Loan growth remains weak in Greece despite a booming economy

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According to the Bank of Greece, in 2020 the net flow of bank financing to businesses amounted to 6.7 billion euros, while the gross amount exceeded 24 billion euros.

Without … banks, economic growth is accelerating this year because, despite the excessive liquidity of the banking system, net flows of loans to businesses and households are either at low levels or, in the case of households, at negative levels.

Based on data from the Bank of Greece, in January – August 2021, the net financing flow, i.e. new loans minus repayments of older loans, to businesses was negative by 100 million euros, while at -1.1 billion euros for the net flow to households. That is, the old loans that were repaid were more than the new loans issued.

The news for business was significantly more positive in September with a net influx of 603 million euros, while the annual rate of change has fallen to 3.5% of 3.7% in August. For households, the change occurred at -2.7%.

It should be noted that, despite the strength of the real estate market, the rise in prices and the significant ongoing construction activity, over the nine months, the net inflows of new mortgage loans amounted to -1.2 billion euros. Here, too, the increased liquidity of government support programs, but also the money that had been saved in previous years of extreme uncertainty, is being used to purchase real estate with only a small amount coming from loans.

Bank officials say this image is largely cyclic due to large repayments of old loans (like that of PPC which stands at $ 600million), companies’ slide towards bond issuance and reduced demand for loans from companies, as they have low levels of liquidity. high, having been reinforced by support measures, but also the recovery of their income this year because of the good economy. They note that the targets for new loans set for 2021 will be met, but the large loan repayments, which were not expected, are changing the overall picture.

The increase in corporate liquidity is also due to significantly higher loans in 2020. According to Bank of Greece, in 2020 the net flow of bank financing to businesses amounts to 6.7 billion euros, while the gross amount exceeded 24 billion euros.

According to banks, the massive injections of liquidity in 2020 created significant liquidity cushions, not only for companies but also for households, making borrowing unnecessary. The excess liquidity is reflected in the consumer boom which happened this year with much of the 16.2% of GDP growth seen in the second quarter of 2021 from consumption.

In addition, bank executives point to another dimension that negatively affects corporate financing: acquisition of companies by funds. Typically, business acquisitions, such as Chipita by the United States Mondelez, lead to debt refinancing with repayments to Greek banks and the provision of liquidity from the parent company’s credit lines.

Collection planned for 2022

According to bank estimates, 2021 was a of transition year. The partial return to normal, with the restoration of sources of income, combined with the sharp increase in loans in 2020, has led companies to keep more cash without needing to borrow. This is expected to change in the new year, when, in addition to the increased needs created by the acceleration of the economy, the first investments financed by the Stimulus Fund we will see it. Thus, banks expect a significant acceleration in the expansion of credit and the flow of new loans, mainly to businesses but also to households.

YIANNIS PAPADOGIANNIS


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