Eurobank on Wednesday said its net profit stood at 85 million euros in the third quarter 2016, from 46 million the second quarter of the current year, including a 55 million euros gain on the disposal of Eurolife ERB.
In more detail, the bank said net interest income grew by 0.3 pct on a quarterly basis to 389 million euros in the third quarter, from 388 million in the second quarter of 2016, driven by continued eurosystem funding cost reduction. In addition, net interest margin expanded further to 2.24 pct from 2.19 pct over the same periods, respectively.
Net fee and commission income increased by 7.1 pct on a quarterly basis to 76 million euros in the third quarter, compared to 71 million in the second quarter. This increase was mainly due to lower expenses from pillar II bonds utilization. Net fee and commission income accounted for 44 basis points of total assets in this period, against 26 basis points the same quarter a year ago.
As a result, core income rose by 1.4 pct to 465 million euros in the July-September period, while other operating income came at 31 million, from 67 million in the April-June period. Thus, total operating income declined by 5.7 pct to 497 million euros, due to lower non-core income.
Operating expenses decreased by 2.5 pct compared with the same period in 2015 to 750 million euros at a Group level and by 4.4 pct in Greece. The efficiency ratio (cost / income) improved to 49.8 pct from 55.6 pct last year. Core pre-provision income grew by 4.3 pct and 24.9 pct in the nine-month period from January to September, while pre-provision income rose by 39.9 pct in the nine-month period to 787 million.
Positive results were also achieved in the management of NPLs. 90 days past due formation was negative for a second consecutive quarter to 28 million euros, while NPE formation in Greece was down 70 pct.
Loan loss provisions reached 191 million euros in the third quarter and accounted for 1.9 pct of net loans.
International operations remained at a consistently profitable path, as net profit stood at 25 million euros in and 83 million euros in the nine-month period, against losses of 32 million euros in 2015.
Common Equity Tier I capital (CET1) increased by 40 basis points to 17.4 pct of risk weighted assets at the end of September 2016.
Total Eurosystem funding decreased by 6.0 billion euros June-to-date to 15.5b billion. ELA funding was down by 2.7 billion euros during the same period to 13.1 billion.
Customer deposits were up by 315 million euros in Greece and 394 mln at a Group level in the third quarter versus the previous quarter, reflecting the gradual normalization of conditions and the restoration of clients’ confidence towards the banking system. It is noted that Eurobank deposits have increased by 1.9 billion euros since the end of 2015.
Gross loans reached 50.6 billion euros at the end of September, with loans to businesses and households amounting to 26.4 bn and 24.2 bn respectively.
“The Greek economy shows a number of positive signs, including the stabilization of the economic environment, the expected return to positive growth rates and a smooth deliberation with international creditors. In this context, the successful and timely conclusion of the second review, within the frame of the Third Economic Adjustment Program is the top priority. The wrap-up of the second assessment will allow for specification on the debt relief framework. In this case, the ECB may consider the inclusion of Greek bonds in the QE program, which in turn would lead to a de-escalation of interest rates, a swift lifting of the capital controls and sovereign access to the debt capital markets.
All these developments can send a strong signal to international and local investors on the positive prospects of the Greek economy, triggering the inflow of foreign capital and investments necessary for liquidity improvement and economic activity recovery. The start of a virtuous circle of investment, growth, higher expectations and increase in asset prices will contribute to addressing the macroeconomic challenges, as unemployment, social inequality, debt sustainability and, critically, NPL management. Eurobank has a clear strategic plan and vision, focused on supporting Greek businesses, households and the economy. Thanks to the qualities, strength and commitment of a unique workforce, the Bank has all it takes to both contribute and make the most of the return of the Greek economy to positive growth,” Nikolaos Karamouzis, chairman of the board said.
“Our Q3 results prove that Eurobank is on track to reach the 2016 targets. The overall result remained positive for a third successive quarter with net profits of 85 million euros, while the capital adequacy ratio strengthened organically by 70bps since the beginning of the year.
Both net interest income and fees improved, while operational cost decreased, leading to a 4.3% increase in core pre-provision income. International activities were once again a key driver of this performance. The pre-provision income reached 249 million euros.
Active and effective management of the NPL stock remains Eurobank’s top priority for the next quarters. The plan for decreasing NPEs has been submitted to the SSM last September and is under way. In this frame, the shrinking of the NPE formation by 70% q-o-q in Greece and the negative formation of NPLs for a second quarter are particularly encouraging signs, reflected in the lower credit cost, which was 191 million euros or 1.9% of net loans. The expected further strengthening of the institutional framework and the return of the economy to positive growth will enhance the bank’s ability to actively manage NPLs.
Deposits in Greece inched higher, in line with the general stabilization trend. Liquidity dependence on the Eurosystem has shrunk considerably by 6 billion euros since last June to 15.5 billion euros. The swift completion of the second program review and the eventual inclusion of Greek bonds to the ECB’s QE program will strengthen confidence to the banking system and provide a boost to our efforts to increase our deposits,” Fokion Karavias, CEO said commenting on the results.