Foreign institutional investors are currently showing a healthy appetite for shares of Greek banks, pushing their prices up. At the same time, international investment banks seem to be competing in their show of optimism on the sector. In a recent study, Merrill Lynch referred to the «Greek onslaught in the Balkans,» noting the positive prospects of the expansion of Greek banks in neighboring countries. UBS has noted strong growth potential in the domestic Greek banking market, projecting an average profit rise per share of 28.5 percent. Reports by Citigroup, CSFB, JP Morgan and other international finance groups have also been extremely positive. Foreign analysts point out two determining factors in particular. One is the significant domestic growth potential in Greece compared to the rest of Europe. They note that total outstanding loans in Greece amount to just 66.3 percent of gross domestic product (GDP), in comparison with a European average of 116 percent. Specifically, outstanding loans to businesses equal 40 percent of GDP (67.6 percent in the rest of the EU), consumer loans equal 26.3 percent of GDP (against 48.4 percent) and mortgages 17.4 percent of GDP (vs 32.4 percent). Greek bankers project a convergence with the European averages, which translates into hundreds of millions of euros during the next three years. The second feature of the Greek banking sector that appeals to foreign investors is its potential for expansion in the Balkans, where a number of countries are preparing to join the European Union and banking is expected to grow strongly in the long term. All five major Greek banks (National Bank of Greece, Alpha Bank, EFG Eurobank-Ergasias, Emporiki Bank, Piraeus Bank) have invested heavily in the region, either by developing their own networks or by acquiring local banks. Among the medium-size banks, Egnatia has expanded in Romania while Novabankãs push into Turkey is considered extremely ambitious. Turkey is also being eyed by National and Emporiki. However, the sudden revival of international institutional interest in Greek banks poses certain questions, since their potential for expansion in the Balkans has been apparent for some time. Some circles insist that the current wave of reports and surveys has more to do with the international banks’ wish to improve their standing in the Greek market, eyeing a share of business in the government’s planned privatization program and partnerships with their Greek peers in related businesses (bond loans and share block flotations). Morgan Stanley Investment bank Morgan Stanley said yesterday it had opened its first office in Athens in order to offer its domestic clients easier access to foreign capital markets, Reuters reported. «The Greek market has always been an important one for Morgan Stanley and our decision to open an office there demonstrates our continued and growing commitment to the region,» the head of Morgan Stanley’s Institutional Securities Group in Europe said. Jonathan Chenevix-Trench also said that Morgan Stanley’s presence in Athens will give the bank the flexibility to expand in the region. Panos Goutakis, managing director for business development in Greece and the Balkans, will head the new office.