Greek Banks Profitability Soars as Lending Rates Outpace Deposits

Greek banks' profitability is heavily influenced by the difference between their lending and deposit rates. According to the European Central Bank's Single Supervisory Mechanism, Greek banks' Net Interest Margin (NIM) stood at 2.72% in the first quarter of this year, second highest in the European Union after Slovenia's 3.11%. Spain, Latvia, and Portugal followed closely behind with NIMs of 2.68%, 2.67%, and 2.58%, respectively.

Italy's banks had the lowest NIM at 2.03%, while Germany and France trailed far behind with NIMs of 1.04% and 0.97%, respectively. The 'big four' Greek banks - National, Eurobank, Piraeus Bank, and Alpha Bank - all saw their NIMs rise in the first half of this year: from 2.72% to 2.73% for National, from 2.46% to 2.48% for Eurobank, from 2.14% to 2.22% for Piraeus Bank, and from 2.12% to 2.16% for Alpha Bank.

The upward trend is expected to continue now that the ECB has increased its main lending rate by 25 basis points. This increase will likely lead to higher borrowing costs for consumers and businesses, which could have a positive impact on banks' profitability due to their higher interest rates on loans compared to deposits.