Greek banking sector NPL performance according to the BoG

According to the Bank of Greece, banking sector resilience indicators declined in 2021, mainly as a result of NPL reduction strategies. More specifically, Greek banks posted elevated after-tax losses in 2021, amounting to €4.8 billion, compared with losses of €2.1 billion in 2020, mainly as a result of losses on NPL portfolio sales. 

Operating income fell by 10.4% year-on-year, on account of reduced net interest income and income from financial operations. 

However, net fee and commission income and other income increased. 

Operating expenses picked up marginally, negatively impacted by one-off expenditure, such as provisioning for voluntary exit schemes, hive downs and impairment of goodwill and other intangible assets. Overall, it should be noted that one-offs account for a substantial share of banks’ profitability in 2021. 

Accelerated balance sheet clean-up by means of NPL portfolio sales resulted in a higher cost of credit risk. In detail, loan-loss provisions totalled €8.5 billion in 2021 (compared with €5.6 billion in 2020), of which €7.2 billion reflect NPL portfolio sales by two significant banks. 

Furthermore, the quality of Greek banks’ prudential own funds deteriorated further; in 2021, deferred tax credits (DTCs) amounted to €14.4 billion, i.e. 63% of total prudential own funds (up from 53% in 2020). This share accounts for 73% of total prudential own funds when taking into account a fully phased-in impact of IFRS 9 (from 63% in 2020). 

Moreover, deferred tax assets (DTAs) of €1.7 billion are included in Greek banking groups’ prudential own funds (on a fully phased IFRS 9 basis), accounting for 8% of their total prudential own funds. 

It should be pointed out that, although DTAs of €5.1 billion are not included in banks’ prudential own funds, sufficient future profitability is needed in order for them not to pose risks to banks’ capital base in the medium to long term. 

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