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Hellenic Bank (HB.CY) posted a 6% drop in first quarter net attributable profit to EUR 22.98 mln compared to EUR 24.35 mln in 1Q 07 on the back of sharply higher provisions as the Bank prepares itself for a worsening outlook in the Cyprus property market.
Net interest income rose 8% to EUR52.27 mln. Total net income was down 2% to EUR70.15 mln, it said.
The lower profitability was the result of a moderate growth in core income (+7.8% yoy), lower NIMs mainly in Greece, large losses from disposal and revaluation of financial instruments of subsidiary Athena, and almost a double amount relating with provision charges (+87% yoy). EPS came in at EUR 0.08.
"The results of the first quarter are seen as satisfactory particularly in view of the difficult conditions in the market climate in the first quarter," Hellenic Bank said in a statement.
Net interest income grew on the back of a 25% increase in the balance of loans, and a 13% increase in customer deposits on an annualised basis. It was also aided by an improvement in the credit portfolio and a 9% increase year on year in foreign exchange deposits, it said.
It reaffirmed it believed group profit targets for full year 2008 could be achieved.
In February, the bank forecast EUR131 mln euros in pretax profits for this year, compared to EUR153 mln in 2007. It said then the fall could be due to an anticipated loss in foreign exchange revenue from Cyprus's adoption of the euro in January 2008.
Provisions up
HB Group’s Net interest margin deteriorated by 14bps in 1Q08 to 2.96% due to increased competition in the Greek market. Net fees and commission income rose by 5.8% yoy to EUR 13.60mln. Total income was lower by 3.6% yoy as a result of losses recorded by Athena (-EUR 9.4m).
Operating expenses remained almost flat (+0.7% yoy) to EUR 39.12mln. Provision charges were up by 87.0% yoy to EUR 7.92mln, due to the higher annualized cost-of-risk (71bps vs. 50bps in 1Q07).
In Greece HB’s operating performance still remains sub-optimal, as at the pretax level, Greek operations marked a EUR 4.35mln loss and relates to high competition and spread compression (lower NIM in Greece: -70bps).
On the balance sheet side, HB’s loan book recorded a robust increase of 25.4% yoy (+8.7% qoq) to EUR 4.44bln. In Cyprus loans advanced by 23.7% yoy to EUR 3.45bln (+7.7% qoq), whilst in Greece growth stood at 31.5% yoy reaching EUR 1.0bln (+12.4% qoq).
As far as deposits are concerned, the management followed a more conservative strategy vs. the aggressive practices adopted by other local and the Greek newcomers. Group deposits grew by a moderate 13.3% yoy to EUR 5.99bln (+2.3% qoq) with Cyprus growing by a 15.1% yoy (+3.7% qoq).
