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Moody’s Upgrades the Four Largest Greek Banks

Greek banks Moody's
Moody’s has upgraded the four largest Greek banks and says their outlook is positive. Credit: Greek Reporter

The credit agency Moody’s upgraded on Monday the long-term deposit ratings of the four biggest Greek banks, and said that the outlook for all of them is positive.

The upgrade, “driven by their improving asset quality and solvency and good prospects for further enhancing their recurring profitability,” it says, concerns National Bank of Greece, Eurobank, Alpha Bank and Piraeus.

The first three Greek banks were upgraded to B2 from Caa1 and Piraeus to B3 from Caa2.

Moody’s says that the upgrade “also reflects their recent and upcoming MREL (minimum requirement for own funds and eligible liabilities) eligible debt issuances until the end of 2025, which will change the banks’ liability structure and enhance the buffers available to protect depositors.”

According to a press release by the American rating conglomerate, the expectation is that the four banks will continue to improve their credit profiles, and be in a good position to manage any new problem loan formation as a consequence of the coronavirus pandemic.

It adds that the ratings could be further upgraded in the coming quarters if the banks maintain their sound capital and liquidity, and further reduce their problem loans.

Greek banks to benefit from growing economy

Greek banks can leverage the economic and credit growth potential of the Greek economy, which will benefit significantly from the EU’s recovery and resilience facility (RRF), Moody’s says and notes that Greece’s real GDP surged by 16.2% year-on-year in the second quarter of 2021, and will likely grow by around 5% on average during 2021 and 2022, providing good opportunities for banks to grow their loan books and support their revenues.

Regarding Piraeus Bank, Moody’s says that the bank has brought down its absolute non performing loans to €9 billion in June 2021 from €22.4 billion in December 2020, which translates into an NPE ratio reduction to 23% from 45% respectively. Another factor driving Piraeus Bank’s rating upgrade are the favorable prospects for its underlying core profitability.

In August, Christos Megalou, the Chief Executive Officer of the Bank, stated that the institution’s performance is strong and driven by a massive transformation program.

”Piraeus has already granted €3.8bn of new financing until end-Julyahead of our €5.7bn target for 2021. Customer deposits and client mutual funds increased by 2.2bn in the first six months of 2021,” he noted.

Bank of Greece sees 4.2 percent growth in 2021

The Bank of Greece (BoG) said in June that economic growth will reach 4.2 percent this year, as it had also forecast in its previous report, with growth being particularly strong in the latter half of 2021.

The forecast is higher than the 3.6 percent that had been estimated by the International Monetary Fund (IMF).

The BoG’s monetary policy report for 2020-21 notes that the recovery of economic activity has already begun, but warned that “significant challenges” remain for the economy.

“The recovery is expected to gain momentum in the second half, driven by pent-up domestic demand, the launch of projects under the National Recovery Plan and an expected increase in tourism receipts relative to 2020,” the central bank said.

It projected the country’s economic growth to pick up next year to 5.3 percent but then ease back to 3.9 percent in 2023.

“The increase in savings during the pandemic, either precautionary or forced due to the containment measures, and the release of pent-up demand are expected to support an increase in private consumption expenditure this year,” it said.

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