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Greek banks ride a wave of optimism

This year’s dovish turn in global monetary policy is difficult for most eurozone lenders, but it’s propping up Greek banks, spurring demand for NPL sales; but if these banks return to normality and grow their loan books, negative rates could still end up causing them pain.

Kyriakos Mitsotakis_780

Business confidence has soared after the election of a new centre-right government led by Kyriakos Mitsotakis

After more than a decade of struggle, Greek bankers are at last daring to believe that – this time – their country and financial sector has begun a recovery that lasts.

While the sector in Europe has struggled to recoup its 2018 losses, Greek bank shares have risen by about 50% this year. And to listen to the banks, this is just the beginning. After all, their shares still trade at a discount to book value of about 60%, compared with typical discounts of around 15% across Europe.

By the early 2020s, Greek banks think they will reach a similar rate of return on equity as their European peers, something approaching 10%.

Gradually, interest in the country and its banks is beginning to spread beyond the hedge fund community – and it’s no longer all about the risk Greece poses to the international economy.

“Investors feel we have turned a corner,” says the head of investor relations at one of the big four Greek banks.

The crucial element this year is the renewed dip in interest rates in the US and Europe.

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