JP Morgan reiterated its analysis of DTCs, prompted by Piraeus Bank’s plan to accelerate their amortization.

P Morgan remains “bullish” on Greek banks, stressing stock buybacks and accelerated amortization of Deferred Tax Credits (DTC) will act as catalysts.

Citing solid third-quarter earnings and announcements from Piraeus Bank, the American multinational financial services firm estimates that the Greek banking sector’s overall yields could exceed 10% by 2025.

Piraeus Bank recently announced an increase in the distribution of net profits, aiming for 35% in 2024 and 50% in 2025. Share buybacks will be the primary capital distribution method next year, which JP Morgan believes will boost returns for the sector. It anticipates that every 10% distribution in the form of share buybacks could add an average of 2.1% to earnings per share, with similar plans expected from other Greek banks.

Two other Greek banks, Eurobank and Alpha Bank have both followed this strategy in the recent past, and the National Bank of Greece has announced plans to repurchase part of the Financial Stability Fund’s holdings. Piraeus Bank also confirmed that a buyback plan is in place as part of its 2024 distribution strategy.

JP Morgan reiterated its analysis of DTCs, prompted by Piraeus Bank’s plan to accelerate their amortization. Greek banks face annual limits on the DTCs they can use to offset tax payments, with the existing schedule extending to 2041.

In addition, bank managements plan to voluntarily deduct additional DTC amounts from their supervisory capital, aiming for complete amortization from Common Equity Tier 1 (CET1) by 2034—well ahead of the 2041 deadline.

In the short term, this strategy won’t alter balance sheet trajectories but signals capital quality confidence, according to JP Morgan, which continues to view the market as overly conservative in perceiving DTCs as an obstacle to higher capital distribution.

Original Story: TOVIMA
Edition: Prime Yield

Deposits of approximately 19 billion euros have returned to banks from households and businesses since 2021, reflecting a 16% increase, according to a note on the Greek economy from the Bank of Greece.

The BoG’s economic bulletin highlights significant inflows of deposits from households primarily during the 2021-2023 period, while the fatigue observed in the first quarter of 2024 is attributed mainly to a shift toward alternative savings options offering higher returns than traditional deposits.

Original Story: Ekathimerini
Edition: Prime Yield

Nearly one in 10 firms in Greece in 2021 were “zombie” companies, according to a recent report by the Foundation for Economic and Industrial Research (IOBE), which revealed that 4,500 of 51,000 firms surveyed were at least 10 years old and had an interest coverage ratio of less than one percentage point for three consecutive years.

Stressing that such a large number of underperforming firms harmed healthy competition in the product and service markets, IOBE found that the ratio of “zombies” rose between 2004 and 2013, from 10% or 3,400, to 18.6%, or 7,200 companies. However, their number started to decline in 2014, dropping from 16.5% or 6,900 to 8.9% and 4,500 companies in 2021.

The study links the increase in the number of companies that struggle to repay the interest on their loan obligations over the course of several years to the non-performing loans (NPL) crisis, going on to highlight the need for measures to prevent a repetition of the phenomenon. 

IOBE notes that a high NPL burden negatively affects credit expansion rates, while the reduction of NPLs frees up resources that stimulate credit expansion. Based on estimates with an average value of business loan stock close to 85 billion euros for the period 2010-2023, every reduction in non-performing business loans by 1 or 5 percentage points leads to new annual net flows of business loans of €200 million or €1 billion, respectively.

As a result, IOBE concludes that the cumulative reduction of non-performing loans on bank books by more than 40 percentage points in 2016-2023 resulted in an increase in net business loan flows by approximately €8 billion out of the €22.5 billion (36% of credit expansion) recorded during the same period.

IOBE notes that despite showing a marked improvement, the reduction of non-performing loans (NPLs) by banks is largely due to write-offs, sales and securitizations during the 2016-2022 period and less so to a conventional improvement. 

As a result, most of the NPL stock moved off bank balance sheets came under the management of servicers. Consequently, business non-performing loans in the overall economy decreased by only 28% during the 2016-2022 period, reaching approximately €42 billion in 2022.

Original Story: Ekathimerini | Author: Evgenia Tzortzi
Edition: Prime Yield

Greece’s mortgage market has registered consecutive negative records, with Greece being the only country in the European Union to be in negative territory for housing loans over the last three years.

With the decline in mortgage lending extending beyond the last three years due to the previous financial crisis, it is clear that mortgages are the main problem in the banking system, despite the fact that funding costs and interest rates for the housing market have fallen to average European levels.

The average interest rate in the country is 4%, down from a year ago and in line with the European average, but the annual financing rate was -2% at the end of July, compared with -3% a year ago and -2% over the last three years.

This is according to the report published by the European Systemic Risk Board (ESRB), which warns of financial stability in the euro area following the intensity of recent geopolitical developments, which, as has been pointed out, could disrupt global trade and prices.

Corporate lending is bucking the downward trend in household borrowing, with Greece ranking second among EU countries – after Lithuania – with the highest annual growth rate in corporate financing, according to ESRB data.

Based on July data, the rate of credit expansion stood at 10% at the end of July, compared with 3% a year ago and 8% cumulatively over the past three years. Two-thirds of the portfolio of Greek banks – 77.7 billion euros out of a total of 118.6 billion euros – now consists of loans to enterprises, and the average cost of financing is the average of the euro area countries, namely 5.8%, with a downward trend compared to a year ago.

The decline in housing loans comes despite a narrowing of bank spreads on housing loans to close to 1.5% at the end of July, down from more than 2% a year ago, and is related to high house prices, according to the ESRB data, with Greece among the countries with the highest increase in house prices. The increase in house prices over the last year is more than 10%, while over a three-year period it is more than 40%, making Greece one of the countries with the highest increase after Poland and Bulgaria.

Fonte: Ekathimerini | Author: Evgenia Tzortzi
Edition: Prime Yield

Greece’s request to the EU’s Directorate General for Competition, to be submitted in early October, foresees €1 billion of new guarantees under Hercules III to help banks reduce non-performing loans (NPLs).

The extension of the programme by €1 billion brings to €3 billion the amount of guarantees that the State has provided or intends to provide under Hercules III (from the €2 billion initially approved), while the total guarantees under the three successive extensions of Hercules are estimated to be close to €23 billion.

The Ministry of Economy and Finance has already started exploratory contacts with the relevant EU Directorate for the approval of the additional amount of guarantees.

DBRS estimates the amount of guarantees repaid so far at €2.2 billion out of a total of €19.2 billion guaranteed by the state for 17 securitisation transactions totalling €42.8 billion. Based on the same analysis, the outstanding balance of guarantees was €17 billion at the end of June and, as DBRS notes, “the decrease of around €2.2 billion, or 11.5%, shows that the majority of business plans still need to be worked out.

Original story: Kahtimerini | Author: Evgenia Tzortzi
Edition: Prime Yield

Consumer credit had been expanding at a 30% clip during the first half of the year, boosted by strong consumer demand and car sales, up 6.5% during the first six months of 2024.

Bank data show that disbursements of consumer loans nearly reached €650 million during the first half compared to €500 million during the same period in 2023.

Banks expect the figure to remain stable during the second half and reach €1.3 billion for the whole year, up from €1 billion in 2023.

Consumer loans were notoriously popular during the period, in the early and mid-2000s, that preceded the financial crisis. After tanking for several years, they once again reached the level of mortgages in 2023.

Of all consumer loans, 50% are simple loans concluded with banks, 30% concern buying a car, and the rest are concluded directly with retailers.

In the loans concluded with banks, the average loan is nearly €6,000, payable within four years. Car loans average €11,500, payable in 4.5 years, while loans from retailers are both much smaller and shorter-term, averaging €800 and payable in 1.5 years.

But the latter category is the fastest-growing because approval is immediate, provided – and this is the difference from 20 years ago – that the retailer accesses the borrower’s tax and credit history.

Besides buying a car, most consumer loans are used for renovations and buying household equipment. Many parents also borrow to cover the costs of their children’s studies, accommodation and spending, mostly abroad.

Original Story: Ekathimerini | Author: Evgenia Tzortzi
Edition: Prime Yield

Deposits showed a significant increase in the Greek banking system last month, while corporate credit also posted a notable expansion, according to the latest official figures.

Bank of Greece data showed a significant rise in new loans to businesses by €3.1 billion on a monthly basis in June, bringing credit expansion back to a double-digit upward rate of 10.3%.

The increase in disbursements from banks, combined with the strengthening of tourism revenues, also boosted business deposits by more than €3 billion in June compared to May, raising the total of deposits held by both businesses and households to €194.8 billion at the end of June.

Since the beginning of the year, household and corporate deposits have increased by €5.1 billion, most of which – close to €4 billion – comes from the increase in bank balances held by businesses: From €45 billion they jumped to €49 billion. Household savings have increased by €1.1 billion, as in end-June they reached €145.8 billion, from €144.7 billion in January.

That significant expansion is a result of the growth of the economy, fueled by the rise of tourism among other things. However, it is also due to a significant extent to the jump in new disbursements from banks to finance new investment projects through the Recovery Fund and other financing programs for businesses. 

New disbursements that are traditionally “rushed” at the end of each quarter due to the closure of banks’ balance sheets temporarily inflate the balances of deposits held by businesses in banks, until these funds are used up and spent on new investments. The acceleration of financing in the second quarter of the year was foreseen by the managements of the banks, as the disbursements were significantly short of the signed contracts of the Recovery Fund and are expected to accelerate further in the next two years in order to achieve the absorption of the resources.

Original Story: Ekathimerini | Author: Evgenia Tzortzi
Edition: Prime Yield

The latest data show that the non-performing loan (NPL) landscape in central, eastern and south-eastern Europe (CESEE) remains resilient, with stable volumes and ratios across most jurisdictions. As for Greece, the NPL market stayed buoyant, in contrast to the more subdued transaction flows in the CESEE region, says the latest NPL Monitor.

According to the study produced under the scope of the Vienna Initiative, the Greek market remained robust as a lot of market movements (some successful and some not) came in the form of smaller transactions in 2023, without hitting the headlines. And, although only €2.8 billion was sold directly by credit institutions, there was significant activity in secondary markets.

 Banks now approach portfolio sales more from a tactical perspective than as a crisis response. Consolidation dynamics in the credit servicers industry also helped to expand the secondary flow in 2023. 

Regulatory activity, rather than macroeconomic headwinds, has influenced deal activity in recent months. In Greece, the Hercules Asset Protection Scheme (HAPS) was renewed in December 2023 with a guarantee ceiling of €2 billion and expiry in 12 months, paving the way for more activity in the primary markets. Attica Bank and Pancreta Bank are expected to take advantage of the extension.

Original Story: EBRD (release) | Author: Nigina Mirbabaeva
Edition: Prime Yield