The shareholders’ Annual Ordinary General Meeting of EFG Eurobank Ergasias took place today. The General Meeting, among others, approved the financial results for the fiscal year 2001 and the Board of Directors’ recommendation for dividend distribution of € 0.53 per share.
The shareholders’ Annual Ordinary General Meeting of EFG Eurobank Ergasias took place today. The General Meeting, among others, approved the financial results for the fiscal year 2001 and the Board of Directors’ recommendation for dividend distribution of € 0.53 per share.Mr. Xenophon Nikitas addressing the shareholders noted: “During 2001, the Greek economy posted positive developments and maintained the advantages that allow us to be optimistic for the future. The actual conditions and prospects remain favourable. This positive economic environment constitutes a unique opportunity for us to achieve considerable progress towards real convergence. However, more needs to change at macro level, such as: modernisation of the legal framework and of the public sector; structural reforms; acceleration of privatisations with liberalisation of key markets; liberalisation of the labour market; a tax system that promotes growth; a viable social security system, which directly affects the future fiscal stability of businesses. In general, wider initiatives for the improvement of the general business environment are required”. Regarding the domestic banking system specifically, Mr Nikitas noted that: “despite the temporary difficulties, the prospects appear positive. In addition, Greek banks enjoy significant potential for stronger growth and satisfactory profitability than their European peers in the next years. EFG Eurobank Ergasias is adequately positioned to take advantage of the opportunities and extract the highest benefits from the expected developments”. Regarding the increasing competitive industry environment, Mr Nikitas stressed the fact that “EFG Eurobank Ergasias will not proceed with any action which may be against its shareholders’ long term interests or incompatible with its strategy”. Referring to the operational merger of former Eurobank with former Ergobank Mr Nikitas, mentioned that “in most major sectors, like the central operations, the risk management systems, the approval processes, the support functions, etc, we have already completed the operational merger. In addition, within a few months, the two branch networks will be operating on the same modern Altamira platform. The delay is partially due to the introduction of the Euro that postponed all the systems’ integration works but mainly due to the fact that the creation of an independent, modern, and complete technological platform requires a lot of time, adequate infrastructure and immense effort”. Following the presentation by Mr Nickitas, Mr Nicholas Nanopoulos, CEO of the Bank, took the stand stating that: “the results of the Group provide the evidence that in 2001 we continued with steady, well thought and visionary steps to implement our strategy irrespective of adverse conditions. This strategy has allowed us to become, in just a few years, the third largest financial group in Greece, achieving solid future growth aiming to create stable, real and long term values”. The main objectives of the strategy were summarised as follows:- To establish a leading position in the domestic banking market with emphasis on the organic growth and the market shares expansion, mainly on the high-margin and high-growth sectors. - To place emphasis on the quality and total customer service. - To establish a strong presence in the wider region (Balkans and Eastern Europe). - To enhance competitiveness and productivity and to create shareholder value. Referring to the Bank’s results for the fiscal year 2001, Mr Nanopoulos stressed that “the circumstances resulted in a restructuring of the revenues mix, as the trading gains from bonds and equity decreased dramatically, while income from activities related to the Athens Stock Exchange (ASE) also retreated substantially. This development offsets the impressive income growth realised from these activities during the previous three-year period, due to the favourable stockmarket conditions. As a result, there were one-off, non-recurring gains. Today, we are in a period during which the banks will distinguish themselves by their ability to generate sustainable and more reliable revenues, such as interest and commission income through organic growth, combined with efficient assets, risk and cost management. During last year, EFG Eurobank Ergasias demonstrated this ability based on its healthy economic fundamentals and following a policy focused on organic growth. As a result, during 2001, our Bank succeeded to maintain its profitability and to expand its market shares, exploiting the advantages realised from the previous mergers.” Analysing the Bank’s market position, Mr Nanopoulos noted that, based on the financial results of 2001, EFG Eurobank Ergasias is the third largest financial group with Assets of €19.6 billion, Loans of €11 billion, Deposits of € 15.5 billion and Shareholders’ Equity of €20 billion. In Consumer Credit the Bank’s market share at the end of 2001 amounted to 24.5%, and in credit cards to 28%, with more than 1,300,000 cards in circulation. In Mortgage Lending, the Bank held a market share of 15% among commercial banks and a 12% market share among all credit institutions. In mutual funds, EFG AEDAK ranked in first position with a current market share of approximately 23%. There is positive acceptance for the specially designed credit products for the small businesses and the depository products for the retail clients. The Bank also enjoys strong competitive advantages in Corporate Banking. In co-operation with its subsidiaries, the Bank offers a complete range of products and services acting as partner or advisor to corporate clients to meet all their needs. In Shipping, the Bank has established a solid base with cautious selections for long-term business relationships. In the Small and Medium-sized Enterprises (SMEs) segment, where the customer base includes more than 23,000 customers, the Bank exploits its experience and the strong business relationships of former Ergobank and offers all the financial services provided to Corporate Banking. The SME services are offered through a dedicated network comprising more than 100 units in Greece. In 2001, the total loan portfolio of the Bank amounted to €11 billion from €8.4 billion at the end of 2000, experiencing an organic growth rate of 27%, against an overall credit expansion rate of 16%. As a result, the Bank’s market share in total loans increased by 1.2%, in line with its broader strategy. The Bank is actively engaged in Investment Banking through EFG Telesis Finance, which resulted from the merger of EFG Finance and Telesis Investment Bank. In 2001, the Group maintained its leading position with a 19% market share in IPOs underwriting, participated in 22 out of 24 issues and concentrated capital funds that represent approximately 25% of the entire demand raised by all the underwriters. In the segment of capital markets and the stockbrokerage transactions, EFG Eurobank Securities successfully absorbed Telesis Securities and Ergo Securities and ranked first in 2001 with a 9.7% market share. In Private Banking, the Group confirmed its leading position due to its competitive advantages, its relationship with EFG Bank Group and Deutsche Bank. The Private Banking commands a distribution network of 14 specialised units in the largest cities in Greece and is supported by an analysis and investment strategy unit. Finally, the Bank intensified its effort in the insurance products and services segments. The complete range of products and services is complemented by a modern distribution and client service culture. At the same time, together with the traditional networks (which amounts to more than 300 units and 550 ATMs) all the available alternative networks are currently deployed. More specifically, the Bank’s clients have access to phone services through Europhone Banking, can execute transactions over the Internet, and over mobile phones, as well as access information through digital TV provider NOVA. In addition, the Bank’s clients can be served through the new OPEN 24 network. The Bank is actively engaged in Internet services and the new economy segment, through its specialised subsidiaries EFG e-solutions, Business Exchanges and Hellas on Line. In the rapidly growing segment of real estate management, EFG Eurobank Properties has an active presence with a real estate portfolio, soon to exceed €70 million. For 2002, the company has an investment program of €60 million. Finally, the Bank is active in the wider economic region. In Romania, EFG Eurobank Ergasias will be controlling 36.25% of Banc Post, following the recently announced increase of its percentage participation. In Bulgaria, the EFG Bank Group, jointly with the international insurance company, AIG, controls 86% of Post Bank, the fourth largest bank of the country.
FINANCIAL RESULTS 2001
Regarding the consolidated financial results of the Group according to the International Accounting Standards, it should be noted that they are the aggregate of the 12-month results of EFG Eurobank Ergasias and the results of Telesis Investment Bank for the last quarter of 2001 (acquisition accounting), since, under IAS, the merger is treated as an acquisition of Telesis Investment Bank by EFG Eurobank Ergasias. Therefore, the acquisition of Telesis results in goodwill of € 18 m, to be amortised over 15 years. The recently approval by the Greek Parliament of a Bill offering significant incentives to Greek companies to merge, will grant our Group a significant tax reduction by 10 percentage points for the year 2002 and by 5 percentage points for the year 2003, more than offsetting the aforementioned goodwill. (According to Greek Accounting Standards, the merger was accounted for under the ‘pooling of interests’ method and the figures published for 2001 are the aggregate of EFG Eurobank Ergasias 12 month 2001 figures and Telesis Investment Bank 12 month 2001 figures).
In 2001, EFG Eurobank Ergasias Group achieved strong organic growth rates, mainly in high growth and high margin segments. At the same time, the Bank maintained a particularly high net interest margin, above 3%, despite fierce competition. Moreover, we managed to sustain a high commission to income ration, at about 26%, despite the overall decline of commission income. Thus, in 2001, Group EFG Eurobank Ergasias achieved a marginal increase of profitability and strengthened its overall market position. Group profit before tax and after minority interests, increased slightly, reaching € 322 m, compared to € 320 m in the year 2000. Group net profit, after tax and minority interests, increased by 3%, reaching € 206 m, from € 200m in 2000
Total Assets increased by 17% to € 19.6 bn. This is mainly attributable to the significant growth in loans by 30% , to a total of about € 11bn. Deposits (including repos), increased by 16%, exceeding € 15 bn at the ebd of 2001. Total assets under management, at current prices, rose by 7% and amounted to € 21 bn. It should be noted that, in absolute terms, the year on year loan growth rate of the Group remains one of the fastest in the market, with an increase in absolute numbers of € 2.5 bn. Retail lending in particular increased by 43%, reaching € 4.6 bn, accounting for 41% of the total loan portfolio at the end of 2001, as opposed to 38% at the end of 2000. The high loan growth rates and the sustainability of the net interest margin at the high level of 3.4% lead to a significant improvement of the net interest income by 22%. Thus, net interest income, which exhibited a growing pattern in all quarters of 2001, reached € 614 m. Net fee and commission income declined by 13%, reaching € 247 m. This development put significant pressure on the results of the year and is mainly attributable to the significant decrease of ASE – related operations. Consequently, stock market-related commissions as a percentage of total commissions, were restricted to less than 15%, from 25% last year. Overall, the increase in net interest income more than offset the decline in net fee and commission income. Consequently, the core organic income (comprising of net interest income and net fee and commission income) increased by 9.4%, compared to 2000, reaching € 861 m. Core organic income contributed over 90% of total operating income, from 88% in 2000, reflecting income quality and sustainability. Income from the trading portfolio, which is market to market, was also adversely affected by the conditions prevailing in the ASE. This led to realised and unrealised equity trading losses, which were, however, offset by gains on bonds, derivatives and foreign exchange. Thus, total trading gains were € 16 m, against €2 m in 2000. For the same reasons, gains less losses from other securities, which are either credited or debited to shareholders’ equity, relating to the available-for-sale investment portfolio, which is marked to market, declined by 53% to € 35 m, from € 74 m. Moreover, losses from other securities in the amount of € 61 m. were charged to shareholders’ equity. The effort to further enhance the Group’s competitivenes is reflected in the decelerating expansion of operating costs. Total costs increased by 9.4%, reaching € 547, compared to an increase of 21% in 2000. This fact enabled the improvement of the cost-to-average assets ratio to 3%, from 3.2% in 2000. At the same time, the cost-to-income ratio stood at 58.1%, which is one of the most efficient ratios in the market, especially when taking into account the quality and sustainability of our income. Opearating cost was significantly burdened by the 14% increase in depreciation of IT and infrastructure investments, which however ensure long term efficiency gains. The quality of the loan portfolio remains high, despite the robust loan growth. Organic non-performing loans, which relate to the actual growth of the Group’s operations, remain steadily under 3% of total loans. Total NPLs, including NPLs for Cretabank and Bank of Athens, which are fully provided for, were contained to 3.8% of total loans. The Group has developed strong management mechanisms for all types of risk (credit, market, operational and liquidity). EFG Eurobank Ergasias Shareholder Funds stood at € 2 bn at the end of 2001, remaining one of the strongest in the sector. Group net asset value (NAV) includes minimal goodwill from mergers and has been burdened by unrealised losses of the available for sale portfolio, which, however, are expected to reverse in the future. Furthermore, NAV has been burdened by the share buy back programme by € 82 m in 2001. However, the programme reduces the number of shares in circulation and thus increases the real value of the shares remaining in the hands of shareholders. Finally, all provisions and other obligations of the Bank have been accounted for. Pre-tax Return on Equity (ROE), after minorities, reached 16.6% (from 16.8%), while pre-tax Return on Assets (ROA) remained one of the highest in the sector at 1.8%. The Captial Adequacy Ratio remains strong at 15% confirming the ability of the Group to maintain high growht rates, without having to resort to shareholders in order to raise new capital in the foreseeable future.
Regarding the consolidated financial results of the Group according to the International Accounting Standards, it should be noted that they are the aggregate of the 12-month results of EFG Eurobank Ergasias and the results of Telesis Investment Bank for the last quarter of 2001 (acquisition accounting), since, under IAS, the merger is treated as an acquisition of Telesis Investment Bank by EFG Eurobank Ergasias. Therefore, the acquisition of Telesis results in goodwill of € 18 m, to be amortised over 15 years. The recently approval by the Greek Parliament of a Bill offering significant incentives to Greek companies to merge, will grant our Group a significant tax reduction by 10 percentage points for the year 2002 and by 5 percentage points for the year 2003, more than offsetting the aforementioned goodwill. (According to Greek Accounting Standards, the merger was accounted for under the ‘pooling of interests’ method and the figures published for 2001 are the aggregate of EFG Eurobank Ergasias 12 month 2001 figures and Telesis Investment Bank 12 month 2001 figures).
In 2001, EFG Eurobank Ergasias Group achieved strong organic growth rates, mainly in high growth and high margin segments. At the same time, the Bank maintained a particularly high net interest margin, above 3%, despite fierce competition. Moreover, we managed to sustain a high commission to income ration, at about 26%, despite the overall decline of commission income. Thus, in 2001, Group EFG Eurobank Ergasias achieved a marginal increase of profitability and strengthened its overall market position. Group profit before tax and after minority interests, increased slightly, reaching € 322 m, compared to € 320 m in the year 2000. Group net profit, after tax and minority interests, increased by 3%, reaching € 206 m, from € 200m in 2000
Total Assets increased by 17% to € 19.6 bn. This is mainly attributable to the significant growth in loans by 30% , to a total of about € 11bn. Deposits (including repos), increased by 16%, exceeding € 15 bn at the ebd of 2001. Total assets under management, at current prices, rose by 7% and amounted to € 21 bn. It should be noted that, in absolute terms, the year on year loan growth rate of the Group remains one of the fastest in the market, with an increase in absolute numbers of € 2.5 bn. Retail lending in particular increased by 43%, reaching € 4.6 bn, accounting for 41% of the total loan portfolio at the end of 2001, as opposed to 38% at the end of 2000. The high loan growth rates and the sustainability of the net interest margin at the high level of 3.4% lead to a significant improvement of the net interest income by 22%. Thus, net interest income, which exhibited a growing pattern in all quarters of 2001, reached € 614 m. Net fee and commission income declined by 13%, reaching € 247 m. This development put significant pressure on the results of the year and is mainly attributable to the significant decrease of ASE – related operations. Consequently, stock market-related commissions as a percentage of total commissions, were restricted to less than 15%, from 25% last year. Overall, the increase in net interest income more than offset the decline in net fee and commission income. Consequently, the core organic income (comprising of net interest income and net fee and commission income) increased by 9.4%, compared to 2000, reaching € 861 m. Core organic income contributed over 90% of total operating income, from 88% in 2000, reflecting income quality and sustainability. Income from the trading portfolio, which is market to market, was also adversely affected by the conditions prevailing in the ASE. This led to realised and unrealised equity trading losses, which were, however, offset by gains on bonds, derivatives and foreign exchange. Thus, total trading gains were € 16 m, against €2 m in 2000. For the same reasons, gains less losses from other securities, which are either credited or debited to shareholders’ equity, relating to the available-for-sale investment portfolio, which is marked to market, declined by 53% to € 35 m, from € 74 m. Moreover, losses from other securities in the amount of € 61 m. were charged to shareholders’ equity. The effort to further enhance the Group’s competitivenes is reflected in the decelerating expansion of operating costs. Total costs increased by 9.4%, reaching € 547, compared to an increase of 21% in 2000. This fact enabled the improvement of the cost-to-average assets ratio to 3%, from 3.2% in 2000. At the same time, the cost-to-income ratio stood at 58.1%, which is one of the most efficient ratios in the market, especially when taking into account the quality and sustainability of our income. Opearating cost was significantly burdened by the 14% increase in depreciation of IT and infrastructure investments, which however ensure long term efficiency gains. The quality of the loan portfolio remains high, despite the robust loan growth. Organic non-performing loans, which relate to the actual growth of the Group’s operations, remain steadily under 3% of total loans. Total NPLs, including NPLs for Cretabank and Bank of Athens, which are fully provided for, were contained to 3.8% of total loans. The Group has developed strong management mechanisms for all types of risk (credit, market, operational and liquidity). EFG Eurobank Ergasias Shareholder Funds stood at € 2 bn at the end of 2001, remaining one of the strongest in the sector. Group net asset value (NAV) includes minimal goodwill from mergers and has been burdened by unrealised losses of the available for sale portfolio, which, however, are expected to reverse in the future. Furthermore, NAV has been burdened by the share buy back programme by € 82 m in 2001. However, the programme reduces the number of shares in circulation and thus increases the real value of the shares remaining in the hands of shareholders. Finally, all provisions and other obligations of the Bank have been accounted for. Pre-tax Return on Equity (ROE), after minorities, reached 16.6% (from 16.8%), while pre-tax Return on Assets (ROA) remained one of the highest in the sector at 1.8%. The Captial Adequacy Ratio remains strong at 15% confirming the ability of the Group to maintain high growht rates, without having to resort to shareholders in order to raise new capital in the foreseeable future.
GOALS FOR 2002
Referring to the Group’s goals for 2002, Mr Nanopoulos stressed that a basic tool for future achievement will be the realisation of the enhanced potential that has resulted from the operational merger between former Eurobank and former Ergobank. The realisation is expected to be greatly facilitated by the implementation of the new IT support system Altamira in the coming months. At the same time, the Group will place further emphasis on covering the needs of all client segments, enhancing cross-selling, and on developing quality initiatives at all levels. Other areas of priority include risk management, further cost compression and efficiency improvement. Finally, an area where the Group heavily invests in, is the area of human resources. The Group prides in the efficiency and capabilities of its personnel, which operates in an environement that rewards skill, quality and efficiency, based on modern and objective criteria. On the Group’s results for the first quarter 2002, Mr Nanopoulos remarked that: ‘...as of recent, there have been rumours that the results will be particularly compressed for the entire banking sector, compared to last year’s quarterly results. Indeed this will be true, up to a point, for our Bank as well, and is attributable to one sole factor: the non-repetition of the one-off real estate gains from the long-term lease rental of King George Hotel. Excluding this factor, the results of the first quarter of 2002 will be comparable to last year’s, but better than those of the fourth quarter of 2001.’ Finally, regarding the estimates for the entire fiscal year 2002, Mr Nanopoulos noted that it is to early for realistic estimates. ‘However, one should take into account the positive growth prospects of the Greek economy compared to the rest of Europe, as well as the dynamism exhibited by the Greek banking sector. In other words, the growth of our Bank is related to the growth prospects of the banking system and of the Greek economy in general. Precondition to all this is the timely completion of projects related to the Third Community Support Framework and the Olympic Games, the maintenance of macroeconomic stability and the containment of inflation, as well as the realisation of structural and legal reforms that will give a new boost to our economy. Regarding the latter point, we stress the need for some real privatisations, to follow the initial IPOs of state-controlled entities, the completion of the recently announced tax reforms, the reform of the social security framework on a more solid ground, the modernisation of public services, whose bureuacratic practices often engulf the conduct of businessm as well as greater flexibility on employment issues. We need to become a country that attracts foreing investments, fosters business and growth, and creates new jobs.’ Upon closure of his presentation to the shareholders Mr Nanopoulos noted: ‘The review of our activities for 2001 and the overview of the business environment and of our prospects for 2002 reiterate the strong and healthy bases of EFG Eurobank Ergasias. A banking Group, that continues to evolve dynamically, and to establish its position among the protagonists of the local banking system, building positive long-term prospects. We are moving methodically in the direction dictated by developments, taking into account the needs of our clients, with whom we build long-term relationships of trust. We make the most of our strategic alliances and we enhance our position to new, promissing segments of the financial services industry. Through our strategy, which we test and readjust daily, we promote a steady development of our operations, which leads to a steady profitability of high quality. Thus we build a strong Group, both within and outside Greece, that creates solid and long-term value for its shareholders and its empoloyees.’ The AGM approved all other issues on the agenda, specifically:
Referring to the Group’s goals for 2002, Mr Nanopoulos stressed that a basic tool for future achievement will be the realisation of the enhanced potential that has resulted from the operational merger between former Eurobank and former Ergobank. The realisation is expected to be greatly facilitated by the implementation of the new IT support system Altamira in the coming months. At the same time, the Group will place further emphasis on covering the needs of all client segments, enhancing cross-selling, and on developing quality initiatives at all levels. Other areas of priority include risk management, further cost compression and efficiency improvement. Finally, an area where the Group heavily invests in, is the area of human resources. The Group prides in the efficiency and capabilities of its personnel, which operates in an environement that rewards skill, quality and efficiency, based on modern and objective criteria. On the Group’s results for the first quarter 2002, Mr Nanopoulos remarked that: ‘...as of recent, there have been rumours that the results will be particularly compressed for the entire banking sector, compared to last year’s quarterly results. Indeed this will be true, up to a point, for our Bank as well, and is attributable to one sole factor: the non-repetition of the one-off real estate gains from the long-term lease rental of King George Hotel. Excluding this factor, the results of the first quarter of 2002 will be comparable to last year’s, but better than those of the fourth quarter of 2001.’ Finally, regarding the estimates for the entire fiscal year 2002, Mr Nanopoulos noted that it is to early for realistic estimates. ‘However, one should take into account the positive growth prospects of the Greek economy compared to the rest of Europe, as well as the dynamism exhibited by the Greek banking sector. In other words, the growth of our Bank is related to the growth prospects of the banking system and of the Greek economy in general. Precondition to all this is the timely completion of projects related to the Third Community Support Framework and the Olympic Games, the maintenance of macroeconomic stability and the containment of inflation, as well as the realisation of structural and legal reforms that will give a new boost to our economy. Regarding the latter point, we stress the need for some real privatisations, to follow the initial IPOs of state-controlled entities, the completion of the recently announced tax reforms, the reform of the social security framework on a more solid ground, the modernisation of public services, whose bureuacratic practices often engulf the conduct of businessm as well as greater flexibility on employment issues. We need to become a country that attracts foreing investments, fosters business and growth, and creates new jobs.’ Upon closure of his presentation to the shareholders Mr Nanopoulos noted: ‘The review of our activities for 2001 and the overview of the business environment and of our prospects for 2002 reiterate the strong and healthy bases of EFG Eurobank Ergasias. A banking Group, that continues to evolve dynamically, and to establish its position among the protagonists of the local banking system, building positive long-term prospects. We are moving methodically in the direction dictated by developments, taking into account the needs of our clients, with whom we build long-term relationships of trust. We make the most of our strategic alliances and we enhance our position to new, promissing segments of the financial services industry. Through our strategy, which we test and readjust daily, we promote a steady development of our operations, which leads to a steady profitability of high quality. Thus we build a strong Group, both within and outside Greece, that creates solid and long-term value for its shareholders and its empoloyees.’ The AGM approved all other issues on the agenda, specifically: