National Bank (NBG) and Alpha, two of Greece’s largest lenders, increased provisions to cover anticipated loan impairments from the coronavirus crisis as they kicked off the first quarter earnings season for the sector on Thursday.
The coronavirus pandemic struck just as Greece’s banks were making headway in their bid to sell, write off or restructure billions of euros of bad debt accumulated during the last financial crisis.
The country’s economy is seen contracting by 6 percent this year, under the central bank’s baseline scenario, hit by restrictive measures to slow the spread of the virus, the global recession and an expected sharp drop in tourism.
The stock of non-performing loans (NPLs) declined by 16 percent last year but remained at a high 40 percent of gross loans, hampering banks’ ability to lend and finance economic recovery.
National Bank NBG, 40 percent owned by the country’s HFSF bank rescue fund, posted net profit from continued operations of 409 million euros ($451.95 million) in the first quarter, up sharply from 18 million in the fourth quarter of 2019 and boosted by gains in Greek government bonds.
Loan impairment provisions amounted to 486 million euros, up from 107 million in the fourth quarter, reflecting the full absorption of anticipated Covid-19 related lending losses.
Peer Alpha Bank, 11 percent owned by the HFSF, fell to a net loss from continuing operations of 10.9 million euros versus net earnings of 5.4 million euros in the previous quarter, due to higher loan impairment provisions and weaker trading income.
“We expect the 24 billion euros of stimulus measures, at 13 percent of GDP, to limit the recessionary impact of Covid-19 in 2020 and pave the way for a strong recovery in 2021,” the bank’s CEO Vassilis Psaltis said.
Alpha’s NPLs inched down to 30 percent of its loanbook from 30.1 percent in the fourth quarter.
National Bank’s ratio of non-performing exposures (NPEs), which includes NPLs and other credit likely to turn bad, fell to 30.9% of its loanbook from 31.3 percent in December.
The economic fallout from the coronavirus pandemic will likely delay planned securitisations to shift legacy bad loans off balance sheets. In response to the crisis, Greek banks have introduced moratoria on debt payments to individuals and businesses that were performing before the outbreak.