National Bank of Greece and Eurobank Lead in Problem Loan Recovery


As large banks in Greece use securitization as a way to improve asset quality, National Bank of Greece SA as well as Eurobank Ergasias Services and Holdings SA leads the way with a sharp reduction in problem loans in the first quarter.

Impaired loans from the National Bank of Greece fell to € 4.2 billion in the first quarter, up from € 10.7 billion in the same quarter of 2020, while Eurobank’s problem loans fell from € 12.9 billion to € 5.8 billion, according to S&P Global Market Intelligence.

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Banks of the “Big Four” of Greece – National Bank of Greece, Piraeus Financial Holdings SA, Alpha Services and Holdings SA and the Eurobank – fought with problem loans that have accumulated over the past decade in the context of the country’s debt crisis. Piraeus’ problem loans in the first quarter were € 16.1 billion, up from € 17.5 billion a year earlier, while Alpha’s loans rose slightly to € 15.3 billion.

The aggregate NPL ratio of Greek banks dropped significantly to 25% at the end of 2020 from almost 40% in 2016, but it remains much higher than in other European countries, including Italy.

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Lenders used securitization as a way to remove bad loans from their ledgers through Hercules’ asset protection scheme. This program encourages banks to securitize bad debt by offering a government guarantee for the least risky tranche of bonds to sell.

In March, Eurobank presented project Mexico as part of ongoing efforts to tidy up its balance sheet, aimed at reducing the 14% share of nonperforming loans, or NPEs, to single digits by the end of 2021. The deal is a follow-up to an earlier € 7.5bn securitization of bad loans in Cairo, which was completed in mid-2020. The Frontier project of the National Bank of Greece aims to reduce its $ 10 billion investment in NPE by approximately € 6 billion.

In March, Piraeus announced that its securitizations of Sunrise 1 and Sunrise 2, worth 7 billion euros and 4 billion euros, respectively, would be carried out using the Greek Asset Protection Scheme 2. Previously, deals included Vega and Phoenix.

Alpha Bank’s Galaxy securitization had a cost € 10.8 billion and he is preparing another one called Cosmos.

Loans subject to a moratorium

The Bank of Greece, the country’s central bank, expects Greek banks to be able to reserve € 8 billion to € 10 billion in new problem loans in 2021 amid COVID-19.

The impact of the pandemic on Greek banks is expected to intensify in 2021 as they, in particular, face problems related to low baseline profitability and competition from non-banks.

Four major banks in Greece have imposed a total moratorium € 19.2 billion loans during a pandemic to save needy borrowers from default. Most moratoriums completed According to Yannis Muzakis, managing director of MacroPolis, a think tank dealing with the economic and political problems of Greece, creditors were not bitten by a wave of defaults.

Moratorium loans from Greek banks fell to € 4.1 billion in the fourth quarter of 2020 from According to the European Banking Authority, 22.2 billion euros in the second and third quarters.

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Cumulatively, Greece’s NPLs fell to € 44 billion in 2020 from 57 billion euros in 2019.

According to the Economist Intelligence Unit, the country’s GDP is expected to grow at 5.40% in 2021, after shrinking by 7.81% in 2020.

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