One of the top issues that international rating agencies, investment banks (e.g., Goldman Sachs), and institutions are examining in recent meetings with bank management is the course of interest income. Some analysts claim that the European Central Bank's interest rate cut is hurting banks' revenues and profitability, but banks have frequently responded to this claim.  

CREDIT EXPANSION

The first way to maintain high profitability and revenues for banks is credit expansion. That is, new loans will be made for housing to businesses and consumers. Through this way, they will offset the losses from interest rates, lowering them. Loans from lower interest rates become more attractive, which will be reflected in new credit. On this issue, reports indicate that bank management will provide answers in the nine-month figures to be announced. 

DEVELOPMENT

Second, banks are being driven into a growth phase. Either through partnerships with international players, for example, Alpha Bank and Unicredit, or through acquisitions. A typical example is the case of Eurobank with Hellenic Bank in Cyprus. 

COST REDUCTION AND PROMOTION

In the first half of 2024, Greek banks in total recorded a profit after tax and discontinued operations of €2.3 billion compared to a profit of €1.9 billion in the corresponding period of 2023. According to the ECB, this development was "driven by the increase in net interest income as a result of the high European Central Bank (ECB) key interest rates and the reduction in provisions for credit risk." As the BoE notes, credit risk reduction has played a role and here the four systemic banks have reduced CoR costs to 0.46% in the six months, exactly at the level of the German banks, but the Italian banks, with an average level of 0.30% and the Portuguese banks with a corresponding rate of 0.37%, may be leading the way. At the same time, cost rationalisation is already showing up in the banks' figures, not today but for several quarters.