Con­cerns threaten bank prof­its

Eco­nomic doubt could con­tain the mo­men­tum of the sec­tor that started last year with a re­turn to gains

Kathimerini English - - Focus - BY YIANNIS PAPADOYIANNIS

Last year may have sig­naled the re­turn of Greece’s sys­temic banks to profit af­ter six con­sec­u­tive years of his­tor­i­cally high losses, but the de­lay in the sec­ond bailout re­view and un­cer­tainty about the course of the econ­omy are re­duc­ing the mo­men­tum for a re­ally ro­bust 2017 in the sec­tor.

Bank of Greece data showed that in the first half of last year the coun­try’s four main lenders posted prof­its of 91 mil­lion euros, and in the first nine months of the year the com­bined earn­ings of Al­pha, Na­tional, Pi­raeus and Eurobank amounted to 250 mil­lion euros.

Con­verg­ing es­ti­mates by se­nior bank of­fi­cials put the net prof­its for the whole of 2016 at 300-400 mil­lion euros, while for 2017 the earn­ings could dou­ble or rise even higher if the econ­omy achieves a growth rate over 2 per­cent, as pro­jected.

Euroxx cal­cu­lates the prof­its of the four core banks last year at 400 mil­lion, fore­cast­ing they will come to 900 mil­lion this year and 1.5 bil­lion euros in 2018.

All pro­jec­tions for an ex­pand­ing econ­omy and ris­ing bank prof­its are based on the as­sump­tion that the bailout re­view will be com­pleted soon, ban­ish­ing un­cer­tainty and restor­ing the econ­omy’s pos­i­tive course. This is the only way that banks will be able to tackle the ma­jor prob­lem of non­per­form­ing loans, re­duce their pro­vi­sions and achieve a grad­ual re­turn of de­posits, which would lead to credit ex­pan­sion, bring­ing fresh rev­enues into the bank­ing sys­tem.

How­ever, the start of 2017 is not at all en­cour­ag­ing as re­gards bad loans, rais­ing ques­tions about how fea­si­ble strong earn­ings are this year. Re­view un­cer­tainty, drachma talk and the ghost of sum­mer 2015 649.52 1.0573 – when Greece teetered on the brink of de­fault and eu­ro­zone exit – have led since the start of the year to a con­sid­er­able in­crease in NPLs by an es­ti­mated 1.5 bil­lion euros (rev­ers­ing the pos­i­tive pic­ture of the last quar­ter of 2016) and a fresh flights of de­posits.

Banks’ prof­its are de­pen­dent on their cut­ting NPLs as this is the only way they can re­duce their pro­vi­sions, which in re­cent years have ab­sorbed ev­ery last euro in rev­enues.

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