Greek banks: 3 out of 10 'bad debt' loans unsalvageable

By A. Doga
[email protected]

Three out of 10 non-performing loans (NPLs) in Greece are unsalvageable, whereas Greek banks claim their data shows that another 20 to 25 percent of the remaining “bad debt” is held by strategic defaulters.

As per the latter, the intent is to exercise pressure on borrowers that are in a position to service their loans and choose not to.

Conversely, Greece’s systemic lenders estimate that 45 percent of the total NPLs bloc is in a “grey zone”, with the emphasis being on boosting the serviceability of as many of those loans as possible.

Another 30 percent of the NPLs are held by borrowers unable to service their loans, due to dire personal economic conditions.

As one high-ranking banking official told “N” this week, the analytics of each bank are crucial, given that each loan contract must be handled individually in order to have effective results.

Nevertheless, pressure by the SSM, the Bank of Greece (BoG) and would strategic investors on Greek banks to reduce the “Olympus-sized” mountain of NPLs and non-performing exposures (NPEs) in the country is intense.

According to BoG figures, uncertainty in the overall Greek economy in the first quarter of 2017 affected the performance of banks to meet NPL and NPE goals set by the SSM and BoG.

Write-offs over the three-month period deflected the flow of NPEs and reached the goal for this specific sector, while the target for NPLs was missed, primarily due to the addition of new NPLs – mostly mortgage borrowing.

In terms of absolute figures, NPEs at the end of March 2017 reached 103.9 billion euros, exceeding the target by 1.4 billion euros; NPLs reached 75.2 billion euros, missing the targeted reduction by 500 million euros.

The NPE index is at 50.6 percent, meeting the target, while the NPL index is at 36.7 percent, with the quarterly target being 36 percent.