Greek banks’ earnings hit by recession

City A.M. Reporter
THE sharp profit fall Greek banks so far reported in the first quarter offers a first glimpse of what will be wrenching their bottom lines this year as an austerity-induced recession to repair public finances deepens.

Two of Greece’s largest lenders – National Bank and Alpha – both lost money at home in the first quarter as loan growth weakened and rising non-performing loans necessitated higher provisioning.

“We expect the deterioration in asset quality and concerns over the value of Greek government bonds to continue to weigh on the outlook of Greek banks,” said Nomura analyst Daragh Quinn in a note.

Alpha Bank, Greece’s third-largest lender, yesterday reported a net loss of €10.4m (£8.8m), including a one-off €61.9m tax. Excluding the tax, its net earnings fell 39.5 per cent year-on-year to €51.6m, coming in above market expectations. “Overall a mixed set of results, with Alpha missing at the bottom-line, albeit on non-core items, and showing accelerating non-performing loan (NPL) formation,” said UBS analyst Alexander Kyrtsis. Bellwether National Bank, the country’s biggest lender, a day earlier posted a 93 per cent fall in earnings to €21m. Losses at home were offset by a better performance by its Turkish unit Finansbank.

Piraeus Bank reports today. Credit Agricole subsidiary Emporiki, which kicked off the earnings season earlier in May, stayed in the red with losses widening 24 per cent to €209m in the first three months, hurt by bad loan provisions. Greek banks have underperformed European peers since the start of the year, shedding 41 per cent. The country’s debt crisis, which sparked contagion fears and roiled the euro, has hurt them through higher funding costs, a squeeze on margins and trading losses tied to their government bond holdings.

“While our balance sheet is low risk, with measured sovereign exposure, and our asset base well collateralised, we will continue to focus throughout the year on shielding Alpha Bank from contagion of the sovereign debt crisis and to deliver on our key priorities,” said chief executive Dimitris Mantzounis.