UPDATE 1-Greece's biggest bank turns to profit in 2013 on lower bad-loan provisions

Thu Mar 20, 2014 12:23pm EDT

Reuters

* National Bank posts net profit of 809 mln euros in 2013

* Bad-loan provisions drop 36 pct from previous year

* National reiterates it plans no equity offering to plug capital shortfall (Adds CEO comment, details)

ATHENS, March 20 (Reuters) - Greece's biggest lender National Bank (NBG) said on Thursday it returned to profit last year, helped by its Turkish unit Finansbank , lower funding costs and reduced provisions for bad loans.

The bank posted a net profit of 809 million euros ($1.13 billion) versus a loss of 2.14 billion a year earlier.

NBG, which has a current market value of 9.83 billion euros, said Finansbank contributed 439 million euros of profit, down 9 percent year-on-year, despite tougher conditions in the Turkish market in the second half of 2013.

"Finansbank showed notable resilience to the adverse conditions in Turkey," Chief Executive Alexandros Tourkolias said in a statement.

NBG said provisions for non-performing loans (NPLs) - credit in arrears for more than 90 days - dropped 36 percent to 1.63 billion euros, with NPLs rising to 22.5 percent of its loan book from 21.9 percent at the end of the third quarter.

"The improving economic climate in Greece contained the pace of new loan impairments," Tourkolias said. The pace of Greece's six-year-long recession slowed in 2013 to 3.9 percent.

The falling economy has caused Greek banks to struggle with bad loans. Record unemployment of nearly 28 percent has made it hard for borrowers to service their debt. This forces lenders to hike loan-loss provisions, even though at a slower pace than in previous years.

NPLs were the focus of a health check the country's central bank ran to assess whether Greece's top banks are adequately capitalised to absorb further credit deterioration.

NBG, facing a 2.18 billion euro capital shortfall based on the central bank's stress test, reiterated it will not resort to an equity offering to plug the gap, taking a different course from peers Alpha Bank and Piraeus.

NBG said it would spell out measures it would take to cover the shortfall in a capital plan to be submitted to the central bank by April 15.

Based on central bank data, non-performing loans held by Greek banks rose to 31.2 percent of their total loan book at the end of the third quarter last year from 29.3 percent at the end of the first half.

NBG, about 84 percent-owned by Greece's HFSF bank rescue fund, said it reduced overall Eurosystem borrowing by 1.5 billion euros in the last quarter of 2013, to 11 percent of group assets. (Reporting by George Georgiopoulos; Editing by Mark Heinrich)