Moody’s remains bullish on credit sector’s outlook

Moody’s said in a report on Monday that the outlook for Greece’s banking sector remains positive due to the expected improvements in banks’ funding and asset risks.

Despite the still challenging economic conditions, recent improvements will likely lead to stronger deposit growth, a gradual decline in problem loans and marginal profitability.

“Moody’s expects more deposit growth and a gradual fall in problem loans,” said Nondas Nicolaides, vice president and senior credit officer at Moody’s.

“Banks should remain marginally profitable in 2019-20 as loan-loss provisioning and operating costs decline,” he added.

The international rating agency estimates that “a gradual return of deposits and increasing access to the interbank lending market have allowed Greek banks to eliminate their emergency liquidity assistance. Further deposit increases are likely as the economy gradually recovers and as more investments flow into the country. Problem loans will slowly decline from very high levels as Greek banks benefit from improved loan recovery laws and a developing secondary market for nonperforming loans.”