ATHENS – The financing of Greek banks by the European Central Bank (ECB) will limit the pressure on banks’ profitability from the coronavirus pandemic, Moody’s said on Thursday.

The credit rating agency noted that the Bank of Greece’s balance sheet in April showed a significant increase in the financing of Greek banks from the ECB, following an ECB decision to begin accepting Greek state bonds as collateral.

Since then, Greek banks raised their borrowing from the ECB to 21.5 billion euros in April (or around 8.0 pct of total assets) from 12.4 billion in March and 8.1 billion in December 2019. The financing is made exclusively through the LTRO mechanism with negative interest (-0.5 pct).

Moody’s said that this activity combined with an increase in private deposits to around 145 billion euros in March 2020 will support net interest margins and banks’ profitability during this year’s financial difficulties.

The credit rating agency said that Greek economy could shrink by more than 5.0 pct this year.

Moody’s said Greek banks’ net income from interest and their net interest margin will remain under pressure because of the decline in loans and the very low interest rates. It expects, however, that the deterioration will be limited, since banks will continue having interest income despite a government measure to suspend loan tranche payments for six months.