NPL&REO News

Piraeus announces the sale of Sunrise I portfolio of Non-Performing Exposures amounting to €7.2bn Gross Book Value

Piraeus Financial Holdings S.A. (“Piraeus”) announced to have reached definitive agreements with Intrum AB (publ) and Serengeti Asset Management LP for the sale of 49% and 2% of the mezzanine and junior notes of the Sunrise I NPE portfolio respectively.

The Sunrise I portfolio consists of retail and corporate NPEs. It comprises c.205k loan exposures and a gross book value of €7.2bn, as at 30.09.2020. 

The implied valuation for the Transaction, based on the nominal value of the senior notes and the sale price of the mezzanine and junior notes, corresponds to 34.5% of gross book value. 

The transaction is part of the wider Sunrise transformation programme Piraeus announced on 16 March 2021 and underlines the rapid progress in Piraeus’ c.€19bn NPE clean-up plan, leading to a single-digit NPE ratio within less than 12 months. 

Piraeus Bank has already filed an application for the inclusion of the Sunrise I senior notes in the Hellenic Asset Protection Scheme (the “Hercules” scheme). The application relates to the provision of a guarantee by the Greek State on the senior notes of c.€2.45bn.

The Transaction will be classified as held for sale in Q2.2021. Together with Phoenix and Vega NPE transactions that are also pending completion this quarter, the Piraeus NPE ratio will radically drop to c.23% from the reported 46% of March 2021. Subject to the required approvals, the loans within the Sunrise I securitization perimeter are expected to be derecognized from Piraeus Financial Holdings consolidated statement of financial position within H2.2021.

The expected capital impact of the Transaction stands at c.2.7 percentage points over the December 2020 total capital ratio, taking into account the P&L effect and the RWAs relief of the Transaction.

Original Story: Piraeus Site
Photo: Piraeus Bank
Edition: Prime Yield

National Bank of Greece sells €174 million Romanian NPLs portfolio to Bain Capital Credit

National Bank of Greece (NBG) has completed the disposal of a 174 million euro ($212 million) Romanian-risk corporate non-performing loans (NPLs) portfolio to Bain Capital Credit.

The transaction is capital neutral, NBG said in a press release.

NBG announced the NPLs sale in December.

At the time, NBG said that the transaction is being implemented in the context of NBG’s non-performing exposure deleveraging strategy and in accordance with the Operational Targets submitted to the Single Supervisory Mechanism and has a neutral capital impact to the bank.

The National Bank of Greece is a global banking and financial services company with its headquarters in Athens, Greece. Some 85% of the company’s pre-tax pre-provision profits are derived from its operations in Greece, complemented by 15% from Southeastern Europe, according to its website.

In January 2020, ​NBG announced the completion of the sale of its 99.28% stake in Banca Romaneasca to Export-Import Bank of Romania (EximBank).

The Greek group is now present in Romania with leasing company NBG Leasing and Insurance company Garanta Asigurari, according to its website.

Original Story: SeeNews.com | Nicoleta Banila
Photo: Photo by Michalis Famelis / Wikimedia Commons
Edition: Prime Yield

Greece gains EU okay to extend ‘Hercules’ bad loan reduction scheme

Greece already secured approval from EU competition regulators to extend its “Hercules” bad loan reduction scheme to help banks reduce the mountain of impaired credit burdening their balance sheets.

The scheme was launched in October 2019 to help the country’s banks offload up to 30 billion euros of bad loans by turning bundles of impaired loans into asset-backed securities that can be sold to investors. Athens wants to prolong the scheme to October 2022.

The European Commission said its approval was on the basis that not state aid would be involved.

I welcome the prolongation of the Hercules scheme, which has already been very successful in providing a market conform solution to remove non-performing loans from the balance sheets of Greek banks, without granting aid or distorting competition,” European Competition Commissioner Margrethe Vestager said in a statement.

Original Story: Reuters | Staff
Photo: Photo by Szymon Szymon in FreeImages.com
Edition: Prime Yield

Impact from the pandemic on Greek banks to intensify in 2021

The impact of the pandemic on the banking sector is expected to intensify in 2021, mainly in the form of a new wave of NPLs, as well as an anticipated worsening of the Deferred Tax Credits (DTCs) as a share of total prudential own funds, according to the Bank of Greece, the country’s central bank. 

In the governor’s annual report, the central bank said that it has estimated that new NPLs in 2021 will amount to 8-10 billion euros.

In addition to the twin problem of NPLsand DTCs, Greek banks face a number of serious challenges, common to most euro area banks, such as low core profitability, increased competition from non-banks, challenges stemming from the incomplete banking union, and others associated with the impact of climate change and cyberattacks,” the bank said. 

“Non-performing loans (NPLs) stood at 47.4 billion euros at end-December 2020, down by about 21 billion euros from a year earlier. The NPL ratio to total loans remains high, at 30.2% compared with an EU average of just 2.6%. However, compared with its March 2016 peak, the stock of NPLs has declined by roughly 60 billion euros, mainly through loan sales and write-offs, and much less through recoveries from active NPL management. 

By the time the Hercules plan is completed in the course of 2021, theNPL ratio will likely have fallen to about 25%and the average capital adequacy ratio to below its current levels, with a simultaneous increase in the share of DTCs. These estimates do not take into account the new NPLs that are expected to be added to the current stock as a result of the pandemic shock,” the report added.

Against this background, additional measures need to be taken to facilitate the frontloaded recognition of credit losses on account of the pandemic, as well as the fast repair of bank balance sheets together with addressing the DTC problem. To this end, the Bank of Greece called on the government, as a complement to the Hercules plan currently underway, to establish an Asset Management Company (AMC). 

The Bank of Greece proposal simultaneously addresses the problem of DTCs. The government is examining the advisability of establishing an AMC, as proposed by the Bank of Greece, and has applied to the European Commission’s DG Competition for an extension of the Hercules plan. Should the proposal of the Bank of Greece not be selected by the authorities, an alternative way of addressing the problem of DTCs will need to be found that is compatible with the applicable capital requirement legislation,” stressed the bank. 

The commitment of sizeable public funds in the form of state guarantees, to support NPL securitisation through the Hercules plan, which was a decision in the right direction, should ensure a definitive and comprehensive solution to the twin problem of NPLs and the high share of DTCs in banks’ regulatory own funds, it said. 

Original Story: Ekathimerini | Newsroom
Photo: Bank of Greece Website
Edition: Prime Yield

Greek banks will absorb additional NPL disposals, says DBRS Morningstar

A few days after upgrading the outlook of the Greek credit sector from stable to positive, DBRS Morningstar said in a commentary it believes that recent subordinated debt issuance and capital actions should enable the banks to absorb the impact of additional nonperforming exposure (NPE) disposals.

Nevertheless, the global credit rating agency considers external factors such as investor appetite and the macroeconomic environment to be key to the banks’ success. It noted that the Greek banks combined reduced their NPE stock by 50% year-on-year on a pro forma basis as of end-2020 and have announced further NPE disposal plans.

Strengthened capital bases through restored and ongoing access to the subordinated debt capital markets along with capital actions should enable the banks to absorb the impact of the newly announced NPE disposal plans, DBRS Morningstar said, adding that continuous investor demand and the pace of the economic recovery, which will likely dictate the performance of the loans that have been granted payment holidays, will be crucial for the banks to achieve their targets.

Following significant NPE reduction in a challenging year and recent announcements for further de-risking, we consider that strengthened capital bases should enable the Greek banks to absorb the impact of the additional NPE disposals. The economic recovery along with the level of investor demand will be key in the banks’ meeting their targets.” the rating agency commented.

Original Story: EkathimeriniAuthor: newsroom
Photo: Photo by Lotus Head in FreeImages.com
Edition: Prime Yield

Piraeus Bank gets shareholder approval for 1bln euro equity offering

Piraeus Bank, one of Greece’s four largest lenders, got the green light for a planned equity offering to raise about 1.0 billion euros from shareholders at an extraordinary meeting.

The bank, 61.3% owned by Greece’s bank rescue fund, the Hellenic Financial Stability Fund (HFSF), has said the offering of new shares will dilute the HFSF’s stake to a minority holding without any blocking power, meaning below 33%.

Chief Executive Christos Megalou told shareholders that the plan would help the bank to cut the ratio of bad loans within its overall debt portfolio.

The reduction of our stock of non-performing exposures (NPEs) is the priority of the ‘Sunrise’ plan … to get us to a single-digit NPE ratio,” Megalou said.

Piraeus Bank’s NPE ratio at the end of last year was 45%, not counting two securitisations that will be concluded later this year.

He said cleansing of the bank’s balance sheet of bad loans would “allow the sustainable funding of Greece’s economy”.

The bank said 99.3% of shareholders at the meeting voted in favour of the plan to issue new shares.

The equity offering will be a combined international placement with institutional investors via bookbuilding, and a domestic public offering that will take place simultaneously.

The issue price of the new shares will be determined in the bookbuilding and will be the same for both institutional and domestic investors.

Original Story: Reuters
Photo: Piraeus Bank Site
Edition: Prime Yield

Moody’s upgrades Greek Bank’s outlook to positive

Moody’s Investors Service changed Greek banks’ outlook to positive from stable.

In a report, the credit rating agency said that its decision reflected mainly expectations for a further improvement in reducing the high levels of non-performing loans, as banks sell off legacy problem loans and move on with securitizations, combined with expectations for a gradual strengthening of Greek banks’ profits (core earnings).

The outlook reflects Moody’s assessment of the basic credit conditions that will affect Greek banks’ credit rating in the next 12-18 months.

Original Story: The National HeraldAuthor: Athens News Agency
Photo: Photo by Jonte Remos in FreeImages.com
Edition: Prime Yield

Alpha Bank enters into definitive agreement with Davidson Kempner over Euro 10.8 billion Galaxy portfolio

Alpha Bank announced on 22nd February that it has entered into a definitive agreement with Davidson Kempner Capital Management LP referring to the sale of 80% of its loan servicing subsidiary Cepal Holdings Single Member S.A. (“New CEPAL”), and the sale of 51% of the Mezzanine and Junior securitization notes of the Euro 10.81 billion NPE portfolio (the “Galaxy Securitizations”) (together with the sale of New CEPAL, the “Transaction” or “Project Galaxy”).

Vassilios Psaltis, CEO of Alpha Bank, said:”We are excited to enter into a long-term agreement for Project Galaxy with Davidson Kempner, a highly experienced US investor. This is a turning point for our Bank as we are making a decisive step in dealing conclusively with the legacy asset quality issues from the long-lasting recession in Greece.In spite of the unprecedented conditions we experienced due to Covid, we are proud to have managed to sign such a complex transaction in just eight months from launch, to attract significant international investor interest and to fully meet our targeted capital envelope for this transaction. Alpha Bank now continues with undivided attention to implement the last mile in its de-risking strategy and to drive forward the implementation of its transformation plan so as to capture superior growth opportunities.”

Original Story: Alpha Bank Press Release
Photo: Alpha Bank Website
Edition: Prime Yield

National sells NPL portfolio to Bain Capital for €1.6 bln

The National Bank of Greece Group on Friday announced the completion of a transaction for the disposal of a nonperforming, predominantly secured, corporate loan portfolio to the investment firm Bain Capital Credit for a total principal amount of 1.6 billion euros.

In a statement, National Bank said that Morgan Stanley & Co International Plc acted as financial adviser, Karatzas & Partners and Milbank LLP as local and international external legal counsel, respectively, and Deloitte Greece as transaction and accounting adviser to NBG.

Original Story: Ekathimerini | Newsroom
Photo: Photo by Michalis Famelis / Wikimedia Commons

Banks have €28.4 billion of loans on ice

Banks and servicers are in a race against time to reach settlement agreements over nonperforming loans (NPL) and suspended loan tranches in a bid to stem the impact of the pandemic crisis, according to Finance Ministry data. The data show that the loans on ice amounted to €28.4 billion at end-2020, while the debts on which a settlement deal had been reached with lenders and NPL management companies added up to €21.2 billion.

From March to December 2020, repayments of a total of 405,473 loans were suspended for up to nine months, a measure that ends on March.

From July 2019 to December 2020, settlement deals for 396,621 loans (mortgage, consumer and corporate) were reached with banks and servicers.In the context of the Gefyra program for the protection of borrowers’ main residences, the state subsidized the repayment tranches of 110,037 loans of 69,443 borrowers up to end-January, disbursing €47.9 million. Applications submitted up to the end-October deadline numbered 160,477, with 74,420 already approved by end-December.

Original Story: Ekathimerini | Evgenia Tzortzi 
Photo: Photo by Markellos P. from FreeImages
Edition: Prime Yield

National Bank applies to join Hercules bad loan scheme

National Bank (NBG), one of Greece’s four largest lenders, has applied to take part in the government’s Hercules bad loan reduction scheme and securitise a € 6.1 billion portfolio of impaired loans, it said.

Banks in Greece have been working to reduce a pile of about €70 billion in bad loans, the legacy of a financial crisis that shrank the country’s economy by a quarter. Shedding the bad debt is crucial to their ability to lend and shore up profits.

The Hercules asset protection scheme (HAPS) was put in place to help banks offload up to €30 billion of bad loans.

Under Hercules, banks can apply for a government guarantee on the senior tranche of an NPL securitisation as long as that tranche is structured to a minimum Double B minus credit rating and they sell the majority of the mezzanine and junior notes.

NBG said applying to include its ‘Frontier’ bad loans portfolio in the Hercules scheme will fetch a Greek state guarantee for senior notes of up to €3.31 billion. The guarantee would give the senior notes a zero risk-weighting.

Original Story: Reuters/Ekathimerini
Photo: Photo by Michalis Famelis / Wikimedia Commons
Edition: Prime Yield

Greek banks loans subject to COVID-19 repayment relief hit $37 billion

Greek banks deferred repayments on €30 billion worth of loans last year to help borrowers cope with the financial fallout of the COVID-19 pandemic.

According to the country’s banking association, lenders granted payment deferrals to about 400,000 individuals and businesses between January and November.

The amount of loans under payment deferrals raises concerns that a chunk may become impaired when the period of grace ends, inflating the load of bad debt on banks’ balance sheets.

The European Banking Authority said in December that a deferral period cannot exceed nine months, from the time a loan is placed under deferral status.

In December, Greek’s central bank governor projected that banks were likely to be burdened by €8-10 billion of new impaired loans as a result of the pandemic.

Banks had already been working to reduce a mountain of impaired credit, the legacy of a 10-year financial crisis that shrank the country’s economy by a quarter.

Despite the reduction of non-performing loans (NPLs) by about €59 billion from a peak of 106 billion in March 2016, banks’ overall NPL ratio of 36% at the end of September remains far above the euro zone average of 2.9%.

The €30 billio of loans under payment moratoria does not include another 15 billion of mortgages and consumer and business loans already restructured, meaning banks have offered relief for €45 billion of loans in total, their association said.

Original Story: Reuters | George Georgiopoulo 
Photo: Photo by Jonte Remos from FreeImages
Edition: Prime Yield

Bank of Greece warns: new NPLs could go up to €10 bn

The burden of new nonperforming loans on Greek banks after the pandemic crisis is expected to come to 8-10 billion euros, relatively greater compared to that faced by other European credit institutions, Bank of Greece Governor Yannis Stournaras said recently.

Addressing the 8th Banking Forum, Stournaras said that Greek banks, already burdened with a high stock of NPLs, will face an even heavier burden in the future since they have exhausted the greater part – if not the entirety of – their capital reserves to deal with them. 

The central banker noted that despite the fact that Greek banks have managed to reduce their NPLs by around €50 billion since their peak in March 2016, they remain at very high levels (35.8% in September 2020), significantly above the EU average.

Stournaras stressed that Greek banks enjoy a satisfactory capital adequacy rate; however, this will be negatively affected by expected developments such as the implementation of IFRS 9 standards, the cost of securitizations of NPLs and the low quality of capital.

For these reasons, Stournaras reiterated the need for the creation of a so-called “bad bank,” to operate in parallel with the Hercules state guarantee scheme. 

His proposal, he said, would deal with the problem of deferred taxation as well and could lead to a further reduction of NPLs by €40 billion.

He asserted that the cost of this bad bank will be covered exclusively by banks.

Original Story: Ekathimerini | Business
Photo: Bank of Greece Site
Edition/Summary/Adaption: Prime Yield

Attica Bank announces the securitization of two NPL portfolios

The Greek bank Attica has announced on late december that, following a resolution of the Board of Directors meeting of 30th November 2020, proceeded to the securitization and transfer of two portfolios of non-performing loans, totalling €712 million.

The bank transferred a portfolio of non-performing corporate loans/credits of a total amount of approx. €340.8 million to a special purpose vehicle (SPV) under the name “Astir NPL Finance 2020-1 Designated Activity Company» based in Ireland. Furthermore, the SPV issued and transferred to the Bank a Class A bond of nominal value of €159,000,000 (Senior Note), a Class B bond of nominal value €1,806,000 million (Mezzanine Note) and a Class C bond (Junior Note) of nominal value of €180,000,000. The bonds derive from the securitization of the above loan portfolio.

Attica also transferred a portfolio of non-performing retail loans/credits of a total amount of approx. €371.2 million to a special purpose vehicle (SPV) under the name “Astir NPL Finance 2020-2 Designated Activity Company» based in Ireland. Furthermore, the SPV issued and transferred to the Bank a Class A bond of nominal value of €190,000,000 (Senior Note), a Class B bond of nominal value €104,921,000 million (Mezzanine Note) and a Class C bond (Junior Note) of nominal value of €76,372,000. The bonds derive from the securitization of the above loan portfolio.

Original Story/source: Aticca Bank
Photo: Attica Bank Linked In
Edition/Summary/Adaptation: Prime Yield

Alpha Bank receives 2 binding bids for the €10.6 billion “Galaxy” portfolio

Alpha Bank, Greece’s fourth largest lender, said it had received two binding bids for the sale of a bad loan portfolio worth about €10.6 billion. The transaction will involve a securitisation and also the sale of the bank’s loan servicing platform Cepal.

The portfolio, known as Galaxy, consists of retail loans worth €7.6 billion plus loans to medium-sized and large corporate clients worth €3 billion. The bank did not disclose further details.

Greek banks have been struggling to reduce a pile of bad loans worth about €60 billion, the legacy of a decade-long financial crisis that shrank the country’s economy by a quarter.

Alpha Bank, which is 11% owned by Greece’s bank rescue fund HFSF, wants to reduce its bad loan ratio to 13% of its total loan book.

It reported profit of €97.5 million euros in the second quarter of the year while its non-performing loans stood at 30.2%.

Original Story: Reuters | Reuters Staff 
Photo: Alpha Bank website
Edition: Prime Yield

Q1 2021 will be decisive for the rise of a new generation of bad loans

We will do whatever it takes” for loans in moratorium status not to drop into the irrecoverable category, Intrum Hellas chief executive Giorgos Georgakopoulos has told Kathimerini.

The executive board member of one of the biggest bad-loan managers in Europe used the famous phrase of former European Central Bank chief Mario Draghi to reflect the concern debt management companies are expressing that loans worth €26 billion currently in suspension due to the pandemic do not definitively join the stock of bad loans.

These worries mostly concern the loans that were being properly serviced until April 2020, when the moratorium was put in place. As doValue Chief Executive and President of the Association of Loan and Credit Obligation Management Companies Tasos Panousis says, “the first quarter of 2021 will be a decisive period for the absorption of shocks so that we are not led to a new generation of bad loans.”

Both banks and servicers say they are determined to ease debt repayments for borrowers hurt by the crisis, while after the second lockdown the prospect for fresh moratoriums is on the table of talks with the European regulators.

Original Story: Ekathimerini | Evgenia Tzortzi 
Photo: Photo by Jonte Remos in FreeImages.com
Edition: Prime Yield

Europe in favor of a band bank

The European Commission is expecting strong pressure on the capital position of Greek banks from the pandemic, leading to further growth in bad loans and the need for additional provisions. In its enhanced surveillance report released on Wednesday, the European Union executive body stressed the need for supplementary systemic solutions that will help to tackle the problem.

The Commission’s remark constitutes an indirect call for a solution such as an asset management company – i.e. a bad bank. The fact that this is coming at a time when the Bank of Greece has formally submitted such a proposal to the government makes it even more significant, as this is the first public statement by the Commission on the matte

The financial impact of the new crisis, Brussels notes, will suppress the already low profits of local lenders, with debt securitizations set to add to that effect even if they contribute to the streamlining of banks’ financial reports: Besides the one-off loss for banks’ capital, they lead to a permanent loss of revenues for banks as those loans leave banks’ assets and stop generating interest.

Original Story: Ekathimerini | Evgenia Tzortzi 
Photo: Photo by Szymon Szymon in FreeImages.com
Edition: Prime Yield

GREECE Greek banks set to suffer when payment holidays end

Greek banks have a large share of their loans subject to payment freezes, leaving them at risk in the future of increased provisioning and a deterioration in profitability, the EU Commission said.

The EU’s eighth surveillance report serves as a basis for the Eurogroup of finance ministers to decide on the release of the next set of policy-contingent debt measures for Greece, worth 767 million euros.

These measures, agreed with the Eurogroup in June 2018, include the transfer to Greece of funds stemming from central banks’ holdings of Greek government bonds under the Securities Markets Programme.

“While accommodative monetary policy conditions have allowed Greek banks to benefit from favourable liquidity conditions, the economic effects of the pandemic are expected to squeeze banks’ already low profitability going forward,” the EU enhanced surveillance report said.

It said the reduction of banks’ non-performing loans (NPLs) continued in the first half of 2020, supported by moratoria on loan repayments which are set to expire at the end of this year.

The ratio of NPLs fell to 36.7% in June but remained the highest in the euro zone.

Loan payment moratoria, coupled with a temporary supervisory flexibility, were instrumental in shielding banks’ balance sheets from the impact of the pandemic on the credit risk of their loan books, the report said.

“Banks have started to adjust their NPL reduction strategies but loan-loss provisions booked so far might only partially capture the eventual effect of the pandemic on asset quality,” the report said, noting that banks’ internal capacity to viably restructure loans “remains a challenge.”

Greek banks’ return on equity remained one of the lowest in the euro zone in the first half of 2020.

Original Story: Zawya by Redefinitv | George Georgiopoulos 
Photo: Bank of Greece (website)
Edition: Prime Yield

Intrum and doValue expand in Greek NPLs

Greece constitutes a magnet for Europe’s major bad-loan management companies, as it has the fourth largest stock of non-performing loans (NPL). Based on January-March 2020 data, the sum of Greek NPLs came to 61 billion euros, amounting to 30% of all Greek loans – compared to an average rate of just 3% in the European Union.

The high stock of bad loans serves to explain the activation in the Greek market of two of Europe’s three biggest NPL management companies, Sweden’s Intrum and Italy’s doValue, whose prospects are analyzed in a recent report by JP Morgan Cazenove. The latter notes that, after a period of stagnation, the supply of bad loans is expected to increase in the European market, as according to data by Intrum the provisions for loan losses by European banks increased by €120 billion in the year’s first quarter from the same time in 2019.

The Italian group, which recently completed the acquisition of bad-loan management company FPS from the Eurobank Group, is also active in Italy, Spain, Portugal and Cyprus. JP Morgan Cazenove comments that the acquisition of FPS will strengthen the doValue’s revenues by 17% in 2020 and by 12% in 2021.

Intrum is present in 25 countries across Europe, in most cases being the dominant market player. After its agreement with the Piraeus Group for the management of the lender’s bad loans, it constitutes one of the top two servicers in Greece.

According to JP Morgan Cazenove, the Swedish group, which is among the biggest investors through portfolio acquisitions, has a balanced exposure in the market of debt servicing too. The variety of its mix across various market categories, its comparatively low dependence on justice systems and the property markets of the countries it is active in, and its automized loan retrieval systems reduce the shock risks from any further lockdowns.

However, despite the positive outlook for new NPLs, Intrum is trying to reduce its pace of investments so as to reduce its leveraging, which is the sector’s highest. This, according to JP Morgan Cazenove, will likely slow down the Swedish company’s investments, and therefore the growth of its profits in the future.

Original Story: Ekathimerini |Evgenia Tzortzi
Photo: Site Intrum
Edition: Prime Yield

ECB funding help Greek banks to face profit’s challenges

Greek banks will be able to face challenges to profitability from the coronavirus crisis with the help of increased funding from the European Central Bank (ECB), said the credit rating agency Moody’s.

According to its latest credit outlook report, Moody’s expects Greek banks’ profitability to weaken as coronavirus-related market disruption shrinks quality lending opportunities and erodes fee and commission income, mainly due to fewer disbursements of new loans.

The ECB’s move in April to accept Greek government bonds as eligible loan collateral, despite their ‘B1-stable’ non-investment-grade rating, led to a steep rise in Greek banks’ ECB borrowing, Moody’s said.

Greek banks increased their ECB funding to €21.5 bn in April, around 8% of Greece’s total banking assets, from €12.4 bn in March and €8.1 bn in December 2019.

The banks borrowed through the ECB’s longer-term refinancing operations mechanism (LTRO), offered to euro zone commercial banks at -0.5%.

“We believe that Greek banks’ increased ECB funding was concurrent with their reduced interbank repo funding, which was around €13.5 bn at year-end 2019,” Moody’s said, noting that repo costs had risen due to the coronavirus pandemic.

The -0.5% cost of funding via the ECB’s LTRO, along with increased private-sector deposit balances of around €145 bn as of March at a cost not higher than 0.14%, will support banks’ net interest margins and profitability, Moody’s said.

Moody’s expects net interest income and margins at the country’s large banks – Piraeus, National, Eurobank and Alpha – to remain under pressure from falling loan balances and very low interest rates.

“However, we expect limited deterioration since banks will continue to accrue interest despite government relief measures that suspend borrowers’ repayment of loan capital for six months,” Moody’s said.

Original Story: Reuters | George Georgiopoulos 
Photo: Photo by Jonte Remos from FreeImages.com
Edition: Prime Yield

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