August 30, 2017 / 4:44 PM / a year ago

UPDATE 1-Greece's Eurobank, Piraeus profitable in Q2, bad debt levels ease

* Eurobank posts 8.8 percent rise in Q2 profit

* Non-performing loans ease to 34.6 pct of book

* Piraeus Bank swings to 7 mln euro profit in Q2 (Adds Eurobank, Piraeus CEOs comment, details)

By George Georgiopoulos

ATHENS, Aug 30 (Reuters) - Greece’s Eurobank reported a sixth straight quarterly profit on Wednesday and Piraeus Bank swung back into the black, pointing to a recovery from the nation’s economic crisis as banks slowly reduce their pile of bad debts.

Greek banks have been struggling with problem loan portfolios after a protracted recession pushed unemployment to record highs, making it hard for borrowers to service debts.

“We are seeing signs of improvement in the sector,” an Athens-based brokerage analyst said after Piraeus and Eurobank reported second quarter earnings.

“New bad debt formation is negative, as the economy slowly recovers,” said the analyst, who asked not to be identified.

Greek banks entered the 2008 global financial crisis with bad loans, or non-performing exposures (NPEs), of 14.5 billion euros, or about 5.5 percent of their loan books. But bad debts climbed to 106.9 billion euros, or 51 percent, last year.

Lenders have agreed with regulators to cut the level to 66.7 billion euros by 2019, bringing the ratio down to 34 percent.

“The gradual return of deposits strengthened our liquidity,” said Fokion Karavias, the CEO of Eurobank, the third-largest Greek lender by assets whose net profit rose 8.8 percent to 40 million euros ($47.6 million) over the first quarter.

“The picture on NPEs is encouraging, their reduction by 0.8 billion euros in the first half confirms our strategy to clean up our portfolio and meet targets agreed with regulators,” he said, after the NPE ratio fell 90 basis points to 44.1 percent.

Eurobank, in which Greek rescue fund HFSF has a 2.4 percent stake, said credit loss provisions fell 2.4 percent quarter-on-quarter to 184 million euros.

The bank’s non-performing loans, based on credit where repayments due have not been made for more than 90 days, dipped to 34.6 percent of loans from 34.8 percent at the end of March.

“Asset quality remains the key focus,” said Nick Koskoletos an analyst at Eurobank Securities, adding investors were watching to see if banks would hit 2019 targets for bad debt levels.

Piraeus, Greece’s largest bank by assets and 26.2 percent owned by HFSF, reported a net profit of 7.0 million euros after a net loss of 7 million euros in the first quarter.

It also recorded a slight improvement in its non-performing loan ratio to 37.1 percent from 37.8 percent in the first quarter. Bad debts stood at 23 billion euros, down for the seventh straight quarter.

The group’s NPE ratio was 52 percent at the end of June, meeting a reduction target agreed with the European Central Bank’s Single supervisory Mechanism (SSM).

“The improving sentiment, due to the closing of the second bailout review, supported our customer deposit base and reversed outflows,” Piraeus CEO Christos Megalou said.

“The trend is continuing so far in the third quarter with inflows of more than 300 million,” he added.

Reporting by George Georgiopoulos; Editing by Edmund Blair

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