Greek banks in 2023 it will face serious problems due to the worsening prospects economy.however, they are much better equipped than in the past to overcome them, emphasizes S&P rating agency in my new report.

In more detail, as they say, the economic outlook across Europe is worsening due to rising inflation and sharp increases in interest rates. “Greece is not immune from this and will face a significant slowdown in growth in 2023,” S&P Global Ratings said, cutting its forecast slightly to 1.4% from 1.7% earlier, but stressing that it will be much higher than in most EU countries. thanks to the boost the economy will receive from the Recovery Fund.

However, Greek banks are in a much better position than in the past to cope with the deteriorating macroeconomic situation and any turbulence. “By the end of 2022, banks have completed most of the transformation process and now have cleaner balance sheets with an increased focus on core business and a more balanced funding profile,” the House of Representatives emphasizes. However, in his opinion, bank capital will remain the main weak point due to the high share of deferred tax credits.

S&P expects profitability growth for Greek banks to approach the level of European banks this year due to widening asset spreads due to higher ECB interest rates and the continued expansion of lending supported by European funds. Abundant liquidity in the system will limit the revaluation of deposits, he said, but the end of the ECB’s targeted long-term refinancing operations (TLTRO) will reduce the industry’s funding sources, leaving them with more expensive options and thus reducing their profitability. In particular, he notes that meeting the minimum equity and eligible liability (MREL) requirements can be challenging, as the securities that banks will have to issue will be worth much more than originally thought.

However, the House expects a limited deterioration in the asset quality of Greek systemic banks due to their portfolio structure. He notes that Greek banks shed the weakest loans in their portfolio during the decade-long crisis, and the high NPLs suggest default rates may be lower than expected in the past. However, he notes that many bank loans are concentrated in cyclical sectors such as tourism, real estate, construction and shipping, which could be hit harder by the economic slowdown. “After a strong recovery in 2022, the 2023 tourist season will be one of the key determinants of the future asset quality of banks,” underlines S&P. Overall, the cost of industry risk is expected to reach 80 basis points in 2023 after averaging above 300 basis points. in 2018-2021