Greece’s systemic banks—Alpha Bank, Eurobank, National Bank of Greece, and Piraeus Bank—plan to expedite the repayment of deferred tax credits (DTC) starting in 2025, a move that credit rating agency Morningstar DBRS has praised as credit positive.
DTCs, a legacy of the debt crisis, constitute a substantial portion of the banks’ capital but are considered a weaker form of capital.
According to Morningstar DBRS, accelerating the repayment of DTCs will improve capital quality and provide banks with greater strategic flexibility in capital utilisation.
The agency also said that the banks should be able to absorb the impact of this acceleration, provided profitability and organic capital generation remain robust.
It should be noted that in the first nine months of 2024, Greek banks reported a combined net profit of €3.5 billion, with a return on equity reaching 14 per cent.
The revised timeline aims to complete the reduction of DTCs by 2034, seven years ahead of the original 2041 target.
This accelerated schedule is expected to strengthen the banking sector’s flexibility and resilience in the years to come.
In August of this year, the agency reported that the capital reserves of Greek banks have been further strengthened, though the quality of these funds remains weak.
What is more, the agency also pointed out that cost control measures helped offset inflationary pressures and increased expenses related to digitalisation.
“The sector’s liquidity continues to be supported by large, growing, and stable deposits,” said the agency.
It also made note of increasing activity related to capital issuances, despite ongoing repayments of central bank funding.
Additionally, DBRS observed that the cost of risk decreased in the first half of 2024 compared to previous years, although it remains above the European average.
“Higher core revenues, cost discipline, and lower provisions for bad debts led to higher profits in the first half of 2024,” said Andrea Costanzo, Vice President of European Financial Institution Ratings at Morningstar DBRS.
