Greek banks beat target in battle to cut sky-high bad loans

7 June 2017
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Greek banks made progress in their fight to cut their exposure to doubtful and non-performing loans in the first
quarter, data from the country’s central bank showed on Tuesday.

But corporate, mortgages and consumer lending that has turned bad during years of crisis still accounts for slightly more than half of the banking sector’s overall loan book, data released by the Bank of Greece revealed, according to Reuters.
A mountain of non-performing exposures (NPEs), comprising non-performing loans (NPLs) and restructured loans likely to turn bad, is the biggest challenge facing Greek banking.
Greek banks began the economic crisis in 2008 with NPEs of 14.5 billion euros ($16.32 billion) or 5.5 percent of loans. Cutting these would free up more capital to fund productive sectors of the economy, which is still struggling.
While NPEs soared to 106.9 billion or 50.5 percent at the end of June last year, banks trimmed the figure to 103.9 billion euros, excluding off-balance sheet items, in the first three months of the year, beating a target of 105.2 billion.
Their NPE ratio was on target at 50.6 percent at the end of the first quarter, while on NPLs, loans past due for more than 90 days, banks missed the target as the rate came to 36.7 percent at the end of March versus a targeted 36.05 percent.
“Despite the still strong formation of new NPEs, especially in the first two months of the year, banks managed to reduce them further mainly as a result of writedowns amounting to 1.3 billion euros,” the central bank said.
The Bank of Greece, which monitors the implementation of lenders’ NPE action plans in cooperation with the European Central Bank, said that while the default rate slowed, it remained higher than the pace of loans were performing again.
Banks have agreed with regulators on ambitious bad debt reduction targets over three years.
Greece’s four major banks – Piraeus, National , Eurobank and Alpha – and three less systemic banks submit data on nine operational targets.
Their aim is to cut NPEs to 66.7 billion euros or 33.9 percent of their loan books by 2019 from 106.9 billion euros last September, when the targets were agreed.
Banks also aim to reduce their NPL rate to 20.4 percent by December 2019 from 37 percent in September.

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