Standard & Poor’s gives ‘green light’ for early repayment of first bailout loans

The international credit rating agency Standard & Poor’s has given the green light-albeit indirectly-for the early repayment of the first bailout loans planned by the Greek government. As analysts from the agency stated today during an online briefing, the reduction of the Greek state’s cash “buffer” will not affect the country’s credit rating or the outlook for an upgrade, since this development does not hinder the projected path for reducing public debt to 114% of GDP by 2028, as forecasted by S&P.

At the same time, although S&P maintained a “ stable” outlook for the Greek economy in its April 18 update – while upgrading Greece’s credit rating to BBB/A2 – it left a “ window” open on Wednesday for a possible further upgrade, citing expectations for improvements in external imbalances.

During its recent upgrade, S&P had noted that “ the international imbalances of the Greek economy remain a barrier to further upgrades.” However, in response to a related question on Wednesday, the agency’s officials stated that they foresee a reduction in Greece’s current account deficit by 2026 – a forecast that reflects an improvement in the country’s external imbalances. Furthermore, they highlighted that Greece’s limited exposure to the U.S. market is an additional positive factor, as it cushions the economy from potential negative impacts stemming from tariffs imposed during the Trump administration.

Regarding the repayment of the first bailout loans-which is expected to be partially funded by the state’s cash reserves, which, according to the Public Debt Management Agency, amounted to 40.1 billion euros at the end of the first quarter of 2025-it is worth recalling that Finance Minister Kyriakos Pierrakakis recently stated that Greece plans to repay the loans from its first bailout programme 10 years ahead of schedule, a move expected to significantly ease the country’s future debt burden.  According to the existing repayment schedule, the final installment of these loans was set for 2041, but the government now aims to repay the entire amount by 2031, as Pierrakakis recently announced.

Positive Outlook for Banks

S&P also expressed a positive outlook regarding the profitability prospects of Greek banks, noting that two of them (National Bank of Greece and Eurobank) already hold the so-called investment grade. It was emphasised that Greek banks have improved the quality of their assets and are making efforts to do the same with their capital base. Analysts highlighted that it is encouraging to see Greek banks seeking ways to offset the loss of interest income resulting from the reduction in interest rates. Special mention was made of strategic moves, such as Alpha Bank’s acquisition of Astrobank and Eurobank’s acquisition of Hellenic Bank, aimed at geographically diversifying their revenue sources. There was also notable reference to Alpha Bank’s acquisition of Axia Ventures, reflecting the bank’s intent to expand its investment capabilities. Furthermore, the analysts discussed the anticipated expansion of Greek banks into the bancassurance market, citing the acquisition of Ethniki Insurance by Piraeus Bank and of CNP Assurance by Eurobank as examples.

However, S&P analysts expressed concerns about the over-indebtedness of Greek households, noting that non-performing loans (NPLs) transferred to loan servicers amount to approximately 75 billion euros.Nevertheless, they forecast that the ratio of non-performing loans held by Greek banks will further decline to 2.5%-3% by 2026.

Source: pagenews.gr