BoG eyes 30 pct NPL cut by end-2018

The Bank of Greece’s main objective is reducing nonperforming loans by 30 percent up to 2018, with Governor Yannis Stournaras asking the Hellenic Bank Association at a meeting on Monday to intensify its efforts for the efficient management of the problem.

For bad loans to drop by almost a third from 2016 to end-2018, it will mean that their rate must go down from 35.5 percent in December 2015 to just 25 percent in the next 34 months. In euro terms, NPLs added up to 72.3 billion euros at end-2015, from a total loan portfolio of 208 billion euros, and should go down to about 52 billion by the end of 2018.

If that ambitious target is met, then the banking system will return in 2018 to where it was in 2012, at the end of which bad loans amounted to 24.5 percent of all loans.

That 30 percent reduction by 2018 is only the first step toward the target for NPLs to come to below 10 percent by 2022, to revert to normal levels by eurozone standards. For that to happen bad loans will have to decrease by 50 billion euros in total, or by some 7 billion euros on an annual basis for the next seven years, although that will also depend on the course of the economy and credit expansion.

Tackling NPLs will be one of the issues the creditors’ technical experts will be discussing with the government this week.