ECONOMY

Piraeus profits drop but beat expectations

Increased provisions caused Piraeus Bank?s first-quarter profits to shrink significantly from last year, the lender announced on Friday, although the figures were better than predicted.

Bad loans are expected to increase as a result of the country?s continuing recession and government measures which have cut salaries and pensions, with net income for the lender dropping from 7 million euros in the January-March 2010 to just 2 million in the same period this year.

However, analysts had been expecting profits of between 1.5 and 1.6 million euros.

?The recent share capital increase has strengthened the group?s balance sheet and improved capital adequacy rations,? stated the group?s chairman, Michalis Sallas.

Having marginally passed the European Central Bank?s stress test last summer, Piraeus completed a rights issue to the amount of 807 million euros that boosted its capital ratio by 200 basis points.

Its loan losses and provisions came to 171 million euros, up from 134 million a year earlier, representing a 28 percent increase. Operating expenses were reduced by 3 percent.

?In response to the unfavorable conditions in the Greek market, the path we are pursuing consists of containing costs, improving revenues and remaining prudent in managing risks and liquidity,? Sallas added.

Deposits declined by 5 percent, although deposits outside Greece increased by 4 percent. The loans-to-deposits ratio rose to 129 from 25 percent. The ratio of loans in arrears over 90 days grew to 8.6 percent of all loans from 7.6 percent in the previous quarter.

Piraeus Bank shares failed to register any movement at the end of trade on the Athens bourse on Friday, while all other bank stocks in the blue chip index posted losses.