Banks optimistic on NPL reduction


This year is set to be a tough one for local banks, as by end-December they have to reduce their stock of nonperforming exposures (NPEs) by some 14 billion euros.

The 2018 targets are much more ambitious and demanding than last year’s, while lenders have to make much more dynamic moves toward the sale of bad-loan portfolios, along with settlements as opposed to write-offs, which were the main instrument used in 2017 to reduce the stock of NPEs.

Banks must bring their NPEs down from the 95.9 billion euros recorded at end-2017 to 81.5 billion by the end of this year – i.e. a reduction of 14.4 billion euros. Similarly, nonperforming loans (NPLs) must drop from 65.9 billion (December 2017) to 52 billion by next December, a difference of 13.9 billion euros.

In fact local banks appear optimistic that they can slash their NPLs, saying the positive trend of 2017 can be extended and strengthened. Senior bank officials argue that in the last quarter of 2017 the sector achieved the best performance in reducing NPLs since the outbreak of the crisis. They claim that NPEs reached 95 billion and NPLs dropped to 65 billion at end-2017, beating both targets by 900 million euros.