JP Morgan: What was discussed in a meeting with investors about Greek banks

Investors from the other side of the Atlantic are trying to diσcern the landscape of the Greek banking system the next day, according to the contacts that JP Morgan had on American soil. In a discussion organized by the American bank for banks in Central and Eastern Europe (CEE), it noted the great investment interest in exposure to the region.

However, the questions that existed revolved around the course of the Greek banks in the prospect that the European Central Bank will start reducing interest rates. And this is because there has been a request for a guide on the course of interest income and how this may affect the numbers of the banks if  rates start to decline.

It is worth noting here that the majority of analysts covering Greek banks have estimated that interest income (NII) will peak in the current or next quarter, which appeared to be adopted by investors who either have exposure to the Greek sector or want to acquire .

Nevertheless, JP Morgan estimated that NIIs will stabilize, provided that loan volumes increase, with the help of Recovery Fund funds as well. Also, the capital efficiency ratio is estimated at 11.5% in 2025, while for the years 2023-2025.

Bank profitability

In the meantime, bank administrations are satisfied with the looming development of monetary policy in the euro zone, as it is estimated that it will work to support profitability in the next fiscal year as well.

Banking sources note that if this scenario is confirmed, the profitability of Greek banks will be maintained at high levels during the next financial year as well.

The reasons are as follows:

– First, for most of 2024 interest rates on loans will remain at current levels, acting as a stabilizer for interest income.

– Second, it is estimated that the wave of early repayments by creditworthy borrowers, mainly in business credit, who rushed after the first big cycle of interest rate hikes to reduce their debt for this reason, will stop.

– Thirdly, the banks will be able to keep the cost of new financing at a reasonable level, a necessary condition for stimulating demand.

– Fourth, the risk of creating new non-performing loans will be reduced, allowing banks to keep the cost of credit risk low.

– Fifth, after the first reductions in interest rates by the ECB, cuts are expected in the returns on time deposits and a decrease in demand for the specific product, which burdens interest costs like no other.