The Incredible Shrinkage Of The Greek Banking Sector

The Greek banking sector has undergone massive changes since the crisis culminated with the First Memorandum in the spring of 2010. The tables below show how the aggregated assets, liabilities and equity of all Greek banks (excluding the Bank of Greece) developed between June 2015 and September 2017. It should be noted that these are aggregated (and not consolidated) figures, i. e. there may be significant overstatements of assets and liabilities. The equity should not be overstated. Source of the figures is the Bank of Greece.

AGGREGATED ASSETS
	Jun 2015	Sep 2017		Change
	(BEUR)	(BEUR)		(BEUR)
Loans to banks	116,4	15,0		-101,4	-87%
Loans to non-banks	281,0	195,4		-85,6	-30%
Debt securities	78,2	41,1		-37,1	-47%
Equities	18,7	8,6		-10,1	-54%
Remaining assets	50,4	55,6		5,2	10%
	--------	--------		--------	--------
Total assets	544,7	315,7		-229,0	-42%

Total assets declined by 42%! To say that total assets in the Greek banking sector were cut in half would be an exaggeration, but not by much! 229 BEUR of assets went away!

The largest decline was in interbank loans which declined by 101 BEUR. This is an understandable development: Greek banks had been active in the international interbank market (most of these interbank loans were to foreign banks) and as liquidity became tight, the Greek banks ran down that portfolio. Still, assuming that interbank lending was profitable for the Greek banks, the near-elimination of that portfolio must have impacted the banks' earnings potential.

The bulk of the loan portfolio of Greek banks represents loans to Greek non-banks (i. e. regular private and corporate customers). This segment accounted for 72 BEUR of the decline in loans. Loans can decline for one out of three reasons: (1) because they are repaid; (2) because they are sold off to investors; or (3) because they are charged off. I would be surprised if a very large portion of the decline in loans was due to repayments because loan repayments typically slow down in a crisis.

The only category which increased during this period was 'remaining assets' but the BoG does not provide any details about that.

AGGREGATED LIABILITIES & EQUITY
	Jun 2015	Sep 2017		Change
	(BEUR)	(BEUR)		(BEUR)
Debt to Bank of Greece	94,3	41,7		-52,6	-56%
Debt to other banks	75,8	18,9		-56,9	-75%
Deposits	294,9	156,7		-138,2	-47%
Securities issued	15,0	2,1		-12,9	-86%
Other liabilities	26,8	21,8		-5,0	-19%
Capital & Reserves	37,9	74,5		36,6	97%
	--------	--------		--------	--------
Total liabilities & equity	544,7	315,7		-229,0	-42%

The decline in the debt due to the Bank of Greece presumably represents the reduced dependance on ECB funding. A deposit decline of 138 BEUR, or -47%, speaks for itself. Of that decline, 94 BEUR were in the category of regular domestic deposits and another 19 BEUR were in the category of deposits from foreign countries.

As regards positive news, capital & reserves in the Greek banking sector almost doubled from 38 BEUR to 75 BEUR. When total assets shrink and equity increases, it has great beneficial impacts on the leverage in the system.