Wood: Risks and solutions for Greek banking system

13 November 2018
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Wood & Company this week reminded that there’s “no magic wand” in dealing with the Greek banking system’s problems, such as clearing NPLs and replenishing deferred tax credits following a recent field trip to Athens by the multinational investment bank’s experts and after a “mini crash” of the banking index at the Athens Stock Exchange (ASE) in early October 2018.

“the mood on the street seems to be muted, following the sell-off over the past two months,” was the quote attributed to Wood analysts.

Moreover, W&C pointed to three steps that must and can be implemented, as well as four risks.

The investment bank calls for the achievement of targets agreed to with the SSM; further efforts to reduce the massive loads of “bad debt” burdening Greek banks’ balance sheets; supporting P&L through a gradual hike in new lending as well as lower costs.

“The substantial improvement in liquidity (no signs of panic, despite the turmoil) should avert regulatory actions over capital, in our view, … although our call on the Greek banks is highly speculative and risky, we maintain our opinion that they are likely to avoid distressed capital issues.”

Risks cited are a reversal of the positive macroeconomic trend; legal changes in suspended tax obligations; failure to meet NPE reduction goals or continuing pressure by regulatory authorities to increase provisions for NPEs, as well as greater pressure on net interest rate margins.

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