Banks see results improve in Q1

By Yiannis Papadoyiannis

Local lenders' first-quarter results will show a significant improvement, reflecting the stabilization of the economy and the notable change in conditions, according to sector professionals.

Bank officials say that the January-March 2014 performance figures will be considerably better as a result of cost synergies, the reduction in the cost of deposits and the slowdown in the creation of new nonperforming loans.

On the other hand, there has been a negative impact from the continued deleveraging. According to Bank of Greece data, the reduction in the issue of loans amounted to 4.1 percent in the first quarter.

However, what has made a difference is the stabilization of the economy and the recession’s containment: The year-on-year drop in gross domestic product amounted to just 1.1 percent, compared with 2.3 percent in the previous quarter and 6 percent in Q1 of 2013. Alpha Bank’s weekly report on Thursday forecast that GDP is expected to grow by 0.6 percent in the second quarter of the year.

There are three main factors that have had a positive impact on bank results. The first is cost synergies, allowing banks to reduce their operating costs following the sector’s drastic restructuring. The second is the cost of funding, which continued to go down in the first quarter, albeit at a slower rate than before, with the average interest rate for deposits amounting to 2.7-2.8 percent from 4 percent a year earlier. And the third is nonperforming loans, which may have reached 33 percent of all credit issued but their growth rate is slipping with every quarter that passes, and bank officials expect them to start receding within two to three quarters.