All four Greek systemically important banks will have achieved the target of reducing their non-performing loans below 10% by the end of this year: Eurobank already achieved it at the end of 2021, Alpha Bank and National Bank should make it in the first half of the year and by the end of the year Piraeus will achieve it by the end of the year.
Towards the end of 2021, banks accelerated their efforts to reduce their NPL stack, conducting transactions totaling 25 billion euros through securitizations and portfolio sales, although they still have a long way to go before they reach the European level achieve average.
Even if the business plans for the full tightening of banks’ fundamentals are perfectly adhered to, the average level of the NPL index in 2022 for the top four lenders will be three times higher than the European average, which according to the latest European Banking Authority (EBA ) Data for the first half of 2021 amounts to 2.2% of all loans.
Greek lenders also have a significant part of their loan portfolio under management (estimated at €8-9bn) that relies on government support schemes (Gefyra 1 and 2); therefore, according to regulators, the impact of the pandemic is not yet reflected in their fundamentals.
The banks assume that the conditions for granting state guarantees ensure that these loans will continue to be serviced in the medium term. The prevailing feeling is that these loans will not weather the effects of the last crisis in the 2010s; because the commitments made under the Gefyra 1 and 2 programs force companies and households to consistently meet their debt service obligations for at least a year after the government subsidies expire. Otherwise, they will have to pay back the subsidy they received to the government and lose the benefit they enjoy from these programs.
Nevertheless, in view of the ongoing corona pandemic, it cannot be ruled out that at least some of these loans will default, which would mean a step backwards for the banks. That risk could force them to accrue additional provisions into 2022 depending on how the pandemic and the economy play out, undermining efforts to keep NPLs in single digits and shore up earnings.