The Greek banking sector is better placed than in the past to withstand potential shocks and perform its intermediation function, despite a slight deterioration in the asset quality of credit institutions, according to the Financial Stability Review released by the Bank of Greece on Tuesday.
In the first half of 2024, Greek banks posted profits after tax and discontinued operations of 2.3 billion euros, compared with profits of 1.9 billion euros in the first half of 2023. This development was mainly underpinned by an increase in net interest and fee income, supported by fees from payment transactions and asset management.
The capital adequacy of the banking sector remained almost unchanged in the first half of 2024, as a rise in prudential own funds was offset by an increase in risk-weighted assets. In particular, the Common Equity Tier 1 (CET1) ratio on a consolidated basis fell marginally to 15.4% in June 2024, from 15.5% in December 2023, and the Total Capital Ratio (TCR) remained unchanged at 18.8%. However, these ratios are still below the European average (CET1: 15.8% and TCR: 19.9% in June 2024). Moreover, the liquidity of the Greek banking sector remained satisfactory in the first half of 2024.
The asset quality of credit institutions during this period deteriorated marginally, owing to the inclusion within the NPL perimeter – pursuant to a supervisory requirement – of certain government-guaranteed loans. It should be noted that the system-wide NPL ratio (June 2024: 6.9%) still remains high and a multiple of the average of European banks (June 2024: 2.3%).
The outlook for the Greek banking sector is positive. However, it is inextricably linked to Greece’s macroeconomic developments, which are in turn affected also by exogenous factors. A further rise in geopolitical risks may have a negative impact, while a sharp repricing of assets in international money and capital markets could have significant negative repercussions on the world economy. Additionally, climate change and the risk of cyber attacks pose significant risks to the smooth functioning of the financial system.
In conclusion, safeguarding financial stability depends, to a large extent, on further enhancing the resilience of the Greek banking sector. At the same time, it becomes all the more important to promote the reforms necessary to deepen the Banking Union and strengthen competitiveness at EU level.
SOURCE; ANA-MPA
