Greece’s systemic banks—Alpha Bank, Eurobank, National Bank of Greece,
and Piraeus Bank—plan to expedite the repayment of deferred tax credits (DTC)
starting in 2025, a move that credit rating agency Morningstar DBRS has praised
as credit positive.
DTCs, a legacy of the debt crisis, constitute a substantial portion of
the banks’ capital but are considered a weaker form of capital.
According to Morningstar DBRS, accelerating the repayment of DTCs will
improve capital quality and provide banks with greater strategic flexibility in
capital utilisation.
The agency also said that the banks should be able to absorb the impact
of this acceleration, provided profitability and organic capital generation
remain robust.
It should be noted that in the first nine months of 2024, Greek banks
reported a combined net profit of €3.5 billion, with a return on equity
reaching 14 per cent.
The revised timeline aims to complete the reduction of DTCs by 2034,
seven years ahead of the original 2041 target.
This accelerated schedule is expected to strengthen the banking sector’s
flexibility and resilience in the years to come.
In August of this year, the agency reported that the capital
reserves of Greek banks have been further strengthened, though the quality of
these funds remains weak.
What is more, the agency also pointed out that cost control measures
helped offset inflationary pressures and increased expenses related to
digitalisation.
“The sector’s liquidity continues to be supported by large, growing, and
stable deposits,” said the agency.
It also made note of increasing activity related to capital issuances,
despite ongoing repayments of central bank funding.
Additionally, DBRS observed that the cost of risk decreased in the first
half of 2024 compared to previous years, although it remains above the European
average.
“Higher core revenues, cost discipline, and lower provisions for bad
debts led to higher profits in the first half of 2024,” said Andrea Costanzo,
Vice President of European Financial Institution Ratings at Morningstar DBRS.
Original Story: Cyprus Mail | Author: Kyriacos Nicolaou
Edition: Prime Yield