ECONOMY

Higher expectations for bank profits

Second-quarter bank profits are expected to improve from the first three-month period on the back of better profit margins, cost containment and more favorable market conditions, according to brokerage P&K National. «We believe that profits are likely to have bottomed out in the first quarter as margins, trading gains and cost evolution will be supportive for second-quarter earnings and likely to offset higher provisions,» said P&K National in a note. Net interest margin – the difference between interest income generated by banks and that paid to their lenders – is likely to have improved due to less competition for deposits and investments in high-yield Greek government sovereign debt, the brokerage said. A source that could also lead to better-than-expected profit numbers is income from trading activities, it added, pointing to the strong momentum of markets in the period from April to June. Regarding non-performing loans, that is those in default or close to being in default, the brokerage said ratios will be higher at the end of the second quarter but the quarter-on-quarter change will be moderate. Major Greek banks are scheduled to start reporting second-quarter figures at the end of this month with Alpha Bank set to be the first on August 25.