The greatest challenge facing Greek banks is to reduce their very high level of nonperforming loans, says credit rating agency Moody’s.
All of the “big four” (Piraeus, Alpha, National and Eurobank) have an inordinately high amount of nonperforming loans, with Piraeus’ NPLs exceeding 50 percent of the total. This is the main reason its credit rating, at Caa2, is the lowest of the four (the other three are rated Caa1).
On the positive side, the improvement in the economic climate should lead to an increase in deposits, better asset quality and higher profitability for all four and could lead to a rating upgrade in the near future, Moody’s notes.
Another positive aspect for Greek banks is the fact that their capital is deemed adequate and within regulatory guidelines.
In the case of National and Piraeus, the issuing of bonds helped improve their profile. However, reducing the bad loans will still be an uphill task and, should the expected economic upturn not materialize, a downgrade is also a real possibility.