Two more banking executives
appeared (July 12, 14, 2016) before a parliamentary committee that is inquiring
about the bank loans giving out to Greek political parties, and media
companies, with questionable collateral.
The first banking executive
was from the Bank of Piraeus and answered questions in general as well as
specific on the loans given by the bank. Loans in arrears are higher by 40%
since the economic crisis in 2010. He alluded to sectors like tourism, where
the non- performing comprise 20% of the portfolio, while before the crisis NPL’s
were <5%. As for mortgage loans in arrears, of the 16 billion euros in total
loans, 4.6 billion are non – performing.
He estimated that strategic
defaulters are between 10 to 30%, and as he explained, are those that
deliberately are trying to buy time appealing to court for some kind of
settlement, citing a decrease in their home income. As for business loans, that
are non – performing, the banking executive said that there has been an
adjustment in business operations, for those businesses that appear to have a
positive EBITDA (earnings before interest, taxes, depreciation, amortization),
are punctual with their loan repayment responsibilities, and in those cases, as
with consumers, the bank will restructure their loans.
EBITDA is an indicator of a
company’s financial performance, and is calculated by earnings less expenses,
which excludes the ITDA. It is net income with interest, taxes, depreciation,
and amortization added back to it. It is used to analyze and compare
profitability between companies and industries because it eliminates the
effects of financing. It is interesting to point out that he used the analogy
of the Greek economic crisis to that of the US depression of 1929…
As for the Greek political
parties and the loans extended to them, he said that the amount of revenue by
those political parties has deteriorated substantially, and it explains why
those political parties are not up to date on their loans. The loans giving out
had collateral the state subsidies they received based on their electoral
percentage.
The members of the committee
asked question on a loan giving out to a media publishing company, with three
majority shareholders, and an offshore company. Two of those shareholders had
also shows on television. The company received 36 million euros loan by the Bank
of Piraeus, with collateral personal guarantees (wealth), they have pledged
additional collateral, and have received a loan restructuring. The banking
executive received hard questions by members of the committee when he admitted
that the company has only paid only 1 million euros back, and in interest.
Committee members asked him
how could he attest that the loan is up to date when they have only paid 1
million out of 36. He was also asked to explain for the loan his bank gave out to
this company, since the money they received was used to buy back shares… The banking
executive said that the company had an owners’ equity of 12 million euros, dramatically reduced
operating expenses, and had a positive EDITDA for 2015. Lastly, the executive from Piraeus
bank said that the bank has taken all the precautions to secure additional
pledge of collateral, so as to get its money back, as well as forfeit
additional current assets.
The deposition continued with
the second banking executive, the CEO of Attica Bank. His bank has given out
loans to media companies worth 12.6 million euros to publishing – media companies,
and 10.2 million to political parties. The president of the committee said that
the total amount of loans due to the Greek banks by the political parties are
417 million euros.
The CEO of Attica said that
the two majority political parties received loans pledging collateral state
subsidies. Both political parties have not kept up to date their dues, and the
loans are non - performing since 2011. The bank has mailed both political
parties a non-judicial notice of default, but without a reply.
Total loans outstanding to
media companies by Attica bank amount to 12.6 million euros, which is 0.26% of
the total loans in the bank’s portfolio. The risk assessment appraisal is
estimated at 6.9 million euros.
Bill T. Alexandratos, MSc. BA
Finance