Thread by @jeuasommenulle

So I’ve spent half the afternoon looking at Greek banks in a Covid world and now I want to drown myself in the Aegean sea. A thread.

How did they enter the crisis? Well capitalized, you might think. CET1 ratios between 14.9% (Alpha) and 12% (Piraeus), wow that sounds great. But there’s a catch. A BIG chunk of that is deferred tax credit.

What’s that? I won’t go into the details, it’s money the government is supposed to “repay” if things go south, but so far it never actually worked as hoped. Monkey money if you ask me. But for some banks it’s almost 100% of the CET1!

But let’s be nice and assume it is actually real money. What do we have for those 5bn to 7bn of equity per bank?

Yummy, magnificent books of non performing loans, ranging from (gross) 11bn€ (NBG) to 24bn (Piraeus.). Sigh. No other country is even remotely looking like this. And the SSM is happy with the numbers because… yeah, why is it happy, again? Oh sorry, I forgot, it’s political.

But don’t you worry, this will go down quickly. All the banks have great plans to reduce NPE!
WE HAVE A PLAN.
More than 51bn€ in NPL reduction expected over 2019-2022.
Fantastic! Great job!

The crowd goes wild!

Ahem.

70% of that is supposed to come from NPL sales.

All right, if you’re brave and want to buy NPLs in an economy in freefall, which is based on the worst sector right now (tourism), please send an email to:

[e-mail]

But hey, let’s see life on the bright side and assume they can manage to sell all that s… sorry, all those Stage 3 financial assets accounted at amortised costs.

What’s left in the books?

Well, performing loans of course! And when I say performing I mean, super...

Err, sorry.

"Performing" might be a stretch here.

More than 30% of the loan books are in sectors severely affected by Covid. That’s probably at par with the worst bank in all the rest of the EU+UK!

We’re talking tourism, shipping, retail trade (non-food), etc.

Closed shops, empty hotels, ships with no cargo.

Argh.

And even before Covid hit, watchlist or substandard loans were already between 2bn and 5bn for each bank!

Not to mention the 3bn to 5bn forborne loan per bank, i.e. loans that were restructured to avoid default but are not in NPL.

Needless to say, those are very solid loans that will face Covid and be strong!

And then of course you’ve got that little problem: tourism is 30%ish of GDP (direct +indirect), with 45% of revenues coming from hotels (that will be closed), and 60% of revenues in Q3 that won’t exist and 50% of revenues coming from countries hit hard by Covid (Fr/Ger/Ita/US/UK)

Oh, and all those 5* hotels with 90% leverage are also probably going to be very good borrowers, going forward. Again, if you're interested by a nice loan with good yield, DM please.

Jokes aside, this is really not funny. On the contrary, I find this severely depressing because Greece was (kind of) heading in the right direction - and I don’t know how they will be able to manage this. I really don’t. End/

@GreekAnalyst @nchrysoloras @MarketElf @achilleas999 @alexapo1980