Eurobank returned to profitability in 2016, recording robust operating results, with net profit standing at 230 million euros, against losses of 1.2 billion euros in 2015, while fourth quarter 2016 bottom-line result reached 38 million euros.
In more detail, net interest income increased by 5.8 pct year-on-year to 1,548 million euros, driven by the reduction in Eurosystem funding cost, while it was stable on a quarterly basis to 389 million.
Net interest margin expanded on an annual basis by 23 basis points to 2.25 pct. Net fee and commission income grew by 22.2 pct (annually) and 7.6 (quarterly).
This was mainly due to the 42 million euros decrease of pillar II bond expenses in 2016 versus 2015.
Net fee and commission income accounted for 49 basis points of total assets in the fourth quarter of 2016, against 34 basis points the same quarter in 2015. As a result, core income rose by 8.2 pct (annually) and 1.2 pct (quarterly), reflecting improved business performance.
Other operating income came at 217 million euros in 2016 and included 73 million EFSF bond gains.
Thus, total operating income increased by 17.1 pct (year-on-year) to 2,063 million euros and by 5.9 pct (quarterly) to 526 million.
Operating expenses decreased by 4.0 pct in 2016 to 992 million and 2.1 pct to 242 million in the fourth quarte.
In Greece, expenses were down by 5.5 pct (annually), as a result of consistent cost rationalization efforts.
The cost / income improved by 1,006 basis points (annually) to 48.1 pct and 380 basis points (quarterly) to 46.0 pct.
Core pre-provision income grew by 26.8 pct, compared with the same period in 2015 to 854 million and 5.0 pct from the previous quarter to 229 million.
Pre-provision income rose by 47.2 pct (annually) to 1,071 million euros and by 13.9 pct in the fourth quarter of 2016.
Positive results were also achieved in the management of NPLs. Both nonperforming exposures (NPEs) and 90 days past due formation was negative in the fourth quarter by 108 million euros and 85 million, respectively.
The NPE ratio decreased by 40 basis points (quarterly) to 45.2 pct of total loans, whereas the 90dpd ratio was down to 34.7 pct, from 34.8 pct in the third quarter of 2016 and 35.2 pct at the end of 2015.
The coverage of NPEs and 90dpd loans improved by 70 and 60 basis points respectively and reached 50.7 pct and 66.1 pct at 2016-end. Loan loss provisions came at 775 million euros in 2016 and accounted for 1.96 pct of net loans.
“A gradual return to normality prevailed throughout 2016. The Greek banking system confirmed that it can perform even in a challenging environment, if the conditions are improving, the impact of a negative juncture remains manageable and uncertainties are limited. However, Q4 and then the beginning of the new year was marked by a relapse of uncertainties, which undermines the efforts for the Greek economy to leave behind the recurring crises. As a consequence, the positive developments in 2016 were reversed in the fields of deposits and NPL formation. The deliberations between Greece and its creditors are inherently difficult; nevertheless, the longer the duration of the talks, the more difficult their conclusion becomes, taking a toll on economic activity. An eventual agreement will allow a gradual enhancement of trust and Greece’s credibility towards international markets and its own citizens, which is a condition for return to a strong growth path and for the inflow of the necessary capital and investments. As the European regulators recently confirmed, the Greek banks have enough capital and a significant stock of provisions, which allow the active management of the NPE stock amassed during the prolonged crisis. On the back of the above, given an improving climate, the Greek banks can finance Greek businesses and abet the return of the economy in positive growth rates. Return to growth is the economic and political foundation for countering Greece’s main problems: unemployment, poverty, high public debt, a pile of non-performing loans, a society of limited opportunities and prospects, economic stagnation and scarcity of investment. In a positive juncture, Eurobank with its solid management, its strong and stable shareholder basis, its high quality human resources, and a business model fit for the new challenges, can be at the forefront of the growth trend, committed to the principles of transparency and efficiency and delivering on the needs of our clients and the communities we serve,” Nikolaos Karamouzis, Chairman of BoD said commenting on the results.
“In our 2016 results, we report the first profitable and capital accretive year for Eurobank since the eruption of the Greek sovereign crisis, with net profit of €230 million.
Return to profitability was our absolute priority and we are delighted to have been able to deliver last year on all our strategic targets.
The increase of the core pre-provision income by more than 25%, along with the increase in deposits by more than €2.5bn and the decrease of ELA liquidity by €8.1bn year-on-year confirm that Eurobank has a robust business, an effective operating model and a solid client basis that can perform even in a challenging environment, when circumstances are not completely forbidding.
The fourth quarter of 2016 was the first of negative NPE formation.
Furthermore, as part of our NPE reduction plan, a €150m corporate loan was disposed.
Overall, asset quality improvement accelerated in the second half of 2016.
International activities continue to bear positively to our results.
We expect this trend to sustain as regional economies are forecast to remain on a path of growth over the medium term.
In 2017 our main goal is to remain profitable, despite the downturn in the economic climate and a relapse of uncertainties that negatively affect economic activity, and strengthen further our capital basis with organic capital generation. Above all, we are focusing on the challenge of reducing the NPE stock to the levels agreed with the regulators.
We are shifting resources; we are investing all the time and effort necessary; and, therefore, we have no doubt that the results will be fully in line with our commitments.
It is obvious that a swift conclusion of the second program review will not only secure the above objectives but it would also unleash the significant growth potential of the Greek economy,” Fokion Karavias, CEO said.