The increase in their loan portfolio will support their profitability
If the banks they want to maintain their profitability and in the coming years, given the reduction of interest rates by the ECB, as it relies to a significant extent on interest-bearing loans, they should mainly increase their loan portfolio.
Given the reduction in interest rates, the strengthening of credit expansion is the main driver for a sustainable and strong profitability of the banks.
As the Greek bankers told investors, according to information, at the recent Greek investment conference organized in London by Morgan Stanley in collaboration with the Athens Stock Exchange, the banks have a target for new loans of 10 billion. euros in 2025.
Net credit expansion for 2024 will exceed 6 billion. euros for the four systemic banks, as in the 9 months January-September 2024, at the group level, the four systemic banks showed a cumulative increase of informed loans by 5.7 billion. euro. (Piraeus granted 1.9 billion euros, Eurobank with 1.8 billion euros, Alpha 1.1 billion and Ethniki with 0.9 billion euros.
The managements of the banks reviewed for the rest of the year the credit expansion which could range between 7 and 8 billion. euro.
Greek banks benefit significantly from the Greek recovery story and the increase in corporate lending, according to estimates by international houses.
The Swiss house UBS, in their previous report, points out, among others, that Greek banks are emerging strongly from the Greek debt crisis and are able to benefit from the strong macroeconomic recovery and credit to businesses.
“We believe that Greece offers a compelling macroeconomic recovery story. Having received 15 billion approximately EUR 36 billion from the available funds. euro of the Recovery and Resilience Facility (RRF), the use of the remaining funds over the next three years is a catalyst for investment,” UBS points out.
And it expects a strong corporate credit cycle of around 8% p.a. (2023-2026), which should offset NIM compression as interest rates fall, with Greek banks having benefited from very low costs of financing.
In its estimates for Greek banks, S&P predicts that Greece’s real GDP will grow by 2.4% on average over the period 2024-2027, outperforming the rest of the eurozone.
The continued absorption of EU support funds will boost demand for new corporate loans. S&P expects banks’ loan portfolios to grow by 4% both this year and 2025, although the potential for underperformance remains high due to economic risks.
In addition, the house assumes that the high demand for bad Greek loans will continue. The positive outlook in domestic real estate markets and the increased prospects for recovery due to reforms will support this development.
The upgrading of the public’s creditworthiness also upgrades the creditworthiness of the banks, which will be able to borrow at lower interest rates.
It should be noted that all Greek banks have been upgraded to investment grade, and indeed two scales above the minimum threshold.
Cheaper borrowing for banks means equally cheaper borrowing for businesses and households.
The banks’ liquidity ratios, which are also monitored by the supervisor, far exceed the minimum requirements. After all, private deposits are on a continuous upward trajectory after 2019. They have increased from 143 billion in 2019 to 194 billion today, i.e. by about 50 billion It is noted that at the end of 2023 the ratio of loans to deposits was at 67.2%, i.e. well below unity, which demonstrates the existence of a surplus in deposits and abundant liquidity.
