Greek banks can weather storm

Greek banks can survive the economic turmoil currently raging in the emerging economies of Southeastern Europe as they are less exposed than their Western European peers and have an adequate capital cushion to absorb loan losses, according to Bank of Greece Governor Giorgos Provopoulos. «In Southeastern Europe economic activity is decelerating. There is a significant slowdown and of course we are keeping a close eye on the situation,» Provopoulos told Reuters in an interview. «The Bank of Greece has required Greek banks to have high Tier 1 capital ratios so that they will be able to deal with any potential problems. In any case, they have to be prudent and they are being prudent. Even if there is further deterioration there is enough of a cushion,» he said. The spreading trouble in emerging Europe has inflated worries about non-performing loans (NPLs) and a possible erosion of Western European banks’ capital base, piling pressure on their financial strength ratings. Greek banks are present in Bulgaria, Romania, Serbia, Albania, Turkey, Poland and Ukraine. Lenders including National Bank, Alpha, Eurobank and Piraeus Bank have joined the foray eastwards, taking part in the rampant credit growth that fueled the region’s boom. But Provopoulos said overall Greek exposure to the region was lower than in Western Europe. «Greek banks have expanded in the area but not as much as banks from other countries such as Austrian banks. Total lending by Greek banks is about 55 billion euros, about 16-17 percent of Greek GDP, whereas the comparable figure for Austria is around 70 percent,» Provopoulos said. Meanwhile, Citigroup yesterday reduced its 2009 and 2010 profit forecasts for Greek banks by 15 percent, citing weakening economic conditions. Citigroup also cut its price target for National Bank to 18 euros, from 21 euros, and Eurobank to 5 euros from 7 euros previously.

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