Greek Eurobank posts Q1 profit on Polbank, ATEbank has loss

Rising bad debt provisions continued to squeeze Greek bank earnings in the first quarter with ATEbank remaining in the red and Eurobank managing a profit but after booking gains from the sale of its Polish operation.
Eurobank, Greece's second-largest lender, on Wednesday reported a profit of 74 mln euros ($104 mln), beating market expectations, after booking gains from the sale of Polbank EFG to Austrian Raiffeisen Bank .
Analysts polled by Reuters were forecasting a loss of 5.3 mln euros, excluding such gain. State-controlled ATEbank, the only Greek lender to fail European stress test last July, posted a loss of 29.5 mln euros.
"Without the gain from the sale of Polbank, results as regards income and provisions were in line with market expectations, hurt by the recession in Greece," said analyst Nikos Lianeris at Alpha Finance.
With Greece's economy in its third straight year of recession and battered by austerity policies to tackle a debt crisis, the banking sector's loan growth has stalled and provisioning for bad debts has been on the rise.
Eurobank, also present in Bulgaria, Romania, Serbia, Turkey and Ukraine, said the recession at home affected non-performing credit, which rose to 9.2% of group loans from 8.2% at the end of 2010.
With access to interbank funding remaining shut on sovereign debt concerns, Greek banks continue to rely on the European Central Bank for liquidity.
Eurobank's exposure at the ECB was more than 19 bln euros at the end of March while ATEbank reduced it to 6.9 bln from 8.3 bln in the previous quarter.
"During this challenging quarter, we further strengthened our balance sheet and continued to manage risks effectively," the group's CEO Nicholas Nanopoulos said in a statement.
"Capitalising on our strategic initiative in the Polish market, we managed a substantial improvement in our capital adequacy ratios and created a collective reserve to cover further prospective risks," he said.
Eurobank set up a 130 mln euro reserve to cover potential future risks and said the gain from the sale of the stake in Polbank that was booked in the first quarter amounted to 230 mln euros.
Its shares are down 14% since the start of the year, outperforming the banking sector's 24% slide while underperforming the broader Greek stock market's index which has shed 9.3%.
ATEbank, which is 77% government owned, is set for a 1.26 bln rights offering to boost its capital adequacy. The government has said it plans to divest a stake in the bank as part of its privatisations agenda to pay down public debt.