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Piraeus updates targets, sees end of restructuring in 2018

The Greek bank with the largest burden of nonperforming loans, Piraeus Bank SA, has been carrying on with its restructuring slightly ahead of its previous guidance and is now confident it will return to relative financial health and end painful cutbacks during 2018, CEO Christos Megalou told analysts on an earnings call March 28.

Megalou also revealed new financial targets, including a bid to cut its cost-to-income ratio to 40% from 54% at the end of 2017.

"We now feel we are very well equipped to execute our [nonperforming exposures and loans] deleveraging strategy in a timely manner and to focus on capital preservation," Megalou said, adding he expected Piraeus to come off emergency liquidity assistance, or ELA, from the ECB entirely in the third quarter. "Overall we are very much on track in terms of concluding our restructuring plan this year."

The amount of ELA used by the bank by March stood at just under €2 billion, according to the executive.

The bank booked a profit of €2 million for 2017, down from €37 million in 2016.

For the fourth quarter of 2017, net profit attributable to shareholders from continuing operations was €12 million, compared to a loss of €17 million in the previous quarter, thanks largely to a tax gain that offset €1.18 billion of fourth-quarter impairment losses on loans.

Piraeus' nonperforming exposure stock was €31.4 billion in December 2017, down from €33.8 billion at the end of 2016. Megalou projected it would be cut to €25.9 billion at the end of 2018 and to €20.3 billion by the end of 2019. Restructuring, curing and liquidations will account for about €7.5 billion of this reduction, while sales are estimated at €3.5 billion.

The bank is in process of selling €2.3 billion of unsecured consumer NPLs and €2.0 billion of secured corporate NPLs in Greece.

The updated targets of the bank include a cost-to-income ratio of around 40% in 2020, Megalou said, announcing that the firm has cut about 1,400 employees in the "past six months." It is aiming for a cost of risk of below 1% in 2020, down from the 4.7% of end-2017, and a return on equity above the cost of capital, said the banker.