Prices rise,
Unemployment Drops
Nowadays things are looking up. The economy is recovering, asset
prices are rising again, and unemployment is falling. Profitability is
returning: Piraeus Bank and NBG reported core operating profits in
2018, while Alpha Bank and Eurobank posted a net profit of €53
million €91 million, respectively.
“The positive performance in 2018 coincides with the successful
conclusion of our restructuring plan, which restored our
commercial flexibility,” says Vassilios Psaltis, CEO of Alpha Bank.
“Now, our priority is to take the next steps in accelerating our non-
performing exposure (NPE) workout.” NPEs are a broad definition
of bad loans that includes other debt instruments and off-balance
sheet items.
In May 2018, the Greek banks successfully passed the European
Central Bank (ECB) stress tests, showing they have enough capital
and provisions to deal with their bad loan problems. Deposits are
returning, albeit at a slow pace, and access to international financial
markets is improving.
Meanwhile, through write-offs, loan sales, and restructuring agreements, by September 2019 the banks had reduced their stock of NPLs to €71.2 billion, or roughly 42% of total loans. That’s still a mountain, but it is ahead of ECB targets and well down from a €107 billion peak in March 2016. By the end of 2021, the Greek banks want to collectively reduce those bad loans to €26 billion.
Deferred tax credits have also served as a key deterrent to
accelerated NPL reduction says the Governor of the Bank of Greece,
Yiannis Stournaras. They need, he adds, to be systematically
addressed.