(Bloomberg) -- Greek banks plan to reduce their deferred tax credits faster than originally scheduled in an effort to improve their capital mix and put an end to the legacies from the past decade’s financial crisis.
Lenders were planning to eliminate DTCs by around 2041, but now they are speeding up their efforts, people familiar with the matter said. Each bank will have its own schedule, they said, asking not to be identified discussing internal information, while one person said all of the four main Greek banks are looking at eliminating DTCs latest by 2034.
On Friday, Piraeus Bank became the first to announce that it’s seeking to cut the credits to zero by 2034, advancing the goal post by seven years. The move sets the stage for rivals to follow suit. Alpha Bank will unveil steps to address DTCs when it announces its earnings next week, a representative said.
Greece’s government granted many of the nation’s lenders deferred tax credits as part of bailouts designed to nurse them back to financial health. In June, the DTC obligation amounted to €12.5 billion ($13.6 billion), or about 50% of their CET1 capital. The move to amortize the DTCs is the latest step in efforts by Greece’s largest banks to draw a line under the crisis-era legacies.
They have recently started paying dividends, the state has pulled back and international investors are returning to the industry, marking a stunning comeback for a market that was long shunned.
Plans to accelerate repayments of DTCs will improve lenders’ finances more quickly and are also expected to help them gradually increase payouts to investors, one of the people said.
A stock index comprising five Greek banks climbed as much as 2% on Friday.
The four main Greek banks were allowed in 2024 to restart dividend payments for the first time since 2008, but payout ratios weren’t higher than 30%. Lenders now want to gradually increase this ratio to levels above 50% in the coming years.
Banks, scheduled to report their nine-month earnings through the end of next week, are going to announce their plans for the DTC reduction, one of the people said.
Eurobank Ergasias Services and Holdings SA confirmed that it will present its relevant plan along with its third quarter results on Nov. 7. A National Bank of Greece representative declined to comment.
(Updates with bank index move in seventh paragraph.)
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