Today, S&P credit rating agency upgraded the rating of Greek banks, citing the significant progress they have made.

In particular, it upgraded:

• the credit rating of National Bank and Eurobank to ‘BB-‘ from ‘B+’ and kept their outlooks positive

• Alpha Bank’s rating to ‘BB-‘ from ‘B+’ with a stable outlook

• Piraeus Bank’s credit rating to ‘B+’ from ‘B’ with positive outlook

• the credit rating of Aegean Baltic Bank to ‘B+’ from ‘B’ with a stable outlook

• the rating of Eurobank Holdings to ‘B’ from ‘B-‘ with a positive outlook

• the rating of Alpha Services and Holdings to ‘B’ from ‘B-‘ with a stable outlook and

• Piraeus Financial Holdings’ rating outlook to positive from stable, affirming its long-term rating at ‘B-‘

In its announcement, S&P says that Greek and Cypriot banks will increasingly reap the benefits of the multi-year clean-up of their balance sheets, the restoration of their profitability and now interest rate hikes.

It also notes that these banks have made significant progress in rebalancing their funding profiles, thanks to strong deposits and high deleveraging of their balance sheets, which now put them in a good position to repay the targeted long-term loans they had taken from the European Central Bank.

Greek and Cypriot banks confirmed in 2022 that they have reached a turning point on their path to normalization, S&P notes. After years of significant sales of non-performing loans (NPLs), securitizations, write-offs and recoveries, all systemic banks in Greece and Cyprus were able to record NPLs of less than 10% of their total loans. In addition, the caution they have shown in recent years in lending shows that the potential deterioration in their asset quality is expected to be much more limited than in past crises, says S&P, which expects the cost of risk to fall from today’s flat.

The house notes that since the middle of the last decade, Greek banks have managed to improve their activity with effective measures to reduce costs and by selling their non-core assets, with the result that the cost-to-income ratio has improved close to or below 40 %. “This ranks them among the most profitable banks in Europe.”

Bank profitability has improved after years of posting losses. “We expect further profitability strengthening supported by lower loan loss provisions, additional benefits from higher borrowing rates and continued focus on controlling operating expenses,” S&P said.

In addition, it expects Greek banks’ NPLs to increase 3% to 4%, mainly due to a boost from the use of funds from European funds, after a number of years of negative loan growth due to large sales of NPEs.