Greek banks repayment of emergency funding a credit positive - Moody's

CrediaBank SA

04/04/2019 10:38

* Greek banks eliminate emergency borrowing from Bank of
Greece
    * ELA balance hit 86.8 bln euros in 2015 at height of debt
crisis
    * Elimination of ELA balance is credit positive - Moody's

    By George Georgiopoulos
    ATHENS, April 4 (Reuters) - Greek banks' full repayment of
emergency liquidity assistance (ELA) drawn from the domestic
central bank is credit positive as it reduces their funding
costs, ratings agency Moody's said in a credit outlook report on
Thursday.
    Greek banks' outstanding ELA balance was around 1.0 billion
euros ($1.1 billion) at the end of December, or about 0.4
percent of the banking system's total assets, down sharply from
a peak of 86.8 billion reached in June 2015 at the height of the
debt crisis.
    Deleveraging, coupled with the gradual return of deposits,
helped banks improve their funding profile, allowing them to 
fully repay the emergency funds they borrowed from the Bank of
Greece  BOGr.AT  over the past three and half years.
    "Without their dependence on ELA and given the sustainable
improvement in liquidity conditions, Greek banks will likely
attract greater interest from international unsecured bond
investors," Moody's said.
    It said Greek banks were also able to repay the ELA balance
by increasing their interbank repo transactions as international
banks' appetite for Greek assets gradually increased over the
last years.
    The ELA repayment helps to strengthen depositors' confidence
in Greek banks, allowing them to attract more deposits. Between
June 2015 and February 2019, private-sector deposits rose by
about 8 percent as market sentiment, economic activity and
employment began to improve.
    More expensive than borrowing from the European Central
Bank, the ELA's full repayment helps lenders to diversify their
funding mix.
    "Greek banks started issuing covered bonds as an alternative
source of funding to repay their ELA balance amid increased
appetite among international investors for Greek banking risk,"
the report said.
    National Bank  NBGr.AT  was the first of the large Greek
banks to fully eliminate its ELA exposure in December 2017,
followed by Piraeus Bank  BOPr.AT  in July 2018.
    Last month Alpha Bank  ACBr.AT  told investors it had fully
eliminated its ELA in February as did Eurobank  EURBr.AT . The
two lenders were the last of Greece's four big banks to fully
eliminate their emergency borrowing from the Bank of Greece. 
    Much smaller Pancretan Cooperative Bank fully repaid its ELA
exposure in August 2017, while Attica Bank  BOAr.AT  repaid its
exposure in the second half of March this year, Moody's said.
    ($1 = 0.8904 euros)

 (Reporting by George Georgiopoulos
Editing by David Holmes)
 ((george.georgiopoulos@thomsonreuters.com; +30210 337 6437;
Reuters Messaging:
george.georgiopoulos.thomsonreuters.com@reuters.net))