S&P: Greek Banks’ stronger balance sheets open a path to profit

Greece’s four largest banks are likely to improve their profitability this year on the back of continued balance sheet strength, said S&P Global Ratings in a report, “Greek Banking Sector 2022: Focus Turns To Profitability,” that was published today.

The lenders, Piraeus, Alpha Bank, National Bank of Greece (NBG), and Eurobank, are expected to build on last year’s momentum, when nonperforming exposure ratios fell to about 10% and below. Further reductions in loan loss provisions during 2022, combined with a focus on cost control, will support profitability, and will likely enable NBG and Eurobank to reinstate dividends from this year’s earnings, while Alpha could follow a year later.

The forecasts for improved performance are not without risks. Stronger balance sheets will stoke competition for new lending, putting pressure on profit margins that could further be eroded by increased funding costs.

The conflict in Ukraine might also weigh on the Greek banking sector’s recovery, albeit largely indirectly, through inflation, suppressed tourism spending, and increased investor risk aversion.