Banks are expected to sell more unserviced corporate loans in 2018 and 2019, in their effort to achieve nonperforming loan reduction targets, according to the Monetary Report that the Bank of Greece published on Monday. The report found that while the sale process is continuing, the pace has slowed.
The index of nonperforming exposures (NPEs) dropped to 48.5 percent at the end of the year’s first quarter, and the total stock of NPEs shrank to 92.4 billion euros. Still, as the BoG notes, the reduction in the January-March period in particular is the outcome of debt write-offs by banks rather than bad-loan portfolio sales. The liquidation of collateral through auctions has made a reduced contribution toward the required result, the central bank observes.
The target for end-2019 is for the rate to come to 35.2 percent, or 64.6 billion euros. Although the pace of decline shows that the target will be met, that level remains high. The main reason for viewing the 35.2 percent rate as insufficient is the downward revision of the pace of credit expansion, as well as the increase in loan write-offs banks are expected to make – although this reduces the absolute figure of bad loans, it keeps the NPE rate at high levels.