FY 2003 RESULTS | Eurobank
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FY 2003 RESULTS

EFG Eurobank Ergasias announces consolidated financial results for FY 2003 under Greek Accounting Standards (GAS).
FY 2003 RESULTS
Net profit at € 273 m (+39%)Dividend per share € 0.60 (yield 3.9%1)
Stronger in Greece and in SE Europe
EFG Eurobank Ergasias announces consolidated financial results for FY 2003 under Greek Accounting Standards (GAS). From 1Q 2005 onwards, the Bank will be publishing its financial statements under International Financial Reporting Standard (IFRS), simultaneously with all other Greek and EU banks, ensuring full comparability. By then, the significant uncertainties, which still remain regarding the implementation of IFRS in Greece and in the EU, including valuation issues for securities portfolios and derivatives, tax issues etc. will have been resolved. The group’ s FY 2003 accounts include Romanian Banc Post, which has been fully consolidated since Nov. 2002. EFG Eurobank Beograd AD (formerly Postbanka AD) is fully consolidated since April 2003. Bulgarian Post Bank, previously accounted for under the equity method, was fully consolidated at end-2003. In year 2003, EFG Eurobank Ergasias achieved dynamic growth in business volumes, revenue and profitability. In Greece the Group expanded and deepened its market position in the rapidly growing areas of consumer, mortgage and business lending. The Group also achieved significant market share gains in asset management 2, capital market activities and insurance services. In the region, the Group acquired additional stakes and management control of Romanian Banc Post, Bulgarian Post Bank and Serbian EFG Eurobank Beograd. The Group’ s strong performance resulted in a rise in Total Loans by 22% to € 16.3 billion and an expansion in Total Revenues of 23% to € 1,215 million, which was combined with increased cost discipline and led to an improvement of the cost / income ratio from 59.4% in 2002 to 54.6% in 2003. Consolidated net profit after tax attributable to shareholders amounted to € 273 million, compared to € 196 million in 2002, rising 39%. Consolidated net profit before tax and after minorities amounted to € 373 million (+37%). The Board of Directors proposes to shareholders the distribution of total dividends of € 185 million or € 0.60 per share, reflecting Eurobank ’s strong capital position and rising organic profitability and corresponds to a dividend yield of 3.9% at end 2003 price levels, comparing favourably with local and international peers. The Board will also propose to shareholders the cancellation of 6 m. outstanding Treasury shares (approx. 2% of capital) and the continuation of the share buy-back programme.
Shareholders’ Equity at the end of 2003 stood at € 1,8 billion and is among the strongest in the sector. The Bank has not made use of the legal provisions of the Law 3229/2004 for the revaluation of real estate. The Capital Adequacy Ratio stands at 10.4%, comprising almost solely Tier 1 capital. The Group’s strong capitalisation ensures its ability to maintain strong growth in the coming years.
FINANCIAL TARGETS FOR 2004-2005
In the aftermath of seven successful acquisitions in the last five years, the strong growth rates achieved in 2003 reflect the dynamics of Eurobank’ s business model and the success of the Group Ls innovative, value-adding product offering. They are the result of a series of initiatives, which were launched in 2002-3 and have contributed to increased efficiency and sharper client focus. These include the roll out of upgraded, unified technological infrastructure across all distribution networks; the group’ s new organizational structure, designed to intensify efficiency and further customize services per client segment; as well as the completion of a series of automation projects, which increase the efficiency of support functions and enhance distribution and cross-selling capabilities. A particularly important initiative for Eurobank Ls future performance is the roll out of a value-based management system. This system has intensified the focus of all units on business development and profitability to the benefit of clients, shareholders and employees. In 2004, the Group maintains its clear focus on achieving strong growth rates and further enhancing its presence both in Greece and in Southeastern (SE) European markets. This successful strategy allows Eurobank to set for itself financial performance targets for 2004 and 2005. The Group aims at:
  • Revenue growth exceeding 14% per annum
  • Cost / Income ratio below 53% at group level and below 50% for Greek operations in 2005
  • Return on Equity (ROE) to exceed 18% in 2005
  • Earnings Per Share (EPS) growth to exceed 20% p.a.
  • Dividend Per Share (DPS) growth of over 12% for each year
    STRONG PRESENCE AND DYNAMIC GROWTH IN GREECE
    In year 2003, Eurobank further enhanced its position in the Greek market. In total lending, the BankL s Total Loans in the domestic market advanced 19.2% to € 16.2 billion 3, leading to an increase in total market share of 40 bps to 13.8%. More specifically, business lending in Greece rose by 12.4% to € 9.6 billion. Loans to households grew by 30.6% to € 6.6 billion, as consumer credit recorded an increase of 28% to € 3.5 billion and mortgage credit advanced 33.7% to € 3.1 billion. This robust performance led to an increase in EurobankL s market share in household lending by 60 bps, from 15.8% to 16.4%.At the same time, Eurobank expanded its market share in the management of (non-money market) mutual funds from 16% to 20% and in equity brokerage from 13% to 16.5%. The Group maintained its leading position in equity placements and IPOs, with a market share of 33%, as well as in debt issues with a market share of 25%. Substantial growth was also achieved in insurance services, allowing Eurobank to become a significant group in this segment in a very short period of time. IN SE EUROPE Eurobank is working to actively participate and contribute to the transformation of regional economies, in their course towards integration with the European Union. In 2003 the Group undertook significant strategic initiatives to further expand and strengthen its presence in selected markets in the region, mainly in countries aspiring to join the EU, through acquiring management control of universal banks and developing retail banking operations. More specifically, in 2003:
  • In Romania the Group raised its stake in Banc Post to 53% by acquiring BPI’ s 17% holding and has the option of further raising its total participation to 62%. As a result, EFG Eurobank Ergasias obtained management control of Banc Post, which is fully consolidated since November 2002.
  • In Bulgaria, upon completion of its recent agreement with AIG to acquire its stake in ACBH, EFG Eurobank Ergasias will control 92% of Post Bank. This agreement led to the full consolidation at the end of December 2003 of Bank Post, which had been consolidated under the equity method since September 2002.
  • In Serbia / Montenegro EFG Eurobank Ergasias acquired a 68% stake in Postbanka, which was further increased to 91% via a capital increase. This bank has been renamed to EFG Eurobank Beograd AD.
    CONSOLIDATED FIGURES IN 2003
    Total Assets at the end of 2003 recorded an increase of 13.8% reaching € 28 billion, compared to € 24.6 billion at the end of 2002. Balance sheet expansion mainly reflects robust growth in business volumes in Greece and in the region. More specifically, Customer Loans at Group level grew 22.2% in 2003, reaching € 16.3 billion. Household Lending expanded 34.2% from € 5.1 billion to € 6.9 billion, while Business lending increased 14.7% from € 8.6 billion to € 9.9 billion. More specifically, Consumer Credit in Greece and abroad expanded by 33.1% to € 3.8 billion and Mortgage Credit advanced by 35.6% exceeding € 3.1 billion. Customer Deposits for the Group increased 2% y.o.y and amounted to € 17.3 billion. Total Customer Funds, including customer deposits, repos, mutual funds and other investment products, rose by 10.3% to € 25.5 billion at current prices. Net Interest Income (NII) increased 17.3% from € 724 million to € 849 million, contributing 70% of Total Operating Income. NII growth was driven by the 33% rise in the margin on loans, which reached € 577 million. The Net Interest Margin (net interest income over avg. total assets) was maintained above 3%. Net Fee and Commission Income recorded a robust 24% rise, from € 250 million to € 310 million, contributing 25.5% of Total Operating Income. Capital markets related fees jumped 61% to € 55 million, on the back of strong market share gains in equity brokerage and a recovery in capital markets from 2Q03 onwards. Asset management fees increased 32% to € 42 million, reflecting significant market share gains in the management of non-money market mutual funds. Therefore Core revenues, comprising Net Interest and Net Fee income, recorded growth of 19%, reaching € 1,159 million (from € 973 million in 2002) and contributing 95% of Total Operating Income. Other Income, comprising dividend, trading and other operating income, reached € 56 million compared to € 18 million in FY 2002. Consequently the Group’ s Total Operating Income increased by 22.5% from € 992 million to € 1,215 million, mainly driven by the growth in net interest income and in net fee and commission income. Concerning Operating Expenses, total growth for the operations in Greece exhibited a marked slowdown and stood at 3.9%. As a result, the Cost to Income ratio in Greece recorded a sharp decline from 59.0% in 2002 to 52.9% in 2003. At Group level, which includes Romanian Banc Post in the whole of 2003 compared to only half of 4Q in 2002 accounts, total operating expenses recorded an increase by 12.6% from € 590 million to € 664 million. In total, the Cost to avg. Assets Ratio improved from 2.7% to 2.5%. The Group ’s Cost to Income Ratio improved significantly from 59.4% in 2002 to 54.6% in 2003, which is one of the lowest in the Greek market. The quality of the loan portfolio has been improving, with organic non-performing loans (NPLs) at 2.8% of the total loan book at the end of 2003, vs. 2.9% in Dec. 2002. Nevertheless, the Group has maintained its conservative and clearly defined provisioning policy, increasing its provision charges by 35.9% from € 104.9 million to € 143 million in 2003. This level of provisions corresponds to 96 bps on the average loan portfolio. Total provisions under Greek accounting standards, including general risk provisions, reached € 157 million, compared to € 111 million in 2002. NPLs are 85% covered by provisions, compared to 80% in 2002, a coverage ratio, which is one of the highest in the Greek market. This fact, combined with the high quality of the loan portfolio, safeguards the Bank going forward. Consequently Eurobank’s Core Profit (net interest income plus net fee income less operating expenses less provisions) climbed 24% to € 338 million in 2003, from € 273 million in 2002. In 4Q 2003, core profit reached a record level of € 95 million. Profit before tax after minorities in 2003 increased 37% to € 373 million. Net Profit after tax and minorities improved 39% to € 273 million. The substantial improvement in the profitability of the Group led to a rise in after-tax Return on average Assets (ROA) from 0.9% in FY 2002 tƒΝ 1.0% in FY 2003. Similarly, after-tax return on average Equity (ROE), at a capital adequacy ratio of 10.4%, increased to 15.1%, compared to 10.7% in FY 2002, while the Return on Required Equity (corresponding to a capital adequacy ratio of 8%) reached 20%.
    EFG Eurobank Εrgasias key figures (€ million) according to Greek
    Accounting Standards
       FY 2003      FY 2002           Δ %     SE European
         subsidiaries
    BALANCE SHEET
           
    Total Assets28.02924.62213,8 %1.157
    Net Loans & Advances
    to Customers
    16.33313.361 22,2 % 569
    Due to Customers
    17.308 17.033 1,6 % 811
    Shareholders Equity
    1.793
    1.822 -1,6 % 144
           
    INCOME STATEMENT       
          
    Net Interest Income849 724 17,3 % 42
    Net Commission Income
    310
    250 24,0 % 28
    Core Banking Revenue 1.159
    973
    19,0 %70
    Total Operating Income
    1.215 992 22,5 % 80
    Core Profit 338
    273 23,8 % 5
    Profit before tax 373
    272
    37,0 % 9
    Net profit after tax & minorities273
    196
    39,0 % 7
        
    1At end 2003 close2 Of non money market funds3 before provisions
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