Economic Analysis, Greece

The Greek Banking System in 2006: Comparative Performance

Authors: G.Hardouvelis, I. Lekkos, E. Simintzi
Publication: Greek Banking Review:Annual report of the Greek banking sector, Eurobank Research, November 2006

The aim of our new annual publication “Greek Banking Review” is to present our views on the prospects of the Greek banking system and bring to the fore issues that can determine the future performance of Greek banks. In the present inaugural issue, we analyse the structure of the Greek banking system and place recent developments in perspective by comparing it with the banking systems of other European countries. Our goal is to identify those aggregate factors necessary for maintaining the current banking asset and profit growth momentum into the future. A critical question today is whether or not the Greek banking system is close to the stage of maturity, beyond which it would begin behaving more like the developed European banking systems.
As elaborated below, the main factors behind the success and profitability of Greek banks are the continuing improvement of the Greek macroeconomic fundamentals, the robust demand for credit from the private sector, especially households, the strong capital adequacy, as well as the contribution of the newly acquired subsidiaries in Central and Eastern Europe. Those same factors are expected to continue pushing Greek banks’ growth potential in the foreseeable future. Over the next year, we expect Greek banking, especially retail banking, to continue growing at rates substantially above the Eurozone’s norm. To achieve consistency and comparability of the Greek data with the data reported by rest of the Eurozone’s banking systems, this review is taking special care in clarifying and presenting the data. Issues like the treatment of securitized mortgage loans or the question of whether or not corporate bonds in Greece are direct substitutes of business loans are important in assessing the true growth rates of the individual credit components. In all cases, we refer the reader to the original data sources listed in the Appendix.

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