Piraeus Bank SA forecasts an increase in sales of bad loans to private-sector buyers in 2018, thanks to an improving economy and what it expects will be the swift conclusion of bailout negotiations between the Greek government and the EU in December.
"Firstly, we have improving trends in the Greek economy," George Georgakopoulos, the head of the so-called legacy unit at the bank, which deals with toxic loans and the restructuring of assets, said on an earnings call Nov. 28. "Secondly, we see the current environment here maturing. And thirdly, and importantly, we see much higher interest from outside investors to buy those NPLs. In this context we thought it is suitable to increase our expectations regarding sales."
Piraeus sat on €32 billion in nonperforming exposures at the end of September 2017, or 55.3% of its book. It is aiming to reduce this pile to €20 billion by December 2020, in line with targets agreed with the ECB. It aims to finish 2018 with €25.9 billion in bad assets and has increased its guidance for those it intends to sell to €3.7 billion from €2 billion previously. The rest of the reduction will come from write-offs, collections and restructuring, said the banker.
€8.2 billion of the bank's nonperforming exposures are once again performing, he added, which means the respective loans will be once again booked as good assets after the regulatory probation period expires.
Greece recently made it easier for banks to repossess collateral from unpaid debts, after its courts became notorious for taking up to 10 years to conclude such proceedings. The reforms, which also included privatizations, tax increases, public spending cuts and the elimination of many labor protections, were part of a hard-won €86 billion bailout for the Greek economy.
The third EU review of the bailout agreement is set for December 2017 when the EU and International Monetary Fund will review Greece's progress in implementing reforms it undertook as part of its 2015 bailout package.
"We now anticipate the successful conclusion of the review and the acceleration of the privatization and public property development program to further boost the economic sentiment for Greece," said Piraeus COO George Poulopoulos.
The bank posted a net loss of €19 million for the third quarter of 2017, but forecast that its year-end result will be positive after revising its cost-to-income ratio target for 2018 to 48%. Piraeus had a cost-to-income ratio of 51% in the third quarter, down from 56% in the same period of 2016. It booked a profit of €7 million in the second quarter.