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Fitch lowered the credit rating of the four largest Greek banks

24 February 2010 / 09:02:52  GRReporter
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New reduction of the credit rating of four Greek banks followed this week. The assessment of long-term creditworthiness of EFG Eurobank, Alpha Bank, Piraeus Bank and National Bank of Greece fell from BBB+ to BBB, with negative outlook for the future. BBB is the lowest rating where investments are recommended. Representatives from Fitch credit rating agency said that lowering the rating of banks is in direct correlation with the profitability of the already undermined Greek capital as a whole. All four Greek banks are active on the Bulgarian market. EFG Eurobank is the owner of Postbank, National Bank of Greece owns United Bulgarian Bank, and Piraeus Bank and Alpha Bank have hundreds of branches in Bulgaria. 

Financial analysts added that "measures taken to improve the financial situation of Greece will have a significant impact on the real economy. This will directly affect the demand for loans and will have additional pressure on the quality of capital." In other words, by raising the cost of borrowed capital, banks will have to increase interest rates. Loan demand will fall, thereby weakening the profitability of commercial banks. Although experts from Fitch estimated as a positive the diversification of bank revenue from the countries of southeastern Europe, the risk is still high because of widespread recession in these areas. 

Following the disclosure of the credit decrease of commercial banks, the values of the spread index "flew" to new heights. The value of the spread between the ten-year Greek bonds and the corresponding German bonds rose to 342 basis points from 315 at the beginning of the day. 

Meanwhile, Finance Minister Georgios Papakonstantinou said a decision to introduce additional measures to lower public deficit will not be made before the end of the talks with representatives of the European Commission. "The government is ready to take all necessary measures to overcome the economic crisis and the implementation of the objectives of the Stability and Development program," was certain Papakonstantinou.

 

Tags: Fitch Economy in Greece Credit Loans Spread Index
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