Greece's Piraeus Bank turns profitable in second quarter, rival Alpha in the red

By George Georgiopoulos

ATHENS (Reuters) - Greece's largest lender Piraeus Bank turned profitable in the second quarter, helped by lower provisions for impaired loans, while rival Alpha Bank widened its loss on higher bad credit charges.

Piraeus, which is 26.2 percent owned by the country's bank rescue fund HFSF after its recapitalisation late last year, reported a net profit of 20 million euros (17.04 million pounds) after a net loss of 37 million euros in the first quarter.

Greek banks still carry large problem loan portfolios after a deep, protracted recession pushed unemployment to record highs, making it hard for borrowers to service their debts.

More than 40 percent of the sector's loans are non-performing, making the reduction of bad loan stock the biggest swing factor for Greek lenders as they continue to provision for impaired credit.

Banks are also grappling with funding gaps after deposit flight last year that led to capital controls in June 2015. They still depend on central bank funding to plug the hole.

Piraeus, with a current market value of 1.14 billion euros, said loan-loss provisions fell 8.0 percent quarter-on-quarter to 265 million euros in April-to-June from 289 million in the first quarter.

"The stabilisation of economic activity in Greece was reflected in the gradual improvement of liquidity, with deposit inflows during the last three months," Piraeus Chief Executive George Poulopoulos said in a statement.

He said Piraeus remained on course to achieve its 2016 profitability targets. Non-performing credit dropped to 39.2 percent of the group's loan book at the end of June from 39.8 percent in the first quarter.

Alpha Bank, the country's fourth-largest lender by assets and 11 percent owned by the country's bank rescue fund HFSF after its recapitalisation late last year, reported a net loss of 16.8 million euros ($18.73 million) after a bottom line loss of 2.2 million euros in the first quarter.

Its provisions for bad debt rose 37 percent quarter-on-quarter to 350 million euros, affected by additional charges to account for the restructuring of large corporate loans.

Alpha's non-performing credit edged up to 37.8 percent of its loan book at end-June from 37.4 percent at end of March.

(Reporting by George Georgiopoulos; editing by Susan Thomas)