ECONOMY

Eurobank hampered by high costs

EFG Eurobank Ergasias, the third largest bank in the country by assets, yesterday reported a 9 percent fall in nine-month net profits as high operating expenses and weak trading income eroded sharp gains in organic earnings. Consolidated net profits after tax and minority rights amounted to 157 million euros, down 9 percent. Excluding 22 million euros in revenues from the lease of the King George Hotel recorded last year, net profits would have shown a 4 percent increase. «Eurobank’s results were in line with expectations, with organic profits better than expected. The overall picture is the same as at the half-year stage,» said Manos Giakoumis, banking analyst at P&K Securities. Reflecting the bank’s aggressive drive into the retail lending market, net interest income rose by 19 percent to 529 million euros. Total loans grew by 26 percent to 12.5 billion euros, unchanged from the half-year figure, due in part to the slowdown in Greek credit expansion. Consumer lending expanded by 37 percent to 2.5 billion euros as Eurobank consolidated its grip on the sector. The bank is the market leader in the consumer credit market with an estimated 27 percent share. Mortgage lending, where Eurobank is ranked third, increased by 34 percent to 2.1 billion euros. Underlining the risks of its rapid expansion into retail lending, the bank said it had lifted provisions for bad debts by 28 percent to 66 million euros. Deposits went up by 8 percent to 16.8 billion euros as the government’s reimposition of a tax on bonds prompted investors to switch to other products. The sluggish stock market continued to exact a toll as commission income edged up by 2.7 percent to 177 million euros and the trading division posted a 9-million-euro loss. Operating income rose by 15.6 percent to 205 million euros. «Cost containment remains the main issue. Efforts toward this are moving at a very slow pace,» said Giakoumis. Operating expenses in the nine-month period increased by 12 percent, estimated to be the highest in the local banking industry. The results were calculated according to International Accounting Standards. Eurobank shares closed at 11.02 euros yesterday, down 1.25 percent.