Lately foreign investment funds are circulating in
Greece, and specifically, trying to negotiate a bargain with Greek banks, to
purchase doubtful loans that were granted to businesses and home owners as
mortgages.
As a matter of fact one such foreign investment fund
is close to a deal with a Greek bank to purchase loans on “red” issued as
business loans for working capital.
The strange part of this is that in the case of the
red loans for home owners, the loans will be 100% outstanding, even though the
funds are bargaining for a haircut as much as 50% of their current value.
Such funds in Greece are: Marathon asset management, York
Capital asset management, Fairfax Financial Holding, KKR, and Blackstone.
Under current Greek law, every six month thus far,
residential auctions and evictions are being suspended, but the Greek
government has now opened the discussion for such a possibility, beginning on
January 2014.
Recently the recapitalization of the four Greek Banks
was successfully completed. At a meeting yesterday with the Greek Prime
Minister with the heads of the four largest banks, it was stressed that the
banks ought to open up credit supply to businesses so as to let liquidity flow
again. There seemed to be a consensus by all present, but it was agreed that
the banks would no longer issue consumer loans. The bankers agreed to
concentrate on business loans and home mortgages.
Everyone also agreed that interest rates are non-competitive
for granting loans and should be reduced. The bankers acknowledged though that
the reasons interest rates are high are due to the risk incorporated. Banks
have red loans already in their portfolio which they are trying to renegotiate.
The projection for the gradual decrease of interest
rates is by this coming September, so as to gradually decrease by about 1 to
1.5 basis points in a 12 to 15 month time span. The interest rate today for a
business loan stands at 8 %( secured mortgage) taking into account 3 basis points
for risk of default. Banks gain by about 7 basis points spread.
According to statistics provided by the Bank of Greece
regarding credit provided by banks and in red, at the end of March 2013,
doubtful loans reached 27.8%. Of that, 27.5% constitute business loans (working
capital), 22.9% are mortgage loans, and 42.4% consumption (i.e. credit cards,
etc).
