Banks for­give 2.5 bln eu­ros of NPLs

Kathimerini English - - Focus - BY YIANNIS PAPADOYIANNIS

Greek banks wrote off non­per­form­ing loans to­tal­ing 2.5 bil­lion eu­ros last year, a new record, while se­nior bank of­fi­cials say that this year write-offs will rise even higher, ex­ceed­ing 3 bil­lion, mak­ing can­cel­la­tions one of the credit sec­tor’s main weapons in its on­go­ing bat­tle to re­duce the amount of bad loans in its port­fo­lios.

Ac­cord­ing to their com­mit­ments to the euro­zone’s Sin­gle Su­per­vi­sory Mech­a­nism, lo­cal lenders will have to re­duce their non­per­form­ing credit ex­po­sure from 108 bil­lion eu­ros to­day to 65 bil­lion at the end of 2019. This tar­get of a 43 per­cent re­duc­tion is quite am­bi­tious.

The banks’ plan­ning pro­vides for about half of that re­duc­tion to come in the form of write-offs, 30 per­cent through loan re­struc­tur­ing and the rest by way of sell­ing bad loans to third par­ties.

Se­nior bank of­fi­cials note that the tar­get of NPL re­duc­tion set by the SSM was ex­ceeded in the last quar­ter of 2016, cre­at­ing a safety cush­ion in the process. How­ever, this was can­celled out at the start of the year as the con­tin­ued de­lays in the com­ple­tion of the bailout re­view and the en­su­ing un­cer­tainty led to the cre­ation of fresh NPLs. Banks es­ti­mate that non­per­form­ing loans in­creased by 1 bil­lion eu­ros in Jan­uary, while no im­prove­ment was noted last month ei­ther. This raises the prospect of banks los­ing the cush­ion they had cre­ated in the lat- ter half of 2016 and miss­ing their tar­get for Q1 of 2017.

Be­sides the con­cerns about a new fis­cal de­rail­ment, the in­crease in bad loans is also due to high ex­pec­ta­tions as re­gards the new ex­tra­ju­di­cial mech­a­nism for the set­tle­ment of debts: A large num­ber of bor­row­ers have re­jected the banks’ pro­pos­als for the re­struc­tur­ing of their debts in the hope that bet­ter terms will be in­tro­duced.

Many be­lieve that their debts will be writ­ten off.

Credit sec­tor of­fi­cials note that sig­nif­i­cant ground has been lost due to the bailout re­view de­lay, but add that some of it could be re­cov­ered if the talks are swiftly con­cluded and Greece en­ters the Euro­pean Cen­tral Bank’s bond-buy­ing pro­gram (QE).

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