Greek banks are facing the prospect of a slowdown in the growth of consumer credit and a narrowing of the relevant spreads that account for their profit margins, investment bank Morgan Stanley said in a report. The reason is a rise in the cost of servicing of such loans, resulting from recent hikes in the basic rate by the European Central Bank (ECB). The report says that banks are more vulnerable in cases of consumer rather than mortgage loans, with Eurobank more so than the other two monitored by Morgan Stanley – National and Alpha. The costs of servicing consumer loans, which have a wider spread than mortgages, is projected to rise from 3.7 percent to 5 percent. Morgan Stanley further notes that there is already a trend of substitution among loans of different categories – of mortgages for consumer loans and of consumer loans for credit cards. The report takes the view that the overall macroeconomic environment is generally positive for banks, and stresses the rise in the competitiveness of those with ample liquidity, such as ATEbank and other state-controlled banks, particularly in the mortgage loan category. This liquidity, parked in bonds or the interbank market, would enable them to grant mortgage loans even with low spreads. The new mortgages are being issued with spreads of 150 basis points for floating rates and 90 basis points for fixed rates. Morgan Stanley expects this shrinking of spreads to continue to even 80 basis points by 2010. Nevertheless, the average spread in mortgage loans is projected to be higher, due to older loans which have an average life of 15 years. It sets a target price of 38.30 euros for NBG, 23.60 euros for Alpha Bank and 26.60 euros for Eurobank.