Credit rating agency Moody’s upgraded six Greek banks – Alpha Bank, Attica Bank, Eurobank, Ethnikis, Pankritias and Piraeus – following the upgrade of the Greek government’s credit rating by two notches on Friday.

The upgrade by 1-2 notches concerns the creditworthiness of the banks’ long-term deposits as well as their autonomous basic credit rating, while the outlook for all six banks is positive.

In particular, the creditworthiness of the long-term deposits of the six banks was upgraded:

• For Alpha Bank in Ba1 from Ba2,

• For Attica Bank in B3 from Caa1,

• For Eurobank to Baa3 from Ba2,

• For National, also at Baa3 from Ba2,

• For Pankritia in B2 from B3 and

• For Piraeus in Ba1 from Ba3

In a statement, Moody’s notes that the upgrades were driven by structural improvements in the Greek economy as well as significant improvements in the banks’ fundamentals. They also reflect the house’s view of the good prospects for Greek banks to maintain their relatively strong financial performance over the next two years.

A key driver for the upgrades is the better operating and credit conditions in Greece, giving a more supportive operating environment for Greek banks.

Structural improvements and reforms have improved the economy’s resilience to shocks, leading to the government’s recent upgrade to Ba1 (with a stable outlook) from Ba3 (with a positive outlook), the release noted.

As a consequence of this assessment, Moody’s upgraded Greece’s macroeconomic profile to ‘moderate+’ from ‘moderate-‘, which in turn puts upward pressure on the stand-alone credit profiles of all six banks.

At the same time, the credit conditions in Greece, reports the house, have improved significantly in recent years, with a significant reduction in their non-performing exposures (NPEs) to approximately 12.8 billion. euros (or 8.6% of total loans) in June 2023 from 47.2 billion. euros (or 30% of total loans) in December 2020.

“This has also helped banks’ ability to lend to the real economy and their customers’ ability to repay,” notes Moody’s, adding that it believes “Greek banks are now better prepared to face new headwinds and challenges arising from inflationary pressures and increased interest rates, which are likely to impact the most vulnerable borrowers.”