By Chrysostomos Tsoufis

The danger bell is ringing for the increase in bad loans Giannis Stournaras. In his report on financial stability, Yannis Stournaras underlines that “the net inflow of new Non-Performing Loans in all loan portfolios is accelerating” and warns of the burden on banks’ loan portfolios due to high interest rates and the slowdown in growth

The successive interest rate hikes have taken a significant toll on households and businesses, and it’s starting to show. Since July 2022, when the “interest rate carousel” began, the average interest rate on loans to households increased by 210 points or 53% from 4% to 6.1%. An increase that is felt most in long-term mortgages. More specifically :

-For housing loans over 5 years, the increase is 226 units.
-For consumer loans over 5 years, the increase is 170 units.

That is why the Bank of Greece notes that in housing loans interest costs have increased significantly as a percentage of the gross disposable income of households.

The data show for the first 6 months of the year a marginal reduction in bad loans to 8.6% from 8.7% at the end of 2022 (€12.7 billion from €13.2 billion) and fatally remains a multiple of the Community average which is just to 1.8%, which is why Yiannis Stournara calls for an intensification of efforts to reduce them.

And the 4 systemic banks have reduced bad loans to a single-digit percentage, 1 of them is below 5%, but the average is raised by small and regional banks whose percentage is at 44%

As expected, consumer loans are more easily “reddened” which are in arrears at a rate of 16%. 10% is the corresponding percentage in housing and 7.6% in business.

Of the red business grants, 27% have been given to freelancers and very small businesses, followed by small and medium-sized businesses with 12%.

Analysis of the data shows an explosion of NEDs in agricultural activity from 10.3% in December to 29.5% in June. They are as follows:

Focus with 27.6%

Construction with 19.9%

Trade 12.9%

Accommodations 10.2%

Manufacturing 9.8%

On the contrary, the sectors that “produce” the least bad loans are energy with 0.9% and financial companies with 0.7%

1/3 of reds are considered to be uncollectible, approximately €4.2 billion and 34% have been reported.

1/4 of bad loans are in arrears for more than a year and this is extremely worrying since their percentage has increased by 4 points compared to last year.

An indication of risk is loans in arrears between 1 and 90 days, one step before being red flagged, which increased by 32.6%% from €5bn to €6.2bn, a delinquency due according to the business loan report .

Developments are also negative in the consolidation index – i.e. loans that “turn” from non-performing to performing – which fell to 2.9% from 4% at the end of 2022 (with the rate for mortgages being at 6.3% % while for business only at 1.4%)

At the same time the default rate rose to 0.7% from 0.4% at the end of last year.