Revision of NPEs target credit positive for Eurobank, Moody’s says

A downward revision of a target for non-performing exposures (NPEs) by Eurobank is credit positive for the bank, Moody’s said on Monday.

In its Credit Outlook report, the credit rating agency said Eurobank announced a larger decline in NPEs – as agreed with regulatory authorities – along with its nine-month results on November 16.

“A lower level of NPEs, that we believe that the bank can achieve, is credit positive for the bank as it will lower credit risks and intensify efforts towards normalisation of its balance with further improvements in the quality of assets and its restructuring through the sale of loans and liquidations,” Moody’s said, adding: “A decline of NPEs by Eurobank, as by other Greek banks, remains a basic priority in its effort to restore confidence of domestic depositors and in international capital markets”.

“We expect Eurobank to overperform compared with its goals for 2017, due to the sale of a portfolio of non-performing unsecured consumer loans in October, worth 1.5 billion euros, to Intrum Justitia, a top European company,” Moody’s said. The credit rating agency noted that Eurobank aimed to complete a similar transaction in 2018 to reduce its NPEs, while an improvement in the country’s economy will allow a further treatment of loans through restructurings.

Moody’s said that Eurobank’s NPEs were currently at the highest end of banks worldwide, “but they are the lowest among local banks”.

Under Eurobank’s revised plan, NPEs will fall by 400 million euros more this year, falling to 12.1 billion euros by the end of 2019. In September, Eurobank said its NPEs totaled 19.4 billion euros from 20.6 billion in June 2016.