By Michalis Matsigos

 

 

Despite the global banking turmoil, there is no concern for Greek banks as they have strong capital buffers, according to various expert estimates.

 

Moody’s said in a report published on Wednesday that it maintains the outlook for the Greek banking sector "positive". According to Moody’s, Greek banks’ capitalization remains stable.

 

Last week, DBRS said in a report on the country’s four systemic banks (Alpha Bank, Eurobank, National Bank and Piraeus Bank) that Greek banks’ profile is solid, their capital base and the quality of their assets improved, while their revenue growth is up significantly.  Greek banks’ capital buffers are strong to absorb any unrealised losses on fixed income securities after the banking crisis in the US, DBRS added. More specifically, the credit rating agency said that Greek banks reported an aggregate net profit of 3.7 billion euros in 2022, compared to a net loss of 4.7 billion in 2021. Revenues in 2022 reflected improvements in all streams, including net interest income (NII), net fees, and other income.

 

Cost management remained sound despite inflationary pressures. Loan loss provisions and cost of risk were down markedly in 2022, and asset quality improved further in the year, driven by de-risking, low new non-performing exposure (NPE) inflows and higher new loans. Their ample, growing and mostly granular deposit bases provide Greek banks with a rather stable, albeit moderately diversified, funding mix. Liquidity was sound and capitalisation improved due to the previous de-risking, DBRS said.

 

For his part, the governor of the Bank of Greece, Yannis Stournaras, said in an interview with CNBC last week that the Greek and the European banking system is well-equipped with capital and the probability of contagion to be "very small".

 

Answering a question on how vulnerable some EU banks are to rising interest rates, he said: "I think the rate hikes are mostly now a story of the past." "I think we are close to the end of the tightening cycle, so, to be honest, I do not believe that there is going to be a problem in the Greek or in the European banking system," he added.

 

At the same time, in an interview with Handelsblatt, Bank of Greece Governor said that “Greek banks are more resilient than they were a few years ago and are better cushioned to absorb the impact of a financial crisis”. Banks have made “significant progress in cleaning up their balance sheets and have ample liquidity thanks to the increase in deposits as well as access to wholesale markets," Mr. Stournaras stressed.

 

The Greek central bank chief added: “They have also returned to profitability in 2022 and improved their capital adequacy to a level above regulatory requirements.” The exposure is “close to zero,” according to Mr. Stournaras. The institutions also have no exposure to Credit Suisse’s equity-like Additional Tier 1 (AT1) bonds.