ECONOMY

Eurobank profits up 28.6 pct

EFG Eurobank, Greece’s third-largest lender, met market expectations with a 28.6 percent rise in 2006 net earnings and set higher profit targets for the years ahead. The group reported net profit of -645 million euros yesterday, broadly in line with analysts’ average forecast of 649 million in a Reuters poll. Robust growth in retail lending was the main driver, both in Greece and Southeast Europe. Greek banks have been riding a credit boom in recent years, as borrowers take advantage of low interest rates to buy property and consumer goods. «Results were in line with market expectations, with strong expansion in all loan categories and in particular small and medium-sized businesses,» said analyst Manos Hadjidakis at Pegasos Securities. Eurobank, also present in Romania, Bulgaria, Serbia, Turkey, Poland and Ukraine, said group net interest income rose 16.4 percent to -1.597 billion, compared to an average forecast of -1.615 billion. Net interest margin was stable at 3.3 percent. «At the end of 2006, the group had established a strong footprint in Greece and New Europe, a network of more than 1,300 branches and points of sale and 19,000 employees,» EFG Eurobank said. The group said its loan portfolio expanded by 27.4 percent to -34.9 billion. Lending to households – mortgages and consumer credit – grew 28 percent to -16.7 billion. Loans in New Europe grew 117 percent to -3.6 billion. Targets raised EFG Eurobank raised its previous performance targets. Management is now aiming for an average annual profit growth of 22 percent for the period 2007-09, versus 20 percent previously. It is also aiming to increase the return on equity (ROE) above 25 percent by 2009, while squeezing its cost-to-income ratio below 45 percent. In 2006, Eurobank’s ROE after tax and minorities improved by 196 basis points to 23 percent. The group’s cost-to-income ratio dropped 33 basis points to 47.5 percent. Eurobank said it would propose a total dividend of -0.92 per share, which includes an interim dividend of -0.36 it has already paid. Based on the share’s closing price yesterday, the dividend yield comes to 3.04 percent. The board will also propose a 2-for-10 bonus share issue. Eurobank shares, up 10.4 percent so far this year, trade at about 18 times 2007 earnings, slightly above European peers which have a multiple of 17.3, according to Reuters Estimates.