Greek banks need to slash their non-performing loan rate to below 10 percent of total loans to return to sustainable growth, the chief executive of bank rescue fund HFSF told Naftemporiki newspaper on Monday.
Soured loans are the biggest challenge facing Greek banks, the legacy of a multi-year debt crisis that shrank the economy by a quarter and drove unemployment to a high of nearly 28 percent in 2013.
Banks’ non-performing exposures (NPEs) stood at 84.7 billion euros in September. That is 46.7 percent of loan books, and equivalent to nearly half of Greece’s projected gross domestic product for this year.
“An NPE ratio at least lower than 10 percent is necessary for banks to become competitive again and return to a path of sustainable growth,” Martin Czurda, Chief Executive of the Hellenic Financial Stability Fund, told the paper in an interview.
That target could be reached with the help of a joint HFSF/finance ministry asset protection plan for the banks to offload soured loans onto state-backed special purpose vehicles (SPVs). The scheme could take six to nine months to implement, he added.
The HFSF rescue fund holds stakes in Greece’s four big banks – Piraeus, National, Eurobank and Alpha – after taking part in three recapitalizations.
Cutting NPEs has been a priority for banks but progress has been slow. The ‘big four’ have reduced them by 21 percent since March 2016, when soured loans peaked at 107 billion euros.
Under the asset protection plan, the SPVs would issue bonds with a government guarantee for senior tranches.
“Considering the peculiarities of the Greek market, the implementation of such a program could take six to nine months,” he told the paper.
“An amount of guarantees up to 5 billion euros could lead to a clean-up of bad loans of gross nominal value of 15 billion euros.”