We are adjusting Greece's macroeconomic profile down by two notches because we are reflecting the ongoing challenges in the country's credit conditions," the rating agency said. The agency says this balances the economy's high per capita income compared to peer countries it rates and its strong growth momentum. However, it rings "bells."

VULNERABLE BORROWERS

The resilience of the corporate sector and new lending, which will continue to contribute to the expansion of banks' non-performing loan portfolios, are likely to offset the potential risks for vulnerable borrowers. In addition, improving macroeconomic conditions will further support banks' asset quality. The analysts note that the lower level of NPLs in the system following the completion of their transformation plans also demonstrates the better credit conditions for Greek banks in recent years.

NPL'S

"NPLs in the Greek banking system fell to €11.1bn (or 7.5% of gross loans) in March 2024 from €47.2bn (or 30% of gross loans) in December 2020. Nevertheless, a portion of the excess debt for some households and corporations, estimated at around €74bn, is still in the pipeline. in December 2023, remains with the servicers currently operating in Greece and thus affects our assessment of the country's credit conditions," the analysts stress.

POLITICAL SITUATION

Regarding the political risk of instability in the country, analysts believe that it is very low following the victory of ND in the elections, reflecting the continuation of reforms and Greece's improved credit conditions. However, there are still several problem loans compared to the Eurozone average.

BANKS

"Through their transformation plans, Greek banks have reduced their NPE ratios to mid-single digits and are focusing on strengthening their core profitability. We believe that recent loan originations have not yet been tested in difficult economic conditions, and there is a significant amount of non-performing loans (NPEs) outside the banking system that continues to weigh on credit conditions," Moody's concludes.