Moody’s said on Monday it is maintaining its stable outlook on the Greek banking system amid improved profitability prospects, balanced by still very high problem loans. This expresses Moody’s expectation of how bank creditworthiness will evolve in Greece over the next 12-18 months.
It also said it expects local banks to remain marginally profitable in 2017-18, but problem loans remain a severe challenge for them.
Nonperforming loans will start declining from around 45 percent of gross loans at end-2016 over the outlook period, it forecast, noting that Greek lenders will face a significant challenge to meet the nonperforming exposure reduction target of around 40 percent by end-2019.
The international rating agency added that the operating environment for Greek banks will remain “challenging” and highly contingent on the government’s ability to get funding from creditors in a timely manner, and highlighted the dependence of Greek banks on “central bank funding is likely to remain high, as political and economic landscape remains fragile.”