UPDATE 1-Greek Banks NBG, Alpha Increases Arrangements to Cover Coronavirus Loan Impact
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ATHENS, May 28 (Reuters) – The National Bank (NBG) and Alpha, two of Greece’s largest lenders, have increased their provisions to cover early loan write-downs due to the coronavirus crisis as they kicked off credit season on Thursday. first quarter results for the sector.
The coronavirus pandemic has struck just as Greek banks progressed in their attempt to sell, write off or restructure billions of euros of bad debt accumulated during the latest financial crisis.
The country’s economy is expected to contract by 6% this year, according to the central bank’s baseline scenario, hit by restrictive measures to slow the spread of the virus, the global recession and an expected sharp drop in tourism.
The stock of nonperforming loans (NPLs) declined by 16% last year but remained at a high level of 40% of gross lending, hampering the ability of banks to lend and finance economic recovery.
NBG National Bank, 40 percent owned by the country’s bank rescue fund HFSF, posted a net profit from continuing operations of 409 million euros ($ 451.95 million) in the first quarter, up sharply from $ 18million in Q4 2019 and boosted by gains in Greek government bonds.
Provisions for loan impairment were € 486 million, up from € 107 million in the fourth quarter, reflecting the full absorption of expected loan losses from COVID-19.
Peer Alpha Bank, 11% owned by HFSF, recorded a net loss from continuing operations of 10.9 million euros compared to net profit of 5.4 million euros in the previous quarter, due to higher provisions for loan impairment and lower trading income.
“We expect the € 24 billion in stimulus measures, at 13% of GDP, to limit the recessionary impact of COVID-19 in 2020 and pave the way for a strong recovery in 2021,” the CEO of the bank, Vassilis Psaltis.
Alpha’s NPLs fell to 30% of its loan portfolio, from 30.1% in the fourth quarter.
The National Bank’s Non-Performing Exposure Ratio (NPE), which includes NPLs and other credit at risk of going bad, fell to 30.9% of its loan portfolio from 31.3% in December.
The economic fallout from the coronavirus pandemic will likely delay planned securitizations to move bad debts inherited from balance sheets. In response to the crisis, Greek banks have instituted moratoriums on debt payments to individuals and businesses that were performing well before the epidemic. (Reporting by George Georgiopoulos; Editing by Kirsten Donovan)