While overall in the core countries of the eurozone, economic conditions increase fears of a rise in non-performing bank exposures, Fitch estimates that Greek banks will reduce “red loans” to 7% this year and 5% in 2023.

At the same time, the ratings agency expects that in Greece (and in the European South in general) banks will benefit more from the ECB’s interest rate increases, predicting that in 2023 they will also show strong rates of growth in their profitability, with loans exceeding the growth rate of deposits.

Operating profitability is close to 2%

After better-than-forecast 2022 results, Greek banks’ operating profitability will remain close to 2% of their assets (RWA), despite lower trading income, as losses from NPL securitizations will be contained , as most of them are completed this year.

Although he acknowledges that asset quality risks will intensify due to inflationary pressures, he nevertheless emphasizes that the formation of new non-performing loans will be manageable, taking into account the government support measures and Greece’s macroeconomic resilience (in the tourism and real estate, among others). Any new negative shocks in the Greek economy that affect the economic recovery and, ultimately, the prospects of the banks, are nevertheless a downside risk.

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