Bank chief: ‘Difficult’ road ahead

Provopoulos says lower exposure to subprime products has saved local market from the worst

Bank of Greece Governor Giorgos Provopoulos speaking at a bank conference in Athens yesterday.

Bank of Greece Governor Giorgos Provopoulos said Greek lenders have marginal exposure to US subprime loans, though he warned markets and investors that the road ahead is “difficult.”

Speaking at a bank conference yesterday, Provopoulos pointed out that the Greek economy has suffered fewer shocks from the current financial market turmoil than many other countries.

“This is largely due to the marginal exposure local banks have had to assets that are either directly or indirectly related to the turmoil,” Provopoulos said.

“In the eurozone, the credit conditions are not as tight as they are across the Atlantic.”

Fears about the financial health of banks worldwide have been rising after a meltdown in the US mortgage market started to spread, prompting some of the biggest names on Wall Street to go out of business, merge or revamp their structure.

On Monday, ratings agency Fitch affirmed its ratings for two of Greece’s largest banks, National and Alpha, with the outlooks on both lenders remaining “stable.”

“The road ahead is difficult. It could also be long,” added Provopoulos.

Economists believe the global economic slowdown will get worse in 2009 after having already revised lower this year’s targets. According to the International Monetary Fund (IMF), targeted global economic growth for 2008 has been revised lower to 4.1 percent year-on-year from 4.9 percent previously.

Gikas Hardouvelis, a chief economist and director of research at EFG Eurobank, said the rising cost of finance is affecting local lenders, adding that the drop in stock prices in bank shares has been excessive.

“Greek banks will come out of today’s crisis stronger because, compared with foreign lenders, they are in better financial shape,” said Hardouvelis, citing their exposure to high growth markets and strong profit growth in the first half of the year. Bank shares have fallen 37 percent in the last 12 months on the Athens bourse with Eurobank and Alpha Bank among the hardest hit.