Local banks’ stocks came under great pressure over the week, as investors remain nervous about the medium-term future of the country’s credit system.
The big issue of nonperforming loans and meeting their reduction targets, uncertainty regarding the outcome of next spring’s stress tests and worries about the impact of the new accounting standards (IFRS 9) that will lead to increased provisions for new bad loans are all causes for concern among investors.
Analysts say that the country’s uncertain prospects after the completion of the bailout program in August and the course of the current bailout review are adding to the jitters in the market. They note that no convincing answers have been provided yet as to how Greece will get along in the post-bailout period, and no one believes the country can proceed without any form of support. This is why many investors are opting to wait for the framework of the period after the program ends to take shape before looking into the Greek stocks.
In the absence of buyers (at least for the medium term), the stock market has been sliding lower, with bank stocks posting major losses on low trading volume, which reflects the lack of interest.
Notably, since mid-July, when the market peaked after the completion of the second bailout review, the banks index has lost 45 percent of its value, while the benchmark of the bourse has dropped about 18 percent.
The stock of National Bank has fared best in the sector, limiting its losses to 25 percent in the last four months thanks to the progress of its restructuring plan that has led to the strengthening of its capital base after the sale of its subsidiaries.
Alpha’s stock has lost 40 percent and Eurobank’s 46 percent, while Piraeus has seen its stock sink the furthest, dropping 61 percent, due to the findings of a probe by the Bank of Greece.
The complications this fall concerning online foreclosures have added to the gloomy atmosphere; many observers are waiting to see whether the auctions will indeed start on November 29 as planned, as they are a crucial tool in terms of tackling NPLs and strategic defaulters.
For their part, bank officials say the pressure of the last few months is not justified, arguing that the bad-loan reduction targets will be met and the stress test results will be positive.