Volatile freight rates a key issue as European stress test looms for Greek banks


Volatile freight rates are playing a key role in discussions between Greek and European Central Bank (ECB) officials as the deadline for the Europe-wide bank stress tests looms.

After four years of mergers and consolidation within the Greek banking sector, the country¹s four systemic banks are to still to finalise the
evaluation of the Asset Quality Review (AQR) of assets held by the lenders in the debt-laden country.

Officials of Greece’s systemic banks ­ Alpha Bank, Eurobank, National Bank of Greece and Piraeus Bank ­ and the ECB met in Frankfurt, Germany, August 27, to start the final phase of the stress tests required under AQR.

With the four banks holding a combined EUR8bn ($10.3bn) in loans to shipping companies, this portfolio combined with the “haircut” on the value of the property pledged as collateral for mortgages, still remain open issues in discussions between the ECB and the Greek banks. The shipping community is also deeply involved in the country¹s real estate sector.

For the Greek banks there are two critical issues: the evaluation of business loans and the valuation of mortgaged properties. In the field of shipping loans, differences have emerged between the negotiators on how to find a common ground in the different forecasts presented by the Greek side and the ECB specialists on how the charter market will move next year.

In addition to loans by Greek banks to shipping companies, loans taken by Greek shipping companies from Greek and foreign banks operating in Greece are about Euro 12bn ($16.32bn). Piraeus Bank, which is heavily involved in the domestic ferry sector, is the largest lender with a book of about $4bn.

Alpha Bank, the third largest local lender to shipping recorded first half of the year shipping loans amounting to EUR1.7bn, with non-performing
loans (NPLs) at 7.5\%. Average duration of the loan portfolio of the bank for the maritime sector is estimated at seven years.

For its part, the National Bank of Greece has a shipping loan portfolio of EUR1.9bn, while Eurobank granted amounts not exceeding EUR1bn.

Wide differences of opinion on capital needs resulting from discrepancies between the estimates of the ECB and the Greek side were a huge issue in Frankfurt where the general outline of AQR was established. However, the level of adjustment and methodology for each separate European Union country is depending on the situation and prospects of the economy.

Greek National Bank’s ceo, Alexandros Tourkolias, an experienced ship financier,maintains the four banks will not only pass the stress tests but will benefit from the exercise. “No matter what problems are identified, the measures taken to rectify themwill see Greek banks emerge stronger from the process,” he told a bank event in Thessaloniki, on 5 September. “After the test no one will ever be able to dispute the quality of the Greek credit system again,” he said.

Greek banks are keen to re-start lending to shipping and in the month of June the National increased its portfolio, when just short of EUR100m was lent to shipping. Alpha Bank plans to put up EUR1bn of its EUR1.7bn shipping portfolio as guarantee for a Citibank loan. The shipping book will continue to be handled by the Greek bank while creating up to EUR500m of extra liquidity.

By from Athens


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