BANKING SECTOR

 Moody’s has upgraded its outlook on Greek banking system to positive from stable on improving funding and asset risk over the next 12 to 18 months. Specifically, Moody’s said: a) GDP is forecast to grow at 2% this year and 2.2% in 2019, driven by a strong increase in exports and services including tourism, b) Greek banks will likely meet the targets for non-performing loans committed to the regulator, reducing their non-performing exposures (NPEs) to around 35% of gross loans by the end of 2019, c) Greek banks have comfortable regulatory capital levels, with a common equity Tier 1 (CET1) ratio for the system of around 15.8% in March 2018, although sizeable Deferred Tax Assets (DTAs) continue to undermine the quality of such capital, d) Most Greek banks are likely to remain marginally profitable through 2019, as credit and operating costs remain low, however net interest margins will remain pressured as banks continue to deleverage and run down their loan balances through write offs and sales of NPEs.

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