Greece: A Closer Look at the NPL Market
In this commentary, DBRS Morningstar analyses the evolution of nonperforming loans (NPLs) on Greek banks’ balance sheets and on credit servicing firms’ books from 2019 to date and reviews some key metrics for the successful workout of these loans.Summary highlights include:
-- The evolution of NPLs on Greek banks' balance sheets (also tracking loans under moratoria and under government guarantees),
-- As the deadline for HAPS of October 2022 approaches, a comparison of NPL ratios at time of renewal of Italian Garanzia Cartolarizzazione Sofferenze (GACS) versus where Greek ratios stand today,
-- A brief analysis of credit servicing firms in Greece and the evolution of total loans managed between 2019 and the present,
-- The evolution of bonds under HAPS guarantee as disclosed by the Greek Ministry of Finance, and
-- An overview of the environment (macroeconomic overview, evolution of real estate values in comparison with other European NPL-issuing countries, and the efficiency of courts) for the workout of NPLs.
“The HAPS programme is expiring in October 2022, having helped substantially reduce the nonperforming exposures of the systemic banks. However, there is continuing uncertainty around the speed and volume of possible future asset deterioration on bank balance sheets. Inflationary pressures, energy price inflation (initially due to supply chain disruptions, augmented by the Russian invasion of Ukraine), and possible supply bottlenecks will put pressure on the consumer and on businesses. It remains to be seen how these pressures will be countered by the additional government measures and the planned inflow of circa EUR 70 billion over the coming years from the NGEU Reform Fund and 2021–27 Structural Funds Budget”, stated Sinem Erol-Aziz, Vice President of European NPLs at DBRS Morningstar.
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