On 22 October, the Bank of Greece (BoG) published its Financial Stability Report, which showed that Greek banks’ profitability continued to improve in the first half of 2026, according to a Moody’s analysis of the domestic banking sector.
The banks’ capital adequacy and loan portfolio quality also remained at satisfactory levels, while liquidity continued to exceed the average for the European Banking Union.
The report, however, highlighted four emerging risk areas: a renewed net inflow of non-performing loans (NPLs), the high share of deferred tax credits (DTCs) in banks’ core capital, increasingly sophisticated cyber threats and an environment of heightened macroeconomic uncertainty.
We consider these risks manageable for Greece’s systemic banks, which account for about 93% of the banking system, the agency’s analysts write. At this stage, they do not change our view of the banks’ credit profiles.
Strong profitability, adequate capital and ample liquidity provide them with significant loss-absorbing capacity. However, the impact of these risks will depend on their severity. A sharp rise in new NPLs, particularly if combined with an external shock, would test the banks’ capital and other safeguards.
Greek banks recorded a return on assets of 1.3% and a return on equity of 12.1% in the first half of 2026. Their cost-to-income ratio, at 37.8%, was significantly below the European average of 54.6%.
At the same time, the banks reported a consolidated common equity tier 1 (CET1) capital ratio of about 14.8% in June 2026, compared with 16% for EU banks supervised by the Single Supervisory Mechanism (SSM).
Asset quality was strong, with the NPL ratio at 3.4% in June 2026, while liquidity remained healthy, with banks reporting a loan-to-deposit ratio of 63.5%, around 40 percentage points below the average for banks supervised by the SSM.
As a result, the banks are well placed to absorb potential pressure on their credit profiles. However, the four emerging risk areas identified by the BoG could weigh on their performance if they materialise more severely than we expect.
Renewed NPL formation
About €1.7 billion of performing loans became non-performing in the first half of 2026, while just €388 million of loans previously classified as NPLs returned to performing status.
The absolute stock of NPLs increased by 9.3% during the period, mainly because of the net inflow of new non-performing loans.
Banks’ NPL ratio remained broadly stable at 3.4% (December 2025: 3.3%). Pressure on asset quality is concentrated among micro-enterprises and SMEs, whose NPL ratios stood at 11.2% and 4.6%, respectively, compared with 0.9% for large companies.
Following two interest rate rises by the ECB, the average interest rate on new loans to non-financial corporations increased by 84 basis points to 4.5% at the end of August 2026. This could put further pressure on more vulnerable borrowers after a period of strong growth in business lending.
Capital quality
DTCs accounted for 36% of CET1 capital in June 2026, limiting the quality of banks’ capital. However, the share was down from about 40% at the end of 2025, as banks stepped up their amortisation.
The 0.5% countercyclical capital buffer, in force from 1 October 2026, further increases capital requirements, reinforcing the need for Greek banks to maintain capital buffers on an ongoing basis.
The BoG notes that future capital adequacy depends on credit growth, asset quality, internal capital generation and dividend policy, alongside the faster amortisation of DTCs.
Cyber and operational risk
Increasingly sophisticated cyber attacks using AI and heavy reliance on third-party technology providers make it necessary to strengthen digital resilience. Geopolitical tensions also increase the risk of targeted attacks on financial infrastructure.
In addition, incidents of social engineering and authorised push payment fraud are increasing, while instant payments make it harder to recover stolen funds. A serious incident could cause direct losses and damage the reputation of domestic banks.
Macroeconomic and geopolitical headwinds
Ongoing geopolitical tensions and higher energy prices are fuelling inflation, disrupting trade and could cause supply chain disruptions. Prolonged uncertainty could also curb foreign direct investment and delay business decisions.
Both factors would put pressure on corporate borrowers’ cash flows and demand for loans, affecting banks’ asset quality and profitability, Moody’s notes.
The baseline scenario for Greece’s four systemic banks does not anticipate a significant change in any of these risks over the next 12-18 months. However, a sharper rise in NPL formation, particularly if combined with an external shock, would erode the asset-quality gains made in recent years and slow capital generation.
In such a scenario, we would probably reassess our view of the banks’ credit profiles and reflect this development in their credit ratings and outlooks, the analysis concludes.