Greek banks are planning this year the sale of three large non-performing loan securitizations, totaling about 6 billion euros. These transactions will be included in the Hercules state guarantee plan.
These are the Sunrise project of Piraeus Bank, a portfolio of NPEs amounting to 3.6 billion euros, the Frontier II of the National Bank (NBG) concerning NPLs amounting to approximately 1 billion euros, and the interbank project Solar which includes NPEs of small and medium enterprises amounting to 1.5 billion euros from the four systemic banks, namely Eurobank, Alpha Bank, Piraeus Bank and NBG.
Bank executives are optimistic about the course of transactions, noting that the world-wide turmoil caused by Russia’s invasion of Ukraine poses some additional challenges, but that investment interest remains strong and it seems that the transactions will close successfully and quickly.
Regarding the Hercules scheme and the objections that Eurostat seems to have raised, it is believed that there will be no issue with the transactions, given that these are the last of the NPEs.
These transactions, along with some other smaller ones, will complete the consolidation of banks' loan portfolios, leading the entire banking system to a single-digit non-performing loan ratio, even below 5% for some banks. The ultimate goal of lenders is for NPEs to be close to 3%, which is the EU average.
In addition to securitization sales, banks estimate that a significant part of the current NPEs balance will be cured. At the same time, in order for the NPEs index to drop to the European average, credit expansion is needed, as it will lead to a reduction in the percentage of non-performing loans in relation to the total amount of loans.
Reduction of NPLs by 83%
With Sunrise, Frontier II and Solar transactions, banks will get rid of the legacy of the crisis: the large stock of non-performing loans created between 2010 – 2015.
According to the Bank of Greece, non-performing loans at the end of December 2021 amounted to 18.4 billion euros, down 28.8 billion euros compared to the end of December 2020, and by 90.3 billion euros compared to March 2016, when they had peaked.
Eurobank was the first systemic bank to achieve the reduction of the NPEs index to a single-digit level. At the end of 2021, its NPEs index reached 6.8% with the bank aiming at an index of 5.8% in 2022 and 4.8% at the end of 2024. Eurobank's stock of NPEs now stands at 2.8 billion compared to 22.9 billion at the end of 2016.
National Bank closed in 2021 with an NPEs index of 6.9% after the completion of Frontier I, a transaction totaling approximately 6 billion euros. With the completion of Frontier II, the bank's NPEs index will be close to 5%, with a target of 3% in 2024.
Alpha Bank, with a large number of transactions in 2021 reduced NPEs to 13.1% at the end of 2021, from 42.5% at the end of 2020. This year’s goal is the reduction of the index to 7%.
Piraeus Bank achieved the reduction of the NPEs index at the end of 2021 to 12.6%, compared to 45.3% on December 31, 2021. This reduction was achieved through securitizations, both through the Hercules Scheme and other transactions, totaling 16.8 billion euros.