Post by Bozur on Apr 10, 2005 3:09:15 GMT -5
Banks growing at rapid clip
Strong retail operations spearheaded a 13.8 percent rise in net income of the ‘big five’ last year
The banking sector enjoyed a year of strong growth in 2004. Spearheaded by the rise in household credit, banks surpassed expectations in most cases.
Credit expansion continued apace, income rose by more than twice the increase in expenses, and expansion in the Balkans has already started bearing fruit, raising expectations higher.
In total, the five largest banks (National, Alpha, Eurobank, Emporiki and Piraeus) posted net profits of 1.24 billion euros in 2004, up by 13.86 percent on 2003. In fact, the big five’s profits were even greater as the image of 2004 was somewhat shadowed by two elements. One was the large voluntary retirement program of the National Bank of Greece, which reduced its profits by 109 million euros. The second was the sanitization and reorganization program of Emporiki Bank, which ended the year in the red.
The results of Emporiki are the sole exception to the general picture. The bank was not able to raise its meager income, while expenses increased at an alarmingly high rate. While in 2003 expenses covered 75.2 percent of income, in 2004 they covered as much as 83 percent, when Eurobank and Alpha were below 50 percent.
Emporiki’s dormant state and its continuous loss of market share were the main elements that drove the new management in its policy: Dozens of mergers were completed, the bank has abandoned non-profitable investments and markets, and the credit portfolio has been sanitized.
In turn, National, Alpha, Eurobank and Piraeus recorded remarkable performances, as their two main sources of income — interest and commissions — showed a highly satisfactory rise. Despite the rising trend of the stock market in 2004, the contribution of trading gains to total income thankfully remained small: 6 percent at National, 4.6 percent at Alpha, 3.6 percent at Eurobank, 2 percent at Emporiki and 11.8 percent at Piraeus.
In net interest income, which contributes about 70 percent of total revenue, EFG Eurobank-Ergasias stood out, closing the year with an impressive 22.2 percent rise, thanks to its strong presence in the profitable consumer credit sector, where its loans outweigh even those of National.
Alpha Bank recorded the highest rate of increase from commissions, the second main income source (contributing 23.1 percent of the total). Yet Alpha’s “secret weapon” was its expansion into the retail sector, where results have begun to appear, and in the coming years it is expected to make a huge difference in the bank’s results. Its managers express certainty that the bank’s share price will rise significantly over the next three years.
Piraeus also expanded fast, threatening Emporiki’s fourth spot, having already overtaken it in some categories such as business credit. The strengthening of its branch network in Attica created expectations for Piraeus’s higher growth rate in the following years.
Retail expansion has been the driving force for National, too, whose active involvement in domains where it used to have a limited presence, such as consumer credit, has worried its competitors. Retail lending showed a 29 percent rise in 2004 compared to the year before, now comprising 53 percent of the total loan book. Last year may have been burdened by the voluntary retirement program, but from this year National will save 70 million euros annually due to staff reductions.
The big discrepancy in banking profits came from loans to the wider public, as their margins were more than double those issued to companies. At end-December 2004 the interest margin was close to 8 percent for consumer credit, while loans to big and medium-sized enterprises had a margin close to 1.85 percent.
Loans to smaller enterprises were another source of profits, with a margin close to 5 percent, as these loans have more in common with retail lending than with business credit.
Interest abroad
Foreign investors have greeted the 2004 results in the banking sector with great interest. After all, it is they who controlled these stocks in the market over the last three years. On the contrary, domestic investors remained outside, as did domestic institutionals, whose weight has been drastically reduced in the last couple of years.
The market has proved skeptics wrong almost daily, taking the sector’s stocks higher and higher despite the great profits of the 2003 and 2004 period. Prior to the 2004 results announcements, foreign rating agencies had flooded investors in Greece and abroad with reports that praised domestic banks’ advantages. After the publication of results a new flood of reports has come, raising target-prices to even higher levels.
The truth is that the domestic banking sector has a very strong development history. The scope for further credit expansion is great as nearly all lending indices related to the gross domestic product have been at levels that are considerably lower than in the rest of the EU.
The other factor that has made the difference for Greek banks is their expansion in the Balkans. Jubanka, recently purchased by Alpha, is a good example: It currently holds a position in Serbia reminiscent of Alpha in Greece in 1970, making foreigners speculate that in 20 years Jubanka (and other Greek investments in the Balkans) will be in Serbia what Alpha is in Greece nowadays.
On the other hand, one should not forget that foreign agencies mainly sell, so today they advertise, possibly in excess, the shares of Greek banks they intend to sell to their clients. Further, Greece will complete dozens of “corporate agreements” in 2005 such as the listing of the Postal Savings Bank, the offering of more state shares (in OPAP, PPC, Piraeus Port Authority and others), bringing business to the foreign agencies business to the tune of millions of euros.
www.ekathimerini.com/4dcgi/news/content.asp?aid=53689
Strong retail operations spearheaded a 13.8 percent rise in net income of the ‘big five’ last year
The banking sector enjoyed a year of strong growth in 2004. Spearheaded by the rise in household credit, banks surpassed expectations in most cases.
Credit expansion continued apace, income rose by more than twice the increase in expenses, and expansion in the Balkans has already started bearing fruit, raising expectations higher.
In total, the five largest banks (National, Alpha, Eurobank, Emporiki and Piraeus) posted net profits of 1.24 billion euros in 2004, up by 13.86 percent on 2003. In fact, the big five’s profits were even greater as the image of 2004 was somewhat shadowed by two elements. One was the large voluntary retirement program of the National Bank of Greece, which reduced its profits by 109 million euros. The second was the sanitization and reorganization program of Emporiki Bank, which ended the year in the red.
The results of Emporiki are the sole exception to the general picture. The bank was not able to raise its meager income, while expenses increased at an alarmingly high rate. While in 2003 expenses covered 75.2 percent of income, in 2004 they covered as much as 83 percent, when Eurobank and Alpha were below 50 percent.
Emporiki’s dormant state and its continuous loss of market share were the main elements that drove the new management in its policy: Dozens of mergers were completed, the bank has abandoned non-profitable investments and markets, and the credit portfolio has been sanitized.
In turn, National, Alpha, Eurobank and Piraeus recorded remarkable performances, as their two main sources of income — interest and commissions — showed a highly satisfactory rise. Despite the rising trend of the stock market in 2004, the contribution of trading gains to total income thankfully remained small: 6 percent at National, 4.6 percent at Alpha, 3.6 percent at Eurobank, 2 percent at Emporiki and 11.8 percent at Piraeus.
In net interest income, which contributes about 70 percent of total revenue, EFG Eurobank-Ergasias stood out, closing the year with an impressive 22.2 percent rise, thanks to its strong presence in the profitable consumer credit sector, where its loans outweigh even those of National.
Alpha Bank recorded the highest rate of increase from commissions, the second main income source (contributing 23.1 percent of the total). Yet Alpha’s “secret weapon” was its expansion into the retail sector, where results have begun to appear, and in the coming years it is expected to make a huge difference in the bank’s results. Its managers express certainty that the bank’s share price will rise significantly over the next three years.
Piraeus also expanded fast, threatening Emporiki’s fourth spot, having already overtaken it in some categories such as business credit. The strengthening of its branch network in Attica created expectations for Piraeus’s higher growth rate in the following years.
Retail expansion has been the driving force for National, too, whose active involvement in domains where it used to have a limited presence, such as consumer credit, has worried its competitors. Retail lending showed a 29 percent rise in 2004 compared to the year before, now comprising 53 percent of the total loan book. Last year may have been burdened by the voluntary retirement program, but from this year National will save 70 million euros annually due to staff reductions.
The big discrepancy in banking profits came from loans to the wider public, as their margins were more than double those issued to companies. At end-December 2004 the interest margin was close to 8 percent for consumer credit, while loans to big and medium-sized enterprises had a margin close to 1.85 percent.
Loans to smaller enterprises were another source of profits, with a margin close to 5 percent, as these loans have more in common with retail lending than with business credit.
Interest abroad
Foreign investors have greeted the 2004 results in the banking sector with great interest. After all, it is they who controlled these stocks in the market over the last three years. On the contrary, domestic investors remained outside, as did domestic institutionals, whose weight has been drastically reduced in the last couple of years.
The market has proved skeptics wrong almost daily, taking the sector’s stocks higher and higher despite the great profits of the 2003 and 2004 period. Prior to the 2004 results announcements, foreign rating agencies had flooded investors in Greece and abroad with reports that praised domestic banks’ advantages. After the publication of results a new flood of reports has come, raising target-prices to even higher levels.
The truth is that the domestic banking sector has a very strong development history. The scope for further credit expansion is great as nearly all lending indices related to the gross domestic product have been at levels that are considerably lower than in the rest of the EU.
The other factor that has made the difference for Greek banks is their expansion in the Balkans. Jubanka, recently purchased by Alpha, is a good example: It currently holds a position in Serbia reminiscent of Alpha in Greece in 1970, making foreigners speculate that in 20 years Jubanka (and other Greek investments in the Balkans) will be in Serbia what Alpha is in Greece nowadays.
On the other hand, one should not forget that foreign agencies mainly sell, so today they advertise, possibly in excess, the shares of Greek banks they intend to sell to their clients. Further, Greece will complete dozens of “corporate agreements” in 2005 such as the listing of the Postal Savings Bank, the offering of more state shares (in OPAP, PPC, Piraeus Port Authority and others), bringing business to the foreign agencies business to the tune of millions of euros.
www.ekathimerini.com/4dcgi/news/content.asp?aid=53689