Bad loans set to soar next year

Bank of Greece (BoG) analysts have forecast further growth in bad loans within 2010. Sources have suggested that, in the first six months of 2009, loans with problematic repayment activity amounted to 7 percent of the total lending portfolio of banks, totaling some 17 billion euros. Bank officials expect this figure to reach 22 billion euros by the end of the year, an all-time high. In the first quarter of 2009, bad loans, with delayed repayment of over 90 days, amounted to 6 percent – up from 5 percent in end-2008. The rapid deterioration of financial conditions has had dramatic consequences on households and enterprises, which paints a picture for a particularly difficult 2010. In this context, BoG officials believe a further rise in bad loans next year is particularly likely, disagreeing with estimates by top bankers that bad loans will peak in end-2009. Some smaller banks are actually in a worse position due to the greater number of problematic loans in their portfolios, jeopardizing their survival.