Emporiki Bank’s disappointing first-quarter results highlight the need for an urgent overhaul of the bank’s finances, the bank’s new chairman and chief executive, Giorgos Provopoulos, said yesterday. Confounding experts, who had expected a modest rise in earnings, Emporiki announced that pretax profit after minorities fell 52.4 percent, to 16.4 million euros, in the first quarter of 2004, compared to 34.5 million in the same quarter of 2003. The sharp drop was the result of higher provisions against bad debts and rising operating costs. (Emporiki increased provisions for non-performing loans by 67.7 percent to 38.5 million euros. Operating costs rose 15 percent to 165.4 million euros with its cost-to-income ratio worsening to 75.7 percent from 71.6 in the same period in 2003. First-quarter net interest income was flat at 153.2 million euros, as lower revenues from bond sales offset an 18.9 percent rise in loans.) The management’s recipe for putting the bank’s finances right includes «radical» cost-cutting, withdrawal from non-productive investments and taking better advantage of the bank’s large branch network to expand its retail banking operations. (Provopoulos said he plans a voluntary retirement scheme to cut operating costs, with the bank set to absorb subsidiaries starting with its factoring unit. «I believe these measures will help cut costs and boost revenues,» he said.) Soon the bank will announce more absorptions and mergers of subsidiaries. Top managers were saying that the battle for higher revenue will be decided by the «awakening» of personnel and the effective operation of its network. For this purpose, Emporiki’s management will adopt a new, more flexible organizational change, with as few overlapping responsibilities as possible. A new administrative information directorate will be established. Its purpose will be to measure and assess each unit’s performance. Bonuses will be directly linked to performance as an added incentive. The rise in costs is partly the result of personnel costs, including covering the deficit in the staff’s pension fund. When these costs, including provisions for future expenditure on pensions, are included in the bank’s balance sheet, according to international accounting standards, the bank’s results will further deteriorate. Despite the big drop in profits, market analysts did not appear very concerned, despite the fact that they had failed to forecast the drop. Their reaction reflects their trust in the current management and its efforts to put the finances right. General follows Another bank that is to increase provisions in order to rid its loan portfolio of bad loans is General Bank. This will include writing off some bad corporate loans. The bank, recently taken over by Societe Generale, has already increased its first-quarter provisions. As a result, the bank’s quarterly results show a 3.1 million euro loss, against a profit of 900,000 euros in the same quarter of 2003. The bank’s new management hopes to complete the portfolio restructuring by the end of the year. To this end, it has been carefully re-examining each loan contract.