The Greek banking sector is in a better position than in the past to face potential disruptions and fulfill its intermediary role, despite the deterioration of credit institutions’ loan portfolios, finds the Financial Stability Report published today by the Bank of Greece .

As the Report states, in the first half of 2024 Greek banks recorded profits after taxes and discontinued operations of 2.3 billion euros, compared to profits of 1.9 billion euros in the first half of 2023. The increase in of net income from interest and fees, with a positive contribution from income from payment operations and asset management.

The capital adequacy of the banking sector remained almost unchanged in the first half of 2024, as the increase in regulatory capital was offset by the increase in risk-weighted assets. Specifically, the Common Equity Tier 1 ratio (CET1 ratio) on a consolidated basis decreased marginally to 15.4% in June 2024 from 15.5% in December 2023 and the Total Capital Ratio (Total Capital Ratio – TCR) remained unchanged at 18.8%. However, these ratios are still below the European average (CET1 ratios: 15.8% and TCR: 19.9% ​​in June 2024). Also, the liquidity conditions of the Greek banking sector remained satisfactory in the first half of 2024.

The quality of the loan portfolio of credit institutions during the period in question deteriorated slightly, due to the inclusion of specific categories of loans guaranteed by the Greek State in the perimeter of non-performing loans (NPLs), following a supervisory requirement. It is pointed out that the NPL ratio at the level of the banking sector (June 2024: 6.9%) still remains high and multiple times the European average (June 2024: 2.3%).

The outlook for the Greek banking sector is positive. However, they are inextricably linked to the macroeconomic course of the country, which is also influenced by external factors. Further aggravation of geopolitical risks may work negatively, while a sharp revaluation of assets in the international money and capital markets may have significant effects on the global economy. In addition, climate change and the risk of cyber-attacks are significant risks to the orderly functioning of the financial system.

In conclusion, ensuring conditions of financial stability largely depends on the further armoring of the Greek banking sector. At the same time, it highlights the importance of promoting the necessary reforms aimed at deepening the Banking Union and strengthening competitiveness at EU level.