Greece’s Piraeus Bank will turn profitable this year, helped by cost cuts and lower provisions for non-performing loans, its chairman, Michalis Salas, announced.
The country’s second-largest lender by assets, like its domestic competitors, has been struggling with large problem loan portfolios after the country’s deep recession pushed unemployment to record highs, making it hard for borrowers to service their debts and forcing lenders to make provisions for impaired credit.
“In 2016 we will be profitable,” Piraeus Bank Chairman Michalis Sallas told journalists. “The easing in non-performing loans in the last quarter of 2015 is continuing in the first quarter. This leads to lower provisions.”
Piraeus, which is 26.2% owned by the Greece’s bank HFSF rescue fund after its recapitalisation last year, booked loan-loss provisions of 1.4 billion euros in last year’s final quarter, leaving it with a 1.24 billion euro loss. The provisioning increased the coverage ratio of impaired loans to 65 percent from 61% in September.
Sallas noted that improving trends on bad loans continued in the first quarter and he expects the group to lower its ratio of non-performing loans (NPLs) — credit in arrears for more than 90 days — to less than 17% of its book by 2018. The bank’s NPL ratio eased to 39.5 percent in the last quarter of 2015, from 40.5% in the third quarter.
Deeper look at resizing
NPL stock is expected to drop by 1 billion euros this year, he said, with strategic defaulters — borrowers who can afford to service their debts but instead take advantage of foreclosure protection regulations — beginning to pay up. “Our cost-cutting effort continues and we are taking a deeper look at resizing, including our presence abroad and our non-core operations,” Sallas added.
In his view, the fall in Greek real estate prices, which affected loan collateral values and was a factor in the surge of loan-loss provisions last year, has bottomed out. “I do not see a further price decline in the Greek real estate market. The completion of the bailout review is crucial and will lead to an improvement,” he stressed.
Greek housing prices fell 5.1% last year. Sallas warned , however, that a full lifting of capital controls and a sizeable return of deposits to the banking system will take time. Greek banks have bled 41 billion euros of deposits since November 2014, though capital controls imposed in June 2015 contained the flight.
Sallas also disclosed that Piraeus will divest its operations in Cyprus — a 13-branch network with 300 employees — by mid-summer as part of its downsizing of foreign activities. The bank’s search for a new chief executive is expected to be completed in the next few weeks, he added.
Source: thetoc.gr
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