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Greek banks slightly ahead of target in efforts to cut toxic loans

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Greek banks slightly ahead of target in efforts to cut toxic loans

Greek banks cut their combined nonperforming exposures by 6.1% to €88.6 billion in the six months to June 30, according to data from the Greek central bank, published Sept. 6.

This is slightly ahead of Bank of Greece SA's target of bringing the stock of gross NPEs down to €90.2 billion by June 2018.

The central bank now aims to reduce Greece's pile of NPEs to €81.5 billion by the end of 2018, and to €64.6 billion by the end of 2019.

Greek banks are under regulatory pressure to tackle their NPE problem, since it hampers their ability to write new loans.

Bad debts represent 46.9% of banks' overall loan books as of the end of June, down from 48.1% at the end of March.

Greek banks shrank their stock of NPEs by 4.1% in the second quarter alone, thanks to sales of around €2 billion of loans, which "mostly relate to transactions performed by two significant institutions" according to an announcement from the central bank.

Notable transactions by Greek banks in the second quarter include Piraeus Bank SA's sale of a €1.45 billion portfolio of nonperforming loans, dubbed the Amoeba project, to Bain Capital for €432 million.

Aside from sales, some €1.6 billion of debt was written off by Greek banks in the second quarter, while collections of €600 million and liquidations of €600 million also contributed to the reduction of the overall bad loan pile over the quarter.

Overall, Greek banks trimmed NPEs in the business and consumer loan segments by 15.7% and 24.6% year over year in the second quarter. But progress was slower in the mortgage segment, where banks reduced NPEs by just 1.1% during the quarter.

NPE ratios remain high across the spectrum of asset classes as of the end of June, at 44.3% for residential mortgages, 56.9% for consumer loans and 48% for business loans. Within the corporate segment, the NPE ratio for shipping loans stood at 31.6%, at 28.3% for large corporates, and 62.3% for small and medium-sized enterprises.