An increase in Euribor interbank interest rates by 100 – 110 basis points compared to current levels is the ideal scenario for Greek banks, since as number-crunching has shown, such a development will help boost their organic profitability, without creating particular problems for customers servicing loans.
In particular, if the deposit acceptance rate of the European Central Bank from -0.50% today stays at the level of 0.50% – 0.60%, for the year, the benefit that net interest income of the four systemic groups will be:
Alpha Bank: +183 million euros
National Bank: +200 million euros
Eurobank: +230 million euros
Piraeus Bank: +100 million euros
This profit will arise from the increase of interest rates on business and household loans, the majority of which are on floating interest rates.
Profitability
At the same time liquidity through deposits will not become more expensive. According to an industry analyst no significant change in deposit rates is expected, until Euribor reaches 25 basis points.
If the European indices move higher, adjustments will come, but they will be significantly lower than those applied to loans. In this context, banking administrations expect an increase in forecast profitability of approximately 15% compared to their original business plans.
Credit expansion is a key to achieving this goal, which among the four systemic banks is estimated to range from 1.2 – 2 billion euros this year, from the expected net increase in loan balances.
This along with the increase in income from commissions and the automatic adjustment of interest rates on existing loans, will lead to a rapid replenishment of the losses that banking groups inevitably have incurred from the consolidation of their balance sheets.
Dangers
But, if the ECB tightens its monetary policy much further, things will change. This is because this will augment the risk of creating a new generation of red loans, while banks will be forced to raise their deposit rates. As a result, the Euribor benefit-growth ratio will worsen. Despite banks desiring a raise to a max of 0.50% – 0.60%, levels of 1% – 1.25% will not be catastrophic, since banks have weathered far worse in the preceding decade.
Another risk is related to a possible reduction in demand for new financing, but this again may not be of particular concern since planned investments will not be deterred by an increase in the cost of borrowing of this size.
In the same vein, an addition of 20 or 50 euros to monthly mortgage installments will not deter prospective home buyers.
Latest News
Developing the Blue Carbon Economy in Greece
Can Greece make money by protecting its marine environment?
EIB Appoints Greece’s Ioannis Tsakiris as New VP
Ioannis Tsakiris started the new role May 1 after spending 15 years at the European Investment Fund (EIF) and serving as Greece’s Deputy Minister for Development and Investments
Two Greek Beaches in Top 50 in the World
Both Greek beaches were on the list of the best beaches in Europe too
Eurostat: Greece 20th out of 26 European States in Hourly Average Wage
According to figures released by Eurostat, the Benelux Grand Duchy of Luxembourg, one of Europe’s hubs for finance, is in first place
Greek Property Renovation Surge amid Economic Constraints
This has led to a notable escalation in renovation costs, with average prices per square meter exceeding previous norms and reaching even 1,000 euros in premium locations
RRF: Additional €5.1bln Funds for Subsidies to Greece in 2025
By April 22, funds totaling 5.75 billion euros had been transferred for approved projects of the Recovery Fund to entities within and outside the general government and final recipients
OECD: Greek Economy Resilient with 2% Growth Forecast for 2024
However, the OECD highlights challenges including the need to enhance productivity and fiscal adjustment due to high debt levels.
Challenges and Delays in Greece’s Hydrocarbon Exploration
Sources disclose that the petroleum companies holding the concessions are seeking partners to jointly invest and share the costs of exploration and drilling.
Greek Beach Visitors Can Report Violations on New ‘MyCoast’ App
Greek authorities hope the newly-launched, free ‘MyCoast’ app will help clamp down on public beach violations
BoG Figures Confirm Banner Year for Greek Tourism in 2023
20.6 billion euros in related revenues topped the previous year’s figure by 16.5%