ECB: NPL ratios still very high for Greek banks’ capital ratios around Eurozone

Greece’s “big four” banks are in the process of agreeing to new, more stringent targets for the reduction of toxic debts in their talks with the European Central Bank’s Single Supervisory Mechanism.

As Greek lenders intensify efforts to clean up their balance sheets, several large portfolios of nonperforming loans of €1 billion or more are either in the market or being prepared for sale. Industry insiders are optimistic about investor appetite for buying large bundles of Greek debt, but warn that certain varieties, such as unsecured consumer loans, may be harder to shift than others.

Greek banks have negative records in non-performing loans and liquidity, the European Central Bank said in its supervisory banking statistics report for the second quarter of 2019.

The ECB, in its quarterly report, said that the four Greek systemic banks (National Bank, Piraeus Bank, Alpha Bank and Eurobank) have the highest NPLs rate in the Eurozone and at the same time the lowest liquidity.

According to the report, the rate of NPLs has fallen to 3.56 pct in the second quarter of 2019 in the Eurozone, but in Greece it was 39.2 pct – the highest rate in the Eurozone. The lowest rates were recorded in banks in Luxembourg (0.97 pct).

Despite the heavy burden of NPLs, the Greek banks’ capital ratios are not so negative, as they range around Eurozone average rates. The Common Equity Tier 1 (CET1) ratio in the Eurozone was 14.34 pct, the Tier 1 ratio was 15.55 pct and total capital ratio was 18.01 pct.

On average, Eurozone’s capital ratios ranged from 1.89 pct in Spain to 28.02 pct in Estonia. For Greek banks these ratios were slightly above 15 pct. The Eurozone liquidity index eased to 146.83 pct in the second quarter of 2019, from 149.51 pct in the first quarter.

Greek banks were in the worst position, with their rate at 99.15 pct, while Slovenia’s credit institutions recorded an average liquidity ratio of 369.16 pct.

ECB stressed that the figures for Greek banks are affected by external factors that temporarily hinder the use of the liquidity coverage ratio as an appropriate liquidity risk indicator.