Banks see light at end of bad loan tun­nel

Kathimerini English - - I N T E Rv I E W - BY YIAN­NIS PAPADOYIANNIS

Deal­ing with­the prob­lem of non­per­form­ing loans con­sti­tutes the lo­cal credit sys­tem’s big­gest chal­lenge now that Greek banks have suc­cess­fully com­pleted the stress tests, con­firm­ing their cap­i­tal health, and the econ­omy has re­turned to growth.

The NPL fig­ures are shock­ing: From 10 bil­lion euros in 2007, bad loans have now ex­ceeded 77 bil­lion, which means that 35 per­cent of all loans are not be­ing ser­viced prop­erly.

The rise of non­per­form­ing loans has been me­te­oric. They amounted to just 4.5 per­cent of all loans in 2007, then dou­bled to 9 per­cent by June 2010, had ex­ceeded 18 per­cent by March 2012 and stood at 30 per­cent in Septem­ber 2013.

At the end of this last Septem­ber bad loans had sur­passed the 35 per­cent mark, ac­cord­ing to es­ti­mates by bank of­fi­cials, although their growth rate is now start­ing to come down on a month-on-month ba­sis.

More en­cour­ag­ing is the news that those join­ing the list of debtors who do not re­pay their loans are mainly bor­row­ers who had al­ready faced prob­lems in the past and have en­tered a set­tle­ment pro­gram, rather than new house­holds or en­ter­prises.

It’s true that the amount of 77 bil­lion euros is of huge con­cern but banks have been ad­her­ing to a par­tic­u­larly ag­gres­sive pol­icy to in­crease pro­vi­sions in re­cent years. Ac­cord­ing to nine-month data, be­tween 55 and 60 per­cent of bad loans have al­ready been cov­ered by pro­vi­sions.

Bank of­fi­cials say that Greece is very close to NPLs reach­ing a peak as a per­cent­age of all loans. They es­ti­mate that the bad loan in­dex will reach its high­est point by the end of the first half of 2015 be­fore grad­u­ally start­ing to de­cline. Banks ex­pect to see the ra­tio drop con­sid­er­ably from 2016, as be­sides the dras­tic re­duc­tion in bad loans, lenders will have also be­gun a credit ex­pan­sion phase that will see the bal­ance of loans grow.

The ef­fi­cient han­dling of the prob­lem of non­per­form­ing loans is, ac­cord­ing to se­nior bank of­fi­cials, a pri­or­ity and one of the nec­es­sary con­di­tions for the re­vival of the coun­try’s econ­omy.

As the chief ex­ec­u­tive of­fi­cer of Eurobank, Chris­tos Me­ga­lou, stressed this week, “the re­in­state­ment of thou­sands of pro­fes­sion­als and small en­ter­prises in the pro- duc­tion process may have mul­ti­ply­ing ben­e­fits for the econ­omy, par­tic­u­larly in re­duc­ing un­em­ploy­ment, in­creas­ing in­vest­ments, re­vert­ing trans­ac­tion be­hav­ior to nor­mal, halt­ing mar­ket dis­tor­tions, re­leas­ing en­trepreneur­ship and in- creas­ing pub­lic rev­enues.”

Me­ga­lou added that spread­ing the costs of loan set­tle­ment be­tween the banks and the state al­lows thou­sands of pro­fes­sion­als and small en­ter­prises to ben­e­fit and retrun to sus­tain­abil­ity.

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