The outlook for Greece's banking system remains positive on expected improvements in banks' funding and asset risks, Moody's Investors Service said in a report released on Monday. "Moody's expects more deposit growth and a gradual fall in problem loans," said Nondas Nicolaides, VP-Sr Credit Officer at Moody's. "Banks should remain marginally profitable in 2019-20 as loan-loss provisioning and operating costs decline."
A gradual return of deposits and increasing access to the interbank lending market have allowed Greek banks to eliminate their emergency liquidity assistance. Further deposit increases are likely as the economy gradually recovers and as more investments flow into the country. Problem loans will slowly decline from very high levels as Greek banks benefit from improved loan recovery laws and a developing secondary market for nonperforming loans. Moody's projects real growth in gross domestic product (GDP) of around 2.2 pct in 2019 and 2 pct in 2020, from 2.1 pct in 2018. Economic sentiment will continue to recover from a very low base. Unemployment will remain high and property prices will only gradually recover from depressed levels, challenging banks' growth.