Greek bank reports further losses
Greek lender Eurobank reported further losses in the third quarter today as the country's deep economic slump led to a rise in impaired loans and weaker banking income, with the tough conditions seen persisting in 2013.
With the economy shrinking at an annualised rate of nearly 7 per cent in the third quarter and with one in four Greeks without work, borrowers are having a hard time servicing their debts, forcing banks to provision for potential loan losses.
"2013 will be a difficult year, there is a chance of another wave of bad debt after measures adopted by the government," chief executive Nicholas Nanopoulos told analysts in a conference call after the results were announced.
Eurobank, which is considering a merger offer by National Bank to form the country's largest banking group, lost €223 million in the latest quarter, which brought its nine-month loss to €1.095 billion.
The bank said its total recapitalisation need, as set by the country's central bank, is €5.8 billion. This includes the impact of two Greek sovereign debt writedowns earlier this year, whose total hit came to €6 billion.
Eurobank has already received nearly €4 billion from the Hellenic Financial Stability Fund (HFSF) which was set up to recapitalise the country's systemic banks, and expects to get a further €1.8 billion from the HFSF shortly, executives told analysts.
Greece and its international lenders have earmarked €50 billion from the country's €130 billion bailout to recapitalise viable banks.
Under the plan banks will have to issue new shares to achieve a core Tier 1 capital solvency ratio of at least 6 per cent of assets and convertible bonds or so-called CoCos to boost the ratio to up to 9 per cent.
The private sector must take up at least 10 per cent of the new shares to be issued to keep lenders privately run.
Eurobank said loans overdue by more than 90 days hit 21.3 per cent of its loan book at the end of September from 17.6 per cent at the end of March.
As a result provisions for impaired loans rose 23 per cent in the nine-month period to €1.213 billion. The bank said the stock of provisions covered 53 per cent of non-performing loans.
Executives told analysts that a diagnostic study on its loan book by Blackrock, commissioned by the central bank to ascertain possible future loan losses to end-2014, saw impairments at €4.9 billion under a baseline scenario.
While the bank had already booked 4.6 billion in provisions, it was about €1.3 billion short under an adverse scenario by Blackrock, they said.