The number of strategic defaulters may actually be twice the figure originally estimated by banks, as they may account for 40 percent of the borrowers who have stopped servicing their debts, mainly from mortgage loans, according to senior banking sources.
After the activation of online auctions and the sales of bad-loan portfolios, there has been an immediate and drastic change in the behavior of borrowers, who are now lining up at banks asking to reach a settlement.
That response has been far greater than what the banks expected; they estimate that this reveals strategic defaulters may account for up to 40 percent of nonperforming loans, against an original estimate of 15 percent, which was revised to 25 percent at the end of 2017.
Of a total 332 online auctions scheduled to take place last week, just 95 were successfully completed, while another 96 were canceled due to last-minute settlements on the borrowers’ initiative.
Banks estimate that strategic defaulters are responsible for the nonpayment of some 35 percent of bad corporate loans. This means that out of a sum of almost 78 billion euros of corporate, housing and consumer NPLs, between 27 and 30 billion euros may concern the cases of borrowers who can meet their obligations but choose not to do so. If that estimate is confirmed, then the landscape of the credit sector regarding its capital conditions and its prospects will change drastically for the better.
Bank managers conveyed the estimate that strategic defaulters amount to 30 to 40 percent of NPL borrowers to a Goldman Sachs mission who recently visited Athens and met with credit sector and other financial officials.
According to a Goldman Sachs report, there are positive signs regarding the course of the quality of banks’ assets, there is optimism about the results of the stress tests, and there are signs of recovery for the Greek economy. It also notes that local banks are working toward the further containment of their operating expenses as an offsetting measure for the reduction of revenues.