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Asset quality improves at Piraeus Bank, despite FY'16 loss

Asset quality improved "consistently" in 2016 at Piraeus Bank SA, according to Spiros Papaspyrou, senior general manager for the bank's noncore and restructuring division.

Piraeus Bank reduced nonperforming loans by €2.5 billion year over year to €24.4 billion, or 37.5% of total loans, as of the end of 2016. The bank has been struggling with a high burden of soured loans, which were at the highest level of the big four Greek banks in mid-2016.

The bank is now hoping to reduce nonperforming exposures, a European metric that includes restructured loans, from €33.8 billion as of the end of December 2016 to €20.3 billion in December 2019, according to the bank's results presentation. Greek banks have been set aggressive targets for bad-debt reduction by the ECB's Single Supervisory Mechanism.

This reduction will be driven by restructuring, liquidations and write-downs, plus around €1.5 billion of "selective" NPL sales, Papaspyrou said on a conference call following the publication of full-year 2016 results. This estimate is based on the assumption that macroeconomic conditions in Greece will stabilize over the medium term, and that improvements in the Greek legal framework will support the bank's plans, he added.

The bank has made progress on cost-cutting in 2016, with the departure of 1,200 full-time employees, acting CEO George Poulopoulos said during the call. It also closed 49 branches in Greece during the year to leave it with 660, just above its 2017-end target of 650. The total branch count in Greece and abroad fell by 7% in 2016 to 921.

Digitization is also expected to cut costs in the near future for Piraeus, which has opened three "e-branches" in 2017. These have extended evening and weekend hours, and a high level of automated services.

Poulopoulos will be succeeded as CEO by Christos Megalou, whose appointment ended a more than yearlong search for a new boss.

At a group level, the bank reported a loss of €4 million on a consolidated basis in 2016 compared with €1.86 billion of losses in 2015. It had reported two consecutive quarterly profits but slipped back to a loss of €18 million in the final three months of 2016 as impairments widened to €310 million from €210 million quarter over quarter.

Its provision coverage of loans more than 90 days in arrears stood at 69.5% at year-end, up 2 percentage points from three months earlier.