Explaining the first effects of Covid-19 on Greek banks’ profitability

Abstract The present paper studies the profitability dynamics of systemic Greek banks. By deploying an econometric methodology based on multiple linear regression analysis, we empirically investigate the drivers of banks’ return on assets between 2008 and 2020. We also shed light on the first effects of Covid-19 on banks. Examining the effects various macroeconomic, regulatory and financial factors, we find that public debt developments, including Greek debt restructuring, and banks’ provisions for credit losses had a negative effect on banks profitability. Besides, we testify that banks' capital adequacy and the size of liabilities of financial institutions towards their customers strengthened chances of increased bank profitability. We discuss the implications of our empirical findings in light of macroeconomic, regulatory and financial developments in Greece and the EU. JEL classification number: G01, G20, G21, M40, M49. Keywords: Systemic Banks, Profitability, Greece, ROA, Debt Crisis, Covid-19, Financial Analysis, Financial Ratios.