2019 may have been the year that marked the strong comeback of Greek banks as uncertainty retreated in the sector and a 101 percent jump in bank stocks fuelled expectations for more gains but the next twelve months will not be a walk in the park for lenders.
In 2020, investors will judge the ability of banks to implement ambitious business plans that have been presented and whether they are enough to pave the way for a return to normal conditions for lenders.
Twelve months ago, banks were under enormous pressure from many who doubted whether they will manage to get by without large share capital increases. Lenders managed to turn sentiment around and put an end to talk about more capital being needed by presenting a series of ambitious business plans that focus on managing their stock of bad loans.
At the end of 2018, Eurobank presented its Acceleration Plan and in May 2019 National Bank of Greece its 4-year business plan. Piraeus Bank unveiled its 5-year Agenda 2023 when publishing first-quarter earnings, while in November Alpha Bank went public with its ambitious 2020-2023 Strategic Plan.
These blueprints, in combination with speedier sales of non-performing loans (NPLs), helped banks respond to doubts about the sector, regain trust and fuel expectations for an exit from the crisis - expectations that drove the bank stock index on the Athens bourse 101 percent higher in 2019.
In 2020, investors and analysts will be keeping a close eye on progress made on these plans and whether they are enough to handle challenges faced by the sector and launch it into a post-crisis era.
Challenges ahead
A significant challenge for the year will be the implementation of NPL sales within the framework of the government's Hercules Asset Protection Scheme. Many analysts are cautious about the proposal, noting that it is a complex scheme that demands a lot of time and involves several risks. The speed and efficiency at which the scheme will be implemented will play a key role in determining the success of the business plans announced by lenders.
Others challenges faced by banks include their ability to further reduce operating costs, maintain profitability without one-off earnings from 2019 (mainly from bonds), broaden healthy business lines and work well with bad loan managers that will undertake the difficult task of managing a large chunk of their NPLs.
Yiannis Papadogiannis
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