Greek Banks: Faster Than Expected DTC Amortisation Is Credit Positive

This commentary analyses the implications for the Greek systemic banks (Alpha Bank S.A., Eurobank S.A., National Bank of Greece S.A., and Piraeus Bank S.A.) stemming from their intention to accelerate the amortisation of deferred tax credits (DTCs).

Summary highlights from the commentary include:

-- Greek banks have sizeable DTCs accounted for in their capital structures because of the sovereign debt crisis.

-- DTCs represent a weaker form of capital, and this is incorporated in our credit rating considerations for Greek banks.

-- The systemic banks are willing to accelerate the DTC amortisation starting from 2025.

"We consider the expected acceleration in DTC amortisation to be credit positive as this would allow for an improvement in the quality of banks' capital as well as increase their strategic options for capital deployment" said Andrea Costanzo, Vice President from the Morningstar DBRS European Financial Institution Ratings team. "Our view is that banks should be able to absorb the impact from the accelerated amortisation under the assumption that their profitability and organic capital generation remain adequate in the medium term, which is what we expect at this stage."