Lenders boost NPL provisions


TAGS: Banking

Greece’s four systemic banks increased their provisions for nonperforming loans by a total of 1 billion euros during the second quarter of the year, despite the first indications of an improvement in the situation as far as bad loans are concerned.

New NPLs were 120 million euros lower in the April-June 2016 period compared to the same period in 2015, while there had been a 211-million-euro year-on-year increase in the first quarter of the year, and a 622-million-euro rise in the last quarter of 2015.

It should be noted that a similar improvement was also recorded at the end of 2014, but the political instability, early elections and prolonged bailout negotiations of 2015 led the economy back into recession, resulting in another deterioration in the quality of banks’ loan portfolios.

True, the improvement in Q2 would have been greater had it not been for the fears generated over supermarket chain Marinopoulos filing for protection in July, which was the main factor that convinced bankers to raise provisions in that quarter.

In total Piraeus, National, Alpha and Eurobank recorded new provisions of 1.04 billion euros, against 877 million euros in Q1, which took a toll on the lenders’ financial results published this week. The stock of provisions has now reached 51.2 billion euros for a combined loan portfolio of 201 billion euros, of which 74.1 billion is considered to be in the form of NPLs. Therefore provisions cover a remarkable 69 percent of bad loans.

Besides NPLs, there are also loans adding up to 30 billion euros that have shown problems in performance, have been restructured and are showing a strong possibility of turning bad. Nonperforming exposures (NPEs), which include both NPLs and the loans under restructuring, exceed 100 billion euros.

If the economy reverts to growth many of those loans under restructuring, which add up to 30 billion, can be reclassified as performing, while NPLs will be tackled with write-offs, sales, corporate restructurings with the entry of new investors, and long-term loan restructurings for households.