Banks to revise targets lower

The early general election and the ensuing freeze of economic activity will lead to fewer loan issues and a lower growth rate in 2015, according to bank officials’ estimates.

“Even if the assessment and the negotiations between Greece and its creditors are completed successfully by the end of February, which is not at all certain, we will have to reduce the original estimates regarding the course of the economy, bank profits and the credit issue for 2015 by 15 percent due to the low speed of the economy in January and February,” said a senior bank official.

Therefore the economy’s 2015 growth rate will have to be revised to 2.5 percent against the baseline scenario of 2.9 percent on which the European Central Bank stress tests were based. That’s provided the deal with the creditors is sealed by the end of February. If the uncertainty continues beyond that date, the consequences will be greater.

Local banks had aimed to issue loans of some 10 billion euros to households and enterprises this year. The political and economic developments mean that this will now have to be curtailed by at least 1 billion. There will also be a similar decline in bank profits, while the impact will be greater if lenders are forced to resort to the high-cost emergency liquidity assistance (ELA), which appears increasingly likely.

Investment and loan issue activity has frozen in recent weeks, while the implementation of banks’ restructuring plans for 2015 has ground to a halt. The only significant activity is in deposits, where a significant outflow has been recorded.

Bank officials report that clients are withdrawing deposits “for better or for worse” and bank branches are receiving queries regarding time deposits and how they can be accessed earlier on a daily basis.

The greatest risks, according to bankers, are the emergence of a weak government from the election, or that there might have to be a second vote, or, even worse, that the polls could lead to political moves that would cause the country to clash with the European Union.