The acceleration of the creation of new non-performing loans (NPLs) in the second half of 2021 as a result of the new lockdown to limit the spread of coronavirus is forecast by Moody's, while estimating that the organic efforts of banks will absorb any increase in .
In today's “credit outlook” bulletin, the house states that the new restrictive measures will squeeze business revenues after a difficult 2020, and will worsen the quality of banks' assets.
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“The support measures are positive for the banks, but they are overshadowed by the greater credit negative effects of the second lockdown,” he says.
Moody's notes that the support measures will mitigate the negative effects on the quality of banks' assets, adding, however, that “severe and prolonged restrictions on the coronavirus will delay the losses for banks, instead of eliminating them.” entirely”.
“Banks may reschedule loans to sustainable borrowers based on their revised income flow expectations, but we expect that some borrowers will not be considered eligible for reprogramming and will eventually default on their obligations,” he said.
As he notes, the new lockdown is being implemented, as the majority of borrowers will continue to pay their installments, after the end of last year’s moratorium at the end of December 2020. He adds that it is possible that the last lockdown will reduce the granting of new loans and banks' fees from fees, thus squeezing their profitability, which is already limited by the environment of low interest rates and increased charges for forecasts.
“Due to the end of the moratorium on installments at the end of 2020 and given the expectations for a small number of new installments, we expect that the creation of new non-performing loans will accelerate, especially in the second half of the year,” said Moody's, recalling the poor quality. of assets is the main challenge for Bank of Cyprus and Hellenic Bank, despite the significant decline in their NPLs in recent years.
However, Moody's believes that the two banks' organic efforts to recover the older NPLs “will absorb any significant increase in NPLs”.
Regarding the new support measures, valued at € 400 million and which include one-time sponsorships for businesses and the self-employed to cover rents and installments and other operating expenses, as well as tax incentives for tenants, the house writes that their implementation is subject to approval. state budget for 2021, which was originally rejected in December 2021, something it expects to happen later this month, he says.
Finally, for the new moratorium on installments until June 2021, the house states that this is more targeted, after the much wider moratorium of 2020, which had led to the postponement of installments for about 50% of loans serviced in 2020.
The house expects that the suspension of installments under the new moratorium will be limited, since the new moratorium applies only to companies that had not suspended the payment of installments for nine months and is limited to a specific group of borrowers.
Philenews / ΚΥΠΕ