Moody’s has revised its outlook on the Greek banking sector from “positive” to “stable,” citing heightened geopolitical risks — just days after the ratings agency issued a favorable assessment of Greek banks’ performance.

The ratings agency, operating under its base-case scenario—which envisions a Middle East conflict that stays contained—doesn’t foresee any significant repercussions for the creditworthiness of Greek banks. This outlook rests on a foundation of consistent loan growth, robust net interest margins, and the sector’s solid capital reserves.

The agency, however, warned that a sustained halt to shipping in the Strait of Hormuz might cause energy prices to surge, which could then negatively impact the broader economy and the stability of banks. If this were to happen, profitability and expansion strategies could be compromised, and the likelihood of new non-performing loans would increase.

Economic Backdrop Remains Supportive

Moody’s said the broader economic environment is expected to stay supportive, with growth continuing to be driven by investment and a strengthening labor market. Loan quality is projected to keep improving, albeit at a more gradual pace, as NPE ratios converge toward the European Union average.
The agency noted that a substantial strengthening of bank balance sheets in recent years has already brought non-performing loan ratios down to low single-digit levels, while provisioning costs are gradually declining.