Marfin Popular Bank reported that Group 3Q 2009 recurring net profit rose 32% on a sequential basis to EUR66.4 mln from EUR50.3 mln in 2Q09 sustained by strong revenue expansion combined with well contained cost and improving asset quality trends. Group net profit attributable to shareholders (including the estimated one-off tax charge) rose 7% q/q to EUR53.6 mln in 3Q09; Group net profit for the 9M 2009 period reached EUR156.7 mln before the one-off tax charge and EUR143.9 mln post tax charge compared to EUR323.3 mln for the 9M of 2008.
The Greek government has announced the imposition of one off tax charge on Greek corporate earnings, including those earned by banks for the financial year of 2008, in the framework of the support program for social solidarity aiming to relieve lower income citizens; for MPB this exceptional tax charge has been estimated at EUR12.8 mln. MPB’s management being prudent has taken the decision to report the above charge in 3Q09 financial results.
The 4% quarterly revenue growth to EUR290.7 mln has been underpinned by 4% rise of net interest income (NII) to EUR170.0 mln and 16% rise of fee & commission income to EUR60.7 mln. The above trends have resulted to an increasing combined contribution of NII and fee & commission income to total operating income from 77% in 2Q 2009 to 79% in 3Q 2009 underlying a sustained improvement of earnings quality; for the nine month 2009 period revenues declined by 5% y/y to EUR801.9 mln.
Fee & commission income rose 16% for the quarter reflecting renewed activity on the Group’s capital markets and international business banking (IBB) businesses, two areas where MPB maintains leading positions within the Hellenic space. For the nine-month 2009, fee and commission income reached EUR164.5 mln exhibiting a decline of 26% y/y.
Financial & other income reached EUR60.0 mln for the quarter exhibiting a 5% decline on sequential basis. For the 9M 2009 financial & other income was up 196% to EUR181.5 million.
Total operating income was 4% up for the quarter and only 5% down to EUR801.9 mln for the 9M 2009, despite the severity of adverse market conditions.
For the 3Q 2009, operating expenses rose by 3% to EUR152.7 million. Operating expenses adjusted for non-organic expansion rose 6% for the 9m 2009. The subdued expansion of operating cost reflects the impact of a Group wide cost restructuring programme aiming to realise cost efficiencies. Among the initiatives of this programme was the absorption by merger of Marfin Egnatia Bank by MPB. The Board of Directors of MPB approved the common draft terms of cross border merger through the absorption of Marfin Egnatia Bank at its meeting on 13 November 2009. The exchange ratio of the two companies has been set at 0.6726990008 common shares of MPB for each one old common share of Marfin Egnatia Bank and is subject to approval by the General Assemblies of the two companies. Following the completion of the merger, which is expected in April 2010, the issued shareholders’ equity of MPB will increase by 5,781,121 new common shares of EUR0.85 nominal value per share.
The 5% expansion of pre provision profit to EUR138.0 mln for the quarter is the combined impact of improving revenues and well controlled cost. For the nine months of 2009 pre provision profit declined 17% to EUR359.0 million.
The successful undertaking of a series of initiatives both in the areas of risk management and collections have started showing up in some key indicators. Quarterly NPL formation declined from EUR216 mln in 2Q 2009 to EUR74 mln in 3Q 2009. As a consequence the NPL ratio rose by only 20 bps to 6.1% in 3Q 2009 compared to an 80 bps increase noticed in 2Q 2009. The cost of credit declined from 122 bps in 2Q 2009 to 96 bps in 3Q 2009. The combined impact of decelerating NPL formation and sufficient provisioning have resulted to an improving provision coverage from 50% in 2Q 2009 to 51% in 3Q 2009, consistent with the Group’s policy to strengthen its provisioning buffer. In terms of the nine month evolution the cost of credit more than doubled from 45 bps in 9M 2008 to 99 bps in 9M 2009. Between September 2008 and September 2009, NPL ratio rose from 4.2% to 6.1% and provision coverage declined from 62% to 51%.
The Group has sustained a strong liquidity position with loan/deposit ratio rising from 94% in September 2008 to 99% in September 2009, still below the 100% comfortable level. In mid-September, the Bank has successfully issued a three year senior unsecured note of EUR500 million. Despite sustained adverse market conditions the Group’s capital position has been further strengthened. The Group’s Tier I and total capital ratio improved from 9.5%(1) and 11.6%(1) in June 2009 to 9.8% and 12.0% in September 2009 respectively.
(1) Tier I ratio is based on the assumption of full utilisation of the issued hybrid capital as Tier I (assumption based on the 35% hybrid capital limit to total Tier I capital)
“The sustained improving operating performance showing up in our third quarter results on a sequential basis reflects the successful implementation of our strategy built upon prudent balance sheet and robust risk management combined with strong focus on efficiency and profitability. The Group’s improving balance sheet strength during the third quarter of 2009 has been crystallised on a combination of elevated liquidity ratios and expanding regulatory capital base. The Group’s loan/deposit ratio has been maintained below 100%, while its total regulatory capital has grown to EUR 3.0 billion corresponding to a total capital adequacy ratio of 12.0% and Tier I ratio of 9.8%. Both the Group’s liquidity and capital position continue to rank amongst the highest both within the Hellenic, as well as, the European banking space. Strong risk and collections management have underpinned a meaningful deceleration in NPL formation from EUR216 mlnin the second quarter to EUR74 mlnin the third quarter, which combined with adequate provisioning have allowed for an improvement in our provisioning coverage from 50% to 51% over the same period. Despite a moderate balance sheet expansion the uplift in our NIM, through effective and targeted pricing, has boosted our NII, while fee and commission income has benefited from renewed activity in our capital markets and international business banking. The Group’s improved revenue generation for the quarter has been accompanied by well contained cost trends primarily reflecting the impact of a series of initiatives as part of the ongoing merger process expected to be finalised by April 2010. The resilience of the Group’s operating performance against a backdrop of adverse market conditions should add to its capacity to service and expand its customer base more effectively, thus contributing to the Group’s medium to long term prospects.”
