The credit rating agency forecasts a faster improvement in the creditworthiness of the four Greek systemic banks Fitch, as stated in its report released today. The firm expects that The credit profiles of Eurobank, National Bank of Greece, Alpha Bank, and Piraeus Bank will improve more rapidly as a result of their plans to reduce non-performing loans more quickly, «with the help of the Greek economy’s recovery, which we expect to gain momentum.».
Fitch now expects that the banks« plans for additional securitizations of »non-performing” loans through the Hercules II framework, combined with their other initiatives, can reduce their ratio (as a percentage of total loans) to 15% over the next 12 months from 35% at the end of 2020. It also expects that banks’ profits—which were weak last year due to provisions they set aside for the expected deterioration in the quality of their assets and to support securitizations — will benefit from lower provisions in 2021–2022. This, he notes, is particularly true for Eurobank and National Bank of Greece, which have made the most progress in clearing up the quality of their assets.
The firm notes that there are risks regarding the implementation of plans to reduce «non-performing» loans, given the potential scale of securitizations and their likely impact on banks« weak capital »buffers”. However, he notes that The extension of the «Hercules» framework and the capital support measures will help mitigate them.
Fitch notes that its recent positive credit ratings for the banks reflected the acceleration of their risk-reduction plans.The agency revised its outlook for the operating environment of the Greek banking sector—which it rates “b”—to positive, as The write-off of «non-performing» loans will give banks greater financial flexibility to grant new loans. Fitch notes that its recent positive ratings also reflect the improvement in banks’ funding and liquidity profiles, which are bolstered by the increase in deposits (9% in total in 2020), the ECB’s easing measures, and their improved access to bond markets.
