As found in his Analysis Center for Planning and Economic Research, in the last two years there has been an excessive accumulation of profits in the four systemic banks i “which can be called the inflation of banking greed”.
As mentioned in the analysis, Greek banks record from higher interest marginsfar exceeding its median and mean value euro zone.
More specifically, a strong one was recorded asymmetric response of Greek banks to ECB interest rate hikes, with interest rates on loans rising immediately, while their counterparts on deposits initially remain unchanged and then increase slightly, resulting in the interest margin “breaking” one historical record after another
Huge profits taking advantage of low competition
The Greek systemic banks, according to KEPE, probably taking advantage of the high concentration and low competition in the domestic industry – no more “red loans” which were largely transferred from their balance sheets to servicers – and benefiting from the ECB’s reference rate hikes, recorded large increases in net interest income (net interest income) and high values of net interest margin (net interest margin) and, consequently, significant profits (estimated at close to 7.53 billion Euros in the two years 2022-2023, after an annual reduction of the profits of the 9th month of 2023) . This excessive accumulation of profits of the Greek banking system can also be called “banking greed” inflation.
According to KEPE, the excessive accumulation of systemic banks’ profits is due to net interest income, which is boosted by colossal increases in net interest margin (NIM) and interest rate spread, and contributes to the inflation of “banking of greed” in Greece.
More specifically, operating income amounts to Euro7.62 billion in 9M 2023, exceeding by 3.3% the amount of 9M 2022 (Euro7.38 billion), while net interest income increased by 56.1% (from Euro3.87 billion to Euro6.04 billion) in 9M 2023 compared to 9th month 2022.
In terms of operating income, net interest income has been increasing continuously since Q2 2022 (46.28%) and the latest available value is for Q3 2023 at 79.25%.
Explosive cocktail
KEPE warns that the combination of high interest rates and the high debt of Greek households – whose purchasing power is shrinking – constitute an “explosive cocktail” for Greece, which could worsen the country’s position in terms of poverty and social exclusion. Greece already holds the 3rd highest rate of poverty or social exclusion over time (26.3% in 2022), since 2015 when the data was recorded by Eurostat, behind Bulgaria (32.2% in 2022, and 2nd place over time) and Romania (34.4% in 2022, and 1st place over time)
Specifically, it is established that the savings rate of Greek households returns to negative levels in 2022 at -4.03%i.e. it receives negative values (dissaving rate) as in the years 2012-2019 after two consecutive years with a positive sign (1.38% in 2020 and 2.10% in 2021), due to the reduction in consumption resulting from the sanitary confinements for the COVID-19.
According to KEPE, the negative savings rates reveal the shrinking of the purchasing power of Greek households and that wages are not enough to cover basic needs. In particular, if we take into account that a quarter (specifically 26.7% in 2022) of the population (8.7% in the EU27) spends more than 40% of their disposable income on housing, with the corresponding percentage soaring to 84, 5% (33.1% in EU27) of households with disposable income below 60% of median income.
Adding to the equation household debt of almost 93 billion in 2022 (Euro101 billion in 2021), or private debt of around Euro208 billion in 2022 (Euro221 billion in 2021), according to Eurostat, adds another burden to Greek consumers which is magnified by the high interest rates on loans and the low interest rates on deposits (and in general by the unconsidered interest margin).
«All this overshadows the aura of Greece’s investment tier (which so far is reflected through the de-escalation of Greek bond yields in the last months of 2023 (Economou, 2024), and is valued positively mainly on the Athens Stock Exchange” concludes the analysis.
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