Moody’s has qualified local systemic banks’ significant reduction of their dependence on emergency liquidity assistance (ELA) from the Bank of Greece as a credit-positive event. The ratings agency notes that the reduction of ELA has had a considerably positive impact on the credit sector, reducing the cost of its financing and resulting in the bolstering of lenders’ profits.
By end-March the dependence of National, Alpha, Piraeus and Eurobank on ELA was reduced to 41 billion euros, from 65.1 billion a year earlier.
According to Moody’s, domestic banks were able to announce improved core revenues before provisions mainly because of the improvement in their net interest rate margins and lower commissions to the state (thanks to the repayment of state collateral).
The reduction of operating expenditure, particularly staff costs, due to the reduction of staff numbers through voluntary exit programs, has contributed toward the improved financial picture of Greek banks.
Banks have improved their cash flow despite the outflow of deposits in the first quarter of the year due to the uncertainty in the economy from the delay in the completion of the second bailout review. Moody’s expects the cost of the banks’ funding will continue to decline for the rest of the year and in 2018.