BANKS

National Bank disbursed new loans worth 3.0 billion euros in 2019 and expects loan disbursement to move around these levels in 2020 as well, financing enterprises and households. Mylonas said a negative climate has been reversed and that demand for new loans has begun.

The loans, reaching 3.4 billion euros, were issued prior to the crisis to vulnerable social groups, such as fire and earthquake victims, residents on remote islands, Roma, farmers, and small business owners. Out of the total amount, 2.1 billion euros have gone to individuals and 1.3 billion euros went to small businesses. 

This transaction, from which NBG will record a book gain of 500 million euros, could only be executed with the approval of the Greek state. The extraordinary gains are a bonus for the bank which would not have been otherwise able to move ahead with large securitizations of non-performing loans (NPLs) under the state guarantee Hercules plan. The gains will help also help cover losses connected with the sale of National Insurance.

In a letter sent to employees and seen by Business Daily, chief executive Paul Mylonas informed staff that the program will be pushed back to February 10, from the end of December. This will allow for a higher participation rate in the program as many employees had questions about it and how they would be affected by upcoming changes to the social security system.

Piraeus Bank was considered by many to be the weak link in the country's financial system, but the bank has managed to implement a plan that has gained the confidence of investors. In 2018, it reduced bad loans by a record amount, exceeding its five billion euro target, cut its reliance on emergency ELA funding, boost deposits by 10 percent and lowered operating costs by 7 percent.  

The finance minister said that the current first residence protection scheme will end in April and a new programme for debt settlement will be implemented. In addition, he announced that a second systemic intervention for the reduction of bad loans (NPLs) will be launched next year.

The deal with doValue, the largest loan servicing company in southern Europe, gives Eurobank first place among the large securitizations to be completed by Greek banks by taking advantage of state guarantees offered by the government's Hercules Asset Protection Scheme.

The country's lenders are currently limited to eight billion euros of investments in Greek government bonds. The cap was introduced after the huge losses incurred by banks from a debt write off deal imposed on private sector bondholders in 2012 by the Greek government. 

Higher property prices mean that the value of real estate tied to loans improves and this strengthens the asset side of the balance sheet for lenders. Commercial property prices have risen by 14 percent since lows seen in 2017, while apartment prices are up by 11 percent. Bank officials estimate that for every 1 percentage point rise in property prices, banks benefit by nearly 400 million euros.

The improved Hercules proposal introduces a new legal form of state guarantees that allows the best part of the securitized asset to be turned into bonds equivalent to Greek government paper. The Hercules plan will be more useful to banks than initially thought, allowing them to reduce non-performing loans (NPLs) by more than 30 billion euros.