Fitch Upgrades Rating of Three Major Greek Banks

Fitch Ratings upgraded the credit rating of three banks on Monday.  Credit: Gideon Benari / Flickr CC BY-2.0

Credit ratings agency Fitch on Monday raised the credit rating of three major Greek banks, Eurobank, National Bank of Greece and Alpha Bank, after upgrading the credit rating of Greece’s economy to one notch below investment grade last Friday.

The credit rating agency upgraded Eurobank and National Bank of Greece to “BB-” from “B+”, and Alpha Bank to “B+” from “B”.

Fitch reported that its decision is justified by their improved capital position, profitability, and the expected resilience of the country’s economy in 2023.

On January 27, Fitch upgraded Greece’s rating from ‘BB’ to ‘BB+’.

The news is positive for the Greek economy, which has been on a bumpy road since the sovereign debt crisis rocked the country in 2009.

According to Fitch, the upgrade reflects improved fiscal outturns, reduced banking sector risks, structural strengths, as well as the country’s macro outlook and reform momentum.

Fitch also addressed the impacts of inflation, stable financing costs, the external balancing sheet, upcoming elections, the country ceiling, and ESG scores.

Fitch highlighted reduced risks for Greek banks

Reduced risks in the banking sector were one of the other primary factors which contributed to the revised “BB+” rating.

According to Fitch, “There continues to be important progress in reducing non-performing loans (NPL), with the domestic NPL ratio falling to 9.7% in 3Q22, under 10% for the first time since 2009, driven by securitization transactions under the Hellenic Asset Protection Scheme (HAPS) and broad-based economic recovery.”

Fitch also expects “further improvement in the sector’s asset position supported by contained new inflows, and as the banks complete pending inorganic actions.”

“Demand for household credit remains weak, but overall credit to the private sector accelerated in 2H22 (only slightly below inflation) driven by corporates,” Fitch noted. “Reduced macro risks, resilience in the labor market, government support measures and continued increase in real-estate prices should moderate pressure on borrowers.”

Immediately after the report’s issue, Greek Finance Minister Christos Staikouras stated that the rating “confirms that the national target for attaining investment grade within 2023 — with multiple benefits for the society and the economy — is feasible.”

The return of the country to investment grade, to take Greek sovereign bonds out of “junk status,” has since 2019 been one of the election pledges of the conservative government that is facing a general election this spring as its four-year mandate is coming to an end.

“This has been the 12th upgrading of the Greek economy in the last three-and-a-half years, despite successive external crises,” Staikouras said in a statement.