Bank are very close to finalizing a new mechanism to proceed with new securitizations of non-performing loans, without activating existing legislation on deferred tax credits (DTC) and the issuance of shares in favor of the state.
Piraeus Bank, Eurobank and Alpha Bank are working intensively on a new plan that will allow them to proceed with a new cycle of securitizations, as part of the expansion of the state guarantee plan (Hercules II), without trading losses activating the legislation on deferred tax requirement (DTC).
According to Business Daily, the new plan developed by the management of Piraeus Bank, in collaboration with specialized consultants, has received the green light from certified public accountants and has already been forwarded to the Single Supervisory Mechanism (SSM) of the ECB, in order to get the green light.
The corporate change that will allow the realization of new securitizations without losses to trigger the issuance of shares in favor of the state is a key element of broader plans from Piraeus Bank for the implementation of the share capital hike set for the spring.
In order to take advantage of the Hercules plan without losses from the transactions leading to the issuance of new shares based on the DTC in favor of the state, banks have proceeded with the division of their activities (hive down) and the transfer of banking activities to a new subsidiary.
The Hercules program provided state guarantees totaling 12 billion with the aim of securitizing and selling to investors non-performing loans of banks amounting to approximately 30 billion euros.
Eurobank was the first to use the Hercules plan by submitting three applications under the Cairo project amounting to 7.5 billion euros, Alpha Bank applied for the Galaxy project amounting to 10.5 billion euros (the completion of the transaction is expected immediately), Piraeus for the Vega (5 billion) and Phoenix (1.9 billion) projects and National Bank for the Frontier project (6.1 billion euros).
It is noted that the management of Piraeus Bank is already preparing a new securitization of at least 5 billion euros. Eurobank's preparations for new securitizations are at an advanced stage and according to sources, management may accelerate the programming that envisages a single-digit non-performing loan ratio at the end of 2022. Respectively, Alpha Bank is working intensively on returning to a single-digit NPL index.
According to the latest available data, at the end of September 2020 non-performing loans amounted to 58.7 billion euros, reduced by 9.8 billion euros from December 2019. When compared to the peak of the crisis, (March 2016) , when problem loans had reached 107.2 billion euros, the reduction achieved by the banks exceeds 48 billion, reflecting the significant progress made.
Despite the progress, the difference with European levels remains large as the index of non-performing loans of Greek banks stands at 35.8% (September 2020) compared to 2.9% which is the average in the euro area (June 2020).