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Annual General Meeting

“Sustaining satisfactory growth rates in the future is not to be taken for granted, as it depends on a series of factors and mainly on implementing a macroeconomic policy that entails fiscal adjustments, but also allows for further growth.
“Sustaining satisfactory growth rates in the future is not to be taken for granted, as it depends on a series of factors and mainly on implementing a macroeconomic policy that entails fiscal adjustments, but also allows for further growth. A more extrovert, productive and globally competitive economic model is required to stimulate the growth dynamics of the Greek economy. To achieve such a model, the economic policy must be clearly oriented towards boosting private initiative and entrepreneurship, as well as rationalising and limiting the role of the State in the economy”. Mr. Nicholas Nanopoulos, CEO of EFG Eurobank Ergasias, made this remark in his speech addressing to the Annual General Meeting of the Greek bank’s shareholders that was held on Tuesday 5th April 2005.  He added that: “an environment where the private sector drives the economic and growth process is now imperative; of course expedient privatisations, as well as structural and institutional reforms in many critical sectors are also required. What is called for is the creation of an environment that reinforces economic competitiveness and encourages investments, business initiatives, as well as some risk taking”. With reference to the recently adopted economic measures, Mr. Nanopoulos remarked that: “on one hand they are necessary for the immediate reduction of the budget deficit and to fulfil our commitments towards the European Union; on the other, we believe that these measures will have a temporary negative impact, both on inflation and on economic growth, however it is too early to clearly assess it”.  Moreover, he stressed that: “new challenges arise for the banking system too, which is called upon to assume a more active, enhanced role – indeed to act as a catalyst – in the growth process.  The conditions are being created”, Mr. Nanopoulos said,  “for further involvement of the Greek banks in all sectors, and further penetration of banking services in the economic activity of households and enterprises”.
In reference to the position of the domestic banking system in the broader EuroZone environment, Eurobank’s CEO stressed the strong position and robustness of Greek banks, underlining that ROE of the five major Greek banks reached 14.4% for 2004, that is 2.5% higher than the ROE of Eurozone banks. Moreover, Greek banks enjoy superior capital adequacy and ROA compared to Eurozone banks. The five major Greek banks are also more efficient than Eurozone banks, as shown by their cost to income ratio, which stood at 57.4% for the fiscal year 2004.
The Bank’s Chairman, Mr. Xenofon Nikitas, referring to the same topic, remarked that the rating of Greek credit institutions compared to that of Eurozone banks represent a “positive statement on our credit system that competes at par, or even from a superior position, with similar European and international institutions. Our credit system, for its greater part at least, is strong and it is not by chance that it achieves high ratings from international investment banks. This is also reflected in the trust which international investors place on our securities”.  In this environment, Mr. X. Nikitas added, Eurobank has reinforced its market position to such an extent that nowadays “it is not only a powerful financial group in Greece, nor is it only one of the major pillars of domestic economic growth; Eurobank is one of the main contributors to economic developments in Southeastern Europe”.
Commenting on developments in the domestic economic environment, Eurobank’s CEO, Mr. Nanopoulos stated that: “This overall positive image of the Greek banking system has been lately overshadowed by a relatively less benign entrepreneurial climate, given that some sectors and individual enterprises are in financial hardship, and thus not in a position to service their debts – these need to be dealt with swiftly and efficiently.” He stressed that: “the aim is to limit this phenomenon to isolated cases”. To achieve this, banks should undertake in due time “a creative role, leading restructuring initiatives with the active and responsible participation of businessmen; this will help enterprises to find both a safe way out and a new growth perspective”.  As Mr. Nanopoulos said: “Greek banks must be set towards reinforcing healthy business activity and detecting the real dynamics of an enterprise, beyond a difficult conjuncture” while it is obvious that by implementing modern risk management systems, they can prevent negative developments and protect their portfolios.  On this topic he concluded: “At Eurobank, besides employing strict and modern risk management systems, we have adopted a differentiated approach to corporate customers, aiming to become their partners and consultants by offering an integrated range of services and not merely grant loans”.
Commenting on the developments in the domestic credit system and on the problems some banks are possibly facing, Mr. Nanopoulos also referred to the banks’ pension issue, stressing that Eurobank “is not a priori against the development and implementation of a unified solution to the banks’ pension issue, provided that this solution satisfies some basic criteria, such as transparent terms, an appropriate form for the new pension fund, a relatively balanced cost allocation between the banking system and the Greek tax payer, and minimum impact on fair competition”. Mr. Nanopoulos said: “We are opposed to proposals that disproportionately burden Social Security (Ι.Κ.Α.), the public sector and consequently the Greek tax payer with restructuring and financing the banking deficits; particularly when at the same time these proposals make the burden even greater, as they offer settlements in favour of certain banks, by reducing their contribution. We reckon these solutions alter the rules of fair and healthy competition to the advantage of specific enterprises. In any case, we believe that Greek citizens and tax payers should be informed in greater detail, depth and substance on such an important issue, considering that the initial estimates for the unfunded pension liabilities of the banking system are in the range of  €4 - 5 billion.”
Eurobank shareholders during the Annual General Meeting, approved the operating results for the financial year 2004 and the distribution of a total dividend of  € 0.72 per share.  Given that an interim dividend of € 0.30 per share has already been paid, the remaining amount (€0.42 per share) will be paid starting from 19th April 2005, while as from 6th April 2005 the shares will be trading ex-dividend.  The dividend is 20% higher than that for the financial year 2003, representing a yield of 2.8% at year-end prices. The total amount distributed as dividend for the financial year 2004 amounts to €226 million; it is the highest in the Greek banking system and corresponds to 61.4% of net earnings.  It is noteworthy that in 2004 Eurobank’s share achieved the highest return among all European banks, at 64.4%, against a 44.3% rise for the Greek banking sector index.
Referring to the course of the Group and of the Bank during 2004, Eurobank’s CEO described 2004 as a year “of further strong growth, significant profitability, successes in a wide range of activities and international distinctions. ”
Group net profit amounted to €368 million in 2004, up 35%, greatly exceeding the initial target pledged to shareholders for a 20% increase. The significant boost of profitability is attributed to the dynamic increase of Operating Income, spearheaded by Interest Income and Commissions, coupled with cost containment. The ROE reached 19.7%, exceeding the 18% target set for 2005.
In 2004 loans increased by 29.3% (on a comparable basis) at Group level and by 28.2% in Greece, i.e. by 11.7% higher compared to the average of the domestic Banking sector, which marked a 16.5% increase. Thus, Eurobank market share in loans increased by 1.2% reaching 15%.  The strong growth rates in 2004 have been translated in very satisfying market shares in the most attractive sectors, in terms of potential and profitability, such as consumer credit (30%), small business lending (33%), mortgage lending (12.5%), mutual funds (35.2%) –excluding money- market mutual funds  – brokerage services (15.3%) and insurance services (16%). In the sector of asset management, Eurobank’s position was reinforced by 18%, with assets under management exceeding €30 billion. The strong increase of operations led to the rise of total operating income by 22% to €1.5 billion. At the same time, cost containment was attained, with operating expenses rising by 5.2% for the activities in Greece and by 8.4% at Group level. Thus, in 2004, the cost to income ratio stood at 46.5% for Greece and 49.1% at Group level, a performance that places Eurobank among the most efficient banks world - wide. For 2004, Eurobank had the lowest percentage of NPLs among the five largest Greek banks. Total NPLs as a percentage of average loans decreased to 2.9% at the end of December 2004, from 3.3% in 2003, while organic NPLs decreased to 2.5%. Moreover, the Bank follows a strict provisioning policy in order to safeguard its asset quality against possible future risks. New provisions correspond to 105 basis points on the average loan portfolio in 2004, while non-performing loans are 87% covered by provisions. This, combined with the high quality of the loan portfolio, insures the Bank against future risks. At the same time, Eurobank’s capital adequacy remains strong. At the end of 2004, shareholders equity amounted to €1.9 billion.  The Total Capital Adequacy ratio stood at 10.6%, while Tier I ratio amounted to 8.8%.
With respect to its expansion in the South-Eastern Europe - Eurobank has approximately 300 branches and employs over 4,500 staff in Bulgaria, Romania and Serbia - the conditions for further enlargement and growth are being set in order to deliver a contribution of at least 20% of the Group’s net earnings in 2009 from the activities in these countries.
In conclusion, Mr. Nanopoulos stressed that given the apparent positive prospects, Eurobank’s Management has committed itself to achieve the following targets at Group level for the period 2005-2006:
  • Net Profit of at least €450m. in 2005
  • Annual Earnings Per Share (EPS) growth to exceed 23%  and
  • Annual Dividend Per Share (DPS) growth of over 15%
These targets , will be achieved on the back of:
  • Annual Revenue growth exceeding 15%Annual increase of income over 15%
  • Cost /Income ratio  below 48% at Group level and below 46% for the activities in Greece in 2006 and
  • Return on Equity (ROE) to exceed 20% in 2006

The new targets, said the CEO, are ambitious, but attainable; and he concluded: “Trusting in the capability of our institution and the skills of our people, while remaining firmly aligned with the Bank’s strategy, we shall work hard in order to achieve them.”

The General Meeting approved the proposal for the Bank for the acquisition of own shares, for a period up to twelve months as of the date of the relevant resolution, at once or partially, at a maximum purchase price of €27.09 per share and a minimum purchase price of €5 per share. The total number of own shares held by the Bank at any time may not exceed 5% (approximately 15,700,000 shares) of the total number of shares.