Piraeus Bank seen swinging to Q2 loss

Piraeus Bank, Greece's fourth-largest lender, is expected to report a second-quarter loss, hit by a one-off austerity tax and higher loan-loss provisions as the recession deepened.
Piraeus will get the ball rolling with bank earnings this week, followed by National Bank on August 27, Eurobank on August 30 and Alpha Bank on August 31.
The average forecast of nine analysts polled by Reuters came to a loss of 16.5 mln euros versus net profit of 76 mln euros in the same period a year earlier. Estimates ranged from losses of 27.2 to 10 mln euros.
A deepening recession in Greece — the economy is projected to contract by 4% this year — weighed on loan demand and asset quality, leading to higher loan-loss provisions.
Credit growth stayed sluggish in the first half as the recession gained speed with consumers and businesses deleveraging.
Piraeus Bank's results were burdened by a 28 mln euro windfall tax the government imposed to shore up public finances. The tax was booked in the second quarter.
Net interest income is seen up 7.2% year-on-year, while provisions for non-performing credit are expected to rise by 11%.
"The loss is the result of the one-off tax, trading losses and weaker loan volumes because of the economic downturn," said analyst Louis Nikolopoulos at Investment Bank of Greece. "We see pressures continuing in the next quarters."
Apart from safeguarding their liquidity with stricter credit criteria, Greek banks faced higher funding costs during the quarter. Wholesale funding stayed closed due to the debt crisis and higher funding costs squeezed lending margins.
Piraeus Bank — also present in Romania, Bulgaria, Serbia, Albania, Cyprus, Egypt, Ukraine and the United States – has offered to buy government stakes in ATEbank and Hellenic Postbank for 701 mln euros in cash.
Its shares are down 45% since the start of the year, underperforming the Greek equity market's 27.6% drop. They trade at about 9.8 times estimated 2010 earnings, compared with a P/E ratio of about 12.5 for European peers, according to Reuters Estimates.