Only just recently have analysts and credit ratings agencies warmed up to National Bank of Greece S.A. (NYSE: NBG) and other banks in Greece. Now comes a reminder just how sensitive the situation is. Standard & Poor’s report called “Banking Industry Country Risk Assessment: Greece” is a reminder of how things stand in the Greek banking recovery.

Standard & Poor’s has classified Greece’s banking industry under its BICRA as a 10, with 1 being the best and 10 being the worst. To put this in context, that puts Greece in line with the nations of Egypt and Belarus.

The good news is that S&P sees European authorities supporting the Greek banks. It also sees a fairly concentrated and stabilizing financial system. We would also point out that S&P gave a very slight upgrade on NBG back in mid-May, so we would consider Thursday’s Greek banking sector outlook an ongoing situational reminder rather than bracing customers for a whole new round of downgrades.

Then there is the bad side of the reading of the Greek banking sector as well. Weaknesses include a negative impact of Greek sovereign financial distress, high credit risk and sizable funding imbalances. Bank losses in Greece are also said to be significantly higher than those of other countries that have a similar amount of private sector leverage.

ALSO READ: Why Nomura Says Now Is the Time to Buy NBG

While S&P’s report is not meant to single out any bank specifically, it does show how sensitive the recovery in Greece is. S&P went on to warn that Greece faces very weak economic prospects, where a lack of growth and deflationary pressures are likely to persist for the next few years.

Despite all the analyst upgrades from major firms in the past couple of months, the American Depositary Shares (ADSs) of National Bank of Greece remain pressured. Shares were at $3.65 in mid-day trading in New York on Thursday, and the 52-week range is $2.85 to $6.48. We keep looking for that breakout recovery to take place in NBG, now that its ratings have become more favorable to analysts and market participants.

Also, we have to revisit the notion that S&P warned that NBG’s recent capital raise may not be enough. Perhaps part of the problem in getting too ambitious in NBG and others is just how sensitive the Greek economic recovery remains. Secular recessionary trends often kill investor ambitions — for obvious reasons.

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