2023-09-19 11:41:00
The start of the cycle for the gradual upgrading of the credit assessment of Greek banks from the three international houses Moody’s, S&P and Fitchmarks the upgrade of the Greek republic last Friday by Moody’s by two places, to the Ba1 level with a stable outlook.
However her recovery investment grade for Greek banks it is estimated that it will require one to one and a half years from today and will be guided by profitability prospects, the further reduction of non-performing loans, capital adequacy and the prospects of reducing deferred tax assets (DTC) as a percentage of their capital, an index which is mainly taken into account by Moody’s methodology.
The four systemic banks are currently ranked one to three notches – depending on the rating agency – below investment grade and given the distance that separates them, the recovery of investment grade is estimated to still require time. The upgrade of the Greek democracy by Moody’s assumes that the next move for the Greek banks will come from Moody’s, without however being able to estimate the time when this move will occur, nor whether the international house will proceed to similar move to the one that followed in the case of the Greek State, upgrading its credit rating by two notches. It should be noted that Moody’s ranks Alpha Bank as Ba2, with a stable outlook, National Bank with a positive outlook and Eurobank, also with a positive outlook, while Piraeus Bank is ranked Ba3 with a stable outlook. One level below is Moody’s assessment of bonds issued by Greek banks in the form of ATI, Tier II or senior preferred, and the prospect of an upgrade will involve all the liquidity-absorbing categories available to banks, facilitating the issuance of bonds for financing of credit expansion and the coverage of the minimum requirements of own funds and eligible liabilities, known as MREL.
Profitability prospects, bad loans and capital adequacy are on the radar of international houses.
This is followed by S&P, which ranks Greek banks three levels below investment grade, namely BB – Alpha Bank with a stable outlook, National Bank with a positive outlook and Eurobank also with a stable outlook, while Piraeus Bank is rated B+ and fixed perspective. Finally, Fitch ranks Eurobank and National Bank at BB- with stable outlooks for both banks, while Alpha Bank and Piraeus Bank are ranked one level lower, at B+ with stable and positive outlooks respectively. It should be noted that the upgrading of the Greek banks follows the perspectives of the Greek State, without of course implying the alignment of the score, which is lacking as far as the banks of this State are concerned. The next possible revisions for the country are expected in October by S&P and in December by Fitch, which place the Greek republic one notch below investment grade, specifically at BB+ with positive and stable outlooks respectively.
The profitability prospects of Greek banks are positive, driven by credit expansion, increased interest income on loans and the weaker rate of pass-through of interest rate increases on deposits. The catastrophic floods in Thessaly are estimated to lead to additional forecasts for 2023 and a clearer picture will be available when the 3rd quarter results are announced. The question will be whether the suspension of installments for those affected, decided by the banking system, will stop the course of reducing bad loans and the planning of the banks for the convergence of the index of non-performing loans to the average European levels of 2%.
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