Kicking off the earnings season for Greek banks, the third-largest lender by assets reported net profit of 60 million euros ($68 million) after a loss of 175 million euros in the final quarter of 2015.

It was Eurobank's first profitable quarter since the third quarter of 2011.

"The results confirm that Eurobank is on course to achieve its main aim, to be profitable in 2016. We had the first positive result after five years of unprecedented challenges in the Greek banking system," Chief Executive Fokion Karavias said in a statement.

Greek banks are still troubled by large problem loan portfolios after the country's 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 the bad loan stock the biggest swing factor for Greek banks as they continue to provision for impaired credit.

Banks are also grappling with funding gaps after a large flight of deposits last year, which led to capital controls in June, and they still depend on central bank funding to plug the hole.

Eurobank, with operations in the Balkans including Romania and Bulgaria, said provisions set aside for bad loans fell 33.4 percent from the previous quarter to 175 million euros as the formation of new bad loans declined.

The bank, which is 2.4 percent owned by Greece's HFSF bank rescue fund after its recapitalisation late last year, said loans in arrears for more than 90 days dropped to 34.8 percent of its loan book from 35.2 percent in the last quarter of 2015.

"The sale of non-performing loan portfolios at attractive terms in Bulgaria and Romania is part of our strategy to strengthen the balance sheets of our subsidiaries there," Karavias said.

Eurobank reduced its central bank borrowing to 22.8 billion euros from 25.3 billion euros at the end of the fourth quarter, helped by repurchase agreement transactions in the interbank market.

(Editing by David Clarke)

By George Georgiopoulos