Last week Emporiki Bank, the premier troubled Greek bank, took further actions to improve returns from its real estate portfolio as well as inject capital into the business. Emporiki provides retail, commercial and investment banking services to its customers who are mainly in Greece however it does have an international office in London as well as presence in Germany, Romania, Bulgaria, Albania and Cyprus though subsidiaries.
Emporiki Bank Property Portfolio LeaseBack
The latest action will improve its capital base and bring it more in line with the capital adequacy targets set by its parent company, Credit Agricole. Emporiki Bank has agreed to sell off and leaseback 14 of its real estate properties in Greece to a Greek American investor for 45 million euros. The sale is part of its four year restructuring plan which was initiated in 2009. The goal is to return Emporiki to profit by the end of 2011, and to align the bank fully with Crédit Agricole Group banking standards.
Emporiki Bank Takes Risk and Cost Reduction Measures
Emporiki may be troubled but it is more than holding its own among its peers, Bank of Cyprus, Marfin Popular and Hellenic, which were all put on ratings watch by Moodys last month. With the backing of its stable parent Credit Agricole, Emporiki will benefit from a Tier 1 injection of 1 billion euros while implementing a programme of risk reduction, making cost reductions by rationalising administrative and general costs, renegotiating the 300 or so branch leases, and relocating its headquarters outside Athens. The last strand of the strategy is a stream of commercial performance improvements. This involves looking at it customer base, assessing its needs, and repackaging the products and services on offer with particular focus on the SME sector. Furthermore Emporiki aims to leverage the expertise at Credit Agricole’s Corporate and Investment Bank to offer more profitable and sophisticated services to its high end clients.
Emporiki Share Price Continue To Fall
However, despite the restructuring program having proceeded well with Emporiki’s last quarter results showing good progress with operating income, cost reductions and risk management the share price (TEMP::GA) has continued to fall, from 4.19 euros back in March 2010 down to 1.62 euros today.
Bad Debt Provisions Spoil Improved Performance
The previous balance sheet looked promising apart from one section
September 2010 Impairment Provisions amounted to €826.1 million, increased 58.9% year on year, as a result of the persistently challenging economic and market conditions.
This bad debt provision turned a modest 90 million euros profit into a whacking 730 million euro loss.
The continued falling of the share price suggests that markets are not confident that Emporiki has turned the corner and will return to profitability in 2012.
The next set of quarterly results is due a week today, on February 11th.