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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 industry , 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 exposures ( 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 suggests 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 combination 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
almost half the gross value of NPLs , higher than the EU average . “ Provisions against these non-performing assets make at least some recognition of income from loan sales a reasonable expectation ,” says Kyroudis , 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 specifically , 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 profiles 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
46 Global Custodian Summer 2018