The results of the first semester of 2023 were driven by higher core revenues, cost control, and lower credit costs for the major Greek banks, namely Alpha Bank, Eurobank, National Bank of Greece, and Piraeus Bank, reporting a combined net profit of 1.8 billion euros, according to DBRS.

Significant growth in net interest income characterized the revenues for the first semester of 2023, as banks benefited from the rapid increase in interest rates despite lower volumes of new loans, alongside higher net fees, albeit to a lesser extent.

DBRS notes that it expects a deceleration in net interest income over the next quarters, reflecting its view on the moderation of the European Central Bank's (ECB) monetary policy tightening, potential financing cost escalation, and the introduction of an upper interest rate limit for retail housing loans from May 2023.

Furthermore, during the first semester of 2023, the annual risk cost remained on par with 2022 but below the very high levels of the recent past. DBRS foresees a potential increase in risk costs from the first semester of 2023, reflecting higher asset quality risks. However, asset quality continued to improve in the first semester of 2023, thanks to low inflows of new non-performing loans and the reduction of legacy issues, despite lower volumes of new loans, the report states.

Abundant and stable deposit bases enabled Greek banks to maintain comfortable liquidity positions despite the repayments of TLTRO III. Deposits are shifting towards more remunerative solutions, though to a lesser extent than initially anticipated. 

The continuous generation of organic capital in the first semester of 2023 bolstered capitalization; nevertheless, capital quality remains relatively weak, the rating agency notes. The results of the European Stress Tests for 2023 displayed a better performance for Greek banks compared to the European average, it adds.