Regulatory authorities and international financial institutions are sending out positive signals about Greek banks, on the eve of announcing their second quarter results.
In an interview to Estonian newspaper Eesti Ekspress, the chairman of the European Central Bank’s Supervisory Board, Andrea Enria, said that Greek banks have met their targets on reducing non-performing loans and plan to further reduce them in 2020, noting that the ECB is closely following progress on this front.
Overall, the bad loans of southern European banks have dropped from over 1 trillion to 580 billion euros.
Enria said that a problem for Greek banks was the slow pace of recovering the collateral pledged for a loan, citing problems with the Greek law and the justice system, noting that the ECB would like a harmonization of the process inside the eurozone.
When a Greek bank wants to recover collateral, the case can drag on for up to 10-12 years in the courts, while a similar case in Denmark takes six months to a year.
Also seeing better prospects for Greek banks ahead is JP Morgan, which notes that there is a friendlier political environment in Greece after the new government revealed its tax-cutting plans and its intention to restore the country’s credibility.
JP Morgan estimates that credit rating agencies will upgrade Greece’s debt in coming months. The US bank notes, however, that a precondition for upgrade is a faster-than-expected reduction in Greece’s debt and a real improvement in the banking sector’s health. Therefore, Greece’s positive prospects are over the medium and long term.
For banks themselves, JP Morgan says that their return to issuing Tier 2 bonds was a very positive development, noting these titles are doing very well, despite the widening of the spreads for such increased risk bonds.
In its own report, Deutsche Bank says investors must focus on Greek banks’ EBITDA and their performance in reducing bad loans. It estimates the reduction in the second quarter at 2.4 percent, 13 percent year-on-year and expects National Bank to have achieved the best result.
Bank quarterly results will be announced on Thursday and Friday.