Eurobank has become the first Greek lender to make use of the government’s Hercules scheme to reduce bad loans after gaining finance ministry approval for state guarantees on senior tranches of its Cairo I and II debt securitisations, officials at the bank said on Wednesday.
Greek banks have been working to reduce 75 billion euros of bad loans that resulted from the last financial crisis, which shrank the country’s economy by a quarter.
The Cairo programme consists of three securitisations that together amount to 7.5 billion euros ($8.26 billion) and will help Eurobank to reduce its ratio of so-called non-performing exposures (NPEs) to 15% in the first quarter.
“We got approval for Cairo I and II and expect approval for Cairo III in the next two weeks,” one of the bankers said, declining to be named.
Shedding the bad debt is crucial for Greek banks’ ability to lend and shore up profits. The Hercules scheme (HAPS) was put in place to help the banks to offload up to 30 billion euros in bad loans.
The Greek state’s guarantee on the senior notes amounts to about 2.4 billion euros.