Greek banks are facing the specter of nonperforming loans climbing to 100 billion euros – or 45 percent of all loans issued – in the coming months owing to the seemingly endless uncertainty in the local economy.
Bank officials say that at the end of the first quarter of the year more than one in three loans (35 percent) was in the red, its repayment having been delayed by at least 90 days, amounting to a total of 75 billion euros, having a direct impact on banks’ liquidity and fundamentals.
However, there is also another 10 percent of loans, adding up to some 21 billion euros, that are close to turning “red” too in the next few months. They are loans that had shown some repayment problems in the past due to the economic crisis, and the banks have already proceeded to term adjustments mainly through extensions, in order to make it easier for households and businesses to service them.
Bank data show that the loans that have presented problems in servicing in the past are likely to stop performing again, and this becomes even more likely given the economic paralysis brought on by uncertainty. In a recent meeting, the managers of Greece’s four systemic banks asked Deputy Prime Minister Yiannis Dragasakis for the government to clarify the framework for the handling of bad loans and to stop cultivating expectations for favorable settlements among borrowers.