Fitch sees fast improvement of NPL rates

Fitch Ratings has upgraded its estimates on the nonperforming loans index of Greek banks, factoring in the new securitization plans through the state’s Hercules 2 program, as well as the capital strengthening actions made by local lenders, such as Piraeus Bank’s recent share capital increase.

The company estimates that the nonperforming exposures index for the entire Greek sector will shrink to below 15% in the next 12 months, from 35% at the end of 2020. Previously Fitch had expected the index would drop below 30% by end-2021, having only factored in the securitizations of the original Hercules asset protection scheme.

The rating agency notes that the recent positive action in rating the Greek systemic banks a few days ago reflect the acceleration of the risk containment plans in their financial balances. Fitch expects the credit profiles of Eurobank, National, Alpha and Piraeus to improve faster as a result of the updated plans of the banks’ managers, with support from Greece’s economic recovery that is also expected to speed up now.

Of course the ratings of the local lenders remain low, reflecting the weak quality of their assets.