National Bank (NBG), one of Greece’s four largest lenders, has applied to take part in the government’s Hercules bad loan reduction scheme and securitise a 6.1 billion euro ($7.40 billion) portfolio of impaired loans, it said on Friday.
Banks in Greece have been working to reduce a pile of about 70 billion euros in bad loans, the legacy of a financial crisis that shrank the country’s economy by a quarter. Shedding the bad debt is crucial to their ability to lend and shore up profits.
The Hercules asset protection scheme (HAPS) was put in place to help banks offload up to 30 billion euros of bad loans.
Under Hercules, banks can apply for a government guarantee on the senior tranche of an NPL securitisation as long as that tranche is structured to a minimum Double B minus credit rating and they sell the majority of the mezzanine and junior notes.
NBG said applying to include its ‘Frontier’ bad loans portfolio in the Hercules scheme will fetch a Greek state guarantee for senior notes of up to 3.31 billion euros. The guarantee would give the senior notes a zero risk-weighting.