The rise in interest rates increases bad loans again – What do the figures of the Bank of Greece show

By Chrysostomos Tsoufis

The message of the Bank of Greece with its report on financial stability, it was clear. Winter is coming and with regard to bad loans.

As long as the war continues, energy costs will remain high and therefore inflationary pressures will intensify. At the same time, the rapid economic growth that until now “masked” the problem, will not exist and therefore and in combination with the environment of increasing interest rates, notes the Bank of Greece, the difficulties of households to meet their loan obligations will increase and with them will bad loans will also increase and in fact to a percentage that cannot yet be estimated.

An indication of risk are loans in arrears of 1 to 90 days, one step before being classified as red, and which increased by 25% from €4bn to €5bn, a delinquency due under business loan exposure.

The central bank’s warning comes at a time when – at least the big 4 systemic banks – have met the targets – in one way or another – of reducing non-performing loans from their portfolios to single digits.

In the much smaller banks, however, almost 1/2 of loans are not serviced – 49%!

Somehow in total, 1 in 10 loans in Greece remains in the red, approximately €14.9 billion. Of these, €3.9 billion, approximately 26%, have to do with loans that are in arrears for more than 1 year, a percentage increased by 5 points compared to the end of last year.

Of the €14.9 billion in bad loans, €4.6 billion belong to households (housing and consumer loans) and €10.3 billion to businesses.

The figures show that 1/3 of red business loans come from the catering industry, 1/4 from construction, followed by agricultural activities with 15.9%, trade with 15.4%, telecommunications with 15.2% and property management with 14 .8%. On the contrary, the sectors that “produce” the least bad loans are energy with 1.1% and financial companies with 2.9%

The consolidation index – i.e. the loans that “turn” from non-performing to performing – remains very low at 3.2% (with the rate for housing at 8.1% and for business at just 1.9%) while the default rate is at 0.6%.

At least the Bank of Greece estimates that for the fourth quarter of the year the criteria for granting loans to households will not change, which in the first quarter of the year increased their demand for housing loans but then the desire was interrupted by the deterioration of confidence and the increase in interest rates. As for consumer loans, their demand remained the same in the first quarter, but increased in the third quarter.

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