Greece’s banking sector recorded strong progress in the first half of 2025, yet the country’s central bank has cautioned that the recovery remains fragile. In its latest Note on the Greek Economy, the Bank of Greece acknowledged improvements in profitability, capital strength and liquidity, but stressed that external risks - from global market volatility and shifting interest rate conditions to broader macroeconomic uncertainties - continue to cast a shadow over the outlook.
Consolidated net profits at the country’s four systemic banks rose year-on-year, driven by higher fee income, gains from other activities and lower provisions for bad loans. Net interest income, however, remained largely unchanged. Capital positions strengthened, with the key CET1 ratio rising on the back of faster equity growth relative to risk-weighted assets, while further improvements are expected as deferred tax credits are gradually absorbed. Liquidity has also remained solid: by June, banks had already met final targets for minimum loss-absorbing capacity, while funding costs eased as deposit rates and interbank borrowing charges fell. At the same time, non-performing exposures continued to decline, narrowing the gap with the European average.
The healthier picture has been recognized by international markets. All four systemic lenders have secured rating upgrades from S&P, Moody’s, Fitch and DBRS, in step with Greece’s improved sovereign credit standing. Greek bank bonds have also remained stable, even as yields in other parts of the eurozone declined.
Still, the central bank has warned that profitability should not be taken for granted. The accelerated amortization of deferred tax credits poses a challenge to future capital adequacy, while asset quality remains vulnerable to economic shocks and the risk of a new wave of bad loans. Although recent stress tests bolstered confidence, the Bank of Greece underlined that geopolitical tensions, trade frictions and a potential reversal in international interest rate trends could yet weigh on the sector’s performance. Longer-term pressures, including the need to contain operating costs, invest in digital transformation and fend off growing competition from non-bank financial service providers, also remain critical hurdles.
