Moody’s today maintained its positive outlook for the Greek banking system despite serious challenges that still lie ahead due to expected improvements in funding and asset risk management.
In a report today the credit rating agency acknowledged lingering problems but projected that the recent improved climate will lead to a hike in deposits, a gradual reduction of non-performing loans (NPLs), and improved prospects for profit.
“Moody’s expects a more rapid rate of increase in deposits and a gradual drop in NPLs,” said VP-Senior Credit Officer Nontas Nikolaidis.
The report made a series of observations and projections.
A gradual return of deposits as well as increased access to the inter-bank lending market has allowed Greek banks to eliminate their emergency liquidity assistance (ELA). Further deposit increases are likely as the economy gradually recovers and as more investments flow into the country.
Problem loans will slowly decline from very high levels as Greek banks benefit from improved loan recovery laws and a developing secondary market for non-performing loans.
Moody’s projects real growth in GDP of around 2.2 percent in 2019 and two percent in 2020, compared to 2.1 percent in 2018.
Economic trust will continue to recover from a very low base.
Unemployment will remain high and property prices will only gradually recover from depressed levels, challenging banks’ growth.