The credit rating agency Fitch has upgraded from stable to positive the credit outlook of the four major Greek banks – Eurobank, Alpha Bank, National Bank and Piraeus Bank – after the investment grade it gave to Greek bonds on December 1st.

So, National Bank and Eurobank are rated ‘BB’ with a positive outlook and Alpha Bank and Piraeus are rated ‘BB-‘ with a positive outlook.

As the bank notes in its relevant announcements, the upgrading of the banks’ prospects follows the revision of the outlook of the ‘bb’ rating for their operational environment (OE) to positive from stable, reflecting the positive impact expected from the upgrade of the Greek public debt to the ‘BBB’ level with stable prospects.

In particular, it reflects Fitch’s view that the recovery of investment grade by Greece will be beneficial to the operating environment of Greek banks, as it will improve the business climate in the country, ultimately helping banks to increase their volume of business without undermining their risk profiles.

Coupled with a steady improvement in economic confidence and strong investment performance, this is likely to lead to an upgrade of the operating environment within the rating horizon, Fitch notes, adding that a more favorable operating environment is expected to support the viability of the business model, profitability resilience and banks’ internal capital formation.

National Bank

In particular, Fitch notes that Greece’s credit rating upgrade also limits risks from the large Greek government bond portfolio held by National Bank (over 90% of CET1 capital at the end of September 2023). Combined with the manageable National Bank’s non-performing exposures (NPE) ratio of 4% and the high NPE coverage ratio of around 90% at the end of September 2023, ‘this led to the revision of our assessment of the bank’s asset quality to ‘ bb-‘ from ‘b+'”, noted.

Alpha Bank

For Alpha Bank it is also noted that the risks from its large portfolio of Greek government bonds (about 1.7 times its CET1 at the end of September) and the systemic risks for its asset quality are decreasing for the same reason. “The latter as well as continued economic growth in Greece support our expectation that Alpha will continue to perform well in asset quality and reduce its NPL ratio to mid-single digits by the end of 2025, which is reflected to our positive outlook on asset quality assessment,” notes Fitch.

Eurobank

For Eurobank, it is also noted that the upgrade of the Greek debt limits the risks from the significant Greek government bond portfolio (around 70% of CET1 at the end of September). “Combined with Eurobank’s manageable NPE ratio of 5.5% and adequate NPE coverage ratio of 72% at the end of September, this led to the revision of our asset quality rating on the bank to ‘bb-‘ from ‘b+”.

Piraeus Bank

For Piraeus, Fitch says the Greek rating upgrade also limits risks from its large government bond portfolio (around 2.2x CET1 at end-September) and systemic risks to asset quality). “The latter and continued economic growth in Greece support our expectation that Piraeus will continue to perform well in asset quality and reduce its NPL ratio to mid-single digits by the end of 2025, which is reflected in the positive outlook for our assessment of asset quality’.

Greece’s investment grade is also likely to lead to easier and lower-cost access for major banks, including Piraeus, to the interbank lending market. This will support the bank’s ability to meet and comply with its final minimum requirements for own funds and eligible liabilities (MREL). “All these developments are expected to ultimately positively impact our assessment of the bank’s funding and liquidity profile,” notes Fitch.