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“We may now begin to discern a relatively
positive outlook amongst all client
segments, which will be further reinforced
by a more stable political and nancial state
of affairs.”
ANNA FAKIOLA, HEAD OF SALES AND RELATIONSHIP MANAGEMENT
FOR PI- RAEUS BANK’S SECURITIES SERVICES DIVISION.
but still close to the market. He points out that, for
the most part, the systemically important banks in
Greece remain largely dependent on income from
residual lending activity. “Imagine any other indus-
try, where the manufacturer was not able to offer the
product they were set up to produce,” he comments.
In September 2017, the gross value of NPLs for
Greek banks stood at €106 billion, around 47% of
total loans, while the ratio for non-performing ex-
posures (NPEs), including all loans, advances, debt
securities and off-balance-sheet exposures, stood at
42%. A significant share of NPEs comprises loans to
SMEs and residential mortgages. Hardouvelis sug-
gests that while some 25% of NPLs are what might
be called ‘strategic’, with the debtors hoping to take
advantage of some future debt relief or court-related
delay, 75% are real.
In June 2016, a plan was launched to reduce NPLs
and NPEs over three and a half years through a com-
bination of write-offs, loan sales and other modes
of restructuring. The first two NPL sales by Greek
banks took place in the second half of 2017, while
in late May, Piraeus Bank, Greece’s largest lender,
agreed to sell a €1.45 billion ($1.7 billion) portfolio
of secured, non-performing business loans to Bain
Capital Credit.
Provisions for the banking sector now amount to
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Global Custodian
Summer 2018
almost half the gross value of NPLs, higher than the
EU average. “Provisions against these non-perform-
ing assets make at least some recognition of income
from loan sales a reasonable expectation,” says Ky-
roudis, adding that the banks’ decreasing reliance on
emergency funding and the dilution of government
ownership are all positive signs.
Where does that leave the transaction banking
businesses of the Greek banks and, more specifical-
ly, their securities services divisions? Hardouvelis
does not see them getting to the front of the queue in
terms of strategic consideration. “Sovereign ratings
affect everything, even the ability of the banks to get
money from their own central bank,” he says.
“Transaction services are a small part of the banks’
overall problems.” Hardouvelis cites the example
of foreign companies refusing to accept Greek bank
Letters of Credit as a bigger problem for banks’
senior executive management. Kyroudis points out
that in the current climate, even if fee-based services
were to grow, the impact on the banks’ earnings pro-
files would be muted. “Increasing fee-based income
by 10% would make little dent on earnings,” he says,
“while 10% growth on a loan portfolio would make a
substantial impact.”
Papapetrou at Piraeus Bank acknowledges that,
“Local banks are placing their focus on improving
their balance sheets, and within this emergency
context, securities services divisions are reorganising