Eurobank and Piraeus Bank reported strong profitability on Monday in the first half of 2023.
Piraeus Bank announced normalised earnings per share at 0.33 euro, or a net profit of 299 million euros. Net interest income was 488 million euros in the second quarter of 2023, driven by expanding margin, for a 9% quarterly growth.
The bank said deposit costs were at 0.4% in June, with time deposit costs at 1.6%, while currently, new time deposits offer rates of around 1.9%. Net fee income was 14 million euros in Q2, which increased by 16%. Recurring operating expenses continued their downward trend at 199 million despite inflationary pressures.
The bank's NPE ratio was down to 5.5%, from 9.3% a year ago, already meeting the NPE year-end target, while performing loan book was up 1.5 billion euros in the first half and credit expansion was 0.8 billion euros in the second quarter. In June, the CET1 ratio increased to 12.2% and the total capital ratio to 17.0%.
Christos Megalou, the bank's CEO, commented on the results: "Piraeus Bank’s performance in the first half of 2023 reaffirmed the value of its franchise and confirmed we are on the right track towards our targets. In H1.23, we delivered strong results, generating € 0.33 normalised earnings per share and 14% RoaTBV."
"Our Group has achieved sustainable risk-adjusted profitability and capital build-up while maintaining a superior liquidity profile and cost discipline. Balance sheet clean-up continued, with the NPE ratio dropping to 5.5%, already meeting our year-end target, while NPE coverage increased to 57%. The organic capital generation has driven our CET1 ratio to 12.3%, up by 0.7% year to date.
"Our cost discipline efforts continued for another quarter, with operating expenses declining further, absorbing the inflationary pressures and achieving a historically low cost-to-core income ratio of 32% in the second quarter. Our Group’s performing loan portfolio grew 6%, with €800mn net credit expansion in Q2 and a strong pipeline of business projects for the second part of the year.
"Moreover, client assets under management increased to € 8.2bn as of June 2023, 9% higher, leveraging our extensive expertise in this field. Overall, our reinforced commercial franchise has delivered a 16% net fee income growth in the first half of 2023 compared to a year ago.
"Piraeus Bank has completed the 2023 SSM Stress Test Exercise conducted by the EBA. The three years depletion of the adverse scenario for Piraeus (-2.4%) is the 13th lowest among the EBA sample of 70 banks, almost half of the European banks' average depletion (-4.6%). On the back of the strong H1.23 performance and the evolving interest rate environment, we upgrade our key financial targets for 2023, now aiming for a return over the tangible book of approximately 14%, with cost-to-core income below 38%. The NPE ratio is expected to end year-2023 below the 5% milestone level.
"Finally, we are proud to be named 'Best Bank in Greece' at the international Euromoney Awards for Excellence 2023, following the strong financial results, the continuous improvement of the Bank's key indicators and the consistent implementation of its strategic plan. We will continue to deliver on our plan and remain focused on creating value for our shareholders, clients, and employees and supporting the Greek economic recovery."
Meanwhile, Eurobank said its operating performance for the first half of 2023 was 'robust' in the announcement of its results on Monday, with a net profit of 684 million euros compared to 941 million in 1H2022, mainly including 111 million euros in negative goodwill from Hellenic Bank in Cyprus.
Specifically:
- Net interest income rose by 56.2% y-o-y in 1H2023 to € 1,043m, driven by interest rate increases, new lending, interest income from bonds and derivative products and international business. Net interest margin increased by 88 basis points y-o-y to 2.63%.
- Net fee and commission income expanded by 9.9% y-o-y to € 270m, mainly due to costs from lending activities and accounted for 68 basis points of total assets in 1H2023.
- As a result of the above, core income grew by 43.7% y-o-y to € 1,313m in 1H2023. However, total operating income decreased by 10.3% y-o-y to € 1,331m in 1H2023 due to high non-recurring trading gains from derivative financial instruments in 2022.
- Operating expenses increased by 5.7% y-o-y to € 443m, mainly due to SEE operations, inflationary pressures and investments in IT. The cost-to-core income ratio improved to 33.8% in 1H2023 from 45.9% in 1H2022, while the cost-to-income ratio remained well below 40% at 33.3%.
- Core pre-provision income was up by 76.0% y-o-y to € 869m, whereas pre-provision income declined by 16.6% y-o-y to € 888m in 1H2023.
- Loan loss provisions increased 36.8% against 1H2022 to € 164m, corresponding to 81 basis points of the average net loans.
- As a result of the above, core operating profit before tax rose from € 374m in 1H2022 to € 705m in 1H2023.
- Adjusted profit before tax amounted to € 712m and adjusted net profit totaled € 599m in 1H2023. EPS reached € 0.18, and the return on tangible book value5 amounted to 17.9% in 1H2023. Reported net profit reached € 684m, compared to € 941m in 1H2022 and mainly included € 111m negative goodwill from Hellenic Bank in Cyprus.
- SEE operations were profitable, as the adjusted net profit increased to € 205m in 1H2023 from € 97m in 1H2022. Core pre-provision income grew by 79.6% y-o-y and amounted to € 233m, with core operating profit before tax rising by 71.5% y-o-y to € 207m in 1H2023. 44% of the adjusted net profit came from the operations in Cyprus (adjusted profit € 90m) and 49% from those in Bulgaria (adjusted profit € 101m) in 1H2023.
- The NPE ratio fell to 5.2% in 1H2023 from 5.9% in 1H2022. NPE formation was positive by € 140m in 1H2023. The stock of NPEs decreased by € 191m y-o-y to € 2.2bn or € 0.6bn after provisions. Provisions over NPEs improved from 72.6% in 1H2022 to 73.2% in 1H2023.
- Total CAD reached 19.0%6 and FL CET1 16.3%6 in 1H2023, up 200 and 230 basis points y-o-y respectively.
- Tangible book value per share increased by 18.8% y-o-y to € 1.90.
- Total assets stood at € 81.5bn in 1H2023.
- Performing loans grew organically by € 0.5bn in 1H2023. Total gross loans amounted to € 42.1bn at the end of June, including senior & mezzanine notes of € 4.6bn. Corporate loans stood at € 24.2bn, mortgages at € 10.0bn, and consumer loans at € 3.4bn.
- Customer deposits rose by € 0.3bn in 1H2023 to € 55.9bn. The loans to deposits ratio was 72.6%, and the liquidity coverage ratio was 174.2% in 1H2023. High-quality liquid assets (QLAs) amounted to € 17.3 bn at June-end. Eurosystem funding was reduced by € 4.2bn against 1H2022 to € 7.4bn in 1H2023.
Commenting on the results, Eurobank CEO Fokion Karavias said, "The economic climate in Greece remains resilient to downward pressures from sluggish EU economy. The growth rate is expected to be significantly higher than the eurozone average. The recent elections provided a stable political environment and long-term policy visibility, while the return to investment grade is a matter of time.
"Positive prospects are also reflected in labour market developments, with unemployment declining further and the real estate market remaining robust. Furthermore, the investment pipeline is building up, as evidenced by projects already submitted to the RRF over € 15 billion.
"In a supportive environment, Eurobank continued to perform well across all lines of business, with a solid contribution from our subsidiaries in Bulgaria and Cyprus. Tangible book value per share increased by 19% yearly to 1.90 euro, and the return on equity is now expected to exceed 15% for the full-year 2023.
"We continue supporting our customers, especially for investment projects that promote the sustainability of the economy. In the first half, disbursements in Greece reached 5.7 billion euro, of which more than 20% were directed to sustainability projects. Furthermore, we have announced specific measures to support our customers on the island of Rhodes, mainly affected by the recent wildfires.
"We remain optimistic about the performance of the Group, which is based on a diversified and efficient business model, which produces sustainable returns to our shareholders and promotes growth in all the countries we serve."
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