Time is running out for Greek NPLs
The Greek banks’ bad debt reduction targets look eye-wateringly ambitious for a country that is only just getting to grips with a coordinated strategy to deal with the issue.
A mere decade after the financial crisis, Greek banks are finally showing signs of tackling their NPL exposures in earnest. However, this is due far more to pressure from the ECB and its desire to push ahead with banking union than a wholesale change in sentiment by the industry itself.
On January 24, Yannis Stournaras, governor of the Bank of Greece, declared that the “effective management of non-performing loans is the most important challenge for the banking industry today… If we think that it is desirable for the NPL ratio to converge rapidly to the European average, the Greek authorities must quickly form a consistent and coordinated approach to address the issue of NPLs in a systemic way, on top of banks’ individual efforts.”
A heavy emphasis should weigh on the word “if” in that statement.
NPLs at Greek banks have fallen 20% since their peak in 2016, but still stand at €88.6 billion, or 48% of total loans outstanding. Of the four largest banks, Piraeus Bank had 54.7% NPL exposure in June 2018, Alpha Bank 51.9%, National Bank of Greece 42% and Eurobank 40.7%. Across the EU, the average NPL ratio is now 4%.