“Global financial uncertainties and negative sentiment intensify the challenges that the Greek economy is facing and make the need for promoting structural reforms promptly even more imperative. Reforms are the necessary prerequisite to improve the macro-economic environment, enhance the economy’s competitiveness and productivity, encourage a climate of trust and attract investments”. These remarks were made by the Chief Executive Officer of EFG Eurobank Ergasias, Nicholas Nanopoulos, addressing the Annual General Shareholders’ Meeting of Eurobank EFG held today (April 8, 2008). Mr. Nanopoulos added that: “Pension reform constitutes a strategic necessity for the long-term macroeconomic stability of the economy and its growth prospects. The Law that has already been voted for by the Greek parliament, is in the right direction. Investments spearheaded by private entrepreneurship can boost supply as well as stimulate economic activity growth. The utilization of European Community Support Framework programs, along with large infrastructure projects, the promotion of privatizations and the liberalization of ‘closed’ professions as well as the development of new investment forms under the Public-Private Partnerships (PPPs) concept are options that offer high growth prospects. Within a fiercely competitive and rapidly changing globalized environment, only under these conditions can we secure the maintenance of strong growth rates in the future.”
Touching on the global framework in 2007, Eurobank’s CEO underscored that it was burdened by uncertainty and volatility, with intense fluctuations in stock markets, and pointed out that this crisis has led to a slow-down in economic growth rates for the world economy. The Greek economy did not remain unaffected, with inflation rates rising over 4% and real GDP growth slowing down to an estimated 3.6%. These unfavourable circumstances have also affected the domestic banking sector but as Mr. Nanopoulos clarified: “Greek banks were not directly hit by this adverse conjuncture, since they had no exposure to sub-prime US mortgage-backed securities, CDOs and CLOs, owing to their responsible and prudent risk management. On the contrary, their strategy during the past few years has been generally based on the further development of their domestic operations, and the strengthening of their expansion outside the Greek borders. In spite of the unfavourable conditions during 2007, this strategy enabled the Greek banking system to sustain the strong growth rates of both its fundamentals and profitability. Competition became more intense, to the benefit of bank customers. In addition, the further expansion of Greek banking presence abroad ensures that the Greek banking system will play a key part in our country's effort to upgrade its role in the wider region, and supports the long-term profitability of Greek banks.”
Moreover, Mr. Xenophon Nickitas, Chairman of the Board underlined that: “While views on the crisis, which is described as the biggest in the last 30 years, are conflicting, estimates on the potential duration of the crisis are also unclear. Nonetheless, the coordinated actions taken both in the US, where the crisis started, and in Europe, which was also impacted, allow us to believe that the worst is over. Concerning Eurobank, its strategic positioning in the wider region of SE Europe acts as a protecting shield, while securing an area of long term growth and profitability”.
CEO N. Nanopoulos analysing Eurobank’s course insisted that, despite the unfavorable environment and intense domestic market competition, 2007 was a year of dynamic organic growth and improvement for the infrastructure of the Bank and its subsidiaries. As a result “Eurobank EFG is today a modern, European, strongly capitalised and highly competitive Bank with a leading presence in Greece and in a wider region of seven more countries, where it competes with great success through a network of 1,500 branches and POS. Our Group’s assets amounted to €68 billion and the number of our staff exceeded 22,000. In ‘New Europe’ we have invested to date €1.9 billion and rolled out a distribution network of approximately 1,000 branches where we employ more than 12,000 people”.
Breaking down Eurobank activities, Mr. Nanopoulos remarked that, despite the highly competitive environment, loans increased by 34% amounting to €47 billion, with loans extended in ‘New Europe’ countries increasing by 142%, thus approaching €10 billion. The dynamic loan growth was not at the expense of the portfolio’s quality as the NPLs in Greece decreased to 2.7% of the loan portfolio, a ratio amongst the lowest in the domestic banking market.
The performance of the Eurobank Group was equally impressive in deposit gathering, with balances increasing by 30.5% in 2007 or €8.5 billion in absolute figures, thus amounting to €36.2 billion. As a result, the loan to deposit ratio decreased to 126% at the end of 2007 from 130% in the nine months of 2007 and compares favourably with most banks in the Eurozone (156% according to analysts). Thus, total Assets under Management increased by 17.4% and amounted to €52.4 billion, confirming the leading position the Group in the fields of asset management and private banking.
In summary, Mr. Nanopoulos stressed that in 2007 net profits for the Group increased by 32.1% and amounted to €851 million. This profitability corresponded to a ROE of 23.5%, with 94% of revenues coming from organic, recurring sources. Last but not least, the capital adequacy ratio stood at 12.2%, exceeding the Bank of Greece’s limit of 8%.
Eurobank’s profitability improves in a stable and consistent way, as shown by the compounded annual growth rate of profits of 34% for the period between 2002 and 2007.
Strong performance allowed the BoD to propose to the AGM the distribution of total dividends of €425 million in 2007 versus €350 million in 2006, an increase of 21.5%. Additionally the Bank received many awards for the quality of services provided and its positioning within the global environment.
Touching on the prospects of Eurobank EFG, CEO N. Nanopoulos stressed that “the current conjuncture requires increased vigilance on containing costs as well as underwriting and pricing credit risks. Our financial targets for the period 2008-2010, announced upon the release of financial results for 2007, are still valid, though achieving such targets may prove more challenging compared to previous years due to the current markets disruption. The main reason lies with the recent increase in the cost of funding, due to the global financial markets crisis, which may be passed on to borrowers only with some delay. Concerning the financial results for the first quarter of 2008, under the caveat that these are only initial estimates or indications, we note the following:
- First, the growth of loans and deposits is very strong both in Greece and in the countries of New Europe.
- Second, the growth in customer deposits is highly satisfactory with the loan to deposit ratio improving further. Deposit growth in Greece, in absolute terms, exceeded loan growth for one more quarter, thus strengthening the Bank’s liquidity. Therefore, rumors or estimates for increased requirements for funding from the wholesale markets are totally unfounded.
Finally, we estimate that the results for the first quarter of 2008 will exceed the results of the respective quarter of 2007. New Europe’s results, despite concerns about macroeconomic imbalances, appear to be strong”.
Mr. Nanopoulos concluded: “We have what it takes to face up to the challenges ahead. We have the vision, strategy, long experience in successfully implementing ambitious business plans but first and foremost, we have highly qualified staff and executives. Our people with their strong commitment, responsible attitude, skills and professionalism guarantee our success. That is why, on behalf of everyone, I wish to warmly thank each and every one of our 22,000 colleagues. Moreover, I wish to warmly thank the millions of customers who chose us and trust us for their banking transactions. Finally, on behalf of the Management, I would like to thank our Shareholders for their trust with which they honor us, and encourage us to continue meeting their expectations with consistency, responsibility and hard work”.
The AGM was attended by the Governor of Bank of Greece, Mr. N. Garganas, the Chairman and CEO of Alpha Bank, Messr. Y. Costopoulos and D. Matzounis, the chairpersons of Bank of Attica (Mr. T. Collintzas), Aspis Bank (Mr. C. Karatzas) and Citibank Greece (Mr. C. Sorotos), the Deputy Governors of Bank of Greece (Mr. P. Thomopoulos) and Agricultural Bank (Mr. V. Drougas) and executives of other banks and industry sectors.
Due to lack of increased quorum, the amendment of the Articles of Association and the dividend reinvestment program will be discussed at the Repeat AGM, which will convene on April 21st, 2008. The ex-dividend date, as well as the payment date, will be decided after the Repeat AGM. We estimate that shares will trade ex-dividend on May 2nd, the dividend for shareholders who will not reinvest will be paid on May 12th, and the issue price of the new shares resulting from the reinvestment will be determined during May 2nd -7th.