Minor recovery of deposits in 2016 – High, but slightly improved rate of Non-Performing Exposures (NPI)

The domestic banking sector is the subject of investigation in a recent study conducted by Infobank Hellastat S.A. According to Alexis Nikolaidis, Economic Research & Sectorial Studies Senior Analyst, the deal that was achieved in July 2015 with regard to the country’s new refinancing program, gradually eliminated the disruption that had been caused by capital controls, which has had a positive impact on the demand for deposits.

Therefore, during 2016, net capital inflows amounting to €4.2bn – which had been placed abroad – were recorded, after significant losses in the year before, with the total balance of deposits being formed at €121.2bn (+3.4%).

In contrast, the provision of finance to the private sector declined further by 2% in 2016. Thus, in the end of the year, the balance of total loans was formed at €195.2bn, with the net outflow amounting to €2.9bn.

The economic recession caused the gradual downgrade of the loan portfolio held by the banks, which has had a restrictive effect on their credit granting capacity. In the end of 2016, the amount of Non-Performing Exposures (NPI) was set at €106.3bn, recording a drop of 1.2% compared to late September. Therefore, the rate of NPI over total exposures was set at 44.8%, versus 45.2% in late last September, and 44.2% in late 2015.

This improvement has been due primarily to loan write-offs and full repayment of NPIs, and secondarily to the liquidation of collaterals and reduction in the net reclassification of exposures, from performing, to non-performing.

Nevertheless, and in spite of this improvement, the NPI ratio has remained high throughout the categories: 54% in consumer loans, 41.5% in mortgage loans, and 44.6% in business loans.

The coverage rate of NPI by Accumulated Impairment rose marginally in December 2016, at 49.6%, versus 49.5% in late September. If, however, the value of collaterals is added to the impairment, the coverage rate reaches 100%.

In late 2016, the exposure of the Greek banks to the Eurosystem was reduced to €67bn, from €108bn in the end of the year before. From this amount, €23bn was derived from refinance provided through the ECB (-€16bn, compared to 2015), and €44bn from the ELA (-€25bn, compared to 2015).

It should be noted that, in June 2016, the ECB reinstated the waiver status, accepting Greek bonds again as collateral in deeds for providing primary refinance to the Greek banks.

According to Mr. Nicolas Gouzelos, CEO of Infobank Hellastat, “A special institutional framework was recently established, in order to reduce non-performing loans, through interventions, such as the development of a secondary market, assignment of management to specialized companies, etc. These actions will allow the banks to improve the picture of their balance sheets and reduce the impairment, improving thus their results. In this way, the banking system will secure its sustainability, and will be able to finance the economy again.”

 

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