Greek lenders are expected to reports billions of euros in losses for 2015 when they report their annual results later this week, but even that isn't the biggest problem on bankers' minds right now.
Instead, the country's battered banking sector is fretting about the latest round of negotiations between Greece and its international creditors, which threaten to drag on for months and freeze the economy.
The banking sectors hopes of returning to profitability this year hinge on when talks between Athens and its lenders end. A deal is needed to help restore business and consumer confidence, and pave the way depositors to return some of their cash to the banks after some EUR43 billion fled the system in just over a year.
The talks between Athens and its creditors also concern the banks directly: the government is under pressure to overhaul laws on nonperforming loans, which amount to 43% of total loans. Creditors--the rest of the eurozone and the International Monetary Fund --want Greece to agree to let banks sell all categories of nonperforming loans to investment funds, freeing up banks to start making new loans to Greek businesses again.
But the Greek government wants to tighten restrictions on the sale of such loans over fears that vulture funds will buy them up and aggressively pursue debtors in arrears, from small businesses to households with mortgages. Greece has so far avoided the politically controversial wave of repossessions and evictions that plagued Spain during its crisis years.
"We see an NPL cleanup as paramount to any return to profitability," Credit Suisse analyst Viktoria Cherevach said in a research note.
Bank of Greece Governor Yannis Stournaras has said a speedy agreement to Greece's bailout review is decisive for the economy's prospects this year. "Every hour that we fail to complete the review weighs on confidence," Mr. Stournaras told a parliamentary committee.
The Bank of Greece has warned against any repeat of 2015's standoff between Prime Minister Alexis Tsipras and international creditors over Greece's bailout conditions, which pushed the economy back into recession and nearly led to the country's exit from the eurozone.
Greek banks were brought back from the brink of collapse in the summer after Greece's central bank introduced capital controls to stem the flow of money leaving the country. In December, Greek banks boosted their capital by EUR14.4 billion , the third recapitalization of the sector in as many years. The move helped ease immediate concerns about the sector's health and even prompted a return of some deposits.
But in recent weeks bankers and investors have been unnerved by the gaps that have emerged again between Greece and its lenders, especially the IMF, on how much fiscal consolidation the government needs.
Greece needs to wind up this review of the country's third bailout, worth up to EUR86 billion ( $93 billion ), before being able to start negotiations with lenders over debt relief.
In January, Athens presented a plan to reform its pension system that it says will save money mainly by unifying Greece's fragmented pension funds, raising social-security contributions and reducing future retirees' entitlements, while protecting current pensioners' incomes.
But the proposal hasn't go far enough for the IMF and has angered many Greeks who are opposed to a new round of austerity. The renewed tension has led analysts to speculate about an early return to the ballot boxes just months after Mr. Tsipras won a snap elections.
The renewed political uncertainty has already begun to affect bank stocks and deposits.
The combination of problems facing the country and clouding its recovery prospects led to Greek bank stocks falling some 50% in the first ten days of February, an even deeper drop than the selloff in the overall European banking sector. Since then Greek bank stocks have recovered some of those losses and ended the month off 18%.
Meanwhile, bank deposits fell slightly in January after rising by around EUR2.5 billion in December, data from the Bank of Greece show. Bankers say deposit levels were roughly stable in February.
An agreement between the government and its creditors could also help Greek banks with their funding costs. Bankers are hoping that a deal that shows the bailout program is on track will persuade the European Central Bank to reinstate a waiver, withdrawn in early 2015, that allows Greek banks to borrow money cheaply from the ECB while posting the country's government bonds as collateral.
The waiver is needed because Greek bonds don't have a high-enough credit rating for the ECB's collateral rules. Since the waiver's withdrawal, the banks have relied on a more expensive funding facility, called Emergency Liquidity Assistance, from the Bank of Greece .
Adding to the sector's woes are headwinds coming in from abroad. A weakening of the global economy could hit Greece's vital tourism sector, which bankers are also concerned worry that the spiraling number of refugees and migrants stuck in Greece could harm tourist number further.
"In the next few weeks, this could turn into one of our big problems," said a senior bank official.
Greece's banks have mostly reported losses ever since the country signed up for its first bailout in 2010. For 2015, the country's four big lenders are expected to report total losses of more than EUR5 billion , mainly due to charges stemming from loan losses, according to Nicosia based brokerage Axia Ventures .
National Bank of Greece is forecast to report a loss of EUR2.2 billion , with Eurobank reporting a loss of more than a billion euros, says Axia Ventures , which tips Piraeus Bank and Alpha Bank to report a loss of around EUR860 million each.
Eurobank reports earnings on Wednesday followed by Alpha on Thursday. The country's top two lenders, Piraeus and NBG, are due to publish their figures on March 9 and 10 respectively.
Nonperforming loans will continue to rise this year, says Nondas Nicolaides, a senior credit officer at Moody's . The NPL ratio is likely to peak toward the end of 2016 or in early 2017, he wrote in a research note--but only if there is political stability and Greece's economic depression doesn't take another turn for the worse.
