2024-09-20 17:17:35
The significantly improved image of domestic systemic banks is highlighted by Moody’s in the ratings it released today regarding the individual sectors of the Greek economy.
As the international house points out, despite the improved credit conditions prevailing in the sector, the levels of non-performing loans remain high compared to the European sector.
Through the transformation plans they implemented, credit institutions were able to further reduce their non-performing exposure (NPE) ratios, to mid-single digits, so that they can now focus on strengthening their organic profitability.
However, the company warns that the loans granted in recent years are yet to be tested over the economic cycle, while there is a significant number of non-banking NPEs that continue to weigh on credit conditions. As he points out, new lending in the real economy consists mainly of corporate loans while households remain underfinanced. These credits have not yet been tested in a full economic cycle, which is a catalyst for negative adjustments to Moody’s assessment of credit conditions in Greece.
As regards to industry funding and liquiditythe picture is positive as credit institutions benefit from the increase in deposits, while the financing facilities from the ECB are reduced. Greek banks are also tapping international capital markets to raise their debt to meet the minimum capital requirement and eligible liabilities (MREL) by the end of 2025. The current structure of the industry does not pose significant challenges on the banks’ financial performance according to Moody’s.
Competition is intensifying
Regarding the high concentration in the domestic banking industry, the house points out that it results in limited competition in the market, especially in terms of deposits due to their strong liquidity. He notes, however, that although competition between banks has historically been intense, competitive pressures have eased in recent years.
However, Moody’s expects conditions to become more competitive in pricing loans and deposits in the current interest rate cycle. As he explains, unlike the big four Greek banks, the much smaller banks in the market are able to attract new deposits by offering customers marginally higher deposit rates.