Eurobank on Thursday reported positive results in the third quarter of 2017, as net profit before discontinued operations and restructuring costs rose to 61 million euros from 37 million in the second quarter.
In more detail: Net interest income increased by 1.3 pct to 369 million euros, mainly due to lower Eurosystem funding and Pillar II utilization. On an annual basis, net interest income was stable at 1.1 billion euros. Net interest margin improved by 11 basis points (on a quarterly basis) to 2.46 pct. Net fee and commission income remained flat to 67 million euros, but was up by 17.8 pct (on an annual basis) due to lower government guarantee cost. Core income expanded by 1.2 pct to 436 million euros and 2.5 pct (annual) to 1.3 billion. Other operating income receded from 34 million euros in the second quarter to 28 million in the third quarter of 2017. Thus, total operating income was stable to 464 million euros. Operating expenses in the January-September period decreased by 2.0 pct (annual) to 668 million euros, whereas costs in Greece were down by 2.7 pct to 534 million.
The NPE formation was negative for a fourth consecutive quarter by 111 million euros. The NPE ratio decreased by 40 basis points to 44.7 pct (quarterly) and the stock of NPEs was down by 0.4 billion euros (quarterly) and 1.0 billion in the nine-month period. The 90 days past due formation was lower by 69.4 pct (quarterly) and reached 26 million euros. The coverage of NPEs improved by 50 basis points to 51.6 pct, while loan loss provisions came at 178 million euros in the third quarter and accounted for 1.90 pct of net loans. It is worth noting that Eurobank recently reached an agreement with Intrum Justitia AB to sell a non-performing unsecured consumer loan portfolio of 1.5 billion euros, of which 0.6 billion is on balance sheet.
International operations remained profitable, as net profit before discontinued operations and restructuring costs amounted to 32 million euros in the third quarter and 97 million in the nine-month period. Furthermore, the bank successfully concluded recently a 500 million euros covered bond transaction, with a 3-year tenor and a yield below 3 pct, while it eliminated Pillar II funding as of late October. Customer deposits in Greece were up by 0.7 billion euros (quarterly) and 1.0 billion euros in the January-September period. The loans to deposits ratio improved to 112.0 pct at the end of September 2017, from 116.4 pct at the end of June.
“The prospect for positive growth rates, improved access to international markets, smooth completion of the 3rd review and the projected achievement of the targeted primary surplus in 2017, act as catalysts in creating more positive expectations. The positive comments made by international officials for the prospects of Greek economy confirm that the international image of the country is getting restored in a gradual manner. This development has to be exploited. In this context, there are clear signs of a recovery in investor interest for Greece. This course of improvement must be continued in order to create conditions of sustainable growth. Implementing in a consistent manner the agreements with our partners, securing fiscal stability, creating a friendly business environment, tax relief, a gradual reduction of interest rates and the implementation of all reforms considered necessary in, economy, public administration and the institutional framework, are critical parameters needed to drive investments and growth. A better economic climate and positive growth rates will assist Greek banks in implementing the ambitious plan of reducing the stock of NPLs, for which they have committed to the European supervising authorities, and restoring normal liquidity conditions. Solving the NPLs and liquidity issues, inherited by the long lasting crisis, is the key for our ability to finance real economy in an effective manner. Eurobank, being well prepared to cope successfully with the important challenges, focuses on this direction. Q3 results prove that the efforts bear fruit in all sectors.” Nikolaos Karamouzis, Chairman of the board said.
“Executing our strategic plan in a consistent and timely manner forms our priority for H2 2017. Important milestones either have been reached already, or are in an implementation process. We are at the final stage of negotiations for the sale of Bancpost, our subsidiary in Romania. This is the last of the commitments taken under our restructuring plan, which had been agreed and approved by the authorities. The regulatory requirements, which come in force next year, are covered through the redemption of preference shares by Eurobank and the issuance of Tier II bonds, in favor of the Greek State, which count in the total regulatory capital of the Bank. In addition we eliminated the use of Pillar II guarantees, completing a cycle of support by the Greek State. In the field of Non-Performing Loans, Eurobank sold a portfolio of total unpaid principal 1.5bn to Intrum. This has a corresponding positive effect in the reduction of NPEs. Last but not least, the issuance of 500m covered bonds marked our return to the international capital markets, the first since 2014, leading to an improvement in our liquidity, which is reflected in the further reduction of ELA. During Q3 2017, Eurobank remained on a track of organic profitability generating profits of 61m or 132m for 9M 2017. The fully-loaded capital adequacy ratio has strengthened organically by 80 bps from the beginning of the year. It is worth noting the increase in deposits by ?1bn at Group level, as well as the continuation of negative NPE formation for a 4th consecutive quarter. This resulted in the reduction of the total stock of NPEs, which will exceed the target for which we committed to the supervising authorities. Following the above we are convinced that 2017 will be a year of success in all the operational and strategic objectives the Bank has set,” Fokion Karavias, CEO said.