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
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
Edition: Prime Yield

NPG and Alpha bank up provisions to cover coronavirus loan impact

National Bank (NBG) and Alpha, two of Greece’s largest lenders, increased provisions to cover anticipated loan impairments from the coronavirus crisis as they kicked off the first quarter earnings season for the sector on Thursday.

The coronavirus pandemic struck just as Greece’s banks were making headway in their bid to sell, write off or restructure billions of euros of bad debt accumulated during the last financial crisis.

The country’s economy is seen contracting by 6% this year, under the central bank’s baseline scenario, hit by restrictive measures to slow the spread of the virus, the global recession and an expected sharp drop in tourism.

The stock of non-performing loans (NPLs) declined by 16% last year but remained at a high 40% of gross loans, hampering banks’ ability to lend and finance economic recovery.

National Bank NBG, 40% owned by the country’s HFSF bank rescue fund, posted net profit from continued operations of €409 million in the first quarter, up sharply from €18 million in the fourth quarter of 2019 and boosted by gains in Greek government bonds.

Loan impairment provisions amounted to €486 million, up from €107 million in the fourth quarter, reflecting the full absorption of anticipated COVID-19 related lending losses.

Peer Alpha Bank, 11% owned by the HFSF, fell to a net loss from continuing operations of €10.9 million versus net earnings of €5.4 million in the previous quarter, due to higher loan impairment provisions and weaker trading income.

«We expect the €24 billion of stimulus measures, at 13% of GDP, to limit the recessionary impact of COVID-19 in 2020 and pave the way for a strong recovery in 2021,» the bank’s CEO Vassilis Psaltis said.

Alpha’s NPLs inched down to 30% of its loanbook from 30.1% in the fourth quarter.

National Bank’s ratio of non-performing exposures (NPEs), which includes NPLs and other credit likely to turn bad, fell to 30.9% of its loanbook from 31.3% in December.

The economic fallout from the coronavirus pandemic will likely delay planned securitisations to shift legacy bad loans off balance sheets. In response to the crisis, Greek banks have introduced moratoria on debt payments to individuals and businesses that were performing before the outbreak. 

Original Story: Reuters | George Georgiopoulos 
Photo: Photo by Michalis Famelis / Wikimedia Commons
Edition: Prime Yield

Greek banks compete for participation in the state-backed Guarantee Fund

There is strong competition among banks for participation in the Guarantee Fund for the provision of state-subsidized liquidity to Greek enterprises, with 14 lenders expressing an interest in response to the invitation published by the Hellenic Development Bank.

These banks are the four systemic ones (Alpha, National, Eurobank and Piraeus), Attica, Optima, Procredit, six cooperative lenders (Epirus, Pancretan, Thessalia, Karditsa, Central Macedonia and Hania), as well as British credit corporation Ebury.

Such is the competition for the state-backed credit that the amount of loans for which banks have submitted offers added up to €8.5 bn, while the sum of the credit with the contribution of banks has been calculated at €7 bn. Sources say the four systemic lenders have submitted demands for loans totaling over €1.5 bn each, thereby laying claim to over €6 bn between them from the liquidity to be channeled to the economy with a strict timetable up to the end of the year.

According to the announcement by the Hellenic Development Bank, the amount of €7 bn to be handed out in the form of working capital to all companies regardless of whether they have been hurt by the pandemic will be distributed among banks based on each lender’s share in the financing of small, medium-sized and large corporations.

The increased competition among lenders is also indicative of the high interest among the enterprises themselves, which anticipate the activation of the fund to bring some cash into the economy and go some way toward tackling the general recession caused by the pandemic.

The Hellenic Development Bank has already announced that is examining the applications submitted for the determination and signing of contract terms with the commercial banks. The contracts will determine the conditions of the state guarantee to maximize the benefit and minimize the cost of funding for the corporations to get loans from the banks. All companies operating in Greece are eligible for the loans providing they were not deemed problematic before January 1, 2020, are considered solvent and serviced their debts up to end-December.

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

Eurobank gets the green light for Greek guarantees on securitization

Eurobank has become the first Greek lender to make use of the government’s Hercules scheme to reduce nonperforming loans after gaining finance ministry approval for state guarantees on senior tranches of its Cairo I and II debt securitisations.

Greek banks have been working to reduce €75 bn of bad loans that resulted from the last financial crisis, which shrank the country’s economy by a quarter.

The Cairo programme consists of three securitisations that together amount to €7.5 bn and will help Eurobank to reduce its ratio of so-called non-performing exposures (NPEs) to 15% in the first quarter.

Shedding the bad debt is crucial for Greek banks’ ability to lend and shore up profits. The Hercules scheme (HAPS) was put in place to help the banks to offload up to €30 bn in bad loans.

The Greek state’s guarantee on the senior notes amounts to about €2.4 bn. 

Original Story: Ekathimerini | News/ Reuters 
Photo: Eurobank website
Edition: Prime Yield

Greece and Italy follow divergent paths on NPL securitization, after pandemic

Before the coronavirus pandemic hit, banks in Italy and Greece had been pinning their hopes on securitization to help them run off billions of euros of toxic debt incurred in the last credit cycle. But the two countries could now follow divergent paths when dealing with bad loans, according to Standard & Poor’s Market Intelligence anaylists’.

Securitization — whereby loans are pooled together and sold on to investors as securities — looks set to remain a viable exit for Italian banks attempting a balance sheet cleanup once the initial shock of the outbreak subsides, analysts say. But for Greece the picture is more complicated.

Both countries came into the current crisis with some of the highest levels of bad debts in Europe, at €110 billion and €70 billion, respectively, as of the end of 2019. Not only do their banks still need to deal with this, but they could also face new inflows of bad loans as struggling borrowers default on repayments during the pandemic.

It is therefore in the interest of all parties, regulators included, that banks have a range of options on the table for unloading bad debts, including securitization, Alessio Pignataro, head of European nonperforming loans at DBRS Morningstar, told S&P Global Market Intelligence.


The Italian government has been actively encouraging banks to use securitization as a means of reducing bad debts since 2016, when it introduced Garanzia sulla Cartolarizzazione delle Sofferenze (GACS). Under this decree, banks can make use of a government-backed guarantee on the least-risky portion of securitized debt.

Some €23.7 billion of bad debt was securitized under the scheme in 2019, and €47.8 billion in 2018. Some analysts believe that Italy’s securitization wave peaked in 2018, but say that GACS, which has been extended until May 2021, remains a useful tool for banks.

“We believe that securitization will continue to play an important role for banks deleveraging,” David Bergman, managing director and head of structured finance, at Scope Ratings, said in an email, adding that a wave of new defaults could accelerate the pace of deals in 2021. Securitization activity in Italy is set to fall by about 50% to 70% in 2020 as banks pause their deleveraging plans until market conditions improve, according to an April 28 note from Scope Ratings. Italy will see around €6.6 billion of securitizations in 2020 under Scope’s baseline scenario, and €11.8 billion under an optimistic scenario. But the company expects securitization volumes to pick up again in 2021 as banks move to take advantage of GACS before it expires, and said it may depend on the speed of the recovery of the Italian economy.

Pignataro also sees a temporary slowdown in securitization deals in both Italy and Greece, where all of the systemic banks have submitted and agreed to deleveraging plans with European authorities.


Securitization as a deleveraging strategy has a shorter history in Greece than in Italy. The Greek government introduced Project Hercules, an asset protection scheme that, like GACS, provides a state-backed guarantee on the least-risky slice of debt, in February this year. The scheme was broadly welcomed by banking analysts, although some warned that it should not be seen as a panacea for Greece’s bad debt woes.

Several banks had already launched major securitizations or were preparing them for market at the time the pandemic hit Greece, including Eurobank Ergasias Services and Holdings SA. The bank’s CEO, Fokion Karavias, reassured analysts in March that the pandemic would not derail its banner €7.5 billion securitization, Project Cairo, a multi-asset portfolio of NPLs. At that point, Eurobank had already signed a binding agreement with a buyer, Italian special servicer doValue SpA.

But it remains to be seen how the balance sheet cleanups of other lenders, such as Piraeus Bank SA, which reported in February that it planned to securitize some €7 billion of bad debt this year, will play out.

Eleni Panagiotarea, head of Greek financial think tank FinGreece and research fellow at the Hellenic Foundation for European and Foreign Policy, believes that the pandemic could pose some material challenges to Greece’s securitization plans.

“Swift implementation, central to restoring banks’ lending capacity at a critical time, is disrupted, and a number of hurdles appear down the road: how the state guarantee will operate considering post-coronavirus conditions, the competition that Greek banks will now face in the European securitization market, and of course, how the value of collateral accompanying the loans to be securitized will be affected,” she said.

She did, however, say she understands that Eurobank has submitted a plan for a third securitization that will make use of a Hercules guarantee.

The Greek government announced in April that it would provide guarantees on up to €2 billion of emergency loans to businesses facing a liquidity crunch thanks to the pandemic.

Talk of bad banks

The Bank of Greece now has doubts that lenders will be able to deleverage quickly enough using securitization, according to local media reports. It is now looking at other options — according to local newspaper Kathimerini, it is understood to be at an advanced stage of preparing plans for a national-level bad bank, which it will submit to the European authorities by the end of May.

But this plan is likely to face stiff resistance from the European Commission, Panagiotarea said.

A broader plan to introduce a pan-European bad bank is also unlikely to come to fruition as there is little appetite for risk pooling in the eurozone at present, she said.

Original Story: Standard & Poor’s Market Intelligence | Sophia Furber and Rehan Ahmad 
Photo: Photo by Vince Varga for
Edition: Prime Yield

Bain Capital Credit Agrees to Acquire NPL Portfolio in Greece

Bain Capital Credit, LP announced at June 5th that it has entered into an agreement with National Bank of Greece to acquire a loan portfolio, known as Project Icon. This is Bain Capital’s second portfolio acquisition in Greece since 2018.

The portfolio comprises c. 2,800 non-performing, predominantly secured, corporate contracts with total principal amount of c. €1.6 billion. The collateral securing the loans is mostly industrial, commercial and residential real estate assets.

“We are excited to expand our presence in the Greek non-performing credit market and to have assisted one of the largest Greek banks in its deleveraging,” said Alon Avner, Managing Director and Head of Bain Capital Credit’s European business. “Project Icon demonstrates our ability to complete highly complex and innovative transactions despite the challenging environment caused by Covid-19 and further demonstrates our commitment to the Greek market”

Support in executing this deal for Bain Capital Credit was provided by Hellenic Finance and Eurobank Financial Planning Services S.A.. Arbitrage Real Estate, Delfi Partners, Property Solutions Asset Management, Prime Yield and Solum Property Solutions provided real estate valuation advice, whilst Kirkland & Ellis, Zepos & Yannopoulos and Serafeim Sotiriadis & Associates provided legal assistance. Other financial due diligence and advisory was performed by Deloitte. Sioufas & Associates Law Firm provided support to the investor. 

Original Story: Bain Capital site
Photo: Photo by Michalis Famelis / Wikimedia Commons
Edition: Prime Yield

No bankruptcy for Greek debtors without total liquidation

Worried for their own survival during the Covid-19 pandemic, people in Greece who owe money to the state or banks and can’t pay will be eligible for bankruptcy only if everything they own is taken from them.

The New Democracy government, praised for its response to handling the crisis, has ended the Katseli’s Law that provided relief for people who couldn’t pay their bills because of almost a decade of harsh austerity measures.

Those included big pay cuts, tax hikes, slashed pensions and worker firings and has already seen many lose their homes to foreclosure after the former ruling Radical Left |SYRIZA,  with then-premier Alexis Tsipras breaking his vow of “not one home in the hands of banks,” let them seize properties.

Now New Democracy’s plan is let debtors be free of what they owe banks and the state and other creditors two years after they file for bankruptcy and 12 months after the procedure ends, but only have had all their assets liquidated after a court decision, according to the new bankruptcy code blueprint Kathimerini has seen.

The government wants the new framework to be ready in the next couple of months under a plan designed to appease Greece’s creditors, the Troika of the European Union-European Central Bank-European Stability Mechanism (EU-ECB-ESM) and banks.

It will replace the Katseli Law, the main residence protection status and the clauses about the bankruptcy of enterprises, the paper said, pushed through quietly while people were distracted with the fear of Covid-19.

The Katseli Law designed to protect people was too lengthy, the government said, as it could take up to 15 years to complete bankruptcy procedures and banks want their hands on properties and people’s asset faster,.

That doesn’t include New Democracy and its former coalition partner the now-defunct PASOK Socialists who owe some €250 million in bad loans that aren’t being paid and with a former Conservative government giving immunity to the bank officers who approved the payouts to the parties.

Original Story: The National Herald |  TNH Staff
Photo: Photo by Lotus Head /
Edition: Prime Yield

Debtors will lease back their homes from the State

Greece’s new bankruptcy code will provide for the main residences of bankrupt borrowers considered financially vulnerable to be transferred to a state entity and leased back to the original owners. This will replace the existing framework for the protection of debtors’ main residence from repossession.

The government is therefore examining the creation of a corporation that will take ownership of the borrowers’ homes and lease the property back to them, with the possibility of a buyback option under certain conditions. This proposal appears to enjoy the support of banks, which are keen to find a way to stop bad mortgages from soaring due to the financial crisis resulting from the coronavirus pandemic.

This idea was discussed extensively at a teleconference with the participation of government and credit sector officials and will form part of the new bankruptcy legislation to replace the existing protection system that expires on April 30.

Borrowers will be eligible for this scheme after the liquidation of all their assets, as long as their monthly disposable household income does not exceed the standard living costs as determined by the Hellenic Statistical Authority (ELSTAT), and the officially determined value (“objective value”) of the main residence does not exceed 120,000 euros for a single borrower, rising by 40,000 euros for a married debtor and another 20,000 euros per child (up to three children).

The transfer of a debtor’s main residence to that entity will be at a price equal to the commercial value of the property. The borrower will be able to stay in the property paying a monthly rent for 12 years. Three years after the start of the lease, the debtor will obtain the right to transform the rental agreement into a 20-year contract with a buyback option.

The blueprint, which is still being discussed between the government and the banks, will provide that the rent will be set based on the average floating mortgage rate adjusted to the European Central Bank interest rate.

If the debtor pays all rental tranches for the duration of the contract, they will regain ownership of the home or be able to transfer it to their legal heirs. However, the agreement will be terminated if the borrower fails to pay three monthly rents.

Original Story: Ekathimerini | Evgenia Tzortzi 
Photo: Photo by Takis Kolokotronis /
Edition: Prime Yield

Europe’s banks brace for bad debt build up from Covid-19 crisis

Europe’s banks are expected to have to set aside billions for potential loan losses as well as take profit hits because of the coronavirus crisis when they start reporting the 1st quarter results.

The region’s banks were already under pressure before the crisis with high costs, low returns, and demands to fix outdated technology. Mergers, which could potentially relieve those issues, have been difficult to pull off because of national barriers.

The largest U.S. banks, which already reported earnings by mid April, set aside $25 billion for credit losses in the first quarter, raising questions about whether European banks would follow suit.

Analysts over the past 30 days have revised upward by almost 130% their expectations for loan loss provisions in 2020 by Europe’s most important banks, according to a Reuters analysis of data from Refinitiv.

At the same time, analysts have cut by more than 40% their full-year profit forecasts for those banks, which include global banks like HSBC, BNP Paribas and Deutsche Bank, the data showed.

Regulators have said they will be lenient in enforcing accounting rules on expected loan losses, but there is pressure on European banks to be realistic about the looming downturn. Lower profitability than their Wall Street rivals will mean European banks have less room for manoeuvre.

«Those U.S. banks make huge amounts of money,» said Rob Smith, financial services partner at KPMG.

«European banks don’t have that luxury of revenue and income to absorb such significant increases» in loan loss provisions, he said. «That in turn that will dictate their approach

Though banks are not legally obliged to come up with the bulk of provisions now, «prudence is a recommendation that should be followed» given the current environment, a person with knowledge of the matter said.

The vulnerability of European banks to the outbreak was highlighted in April by the credit rating agency Fitch, which disclosed that it had taken 116 rating actions on Western European banks, mainly revising their outlook to negative.

The flood of European bank earnings will provide only a partial snapshot of how they are faring so far during the crisis, which began in earnest as the first quarter was well underway. Credit ratings agency S&P said management disclosures and comments would be «more revealing than the results themselves. »

Italian banks, which have worked hard to tackle the legacy of previous recessions, are expected to start raising provisions against loan losses in the first quarter as the economy heads for a contraction which the International Monetary Fund estimates could reach 9.1% this year, analysts say.

Italy’s banks have the highest exposure among European lenders to small- and medium-sized businesses, which are likely to suffer the most from a prolonged lockdown as the country battles with one of the world’s deadliest coronavirus outbreaks.

Morgan Stanley estimated the crisis risks saddling Italian banks with up to an additional €60 billion to €80 billion in impaired loans over the next two-to-three years, an up to 45% increase on the current stock.

Spain’s banks will also report an increase in provisions, said Nuria Alvarez, analyst at Madrid-based brokerage Renta 4.

Santander said earlier this month in a U.S. regulatory filing the pandemic may cause «us to experience higher credit losses» there.

Analysts said that a near standstill in Spain’s economy would first have a direct impact on the banks’ mortgage books, which account for around 40% of their credit portfolios, and on their consumer books, which make up for 8% of lending.

The Bank of Spain said that the country’s tourism- dependent economy could shrink as much as 12.4% this year if the coronavirus lockdown lasts 12 weeks.

At French banks, any higher loan loss provisions are expected to be «manageable», Jon Peace, an analyst at Credit Suisse, said.

Deutsche Bank is the only major European lender that analysts forecast to post a loss for the full year of 2020 as it goes through a costly restructuring. The crisis has made it difficult for the bank to predict whether it will meet its financial targets after years of losses.

Analysts doubled their expectations for Deutsche Bank’s first-quarter and full-year provisions for credit losses compared with early March, according to consensus forecasts published on the bank’s website.

Moody’s has highlighted that Deutsche Bank is among the global Europe-based investment banks that is most vulnerable to loan-loss charges.

Original Story: Reuters| Huw Jones, Valentina Za, Jesus Aguado, Maya Nikolaeva and Tom Sims
Photo: European Comission
Edition: Prime Yield

Covid-19’s recession will lead to an increase in NPL in Greece

The recession caused by the Covid-19 pandemic will lead to an increase in nonperforming loans (NPL) in Greece through the rise in unemployment, according to the Center for Planning and Economic Research (KEPE).

In its analysis titled “The Effects of Covid-19 on Greek Banks’ Nonperforming Loans,” KEPE explains that the blow from the economic slump will have a stronger effect on mortgage loans, as each percentage point that the gross domestic product falls will lead to a 3% increase in bad mortgages. The acceleration of the unemployment rate by 1% could also lead to a rise in bad loans ranging between 0.33% and 0.96% for corporate and consumer credit.

In any case the rise in unemployment is the main parameter that affects households’ ability to service their loans, so KEPE attributes great significance to the effort to contain the steep rise in bad loans, as well as the increase in state expenditure and the support of the real economy.

In Greece’s case, KEPE noted, that could mean a reduction in the primary budget surplus required for as long as is needed in order to support the economy under the extraordinary conditions comparable to post-war reconstruction. The relatively small impact of the public debt level on NPLs is an encouraging message to those responsible for drafting a more interventionary policy of support for households and corporations, according to KEPE. However, given that the support of incomes and GDP is the main factor affecting NPLs, the role of the fiscal balance should be assessed in combination with the expected favourable effect of public spending.

The financial health of banks, as reflected in the maintenance of strong capital adequacy, is for KEPE an important second line of defence to prevent new NPLs of all categories in the future, as it contributes toward safeguarding confidence in the credit system and in financial stability in general.

The KEPE analysts estimate that the negative impact on bad loans from a possible shift in property prices is expected but should be small, while increasing the incentives offered to banks for strengthening the economy’s funding will provide a small short-term support to the effort to reduce or contain the rise of bad loans.

Original Story: Ekathimerini |Evgenia Tzortzi 
Photo: Photo by Jonte Remos /
Edition: Prime Yield

National Bank of Greece results hit by NPL provisions

The National Bank of Greece (NBG) reported sharply lower net profit in the fourth quarter of 2019 compared to July-to-September on the back of weaker trading and net interest income and higher provisions for impaired loans.

NBG, Greece’s second-largest bank by assets and 40% owned by the country’s bank rescue fund, said net profit from continued operations reached €18 million versus a net profit of €210 million in the third quarter.

«At present, visibility as regards the future is extremely limited, » Chief Executive Paul Mylonas said in a statement.

«NBG will … do everything it can possibly do to implement efficiently the new policies and solutions approved by national and European authorities to ease the impact from the unprecedented shutdown of large swathes of the economy. »

Greece’s economy is expected to contract by 1% to 3% this year due to the impact of the coronavirus, the country’s finance minister said earlier.

Banks in Greece have been working to reduce a pile of about €75 billion in bad loans, the legacy of a decade-long financial crisis that shrank the country’s economy by a quarter.

NBG said its ratio of non-performing exposures (NPE), which includes NPL and other credit likely to turn bad, fell to 31.3% from 33.5% in September.

Trading income fell to €4 million in the fourth quarter from €129 million in the previous quarter when the bank booked sizable gains from the sale of sovereign bonds amounting to €126 million.

Mylonas said the group would be ready to launch a large securitisation of more than €6 billion of NPE «as soon as market conditions permit. » 

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

Credit contracted in Greek banks fall 1.4% in January

Total credit in Greece’s banking system contracted 1.4% year-on-year in January after a

1.3% decline in the previous month, according to the latest data released by the Bank of Greece.

The most sharpen fall was on the public sector segment: -5.9% year-on-year, while in the credit to business and households the contraction was -0.6% compared to the year before.

Original Story: Reuters | Angeliki Koutant
Photo: Photo by Jonte Ramos in
Edition: Prime Yield


Piraeus Bank launches the process for its first NPL securitization

Greece’s  Piraeus Bank is launching the process for its first nonperforming loan (NPL) portfolio securitization, opening the virtual data rooms to candidate investors in the Phoenix package within March.

Phoenix contains mortgage loans adding up to €2 billion and according to the bank’s plan this will be the first securitization to enter the state’s Hercules asset protection scheme in the context of a broader securitizations program adding up to €7 billion.

The non-binding offers for the Phoenix portfolio are expected next month. Based on the plan, the senior notes to be issued in the context of the securitization – for which the lender will demand state guarantees via Hercules –  will come to €900 million. Besides the senior section of the bonds to be issued, which Piraeus will keep on its books, it will also hold onto 5% of the junior notes, offering 95% to candidate buyers.

Piraeus has already commissioned the assessment of the portfolio to an independent firm (DBRS Morningstar), while the start of procedures for the securitization of a second package of NPL, under the name Vega, will be run in parallel. This will include mortgage and corporate loans adding up to €5 billion.

The plan that was announced by the bank’s chief executive officer, Christos Megalou, foresees that the bad loans pile will be reduced from €24 billion in end-2019 to €13 billion in end-2020 and below €8 billion by the end of 2022.

As for its NPL ratio will drop from 49% in end-2019 to 29% in December 2020 and 8% in end-2022.

In absolute figures the two securitizations will cost Piraeus just over €1 billion. In order to avert the increase in the state’s holding, which currently amounts to 26% of Piraeus’ share capital, the lender will follow the model of the separation of banking activity and the creation of a holding company.

The latter will be listed on the stock market and incorporate 100% of the banks’ shares, as well as the mezzanine and the junior notes.

Based on the business plan, the rest of the losses will be covered by the profits to be released from the reduction of provisions and the increase in operating profits.

Original Story: Ekathimerini |Evgenia Tzortzi
Photo: Piraeus Bank site
Edition: Prime Yield

Four suitors interested in Piraeus’ loans to MIG

At least four groups appear to be interested in the acquisition of Piraeus Bank’s loans to Marfin Investment Group (MIG), which add up to almost €550 million.

Sources say that the already known suitors Emma Capital and Comer Group have been joined by a foreign private investment fund, as well as another vehicle belonging to the United Arab Emirates’ state investment fund.

Piraeus is said to deem that the right conditions are now in place for the launch of a tender process for those loans, and decisions to that effect will be made soon, even though international economic conditions due to the coronavirus may delay the procedure for the time being.

UBS has undertaken to examine the investment interest and consider the alternative models this process could have, and the messages it has passed on to Piraeus Bank are very encouraging. It has contacted several investment funds, including Oak Hill, Farallon and Fortress.

It remains to be seen which funds will be invited to participate in the loan sale process and which will submit binding offers, but it is estimated there will be at least four.

Original Story: Ekathimerini |Ilias Bellos
Photo: Piraeus Bank site
Edition: Prime Yield

Foreign investment in real estate reaches a new all-time high

Capital inflows from abroad for real estate investment in Greece reached a new all-time high in 2019, coming to €1.45 billion and soaring 29.4% from 2018, when the figure amounted to €1.128 billion, according to latest figures from Bank of Greece.

Consequently, based on the data of the payments balance for last year, the real estate sector accounted for 35% of foreign direct investment in the Greek economy that added up to €4.2 billion.

Real estate purchases in Greece by foreigners have been on the rise in recent years, growing more than sixfold compared to 2016, when the amount invested in property by foreigners had come to just €22.4 million.

Even so, there was a slight slowdown recorded in the last quarter of 2019, which may have been coincidental. In the October-December period there was an annual decline of 9.6% from the same quarter of 2018, when an all-time quarterly high of €464.1 million had been registered.

Property market professionals argue that a certain fatigue was to be expected, and this is mainly due to the wait-and-see stance adopted by interested investors ahead of measures to boost the market such as the suspension of value-added tax on new buildings.

Original story: Ekathimerini | Nikos Roussanoglou
Photo: Photo by Toomas Järvet for
Edition: Prime Yield 

EC warns out Greece on NPLs

Greece passed the test of the fifth post-bailout assessment on Wednesday as the European Comission hailed the country’s progress on reforms and its fiscal position, although concerns remain on the nonperforming loans front.

The Commission’s post-program surveillance report said that Greece’s fiscal and economic prospects have improved and the country is once again projected to exceed the primary budget surplus target of 3.5% of gross domestic product. However, it notes that the planned easing of policy this year (on the solidarity levy, the Single Property Tax – ENFIA and social security contributions) may put off the gradual reduction of the corporate tax to 20%.

In a statement to Ekathimerini, Commission Vice President Valdis Dombrovskis said Greece has generally achieved good progress in fulfilling its reform pledges. However, he did express concern regarding bad loans: «Greece continues to have by far the biggest ratio of NPL in the EU,» he said, adding that Brussels supports the Hercules asset protection scheme aimed at reducing the stock of NPLs, but «it is important to avert the creation of new NPLs.» To achieve that, he noted, Greece needs the appropriate legal framework on bankruptcy and on imposing the terms of loan contracts.

The Latvian official stressed that there is still a problem with strategic defaulters that has to be tackled, and that the very high rate of bad loans is preventing banks from issuing credit to the real economy.

Original story: Ekathimerini | Yannis Palaiologos
Photo: Photo by Jonte Remos for
Edition: Prime Yield  

Eurobank applies to join Hercules bad loan reduction scheme

Eurobank has applied to take part in Greece’s Hercules bad loan reduction scheme via a €7.5 billion securitisation, the country’s third-largest bank said.

Banks in Greece have been working to reduce a pile of about €75 billion in bad loans, a legacy of a financial crisis that shrank the country’s economy by a quarter. Shedding the bad debt is crucial for their ability to lend and shore up profits.

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

Similar to Italy’s GACS model, the scheme was created to help lenders to clean up balance sheets and offload bad debt by turning the bundles of bad loans into asset-backed securities that can be sold to investors.

Eurobank said it had submitted two applications to the country’s finance ministry to “opt-in” to Hercules with two securitisations dubbed Cairo I and II.

«The applications relate to the provision of guarantee by the Greek State on senior notes amounting to €1.655 billion in total,» the bank said. An application for Cairo III will follow in the coming weeks, it said.

Overall, Cairo consists of three securitisations of different size and different types of loan claims.

Eurobank aims to reduce its ratio of non-performing exposures to 15% in the first quarter.

Original Story: Reuters | George Georgiopoulos  
Photo: Eurobank Site
Edition: Prime Yield