ATHENS--Greece's third-largest lender by assets, Eurobank Ergasias SA (EUROB.AT), reported a better-than-expected third-quarter net loss Friday after further boosting provisions for bad loans but added that it expects to return to profitability next year.

For the three months through September, the bank said losses totaled 187 million euros ($233.2 million), compared with EUR285 million a year ago.

After six years of recession, a financial crisis and an unprecedented sovereign debt restructuring, Greek banks are struggling to nurse their balance sheets back to health.

Eurobank, along with Greece's three other big lenders--Alpha Bank SA, Piraeus Bank SA, National Bank of Greece SA --are staggering under a mountain of bad loans that collectively add up to about EUR80 billion and make up about a third of banking system loans.

Amid signs of a recovery in Greece's economy, the rate of new bad loans has been slowing and is expected to peak later this year or early next year. However, Eurobank as well as Alpha and NBG have been trying to boost their coverage ratio of those loans. In the third quarter, Eurobank reported credit loss provisions of EUR588 million, up from EUR417 million a year earlier.

At the same time, the Greek banks have been able to bolster their liquidity by attracting back nervous depositors and reduce their dependence on emergency ECB cash. Eurobank said that its net interest income--a core measure of income reflecting the difference between what a bank pays depositors and collects from borrowers--continued to improve. In the third quarter, the bank said net interest income rose to EUR379 million from EUR320 million in the same period a year earlier.

It added that deposits expanded by 772 million euros to 42.7 billion euros at the end of the third quarter period.

"Having the necessary liquidity and a loans to deposits ratio below 100%, we can finance our customers, households and businesses. The results of the third quarter 2014 lay the foundations for Eurobank's return to profitability in 2015," the bank's Chief Executive Christos Megalou said in a statement.

The results were generally better than expected with analysts estimating third-quarter losses of more than EUR200 million.

Write to Alkman Granitsas at alkman.granitsas@wsj.com

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