Concerns threaten bank profits


Last year may have signaled the return of Greece’s systemic banks to profit after six consecutive years of historically high losses, but the delay in the second bailout review and uncertainty about the course of the economy are reducing the momentum for a really robust 2017 in the sector.

Bank of Greece data showed that in the first half of last year the country’s four main lenders posted profits of 91 million euros, and in the first nine months of the year the combined earnings of Alpha, National, Piraeus and Eurobank amounted to 250 million euros.

Converging estimates by senior bank officials put the net profits for the whole of 2016 at 300-400 million euros, while for 2017 the earnings could double or rise even higher if the economy achieves a growth rate over 2 percent, as projected.

Euroxx calculates the profits of the four core banks last year at 400 million, forecasting they will come to 900 million this year and 1.5 billion euros in 2018.

All projections for an expanding economy and rising bank profits are based on the assumption that the bailout review will be completed soon, banishing uncertainty and restoring the economy’s positive course. This is the only way that banks will be able to tackle the major problem of nonperforming loans, reduce their provisions and achieve a gradual return of deposits, which would lead to credit expansion, bringing fresh revenues into the banking system.

However, the start of 2017 is not at all encouraging as regards bad loans, raising questions about how feasible strong earnings are this year. Review uncertainty, drachma talk and the ghost of summer 2015 – when Greece teetered on the brink of default and eurozone exit – have led since the start of the year to a considerable increase in NPLs by an estimated 1.5 billion euros (reversing the positive picture of the last quarter of 2016) and a fresh flights of deposits.

Banks’ profits are dependent on their cutting NPLs as this is the only way they can reduce their provisions, which in recent years have absorbed every last euro in revenues.