Indications of NPL reduction fatigue
The Bank of Greece reported on Wednesday signs of fatigue in the commercial lenders’ efforts to reduce their nonperforming loan (NPL) stock, reflecting the difficulties of the mission.
In the January-March period nonperforming exposures declined by 2 billion euros, but regarding NPLs, the banks have lost the cushion of 900 million euros above the target that they had created last year.
The main source of concern is that there are signs of fatigue despite the theoretically strong growth rate in the first quarter of the year, put at 2.3 percent. Bank officials stress the fact that Greeks’ overtaxation has led to a 0.3 percent decline in consumption, and that online auctions remain below the projected number, while a large number end up failing to make a sale.
They are hoping that the picture will change in the following quarters, with an increase in auctions and the sale of more NPL portfolios.
Although the rate of the NPL decline weakened in Q1, Goldman Sachs argues that this will be offset by the greater reduction of NPEs. At the same time Moody’s warns that the continuing high levels of NPLs in Greece are hampering banks’ capacity to finance the economy.