Reuters: Piraeus Bank gets grip on Greek bad debts to drive profit

Piraeus Bank, Greece’s largest lender by assets cut its bad loan provisions during the summer months to improve its net profit by 52 percent over the previous quarter.

Greek banks still carry large problem loan portfolios after a deep, protracted recession pushed unemployment to record highs, making it hard for borrowers to service their debts.

Piraeus, which is 26.2 percent owned by the country’s bank rescue fund HFSF after its recapitalisation late last year, said on Tuesday net profit was 31 million euros ($33 million) for July to September, up from 20 million euros.

Greek banks have about 109 billion euros of non-performing exposures (NPEs), which at 45 percent of their loan books is the second highest ratio in Europe after Cyprus. They face ambitious targets to cut the overhang by 40 percent by 2019.

They are also grappling with funding gaps after a deposit flight last year that led to capital controls in June 2015. They still depend on central bank funding to plug the hole.

Piraeus, with a current market value of 1.25 billion euros, said loan-loss provisions fell 9.0 percent to 242 million euros in the third quarter, from 265 million in the second.

“Active management of non-performing loans continues to yield significant positive results,” CEO George Poulopoulos said in a statement. “On an annual basis, loans in arrears have declined by 2.2 billion euros or 8 percent.”

Piraeus said non-performing loans (NPLs) dropped to 38.8 percent of its loan book at the end of September, from 39.2 percent in the second quarter.

A wider measure, Non Performing Exposures (NPEs) which include NPLs and restructured loans likely to turn bad, were reduced by 200 million euros quarter on quarter and by 1.1 billion euros year-on-year.

Net interest income rose one percent from the second quarter to 488 million euros, with the group’s net interest margin improving to 2.92 from 2.89 percent in the second quarter. ($1 = 0.9310 euros) (Editing by Alexander Smith)