National Bank says net profit at 423 million euros in Jan-Sept

National Bank Group on Thursday said its net profit from continuing operations rose to 423 million euros in the January-September period from 61 million in the same period last year. Operating profit grew to 465 million euros in the January-September period, from 65 million last year, driven by strong core income, solid trading & other income aided by one-off gains, cost cutting and low CoR despite rigorous cleanup of the NPE book

National Bank Group on Thursday said its net profit from continuing operations rose to 423 million euros in the January-September period from 61 million in the same period last year.

Pavlos Mylonas, CEO of the bank, commenting on the results said: "Continuing the strong track record of the previous quarters, NBG’s 3Q19 results constitute another step in the direction of normalizing the balance sheet and improving profitability, capitalizing on our comparative strengths through the implementation of our ambitious and comprehensive Transformation Program. In the nine-month period, core operating profitability reached 158 million euros, up by 41% yoy, reflecting both core income expansion (+7% yoy) and cost containment (-7% yoy).

"Despite an aggressive reduction of the NPE book, credit risk charges were maintained at relatively low levels (136 bps over net loans). Including strong trading gains relating to bonds and non core asset sales, PAT from continued operations reached 423 million euros relative to 61m a year ago. As regards our Balance Sheet, we have accelerated the NPE clean-up process through a third major sale for this year, bringing the NPE reduction to 4 bn (over 25%), which is close to the SSM target. On the organic front, NPEs have been reduced by almost 1 billion so far this year, reflecting viable restructurings involving significant debt forgiveness, as well as liquidations for non-cooperative borrowers.

"Our capital position has been boosted by 80 bps quarterly to a CET1 level of 16.8%, well above regulatory thresholds for 2019 and 2020. Pending divestments and unrealized capital gains in the bond portfolio provide further flexibility to our NPE strategy. As a result of these developments combined with rapidly improving macroeconomic conditions and with the necessary tools in place (e.g. Hercules scheme), the prospect of delivering on our Business Plan targets sooner than promised is gaining ground. This will expedite our return to normalcy, allowing us to focus wholly on our role in supporting the economy."

Operating profit grew to 465 million euros in the January-September period, from 65 million last year, driven by strong core income, solid trading & other income aided by one-off gains, cost cutting and low CoR despite rigorous cleanup of the NPE book. The bank reported PAT from continuing operations of 476 million euros from 45 million in 2018, excluding VES (94 million in the nine-month period) and restructuring costs (16 million). NII amounted to 284 million euros in the third quarter from 293 million the previous quarter, negatively affected by the cost associated with the Tier II issuance.

As a result, NIM decreased by 6bps quarterly to 269bps. In the nine-month period, NII was up by 7.6% annually to 852 million euros. Net fee and commission income increased by 4.9% quarterly to 60 million euros in Q3, reflecting stronger retail banking fees, driven by lending activity and digital channels. On an annual basis, net fee and commission income increased by 5.4% annually to 174 million euros. Trading and other income recovered to 254 million euros in the January-September period against losses of 27 million last year, providing support to profitability.

Operating expenses reached 204 million euros in Q3 from 194 million the previous. OpEx dropped by 6.3% annually to 592 million in the nine-month period, driven by the 8.4% yoy drop in personnel expenses to 371 million, as VES (voluntary exit schemes) reductions began to bear fruit (c700 employees accepting the VES offering ytd). In international activities, the Group reported losses after tax (continuing operations) of 66 millione uros against profits of 9 million in 2Q19 on sizable loan impairments) arising from the imminent NPE sales in Romania and Cyprus. As a result, the Group reported losses after tax (continuing operations) of 53 million euros in the nine-month period compared to profits of 17 million a year ago.

NPE reduction gathered pace in 3Q19, with the stock of NPEs down by 1.5 bn quarterly, mainly driven by the NPE disposals of secured corporate & SBLs and shipping loans, as well as negative organic NPE formation of 0.3 bn, aided by mortgage restructurings involving debt forgiveness on our back book. With NPEs reduced by 4.0 bn euros so far this year, the Bank is already close to fulfilling the nine-month SSM NPE reduction target of 4.3 bn.

Pro forma for the impact of agreed divestments and including the PAT, CET1 ratio stands at 16.8%, up by 80bps qoq, with Total Capital ratio at 17.7%. Group deposits stabilize at 42.8 bn in Q3 (-0.1bn euros quarterly), reflecting domestic market developments. Deposits in Greece stood at 41.4 billion euros.

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