ECONOMY

Banks set for one more year of strong growth, study says

Greece’s banking sector will maintain strong growth into 2007, a study by EFG Eurobank’s Economic Studies and Forecasts Department predicts. According to the study, housing loans will grow 22 percent this year, only slightly less than this year’s 25 percent and a pace still more than double the eurozone’s, where housing loan growth is expected to reach 10.5 percent next year. This year’s higher pace of growth is explained by events such as the introduction of VAT, which accelerated the issuing of building permits before the measure was put into effect. Consumer credit expansion will reach 20.5 percent at the end of the year, versus 4 percent in the eurozone, tapering off to 19.5 percent in 2007 (4.5 percent in the eurozone). Corporate credit growth will reach 11 percent this year and 10 percent in 2007 (14 and 13 percent respectively, if corporate bonds are included). The rapid credit growth may raise risks to the quality of loan portfolios, the study says, but adds that the Greek economy is still «underbanked.» Greek banks, where loans account for 90 percent of deposits, versus 113 percent in the eurozone, are still capable of funding credit growth.