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Eurobank Ergobank Merger

The financial data, strategy for future development, business objectives and new management team of the banking institution to result from the merger of Ergobank and EFG Eurobank were presented today by Mr. P. Petalas, General Director of the EFG Bank Group, parent group of the two banks, Mr. X. Nikitas, Chairman of Ergobank, and Mr. N. Nanopoulos, CEO of EFG Eurobank.
The financial data, strategy for future development, business objectives and new management team of the banking institution to result from the merger of Ergobank and EFG Eurobank were presented today by Mr. P. Petalas, General Director of the EFG Bank Group, parent group of the two banks, Mr. X. Nikitas, Chairman of Ergobank, and Mr. N. Nanopoulos, CEO of EFG Eurobank.
The new banking organisation will have 7,500 staff, a network of 330 branches throughout Greece, equity of GRD 600 billion and total assets of GRD 5 trillion. Assets under management, including mutual funds, will total GRD 7,6 trillion. This makes it the third largest banking group in the Greek market and, in terms of capitalisation, the fifth largest company quoted on the Athens Stock Exchange. The legal merger will be completed by June 2000.P. Petalas, General Director of the EFG Bank Group, spoke of the Group's strategic choices in the Greek market, all of which are designed to create a powerful, modern and large-scale banking group with a leading position in the domestic market, strong international connections and alliances and strong regional activities. He also announced the composition of the new management team, which is as follows:
  • Chairman: Mr. Xenophon Nikitas, currently Chairman of Ergobank.
  • Chief Executive Officer: Mr. Nicholas Nanopoulos, currently Managing Director of EFG Eurobank.
  • The current Chairman of EFG Eurobank, Mr George Gonticas, will be Honorary Chairman of the new bank and a member of its Board of Directors. He will also serve on the Board of Directors of EFG Consolidated Holdings, will chair the Bank's senior Credit Committee, will be Deputy Chairman of the Co-ordinating Council for subsidiaries, and will be a member of the Audit Committee and the Strategy Council.
  • Antonis Bibas, currently Managing Director of Ergobank, will become Chairmanship of the Co-ordinating Council for subsidiaries. He will also be a member of the Board of Directors of the new bank and of EFG Consolidated Holdings, Chairman of the Audit Committee, and a member of the senior Credit Committee. As a member of the Board of the Bank, he will be accountable to the Bank of Greece.
  • A nine-member Executive Committee will be set up to manage the bank, consisting of Xenophon Nikitas, Chairman, Nicholas Nanopoulos, CEO, Nikolaos Karamouzis and Byron Ballis, Deputy Managing Directors, and five General Managers: in alphabetical order, Haralambos Kyrkos, Kyriakos Nasikas, Stelios Papaderos, Nikos Pavlidis and Christos Sorotos.
  • Also to be formed is a five-member Strategy Council, consisting of Messrs Nikitas, Gonticas, Nanopoulos, Karamouzis and Ballis.
Mr Nanopoulos will be responsible for the coordination of the Executive Committee and the Strategy Council. In his address, Xenophon Nikitas, Chairman of Ergobank, focused on the necessity for the two banks' merger, on the synergies that can develop, and on matters of operational integration. The most important factor for success, he pointed out, will be functional identification - with the term 'identification' being used deliberately rather than 'merger'. In the new banking group currently being established, there is wide scope for synergies and further development, to the point of ensuring the creation, rather than the loss, of jobs, as well as providing opportunities for career advancement. Naturally, given our originally different environments, everyone will have to become acclimatised to the new environment. It would be utopian for one bank to try to impose its authority or its ideas on the other, and management's aim is to strive to further the interests of all. The first internal transfers of staff - of which there will not be few - are already bearing fruit, earlier than expected. Mr Nikitas stated his belief that the expertise of Ergobank in the small- and medium-size business sector, as well as larger enterprises, will complement Eurobank's strengths in the private sector, investments and consumer loans, producing an unbeatable combination. Not one of the 7,000 members of the banks' combined staffs will be left on the sidelines of developments, he pledged. Mr Nicholas Nanopoulos, CEO of EFG Eurobank, presented the strategic objectives of the new institution, whose development will focus on three targets: a leading position in Greece; a strong presence in the region; and a selective presence in the markets of Western Europe coupled with strategic alliances designed to acquire know-how and gain access to new markets, thus enabling the group to provide its clients with more effective and highly-integrated services. The inherently complementary nature of the two banks, the ensuing synergies, and the associated economies of scale will be an important lever for improving the competitiveness and further dynamic development of the new entity in all sectors of financial products and services. In this light, the estimated benefits from synergies and economies of scale, beginning in 2002, i.e., after the completion of the merger, will be of the order of GRD 45 billion annually. "We are laying claim", Mr Nanopoulos said, "to a leading position in quality, in innovation, in ability to adapt to developments, in technology and competitiveness, in the service we provide for our clients - and therefore in rates of business growth and profitability. Our objective is to achieve an ever-increasing share of the market. For 2000, our target is to increase our market share, based on loans, by at least two percentage points thanks to organic development. These high rates of business growth and profitability will be based on a series of advantages which make our bank extremely competitive and thus capable of meeting the challenges of the day. Let me mention, indicatively, that we already hold more than 20% of the consumer-credit market, we are the largest issuer of credit cards, with approximately 600,000 cards in circulation, and we have a major share - of the order of 20% - of the market in non-subsidised housing loans. In investment banking, the first two months of the current year found us with a share of more than 20% of new issues, while as far as stock-market transactions are concerned, we were among the five leading stockbroking firms during the same period. We hold a dominant position in private banking, too, thanks not only to our expertise, but also the unique international network of the EFG Bank Group." Mr Nanopoulos then referred to projections for 2000. The loan portfolio, he said, is expected to grow by approximately GRD 1 trillion to over GRD 3 trillion, while deposits are expected to exceed GRD 4.5 trillion at at least 350 branches by year-end. Pre-tax organic profits, i.e. not including certain extraordinary results based on security transactions, are expected to rise by at least 20%. Referring to the price of the Eurobank share, Mr Nanopoulos stated that it is henceforth directly and mathematically linked to Ergobank's share-price, and displays highly attractive features. The P/E ratio appears to be around 15 on the basis of organic profits alone. Also, profitability per share over the next three years is expected to increase by more than 30% annually, according to foreign analysts, making the share an even more attractive prospect. The combination of a low P/E ratio and an expected rise in profitability is a highly attractive one.
Mr Nanopoulos ended his speech with the following words: "The Greek banking system is an inseparable part of the global market, obeying the same laws and subject to the same shocks as the international banking system. It is not only the structure of the system which may change and evolve in accordance with international trends: the development of new products and services is, perhaps, of still greater importance, as is the introduction of new forms of banking transactions and means of access for clients, together with the use of new technology to achieve greater efficiency and more diversified services. In this context, which affects not only the product range, but also the new architecture taking shape, the new bank born out of the shared strengths of Ergobank and Eurobank will be in a position to play a creative and positive leading role."