Banks expect high Q3 profits

Banks are expected to report record profits for the third quarter (July-September) this month. Piraeus Bank will report its Q3 results on November 9, to be followed by EFG Eurobank on the following day, National Bank on the 24th and Alpha Bank on the 30th. Continued rapid growth in housing and consumer credit, the boom in loans to professionals and small and medium-sized enterprises and increased revenue from Greek banks’ subsidiaries in other Balkan countries are the three reasons for these profits. Of these, credit to households is by far the most important: Retail banking is growing at a 25 percent annual pace, as have housing loans (25.1 percent at end-August, up from 24.9 percent in July and 24.3 percent in June). This credit boom must be attributed directly to banks’ aggressive selling policies, with lower rates offered and a number of fees waived. According to Bank of Greece data, the outstanding amount due in housing loans reached 37.85 billion euros at the end of August. Outstanding consumer credit stood at 19.24 billion, although expansion has slowed down somewhat (at 25.6 percent at the end of August compared to 26.1 percent in July and 32.9 percent in June). While the central bank is worried about the rate of consumer credit growth, this expansion is a godsend to retail banks. Consumer loans may be about twice as risky as housing loans, but the profit of margin is far higher; it stands at about 8 percent, rising to 10 percent for credit cards, while the profit margin for housing loans is a mere 2 percent. Bank managers consider that, sooner or later, consumer credit growth will start to level off, as household indebtedness increases. They believe that the motor of growth will be credit to self-employed professionals and small and medium-sized businesses. Revenue from operations in other Balkan countries is an increasingly important part of Greek banks’ profits. These are fast-growing economies, coming out of decades of slumber under communism. Retail banking is growing at a pace of 30 to 50 percent per year.

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