HAPS underpins improving asset quality at Greek banks

The success of the Hercules Asset Protection Scheme (HAPS) has helped Greece’s four largest banks decrease their aggregated impaired loan ratio from 39% at the end of 2019 to around 25% at end-March 2021, according to a recent report by Fitch Ratings.

HAPS was set up at the end of 2019 to help Greece’s banks offload up to €30bn of bad loans.

Similar to Italy’s Garanzia Cartolarizzazione Sofferenze programme, HAPS has helped Greek banks clean up their balance sheets by turning bundles of impaired loans into asset-backed securities that can be sold on. Banks can apply for a government guarantee on the least risky tranche of debt which has helped encourage investors.  

According to Fitch, Greek banks’ impaired loan ratio — a broader category than non-performing loans (NPLs) — could drop into single digits by the end of 2022, despite the pressures on asset quality from the Covid-19 pandemic.

Among Greece’s four largest banks, National Bank of Greece and Eurobank Ergasias have achieved the most impressive reduction in their NPL ratio over the past five years, according to The Banker Database.

The NPL ratio at National Bank of Greece has dropped dramatically from 33% in 2016 to 7.7% in 2020. The NPL ratio at Eurobank Ergasias fell from 38.1% to 10.6% during the same period.

Alpha Bank has also seen its NPL ratio fall between 2016 and 2020, but the decline has been more modest, while the NPL ratio at Piraeus Bank rose from 33.5% in 2019 to 35.6% in 2020.

Trends identified using The Banker Database, an online database providing comprehensive financial data and insight for 4,000 of the world's leading banks in 190 countries. Contact us.