The Greek banking sector remains under pressure due to the low quality of its assets due to the high amount of nonperforming exposures (NPEs), Moody’s said in a report released on Wednesday, just after Bank of Greece Governor Yannis Stournaras had expressed confidence in the local banking system.
The ratings agency said asset quality remains the main challenge for local lenders, with assets at end-June adding up to 291 billion euros and NPEs at 89 billion euros. The huge load of NPEs is consuming resources and reducing banks’ profits and funds, Moody’s notes.
It adds that Greece’s vulnerability to risks from an unexpected event remains high due to the dangers associated with the banks’ low asset quality, low earnings and the large portion of lower-quality capital in the form of deferred tax assets.
Stournaras spoke for the first time since the bank stock sell-off started on the Athens Exchange last week, saying that the country’s credit sector is healthy and attributing the pressure on stocks to external factors, “such as the rise of bond yields internationally and particularly in countries neighboring Greece,” he said, referring to Italy and Turkey.