In a commentary on Thursday, DBRS Morningstar noted the significant reduction in the stock of nonperforming exposures (NPE) at Greece’s four systemic banks through NPE securitizations under the Hercules Asset Protection Scheme.
The report highlighted that Greek banks reduced their combined NPE stock by circa 39%, on a pro forma basis, over the January-September 2020 period, as the Hercules scheme facilitated sizable volumes of NPE securitizations. Asset quality metrics will materially improve after the conclusion of the Hercules scheme, yet still significantly lag those of the banks’ European peers, it said, stressing the need for additional system-wide solutions required in order for Greek lenders to further converge their asset quality metrics toward the EU average.
“Once all NPE transactions have been finalized, the banks’ asset quality metrics are expected to materially improve, even though they will still lag those of their EU peers. As such, additional system-wide solutions are required in order for the Greek banks to further converge their asset quality metrics towards the EU average,” said Lito Chousiada, assistant vice president at the ratings agency.