ANNUAL REPORT 2007 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 Contents
1 GROUP FINANCIAL HIGHLIGHTS 2 NOTICE OF ANNUAL GENERAL MEETING 3 BOARD OF DIRECTORS AND GENERAL MANAGEMENT 6 CHAIRMAN’S STATEMENT 10 CHIEF EXECUTIVE OFFICER’S REVIEW 16 REVIEW OF GROUP OPERATIONS 40 REPORT OF THE BOARD OF DIRECTOS FOR THE YEAR 2007 46 BOARD OF DIRECTOS’ REPORT ON CORPORATE GOVERNANCE FOR THE YEAR 2007 60 REMUNERATION POLICY REPORT 66 INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF HELLENIC BANK PUBLIC COMPANY LIMITED 68 CONSOLIDATED INCOME STATEMENT 69 CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE 70 CONSOLIDATED BALANCE SHEET 71 CONSOLIDATED CASH FLOW STATEMENT 72 INCOME STATEMENT 73 STATEMENT OF RECOGNISED INCOME AND EXPENSE 74 BALANCE SHEET 75 CASH FLOW STATEMENT 76 NOTES TO THE FINANCIAL STATEMENTS 139 DECLARATION BY THE MEMBERS OF THE BOARD OF DIRECTORS AND THE COMPANY OFFICIALS RESPONSIBLE FOR THE DRAFTING OF THE FINANCIAL STATEMENTS 144 MAIN SUBSIDIARY COMPANIES 145 OFFICES AND BRANCHES 151 SHAREHOLDER INFORMATION AND INVESTOR RELATIONS WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 ANNUAL REPORT 2007 ANNUAL REPORT
Group Financial Highlights HELLENIC BANK GROUP
2007 2006 2005 2004 2003
CUSTOMER DEPOSITS AND OTHER CUSTOMER ACCOUNTS
Cí million 3.430,0 3.110,6 2.502,8 2.084,7 1.927,6
ú million 5.860,5 5.314,7 4.276,3 3.561,9 3.293,5
LOANS AND ADVANCES
Cí million 2.395,6 1.949,2 1.666,9 1.627,6 1.548,5
ú million 4.093,1 3.330,4 2.848,1 2.780,9 2.645,8
BALANCE SHEET TOTAL
Cí million 4.306,1 3.797,6 3.080,6 2.685,8 2.504,9
ú million 7.357,3 6.488,6 5.263,5 4.588,9 4.279,8
CAPITAL RESOURCES
Cí million 307,2 212,5 165,3 141,0 158,3
ú million 525,0 363,1 282,4 241,0 270,5
GROUP OPERATING PROFIT BEFORE PROVISIONS FOR IMPAIRMENT OF LOANS AND ADVANCES
Cí million 96,8 64,1 32,4 29,5 24,1
ú million 165,3 109,6 55,3 50,4 41,2 1 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 Notice of Annual General Meeting
Notice is hereby given that the 34th Annual General Meeting of the HELLENIC BANK PUBLIC COMPANY LIMITED will be held at the registered office of the Bank, corner Limassol Avenue & 200 Athalassa Avenue, Strovolos - Nicosia, on Wednesday 28th May 2008 at 5:30 p.m.
Agenda 1 To consider and approve the Directors’ Report for the year ended 31st December 2007.
2 To consider and approve the Accounts and the Auditors’ Report thereon for the year ended 31st December 2007.
3 To declare the final dividend for the year 2007.
4 To elect Directors in the place of those retiring.
5 To approve the Remuneration Policy Report and to fix the remuneration of the Directors.
6 To re-appoint the Auditors and fix their remuneration.
By order of the Board, PIERIS TH. THEODOROU Company Secretary
Nicosia, 26 March 2008.
Every shareholder having the right to be present and vote at the above Meeting is entitled to appoint a Proxy, whether shareholder or not, to be present at the meeting and vote on his/her behalf. The relative instrument of proxy must be drawn in accordance with the provisions of Article 83 of the Articles of Association of the Hellenic Bank Public Company Ltd and must be deposited at the registered office of the Bank, corner Limassol Avenue & 200 Athalassa Avenue, 2025 Strovolos - Nicosia, not later than 48 hours before the time fixed for the Meeting. The proxy so appointed does not have to be a shareholder of the Bank in his/her own right.
At its meeting on 28th February 2008, the Board of Directors of the Company decided to propose for approval Monday, 9 June 2008 as the ex-dividend date. Consequently, transactions that take place until Friday, 6 June 2008 (inclusive), will be eligible to receive the dividend. The dividend, will be paid to eligible shareholders on Monday, 7 July 2008, provided that it is approved by the Annual General Meeting.
2 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 ANNUAL REPORT 2007 ANNUAL REPORT
Board of Directors and General Management
BOARD OF DIRECTORS OF HELLENIC BANK PUBLIC COMPANY LTD HELLENIC BANK GROUP Andreas P. Panayiotou, CHAIRMAN Andreas M. Moushouttas, VICE-CHAIRMAN Iacovos G. Iacovou Antonis I. Pierides Demetris J. Eliades Soteris Z. Kallis, Senior Independent Director Charalambos P. Panayiotou Ioannis Ch. Charilaou Georgios K. Pavlou Kyriakos E. Georgiou Makis Keravnos Pieris Th. Theodorou (appointed on 12.10.2007) Kyriacos I. Droushiotis (appointed on 08.01.2008)
CHIEF EXECUTIVE OFFICER Makis Keravnos
GENERAL MANAGEMENT OF THE HELLENIC BANK GROUP Ioannis N. Epaminondou, Chief General Manager (until 31.12.2007) Pieris Th. Theodorou, General Manager Georgios Chr. Papadopoulos, General Manager (until 31.12.2007) Marios Clerides, General Manager Glafkos G. Mavros, General Manager (as from 01.01.2008) Thomas P. Stylianou, General Manager (as from 01.01.2008) Michalis Tagaroulias, Chief General Manager Greece (until 14.03.2007) Nearchos Marangos, General Manager Greece
GROUP CHIEF FINANCIAL OFFICER George V. Appios (until 31.12.2007) Antonis Rouvas (as from 01.03.2008)
AUDITORS KPMG
LEGAL ADVISERS Costas Ch. Velaris Alecos F. Markides
SECRETARY Pieris Th. Theodorou
REGISTERED OFFICE Corner Limassol Avenue & 200 Athalassa Avenue, 2025 Strovolos, P. O. Box 24747, 1394 Nicosia, Cyprus 3 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 BOARD OF DIRECTORS WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 Chairman’s Statement
Dr Andreas Panayiotou CHAIRMAN
Dear Shareholders,
I communicate with you once again to inform you of The results of 2007 have been achieved thanks to the the Group's results for the year ended 31 December, hard work of the people of Hellenic Bank, whom I 2007. congratulate and thank warmly.
It is with pleasure that I can say the financial year 2007 First and foremost I congratulate the Chief Executive was generally acknowledged as an excellent year for Officer, Mr. Makis Keravnos, and the group of Executive the Cyprus economy and for our Group. Especially for Officers around him for the careful planning and Hellenic Bank, the year that passed was particularly concerted effort they put in, providing guidance and successful both in terms of our performances and in inspiration to the staff of the Group. promoting our key strategic objectives. The results of 2007 did not only come about from the Profit attributable to shareholders more than doubled favourable economic conjuncture. They were a result of compared to the corresponding period in 2006, reaching the systematic effort made in recent years to create a Cí77 million (ú133 million). Particularly satisfying was strong base for the Group. The strategy set by the Board the increase in the key figures of the Group (deposits of Directors and Senior Management created a flexible and loans), while the important cost to income ratio and robust Organisation, which succeeded in taking full also recorded a notable improvement. advantage of the favourable conjuncture on offer.
The very good results have enabled the Board of Additionally, in surpassing the economic targets and Directors to propose to the Annual General Meeting indicators that we set, the Group proceeded with the a final dividend for 2007 amounting to ú0,11 per implementation of its strategic planning, laying the share (approximately Cí0,06 per share). The final groundwork for further progress. dividend together with the interim dividend of Cí0,05 per share (about ú0,09) paid in October 2007, When we started with our first Three Year Strategic raises the total dividend for 2007 to ú0,20 (Cí0,11) Plan, we set three objectives: Profitability, Growth and per share. Quality of Service. 6 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 ANNUAL REPORT 2007 ANNUAL REPORT
HELLENIC BANK GROUP
The goal of profitability has now been achieved, while The Hellenic Bank Group is a vibrant Organisation which we have laid the foundations for stable profit-making fulfils its potential thanks to the support and trust from in the future. its customers, shareholders and supporters. It is to them who we owe our success. We thank them and promise The growth of the Group, which was our second to continue our effort. medium-term strategic objective, has begun to yield its first results. We have already begun developing As an Organisation that is based and operates in Cyprus, our branch network in Greece, while the further it is natural that we care about the country. We are proud internationalisation of the Group is being implemented because we are a socially active body that recognises through the planned opening of our first branch in the and accepts fully its Corporate Social Responsibility. Russian capital in 2008. Within our economic capabilities, we give our support The third pillar of our strategy focuses on ensuring the to sport, culture, the environment and society. quality of service we offer. Exemplary service is an Recognising the importance and obligation we have important strategic advantage that we have and which to contribute to the society which supports us, we we are determined to preserve. have announced a number of important initiatives in this area. To that end, we have already drawn up an ambitious programme of quality development which we are At the initiative of the Group's Executive Management, implementing throughout the whole Organisation. we use our Head Office building as a place for events The aim is to obtain the European Quality of and exhibitions in which we host various bodies and Excellence for the whole Group within the current organisations that contribute to our country. three-year plan. Our objective is to make Hellenic Bank synonymous with the best possible service, We have supported dozens of significant events in order combining professionalism with a friendly, human and to reinforce the social, cultural and charitable activities personal approach. on our island. 7 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 We were at the vanguard of efforts to improve and open nature of our economy in conjunction with the protect the environment, supporting the project for accession of Cyprus to the European Union and the appointing Ecological Schools, now numbering 280 Eurozone, have made the island an integral part not schools across the free areas of Cyprus. only of the European family but also of the international economy. Thus, the turmoil in international markets We created institutions such as the Christmas concert and the slowdown of the world economy in recent in cooperation with excellent partners who share our months is expected to have some kind of an impact on vision for a better Cyprus, for us and our children. the economy of Cyprus. The Head Office and Senior Management of the Bank are monitoring closely Finally, sympathising with collective Hellenism, we aided international developments. They remain constantly in the effort to heal the wounds of our brothers and alert and adjust their plans accordingly. sisters in the fire-ravaged Peloponnese. But I am optimistic that the targets we have set will Dear shareholders and friends, be met with the hard and coordinated work of the Management and personnel. I am also confident that This is the essence of our Group. A vibrant Organisation with the diligence, zeal, dedication and commitment expanding internationally on solid foundations, which that characterises the people of Hellenic Bank, we will does not forget its roots but also the responsibility it achieve the goals we have set for the three-year period has towards the country that supported it in the past 2008-2010. and continues to do so in the present. In conclusion, I would like once again to express my In closing, I would like to refer to developments in the sincere thanks to the Chief Executive Officer, Mr. Makis international economy in recent months. International Keravnos, to the Members of the Board of the Bank economic developments, both positive and, and its subsidiary companies and to the Members unfortunately, negative, increasingly affect the Cyprus of the Committees of the Board for the excellent and economy when compared to the past. The small and productive cooperation. I thank again our shareholders 8 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 ANNUAL REPORT 2007 ANNUAL REPORT
HELLENIC BANK GROUP
and customers for their trust in the Group and I assure them that the Board of Directors and Management of the Group are making every effort to meet their expectations. Finally, I would like to thank once again the Management and staff of the Group who make up the heart and soul of our Organisation.
Dr Andreas P. Panayiotou Chairman
Nicosia, 26 March, 2008
9 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 Chief Executive Officer’s Review
Makis Keravnos CHIEF EXECUTIVE OFFICER
Dear Shareholders,
2007 was a year of significant results for the Group, ñ The systematic preparation for growth in Cyprus, characterised by a substantial increase in profits, increased Greece and Russia productivity and greater financial indicators of the Group in general. ñ The flexibility of the Group and its ability to evaluate correctly and utilise emerging opportunities FINANCIAL YEAR 2007 The Group’s results for the year ended 31 December 2007 Total net income increased substantially by 25%, are considered more than satisfactory. Profit attributable reaching the amount of Cí187,6 million (ú320,5 million). to shareholders for the year 2007 exceeded Cí77 million This significant increase is due to the substantial (ú133 million) and more than doubled compared to the increase in the interest income, despite intense corresponding last year period, increasing by 129%. Profit competition, the growth of our loan portfolio with no from ordinary operations before provisions registered a deviation from our lending criteria, and the increase of significant increase of 51%, reaching Cí96,8 million the non-interest income. Simultaneously, significant (ú165,3 million) compared to Cí64,1 million (ú109,6 containment of expenses was achieved due to million) in 2006. The outstanding profitability for the appropriate planning, the establishment of audit policies, year shows the Group’s operational robustness and its the utilisation of synergies and economies of scale, the ability to fully utilise the favourable economic conjuncture proper utilisation of the personnel and the internal and the opportunities presented. reorganisation. As a result, cost to income ratio for 2007 registered an improvement at 48,9% compared to The major characteristic of the year was the significant 58,9% for 2006. increase of the basic financial indicators of the Group which is attributed to the following: The Branch Network in Greece improved its loan portfolio quality, increased operations and attracted new ñ The hard work of the previous years customers; at the same time reorganisation and restructuring continued. Due to the pressure on interest ñ The focused strategy followed margins for loans from competition and the continuing 10 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 ANNUAL REPORT 2007 ANNUAL REPORT
HELLENIC BANK GROUP
crisis in the interbank market the profitability of the significantly to further strengthening efforts to create year was negatively affected. The Group aims to further a culture of quality, as well as to enhance the customer expand the operations of the Branch Network in Greece oriented approach of Business Units; these parameters and achieve profitability. constitute the central pillars of the Group’s Corporate Strategy. Recognising the importance of quality service In view of the successful operations of the Repre- as a significant strategic target, the Group decided to sentative Offices in Moscow and South Africa since their concentrate its efforts on preparing the Bank in its establishment in 1998, the Bank decided to expand entirety for accreditation at the second level of the the network by setting up two new Offices in Saint EFQM. This ambitious target is expected to materialise Petersburg and Kiev. At the same time, preparation for in about ten years. the opening of a subsidiary bank in Russia is proceeding. Regarding the Group’s efforts for continuous professional In 2007, Hellenic Bank continued to widen the training and development of its personnel, the training range of its products, covering fully the needs of its programme was completed with success. The aim of customers, individuals and businesses. New flexible the programme was to respond and incorporate products were launched, adapted to the needs and developments in the banking sector, while providing preferences of the customers in every stage of their employees with the opportunity to participate in lives; at the same time existing products and services programmes related to their duties in order to improve were upgraded. their knowledge and further develop their skills.
The implementation of the European Foundation for STRATEGIC GOALS Quality Management Model, known as EFQM continued Both the strategy and targets set for 2007 have been successfully. Three more Banking Units, the Branch achieved. Among others, the following have been achieved: Networks in Limassol, Paphos and North Greece were accredited with this award. The experience gained ñ Significant expansion of business and income in by the members of staff of these Units contributes all key sectors 11 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 ñ Smooth transition to the euro, thanks to the right The strategic focus for 2008 is based on the following: preparation of all the Units of the Group ñ Further expansion of the Branch Network in ñ Improvement of the Group’s efficiency through Greece, business development and attainment of increased productivity, and effective control of expenses profit target
ñ Satisfactory progress in matters of implementation ñ Further strengthening of the International Business of the new Basel II framework and the MiFID Directive Division, combined with the commencement of banking operations in Russia and expansion of our According to the Group’s set policy, upon completion of presence in other countries of Eastern Europe the fiscal year 2007, the feedback procedure and review of the Strategic Plan commenced, taking 2007 as the base ñ Utilisation of the expected excess liquidity and year and extending the planning horizon to include 2010. development of the Investment Services and the As a result, the Plan covers the three year period 2008- Retail Banking Division 2010. Market and financial conditions were taken into account, putting special emphasis on the multiple challenges CHALLENGES AND PROSPECTS FOR 2008 and opportunities for growth both in Cyprus and abroad. In 2008, the Group has to face challenges with regard to the institutional framework and the competitive The targets of the Three Year Plan 2008-2010 include environment. Specifically, there will be continued the following: implementation of the new Basel II accord and the second phase of the Single Euro Payments Area (SEPA). ñ Expansion of business Regarding the competitive environment, the Group will have to face the new interest rate regime, which ñ Steady profitability resulted from the entry into the Eurozone as well as the ongoing crisis in the interbank market and the continuous ñ Continuous upgrading of the quality of service intense competition. 12 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 ANNUAL REPORT 2007 ANNUAL REPORT
HELLENIC BANK GROUP
As with every organisation, Hellenic Bank is inevitably trust and support, which encourages us to continue affected by international economic developments. We the hard work and our devotion to greater success. are aware that these developments will also have consequences on the Cyprus economy and we are constantly alert. We examine the international and local economies and we adjust our actions with great attention. Makis Keravnos Given the international crisis on the interbank market, Chief Executive Officer the loss of income from adoption of the euro, the reduction of the basic interest rate and the fact that Nicosia, 26 March, 2008 2007 was a specially good year, with the possibility of a repeat being remote for the time being, the prospects of the Group are encouraging, based on our intensified efforts. The focus on the continuing improvement of the quality of service combined with the targeted growth in Greece and Russia and in other specific sectors ensures a steady upward path for the Group. These support, at the same time, business growth for the benefit of the Group’s shareholders and personnel.
I express my warm thanks to the Chairman and Members of the Board for their fruitful cooperation and valuable guidance. I also thank all the staff for its contribution to the Group’s success and growth as well as our shareholders and customers for their 13 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 RUSSIA
UKRAINE
GREECE
CYPRUS
SOUTH AFRICA
WE STRENGTHEN OUR PRESENCE ABROAD BY EXPANDING OUR BUSINESS ACTIVITIES. DRIVEN BY OUR FIRM COMMITMENT TO CORPORATE SOCIAL RESPONSIBILITY, WE ENHANCE OUR PLANS WITH SOCIAL AND ENVIRONMENTAL ACTIVITIES FOR THE BENEFIT OF THE SOCIETY WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 REVIEW OF GROUP OPERATIONS WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 Review Of Group Operations
FINANCIAL RESULTS 2007 results, the decrease in net interest rate margins as a The year 2007 was an outstanding year for the Hellenic result of competition as well as the continuing crisis in Bank Group. Profit attributable to shareholders for the year the interbank market have adversely affected the 2007 exceeded Cí77 million (ú133 million) and has more profitability for the year. Given also the relatively small than doubled compared to the corresponding last year sizes, Greece results for the year before taxation show period (increase of 129%). Profit from ordinary operations a loss of Cí3 million (ú5,1 million) compared to a loss before provisions registered a significant increase of 51%, of Cí4,4 million (ú7,5 million) for 2006. reaching the amount of Cí96,8 million (ú165,3 million) compared to Cí64,1 million (ú109,6 million) in 2006. Equity attributable to the shareholders of the Bank increased significantly by 45% reaching the amount of Cí307,2 million Total net income increased substantially by 25% reaching (ú524,9 million), compared to Cí212,5 million (ú363,1 the amount of Cí187,6 million (ú320,5 million) million) in 2006. During 2007, shareholders’ equity was compared to Cí150,1 million (ú256,4 million) in 2006. strengthened by Cí28,8 million (ú49,2 million) following At the same time, the increase in total expenses was the exercise of Share Warrants that expired on 30 November limited to 4%, reflecting the Group’s systematic effort 2007 and by the reinvestment of dividends amounting towards increasing its income as well as restraining to Cí17,5 million (ú29,9 million). The return on equity expenditure. The result of this effort is demonstrated of the Group for the year 2007 reached 30,0%, exceeding by the low level of the cost to income ratio of 48,9% significantly the target of 25,1% set in August 2007. for 2007 compared to 58,9% for 2006. The Board of Directors of the Bank, considering the The successful completion of the Public Offer to the results for the year, decided to propose at the Annual shareholders of Athena Cyprus Public Company Ltd resulted General Meeting of the shareholders the payment of a in profits of Cí4 million (ú6,8 million) in respect of negative final dividend for the year 2007 of ú0,11 per share goodwill that was recognised under non-interest income. (approximately Cí0,06 per share). The final dividend of ú0,11 (approximately Cí0,06 per share) together with Provisions for impairment of loans and advances were the interim dividend of Cí0,05 (approximately ú0,09) restricted to Cí7,5 million (ú12,7 million) and showed paid in October 2007, raise the total dividend for 2007 a substantial decrease of 67% compared to the to ú0,20 (Cí0,11) per share. corresponding amount in 2006. The decrease is mainly attributable to the continuing improvement of the DOMESTIC OPERATIONS quality of the loan portfolio, combined with the significant increase in collections from problematic customers. CORPORATE BANKING DIVISION The primary target of the Corporate Division is to foster Total customer advances increased by 23% reaching the and strengthen its business relations with its customers amount of Cí2,4 billion (ú4,1 billion) compared to which include large corporations, public companies and Cí1,9 billion (ú3,3 billion) in 2006, while customer semi-government organisations. Working in close co- deposits increased by 10% reaching the amount of operation with other Departments of the Group, it Cí3,4 billion (ú5,9 billion) compared to Cí3,1 billion provides integrated solutions, covering the whole range (ú5,3 billion) in 2006. of products and services offered by the Group.
The development of an expanded Branch Network in The Division offers a wide array of attractive packages, Greece, as a major strategic target of the Hellenic Bank including, among other services, Net Banking for Business, Group, was pursued further with the operation of the a wide range of insurance products, specialised packages first branch of Hellenic Bank in Larissa in October and that cater to high-ranking company officials, and company of the fifth branch in Thessaloniki in November 2007. In credit cards, as well as factoring and hire purchase facilities. February 2008 a new branch began operations in Patra. The excellent service offered by the Division's staff remains Even though the reorganisation and structural changes the cornerstone of its success. Its targets are met through in the Greece Branch Network rendered overall positive the consistent provision of friendly and efficient customer 16 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 ANNUAL REPORT 2007 ANNUAL REPORT
service as well as consulting services for the future needs 2002. Its primary aim is to offer competitive and continuously HELLENIC BANK GROUP of its customers, particularly following the introduction upgraded quality services which will fully satisfy its customers’ of the euro. banking requirements in a competitive and fast moving economic environment. The Division offers a wide range The main objective remains the effective handling of of services and specialised products to small and medium corporate proposals, enhanced by the support given and sized businesses that are active in all sectors of the quick decision-making of Senior Management where economy and to their owners and shareholders. necessary. The Division continued its excellent record during 2007 2007 was another successful year for the Corporate and achieved its targets for quality business development, Division highlighted by a substantial improvement in the improvement of the quality of its loan portfolio, the quality of its lending portfolio achieving a significant and the increase of its revenue from interest and other increase in interest income and other income. It marked sources, thereby contributing to the achievement of the a noticeable increase in its customer base through the Group’s increased profit. offering of services and lending facilities to large companies and corporations with activities both in Cyprus and abroad. The Division is staffed by qualified, highly trained and experienced Officers within the eight Business Centres, The Corporate Banking Division has set the following covering the whole of the free areas of Cyprus. Customers targets for 2008: have direct access to their Customer Relationship Officers who are specially trained and in a position to satisfy all ñ Increase further the lending portfolio with pioneer their banking needs from the wide range of the Group’s and flexible lending schemes products and services. The Division’s priority for efficient ñ Sustain the improved lending portfolio at very service to its customers is supported by advanced electronic high levels systems and modern technology which enables the ñ Continuously improve the level of customer service electronic preparation and approval of loan applications by the experienced and qualified Officers as well as the preparation of the relevant documentation. ñ Further increase and enrichment of products and The new loan automation system is continuously upgraded services offered bearing in mind the economic and improved in line with new technology and customers’ developments both locally and abroad, especially requirements, which increases effectiveness and efficiency after the introduction of the euro. in the loan application processing.
BUSINESS SERVICES DIVISION The Business Services Division’s priority, after the introduction The Business Services Division commenced operations in of the euro, is to achieve once again increased business ú million 7.357,3 ú million 6.488,6 ú million 5.860,5 ú million 5.314,7 ú million 5.263,5 ú million 4.588,9 ú million 4.279,8 ú million 4.276,3 Cí million 4.306,1 ú million 4.093,1 ú million 3.561,9 Cí million 3.797,6 ú million 3.330,4 ú million 3.293,5 ú million 525,0 ú million 363,1 ú million 270,5 ú million 282,4 ú million 241,0 ú million 2.848,1 ú million 2.780,9 Cí million 3.430,0 ú million 165,3 ú million 2.645,8 ú million 109,6 ú million 55,3 ú million 50,4 ú million 41,2 Cí million 3.110,6 Cí million 3.080,6 Cí million 2.685,8 Cí million 2.504,9 Cí million 2.502,8 Cí million 2.395,6 Cí million 307,2 Cí million 2.084,7 Cí million 212,5 Cí million 1.949,2 Cí million 165,3 Cí million 158,3 Cí million 141,0 Cí million 1.927,6 Cí million 96,8 Cí million 64,1 Cí million 32,4 Cí million 29,5 Cí million 24,1 Cí million 1.666,9 Cí million 1.627,6 Cí million 1.548,5 03 04 05 06 07 03 04 05 06 07 03 04 05 06 07 03 04 05 06 07 03 04 05 06 07 CUSTOMER DEPOSITS LOANS BALANCE SHEET CAPITAL GROUP OPERATING PROFIT AND OTHER AND ADVANCES TOTAL RESOURCES BEFORE PROVISIONS FOR CUSTOMER IMPAIRMENT OF LOANS 17 ACCOUNTS AND ADVANCES WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 development thus maintaining its high profitability. It the retail sector. The contribution of the Division to the also aims to introduce new products to its customers overall profitability of the Bank was substantial and to cover their needs within the new European environment beyond expectations. created after the introduction of the euro. During the year, the economy's booming housing market INTERNATIONAL BUSINESS DIVISION contributed largely to the increase of the Division’s loan The International Business Division played a key role in balances in the housing sector. Overall, increases were the overall success and profitability of the Group during recorded in all of the Division’s products such as the 2007. The rapid increase of operations, coupled with personal loans and the credit card portfolio. Due to the increased profitability contributed to the Division above increase, a significant improvement was achieved surpassing initial targets. This success was due to in the cross-selling ratio compared to previous years. the high quality of customer service offered by the International Business Centres, the staff's professionalism The continuous efforts to clear the Division's loan lending and the importance given by the General Management portfolio of non-performing accounts were very successful. to the expansion of the Division. The determining factor was the strict enforcement by the Division of the newly issued and stricter Central The accession of Cyprus to the European Union combined Bank mandates governing the acquisition of immovable with the increased number of double taxation agreements property in Cyprus. and the particularly favourable tax environment contributed to the rapid growth of international businesses operating Within the framework of continuously upgrading the in Cyprus. Hellenic Bank, which was already well-organised level of service to our customers, the human resources in this sector, benefited greatly from this development. of the branch network was enriched with newly hired qualified personnel. A special emphasis was placed on The success of the year that ended was based primarily customer service during the transitional period from the on the improvement in the level of service and Cyprus pound to the euro. A number of seasonal personnel professionalism of the officers and staff of the Division. were employed to help cope with the increased banking In 2007, particular emphasis was given to continuing needs of customers at that time. the education and training of staff, and improving operational efficiency through the upgrade of existing As a result of the coordinated efforts between the software and the installation of new software. It is worth Personal Banking Division and other Departments of mentioning the trilingual operation of Hellenic Net the Bank involved, the end of year change of national Banking with the adoption of the Russian language. currency was a complete success. The transitional phase from the Cyprus pound to the euro ran smoothly Key objectives of the Division for 2008 remain the and all the Central Bank Directives and the internal continued improvement of operational efficiency, the procedures of Hellenic Bank were adhered to. full satisfaction of all banking requirements of customers and continuous training and information for staff to The emphasis on staff training and technological provide a safe and speedy service to customers. upgrades was continuous throughout the year. The Division staff was trained on a wide range of issues, The International Business Division sends out a positive especially on matters concerning the introduction of image and plays an important role in the overall profitability the euro and the effect of the change of currency on of Hellenic Bank, as has been shown in recent years. our banking system. The staff was also trained on a number of issues involving quality improvements in their PERSONAL BANKING DIVISION personal and professional development. The year 2007 ended with outstanding indicators for the Personal Banking Division, far beyond initial expectations. The targets of the Personal Banking Division for 2008 It recorded impressive increases in both its deposit and continue to be the maintenance of its position in the lending numbers, despite the increased competition from ever increasing competitive banking sector, assimilation local banks and the entry of new competitor banks in of the new banking conditions within the Eurozone, 18 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 ANNUAL REPORT 2007 ANNUAL REPORT
cost containment, improvements in the loan portfolio In its efforts to achieve a better and safer handling of HELLENIC BANK GROUP and the increase of it’s customer base and market share. customer payments in euro, Hellenic Bank has utilised all payment platforms on offer in the European arena, TREASURY ACTIVITIES directly participating in all European platforms (such as The Treasury Department is responsible for the EBA, TARGET 2 and SEPA). management of the investment portfolio and the market and liquidity risks of the Group. It acts within the policy The technological upgrades and participation in and limits set by the Assets and Liabilities Management international payment platforms have given Hellenic Committee (ALCO). Bank the opportunity to substantially improve the quality of service in the field of international payments and to The activities of the Treasury Department continued enter into preferential cooperation agreements with successfully in 2007 despite the serious problems in foreign banks. This successful practice has ensured the international financial markets arising from the subprime Bank's ability to comply and continuously harmonise loans crisis in the United States. The Department, continuing with International Standards and respond directly to its relatively conservative investment policy of recent years, customers' requirements both in terms of pricing and did not have any direct investments in the above market in dealing with international cross-border payments. and consequently the Bank did not suffer severe losses. PRIVATE BANKING During 2007, a sizeable increase was noticeable in the In 2007, the Private Banking Service completed its second volume of operations of the Department in all fields of year of operation as an independent Service, since it activity, especially the foreign exchange from customer previously belonged to Hellenic Bank (Investments) Ltd. transactions where the contribution to the Department’s The 2007 results are considered particularly satisfactory profitability was very significant. with both profitability and global funds under management showing a sizeable increase compared to 2006. The role of the Department was also important in preparing the Bank for the smooth introduction of the The Personal Banking Service is a specialised service with euro. The Department concentrated, among other the primary objective of analysing the needs of prominent things, on the conversion of accounts, on procedural customers in Cyprus and abroad, efficiently allocating changes, on the electronic systems of the Department their investment portfolios while at the same time and the Bank in general and on continually informing maintaining high levels of discretion. The Service aims both the staff and customers. At the same time, new to create long-term relationships with customers that fields of activity were initiated and as a result the will achieve their investment objectives and hopefully Department was strengthened with new personnel while this will enable it to further increase its contribution to the existing staff was provided with additional training. the profitability of the Group.
During 2007, the final phase of evaluation and selection The Service provides access to a wealth of international of the Department’s new information technology system investment options, such as: was implemented while the first phase of a new project commenced that included the detailed determination ñ Mutual funds of renowned foreign companies such of the Department’s needs. as Credit Suisse and JP Morgan ñ Structured investment products including guaranteed FINANCIAL INSTITUTIONS capital products The priority of the Financial Institutions Department is ñ Financial services and access to shares and bonds to maintain and expand relations between the Hellenic traded on major markets abroad Bank Group and major international banking institutions. The objective of Hellenic Bank is to be in a position to Cyprus' accession to the Eurozone, the reduction in meet every need of its customer base, providing an interest rates and the broader investment choices are excellent and professional service through its wide expected to create increased demand for the services international network of correspondent banks. offered, creating excellent prospects for the Service. Its 19 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 WE SUPPORT EVERY CULTURAL INITIATIVE WHICH AIMS TO SPREAD OUR CULTURE AND TRADITIONS. WE ENCOURAGE AND OFFER EVERY SUPPORT TO THE CREATIVE EFFORTS OF OUR COUNTRY’S ARTISTS. THROUGH AN EXTENSIVE RANGE OF ACTIVITIES, WE ARE ENTHUSIASTICALLY PRESENT IN ALL AREAS OF CULTURAL LIFE WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 vision is to further strengthen through the restructuring During the annual evaluation of Custodians world-wide of its organisational structure, with the support of most Custodians operating in the Cyprus market either experienced staff and the creation of Private Banking with a local presence or remotely were evaluated. The Units in other cities of Cyprus to provide a comprehensive Custodian Services Unit of Hellenic Bank was the only service to its Cypriot and foreign customers. one awarded the highest possible distinction of “Top Rated” Custodian. CUSTODIAN SERVICES Year 2007 proved to be very successful for the Bank's HELLENIC BANK (INVESTMENTS) LTD Custodian Services. The Custodian Services Unit significantly 2007 was yet another exceptional year for Hellenic Bank expanded its customer base and increased its income. (Investments) Ltd. As far as the financial results are Through clear objectives and vision, it contributed to the concerned, the Company registered the highest increase of the Group’s profitability. Following the adoption profitability of the last seven years, substantially surpassing of a joint trading platform between the Stock Exchanges the budgeted figures and contributing satisfactorily to of Cyprus and Athens, the Unit actively participated in the overall Group results. clearing and settlement systems of the two Stock Exchanges, thereby, providing its customers, local and foreign The most significant contribution to Company results institutional investors, with the possibility of eliminating was made by the Brokerage Department and the Funds operational and other risks arising from their dealing Management Department. The Brokerage Department with financial instruments both in Cyprus and Greece. enjoyed a substantial increase in revenues from commissions due to the 35% increase in the volume of transactions The modernisation of Cyprus legislation regarding the at the Cyprus Stock Exchange in 2007 and increased client management of Provident Funds and more generally interest for investments in the Athens Stock Exchange. Collective Investments has given the Custodian Services Unit the opportunity for rapid growth in the Cyprus As far as the Funds Management Department is market. Hellenic Bank willingly provides its expertise to concerned, it should be noted that both the Cyprus managers of collective investments, helping to safely and the Greek equity markets, in which the Company manage their investments. was primarily engaged in during 2007, had a robust performance registering gains of the order of 23,6% In 2007, the Custodian Services expanded its operations and 17,8% respectively, which were among the highest to the Greek market by creating a service station in in the world. Consequently, the investment portfolios Athens. The employment of high quality experienced under management registered satisfactory returns for staff and the use of modern information technology 2007 after the exceptional year they had in 2006. systems, enables the Unit to offer trust and custodian services quickly, accurately and safely. Through the Furthermore, the continuously changing regulatory creation of a carefully selected network of partners in framework has led to some important changes in the most markets along with a physical presence in the operational and organisational structure of the Company. markets of Cyprus and Greece, the Unit pioneers, offering More specifically, the November 2007 implementation a full range of custodian services addressed to both local of the new law regarding the provision of investment and international markets at the standards of the biggest services and the operation of regulated markets, which Global Custodians. Services offered cover apart from was a direct consequence of the relevant European core custodian services like transaction settlement, safe- Directive 2004/39/EC for the markets in financial keeping, cash management, corporate actions, tax instruments, better known as MiFID, throughout Europe reclamation and reporting services also specialised services and in Cyprus, made it necessary for Hellenic Bank to Global Custodians, managers of collective investment (Investments) Ltd to adapt and operate under the stricter schemes, escrow agency services and fiduciary deposits. guidelines for transparency and investor protection.
A mark of its great achievement, the Custodian Services Finally, in 2007 specific initiatives were taken to attract Unit of the Bank was awarded for a second consecutive new customers from Greece and Cyprus through the year by the esteemed magazine “Global Custodian”. promotion of “HBI e-trade”, the electronic order routing 22 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 ANNUAL REPORT 2007 ANNUAL REPORT
platform of the Company, and to attract new provident organisational structure, which was gradually put into HELLENIC BANK GROUP funds under management. Specific actions were also taken force with the aim being to utilise the synergies within to upgrade and enhance the technology that is made the Bank's network, simplify procedures and effectively available to customers. Through the transmission of SMSs, monitor credit risk. customers may now have a more comprehensive and up to date knowledge regarding the outcome of their During 2007 and for the second year running, the brokerage orders. operation of the new systems (Collection and Credit Scoring Systems) continued, achieving exceptional results ATHINA CYPRUS PUBLIC COMPANY LTD both in the recovery of debts and in the improved quality 2007 was a milestone year for Athena Cyprus Public of the portfolio of the Company. Company Ltd. In July 2007, following a public offer by Hellenic Bank, Athena became a subsidiary Company of Hellenic Bank (Finance) Ltd has fully qualified staff and the Hellenic Bank Group. In particular, as a result of the the necessary technological supporting systems to public offer, Hellenic Bank now holds 77,8% of Athena’s continue its successful course to the future, contributing share capital. substantially to the Group’s results.
Following the substantial change in the Company’s FACTORING SERVICES shareholding structure, an internal study was conducted During 2007, the new organisational structure of the which examined certain aspects regarding the participation Factoring Services Department was completed with the of the Hellenic Bank Group in the Company as well as the full incorporation of the factoring operations to the strategic direction to be followed by Athena in the future. various Business Services and Corporate Banking Centres, It was clarified, among other things, what the final status primarily aimed at providing a fast service to customers of the Company would be as well as the fact that it will from the Centres where their accounts are booked. remain as a listed Company in the Cyprus Stock Exchange. The Board of Directors was reorganised and the investment The attempt to promote factoring services through the strategy redefined. Actions were also taken to clarify the newly structured mechanisms in place was intensified Company’s Cyprus Stock Exchange listing categorisation. with very positive results, creating better prospects for the future. Sales were marked by an impressive increase While all the above were taking place, the Company compared to the year before and all other previous years. not only continued its normal course of business but also managed to register an extraordinary performance The Department continued upgrading the mechanisms in 2007. Specifically, profit after tax for the year reached for monitoring and controlling operations by further ú18,6 million, which represents the highest profitability utilising its electronic systems, while at the same time level recorded by the Company since 1999. safeguarding the continued provision of high quality service to customers. HELLENIC BANK (FINANCE) LTD Hellenic Bank (Finance) Ltd is a wholly owned subsidiary The Department is an active member of the International company of Hellenic Bank Group incorporated in 1986 Factors Group (IFG), through which international factoring with the aim of covering the need for specialised finance exchanges are carried out (import and export). solutions through hire purchase for its existing customers as well as for new customers. The highly-trained staff, the knowledge acquired and the strong organisational infrastructure are expected to Despite the vigorous and continuously changing increase further factoring operations. competitive environment Hellenic Bank (Finance) Ltd continued its activities during 2007, offering flexible PANCYPRIAN FINANCE PUBLIC COMPANY LTD and low cost finance schemes. Pancyprian Finance Public Company Ltd is a wholly owned subsidiary of the Hellenic Bank Group since 1999, Parallel to and in connection with market conditions, through the acquisition of Pancyprian Insurance Ltd, the Company prepared a special study on changing its which is its direct holding company. 23 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 Within the framework of an internal reorganisation and attention to the classes of insurance business having achievement of synergies between the various units of increased margins of development and profitability. the Group, the Bank’s Board of Directors decided in May 2007 the absorption of Pancyprian Finance‘s During 2008 special emphasis will be given to the systematic operations into the Group. training and development of skills and knowledge of the Company’s personnel and the insurance agents so as to Having always in mind the Group’s interest as a whole, offer a more efficient and effective response to customers’ it is expected that this move will contribute to the demands. In achieving these objectives, the Company utilisation of existing synergies, further increasing the will continue to strengthen / expand its range of products, efficiency of resources. The above decision is being always operating based on sound insurance principles. implemented gradually in order to ensure a smooth and proper customer service. Through its insurance contracts, Pancyprian Insurance Ltd provides certainty and security, enhanced by the Regarding the results of the Company for 2007, these support of Hellenic Bank. The knowledge, experience are considered satisfactory. The significant provisions and high level of professionalism of the Company’s for impairment of advances for the full coverage of the staff and associates ensure the Company’s successful unsecured amounts performed in previous years had as growth and the strengthening of its position in the a consequence a positive effect on the financial results insurance market. of the year under consideration. HELLENIC ALICO LIFE INSURANCE COMPANY LTD The Company’s main target for the near future is to The excellent results of Hellenic Alico Life continued for maintain relations with customers and associates in the seventh consecutive year, both in sales penetration order to ensure as best as possible the smooth transition of new customers as well as in the general profitability, to the Hellenic Bank Group. which has consequently contributed very positively to the Group’s overall financial results. PANCYPRIAN INSURANCE LTD Pancyprian Insurance Ltd has set as a target the provision The success and the excellent results achieved by the of consistent and professional services to satisfy the Company from the beginning of its operations are due insurance needs of its customers. During the year 2007, to its innovative products and the way in which these the Company achieved significant growth in sales and products are being promoted. They have simple and profitability. The improved results were mainly attributed concise procedures and are promoted by the well-trained to the following: and experienced staff of the Hellenic Bank, which has acquired the appropriate professional insurance licenses. ñ Successful underwriting policy, in both pricing and selection of risks These products were created primarily to meet the ñ Prompt and efficient handling of all claims and their needs of the customers and are targeted to cover continuous review customers and their families in the case of financial ñ Increased sales through the Company’s intermediaries, constraints arising from death or permanent total disability. direct sales and Hellenic Bank’s clientele The Company has created a variety of products categorised as Credit Life (Bundled) Products and Other (Non Bundled) The Company’s strategic objective for 2007 was to Products. increase further its customer base and profitability by improving productivity and increasing sales through the The Company’s target for 2008 is the further enrichment application of new procedures and the upgrading of of the range of products with other similarly innovative the technological infrastructure. Emphasis is also given and pioneering insurance products, offered with the on the increase of sales through the provision of complete same simple and speedy procedures. Furthermore, insurance solutions to the needs of the customers and the systematic training of the Group’s staff on insurance the improvement of cross-selling within the Company’s matters will continue, so as to respond to customer customers and those of Hellenic Bank, paying special demands in the most efficient and effective way. 24 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 ANNUAL REPORT 2007 ANNUAL REPORT
OPERATIONS ABROAD as a basic rule on the one hand to attract healthy, in HELLENIC BANK GROUP financial terms, businesses and on the other, more OPERATIONS IN GREECE intensive and effective cooperation with existing The year 2007 was marked by the resumption of the customers through a full range of products. Bank's branch network expansion in Greece. Three years after the operation of the Bank's 25th branch and The year 2007 was a transitional period for Personal following the relevant approvals from the Bank's Board Banking Division, which was organised to penetrate the of Directors and the Central Bank of Cyprus, two new highly competitive world of retail banking. The effort branches were opened within the year (Larissa and focused on developing the products, supporting and Thessaloniki), bringing the total number of branches to training staff and expanding to credit cards the existing twenty-seven (27): Attica, twenty (20), Thessaloniki, five system of customer credit scoring, already used in (5), Ioannina and Larissa, one (1) each. In the three consumer loans. By the end of the year, the strengthening intervening years, the organisational structure and loan of the Division was complete. approval procedures were redesigned, creating all the conditions for achieving the Group's target of returning The Debt Recovery Unit proceeded to implement additional the Greek Branch Network to a position of permanent measures for the timely and effective monitoring of the and stable profitability. loan portfolio, achieving a significant reduction (compared with 2006) in the accounts transferred to permanent The upward trend of the balance sheet total for Greece delay and in total arrears of loan accounts. continued in 2007, showing an increase of 4% compared with 2006, from Cí632 million (ú1.079 million) to Cí658 The Information Technology Department completed the million (ú1.124 million). Loans to customers increased by installation of a new system for a better assessment of 23%, reaching Cí520 million (ú888 million), representing credit risk and upgraded the trading system while the 22% of the Group's total loans. Customer deposits also custodian system and the system for detecting and showed a significant increase of 28%, reaching Cí577 preventing money laundering transactions were put million (ú986 million) from Cí451 (ú771 million) in 2006. into operation.
The operating profitability of the Greek Branch Network The creation of the new Custodian Services was completed, in 2007 was surcharged as a result of the ongoing crisis currently serving customers of the branch network, as in the interbank market (which occurred during the second was the preparation of the Bank's infrastructure for half of the year), reducing operating profits to Cí0,5 direct membership of the Target 2 Payment System and million (ú0,8 million) compared with Cí1,5 million (ú2,6 the Single Euro Payments Area (SEPA). million) in 2006. In conjunction with the pressure on loan interest rate margins due to competition, the results for The Northern Greece Branch Network won the European 2007 before tax showed a loss of Cí3,0 million (ú5,1 honorary award “Committed to Excellence” of the million) compared with a Cí4,4 million (ú7,5 million) European Foundation for Quality Management (EFQM). loss for 2006. At the same time, the systematic evaluation of exemplary service in all branches began at the start of 2007 using Provisions for impairment of loans and advances amounted the “Mystery Shopper” method. to Cí3,5 million (ú6,0 million), reflecting a decrease of about 41% compared with 2006, as a result of action The Human Resources Department intensified the training to improve the loan portfolio. Provisions for impairment programme for staff with seminars on staff development, of loans and advances in Greece comprised 17% of the Bank products, preventing money laundering and sales Group's total provisions for impairment of loans and techniques. Employees were also given the chance to advances at the end of 2007. actively participate in creating new products through Working Groups. Review of Operations in 2007 The dynamic growth of business credit continued in Prospects and Goals for 2008 2007 at a higher level than the market average, having The core of the Greek Branch Network's strategy for 25 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 2008 remains a permanent and stable profitability, ñ Obtaining the European award “Committed to which will be based on the following strategic goals: Excellence” of the European Foundation for Quality Management (EFQM) for the Attica Branch Network Business Development ñ Continued expansion of the branch network with REPRESENTATIVE OFFICES the operation of four new branches The Representative Offices concentrate on developing ñ Design of a series of competitive and flexible products further their network of associates and investigate new with emphasis on Small and Medium-sized Enterprises potential markets in their areas. The economic and (SME) and Individuals and their subsequent promotion structural developments of the local markets are closely ñ Completing the staffing and infrastructure of the monitored and communicated back to the Head Office new Leasing Service systems and procedures and for evaluation and appropriate action to meet the the design of new line of products new challenges. ñ Creation and staffing of the Small Business Loans Department within the Personal Banking Division Market globalisation and world economies have contributed and staffing of that Division with experts on to a large extent to the expansion of international consumer / housing loans and credit cards business. The role of the Representative Offices became even more important in representing and promoting Portfolio Quality Improvement the interests of the Bank to targeted markets. ñ Completing revision of the Credit Rules (which will include the new Leasing Service), reissuing the In view of the successful operations of the Representative Doubtful Debt Rules and redefining limits for the Offices in Moscow and South Africa since their establish- handling of doubtful customers ment in 1998 and their substantial contribution to the ñ Improved collection of non-secured debts and Group’s results, the Bank decided to expand the network reduction of doubtful debts as a percentage of the of Representative Offices by setting up two new Offices total loan portfolio in Saint Petersburg and Kiev, thereby doubling the number of the Bank’s Representative Offices from two to four. Modernisation and Simplification of Internal Control Procedures The license for opening the Representative Office in ñ Automate internal control procedures, including Saint Petersburg was obtained from the Central Bank the extension of the Workflow Process Management of Russia on 18 October 2007, and operations have to consumer loans already begun via a fully fledged local office. The license ñ Introducing new and modernised systems, including for the new Representative Office in Kiev was obtained computer infrastructure for the new Leasing Service, from the National Bank of Ukraine on 9 October 2007, the development of a new computerised system for and the setting up of the new office is in its final stage. Asset Management and preparation for the installation of the Group's central banking system in Greece The Representative Offices in Russia, which actively participated in setting-up the Bank’s organic growth in Exemplary Service the Russian market are now more actively engaged in ñ Design and implement research on customers' this effort, supporting and promoting the forthcoming opinions and a comprehensive system for the operations via the wide network of associates and collection, management and evaluation of customer contacts with banks operating in the local market. complaints, analysis of the findings, identifying and implementing corrective measures The Representative Office in South Africa continued to ñ Design improvement measures based on the Staff provide financial advisory services to the extensive expatriate Loyalty Research on issues such as teamwork and population and in collaboration with the branch network Corporate Social Responsibility activities in Cyprus and Greece serves all its business needs. ñ Training of staff in the Bank's products and those The activity of the Office also includes involvement in of competitors, in selling skills but also in the Group's cultural issues. Additionally, it operates as a link with Quality Development Programme the metropolitan community in Cyprus and Greece. 26 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 ANNUAL REPORT 2007 ANNUAL REPORT
HEAD OFFICE SUPPORT SERVICES Risk in the assessment of large exposures and the HELLENIC BANK GROUP restructuring of problematic loans. The Department GROUP RISK MANAGEMENT is also actively involved in the process of launching The Group Risk Management monitors all risks in which new credit products to ensure that the risk undertaken the Group may find itself, through its specialised Units is fairly priced. which cover all risks that might arise in the Group’s operations. The main target is improvement of the During 2007, the scoring systems servicing the methods used for identifying, measuring, evaluating Personal Banking Division for the evaluation of the and controlling the Group’s risks. creditworthiness of individuals and the provision of personal credit cards and personal loans were ñ Credit Risk Management reviewed. In addition, the Country Limit model was Group Credit Risk, in liaison with other Departments, upgraded in order to improve the management and implemented the provisions of the Basel II treaty in monitoring of country risk stemming mainly from accordance with the relevant Directive issued by the the overseas placements of the Treasury Department. Central Bank of Cyprus. For Pillar I, the Standardised Approach was followed for risk weighting the The objective is to continue the effort for the exposures of the Group while the Analytical Method deployment of more sophisticated and more accurate was used for recognition of collaterals. models for the measurement of credit risk to allow the efficient allocation of capital of the Group and In relation to Pillar II, the Central Bank of Cyprus maximise profitability. issued guidelines for the “Internal Capital Adequacy Assessment Process (ICAAP)”, whereby the Group ñ Market and Liquidity Risk Management will retain additional capital for those risks that are To comply with Basel II, Pillar I requirements, the not captured under Pillar I. Market and Liquidity Risk Department adopted the automatic calculation of minimum capital Group Credit Risk also prepared the relevant information requirements. Additionally, to comply with Basel II, concerning Pillar I and Pillar II as well as the credit policies Pillar II requirements, an Internal Capital Adequacy of the Group to be included in the financial state- Assessment Process was set up to provide for ments in accordance with the provisions of Pillar III. additional capital for risk that was not included in Pillar I, like Interest Rate in the Banking Book (IRRBB) Furthermore, various seminars were organised, in and Liquidity Risk. Stress scenarios based on expected liaison with external consultants. The management and unexpected events were devised so as to of the Group had the opportunity to gain an in measure the effects of interest rate shocks on the depth knowledge of the specific provisions of the Net Interest Income and on the economic value of Treaty and their effect on the operations and capital the Bank. Similar stress scenarios were also applied adequacy of the Group. so as to measure liquidity levels under financially stringent conditions. These scenarios were carried At the beginning of 2007, Group Credit Risk started out on a consolidated basis, including the operations the implementation of the “Framework of Principles in Greece. Furthermore, the Department dealt and Criteria of Assessment of Bank’s Organisational with the preparation of the information to be Structure, Internal Governance and Internal Control disclosed under Pillar III and in accordance with Systems” issued by the Central Bank of Cyprus, IFRS 7requirements. for monitoring and controlling credit risk in the banking and trading book of the Group. The Market and Liquidity Risk Department was instrumental in the pre-euro period, participating For the effective implementation of the provisions in a number of projects aimed at the smooth transition of the new Directives in Cyprus and Greece, the from the pound to the euro. More specifically, the internal credit processes and powers are currently conversion of all Treasury and peripheral systems, under review with the objective of engaging Credit like SWIFT, was undertaken by the Department. 27 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 The Department was also active in the setting up has convened, in non-scheduled meetings, several of the new interest rate structure of the Bank and times to discuss issues of the crisis and take pertinent participated actively in the allocation process of actions based on the market developments as they interest rates to the Bank’s deposit and loan products. were arising day by day.
During 2007 the Bank decided to replace its existing ñ Operational Risk Management Treasury system with a new one in an effort to satisfy The Operational Risk Management Department is increased needs from Treasuries and also position responsible for the development of specialised itself favourably in the rapidly changing international methods for the management of operational risks. markets. In the request for proposal (RFP) process, These methods help in the timely identification and three vendors participated. After a thorough and strict rectification of any deficiencies or failures, in such criteria based assessment, one of the three was a way that the Group will fully comply with the selected. The Department has been directly involved provisions of Basel II, the Directives of the European in this effort, assisted by several other Departments. Union and the Directives of the Central Bank of Cyprus. The selected system is at the moment under the scrutiny of the various related Departments. Besides the manual collection of data related to system interruptions and failures, errors, losses and The Department has also participated in the work near misses that have already started, an electronic team that was assigned to deal with the Bank’s system has been developed internally for the recording participation in the new payment system Target 2 and reporting of these events. The system will be (Trans-European Automated Real–time Gross settlement implemented on a pilot basis in a number of branches Express Transfer system). The Department through in 2008. The purchase of an external system for the its second role as Mid Office played a key role in the management of Operational Risks has been postponed preparation of the systems to comply with Target 2 as we await the performance and output of the requirements. Final adoption is planned for May 2008. system that has been developed internally.
The Market and Liquidity Risk Department, in its Visits were made to all International Business Centres effort to enrich its surveillance role, decided to extend of the Bank, where due to the nature and complexity the use of VaR methodology to capture a wider scope of transactions and procedures at these Centres, (whole portfolio with minor exceptions), apart from there are increased and high risks. The procedures the foreign exchange that is currently being used. followed were discussed at length and measures were After a meticulous examination of various vendors, taken by the Centres to manage the risks identified. one was selected and the implementation phase has already started. VaR methodology gives the maximum Seminars and workshops were organised for the possible loss in a portfolio of assets/financial staff aimed at further consolidating a culture of instruments, at a given time period and predefined management of Operational Risks. confidence level. ñ Compliance Services Despite the fact that the Bank had no direct exposure The main function of the Group Compliance Services to the subprime market, its investments to counter- is the establishment and application of suitable proce- parties that had such exposure or were thought to dures for the purpose of achieving timely and on-going have had, affected Hellenic Bank as well. The onset compliance of the Bank with the existing regulatory of the crisis in July 2007 led to an increased, continuous framework. In particular, it should ensure that the and meticulous monitoring of the Bank’s portfolios. Bank complies with the regulatory framework relating In an effort to mitigate possible losses, Risk Management to the prevention of the use of the financial system for has taken all appropriate actions like “limit freezing”, purposes of money laundering and terrorist financing. activation of stop loss framework, and in general qualitative and quantitative measures to restrain During the period under review, the Group Compliance trading activity. The Asset and Liability committee Services focused on the installation, parameterisation 28 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 ANNUAL REPORT 2007 ANNUAL REPORT
and customisation of the computerised Anti-Money DEBT RECOVERY HELLENIC BANK GROUP Laundering system to meet the Bank’s requirements. The Debt Recovery Unit (DRU) is staffed with experienced It also dealt with the development of procedures Officers and is under the management of Legal Services for the effective monitoring of the accounts held in & Human Resources of the Group. the International Business Centres in view of the high money laundering risk that they involve. Despite the fact that the inflow of new accounts in the DRU during 2007 increased both in number and in total In this respect, the Group Compliance Services had balance, compared to accounts received in 2006, it regular meetings with the management of the significantly decreased from previous years and this International Business Centres, selected customers, reflects the improvement in the quality of the lending professional intermediaries and banks that maintain portfolio of the Group. The determination of the DRU correspondent accounts (Vostro Account) with the in the achievement of its goals has resulted in the Unit’s Hellenic Bank Public Company Ltd. total collections of problematic debts exceeding by far the target which had been set in the budget for 2007. Furthermore, the Department had organised a number Furthermore, the collections effected in the year far of seminars for training purposes and carried out a outweighed the total balances of cases received by the number of special investigations for suspicious customer Unit, contributing in this way to the Group’s profitability activities and/or transactions. Where shortcomings for 2007. It is also worth mentioning that a large or weaknesses were identified, the Unit took corrective proportion of total collections made in 2007 related to action, which included revision of the procedures, accounts which have been fully settled and closed. recommendations for account monitoring, enhanced due diligence and even closing of accounts. Taking into consideration this year’s results, the prospects look very encouraging as there has already been an Generally, the year that passed was particularly increase in the collections and efficiency of the Unit. demanding for the Group Compliance Services The automated system (DRS) which allows easier mainly due to the substantial increase in the activities access and information and which is used by the Unit’s of the International Business Centres, the high entire staff has also contributed to these results. The money laundering risk that they involve and the program is used successfully, enabling better time increased number of the “Requests for Assistance” management with a positive impact on the increase (seeking information about specific transactions) of collections. received from US and Russian banks. Through the close cooperation of the DRU and the GROUP CREDIT CONTROL Credit Risk Management Unit, which aims to minimise Δhe main responsibility of the Group Credit Control the credit and legal risk, it is expected that the percentage Department is the monitoring of the Group’s loan of non-performing lending will be reduced further. The portfolio, making recommendations as necessary to the same aim is also being served by the delivery of specialised Corporate, Business Services, Personal Banking and seminars from Officers of the Unit to Officers of the International Business Divisions, as well as to the Group dealing with credit matters. Subsidiary Companies of the Group and the Greek Branch Network, with a view to improving the quality TECHNOLOGY of the loan portfolio and reducing credit risk. During 2007, a number of important information technology projects were implemented for the provision Furthermore, through regular spot checks on customers’ of better customer service, the introduction of new accounts (irrespective of amount), it investigates the products and services, the reduction of operating costs level of adherence to the Bank’s lending policy. and compliance with legal regulations.
In addition, it examines at regular intervals the non- The adoption of the euro from 1 January 2008 required performing accounts and suggests the creation of significant changes to the Bank's information systems provision for bad debts. in order to: 29 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 ñ Prepare the systems to make them compatible with uniform operation of all units and create synergies among the new local currency as from 1 January 2008 them, both in terms of technology and procedures but ñ Have the correct changeover of existing customer also at the level of products and services. It is expected data into euro (balances, limits, loans, deposits) to bring significant savings in operating costs as well as the transfer of technical know-how between the units. The changeover of all computer systems to the euro was very successful, without experiencing any problems. ELECTRONIC BANKING The Bank considers Internet Banking (Hellenic Net Banking) In addition, during 2007, a large number of upgrades were as one of its most powerful tools in offering electronic made with new information systems and new technology banking services on a 24-hour basis which helps to service infrastructure introduced. The main projects were: existing customers and attract new young ones from both Cyprus and abroad. ñ Creation of new products and services and enhancement of existing systems for the Personal Flexibility, speed, security, reliability, extensive and Banking Division, Net Banking and Card Services comprehensive information and the ability to manage ñ Participation of the Bank in the Single Euro Payments accounts without restrictions are the main characteristics Area (SEPA) which enables the processing of of Hellenic Net Banking. payments through the new European payments network. With this project customers of the Bank During 2007, a number of upgrades and enrichment of are able to transfer funds to banks in Europe very products and services were offered. With the inclusion easily and at the same low cost with which they of the Russian language, the Hellenic Net Banking Service transfer funds to other local banks. is the first and only service of its kind in Cyprus offering ñ Adoption and implementation of cutting-edge techno- a trilingual edition in Greek, English and Russian. logies relating to the Bank's information infrastructure such as “Virtualisation” and Centralised Systems The number of subscribers / customers that use Net Banking ñ Within the framework of regulation compliance, increases all the time while the number of transactions improvements were made in the Bank's Security and uses of other services has reached new high levels. Systems. Use of the telephony technologies VoIP It is anticipated that, like every year, the new high targets and IP Telephony at all branches / services of the set will be easily achieved, providing a 24-hour service Bank, apart from providing ease of telephony facilities to customers while reducing operating costs of the Bank. to all staff, resulted in a significant reduction in telecommunications costs CARD SERVICES - PLASTIC MONEY - ñ To comply with the requirements of the Central Bank AUTOMATED TELLER MACHINES of Cyprus regarding the provisions of the Basel II Card Services responded successfully to the challenges Directive and the requirements of the Capital that appeared throughout the year. It continued its Adequacy Ratio, the Bank implemented a new substantial contribution to the turnover and profit of Information System. New infrastructure was created the Group though it was operating in an exceptionally for implementing the next phases regarding the competitive environment. Furthermore, Card Services short and long-term liabilities of the Bank, as continued working to secure the infrastructure of the stipulated in the provisions of the Basel II Directive Group in the plastic money sector to the highest possible ñ Within the framework of utilising the Group's level in terms of technology, card management and synergies and Centralised Information Systems, an control systems. extension was made to cover the needs of the Bank regarding the prevention of money laundering in The success is due to a series of factors and actions Greece utilising the same Software already installed taken mainly for the provision of high level support and in Cyprus service through the most advanced card management systems as well as to the development of innovative The implementation of the Bank's Single Operation Strategy products and to the promotion of attractive incentives for Foreign Units was approved. This will bring about a and offers to its cardholders. 30 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 ANNUAL REPORT 2007 ANNUAL REPORT
Within the framework of developing new products and competitions and promotional schemes such as free HELLENIC BANK GROUP services, Card Services launched the “Student Card”, the air tickets. This scheme was very simple and eligible “Money Transfer Card” as well as the service “Card Alerts”. cardholders were offered air tickets without participating in prize draws through simplified procedures. The “Money Transfer Card” is a prepaid card that provides a safe, easy-to-use way to send money abroad and is Lastly, as far as the Automated Teller Machine (ATM) offered only from Hellenic Bank. The card is promoted network is concerned, technology was further upgraded mainly to foreigners working in Cyprus who transfer and the number of ATM’s reached 80, providing to funds to their relatives abroad. customers fast and uninterrupted 24-hour service.
The “Student Card” is a debit (Link) VISA Electron card HUMAN RESOURCES and has been specially created to respond to the needs The Group’s human resources numbered 1.916 and lifestyle of students. The card offers direct access to employees at the end of 2007, showing an increase of current account or Hellenic Net Account with zero charges 4,6% in comparison to 2006. This increase is associated for cash withdrawals abroad, free access to Hellenic Net with the expansion of the Group’s operations. Banking services for 24-hour management of the account, participation in discount offers scheme and the incentive The 2007 training programme was successfully implemen- scheme “Everybody Wins”, as well as free travel insurance. ted, thus supporting the Bank’s effort for continuous professional training and development of its employees. Hellenic Bank cardholders can now effortlessly keep track The aim of the programme was to respond and incorporate of their card transactions with the new service “Card Alerts” the developments in the banking sector, while providing without having to contact Hellenic Bank. By activating employees with the opportunity to participate in the Card Alerts service, cardholders will receive free SMS programmes related to their duties in order to improve on their mobile phones informing them about their purchases, their knowledge and further develop their skills. cash withdrawals, available balance at a certain amount and at any given time. Card Alerts allow cardholders to For the achievement of this aim, a large number of in- securely manage and control their card transactions. house training programmes and presentations were implemented. Furthermore, members of staff participated During March 2007, Hellenic Bank started the replacement in open training programmes that were organised by of all magnetic cards - debit and credit - into the chip external training institutions in Cyprus and abroad. technology. This new way of transactions via the chip technology is known to the public as “PIN & PAY”. The The training programmes covered important subjects upgrading of this venture is continued at a speedy rate such as management and leadership, the development and Hellenic Bank anticipates to finalise the transition of personal skills, quality of service, banking information of all the Bank’s cards to the new “PIN & PAY” (chip systems, banking practice and specialised banking and card) technology by the end of 2008. finance subjects. In the framework of the Group’s preparation for the introduction of the euro, particular The incentive scheme “Everybody Wins” continued its emphasis was attributed to the implementation of operation during the year 2007 offering points, cash specialised programmes and presentations on the new and gifts to its cardholders. A prize draw takes place currency and the Single Euro Payments Area – SEPA. each month offering a car. In addition, during June and December a prize draw takes place for cash prizes worth During 2007, the third phase of the Quality Evolution Cí50.005 and Cí100.001 respectively. Programme continued, with the training of all personnel in the modules “Profit from Complaints” and “Customer Apart from the prize draws, cardholders collect goSmart Service Chain”. Moreover, in June 2007, the workshops points by using their cards in a large number of stores of the second phase of the Quality Evolution Programme in Cyprus, earning double points. were completed in Greece.
Moreover, from time to time Card Services offer various Aiming for the promotion of innovation and creativity 31 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 in the Organisation, the Group Human Resources knowledge and skills of each member of Hellenic Bank’s introduced the idea of “Working Groups”. These Groups personnel constitutes a basic aspect of the Group’s which are composed of members of staff, lead – through dynamic progress, Hellenic Bank introduced an Incentives various innovation and creativity techniques – to the and Rewards Scheme in 2007. Through the Scheme’s production of new and innovative ideas for different basic aspects, the main priorities are the promotion of areas of the Bank’s operations. In 2007 the third Working teambuilding through common and shared targets, as Group was implemented with the aim of producing ideas well as the motivation of employees. The Scheme comprises and recommendations for actions related to the treatment of the following: (i) the General Scheme of Incentives of employees and the management of change within and Rewards, (ii) Group Incentives (iii) Rewards for Hellenic Bank. Furthermore, in 2007 a Working Group Specific Business Units and (iv) Individual Incentives. took place for the first time in Greece aiming at the production of ideas regarding new products of the Bank. GROUP STRATEGIC DEVELOPMENT Among the major responsibilities of the Group Strategic For the sixth year running, one of the most important explo- Development team is the preparation of the Group’s ratory monitoring tools, that of the “Mystery Customer” Annual Business Plans and the Three Year Strategic continued. With an overall rate of improvement that Plan, as well as monitoring the progress made by exceeds 90%, this tool proves the importance attributed the Units in achieving their targets. It is also responsible to offering high quality of service to the Group’s customers. for coordinating the various Departments and Units in order to achieve smooth and productive cooperation, Three more Banking Units, the Branch Networks in in line with the strategy set by the Bank’s management. Limassol, Paphos and North Greece were accredited with the “Committed to Excellence Award” in 2007 One of the primary projects in 2007 was the revision of by adopting successfully the European Foundation for the Three Year Strategic Plan for the period 2007-2009. Quality Management Model, known as EFQM. The In collaboration with all the Group’s Units, the strategies, experience gained by the members of staff of these objectives and requisite actions for the realisation of the Units contributes significantly to further strengthening objectives were revised for the subsequent three-year and promoting actions for the creation of a quality period. Market conditions and the financial environment culture, as well as to the empowerment of the customer were taken into consideration with emphasis on threats orientation of Business Units; these parameters constitute and opportunities, both in Cyprus and overseas. Each the central pillars of the Group’s Corporate Strategy. key strategy was given a numerical target so that it would be clear, both internally and externally, what the In the area of staff appraisal and development, the Group was aiming to accomplish in the next three-year on-line system has been operating for a third year, period. Once this was completed, the Three Year Strategic contributing to a more effective management of Plan was presented to analysts and the media. performance. In 2007, the Appraisal and Development System was implemented for all staff of Pancyprian The Three Year Strategic Plan formed the basis for the Insurance Ltd, thus providing better feedback and a more Annual Business Plans, which were prepared in collabora- effective management of the personnel’s performance. tion with the Group Financial Management and were used in the preparation of the 2008 budget. Special In 2007, various policies were approved and implemented emphasis was given to the operations of the front-line in line with the Group’s aim to reduce expenditures that Units as well as to Private Banking and Custodian concern personnel’s benefits such as the policy concerning Services. Also, in collaboration with the Human Resources the Company’s cars and traveling allowances. Department, the development of Incentive Plans continued with the inclusion of the Branch Network of Furthermore, the Succession Policy as well as the Greece and Pancyprian Insurance. At the same time, Professional Code of Ethics and the Disciplinary Code taking into consideration the accession of Cyprus to the of the Bank were implemented in 2007. Eurozone, focus was placed on finding new sources of income and cost reduction methods which included the Recognising the fact that the contribution of the efforts, branch rationalisation in Cyprus, especially in tourist areas. 32 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 ANNUAL REPORT 2007 ANNUAL REPORT
The rationalisation of the branch network continued in the expected excess liquidity. In Greece, the focus is on HELLENIC BANK GROUP 2007 along with the upgrade and renovation of branches, further expanding the Branch Network, developing business where appropriate, to maintain a high standard of and attaining profit targets. As far as other countries buildings. During 2007, the Bank proceeded with the are concerned, the Bank is proceeding with all necessary agreement for the development of a fully-owned building actions in order to obtain the final license for commencing in Larnaca where a number of Departments will be its banking operations in Russia during 2008. housed, catering to all the financial needs of individuals and companies. PRODUCT DEVELOPMENT During 2007, Hellenic Bank continued to observe, locate Significant progress was made in 2007 in achieving the and satisfy customers’ needs, offering a full range of Group’s strategic targets. Specifically, significant business products and services, especially designed to cover all development was achieved in all sectors, both in Cyprus customer requirements. and in Greece, along with improvements in loan portfolio quality. In addition, there was an increase in the Group’s During the year, the focus was in the development of efficiency, through increased productivity and effective new products as well as in the upgrading of existing cost containment. The Group made a smooth and seamless ones, with the main target being the provision of full transition to the euro, while there was satisfactory and effective customer service and satisfaction. progress in the implementation of the new Basel II framework and the MiFID directive. The development More specifically, the Bank upgraded its existing housing of a broad Branch Network in Greece was further pursued loans, offering even more attractive and flexible solutions with the opening of two new branches. At the same time, to its customers. Within this framework, the existing focus was placed on loans where a significant increase was scheme “Home Loan Solution” was improved even further, achieved, while maintaining high loan portfolio quality. providing a very attractive interest rate margin.
Another main strategic target of the Group, that of More generally, in the lending sector, the Bank designed overseas expansion, progressed further in 2007. After and offered a new scheme “One Loan, One Bank” which the decision to open a subsidiary bank in Russia, a Protocol offers individuals an improvement in their cash flow liquidity was signed with the Central Bank of Russia for the and achievement of better control and financial planning development of banking operations in Russia in Rubles through consolidation of all loan balances. This is achieved and foreign currency. At the same time, Hellenic Bank with the concentration of all card, personal loans or/ obtained the approval of the Central Bank of Ukraine for and leasing balances in one consolidated loan with one the opening of a Representative Office in Kiev and the monthly instalment. approval of the Central Bank of Russia for the opening of a Representative Office in St. Petersburg. In parallel, during the year, the scheme “Education” was also upgraded, offering complete and flexible In 2008, the Group will face challenges arising from changes solutions to parents/guardians for all educational needs in the institutional and regulations framework as well as arising as early as kindergarten and as late as university. from the competitive environment, especially after the Also the successful scheme “Autoloan” that was designed recent entrance of new Greek banks in the Cyprus market. in 2006 was promoted again during 2007. In addition, the financial environment in which the Group operates may be affected by the continuing crisis in the Additionally, the Bank in response to modern-day needs interbank market and the global economic slowdown. as well as to specific customer requirements, revised Accordingly, the volatile environment does not allow for and offered to the market three new limited period the extraction of well defined conclusions and evaluations. deposit schemes, which were very successful. Profitability, loan portfolio quality and business develop- ment remain the Group’s main targets for 2008. The During 2007, the minors deposit scheme “Winners’ strategy in Cyprus is focused on further strengthening Team” was further enhanced, offering to young and developing the International Business, the Personal depositors more gifts, discounts to a wide range of Banking and Investment Services Divisions and utilising shops, participation in draws and other privileges. 33 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 In the area of insurance products, Hellenic Bank supported the Environment, Sports, Research, Health and Safety. its subsidiary company Hellenic Alico Life Insurance In 2007, within the framework of Corporate Social Company Ltd in the promotion of its specialised product Responsibility, the Group gave to society a significant share “Pension Plan”. Pancyprian Insurance Ltd at the same of its profits, demonstrating once again its human face. time promoted its pioneering product “Contract Private Combined” that covers all insurers, providing a single ENVIRONMENT contract for housing, private vehicle, personal accidents Hellenic Bank implements on an annual basis programmes and, optionally, housekeeping staff. and initiatives that improve qualitatively and quantitatively its Corporate Social Responsibility. Within this context, Great effort was placed in selling both existing and new it has formulated an environmental policy, in the belief products and services. Emphasis was also placed on that banks should have an essential role to play in the achievement of cross-selling as well as on the tackling the problem of environmental degradation. enhancement of the Banks’ corporate image through the familiarity of its products. For this purpose, in formulating an environmental policy, the Bank is undertaking the following actions: CORPORATE SOCIAL RESPONSIBILITY ñ Harmonising policies to reduce the environmental SOCIAL, CULTURAL AND ENVIRONMENTAL impact of the Group's operations CONTRIBUTION ñ Integrating environmentally-friendly processes in Today's businesses and particularly banks are not judged the structure of the Bank and evaluated solely on the products they produce or ñ Strengthening efforts to protect and preserve the their economic results but also by their substantial environment contribution to society: their initiatives and participation ñ Sensitising and pushing staff to implement the in Education and Training, Culture and the Arts, the environmental strategy of the Bank Environment, Research and Sport. ñ Incorporating with consistency and continuity in its development planning, actions and measures The Hellenic Bank Group as a living organism that takes of environmental responsibility, which address Man into consideration and always acts for society, gives the whole issue as an investment rather than a cost great importance to policies, which cover actions and measures that focus on: The biggest initiative of the Bank in its environmental policy is the continued support of the successful Eco- ñ The consolidation of Corporate Social Responsibility Schools Program, in collaboration with the environmental ñ The implementation of Corporate Governance organisation CYMEPA. ñ The strengthening of relations with customers ñ The encouragement of relations with the workforce SOCIAL CONTRIBUTION ñ The increase in social work The Hellenic Bank Group believes that increasing its ñ The strengthening of cultural and artistic initiatives activities will achieve better results when operating in ñ The creation of environmental policy and environmental a robust social, cultural and environmental context. For awareness this reason, it aligns its economic and financial policies and strategies with those that concern and are directed Through its Corporate Social Responsibility, the towards society. Through its community outreach, which Bank is committed to incorporating into its supports Education, Training, Sport and Research, the business practices, social, environmental and cultural Group proceeded with the following worthy events activities that support and enhance employees, during 2007: shareholders, artists, consumers, pupils, students and the society in general within which it operates. ñ Donated to the fire-ravaged communities in Greece financial assistance amounting to ú500.000 with The Hellenic Bank Group now has a strong presence in the request that the sum be allocated for the areas such as Culture, Arts, Education and Training, construction of a School or Community Centre 34 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 ANNUAL REPORT 2007 ANNUAL REPORT
ñ Contributed substantially to raising public awareness The Cultural Centre of Hellenic Bank, consistent in its HELLENIC BANK GROUP on the euro with two important publications: the tradition, also encouraged worthy efforts in the field of “Euro-Guide”, a useful tool for informing workers Culture and the research of our history. With great and pensioners on the new currency; and the series pleasure, it subsidised the fifth book of the publication called “Learning about the Euro”, with the main benefi- “Monuments and Memories”, which refers to the History ciaries being pupils in the last three grades of primary of Paphos, the City of Myth and History. school. Both versions were given free to the Ministry of Labour and Social Insurance and the Ministry of The publishing efforts of the Cultural Centre continued Education and Culture and distributed to schools. with the sponsorship of the publication of the book At the same time, lectures were organised with great “Football - Another Dimension” by Michalis Hadjipieris. success to inform businesses and the wider public on adoption of the single European currency across Cyprus. ARTISTIC CONTRIBUTION Some of the fantastic artistic shows of the year were SUPPORTING RESEARCH the majestic ballet performances of “Swan Lake” and In the area of Research, the Hellenic Bank Group launched the concert of the great Italian singer Lucio Dalla, which into cooperation with the Faculty of Engineering at the were sponsored by the Hellenic Bank Group. In addition, University of Cyprus. Specifically by: the Group undertook the following actions:
ñ Financially supporting the Physiology and Biomedical ñ Continued its successful cooperation with the Rialto Imaging Laboratory “Hippocrates” of the Department Theatre Limassol and Hampi's Engraving School of Mechanical and Manufacturing Engineering at ñ Continued cooperation with Avantgarde, enjoying the University of Cyprus. The Laboratory aims to develop the great success of the Annual Concert “Stars in techniques and promote the study of the cardio- Concert” and the “Pianisti non Solo” concert vascular system and the artificial heart in live organisms ñ Supported the Painting Competition for young painters like normal and genetically modified mice. The research ñ Supported the release of new albums by Thomas aims to provide knowledge to the scientific community Duis with the Symphony Orchestra of Cyprus, Joja and to those who suffer from cardiovascular diseases Wendt and the Tribute to Manos Hatzidakis ñ Awarding two top students of the MBA programme at the University of Cyprus with the total amount In Sport, the Bank awarded for the ninth consecutive of ú4.000 year the Fair Play Team award for the footballing season of 2006 - 2007 to Digenis Morfou. CULTURE AND ART In Culture and the Arts, the Group has made a successful CORPORATE IMAGE and dynamic contribution. In 2007, the following unique The Hellenic Bank Group with its social action and and first-rate exhibitions were organised: responsibility maintains and strengthens its corporate image through the following: ñ The world-famous photographic exhibition “Europeans” by the renowned French photographer Henri Cartier ñ Its service - Bresson in cooperation with the French Embassy. ñ Its products The exhibition was presented in most capitals of ñ Its promotion and advertising the world ñ Its branches and buildings ñ The exhibition of cartoonists, titled “Greek Cartoonists” ñ The electronic distribution of its products and services in cooperation with the Cartoonists Revival, in which 21 distinguished cartoonists took part. The exhibition HEALTH AND SAFETY was co-funded the Ministry of Education and Culture The Ministry of Labour and Social Insurance notably awarded ñ The “Natura Madre – Natura Morta” exhibition a prize to the Group for being the first Organisation to ñ The painting exhibition of the esteemed Cypriot employ people with disabilities. The Bank employs a painter George Kotsonis. Work of the artist was number of people with disabilities and provides all the used for the Hellenic Bank's Wall Calendar building infrastructure necessary to facilitate these people. 35 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 The Hellenic Bank believes that the Health and Safety of 2007 was 2,4%, marginally lower than the 2,5% inflation its staff is an integral part of its people-centric philosophy. rate for 2006. Despite the general impression that high The main objective is to achieve conditions of health fuel prices are responsible for inflation, the largest price and safety, which will ensure the health and physical increases occurred in categories such as domestic and integrity of the staff. imported agricultural products, and in services such as medical care, education and transport. Hence, the Bank adopts a precautionary approach, taking into account Health and Safety issues when designing and Regarding the third most important economic indicator equipping buildings while at the same time, collaborating -unemployment- it can be said that in 2007 conditions with external consultants to assess occupational risk, to of nearly full employment prevailed. According to the create security systems and to train staff in health and European Union's statistical office, Eurostat, the harmonised safety matters. unemployment rate fell to 3,9% compared with 4,6% the previous year. As a result, in December 2007, Cyprus had The Group ensures the implementation of the Health the third lowest unemployment rate among the members and Safety at Work Act 1996 through the following actions: of the European Union. Undoubtedly, in 2007, low unemploy- ment played a significant role in supporting consumption ñ Providing secure facilities, systems and methods of and as a result, helped retail sales helped to post an working without risks to health impressive increase of 8,9% in volume (preliminary estimate). ñ Arranging for the safe use, handling, storage and transport of objects and substances Another important factor, which strengthened economic ñ Providing information, instruction, training and activity in 2007, particularly construction and consumption, supervision was credit expansion. 2007 ended with a growth rate of ñ Keeping the workplace in a safe condition without credit expansion (lending to the private sector) of around risks to health 28.2% (adjusted data from December). The main categories ñ Providing and maintaining a safe and healthy work of lending that saw big increase were personal and environment with adequate arrangements for the business loans - including housing loans - and loans to staff's welfare construction companies. The high rate of credit expansion was the key reason why the financial sector recorded the The Hellenic Bank Group is committed to the promotion best performance among the main sectors of the economy. of safety and health in the workplace and the creation of the safest working environment possible. Staying with monetary matters, the base rate of the Central Bank of Cyprus remained unchanged at 4,50% for most CYPRUS ECONOMIC ENVIRONMENT of 2007. With a view to full harmonization of Cyprus' interest rates with those of the Eurozone, the Monetary 2007 ECONOMIC REVIEW Policy Committee, in its last decision on setting interest 2007 can be described as a very satisfactory year for rates, reduced the base rate of the Cyprus Pound to the economy, since the economic growth rate, adjusted 4,00% on 21 December 2007. for inflation, accelerated to 4,4% (preliminary estimate), compared to 4,0% the year before. The growth rate for The year 2007 was also a crucial year in terms of Cyprus' 2007 was the highest in the last seven years. According accession to the Eurozone. Following the final approval on to the Statistical Service, the highest growth rates were Cyprus' application, in July, and the fixing of the rate of recorded in the areas of financial intermediaries, real conversion of the Cyprus pound to the euro, all stakeholders, estate, renting and business activities, construction and authorities, businesses and consumers intensified their wholesale and retail trade. Generally, all areas of the preparations for a smooth transition to the new currency. economy, apart from agriculture and fishing, recorded positive growth rates. PROSPECTS OF THE CYPRUS ECONOMY FOR 2008 2008 is generally expected to be a positive year in economic The high rate of economic growth was accompanied terms but with an increased number of challenges. The by modest inflation. The average inflation rate during economic growth rate is expected to be around 3,5- 36 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 ANNUAL REPORT 2007 ANNUAL REPORT
ANALYSIS OF SHAREHOLDERS HELLENIC BANK GROUP 31 December 2007 Percentage Number of Category of Shareholders Number of Shares % Shareholders 6,66% INSURANCE COMPANIES 19.383.360 6,66 28 19,13% CHURCH INSTITUTIONS 59.253.411 20,37 32 20,37% PROVIDENT FUNDS 13.308.040 4,57 129 STAFF 5.459.811 1,88 1.192 PRIVATE INDIVIDUALS 137.872.368 47,39 19.064 COMPANIES 55.666.000 19,13 439 4,57% 1,88% TOTAL NUMBER OF SHARES LISTED IN THE CYPRUS STOCK EXCHANGE 290.942.990 100% 20.884 Issued Capital 290.942.990 47,39%
4,0% while inflation is expected to increase above 3%. and stock exchanges. Central banks have intervened Unemployment is also expected to increase slightly to using reductions in interest rates and liquidity injections, levels around 4,0-4,5%. Domestic demand, supported by thereby addressing the problems to some extent. consumption, low unemployment and services, is expected to continue supporting economic activity in Cyprus. And while expansionary monetary policy is expected to help revive the world economy, at the same time, 2008 began with the generally acknowledged successful concerns are raised about the course of inflation. The adoption of the euro in Cyprus. Despite individual problems rise of commodity prices such as oil, food and various encountered in the first few days of the year, government, metals also constitute a risk of higher inflation. businesses, financial institutions and consumers appeared to deal successfully with the transition to the euro, In conclusion, while the economic prospects for 2008 are suggesting that the proper preparation had taken place. generally positive, a minor slow-down is expected compared with the fairly high growth rate of 2007. Also, the course The main challenge facing the Cypriot economy in 2008 of the world economy and inflation trends, particularly is the potential deterioration of the external environment in relation to the prices of commodities, will play an due to a slow-down of the international economy. This important role in shaping the economic environment in turn is due to the crisis facing the biggest economy for 2008. in the world, the United States. The housing loans crisis in the U.S. has also negatively affected the international The conversions from Cyprus pounds to euro mentioned above financial system and caused turmoil in the money markets were made based on the fixed exchange rate of ú1= Cí0,585274. 4,4% 4,2% 4,1% 4,0% 3,9% 2,6% 2,5% 2,4% 2,3% ú million 15.490,2 1,9% ú million 14.393,6 ú million 13.462,3 ú million 12.653,6 ú million 11.761,2 787,6 thousands 772,6 thousands 757,8 thousands 739,8 thousands 722,8 thousands 710,3 thousands ú million 1.858 ú million 1.755 ú million 1.734 ú million 1.718 ú million 1.678
03 04 05 06 07 03 04 05 06 07 03 04 05 06 07 02 03 04 05 06 07 03 04 05 06 07 REAL GDP GDP IN CURRENT INFLATION POPULATION INCOME GROWTH RATE MARKET PRICES (percentage points) (thousands) FROM TOURISM (percentage points) (million euro) (million euro) 37 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 REPORT OF THE BOARD OF DIRECTORS REPORT OF THE BOARD
WE VIEW THE ENVIRONMENT AND ITS PROTECTION RESPONSIBLY. WE ARE CONSIDERATE TO ENVIRONMENTAL ISSUES BOTH INSIDE AND OUTSIDE OUR GROUP, BELIEVING THAT DEVELOPMENT AND PROTECTION OF THE ENVIRONMENT SHOULD GO HAND IN HAND AND COMPLEMENT EACH OTHER WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 HELLENIC BANK PUBLIC COMPANY LIMITED Report of the Board of Directors
The Board of Directors submits to the shareholders its Equity attributable to the shareholders of the Bank annual report together with the audited consolidated increased significantly by 45% reaching the amount of financial statements for the year ended 31 December Cí307,2 million (ú524,9 million), compared to Cí212,5 2007. million (ú363,1 million) in 2006. During 2007, shareholders’ equity was strengthened by Cí28,8 million (ú49,2 RESULTS million) following the exercise of Share Warrants that Profit attributable to shareholders for the year 2007 expired on 30 November 2007 and by the reinvestment exceeded the amount of Cí77 million (ú133 million) and of dividends amounting to Cí17,5 million (ú29,9 million). has more than doubled compared to the corresponding The return on equity of the Group for the year 2007 last year period (increase of 129%). Profit from ordinary reached 30,0%, exceeding significantly the target of operations before provisions registered a significant 25,1% set in August 2007. increase of 51%, reaching the amount of Cí96,8 million (ú165,3 million) compared to Cí64,1 million (ú109,6 ACTIVITIES million) in 2006. The principal activity of the Group during 2007 continued to be the provision of a wide range of banking and Total net income increased substantially by 25% reaching financial services, including hire purchase, investment, the amount of Cí187,6 million (ú320,5 million) insurance services, as well as trustee and factoring services. compared to Cí150,1 million (ú256,4 million) in 2006. Certain developments during 2007 relating to investments At the same time, the increase in total expenses in subsidiary companies are described in Note 20 to the was limited to 4%, reflecting the Group’s systematic Financial Statements. effort towards increasing its income while restraining expenditure. The result of this effort is demonstrated BRANCH NETWORK by the low level of the cost to income ratio of 48,9% The Bank provides banking and financial services through for 2007 compared to 58,9% for 2006. its branches in Cyprus and Greece and maintains Representative Offices in Moscow, Johannesburg and Provisions for impairment of loans and advances were Saint Petersburg. restricted to Cí7,5 million (ú12,7 million) showing a substantial decrease of 67% compared to the During 2007 the Bank obtained the approval of the corresponding amount in 2006. The decrease is mainly Central Bank of Russia and Ukraine for the establishment attributable to the continuing improvement of the of Representative Offices in Saint Petersburg and Kiev quality of the loan portfolio, combined with the significant respectively. At the end of 2007 the Representative Office increase in collections from problematic customers. in Saint Petersburg began its operations. The Bank proceeds Further details in respect of provisions for impairment with the completion of the necessary work required for of loans and advances are presented in Note 17 to the the operation of the Representative Office in Kiev. Financial Statements. In November 2007, the first stage of procedures for the The Group’s total assets reached the amount of Cí4.306 granting of a license for the exercise of banking operations million (ú7.357 million) compared to Cí3.798 million in Russia was completed with the signing of a Protocol (ú6.489 million) for 2006, registering an increase with the Central Bank of Russia. The Protocol is a joint of 13%. agreement that the Central Bank of Russia will grant a license for the opening of a subsidiary company in Russia, Total customer advances increased by 23% reaching the which will carry out banking activities, following the amount of Cí2,4 billion (ú4,1 billion) compared to submission by the Bank of all necessary documents Cí1,9 billion (ú3,3 billion) in 2006, while customer pursuant to the Regulations of the Central Bank of Russia. deposits increased by 10% reaching the amount of Cí3,4 billion (ú5,9 billion) compared to Cí3,1 billion SHARE CAPITAL (ú5,3 billion) in 2006. At 31 December 2007, there were 290.942.990 issued 40 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 ANNUAL REPORT 2007 ANNUAL REPORT
shares with a nominal value of Cí0,25 each (2006: (approximately Cí0,06 per share) (total amount HELLENIC BANK GROUP 241.924.699 shares with a nominal value of Cí0,25 of proposed final dividend approximately ú32.004 each). thousand, Cí18.731 thousand), in addition to the interim dividend of Cí0,05 per share (approximately During the year, the issued share capital was increased ú0,09 per share) paid in October 2007. by 41.108.264 shares following the exercise of part of the Warrants at the exercise price of Cí0,70 per share In addition, the Board of Directors will grant to the and 52.506 shares following the issue of bonus shares shareholders the option to reinvest in part or in full the to members of staff. In addition, in July 2007, 3.760.850 net amount of the proposed final dividend in additional shares were issued following the reinvestment of the ordinary shares of the Bank, rather than paying the final final dividend for 2006 and in October 2007 4.096.671 dividend in cash. The basis for the reinvestment will be shares were issued from the reinvestment of the interim the average buy/sell price of the share in the CSE at the dividend for 2007. close of the first five (5) business days from the ex-final dividend date (that is, from 9 to 13 June 2008), less a At 31 December 2007 there were no Warrants, as their discount of 12%. exercise period expired on 30 November 2007 (2006: 43.510.717). The unexercised Warrants amounting to RISK MANAGEMENT 2.402.453 are no longer valid according to the Prospectus The Group is exposed to a variety of risks, the most filed with the Cyprus Stock Exchange (CSE). important of which are described and analysed in Note 44 to the Financial Statements. The management and LOAN CAPITAL monitoring of risks is centralised under a uniform unit Non Convertible Bonds 2016 which covers the entire range of the Group’s operations. On 1st July 2006 the Bank proceeded with a new issue of new Tier 2 Capital in the form of subordinated bonds ANTICIPATED GROUP DEVELOPMENTS (Bonds 2016) for up to the total amount of Cí75 million Within the next three years the Group will face challenges (ú128,1 million) with a maturity date in 2016, according arising from the regulatory framework, the competitive to the Prospectus dated 11 May 2006. The 2016 environment and the successful realisation of the main subordinated Bonds are issued in one to four different strategic directions for business development. series which will be redeemed on 1st July 2016, irrespective of the date of issue. The Bank has the right to redeem the The main strategies for the next three years focus on Bonds on any interest payment date after 1st July 2011. business development, stable profitability and quality of service. By 30 September 2006, Cí38 million (ú64,9 million) Series A’ bonds were issued and listed on the CSE, The revised strategic plan for 2008-2010 demonstrates whereas on 22 November 2006 the Bank proceeded that the Group’s prospects for further development are with the issue of Cí25 million (ú42,7 million) Series B’ particularly encouraging. This estimation is reflected in bonds in accordance with the Second Supplementary the anticipated substantial improvement of the cost to Prospectus. On 27 April 2007 the Bank issued Cí12 income ratio to around 45% by 2010. Also, the return million (ú20,5 million) Series C’ bonds. With the issue on equity ratio is anticipated to fluctuate between 20% of the Series C’ bonds, the issue of Cí75 million (ú128,1 and 22% per annum for the next three years. million) of the Non Convertible Bonds 2016 was completed according to the Prospectus dated 11 May BOARD OF DIRECTORS 2006. The bonds are listed on the CSE. The members of the Board of Directors at 31 December 2007 were the following: DIVIDEND The Board of Directors proposes the payment of a Dr. Andreas P. Panayiotou final dividend for the year 2007 of ú0,11 per share Non Executive Chairman 41 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 Andreas M. Moushouttas INDEPENDENT AUDITORS Non Executive Vice Chairman Messrs KPMG have expressed their willingness to continue in office as the Bank’s external auditors. A Iacovos G. Iacovou resolution authorising the Board of Directors to fix their Non Executive Member of the Board remuneration will be proposed at the Annual General Antonis I. Pierides Meeting. Non Executive Member of the Board
Demetris J. Eliades On behalf of the Board of Directors Non Executive Member of the Board Dr Andreas P. Panayiotou Soteris Z. Kallis Chairman Non Executive Member of the Board Nicosia, 26 March, 2008 Charalambos P. Panayiotou Non Executive Member of the Board
Ioannis Ch. Charilaou Non Executive Member of the Board
Georgios K. Pavlou Non Executive Member of the Board
Kyriacos E. Georgiou Non Executive Member of the Board
Makis Keravnos Executive Member of the Board
Pieris Th. Theodorou Executive Member of the Board
The following changes took place in the composition of the Board of Directors until this date:
On 12 October 2007, Mr. Pieris Th. Theodorou was appointed as a new Member of the Board of Directors. On 8 January 2008, Mr. Kyriacos I. Droushiotis was appointed as a new Member of the Board of Directors. All other Directors were members of the Board of Directors throughout the year.
Reference to Directors’ emoluments, fees and compensation is made in Note 38 to the Financial Statements.
According to the Bank’s Articles of Association, Messrs Andreas M. Moushouttas, Soteris Z. Kallis, Ioannis Ch. Charilaou, Georgios K. Pavlou, Pieris Th. Theodorou and Kyriacos I. Droushiotis retire, and being eligible, offer themselves for re-election. The vacancies will be filled by election. 42 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 ANNUAL REPORT 2007 ANNUAL REPORT
HELLENIC BANK GROUP
43 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 BOARD OF DIRECTORS’ REPORT ON CORPORATE GOVERNANCE FOR THE YEAR 2007 ON CORPORATE
WE SUPPORT EDUCATION AND TEACHING BECAUSE TODAY’S YOUTH ARE TOMORROW’S CITIZENS; THEY ARE THE FUTURE. AT THE SAME TIME, WE STAND BY RESEARCHERS AND THEIR WORK, SINCE HUMANITY PROGRESSES THROUGH NEW DISCOVERIES WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 HELLENIC BANK PUBLIC COMPANY LIMITED Board of Directors’ Report on Corporate Governance for the Year 2007
INTRODUCTION Operations laws and of course the Bank’s Articles of The Bank’s Board of Directors fully adopted the Code Association. On 31st December 2007, the Board was of Corporate Governance, which was published by the composed of ten non-Executive Directors and two Cyprus Stock Exchange (2nd revised edition - January Executive Directors, all having the appropriate 2007), hereinafter referred to as “the Code”. In qualifications and broad relevant experience. On 8 compliance with the provisions included in the Code’s January 2008, another non-Executive Director was introduction, the Board of Directors incorporates the appointed to the Board. The Board of Directors’ present Report on Corporate Governance in the Bank’s composition as at 31 December 2007, as well as the 2007 Annual Report. changes in the composition and distribution of responsibilities of the Board throughout the year and PART A up to the date of the present Report, appear in the The Bank states that the full implementation of the Directors’ Report for the year 2007. Code’s principles constitutes the Bank’s policy and that it had already taken the initiative of applying many During 2007, the Board of Directors met sixteen times. of these principles well before the establishment of In all instances, it is ensured that all Members of the the Code. The Board of Directors believes that correct Board are correctly informed in writing of forthcoming corporate governance, based on the Code, in conjunction Board meetings and all necessary documentation related with the terms of reference and the practices to the meeting is provided so that they have adequate followed by the various Board Committees, constitutes time to review it. The Members of the Board hold a fundamental factor in achieving the corporate positions in the Boards of Directors of other companies goal of maximising shareholder value. The Board as shown in their curricula vitae, published in the acknowledges that there is an on-going process of Corporate Governance Report for the year they offer formulating principles of corporate governance based themselves for re-election. Their participation in other both on international as well as local conditions. As Boards allows them to devote the necessary time and such, the Board continually follows a policy of reviewing attention to their duties as Members of the Board of and readjusting the various aspects of corporate Directors of the Bank. governance accordingly. The Company Secretary / Executive Officer responsible PART B for ensuring compliance with the Code of Corporate The Bank confirms that it has taken appropriate action Governance provides information and advisory services in order to comply with the provisions of the Code as to the Members of the Board of Directors related to of 1st January 2003. Specifically, bearing in mind its Board procedures and the Code. second revised edition in January 2007, the Bank proceeded to inform all the Departments, Services and 1. Independent non-Executive Directors in 2007 officers of the Bank and also all Board Members of the ñ Andreas M. Moushouttas, Vice Chairman Bank and affiliated, subsidiary and associated companies ñ Antonis I. Pierides so as to ensure the broadest possible cooperation of all ñ Demetris J. Eliades parties concerned in the full implementation of the ñ Soteris Z. Kallis, Senior Independent Director principles and provisions of the Code. ñ Ioannis Ch. Charilaou ñ Charalambos P. Panayiotou In light of the above, the following confirmations and ñ Georgios K. Pavlou reports are made: ñ Kyriacos E. Georgiou ñ Kyriacos I. Droushiotis (from 8 January 2008) THE BOARD OF DIRECTORS The Bank is governed and controlled by the Board of 2. Non-Executive Directors in 2007 Directors, which operates on the basis of the Code, the ñ Andreas P. Panayiotou, Chairman relevant Companies, Stock Exchange and Banking ñ Iacovos G. Iacovou 46 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 ANNUAL REPORT 2007 ANNUAL REPORT
A relevant “Confirmation of Independence” based on of an additional member in the Audit, Remuneration HELLENIC BANK GROUP the minimum independence criteria in accordance with and Risk Management Committees. On 12 October Provision A.2.3. of the Code has been signed by each 2007, another Executive Director was appointed to the of the above mentioned Directors (in paragraphs 1 and Board, Mr. Pieris Th. Theodorou, Group General Manager 2 above) and has been submitted to the Cyprus Stock Legal Services and Human Resources / Company Exchange together with the present Report on Corporate Secretary. On 8 January 2008, another independent Governance. non-Executive Director was appointed to the Board, Mr. Kyriacos I. Droushiotis. 3. Executive Directors in 2007 ñ Makis Keravnos, Director / Chief Executive Officer The appointment of the above mentioned Members in ñ Pieris Th. Theodorou, Director / Group General the Board of Directors of the Bank took place after Manager / Company Secretary (Director from 12 applying in full the procedures of the directive of the October 2007) Central Bank of Cyprus “About the Ability and Suitability (Evaluation Criteria) of the Bank Directors and Managers At least 50% of the Board of Directors (excluding the of 2006 and 2007”. At the senior management level, Chairman) consists of independent non-Executive the procedures were also applied in full for the Directors. appointment, from 1st January 2008, of Mr. Glafkos Mavros as Group General Manager, Banking Services 4. Chief Executive Officer Development, and of Mr. Thomas Stylianou as Group ñ Makis Keravnos General Manager, Operations, replacing Messrs. Yiannis Epaminondou and George Papadopoulos respectively, 5. Further application of best possible practices who retired on 31 December 2007. On the same date, of Corporate and Internal Governance in the Bank the Chief Financial Officer Mr. George Appios left the during 2007 Group. Mr. Antonis Rouvas was appointed as the new During 2007, various actions were taken in compliance Group Chief Financial Officer, assuming his duties on with the following directives: 1st March 2008. Moreover, in an internal transfer that took place on 3 December 2007, Mrs. Niki Nicolaidou (a) The directive of the Central Bank of Cyprus, – Hadjixenophontos took over the post of Manager, “Framework of Principles of Operation and Criteria Group Internal Audit. On the same date, a new for Evaluation of Banks’ Organisational Structure, department, Credit Administration, was set up reporting Internal Governance and Internal Control Systems” to the Chief Executive Officer, to which the existing (May 2006) departments Group Credit Appraisal and Group Credit Policy were transferred. (b) The directive of the Central Bank of Cyprus, “Directive to the Banks for the Calculation of Capital During the year, a new Staff Succession Policy was Requirements and Large Exposures” (December approved by the Board following the suggestion of the 2006), and the corresponding framework of the Chief Executive Officer. Second Basel Accord The Department of Corporate Governance / Compliance, always taking into consideration in co-operation with the Chairman, the Chief Executive Officer and the Executive Officer responsible for ensuring (c) The Code of Corporate Governance published by compliance with the Code of Corporate Governance / the Cyprus Stock Exchange (2nd revised edition – Company Secretary, confirms compliance with the January 2007). relevant laws, regulations and directives and the implementation of best possible practices of Corporate Within the above mentioned framework, there was a Governance within the Bank. Within this framework, reshuffle of the Board Committees with the appointment during 2007 the Department cooperated with the 47 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 Chairman and the Company Secretary as well as with the Risk Management of the Group. The Group Internal the Members of the Nominations / Internal Governance Audit reports directly to the Audit Committee and the Committee for the drafting of the Operational Board of Directors itself. It consists of 30 persons and Regulations of the Board of Directors. It also cooperated is headed by Mrs. Niki Nicolaidou – Hadjixenophontos with the Departments of Human Resources, Organisation (B.Sc. Honours in Financial Services, M.B.A., A.C.I.B., & Methods and other Head Office departments F.C.C.A.). All the Internal Audit functions are carried out involved with the issue of a Group Professional Ethics in accordance with the Internal Audit Manual. No Internal Code approved by the Board and an Operational Audit function has been outsourced during 2007. Memorandum, headed “Related Party Transactions”. The above mentioned actions were taken for full In this context, all Group operational management units compliance with the Central Bank of Cyprus directive are suitably staffed and committed to the introduction “Framework of Principles of Operation and Criteria for and operation of appropriate control systems according Evaluation of Banks’ Organisational Structure, Internal to their respective business and responsibilities. Within Governance and Internal Control Systems” (May 2006), this framework, the above mentioned management units: the Bank's aim being to apply an adequate and transparent framework of internal governance. ñ Operate on the basis of a specific organisational structure and allocation of responsibilities; 6. Remuneration Policy Report ñ Prepare and monitor the implementation of the The Remuneration Policy Report was prepared by the strategic and business plans and annual budgets; Board of Directors following a proposal by the ñ Follow written procedures, receive and disseminate Remuneration Committee in accordance with Appendix information and advice through circulars and training 1 of the Code. It is presented in the Annual Report of programmes; the Company after the present Board of Directors’ ñ Adopt a policy of adequate segregation of duties Report on Corporate Governance (page 60). The in order to avoid a conflict of interests wherever Remuneration Policy Report will be presented to the this is considered necessary; Annual General Meeting of Shareholders for approval. ñ Apply, at branch level, performance evaluation and measurement models on the basis of specific targets; Information on the remuneration / fees of the Members ñ Are supported by appropriate software and hardware of the Board of Directors and the Chief Executive Officer systems, and for the year 2007 is disclosed in the notes to the Accounts ñ Are subject to regular internal and external audits. contained in this Annual Report (Note 38). The adequacy of the internal control system safeguards 7. Going Concern the Group’s and its customers’ assets, as well as the The Board of Directors states that the Company intends validity of the financial data and compliance with existing to continue to operate on a going concern basis for the laws in general. It aims towards the management and next twelve months. not the complete removal of risks, providing reasonable but not absolute assurance that no major loss will 8. Internal Control System be incurred. The Board of Directors confirms that the Company has an effective internal control system, the adequacy of 9. Confirmation in Accordance with the Provision which is reviewed by the Board at least once a year. It C.2.1. of the Code is also reviewed on a more regular basis by the Audit In relation to paragraph 8 above (Internal Control Committee, both in respect of financial and operational System), the Members of the Board of Directors confirm systems as well as of compliance systems for the that they have reviewed the adequacy of the internal management of risks, which might occur and which fall control system of the Company as well as the procedures within the competencies, duties and responsibilities of for verification of correctness, accuracy and validity of the Asset and Liability Management Committee and information disseminated to investors. 48 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 ANNUAL REPORT 2007 ANNUAL REPORT
The Board also confirms that, to its knowledge, no 12. Code of Corporate Governance Compliance HELLENIC BANK GROUP violation in the Stock Exchange Legislation and Officer Regulations has occurred, except in cases already reported The Bank has appointed Mr. Pieris Th. Theodorou, Group to the relevant authorities (where this applies). General Manager / Company Secretary, as Executive Officer responsible for ensuring compliance with the 10. External Auditors - Provision C.2.2. of the Code Code of Corporate Governance. In 2007, Messrs KPMG, external auditors of the Bank, offered other services apart from auditing e.g. 13. Board Committees tax services, training seminars, advisory services, etc. The following Board Committees operate within Their objectivity and independence is ensured in the the Bank: following ways: a. Audit Committee a. The non-auditing services are offered by different Chairman: Antonis I. Pierides companies / departments of the KPMG Group in Members: Ioannis Ch. Charilaou accordance with the professional code of certified Georgios K. Pavlou accountants / auditors (“Chinese Walls”). Kyriacos E. Georgiou) Soteris Z. Kallis (from 3 October 2007) b. The KPMG team that carries out the external audit of the Bank does not participate in offering services b. Remuneration Committee apart from auditing. Chairman: Demetris J. Eliades Members: Soteris Z. Kallis c. The offer of non-auditing services is carried out Charalambos P. Panayiotou by a tendering process except where these are Kyriacos E. Georgiou considered to be of minor importance. Iacovos G. Iacovou (from 3 October 2007)
Messrs KPMG have confirmed in writing to the Bank c. Nominations / Internal Governance Committee that the offering of the above mentioned services does Chairman: Dr. Andreas P. Panayiotou not affect their independence and objectivity. The Members: Andreas M. Moushouttas external auditors do not offer internal audit services to Iacovos G. Iacovou the Bank. Georgios K. Pavlou Soteris Z. Kallis 11. Credit Facilities to Directors Information as to credit facilities provided to Company d. Risk Management Committee Directors (and related parties) or to its subsidiary or Chairman: Andreas M. Moushouttas associated company Directors is to be found in the Members: Antonis I. Pierides relevant notes to the Financial Statements contained Ioannis Ch. Charilaou within the present Annual Report (Note 38). It is Charalambos P. Panayiotou confirmed that all such transactions were carried out Pieris Th. Theodorou (from 12 October 2007) within the normal course of the Bank’s business, under normal commercial and employment terms and with The terms of reference of the above Committees are transparency. Furthermore, it is confirmed that all based both on the relevant provisions of the Code relevant cases of Bank facilities to Company Directors pertaining to them and the relevant guiding directives and its subsidiary company Directors are forwarded for of the Central Bank of Cyprus. They are published in approval to the Board, after the relevant proposal of paragraph 14 below while those of the Remuneration the Board’s Audit Committee. During this procedure Committee are in the Remuneration Policy Report. the interested Member of the Board neither participates Within the framework of the provisions of the Code nor is he present. concerning relations with the Shareholders, the Chairmen 49 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 of these Committees are available to answer any the market, especially in areas where the Group is active, questions at the Annual General Meeting in which all as well as salaries in other levels of the Group. The shareholders are encouraged to participate. The Chairmen Committee aims to attract and retain good quality and Members of the Committees periodically submit officers at Executive and General Management levels, reports or proposals to the Board of Directors following in order to better serve the interests of the Group as the meetings of the corresponding Committees, well as its shareholders and other stakeholders. depending on the subjects being addressed. Each year, the Remuneration Committee proposes to The Audit Committee meets on its own before the the Board of Directors the Annual Remuneration Policy announcement of the quarterly results to review the Report, as part of the Annual Report of the Company, Financial Accounts and more specifically, the extent and which is submitted to the shareholders’ Annual General sufficiency of provisions for debts which may be doubtful Meeting for approval. The Committee also reviews and of collection, as well as the adequacy of the internal approves the information disclosed on the annual control system. It then proceeds with the relevant remuneration of the Members of the Board, which is suggestions to the Board. The Audit Committee also prepared by Group Financial Management for inclusion meets on its own (without the presence of members of in the notes to the annual accounts of the Company. the Executive Management) to review matters within its responsibility. Additionally, it participates in meetings The Nominations / Internal Governance Committee with the Executive Management of the Bank and the is engaged in selecting fit and proper individuals for Internal Audit in Cyprus and in Greece, to review issues appointment as Board Members of the Bank or its which arise either from the financial accounts or from subsidiaries, either for positions extraordinarily vacated various special reports or investigations or from the or after the retirement of Board Directors, in accordance Annual Report of the Internal Audit of the Bank and its with the Bank’s policy regarding retirement age. The subsidiary companies. The Committee makes Committee then submits its suggestion to the Board of recommendations or suggestions to the Board of Directors of the company concerned for its decision. Directors on issues related to its jurisdiction. The The decision applies for the period from the appointment Committee is assisted by the respective audit committees date of the new Member to the next shareholders’ of the Bank’s subsidiary companies. During 2007, the General Meeting, when the Directors so appointed, if Audit Committee held a considerable number of eligible, may offer themselves for re-election. New Board meetings. The Committee’s Chairman has a university Members are briefed by the Executive Officer responsible degree and extensive experience in Finance and is a for ensuring compliance with the Code of Corporate Business Consultant by profession. Governance and by other high-ranking officers, regarding the provisions of the Code as well as on broad issues The Remuneration Committee meets whenever it is in relation to the organisational structure, procedures, necessary to fix or review the remuneration of Executive strategic planning, the Company’s practices in general and non-Executive Members of the Board of Directors, and those of the Board and its Committees in particular. the Chief Executive Officer and the General Managers The Committee also has the responsibility of implementing of the Group (if the remuneration of the General the Group’s policies on internal governance. The Managers is not within the remuneration scales of the Nominations / Internal Governance Committee meets collective agreements). After considering all relevant whenever issues arise that are within its jurisdiction. parameters and data, it makes relevant recommendations to the Board for taking decisions, in the absence of the The Risk Management Committee assists the Bank’s Executive Member of the Board or other Officers involved. Board of Directors in fulfilling its responsibilities and The Committee’s suggestions and the Group’s obligations concerning the recognition, measurement, remuneration policy take into consideration the relevant monitoring and effective management of all the Group's responsibilities, workload, qualifications, experience, risks (credit, interest-rates, operational, market, liquidity, performance, remuneration of comparable positions in foreign exchange, capital and other). Amongst its other 50 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 ANNUAL REPORT 2007 ANNUAL REPORT
duties, the Committee prepares and submits proposals 2. Composition and Term-in-Office of Members HELLENIC BANK GROUP for approval to the Board. When applied, it evaluates of the Audit Committee the principles, the framework and policies of undertaking The Board appoints at least three non-Executive Directors and managing all forms of risks and the use of capital as members of the Committee. The majority of the that would correspond to the business objectives of members of the Committee must be independent non- the Bank, the Group and / or each subsidiary company Executive Members of the Board. separately. It also recommends to the Board the assignment of approval authority (which concerns the The Chairman of the Committee should have experience undertaking of risks) to the Executive Management, in accounting and / or finance and will be appointed General Management and other approving groups, as by the Board of Directors. The Chairman of the Group well as the approval of new products or services that should not be a member of the Audit Committee. the Group intends to introduce. The Risk Management Committee meets whenever issues arise that are within The term-in-office of the members of the Committee its jurisdiction. is decided by the Board of Directors.
14. Terms of Reference of the Board of Directors’ 3. Meetings of the Committee Committees (except the Remuneration Committee) The Committee meets at regular intervals, at least six times a year. The next integral number of one half of Terms of Reference of the Audit Committee the members comprises a quorum. 1. Establishment / Mission The Audit Committee was established to ensure that The Committee invites to its meetings any officers of the Bank complies with the directives published by the the Group whose opinion it considers necessary for the Central Bank of Cyprus in accordance with the provisions best conduct of its duties. of article 41 of the Banking Business Law of 1997. The Committee should meet with the external auditors The primary mission of the Committee is to ensure the at least once a year to discuss matters arising from achievement, in a reliable and effective manner, of the audits. obligations imposed on the Bank by the above mentioned directive, the compliance with the relevant provisions The Committee keeps minutes of its meetings and of the Code of Corporate Governance and its contribution decisions and submits its annual and periodical reports in general to the strengthening of the principles of of proceedings to the Board, as it deems advisable. sound management in the conduct of operations and activities of the Bank. 4. Decision-making Process In case of disagreement, the decisions of the Committee The Audit Committee is responsible for helping the are taken by voting. In the case of a tie, the Chairman Board of Directors in the effective monitoring of the has the casting vote. activities and operations of the Group. 5. Duties and Responsibilities In order to accomplish its mission, the Committee has The duties and responsibilities of the Committee are: under its direct monitoring and control the Group Internal Audit, which is, as required by the Central A. Financial Statements Bank, independent of the Executive Management and A1. It examines the contents of the quarterly, semi- answerable to the Committee. annual, nine-monthly and annual financial statements and of the other special periodic financial reports, The Committee has the approval of the Board of Directors to be satisfied that they present a true and fair view to obtain independent professional advice whenever it before they are submitted to the Board of Directors deems this necessary. for approval. 51 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 A2. It supervises the processes applied by the Group This table is submitted to the Board of Directors, along Financial Officer with the technical supervision of the with the relevant comments of the Audit Committee. external auditors (where this is judged necessary) regarding the choice of accounting policies and accounting estimates C. Internal Audit for the preparation of the Group’s financial statements. C1. It approves and evaluates the Internal Audit manual that contains, among other things, the rules, the way B. External Audit the Committee works and the audit objectives and B1. It submits proposals to the Board regarding the appoint- programmes. ment, termination and remuneration of the Group’s auditors. C2. The Group Internal Audit submits its annual audit B2. It monitors and ensures the independence and plan and the Unit’s budget to the Audit Committee for effectiveness of the auditors. approval. Any changes that are likely to be made to the audit plan or the budget during the year must also be B3. It monitors the relationship between the Group and approved by the Committee. its auditors. C3. It proposes to the Board the appointment and B4. It evaluates the extent and effectiveness of the audits replacement of the Head of Group Internal Audit. and examines ways to better co-ordinate the audit effort to ensure complete coverage, avoidance of overlapping It evaluates his performance and also the work and work and the best use of available audit resources (cost effectiveness of Group Internal Audit. - effectiveness). C4. It evaluates the adequacy and effectiveness of the B5. It evaluates the comments / proposals of the auditors Internal Control System of the Group. with regard to the management of the Group, the preparation and presentation of its financial statements C5. It submits to the Board of Directors a report and the monitoring of their application. regarding:
B6. It monitors the substantial volume, nature and extent a. The adequacy of audits carried out, the conclusions of non-auditing services provided by the auditors at and the proposals of Group Internal Audit. Group level, aiming to maintain the balance between objectivity and the value added by the services offered. b. Subjects that are related to the independence and smooth carrying out of audit work carried out by In the case where non-auditing services are offered to Group Internal Audit. a subsidiary or affiliated company of the Bank and the volume is such that it downgrades the objectiveness of C6. It confirms that the Bank assigns the evaluation their audits, then the Committee informs the corresponding of the adequacy of the Internal Control System, on an Committee (where it exists) of the subsidiary company individual and consolidated base, to external auditors or its Board of Directors. who have the necessary experience.
The Committee is informed, at least once a year, by the It evaluates the findings of the above audits and proposes Group’s Financial Management about the nature, extent corrective measures to the Board of Directors. and fees for non-auditing services or other advisory duties of the auditors. D. Miscellaneous Issues D1. It assigns to Group Internal Audit or, following B7. It annually prepares a table in which the auditing and authorisation of the Board of Directors, to independent non-auditing services by category, time and fees paid experts, the investigation of any subjects which fall are recorded. within its mission and powers. 52 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 ANNUAL REPORT 2007 ANNUAL REPORT
D2. It requests information from the Management on D9. The Chairman of the Committee will be HELLENIC BANK GROUP the significant risks to which the Group is exposed; it available for personal, telephone, electronic or written evaluates the steps taken by the Board to minimise communication, which shareholders of the Bank these risks, and submits proposals for their improvement. may request, regarding issues concerning the work of the Committee. He will also be available to answer D3. It investigates any other important elements, data any questions during the Annual General Meeting or or facts that concern and influence the efficiency and any meeting for purposes of briefing all shareholders operation of the Bank or its compliance with the laws of the Bank. and regulations that govern it. Information concerning the structure and work of the D4. The Committee confirms, once a year, the compliance Committee will also be given in the Annual Corporate of the Bank with the laws and the institutional framework Governance Report of the Board of Directors of Hellenic in which it is active. Bank Public Company Limited.
D5. Following a decision of the Audit Committee, the 6. Validity and Modification of the Terms Chairman convenes a joint meeting with the members of Reference of the audit committee of any subsidiary company to The terms of reference will be revised and appropriately discuss and study any matters concerning that company readjusted so as to reflect any new practices that may as may be deemed necessary. be adopted by the Group. These might include organisational restructuring, directives of the Central D6. The Committee has the responsibility for examining Bank, changes in the relative legislation, new directives any significant transactions, in any form, carried out by of the Securities Commission or new regulations of the the Bank and / or its subsidiary companies, where any Cyprus Stock Exchange added to the Code. Member of the Board, Chief Executive Officer, Senior Executive Officer, Secretary, Auditor or large shareholder The Board has the responsibility for any addition to or (who directly or indirectly holds more than 5% of the readjustment of the procedures related to the terms of issued share capital of the Company or voting rights) reference. has, directly or indirectly, any significant interest. It ensures that these transactions are carried out within 7. Code of Corporate Governance the framework of the Bank’s normal commercial practices In observing all the above, it is understood that the (at arm's length). Audit Committee will function strictly within the framework of the relevant provisions of the Code of The above definition includes the Board Members of Corporate Governance, as these are determined by subsidiary companies. Chapter C of the Code.
D7. It draws up, with the assistance of the Executive Terms of Reference of the Risk Management Officer responsible for ensuring compliance with the Committee Code of Corporate Governance, the Board of Directors’ 1. Terms of Reference of the Risk Management Report on Corporate Governance to be included in the Committee Group’s Annual Report. The role of the Committee is to assist the Board of Directors of Hellenic Bank Public Company Limited (“the D8. It discusses with the Group’s Management the Company”) to fulfil its responsibilities and obligations policy for management and evaluation of business risk, concerning the recognition, measurement, monitoring including the main Group financial risks, and the measures and effective management of all Group risks (credit, that are taken by the Board for their monitoring and operational, market, liquidity, foreign currency and containment. The external auditors and the Head of others). The Committee also has the responsibility of Group Internal Audit may also be invited to this meeting. monitoring compliance risk. 53 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 2. Appointment of the Risk Management Committee correspond to the business objectives of the Company, The Committee will be appointed by the Board of Directors Group and / or each Company separately. Inter alia: and will consist of between three and five members with sufficient knowledge and experience in the Risk (a) The Committee will shape the policy of the Group Management sector. with regard to the limits and pricing of undertaking At least one member will be an Executive and one an Group risks independent non-Executive member. (b) The Committee will ensure that the Group’s capital One of the Committee’s non-Executive members will is maintained at levels that correspond to the risks be appointed by the Board as Chairman. undertaken The term-of-office of the members of the Committee (c) The Committee will confirm the sufficiency of the will be decided by the Board. acceptable limits of risk and the limits of interruption The Board can, during the term-of-office of the Committee: of loss-making activities or the undertaking of other (a) replace any member of the Committee including the corrective measures. Chairman, and (b) fill positions in the Committee which are, for any reason, vacated. 4.3 The Committee will formulate and submit to the Board of Directors of the Company proposals for the undertaking 3. Meetings of the Risk Management Committee of corrective measures in cases where it sees a weakness The Committee will meet whenever necessary and at in the implementation of the risk management strategy. least once every quarter. The majority of Committee members will comprise a 4.4 The Committee will recommend to the Board of quorum. A majority of Committee members is considered Directors the transfer to the Top Executive and General to be the next integral number of one half of the Management and other approving groups of approval members. rights (which concern the undertaking of risks) along In the case of a tie, the Chairman will have the casting with the restrictions and limits which govern these rights. vote. Specifically, it will propose to the Board approval limits The Committee will keep minutes of its meetings for the Executive Loan Committee and the Assets and and decisions. Liabilities Management Committee (ALCO). The Chairman of the Committee will inform the Members of the Board of the Committee’s work. 4.5 The Committee will receive and evaluate, on a The Committee may invite to any of its meetings any quarterly basis, reports by the head of Group Risk person who may contribute to the effective conduct Management Unit with regard to the more important of its business. risks that were undertaken by the Group and will inform the Board of Directors accordingly. 4. Duties, Responsibilities and Rights of the Risk Management Committee 4.6 The Committee will evaluate, annually, the adequacy 4.1 The Committee will prepare and submit to the Board and effectiveness of the risk management policy, of Directors, for approval, the principles which should including the appropriateness of limits, the adequacy govern risk management. Based on these principles, the of provisions and own funds in relation to the size and Committee will cultivate an internal environment of risk form of risks undertaken. The evaluation will be carried management, which will govern the business decision- out based on the annual report of the Head of the making processes across the activities and / or units of Risk Management Unit. the Group and its subsidiaries. The above mentioned report and evaluation, along with 4.2 Based on the approved principles, the Committee the relevant extracts of the minutes of the Board, will will shape and propose to the Board of Directors, be submitted to the Department of Regulation and for approval, the framework for undertaking all Supervision of Banking Institutions of the Central Bank forms of risks and the use of capital that would of Cyprus by 30 April each year. 54 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 ANNUAL REPORT 2007 ANNUAL REPORT
4.7 The Committee will refer to the Board of Directors, may request, regarding issues concerning the work of HELLENIC BANK GROUP for approval, any new products or services that the the Committee. He will also be available to answer any Group intends to introduce which, in the opinion of the questions during the Annual General Meeting or any Risk Management Unit, include new risks or require the meeting for purposes of briefing all shareholders of the adoption of risk limits. It will also ensure that the various Company. Information concerning the structure and risks contained in these products (credit, market, work of the Committee will also be given in the Annual liquidity, operational, etc.) are adequately monitored. Corporate Governance Report of the Board of Directors of Hellenic Bank Public Company Limited. 4.8 The Committee will evaluate the risks that are related in the involvement of the Group in new markets, new Terms of Reference of the Nominations / companies or business ventures and will submit a Internal Governance Committee recommendation to the Board of Directors. Principle of the Code of Corporate Governance There should be a specified and transparent process for 4.9 The Committee will be informed of the relevant the nomination of new Board Members to the Board reports of the Central Bank of Cyprus and the Group of Directors. The Board should consist of individuals fit Internal Audit concerning risk management and will see and proper to participate in the Board of Directors of to the undertaking of corrective measures where these the Company. are necessary, based on the observations and suggestions of these reports. 1. Terms of Reference of the Nominations / Internal Governance Committee The Committee will also be informed of the contents The role of the Committee is to prepare proposals to of reports by the International Rating Agencies the Board of Directors of Hellenic Bank Public Company and, after evaluation, will proceed with proposals Limited (“the Company”) for the selection of fit and for any necessary corrective measures concerning proper individuals for nomination as Members of its risk management. Board or the Boards of Subsidiary Companies of the Group, either to fill extraordinarily vacated or vacant 4.10 The Committee will propose to the Board the seats or after the retirement of a Member based on the nomination or replacement of the Head of the Risk retirement policy due to age. The Committee also has Management Unit of the Group. the general responsibility for the implementation of policies of internal governance within the Group. 4.11 Within the framework of its responsibilities, the Committee, in co-operation with the Audit Committee, 2. Appointment of the Nominations / Internal will also be responsible, at Board level, for the Governance Committee implementation of the Second Basel Accord (Basel II) The Board of Directors decided that the Committee and the Directives of the European Union (CAD 3). would consist of five non-Executive Board Members. The term-of-office of the members of the Committee 4.12 The Risk Management Committee will work with is decided by the Board of Directors. the Audit Committee of the Board to ensure that a global view is taken in the management of risk. 3. Meetings of the Nominations / Internal Governance Committee 4.13 The Committee has the approval of the Board of The Committee will meet whenever necessary and at Directors to obtain independent professional advice least three times a year. whenever it deems this necessary. Three of the five members of the Committee will constitute a quorum. 4.14 The Chairman of the Committee will be available The Committee will keep minutes of its meetings and for personal, telephone, electronic or written decisions and will submit copies to the Chairman and communication, which shareholders of the Company the Members of the Board of Directors of the Company. 55 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 The Committee has the approval of the Board of Directors 4.5 The Committee will have the responsibility of to obtain independent professional advice whenever it preparing plans for the succession of Board Members. deems this necessary. 4.6 The Committee will evaluate the extent of compliance 4. Duties and Responsibilities of the Nominations / with the policies of internal governance as these were Internal Governance Committee approved by the Board of Directors of the Company. 4.1 The Committee will propose to the Board the necessary qualifications that an individual should possess 4.7 The Chairman of the Committee will be available in order to serve as a member of the Board of any of for personal, telephone, electronic or written the Group’s companies. The minimum qualifications communication, which shareholders of the Company required are: may request, regarding issues concerning the work of the Committee. He will also be available to answer any (a) Knowledge, skills and experience. questions during the Annual General Meeting or any (b) Honesty and objective judgement. meeting for purposes of briefing all shareholders of the (c) Any special qualifications that may be required by Company. Information concerning the structure and laws that govern the operation of a particular work of the Committee will also be given in the Annual company (including the Directive of the Central Corporate Governance Report of the Board of Directors Bank “Concerning the Ability and Suitability [Criteria of Hellenic Bank Public Company Limited. of Evaluation] of Board Members and Executives of Banks Directive of 2006 and 2007”). 5. Best Principles of Internal Governance (d) Availability of time for the business of the Company. As these are reported in the Directive of the Central (e) Appropriate age. Bank of Cyprus - May 2006 and by the Basel Committee on Banking Supervision - February 2006. 4.2 The Committee will examine proposals for the nomination of members to the Group Boards of Directors 6. Code of Corporate Governance based on the required qualifications and will submit the It is understood that the Nominations / Internal Governance relevant report, with its opinion, to the Board of Directors Committee will operate strictly within the framework of the Company, which will take the final decisions. of the relevant provisions of the Code of Corporate The Committee will state in its report the companies Governance as these are determined in Chapter A of in which a candidate for Board membership is not the Code. allowed to participate because of conflict of interests, as well as what information the candidate should have 15. Part D of the Code which refers to the Relations at his / her disposal before being appointed as a Member of the Company with its Shareholders of the Board. Hellenic Bank Group announces its financial results every quarter. 4.3 The Committee will examine, on an annual basis, the structure, size, composition and the output / The Board of Directors of the Company utilises the effectiveness of the Board of Directors of the Company occasions of the announcements of the quarterly or and those of the Group’s Subsidiary Companies and will interim results, as well as of the Annual General Meeting propose any changes that are judged necessary to the of the Shareholders itself for organising analytical Board of the Company. presentations of the Financial Statements. These are usually undertaken by the Group Chief Financial Officer 4.4 The Committee will evaluate, on an annual basis, and the Company’s Executive Management for the the skills, knowledge and expertise of Members of the benefit of shareholders, financial analysts, members of Board of Directors of the Company and those of the the Stock Exchange and representatives of the Mass Group’s Subsidiary Companies, reporting accordingly to Media. More specifically, regarding the Annual General the Board of the Company. Meeting, there is complete compliance with the relevant 56 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 ANNUAL REPORT 2007 ANNUAL REPORT
provisions of the legislation, the Bank’s Articles of was Chairman of the Cyprus Clothing Industries HELLENIC BANK GROUP Association and the Code. The shareholders also have Association from its establishment until 2007. He the opportunity to communicate, regarding matters is a member of the Executive Committee of the that concern them, with the Secretariat of the Company Board of Directors of the Cyprus Employers’ and and the Investor Relations Officer, Antonis Rouvas (tel: Industrialists’ Federation (O.E.V.) and a Member of 22500760). the Labour Issues Advisory Body. He was a member of the Board of Directors of Universal Bank Public 16. Rotating Directors eligible for Re-Election Limited and Universal Life Insurance Company Limited. Members of the Board retire on a rotating basis or retire according to the relative articles of the Bank’s Articles He was elected a Member of the Board of Directors of Association and the relevant provisions of the of Hellenic Bank on 1 June 2005 and is also a Companies Law and the Code (at least every three member of the Board of Directors of Hellenic Bank years). The retiring Directors, who are eligible and offer (Finance) Limited and Athena Cyprus Public Company themselves for re-election at the Annual General Meeting Limited. He is a Member of the Nominations / Internal of the Bank which will take place on 28 May 2008, are Governance, Remuneration and Audit Committees the following (brief curriculum vitae included): of the Bank’s Board of Directors.
(a) Andreas M. Moushouttas, Lawyer (c) Ioannis Ch. Charilaou, Chartered Accountant / Auditor He was born on 29 April 1939. He graduated from He was born on 3 April 1966. He graduated from the Pancyprian Gymnasium of Nicosia and holds a the Acropolis Lyceum and in 1995, qualified as a Law Degree from the Faculty of Law of the National Certified Accountant with the Association of and Kapodistrian University of Athens. He is a Chartered Certified Accountants (2001 F.C.C.A.) member of the Cyprus Bar Association. He was while also becoming a member of the Institute of Minister of Labour and Social Insurance from 1985 Certified Public Accountants of Cyprus. In 1998, until 1988, from 1993 until 1997 and from 1998 he became a member of the Association of until February 2003. He also served as Chairman of International Accountants (2001 F.A.I.A.) and in the Board of Directors of the Electricity Authority 2001, a member of the Association of Certified of Cyprus as well as in other boards of public and Fraud Examiners (U.S.A.). In 2003, he received a private companies. postgraduate degree in Business Administration M.B.A. from the University of Leicester. In 1988, he He was appointed as a Member of the Board of was employed by the Cyprus Telecommunications Directors of Hellenic Bank on 2 July 2003 and elected Authority in the Internal Audit Department. as a Vice Chairman of the Board on 19 March 2005. Since 1997, he has been working in the Central He is the Chairman of the Board of Directors of Ecclesiastical Fund and the Audit Department of Hellenic Bank (Finance) Limited, Chairman of the the Church of Cyprus as Head of Research and since Risk Management Committee and Member of the September 2003, as their Director. He is the Vice Nominations / Internal Governance Committee of Chairman of the Institute of Certified Public the Bank’s Board of Directors. Accountants of Cyprus and a member of the Board of Directors of various companies of the Hellenic (b) Soteris Z. Kallis, Businessman Mining Company Group, of Logosnet Services Ltd, He was born on 26 July 1945. During his career of the Information and Cultural Company ‘Ô Logos’ he received extensive education in Business and other private companies. Administration and Bookkeeping. He is Executive Director of the private company G. Kallis He was elected a Member of the Board of Directors (Manufacturers) Ltd and other subsidiary or of Hellenic Bank on 1 June 2005 and is also a associated companies involved in industrial, trading member of the Board of Directors of Hellenic Bank and investment activities in Cyprus and abroad. He (Finance) Limited, Pancyprian Finance Public Company 57 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 Limited and Pancyprian Insurance Limited. He is a the Paphos Chamber of Commerce and Industry member of the Audit and Nominations / Internal and is also a member of the Executive Committee Governance Committees of the Bank’s Board of the Cyprus Chamber of Commerce and Industry of Directors. (K.E.V.E.), the Chairman of the Body for Tourism Development of Paphos and a member of the Board (d) Georgios K. Pavlou, Financial Controller of Directors of Paphos Aphrodite Festival Ltd. He was born on 7 February 1959. He graduated from the Nicosia Commercial Lyceum and in 1980, He was appointed a Member of the Board of received the Diploma in Management, qualifying as Directors of Hellenic Bank on 8 January 2008. a Member of the Association of Business Executives London. In 1983, he received the Diploma of the (a) Pieris Th. Theodorou, Legal Adviser / Banker British Educational Council in Business Studies / He was born on 5 October 1947. He graduated from Accounting. In 2006, he became a Member of the the Pancyprian Gymnasium of Nicosia and studied Institute of Directors (U.K.). In 1983, he was employed Law at the University of London (LL.B. Hons) and at by the Audit Department of the Church of Cyprus the Middle Temple Inns of Court. He practiced and in June 1986, he took over as Financial Controller law from 1970 until 1976 when, at the of the Holy Monastery of Kykkos. He is a member commencement of operations of Hellenic Bank, he of the Board of Directors of Hellenic Mining Company. took over as Internal Legal Adviser / Company Secretary. Today, he holds the positions of Group He was elected a Member of the Board of Directors General Manager, Company Secretary of the Bank of Hellenic Bank on 1 June 2005 and is also a member and Executive Officer responsible for ensuring of the Board of Directors of Hellenic Bank (Finance) compliance with the Code of Corporate Governance, Limited, Pancyprian Finance Public Company Limited with responsibility for the Group Legal Services, and Hellenic Alico Life Insurance Company Limited. Group Human Resources, Group Strategy, Group He is a member of the Audit and Risk Management Debt Recoveries, Group Credit Control, Group Committees of the Bank’s Board of Directors. Corporate Governance / Compliance and Group Companies’ Secretariats. He represents Hellenic (e) Kyriacos I. Droushiotis, Economist / Bank in the Board of the Cyprus Bankers Employers’ Financial Consultant Association. He was Executive Member of the Board He was born on 5 February 1955. He studied of Hellenic Bank from 2000 until 2006. Economics at the School of Economics and Business of the University of Athens and was subsequently He was actively involved in Stock Exchange matters employed by the International Auditing / Financial from the early years of the unofficial Cyprus Stock Consulting Firm Arthur Andersen & Co. He was Exchange (1979-1996) and was a founding member, trained in the United Kingdom and worked in Europe in 1988, of the Board of the Association of Public and the Middle East, in the Audit and Consultancy (Listed) Companies of Cyprus, which he has been Services Departments. After returning to Cyprus, chairing since 1997. He is also a member of the he worked at Price Waterhouse and Coopers & Board of EuropeanIssuers, which is a confederation Lybrand before establishing in 1987 the Financial of associations of listed companies in Europe. Consulting Firm Droushiotis & Co, a company that Since 1987, he is an active member of the Banking has provided financial consulting services to all Commission of the International Chamber of municipalities in the Paphos District, the Paphos Commerce (I.C.C.) while since 1990, a member of City Buses Company and the Cooperative the Cyprus National Committee of the I.C.C. He Movement. He is a member of the Cyprus Qualified is also a member of the I.C.C. Task Force for issues Certified Accountants / Auditors Association and of Uniform Rules for Demand Guarantees and a an Approved Consultant of the Cyprus Technology member of the Editorial Board of the Journal of Foundation. In 2003, he was elected Chairman of International Banking Regulation. 58 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 ANNUAL REPORT 2007 ANNUAL REPORT
He was appointed an Executive Member of the Board HELLENIC BANK GROUP of Directors of Hellenic Bank on 12 October 2007. He is also Chairman of the Board of Directors of Hellenic Bank Trust and Finance Corporation Limited and Member of the Board of Directors of Hellenic Bank (Investments) Limited and Hellenic Alico Life Insurance Company Limited. He is also a member of the Risk Management Committee of the Bank’s Board of Directors.
Nicosia, 26 March, 2008
59 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 Remuneration Policy Report for the Year 2007
INTRODUCTION Charalambos P. Panayiotou The Board of Directors, in compliance with the provisions Kyriacos E. Georgiou in the Code of Corporate Governance, published Iacovos G. Iacovou (from 3 October 2007) by the Cyprus Stock Exchange (2nd revised edition - January 2007) and particularly Appendix 1 of the Code, The terms of reference of the Remuneration Committee incorporates the present Remuneration Policy Report in are listed below: the Bank’s 2007 Annual Report. The latest has been published in the Bank’s Website. Terms of Reference of the Remuneration Committee Principles of the Code of Corporate Governance REMUNERATION COMMITTEE The companies should introduce official and transparent The Remuneration Committee meets whenever it is procedures for the development of policies concerning necessary to fix or review the remuneration of Executive the remuneration of Executive Members of the Board and non-Executive Members of the Board of Directors, and for fixing the remuneration of each Board Member the Chief Executive Officer and the General Managers separately. of the Group (if the remuneration of the General Managers is not within the remuneration scales of the The level of remuneration should be sufficient to attract collective agreements). After considering all relevant and retain in the Company Board Members who parameters and data, it makes relevant recommendations strengthen the Group’s Management but the Companies to the Board for taking decisions, in the absence of should avoid paying more than is required in order the Executive Member of the Board or other Officers to achieve this. It is recommended that part of the involved. The Committee’s suggestions and the Group’s remuneration of the Executive Members of the Board remuneration policy take into consideration the relevant is determined in such a way that it relates remuneration responsibilities, workload, qualifications, experience, to the company and individual performance. performance, remuneration of comparable positions in the market, especially in areas where the Group is active, The Company’s Corporate Governance Report should as well as salaries in other levels of the Group. The include a statement of the Remuneration Policy and Committee's aim is to attract and retain good quality relevant criteria, as well the total remuneration of the officers at Executive and General Management levels, Executive and non-Executive Members of the Board. in order to better serve the interests of the Group as well as its shareholders and other stakeholders. 1. Terms of Reference of the Remuneration Committee Each year, the Remuneration Committee proposes The role of the Committee is to prepare suggestions to to the Board of Directors the Annual Remuneration the Board of Directors of Hellenic Bank Public Company Policy Report, as part of the Annual Report of the Limited (“the Company”) for the remuneration packages Company, which is submitted to the shareholders’ of Executive and non-Executive Members of the Board Annual General Meeting for approval. The Committee of the Company as well as of the Chief Executive Officer also reviews and approves the information disclosed on and the Group General Managers. the annual remuneration of the Members of the Board, which is prepared by Group Financial Management 2. Appointment of the Remuneration Committee for inclusion in the notes to the annual accounts of The Committee is appointed by the Company’s Board the Company. of Directors and consists of three to five non-Executive Board Members, the majority of whom must be The Remuneration Committee consists of the following independent. Board Members: The Chairman of the Committee is appointed by the Board. Chairman: Demetris J. Eliades The term-in-office of the members of the Committee Members: Soteris Z. Kallis is also decided by the Board. 60 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 ANNUAL REPORT 2007 ANNUAL REPORT
3. Meetings of the Remuneration Committee b. The non-correlation of remuneration to the HELLENIC BANK GROUP The Committee will meet whenever necessary and at profitability of the Company. least twice a year. c. The non-participation in any insurance or pension The majority of Committee members will comprise a plan. quorum. A majority of Committee members is considered to be the next integral number of one half of the 4.3 The Committee will submit to the Board of Directors members, provided that the Chairman is present. In the proposals for the determination of each readjustment case of a tie, the Chairman has the casting vote. of benefits of the Members of the Board, the Chief The Committee will keep minutes of its meetings and Executive Officer and the General Managers, being decisions. sensitive to the terms of remuneration and conditions The Committee has the approval of the Board of Directors of employment at other levels of the Group. of the Company to obtain independent professional advice whenever it deems this necessary. 4.4 The Remuneration Committee, during the The Committee may invite to any of its meetings any preparation of its proposals, will provide the opportunity person who may contribute to the better conduct of to the Chairman and the Chief Executive Officer to its business. express an opinion with regard to its proposals concerning the salaries of other Executive Board Members and 4. Duties and Responsibilities of the Remuneration General Managers. It should also have access to Committee professional advice both internal and external. 4.1 The Committee will submit to the Board of Directors of the Company, within terms of reference agreed upon 4.5 The Committee will prepare for submission to the and without the presence of the party interested in Board of Directors the Annual Remuneration Policy their evaluation, proposals concerning the framework Report, which will comprise part of, or be attached to, and level of remuneration (including pension rights and the Annual Report of the Company. It should also be any compensation payments, share options, etc.) of presented to the Annual General Meeting of the Executive and non-Executive Members of the Board, shareholders for approval and posted on the official the Chief Executive Officer and the General Managers website of the Company. Details of the content that of the Group. The Committee will take into consideration needs to be published are described in Appendix 1 of factors such as responsibilities, workload, qualifications the Code of Corporate Governance. (academic qualifications, know-how and experience in the sectors where the Group is active), performance 4.6 The Committee will review and approve the Annual and the remuneration offered by other Cypriot Remuneration Statement, prepared by Group Financial companies / groups that are similar in size and range Management for inclusion in the Company’s annual of activities. It will also consider the need to attract accounts or in the notes to the annual accounts, in and retain the most suitable Directors (Executive and accordance with Appendix 2 of the Code of Corporate non-Executive) / General Managers for the Company. Governance. The possibility of relating the remuneration of the Chief Executive Officer, both to the performance of the 4.7 The Committee will review and approve the content Company and to the promotion of its shareholders’ of any resolutions submitted for approval at the General interests, will also be examined. Meeting of the shareholders, which will be prepared by the Secretariat in cooperation with the Group’s legal 4.2 In relation to the level of remuneration of the non- advisers, in accordance with Appendix 3 of the Code Executive Members of the Board, the Committee will of Corporate Governance, and concern possible plans take the following into consideration: for the compensation of Members of the Board in the form of shares, share warrants or share options. a. The time that the Members have available to attend meetings. 4.8 The Committee will review and approve, where this 61 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 is considered necessary, the Job Descriptions (roles, Directors as Members of the Committees of the Board responsibilities, main duties, powers, etc.) of Top and was revised in 2007 to take into consideration the Senior Executive Management. services rendered by the Members of Board, the time they devote, the fees received by corresponding officers 4.9 The Chairman of the Committee will be available of other comparable organisations and the responsibilities for personal, telephone, electronic or written undertaken. communication, which shareholders of the Company may request, regarding issues concerning the work of REMUNERATION POLICY FOR THE EXECUTIVE the Committee. He will also be available to answer any DIRECTORS / CHIEF EXECUTIVE OFFICER questions during the Annual General Meeting or any The Executive Directors are compensated with a meeting for purposes of briefing all shareholders of the remuneration package based on a contract whose terms Company. Information concerning the structure and are compliant with the relevant provisions of the existing work of the Committee will also be given in the Annual Code of Corporate Governance (paragraphs B.2.7., Corporate Governance Report of the Board of Directors B.2.8. and B.2.9.). of Hellenic Bank Public Company Limited. The remuneration package includes a non-variable 5. Code of Corporate Governance annual salary payable monthly, which takes into 5.1 It is understood that the Remuneration Committee consideration the relevant responsibilities, workload, will act strictly within the framework of the relevant qualifications, experience, performance, remuneration provisions of the Code of Corporate Governance as of comparable positions in the market, especially in the determined in Chapter B of the Code. scope of activities of the Group, and remuneration within other Group companies. It aims to attract and DIRECTORS’ REMUNERATION POLICY retain the most suitable individuals. The term The Remuneration Policy for the Directors of the “performance” encompasses the evaluation of the Company remains the same as it was when approved individual performance as well as that of the Group in the Annual General Meeting of 30 May 2007, as Results in relation to the achievement of its targets and shown below. A related proposal will be submitted by profitability. The remuneration package also includes the Board of Directors to the Annual General Meeting hospitality expenses, health, life and accident insurance of the shareholders for approval. cover, the use of a company car (in accordance with the current regulations for the Group’s Managerial Staff) The Chairman of the Board receives annual fees of Cí30 and participation in the Company’s Employees Provident thousand, the Vice Chairman Cí15 thousand and the Fund, which is offered to Group personnel in Cyprus. Members Cí6 thousand. The remuneration for the The above mentioned Provident Fund is a defined-benefit Directors as Members of the Board was revised in 2007 scheme. The changes in the cumulative retirement to take into consideration the services rendered by the benefits of the Executive Directors for the year are Chairman, the Vice Chairman and the Members of the disclosed in Note 38 to the Accounts contained in this Board, the time they devote, the fees received by Annual Report. corresponding officers of other comparable organisations, the responsibilities undertaken and in general their The Executive Director / Chief Executive Officer’s contract overall contribution to the Group’s best interests. has a five-year duration and can be renewed six months before its expiry (with a Board of Directors’ decision The Chairmen of the Audit and Risk Management following suggestions of the relevant committees of Committees receive annual fees of Cí4 thousand and the Board). In the case of early and unjustified termination each Member Cí3 thousand. The Chairmen of the of the contract (which can be effected any time Remuneration and Nominations / Internal Governance during its term), variable compensation is paid up to a Committees receive annual fees of Cí1,5 thousand and maximum amount equal to two annual salaries. It is each Member Cí1 thousand. The remuneration for the understood that the compensation will be equal to 62 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 ANNUAL REPORT 2007 ANNUAL REPORT
the salaries attributed to the remaining period of the HELLENIC BANK GROUP contract if the latter is of less than two years’ duration.
The employment of the Executive Director / Group General Manager, in relation to its duration, is governed by the retirement age applicable for the personnel of the Bank. There is no specific stipulation for compensation in case of premature termination of the employment.
There has been no change to the remuneration policy for the Executive Directors / Chief Executive Officer since 2006.
Related to the Remuneration Policy for the Members of the Board, the Chief Executive Officer and other Senior Managers for 2007 is the disclosure of information in the notes to the Accounts contained in this Annual Report (Note 38).
The Board of Directors submits this Remuneration Policy Report to the Annual General Meeting of the shareholders and unanimously recommends its approval.
Nicosia, 26 March, 2008
63 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 HELLENIC BANK GROUP Auditors’ Report and Financial Statements
66 INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF HELLENIC BANK PUBLIC COMPANY LIMITED 68 CONSOLIDATED INCOME STATEMENT 69 CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE 70 CONSOLIDATED BALANCE SHEET 71 CONSOLIDATED CASH FLOW STATEMENT 72 INCOME STATEMENT 73 STATEMENT OF RECOGNISED INCOME AND EXPENSE 74 BALANCE SHEET 75 CASH FLOW STATEMENT 76 NOTES TO THE FINANCIAL STATEMENTS 139 DECLARATION BY THE MEMBERS OF THE BOARD OF DIRECTORS AND THE COMPANY OFFICIALS RESPONSIBLE FOR THE DRAFTING OF THE FINANCIAL STATEMENTS WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 Independent Auditors’ Report to the Members of Hellenic Bank Public Company Limited
Report on the Consolidated and Company’s Separate Financial Statements We have audited the consolidated financial statements of HELLENIC BANK PUBLIC COMPANY LIMITED (the “Company”) and its subsidiaries (the “Group”) and the Company’s separate financial statements on pages 68 to 138, which comprise the balance sheets of the Group and the Company as at 31 December 2007, and the income statements, statements of recognised income and expense and cash flow statements of the Group and the Company for the year then ended, and a summary of significant accounting policies and other explanatory notes.
Board of Directors’ Responsibility for the Financial Statements The Company’s Board of Directors is responsible for the preparation and fair presentation of these consolidated and Company’s separate financial statements in accordance with International Financial Reporting Standards as adopted by the European Union (EU) and the requirements of the Cyprus Companies Law, Cap. 113. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.
Auditors’ Responsibility Our responsibility is to express an opinion on these consolidated and Company’s separate financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements, in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board of Directors, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion In our opinion, the consolidated and the Company’s separate financial statements give a true and fair view of the financial position of the Group and the Company as of 31 December 2007, and of the financial performance and the cash flows of the Group and the Company for the year then ended in accordance with International Financial Reporting Standards as adopted by the EU and the requirements of the Cyprus Companies Law, Cap. 113.
Report on Other Legal Requirements Pursuant to the requirements of the Companies Law, Cap. 113, we report the following: ñ We have obtained all the information and explanations we considered necessary for the purposes of our audit. ñ In our opinion, proper books of account have been kept by the Company. ñ The Company’s financial statements are in agreement with the books of account. ñ In our opinion and to the best of the information available to us and according to the explanations given to us, the financial statements of the Group and the Company give the information required by the Companies Law, Cap. 113, in the manner so required. ñ In our opinion, the information given in the report of the Board of Directors on pages 40 to 42 is consistent with the consolidated and Company’s separate financial statements. 66 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 ANNUAL REPORT 2007 ANNUAL REPORT
Other Matter HELLENIC BANK GROUP This report, including the opinion, has been prepared for and only for the Company’s members as a body in accordance with Section 156 of the Companies Law, Cap.113 and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whose knowledge this report may come to.
KPMG Chartered Accountants
Nicosia, 26 March, 2008
67 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 HELLENIC BANK GROUP Consolidated Income Statement for the year ended 31 December 2007
2007 2006 Note Cí'000 Cí'000
Interest income 3 262.501 200.608 Interest expense 4 (139.714) (106.177) Net interest income 122.787 94.431
Fee and commission income 5 36.535 30.982 Fee and commission expense 6 (2.854) (2.065) Net fee and commission income 33.681 28.917
Net gains on disposal and revaluation of foreign currencies and financial instruments 7 17.081 17.899 Other income 8 14.040 8.815
Total net income 187.589 150.062
Staff costs 9 (62.116) (58.531)
Depreciation 23 (3.804) (3.919)
Administrative and other expenses (25.808) (25.896)
Total expenses (91.728) (88.346) Share of results of associate company 906 2.403
Profit from ordinary operations before provisions 96.767 64.119 Provisions for impairment of loans and advances 17 (7.454) (22.837)
Profit before taxation 10 89.313 41.282
Taxation 11 (10.360) (7.003)
Profit for the year 78.953 34.279
Profit attributable to: Equity holders of the parent company 31 77.881 34.030 Minority interest 32 1.072 249 Profit for the year 78.953 34.279
Basic earnings per share (cent) 13 28,1 14,2
Fully diluted earnings per share (cent) 13 28,1 12,6
68 The notes on pages 76 to 138 form an integral part of the financial statements. WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 HELLENIC BANK GROUP Consolidated Statement of Recognised ANNUAL REPORT 2007 ANNUAL REPORT Income and Expense for the year ended 31 December 2007
2007 2006 Note Cí'000 Cí'000 Investments available for sale: HELLENIC BANK GROUP Surplus on revaluation of equity securities 1.364 6.675 Deficit on revaluation of debt securities (12.191) (4.324) Share of results of associate company 702 1.754 Transfer to income statement on impairment of debt securities 852 -- Transfer to income statement on disposal of debt securities 249 374 Transfer to income statement on disposal of equity securities (2.436) (227) Revaluation of property -- 9.292 Deferred taxation on revaluation of property 29 (1.059) Foreign exchange gain/(loss) 21 (26)
Net income and expense not recognised in the consolidated income statement (11.410) 12.459 Profit for the year 78.953 34.279 Total recognised income and expense 67.543 46.738
Total recognised income and expense attributable to: Equity holders of the parent company 66.627 46.491 Minority interest 32 916 247 Total recognised income and expense 67.543 46.738
The notes on pages 76 to 138 form an integral part of the financial statements. 69 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 HELLENIC BANK GROUP Consolidated Balance Sheet at 31 December 2007
2007 2006 Note Cí'000 Cí'000 Assets Cash and balances with Central Banks 14 137.931 149.855 Government securities and other eligible bills 15 320.308 323.560 Placements with other banks 16 737.734 691.469 Loans and advances to customers 17 2.180.180 1.736.923 Debt securities 18 771.542 761.209 Equity securities 19 52.235 22.262 Investment in associate company 21 -- 11.871 Property, plant and equipment 23 47.425 48.079 Intangible assets 24 12.064 12.938 Other assets 25 46.638 39.457 Total assets 4.306.057 3.797.623
Liabilities Deposits by banks 26 287.998 227.586 Customer deposits and other customer accounts 27 3.429.976 3.110.562 Other liabilities 28 136.886 125.621 3.854.860 3.463.769
Loan capital 29 132.269 120.496
Equity Share capital 30 72.736 60.481 Reserves 31 234.509 152.060
Total equity attributable to equity holders of the parent company 307.245 212.541
Minority interest 32 11.683 817 Total equity 318.928 213.358 Total liabilities and equity 4.306.057 3.797.623
Contingent liabilities and commitments 33 868.290 647.819
The consolidated financial statements have been approved by the Board of Directors on 26 March 2008.
Dr. A. P. Panayiotou A. M. Moushouttas M. Keravnos M. Keleshi Chairman Vice Chairman Chief Executive Officer Group Chief Accountant
70 The notes on pages 76 to 138 form an integral part of the financial statements. WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 HELLENIC BANK GROUP ANNUAL REPORT 2007 ANNUAL REPORT Consolidated Cash Flow Statement for the year ended 31 December 2007
2007 2006 Note Cí'000 Cí'000 Cash flow from operating activities HELLENIC BANK GROUP Group profit after taxation 78.953 34.279 Issue of shares 154 56 Depreciation of property, plant and equipment 23 3.804 3.919 Amortisation of intangible assets 24 1.013 1.101 Impairment loss on goodwill 24 1.878 3.060 Share of results of associate company (906) (2.403) Negative goodwill 8 (3.950) -- (Gain)/loss on disposal of property, plant and equipment (4) 3 Gain on disposal of subsidiary company 8 (118) -- Net gains on disposal and revaluation of financial instruments (1.442) (2.988) Investment income from debt and equity securities (59.321) (46.542) Interest payable on loan capital and debenture loan 3.039 6.134 Taxation 10.360 7.003 Operating profit before working capital changes 33.460 3.622 Increase in loans and advances to customers and other assets (443.269) (262.100) Increase in customer deposits and other customer accounts and other liabilities 324.806 624.004 Increase in placements with other banks (3.248) (3.581) Increase in deposits by banks 31.956 8 Net cash (used in)/from operating activities before taxation (56.295) 361.953 Taxation paid (10.943) (2.563)
Net cash flow (used in)/from operating activities (67.238) 359.390 Cash flow from investing activities Acquisition of subsidiary company (14.217) -- Disposal of subsidiary company 1.280 -- Investment income from debt and equity securities 59.321 46.542 Net acquisitions of debt and equity securities (4.607) (118.156) Net disposals/(acquisitions) of government securities and other eligible bills 12.457 (22.958) Acquisition of shares in associate company -- (424) Purchase of property, plant and equipment 23 (3.542) (6.000) Purchase of intangible assets 24 (2.030) (1.033) Proceeds from disposal of property, plant and equipment 438 11 Net cash flow from/(used in) investing activities 49.100 (102.018) Cash flow from financing activities Proceeds from issue of share capital 46.321 5.488 Proceeds from issue of loan capital 11.773 26.144 Repayment of debenture loan -- (51.523) Dividend paid (23.737) (4.536) Interest paid on loan capital and debenture loan (3.039) (6.134) Net cash flow from/(used in) financing activities 31.318 (30.561) Net increase in cash and cash equivalents 13.180 226.811 Effect of exchange rate fluctuations on cash and cash equivalents (1.126) (813) Cash and cash equivalents at the beginning of the year 627.707 401.709 Cash and cash equivalents at the end of the year 36 639.761 627.707
The notes on pages 76 to 138 form an integral part of the financial statements. 71 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 HELLENIC BANK PUBLIC COMPANY LIMITED Income Statement for the year ended 31 December 2007
2007 2006 Note Cí'000 Cí'000
Interest income 3 255.884 194.744 Interest expense 4 (139.551) (105.572) Net interest income 116.333 89.172
Fee and commission income 5 33.190 26.373 Fee and commission expense 6 (1.020) (567) Net fee and commission income 32.170 25.806
Net gains on disposal and revaluation of foreign currencies and financial instruments 7 15.931 17.780 Other income 8 4.052 4.172
Total net income 168.486 136.930
Staff costs 9 (56.154) (52.908)
Depreciation 23 (3.648) (3.745)
Administrative and other expenses (22.235) (20.982)
Total expenses (82.037) (77.635)
Profit from ordinary operations before provisions 86.449 59.295 Provisions for impairment of loans and advances 17 (8.021) (16.366)
Profit before taxation 10 78.428 42.929
Taxation 11 (9.438) (6.496)
Profit for the year 31 68.990 36.433
Basic earnings per share (cent) 13 24,9 15,2 Fully diluted earnings per share (cent) 13 24.9 13,4
72 The notes on pages 76 to 138 form an integral part of the financial statements. WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 HELLENIC BANK PUBLIC COMPANY LIMITED ANNUAL REPORT 2007 ANNUAL REPORT Statement of Recognised Income and Expense for the year ended 31 December 2007
2007 2006 Note Cí'000 Cí'000 Investments available for sale: HELLENIC BANK GROUP Surplus on revaluation of equity securities 2.021 5.802 Deficit on revaluation of debt securities (12.132) (4.319) Transfer to income statement on impairment of debt securities 852 -- Transfer to income statement on disposal of debt securities 249 374 Transfer to income statement on disposal of equity securities 1.003 (217) Revaluation of property -- 8.309 Deferred taxation on revaluation of property 24 (1.013) Foreign exchange gain/(loss) 17 (27)
Net income and expense not recognised in the income statement (7.966) 8.909 Profit for the year 31 68.990 36.433 Total recognised income and expense 61.024 45.342
The notes on pages 76 to 138 form an integral part of the financial statements. 73 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 HELLENIC BANK PUBLIC COMPANY LIMITED Balance Sheet at 31 December 2007
2007 2006 Note Cí'000 Cí'000 Assets Cash and balances with Central Banks 14 136.888 148.686 Government securities and other eligible bills 15 316.116 321.434 Placements with other banks 16 730.464 685.436 Loans and advances to customers 17 2.115.867 1.674.211 Debt securities 18 771.036 760.837 Equity securities 19 20.969 18.956 Investment in subsidiary companies 20 66.249 34.258 Investment in associate company 21 -- 14.694 Amounts due from subsidiary companies 45.475 45.123 Property, plant and equipment 23 42.314 42.799 Intangible assets 24 3.344 2.314 Other assets 25 33.924 27.301 Total assets 4.282.646 3.776.049
Liabilities Deposits by banks 26 287.998 227.586 Customer deposits and other customer accounts 27 3.409.476 3.086.455 Amounts due to subsidiary companies 36.721 15.650 Other liabilities 28 109.743 101.887
3.843.938 3.431.578 Loan capital 29 134.020 121.747
Equity Share capital 30 72.736 60.481 Reserves 31 231.952 162.243 Total equity 304.688 222.724 Total liabilities and equity 4.282.646 3.776.049
Contingent liabilities and commitments 33 879.718 662.824
The financial statements have been approved by the Board of Directors on 26 March 2008.
Dr. A. P. Panayiotou A. M. Moushouttas M. Keravnos M. Keleshi Chairman Vice Chairman Chief Executive Officer Group Chief Accountant
74 The notes on pages 76 to 138 form an integral part of the financial statements. WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 HELLENIC BANK PUBLIC COMPANY LIMITED ANNUAL REPORT 2007 ANNUAL REPORT Cash Flow Statement for the year ended 31 December 2007
2007 2006 Note Cí'000 Cí'000 Cash flow from operating activities HELLENIC BANK GROUP Bank profit after taxation 68.990 36.433 Issue of shares 154 56 Depreciation of property, plant and equipment 23 3.648 3.745 Amortisation of intangible assets 24 977 1.063 (Gain)/loss on disposal of property, plant and equipment (10) 4 Loss on disposal of subsidiary company 357 -- Net gains on disposal and revaluation of financial instruments (499) (2.860) Investment income from debt and equity securities (61.553) (47.925) Interest payable on loan capital and debenture loan 3.039 6.134 Taxation 9.438 6.496 Operating profit before working capital changes 24.541 3.146 Increase in loans and advances to customers and other assets (441.227) (278.430) Increase in customer deposits and other customer accounts and other liabilities 325.068 617.453 Decrease/(increase) in placements with other banks 50 (4.176) Increase in deposits by banks 31.956 8 (Increase)/decrease in amounts due from subsidiary companies (352) 13.489 Increase in amounts due to subsidiary companies 21.071 5.247 Net cash flow (used in)/from operating activities before taxation (38.893) 356.737 Taxation paid (10.176) (2.333)
Net cash flow (used in)/from operating activities (49.069) 354.404 Cash flow from investing activities Acquisition of subsidiary company (19.240) -- Disposal of subsidiary company 1.280 -- Takeover of operations of subsidiary company (1.244) -- Investment income from debt and equity securities 60.720 47.925 Net acquisitions of debt and equity securities (18.417) (118.541) Net disposals/(acquisitions) of government securities and other eligible bills 14.523 (22.086) Acquisition of shares in associate company -- (424) Purchase of property, plant and equipment 23 (3.437) (5.615) Purchase of intangible assets 24 (2.021) (1.018) Transfer of property, plant and equipment and intangible assets -- (17) Proceeds from disposal of property, plant and equipment 323 10 Net cash flow from/(used in) investing activities 32.487 (99.766) Cash flow from financing activities Proceeds from issue of share capital 46.321 5.488 Proceeds from issue of loan capital 12.273 26.344 Repayment of debenture loan -- (51.523) Dividend paid (23.990) (4.536) Interest paid on loan capital and debenture loan (3.039) (6.134) Net cash flow from/(used in) financing activities 31.565 (30.361) Net increase in cash and cash equivalents 14.983 224.277 Effect of exchange rate fluctuations on cash and cash equivalents (742) (801) Cash and cash equivalents at the beginning of the year 623.789 400.313 Cash and cash equivalents at the end of the year 36 638.030 623.789
The notes on pages 76 to 138 form an integral part of the financial statements. 75 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 HELLENIC BANK GROUP Notes to the Financial Statements for the year ended 31 December 2007
1. INCORPORATION AND PRINCIPAL ACTIVITY Hellenic Bank Public Company Ltd was incorporated in Cyprus and is a public company in accordance with the provisions of the Companies Law Cap. 113, the Cyprus Stock Exchange Laws and Regulations and the Income Tax Laws. The Company’s registered office is located at 200, Corner of Limassol and Athalassa Avenues, 2025 Strovolos, P.O.Box 24747,1394 Nicosia.
At the shareholders’ Extraordinary General Meeting on 1st June 2005 it was decided to change the Company’s name from Hellenic Bank Limited to Hellenic Bank Public Company Limited. The change was filed with the Companies’ Registrar on 6 June 2005.
The principal activity of the Group is the provision of a wide range of banking and financial services, which include hire purchase, leasing, investment and insurance services, trustee and factoring services.
2. ACCOUNTING POLICIES The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements and have been applied consistently by all Group companies.
2.1. Basis of presentation Financial Statements The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. In addition, the financial statements have been prepared in accordance with the requirements of the Cyprus Companies Law, Cap.113 and the Cyprus Stock Exchange Laws and Regulations.
The financial statements are expressed in Cyprus pounds, which is the main functional currency that most faithfully represents the economic effects of the underlying transactions and activities of the Group companies. For the subsidiaries and the branch in Greece, the functional currency is the euro. Their financial statements are translated into Cyprus pounds for the purposes of preparing the consolidated financial statements of the Group.
Supplementary information The consolidated income statement, the consolidated balance sheet, the consolidated statement of recognised income and expense and the consolidated cash flow statement for the year ended 31 December 2007, presented in euro, constitute supplementary information. This supplementary information is shown in Note 45. The translation from the Group’s functional currency, the Cyprus pound, into euro for the purposes of presenting the supplementary information, was performed using the fixed exchange rate of ú1=Cí0,585274.
2.2. Basis of preparation The consolidated financial statements have been prepared on a historical cost basis, except for property, financial instruments at fair value through profit or loss, available for sale financial assets and derivative financial instruments that have been measured at their fair values.
The preparation of financial statements in accordance with International Financial Reporting Standards requires Management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. The estimates and underlying assumptions are based on historical experience and various other factors that are believed to be reasonable in the circumstances and the results of which form the basis of making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. 76 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 ANNUAL REPORT 2007 ANNUAL REPORT
2. ACCOUNTING POLICIES (continued)
2.3. Adoption of new and revised International Financial Reporting Standards HELLENIC BANK GROUP During the year, the Group has adopted all new and revised International Financial Reporting Standards that relate to its operations and are applicable to accounting periods commencing on 1st January 2007. Adoption of these standards did not have a significant impact on the Group’s accounting policies.
The adoption of IFRS 7 “Financial Instruments: Disclosures” and the amended IAS 1 “Presentation of Financial Statements – Capital Disclosures” on 1st January 2007, has affected the qualitative and quantitative disclosures regarding the nature and extent of risks arising from financial instruments and the disclosures relating to the management of capital in the consolidated financial statements, but it did not have any effect on the financial position and performance of the Group.
At the date of approval of these consolidated financial statements, the following Standards and Interpretations have been issued by the International Accounting Standards Board but have not yet been adopted by the Group:
(i) Adopted by the European Union ñ IFRS 8 “Operating Segments” (effective for annual periods beginning on or after 1st January 2009) ñ IFRIC (International Financial Reporting Interpretations Committee) 11: “IFRS 2 - Group and Treasury Share Transactions” (effective for annual periods beginning on or after 1st March 2007)
(ii) Not adopted by the European Union ñ Amendments to IAS 1 “Presentation of Financial Statements: A Revised Presentation” (effective for annual periods beginning on or after 1st January 2009) ñ Amendment to IAS 23 “Borrowing Costs” (effective for annual periods beginning on or after 1st January 2009) ñ Amendments to IAS 27 “Consolidated and Separate Financial Statements” (effective for annual periods beginning on or after 1st July 2009) ñ Amendment to IFRS 2 “Share-based Payment: Vesting Conditions and Cancellations” (effective for annual periods beginning on or after 1st January 2009) ñ Revised IFRS 3 “Business Combinations” (effective for annual periods beginning on or after 1st July 2009) ñ IFRIC 12 “Service Concession Arrangements” (effective for annual periods beginning on or after 1st January 2008) ñ IFRIC 13 “Customer Loyalty Programmes” (effective for annual periods beginning on or after 1st July 2008) ñ IFRIC 14 “IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction” (effective for annual periods beginning on or after 1st January 2008).
The Board of Directors is not expecting the application of these Standards or Interpretations to have a material effect on the consolidated financial statements of the Group in future accounting periods.
2.4. Basis of consolidation The consolidated financial statements comprise the financial statements of Hellenic Bank Public Company Ltd and all its subsidiary companies: Hellenic Bank (Finance) Ltd, Hellenic Bank (Investments) Ltd, Hellenic Bank Trust and Finance Corporation Ltd, Hellenic Bank (Factors) Ltd, Ledra Insurance Ltd, Hellenic Mutual Funds Ltd, Hellenic Trust Mutual Funds Management S.A., Hellenic Trade Services Ltd, Pancyprian Insurance Ltd, Hellenic Pancyprian Insurance (Estate) Ltd, Pancyprian Finance Public Company Ltd, Hellenic Pancyprian Insurance Agencies Ltd, MIA (Insurance Agencies) Ltd, Hellenic Alico Life Insurance Company Ltd, Hellenic Trust Holdings S.A., Hellenic Insurance Agency S.A., Hellenic Insurance Agency Ltd and Athena Cyprus Public Company Ltd.
The investment in Athena Cyprus Public Company Ltd was included in the financial statements as an associate company until 29 May 2007. Following the acquisition of additional shares in the company by the Bank, Athena Cyprus Public Company Ltd is accounted for as a subsidiary company.
An associate is a company over which the Group has significant influence. Significant influence exists when the Group controls (directly or indirectly) a percentage of 20% or more of the voting rights, without controlling or jointly controlling the company. 77 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 2. ACCOUNTING POLICIES (continued)
Subsidiary companies are consolidated, using the acquisition method, from the date on which control is transferred to the Group and cease to be consolidated when control is transferred outside the Group. Control is achieved when the Bank controls directly or indirectly more than 50% of the subsidiary company’s share capital with voting rights, or is in a position to control the financial and operating policies of the subsidiary, or controls the appointment or removal of the majority of the members of its Board of Directors. Intra-group balances and transactions are eliminated on consolidation.
2.5. Foreign currencies Transactions in foreign currencies are recorded at the exchange rate ruling on the date of the transaction. Assets and liabilities denominated in foreign currencies are retranslated into Cyprus pounds at the exchange rate ruling at the balance sheet date. Foreign currency differences arising on retranslation are recognised in the income statement for the year.
Results from foreign operations are translated into Cyprus pounds using the average exchange rates for the year. The assets and liabilities of foreign subsidiaries and branches are translated into Cyprus pounds at the exchange rates ruling at the balance sheet date. Foreign currency differences arising on retranslation are taken to the translation reserve.
2.6. Turnover Turnover comprises of interest income, fee and commission income, gains on disposal and revaluation of foreign currencies and financial instruments and other income.
2.7. Interest income Interest income is recognised in the income statement on an accruals basis, using the effective interest method. The effective interest rate is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial asset to the carrying amount of the financial asset. The effective interest rate is established on initial recognition of the financial asset and is not revised subsequently.
Interest income on non-performing loans is suspended and is recognised in the income statement upon collection. This interest income is transferred to a temporary income suspension account which is included in the total of provisions for impairment of loans and advances.
2.8. Fees and commissions Fee and commission income and expense is recognised in the income statement on an accruals basis as the related services are performed.
2.9. Income from hire purchase and leasing activities Income from hire purchase and leasing activities is recognised in the consolidated income statement on an accruals basis and is calculated in a systematic manner on the basis of instalments falling due, in order to produce a constant periodic rate of return on the net investment outstanding.
Hire purchase and leasing debtors are included in loans and advances to customers in the consolidated balance sheet, net of unearned charges attributable to future instalments.
2.10. Interest expense Interest expense is recognised in the income statement on an accruals basis, using the effective interest method. The effective interest rate is the rate that exactly discounts the estimated future cash payments through the expected life of the financial liability to the carrying amount of the financial liability. The effective interest rate is established on initial recognition of the financial liability and is not revised subsequently.
2.11. Retirement benefits The Group provides defined retirement benefits to its permanent employees in Cyprus in the form of lump sum payments estimated by reference to the employee’s salary and length of service on retirement. The cost of providing retirement benefits 78 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 ANNUAL REPORT 2007 ANNUAL REPORT
2. ACCOUNTING POLICIES (continued)
is borne exclusively by the Group and is estimated annually using the projected unit credit method. Any surpluses or deficits HELLENIC BANK GROUP arising from differences between the expected and actual return in actuarial assumptions are allocated over the remaining working lives of the employees.
To the extent that any cumulative unrecognised actuarial gains or losses at the end of the previous reporting period exceed 10% of the greater of the present value of the defined benefit obligation and the fair value of the plan’s assets at that date, that portion is recognised in the income statement over the expected average remaining working lives of the employees participating in the plan.
The Group also provides other defined contribution pension benefits to its employees in Greece and to employees of its general insurance companies.
2.12. Loans and advances to customers Loans and advances to customers are originated by providing cash directly to customers and are initially measured at the fair value of the consideration given to originate these loans, including issue costs. Subsequently, loans and advances are measured at amortised cost, which includes accrued interest less provisions for impairment.
The amortised cost of a financial asset is the amount at which the financial asset is measured at initial recognition, minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between the initial amount recognised and the maturity amount, minus any reduction for impairment.
2.13. Provisions for impairment of loans and advances to customers Loans and advances to customers are impaired when objective evidence demonstrates uncertainty of the Group’s ability to collect part or all of the amount due. Objective evidence that financial assets are impaired can include default by a borrower, restructuring of a loan or advance on terms that the Group would not otherwise consider, indications that the borrower will enter bankruptcy and the disappearance of an active market for the collateral of the loan.
The carrying amounts of the Group’s loans and advances are reviewed at each reporting date to determine whether there is an indication of impairment. All individually significant loans and advances are assessed for specific impairment. Impairment losses are measured as the difference between the carrying amount of the loans and advances and their recoverable amount. Assets that are not individually significant and significant assets found not to be specifically impaired are then collectively assessed for any impairment by grouping together financial assets with similar risk characteristics. Any collective impairment loss on these groups is not charged to specific loans and advances. In assessing collective impairment the Group uses historical trends of the probability of default demonstrated by the relevant groups.
When a subsequent event causes the amount of the impairment loss to decrease or amounts are collected from impaired loans, the impairment loss is reversed through the income statement.
2.14. Customer deposits and other customer accounts Customer deposits and other customer accounts are measured at amortised cost, which includes accrued interest, except for certain deposits that the Group has elected to classify as “financial liabilities at fair value through profit or loss” for which any changes in fair value are taken to the income statement.
2.15. Investments The Group has classified its financial assets that comprise of government securities and other eligible bills, debt securities and equity securities under the following three categories:
(a) Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss consist of the following two categories: 79 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 2. ACCOUNTING POLICIES (continued)
Financial assets held for trading: these comprise of financial assets acquired either with the intention of generating profit from short-term price fluctuations or are included in a portfolio in which a pattern of short-term profit making exists. Fair value is considered to be the closing bid price at the balance sheet date. Any unrealised gains and losses arising from fair value changes are recognised in the income statement.
Financial assets designated at fair value through profit or loss: This category includes assets and liabilities which are part of a group of financial assets, financial liabilities or both which are managed and their performance is evaluated on a fair value basis.
These financial assets are recognised and measured at fair value. Once a financial instrument is classified as at fair value through profit or loss, it cannot be reclassified out of this category while it is held.
(b) Financial assets available for sale Assets intended to be held for an undetermined period of time, which may be sold in response to changes in market risks or liquidity requirements are classified as available for sale investments.
These investments are initially recognised at fair value, plus transaction costs. Subsequently, available for sale investments are measured at fair value. The fair value of quoted investments is the closing bid price at the balance sheet date. The fair value of unquoted investments is determined by using appropriate valuation techniques adjusted to reflect the individual characteristics of the specific issuer. The cost is considered to be the fair value, in cases where it approximates the estimated fair value. Unrealised gains or losses arising from changes in the fair value of financial assets classified as available for sale are recognised in the revaluation reserves.
(c) Financial assets held to maturity Held to maturity investments include securities with fixed maturity that the Group has the positive intent and ability to hold to maturity. Held to maturity investments are carried at amortised cost using the effective interest method, less any provisions for impairment.
Any sale or reclassification of a significant amount of held to maturity investments for reasons other than those provided in IAS 39, would result in the reclassification of all held to maturity investments as “available for sale”, and prevent the Group from classifying investment securities as held to maturity for the current and the following two financial years.
Investments are classified in the above categories at the time of their acquisition.
On disposal, the difference between the net proceeds and the carrying amount of the investment is transferred to the income statement together with any accumulated related fair value adjustments in the revaluation reserves.
2.16. Investment in subsidiary companies and in associate company Investments in subsidiary companies and associate company are accounted for at cost in the Bank’s balance sheet.
2.17. Property, plant and equipment Land and buildings are shown at valuation less accumulated depreciation and impairment in value. Valuations are performed by independent qualified valuers on the basis of current market value. Plant and equipment is measured at cost less accumulated depreciation and impairment losses. Upon disposal of an asset, the difference between the sale proceeds and the carrying amount is charged or credited to the income statement for the year.
Depreciation of property, plant and equipment is calculated on a straight-line basis over the estimated useful life of the asset.
80 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 ANNUAL REPORT 2007 ANNUAL REPORT
2. ACCOUNTING POLICIES (continued)
Depreciation rates are as follows: HELLENIC BANK GROUP Buildings 2% Leasehold improvements 20% Plant and equipment 10% to 25%
Land is not depreciated.
Residual values and useful lives of property, plant and equipment are reassessed, if considered necessary, on an annual basis.
2.18. Revaluation reserve Any surplus arising on the revaluation of land and buildings is credited to the property revaluation reserve. Any depreciation charge attributable to the revaluation of land and buildings, net of deferred taxation, is transferred annually from the property revaluation reserve to revenue reserves. On disposal of revalued property, any revaluation surplus relating to that property, which remains in the property revaluation reserve, is also transferred to revenue reserves.
2.19. Intangible Assets Goodwill Goodwill represents the difference between the cost of acquisition and the net fair value of the Group’s share of the identifiable assets, liabilities and contingent liabilities of the acquired entities at the date of acquisition. Goodwill arose on the acquisition of the onshore operations of Barclays Bank PLC in Cyprus, the acquisition of Pancyprian Insurance Ltd and the increase in the share of Athena Cyprus Public Company Ltd.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. The carrying amount of goodwill is tested for impairment on an annual basis.
Negative goodwill arising from the excess of the Group’s share in the net fair value of the net assets of the subsidiary companies acquired is credited to the consolidated income statement and specifically under other income.
Goodwill relating to the branch network is amortised through the income statement on a straight-line basis over the lease term.
Computer software Computer software is measured at cost less accumulated amortisation and impairment losses. Computer software is amortised on a straight-line basis over its estimated useful life of 5 years.
2.20. Cash and cash equivalents Cash and cash equivalents include cash and balances with Central Banks, government securities and other eligible bills, placements with other banks and amounts due to other banks, with original maturities of three months or less.
2.21. Loan capital Loan capital is carried in the balance sheet at amortised cost.
Loan capital is initially measured at cost, being the fair value of the consideration received. Subsequently it is measured at amortised cost using the effective interest method, in order to amortise the difference between the cost and the redemption value, over the period to the earliest date that the Bank has the right to redeem the loan capital.
2.22. Share capital The difference between the issue price of share capital and its nominal value is recognised in the share premium reserve. 81 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 2. ACCOUNTING POLICIES (continued)
When other members of the consolidated group acquire shares of the parent company these treasury shares are shown at market value in the treasury shares reserve which is included in reserves and is part of equity. Any gain or loss on disposal of these share is shown in equity.
2.23. Taxation Provision for taxation is made in accordance with the tax legislation and tax rates applicable in the countries where the Group operates.
2.24. Deferred taxation Deferred taxation is provided using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse. Deferred tax assets are recognised only to the extent that it is probable that future taxable profits will be available against which the assets can be utilised.
2.25. Derivative financial instruments and hedge accounting Derivative financial instruments mainly include forward contracts, interest rate and currency swaps, credit default swaps and futures. Derivative financial instruments are measured at their fair value based on the relevant market price. In cases where there is no available market price, fair value is estimated using discounted cash flows or other specialised valuation models.
Derivative financial instruments are carried as assets when their fair value is positive and as liabilities when their fair value is negative.
On acquisition, derivatives designated as hedging instruments, are classified as either hedging instruments for fair value hedges or as hedging instruments for cash flow hedges. For these derivatives hedge accounting is applied. For the remaining derivatives where the hedging criteria are not satisfied in order to qualify for hedge accounting or which are held for trading, the accounting policies for financial instruments held for trading are followed. Hedge accounting is applied provided that the following criteria are met:
(a) Existence of formal documentation describing the derivative financial instrument and the hedging objective as well as the specific hedged item.
(b) Existence of written reference to the high effectiveness of the hedging derivative, which offsets the risk in the hedged item throughout the financial reporting periods for which the hedge was designated.
(c) Maintenance of monitoring systems and verification of the high effectiveness of the hedging derivative on an ongoing basis.
For fair value hedges, changes in the fair value of the hedging instrument are recorded in the income statement together with the corresponding change in the fair value of the hedged item.
For cash flow hedges, changes in the fair value of the hedging instrument are recognised in the hedging reserve. When a hedged anticipated transaction, or firm commitment, results in the recognition of an asset or a liability, the cumulative gain or loss on the hedging instrument recognised in equity is removed from equity and is included in the initial measurement of the asset or liability. Otherwise the cumulative gain or loss recognised in equity is transferred to the income statement at the same time that the hedged transaction affects the income statement and is included in the same line item as the hedged transaction.
If the hedge no longer meets the above criteria for hedge accounting, necessary adjustments are made and the use of hedge accounting is terminated. 82 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 ANNUAL REPORT 2007 ANNUAL REPORT
2. ACCOUNTING POLICIES (continued)
Many of the derivatives have been acquired with the intention of hedging interest rate risks or foreign currency risks. Certain HELLENIC BANK GROUP derivative transactions, while providing effective economic hedges under risk management, do not qualify for the use of hedge accounting. These are treated as derivative assets or liabilities and are included under other assets or liabilities respectively, with any changes in their fair value recorded in the income statement for the year. These include derivatives held for offsetting interest rate or other risks, in relation to other assets and liabilities that are selectively measured at fair value through profit or loss and which do not qualify for the use of hedge accounting.
The Group hedges the foreign currency risk that derives from the translation to Cyprus pounds of the net position of its foreign branch and subsidiaries by maintaining an open foreign exchange position. All exchange differences resulting from the translation of the open foreign exchange position are recognised in the translation reserve.
2.26. Segmental Reporting The financial position and the performance of the Group are analysed as follows:
Primary Segment: The financial position and performance are presented based on their geographical organisation. The Group carries out its operations in Cyprus and abroad.
Secondary Segment: The financial position and performance are analysed in the following business segments: ñ Banking and financial services ñ Insurance services
2.27. Impairment of assets The carrying amounts of the Group’s assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the assets are measured at their recoverable amount. The recoverable amount of an asset is the greater of its net selling price in an arm’s length transaction and the present value of the future cash flows from its continuing use and disposal at the end of its useful economic life. This impairment is recognised as a charge in the income statement for the year.
Financial assets stated at fair value through revaluation reserve
The recoverable amount of equity securities is their fair value. The recoverable amount of debt securities that are remeasured at fair value is calculated as the present value of their estimated cash flows discounted by the original effective interest rate. Any revaluation deficit previously recognised in the revaluation reserve is transferred to the income statement and is recognised as part of the impairment loss. Any revaluation surplus previously recognised in the revaluation reserve is reversed to the extent of the impairment. Any additional impairment is recognised in the income statement.
In the case of debt securities, if in a subsequent period there is a decrease in the amount of impairment due to events occurring after the impairment loss was recognised, the impairment loss is reversed through the income statement, whereas in the case of equity securities the relevant impairment loss is reversed through the revaluation reserve.
2.28. Comparative figures Comparative figures are restated, where necessary, to follow the presentation of the current year.
83 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 3. INTEREST INCOME The Group The Bank 2007 2006 2007 2006 Cí'000 Cí'000 Cí'000 Cí'000
Interest income from cash and balances with Central Banks 7.009 3.591 7.009 3.591 Interest income from government securities and other eligible bills 11.669 10.047 11.541 9.958 Interest income from placements with other banks 29.455 22.699 31.489 25.852 Interest income from loans and advances to customers 147.554 114.655 139.119 105.765 Interest income from debt securities 46.410 36.285 46.325 36.285 Interest income from other financial instruments 20.404 13.331 20.401 13.293 262.501 200.608 255.884 194.744
4. INTEREST EXPENSE The Group The Bank 2007 2006 2007 2006 Cí'000 Cí'000 Cí'000 Cí'000
Interest expense on deposits by banks 9.508 3.734 10.274 4.112 Interest expense on customer deposits and other customer accounts 107.491 83.394 106.484 82.343 Loan capital interest expense 6.733 7.158 6.812 7.227 Interest expense on other financial instruments 15.982 11.891 15.981 11.890 139.714 106.177 139.551 105.572
5. FEE AND COMMISSION INCOME The Group The Bank 2007 2006 2007 2006 Cí'000 Cí'000 Cí'000 Cí'000
Banking fees and commissions 31.523 25.269 31.983 25.503 Commissions from insurance operations 1.920 1.664 -- -- Asset management fees 1.337 2.668 866 694 Other fees and commissions 1.755 1.381 341 176 36.535 30.982 33.190 26.373
6. FEE AND COMMISSION EXPENSE The Group The Bank 2007 2006 2007 2006 Cí'000 Cí'000 Cí'000 Cí'000
Banking fees and commissions 689 262 689 262 Commissions for insurance operations 1.730 1.420 -- -- Other fees and commissions 435 383 331 305 2.854 2.065 1.020 567
84 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 ANNUAL REPORT 2007 ANNUAL REPORT
7. NET GAINS ON DISPOSAL AND REVALUATION OF FOREIGN CURRENCIES AND FINANCIAL INSTRUMENTS HELLENIC BANK GROUP The Group The Bank 2007 2006 2007 2006 Cí'000 Cí'000 Cí'000 Cí'000
Gain on sale and revaluation of foreign currencies 14.289 10.401 14.082 10.410 Loss on disposal of financial instruments: Instruments available for sale (698) (478) (698) (478) Instruments at fair value through profit or loss (296) (403) (296) (403) Surplus on revaluation of financial instruments: Instruments at fair value through profit or loss 2.344 5.391 2.344 5.391 Gain on disposal of equity securities: Instruments available for sale 3.783 862 2.383 766 Instruments at fair value through profit or loss 2.219 223 2.164 218 (Deficit)/surplus on revaluation of equity securities: Instruments at fair value through profit or loss (59) 1.918 449 1.891 Impairment loss on equity and debt securities: Instruments available for sale (2.271) (15) (2.267) (15) Instruments held to maturity (2.230) -- (2.230) -- 17.081 17.899 15.931 17.780
The Group The Bank 2007 2006 2007 2006 Cí'000 Cí'000 Cí'000 Cí'000
Impairment loss on equity and debt securities: Listed investments (4.501) -- (4.497) -- Unlisted investments -- (15) -- (15) (4.501) (15) (4.497) (15)
The Group The Bank 2007 2006 2007 2006 Cí'000 Cí'000 Cí'000 Cí'000
Impairment loss on equity and debt securities: Equity securities (4) (15) -- (15) Debt securities (4.497) -- (4.497) -- (4.501) (15) (4.497) (15)
85 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 8. OTHER INCOME The Group The Bank 2007 2006 2007 2006 Cí'000 Cí'000 Cí'000 Cí'000
Dividend income 1.242 629 2.594 2.172 Gain/(loss) on disposal of subsidiary company 118 -- (357) -- Income from insurance operations 6.675 5.815 -- -- Negative goodwill on the acquisition of subsidiary company 3.950 ------Other income 2.055 2.371 1.815 2.000 14.040 8.815 4.052 4.172
9. STAFF COSTS The Group The Bank 2007 2006 2007 2006 Cí'000 Cí'000 Cí'000 Cí'000
Staff remuneration 52.376 44.205 47.361 39.474 Staff retirement benefits 9.740 14.326 8.793 13.434 62.116 58.531 56.154 52.908
The Group provides retirement benefits, in the form of lump sum payments based on a defined benefit retirement plan, to its permanent employees in Cyprus, which amount to 79% of the Group’s total number of employees. The Group’s policy is to carry out an independent actuarial valuation of the liabilities with regard to the retirement benefit plan every two to three years. The most recent independent actuarial valuation was performed at 31 December 2007. The Group provides a specific pension plan to its employees in Greece and other retirement benefit plans to the rest of its employees in Cyprus.
The number of employees of the Group at 31 December 2007 was 1.916 (2006:1.832 employees) and that of the Bank was 1.723 (2006:1.622 employees).
The assumptions applicable for the year 2007 are: 2007 2006
Discount rate 5 % 4ó% Long term return on plan assets 6% 6% Salary increases 6ó% 6%
During the year an amount of Cí9.432 thousand (2006: Cí14.045 thousand) was charged to the income statement in respect of the above plan.
The amount charged to the income statement is analysed as follows: 2007 2006 Cí'000 Cí'000
Service cost 5.108 10.545 Interest 4.324 3.500 9.432 14.045
86 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 ANNUAL REPORT 2007 ANNUAL REPORT
9. STAFF COSTS (continued)
Movement in provisions for retirement benefit obligations as shown under other liabilities (Note 28): HELLENIC BANK GROUP 2007 2006 Cí'000 Cí'000
1 January 72.038 58.327 Provision for the year 9.432 14.045 Return for the year -- 38 Payments to retired members (2.871) (372) 31 December 78.599 72.038
The Plan assets include shares and warrants, the total market value of which amounted to Cí14.662 thousand (2006: Cí9.621 thousand) at 31 December 2007. The return on Plan assets during 2007 was 34% and the increase in the value of Plan assets was 53%.
The actuarial position for the defined benefit plan at 31 December is analysed as follows: 2007 2006 Cí'000 Cí'000
Present value of defined benefit obligation 98.282 96.090 Fair value of plan assets (14.027) (9.092) 84.255 86.998 Actuarial deficits recognised over the remaining working lives of the employees (5.656) (14.960) Provision for defined benefit obligation in the balance sheet 78.599 72.038
10. PROFIT BEFORE TAXATION Profit before taxation is stated after charging the following: The Group The Bank 2007 2006 2007 2006 Cí'000 Cí'000 Cí'000 Cí'000
Amortisation of intangible assets (1.013) (1.101) (977) (1.063) Impairment loss on goodwill (1.878) (3.060) -- -- Interest on loan capital and debenture loan (3.039) (6.134) (3.039) (6.134) Operating lease rentals for land and buildings (3.378) (3.230) (3.225) (3.078) Auditors' remuneration (176) (157) (90) (86)
87 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 11. TAXATION The Group The Bank 2007 2006 2007 2006 Cí'000 Cí'000 Cí'000 Cí'000
Corporation tax 9.670 7.359 8.851 7.081 Special contribution for defence 27 15 -- -- Foreign taxes -- (1.590) -- (1.629) Prior years’ taxes 1.139 694 1.115 648 Deferred tax (486) 525 (538) 396 Capital gains tax 10 -- 10 -- 10.360 7.003 9.438 6.496
According to the Income Tax Law 118(I)/02 as implemented from 1st January 2003, the Bank’s profit and that of its subsidiaries in Cyprus is subject to corporation tax at the rate of 10%. In addition, taxable profits are no longer subject to defence fund contribution.
In accordance with article 13 of the Income Tax Law 118(I)/02, any tax losses of the Group companies which are not offset against taxable profits of other Group companies, are carried forward and offset against future taxable profits.
Profits earned abroad are subject to taxation at the rates applicable in the country in which the operations are carried out.
As from 1st January 2003, companies which do not distribute 70% of their profit after tax, as defined by the Special Contribution for the Defence of the Republic Law, during the two years after the end of the year of assessment to which profits refer, will be deemed to have distributed this amount as dividend. Special contribution for defence at 15% will be payable on such deemed dividend to the extent that shareholders (individuals and companies) at the end of the period of two years from the end of the year of assessment to which the profits refer are Cyprus tax residents. The amount of this deemed dividend distribution is reduced by any actual dividend paid out of the profits of the relevant year at any time. This special contribution for defence is paid by the company on account of the shareholders.
88 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 ANNUAL REPORT 2007 ANNUAL REPORT
11. TAXATION (continued)
Reconciliation of taxation based on taxable income and taxation based on accounting profits HELLENIC BANK GROUP
The Group 2007 2006 Cí'000 Cí'000
Group profit before taxation 89.313 41.282
Taxation based on applicable tax rates 9.004 4.666 Differences on tax rates applicable in Cyprus and other countries 463 852 Expenses non tax deductible 2.187 4.699 Non taxable income (1.547) (2.964) Prior years’ tax losses (136) (279) Group loss relief -- 896 Tax effect of losses from overseas operations (750) (1.590) Prior years’ taxes 1.139 723 Taxation for the year 10.360 7.003
The Bank 2007 2006 Cí'000 Cí'000
Bank profit before taxation 78.428 42.929
Taxation based on applicable tax rates 7.915 4.731 Differences on tax rates applicable in Cyprus and other countries 450 878 Expenses non tax deductible 2.131 3.891 Group loss relief -- 399 Non taxable income (1.423) (2.422) Tax effect of losses from overseas operations (750) (1.629) Prior years’ taxes 1.115 648 Taxation for the year 9.438 6.496
89 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 12. DIVIDEND 2007 2006 Cí'000 Cí'000
Interim dividend 2006 paid at 8% (2 cent per share) -- 4.798 Final dividend 2006 paid at 16% (4 cent per share) 10.454 -- Interim dividend 2007 paid at 20% (5 cent per share) 13.536 --
A percentage of 63,15% of the net interim dividend 2006 was reinvested in shares. The number of shares issued relating to the reinvestment of dividend amounted to 1.705.007.
A percentage of 72,49% of the net final dividend 2006 was reinvested in shares. The number of shares issued relating to the reinvestment of dividend amounted to 3.760.850.
A percentage of 79,71% of the net interim dividend 2007 was reinvested in shares. The number of shares issued relating to the reinvestment of dividend amounted to 4.096.671.
The Board of Directors proposes the payment of a final dividend for 2007 of ú0,11 per share (approximately Cí0,06 per share) (total amount of proposed final dividend is approximately ú32.004 thousand, Cí18.731 thousand), in addition to the interim dividend of Cí0,05 per share (approximately ú0,09) paid in October 2007. The proposed final dividend for the year 2007 is subject to approval at the Annual General Meeting and will be paid on 7 July 2008 to the registered shareholders at 6 June 2008. The ex-dividend date will be the 9th of June 2008. Based on this date, all share transactions until Friday 6 June 2008 (inclusive) are entitled to final dividend distribution.
The Board of Directors will also provide to the shareholders, with a written notification, the option to reinvest in part or in full the net amount of the proposed final dividend in additional ordinary shares of the Bank, rather than paying the final dividend in cash. The basis for the reinvestment will be the average buy/sell price of the Bank’s share in the Cyprus Stock Exchange at the close of the first five (5) business days from the ex-final dividend date (that is, from 9 to 13 June 2008), less a discount of 12%.
90 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 ANNUAL REPORT 2007 ANNUAL REPORT
13. EARNINGS PER SHARE HELLENIC BANK GROUP The Group The Bank Year ended Year ended 31 December 31 December 2007 2006 2007 2006 Basic earnings per share Profit attributable to shareholders (Cí thousand) 77.881 34.030 68.990 36.433
Average number of shares in issue during the year (thousand) 277.589 240.369 277.589 240.369
Basic earnings per share (cent Cí) 28,1 14,2 24,9 15,2
Fully diluted earnings per share Profit attributable to shareholders (Cí thousand) 77.881 34.030 68.990 36.433
Average number of shares used in the calculation of the basic earnings per share (thousand) 277.589 240.369 277.589 240.369
Effect of Share Warrants -- 30.653 -- 30.653
Average number of shares used in the calculation of the fully diluted earnings per share (thousand) 277.589 271.022 277.589 271.022
Fully diluted earnings per share (cent Cí) 28,1 12,6 24,9 13,4
There was no effect on the fully diluted earnings per share at 31 December 2007 due to the fact that there were no Share Warrants, since the exercise period of the Warrants expired on 30 November 2007.
14. CASH AND BALANCES WITH CENTRAL BANKS Balances with Central Banks at 31 December 2007 include the deposits for the minimum liquidity requirements amounting to Cí34.098 thousand (2006: Cí48.265 thousand) for the Group and Cí33.056 thousand (2006: Cí47.098 thousand) for the Bank.
91 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 15. GOVERNMENT SECURITIES AND OTHER ELIGIBLE BILLS The Group The Bank 2007 2006 2007 2006 Cí'000 Cí'000 Cí'000 Cí'000 Securities held for trading Government securities and other eligible bills 20.483 36.644 19.781 36.644
Securities available for sale Government securities and other eligible bills 299.825 286.916 296.335 284.790 320.308 323.560 316.116 321.434
Listed securities 315.778 319.115 311.586 316.989 Unlisted securities 4.530 4.445 4.530 4.445 320.308 323.560 316.116 321.434
Within three months 30.682 21.477 30.682 21.477 Between three months and one year 17.003 52.096 16.374 52.096 Between one year and five years 53.237 96.460 51.204 94.781 Over five years 219.386 153.527 217.856 153.080 320.308 323.560 316.116 321.434
Government securities and other eligible bills and Treasury Bills are acceptable for refinancing by Central Banks.
16. PLACEMENTS WITH OTHER BANKS The Group The Bank 2007 2006 2007 2006 Cí'000 Cí'000 Cí'000 Cí'000
Interbank accounts 31.007 5.172 31.007 5.172 Other deposits with banks 706.727 686.297 699.457 680.264 737.734 691.469 730.464 685.436
The Group The Bank 2007 2006 2007 2006 Cí'000 Cí'000 Cí'000 Cí'000
On demand 64.001 23.097 63.684 22.661 Within three months 654.187 652.139 653.816 649.826 Between three months and one year 6.582 3.311 -- 27 Between one year and five years 4.027 4.000 4.027 4.000 Over five years 8.937 8.922 8.937 8.922 737.734 691.469 730.464 685.436
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17. LOANS AND ADVANCES TO CUSTOMERS HELLENIC BANK GROUP The Group The Bank 2007 2006 2007 2006 Cí'000 Cí'000 Cí'000 Cí'000
Manufacturing 132.033 130.122 132.033 105.428 Trade 423.444 394.998 420.932 394.998 Tourism 179.142 177.370 179.142 177.370 Construction 523.854 375.071 523.854 375.071 Personal and professional 765.398 652.134 677.102 586.622 Other sectors 371.698 219.519 371.700 219.519 2.395.569 1.949.214 2.304.763 1.859.008
Provisions for impairment (215.389) (212.291) (188.896) (184.797)
2.180.180 1.736.923 2.115.867 1.674.211
The Group The Bank 2007 2006 2007 2006 Cí'000 Cí'000 Cí'000 Cí'000
On demand 456.922 444.684 432.124 425.039 Within three months 258.027 240.173 254.018 237.727 Between three months and one year 264.678 219.921 259.482 212.836 Between one year and five years 644.961 539.420 596.926 483.288 Over five years 770.981 505.016 762.213 500.118 2.395.569 1.949.214 2.304.763 1.859.008 Provisions for impairment (215.389) (212.291) (188.896) (184.797)
2.180.180 1.736.923 2.115.867 1.674.211
The geographical analysis of the Group’s and the Bank’s total loans and advances to customers is as follows:
The Group The Bank 2007 2006 2007 2006 Cí'000 Cí'000 Cí'000 Cí'000
Cyprus 1.875.939 1.526.344 1.785.133 1.436.138 Greece 519.630 422.870 519.630 422.870 2.395.569 1.949.214 2.304.763 1.859.008
93 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 17. LOANS AND ADVANCES TO CUSTOMERS (continued)
Provisions for impairment of loans and advances Income Provisions for suspension impairment account Total Cí'000 Cí'000 Cí'000 The Group 1 January 2007 149.888 62.403 212.291 Loans and advances written off (9.532) (678) (10.210) Exchange difference 340 89 429 Suspended income for the year -- 5.425 5.425 Charge for the year 7.454 -- 7.454
31 December 2007 148.150 67.239 215.389
1 January 2006 137.566 51.948 189.514 Loans and advances written off (10.719) (2.584) (13.303) Exchange difference 204 46 250 Suspended income for the year -- 12.993 12.993 Charge for the year 22.837 -- 22.837
31 December 2006 149.888 62.403 212.291
Income Provisions for suspension impairment account Total Cí'000 Cí'000 Cí'000 The Bank 1 January 2007 129.663 55.134 184.797 Loans and advances written off (9.025) (595) (9.620) Exchange difference 340 89 429 Suspended income for the year -- 5.269 5.269 Charge for the year 8.021 -- 8.021
31 December 2007 128.999 59.897 188.896
1 January 2006 121.525 45.696 167.221 Loans and advances written off (10.483) (2.919) (13.402) Exchange difference 204 46 250 Suspended income for the year -- 12.066 12.066 Transfer within the Group 2.051 245 2.296 Charge for the year 16.366 -- 16.366
31 December 2006 129.663 55.134 184.797
The total amount of net loans and advances to customers, for which no interest has been credited to the income statement and has been transferred to the income suspension account, amounts to Cí189.712 thousand (2006: Cí236.805 thousand) for the Group and to Cí162.703 thousand (2006: Cí205.348 thousand) for the Bank.
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18. DEBT SECURITIES HELLENIC BANK GROUP The Group The Bank 2007 2006 2007 2006 Cí'000 Cí'000 Cí'000 Cí'000 Securities at fair value through profit or loss Government 227 473 227 473 Banks 6.444 17.558 6.444 17.558 Other issuers 5.544 9.824 5.544 9.824 12.215 27.855 12.215 27.855
Securities available for sale Government 52.661 68.211 52.661 68.211 Banks 698.939 645.822 698.544 645.495 Other issuers 6.877 14.029 6.766 13.984 Less: Provisions for impairment (2.267) -- (2.267) -- 756.210 728.062 755.704 727.690
Securities held to maturity Other issuers 5.347 5.292 5.347 5.292 Less: Provisions for impairment (2.230) -- (2.230) -- 3.117 5.292 3.117 5.292
771.542 761.209 771.036 760.837
The Group The Bank 2007 2006 2007 2006 Cí'000 Cí'000 Cí'000 Cí'000
Provisions for impairment 1 January ------Charge for the year 4.497 -- 4.497 --
31 December 4.497 -- 4.497 --
The Group The Bank 2007 2006 2007 2006 Cí'000 Cí'000 Cí'000 Cí'000
On demand 406 395 406 395 Within three months 13.326 92.443 13.326 92.443 Between three months and one year 52.491 77.076 52.491 77.004 Between one year and five years 624.676 463.892 624.456 463.543 Over five years 80.643 127.403 80.357 127.452 771.542 761.209 771.036 760.837
Listed securities 762.734 663.441 762.239 663.114 Unlisted securities: Bonds 8.808 14.111 8.797 14.066 Euro Commercial Papers -- 83.657 -- 83.657 771.542 761.209 771.036 760.837 95 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 18. DEBT SECURITIES (continued)
The unlisted Euro Commercial Papers are Moody’s P1 short-term rated, with maturities not exceeding a period of three months.
The available for sale securities include debt securities of Cí31.823 thousand pledged as collateral to third parties, within the normal practices of the treasury department.
19. EQUITY SECURITIES The Group The Bank 2007 2006 2007 2006 Cí'000 Cí'000 Cí'000 Cí'000 Securities held for trading Listed securities 20.118 1.553 436 1.525 Unlisted securities 91 ------20.209 1.553 436 1.525 Securities available for sale Listed securities 31.457 28.541 20.690 24.497 Unlisted securities 10.756 8.425 7.916 7.177 Less: Provisions for impairment (10.187) (16.257) (8.073) (14.243) 32.026 20.709 20.533 17.431
52.235 22.262 20.969 18.956
The Group The Bank 2007 2006 2007 2006 Cí'000 Cí'000 Cí'000 Cí'000 Provisions for impairment 1 January 16.257 16.306 14.243 14.302 Charge for the year 4 15 -- 15 Transfer to income statement on disposal (6.074) (64) (6.170) (74) 31 December 10.187 16.257 8.073 14.243
Unlisted securities include the Group’s and the Bank’s investment in mutual funds of Cí2.388 thousand (2006: Cí2.688 thousand for the Group and Cí2.026 thousand for the Bank), the Bank’s investment in JCC Payment Systems Ltd of Cí3.236 thousand (2006: Cí3.001 thousand), as well as investments in other unlisted securities.
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20. INVESTMENT IN SUBSIDIARY COMPANIES HELLENIC BANK GROUP Investment in subsidiary companies represents the cost of acquisition of shares in the following subsidiary companies:
The Bank Percentage Number 2007 2006 of ownership of shares Cí'000 Cí'000 % (thousands)
Hellenic Bank (Finance) Ltd 100 2.800 2.800 2.800 Hellenic Bank (Investments) Ltd 100 3.750 3.750 3.750 Hellenic Bank Trust and Finance Corporation Ltd 100 50 55 55 Hellenic Bank (Factors) Ltd 100 300 -- 300 Pancyprian Insurance Ltd 99,99 10.646 22.634 22.634 Ledra Insurance Ltd 100 600 -- 1.637 Hellenic Alico Life Insurance Company Ltd 72,50 725 725 725 Hellenic Trust Holdings S.A. 99,99 293,5 1.688 1.688 Hellenic Insurance Agency S.A. 99,50 600 11 11 Hellenic Trust Mutual Funds Management S.A. 100 1.175 607 607 Hellenic Trade Services Ltd 99,99 1,9 1 1 Hellenic Insurance Agency Ltd 100 50 50 50 Athena Cyprus Public Company Ltd 77,84 84.573 33.928 -- 66.249 34.258
All subsidiary companies are incorporated in Cyprus where they carry out their principal activities, with the exception of Hellenic Trust Holdings S.A., Hellenic Trust Mutual Funds Management S.A. and Hellenic Insurance Agency S.A., which are incorporated in Greece where they carry out their principal activities. Hellenic Trade Services Ltd was incorporated in Hong- Kong where it carries out its principal activities.
Hellenic Bank (Investments) Ltd owns 0,01% of the share capital of Hellenic Trade Services Ltd. In combination with the Bank’s direct holding in the share capital of Hellenic Trade Services Ltd, the company is a wholly owned subsidiary of the Group.
The subsidiary companies of Pancyprian Insurance Ltd are the following:
Percentage of ownership % Pancyprian Finance Public Company Ltd 99,68 Hellenic Pancyprian Insurance Agencies Ltd 100 MIA (Insurance Agencies) Ltd 100 Hellenic Pancyprian Insurance (Estate) Ltd 100
During 2005 the Bank‘s management decided to discontinue the operations of its subsidiary company Hellenic Trust Investment Services S.A. which operated in Greece as an investment company and also alter its articles of association. This decision is part of the Group’s redesign of its business activities in Greece. On 21 November 2005, Hellenic Trust Investment Services S.A. was renamed to Hellenic Trust Holdings S.A. On 22 June 2006 the Annual General Meeting of Hellenic Trust Holdings S.A. decided on the dissolution of the company and the appointment of liquidators as from the same date.
97 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 20. INVESTMENT IN SUBSIDIARY COMPANIES (continued)
In October 2006 the Bank’s existing cooperation with American Life Insurance Co (ALICO AIG Life) was significantly extended in the area of Mutual Funds. According to the agreement signed by the two parties, Hellenic Trust Mutual Funds Management S.A. assigned the management of its mutual funds to ALICO AIG Mutual Funds. In addition, the Bank is assigned as sales representative of mutual funds of ALICO AIG Mutual Funds and as investment consultant for two mutual funds through its subsidiary Hellenic Bank (Investments) Ltd.
In view of the above, and following the approval of the Capital Market Commission in Greece, on 20 December 2006 the Extraordinary General Meeting of Hellenic Trust Mutual Funds Management S.A., approved the cessation of the operations and dissolution of the company as from 1st January 2007 and the appointment of liquidators as from the same date.
On 27 November 2006 the Board of Directors of Hellenic Bank (Factors) Ltd agreed to the transfer of all its assets and liabilities and all of its operations to Hellenic Bank Public Co Ltd, according to the restructuring plan, and the taking of measures towards the dissolution of the company upon completion of the transfer. The relevant resolutions were approved at the Extraordinary General Meeting of Hellenic Bank (Factors) Ltd on 27 November 2006. The transfer agreement in view of the restructuring was signed by the interested parties on 1st December 2006 and was approved by the Nicosia District Court on 20 December 2006. The transfer of operations was implemented on 27 December 2006. As a result of the transfer, the amount of Cí25 million at 31 December 2006 (2005: Cí21,3 million) relating to factoring invoices was transferred to Hellenic Bank Public Company Ltd.
During 2007, the Board of Directors of Hellenic Bank decided to proceed with the absorption of the operations of Pancyprian Finance Public Company Ltd by the Bank. The target being the overall benefits to the Group, as this movement is expected to take advantage of the synergies which are present in the Group and therefore further improve its efficiency. The implementation of the agreement will take place gradually in order to ensure even and smooth customer service.
During 2007, the Board of Directors of Hellenic Bank decided to discontinue the operations of its subsidiaries Hellenic Pancyprian Insurance Agencies Ltd, MIA (Insurance Agencies) Ltd and Hellenic Pancyprian Insurance (Estate) Ltd.
On 12 February 2007 the Hellenic Bank Public Company Ltd disposed of all of the shares held in the subsidiary Ledra Insurance Ltd. Ledra Insurance Ltd had been acquired by Hellenic Bank in July 1999 and its insurance activities had been gradually transferred to Pancyprian Insurance Company, which continues to be the main route for the development of the general insurance services for the Hellenic Bank Group.
On 29 May 2007, the Hellenic Bank Group increased its share in Athena Cyprus Public Company Ltd to 50,36% following the acquisition of 21.465.911 shares held by SFS Group Public Co Ltd at a cash consideration of Cí7.756.707. The offer for the sale of shares was equivalent to the Public Offer of the Bank to all shareholders of Athena Cyprus Public Company Ltd, announced on 3 May 2007 for the acquisition of up to 100% of the share capital of Athena Cyprus Public Company Ltd. Additionally, in June 2007, following the reinvestment of dividend of Cí833 thousand in additional shares of Athena Cyprus Public Company Ltd, the Group increased its shareholding to 50,75%.
On 30 July 2007, the Public Offer of Hellenic Bank Public Company Ltd to the shareholders of Athena Cyprus Public Company Ltd for the acquisition of up to 100% of its share capital was completed with the transfer of 29.502.532 shares. The acceptance percentage of the Public Offer including the dividend reinvestment amounts to 27,15%. As a result, the shareholding percentage of Hellenic Bank Group to the share capital of Athena Cyprus Public Company Ltd increased to 77,84%.
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21. INVESTMENT IN ASSOCIATE COMPANY HELLENIC BANK GROUP Investment in associate company at 31 December 2006 represented 29,43% of the issued and fully paid share capital of Athena Cyprus Public Company Ltd, a company listed on the Cyprus Stock Exchange which carries out its operations mainly in Cyprus. The principal activity of the associate company is the investment in securities listed on the Cyprus Stock Exchange as well as in securities of private companies that intend to and are eligible to be listed on the Cyprus Stock Exchange or in other companies with high profitability prospects.
The investment in Athena Cyprus Public Company Ltd was included in the financial statements as an associate company until 29 May 2007. Following the acquisition of additional shares of the company by the Bank, Athena Cyprus Public Company Ltd is accounted for as a subsidiary in accordance with the provisions of International Financial Reporting Standards.
The Group The Bank 2007 2006 2007 2006 Cí'000 Cí'000 Cí'000 Cí'000
1 January 11.871 8.106 14.694 14.270 Group’s share of results for the year after taxation 905 2.394 -- -- Share of revaluation reserve movement 702 1.754 -- -- Dividends received (833) (807) -- -- Exercise of Share Warrants -- 424 -- 424 Acquisition of subsidiary company (12.645) -- (14.694) -- 31 December -- 11.871 -- 14.694
22. ACQUISITION OF SUBSIDIARY COMPANY On 29 May 2007, Hellenic Bank Group increased its share in Athena Cyprus Public Company Ltd to 50,36%, following the acquisition of 21.465.911 shares held by SFS Group Public Co Ltd at a cash consideration of Cí7.756.707. The offer for the sale of shares was equivalent to the Public Offer of the Bank to all shareholders announced on 3 May 2007 for the acquisition of up to 100% of the share capital of Athena Cyprus Public Company Ltd. The assets and liabilities acquired at the acquisition date were as follows:
Cí'000
Financial instruments at fair value through profit or loss 20.023 Debtors and other receivables 897 Other tax receivable 20 Balances with Banks 10.656 Tangible fixed assets 8 Intangible assets 1 Financial assets available for sale 14.965 Creditors (3.606) 42.964
Share in fair value of net assets acquired 8.992 Total acquisition cost (7.757) Excess of the Group’s share in fair value of the net assets acquired (negative goodwill) 1.235
99 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 22. ACQUISITION OF SUBSIDIARY COMPANY (continued)
Additionally, in June 2007 following the reinvestment of dividend of Cí833 thousand in additional shares of the company, Hellenic Bank Group increased its share to 50,75%. As a result there was additional negative goodwill.
Cí'000
Share in fair value of net assets acquired 908 Acquisition cost (833) Excess of the Group’s share in fair value of the net assets acquired (negative goodwill) 75
On 30 July 2007, the Public Offer of Hellenic Bank Public Company Ltd to the shareholders of Athena Cyprus Public Company Ltd for the acquisition of up to 100% of its share capital was completed with the transfer of 29.502.532 shares. The acceptance percentage of the Public Offer following the dividend reinvestment amounts to 27,15%. The assets and liabilities acquired at the acquisition date were as follows:
Cí'000
Financial instruments at fair value through profit or loss 21.646 Debtors and other receivables 194 Other tax receivable 25 Balances with Banks 10.162 Tangible fixed assets 7 Intangible assets 1 Financial assets available for sale 17.772 Creditors (760) 49.047
Share in fair value of net assets acquired 13.290 Total acquisition cost (10.650) Excess of the Group’s share in fair value of the net assets acquired (negative goodwill) 2.640
The total negative goodwill of Cí3.950 thousand has been credited in the consolidated income statement, under other income.
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23. PROPERTY, PLANT AND EQUIPMENT HELLENIC BANK GROUP Land and Plant Δotal buildings and equipment 2007 2007 2007 Cí'000 Cí'000 Cí'000 The Group Cost or valuation 1 January 36.196 37.249 73.445 Acquisition of subsidiary company -- 27 27 Additions 37 3.505 3.542 Disposals/transfers (406) (480) (886) Exchange difference -- 133 133
31 December 35.827 40.434 76.261
Depreciation 1 January 73 25.293 25.366 Acquisition of subsidiary company -- 20 20 Charge for the year 523 3.281 3.804 Disposals/transfers (12) (448) (460) Exchange difference -- 106 106
31 December 584 28.252 28.836 Net book value at 31 December 35.243 12.182 47.425
Land and Plant Δotal buildings and equipment 2006 2006 2006 Cí'000 Cí'000 Cí'000 The Group Cost or valuation 1 January 24.442 35.265 59.707 Revaluation 8.300 -- 8.300 Additions 3.434 2.566 6.000 Disposals/transfers 20 (671) (651) Exchange difference -- 89 89
31 December 36.196 37.249 73.445
Depreciation 1 January 662 22.266 22.928 Revaluation (992) -- (992) Charge for the year 396 3.523 3.919 Disposals/transfers 7 (561) (554) Exchange difference -- 65 65
31 December 73 25.293 25.366 Net book value at 31 December 36.123 11.956 48.079 101 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 23. PROPERTY, PLANT AND EQUIPMENT (continued)
Land and Plant Δotal buildings and equipment 2007 2007 2007 Cí'000 Cí'000 Cí'000 The Bank Cost or valuation 1 January 31.242 35.108 66.350 Additions -- 3.437 3.437 Disposals/transfers (293) (388) (681) Exchange difference -- 135 135
31 December 30.949 38.292 69.241
Depreciation 1 January -- 23.551 23.551 Charge for the year 456 3.192 3.648 Disposals/transfers (3) (375) (378) Exchange difference -- 106 106
31 December 453 26.474 26.927 Net book value at 31 December 30.496 11.818 42.314
Land and Plant Δotal buildings and equipment 2006 2006 2006 Cí'000 Cí'000 Cí'000 The Bank Cost or valuation 1 January 20.628 32.937 53.565 Revaluation 7.426 -- 7.426 Additions 3.188 2.427 5.615 Disposals/transfers -- (345) (345) Exchange difference -- 89 89
31 December 31.242 35.108 66.350
Depreciation 1 January 550 20.340 20.890 Revaluation (883) -- (883) Charge for the year 333 3.412 3.745 Disposals/transfers -- (266) (266) Exchange difference -- 65 65
31 December -- 23.551 23.551 Net book value at 31 December 31.242 11.557 42.799
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23. PROPERTY, PLANT AND EQUIPMENT (continued)
Land and buildings have been revalued at 31 December 2006 by independent qualified valuers on the basis of their market HELLENIC BANK GROUP value for their existing use. The surplus of Cí9.292 thousand for the Group and Cí8.309 thousand for the Bank, arising from the revaluation has been transferred to the property revaluation reserve.
The cost of the Group’s freehold land and buildings stated at valuation and their net book value on a historic cost basis at 31 December 2007 amount to Cí20.594 thousand (2006: Cí21.268 thousand) and Cí18.646 thousand (2006: Cí19.571 thousand) respectively and for the Bank Cí17.679 thousand (2006: Cí18.276 thousand) and Cí16.259 thousand (2006: Cí17.068 thousand) respectively.
The cost of the Group’s buildings under construction, included under plant and equipment at 31 December 2007 amounted to Cí4.656 thousand (2006: Cí3.183 thousand) and of the Bank Cí4.656 thousand (2006: Cí3.102 thousand).
At 31 December 2007 the value of the Group’s freehold land not subject to depreciation amounted to Cí10.580 thousand (2006: Cí10.580 thousand) and of the Bank Cí8.345 thousand (2006: Cí8.345 thousand).
24. INTANGIBLE ASSETS Computer Goodwill Total software 2007 2007 2007 Cí'000 Cí'000 Cí'000 The Group Cost 1 January 8.782 15.575 24.357 Additions 2.030 -- 2.030 Disposals (95) -- (95) Exchange difference 29 1 30
31 December 10.746 15.576 26.322
Amortisation and impairment losses 1 January 6.467 4.952 11.419 Charge for the year 1.003 10 1.013 Impairment losses -- 1.878 1.878 Disposals (75) -- (75) Exchange difference 22 1 23
31 December 7.417 6.841 14.258 Net book value at 31 December 3.329 8.735 12.064
103 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 24. INTANGIBLE ASSETS (continued)
Computer Goodwill Total software 2006 2006 2006 Cí'000 Cí'000 Cí'000 The Group Cost 1 January 7.730 15.574 23.304 Additions 1.033 -- 1.033 Exchange difference 19 1 20
31 December 8.782 15.575 24.357
Amortisation and impairment losses 1 January 5.361 1.883 7.244 Charge for the year 1.092 9 1.101 Impairment losses -- 3.060 3.060 Exchange difference 14 -- 14
31 December 6.467 4.952 11.419 Net book value at 31 December 2.315 10.623 12.938
Computer Goodwill Total software 2007 2007 2007 Cí'000 Cí'000 Cí'000 The Bank Cost 1 January 8.385 867 9.252 Additions 2.021 -- 2.021 Disposals (22) -- (22) Exchange difference 28 1 29
31 December 10.412 868 11.280
Amortisation and impairment losses 1 January 6.141 797 6.938 Charge for the year 967 10 977 Disposals (2) -- (2) Exchange difference 22 1 23
31 December 7.128 808 7.936 Net book value at 31 December 3.284 60 3.344
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24. INTANGIBLE ASSETS (continued)
Computer Goodwill Total HELLENIC BANK GROUP software 2006 2006 2006 Cí'000 Cí'000 Cí'000 The Bank Cost 1 January 7.263 866 8.129 Additions 1.018 -- 1.018 Transfer 86 -- 86 Exchange difference 18 1 19
31 December 8.385 867 9.252
Amortisation and impairment losses 1 January 4.988 788 5.776 Charge for the year 1.054 9 1.063 Transfer 84 -- 84 Exchange difference 15 -- 15
31 December 6.141 797 6.938 Net book value at 31 December 2.244 70 2.314
The carrying amount of intangible assets was reviewed at 31 December 2007 to determine whether there is any indication of impairment. In the case of the subsidiary company Pancyprian Finance Public Company Ltd an impairment loss of Cí1.878 thousand was identified and was written off during 2007 in the Group’s income statement.
During 2006 impairment losses of Cí2.570 thousand and Cí490 thousand arose in respect of the subsidiary companies Pancyprian Finance Public Company Ltd and Ledra Insurance Ltd. The total amount of impairment losses of Cí3.060 thousand was written off during 2006 in the Group’s income statement.
Goodwill shown in the Group’s and the Bank’s financial statements with a net book value of Cí60 thousand (2006: Cí70 thousand) relates to the branch network in Greece.
25. OTHER ASSETS The Group The Bank 2007 2006 2007 2006 Cí'000 Cí'000 Cí'000 Cí'000
Deferred taxation 6.399 5.845 6.382 5.665 Taxation receivable 1.617 724 1.121 265 Prepaid expenses 1.098 199 964 97 Fair value of derivatives (Note 34) 11.785 6.194 11.785 6.194 Assets held to cover liabilities of unit linked funds 4.155 2.800 -- -- Debtors and other receivables 21.584 23.695 13.672 15.080 46.638 39.457 33.924 27.301
105 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 25. OTHER ASSETS (continued)
Deferred taxation arises from:
The Group The Bank 2007 2006 2007 2006 Cí'000 Cí'000 Cí'000 Cí'000
Differences between depreciation and capital allowances 530 531 518 517 Tax losses 3.000 1.587 3.000 1.427 Other temporary differences 2.869 3.727 2.864 3.721 6.399 5.845 6.382 5.665
Assets held to cover liabilities of unit linked funds comprise of:
The Group 2007 2006 Cí'000 Cí'000
Deposits 529 452 Government bonds 2.317 1.451 Bank bonds 207 196 Equity securities 1.102 701 4.155 2.800
26. DEPOSITS BY BANKS The Group and the Bank 2007 2006 Cí'000 Cí'000
Interbank accounts 140.465 209.726 Other deposits by Banks 147.533 17.860 287.998 227.586
The Group and the Bank 2007 2006 Cí'000 Cí'000
On demand 68.662 38.209 Within three months 178.378 180.652 Between three months and one year 40.958 8.725 287.998 227.586
27. CUSTOMER DEPOSITS AND OTHER CUSTOMER ACCOUNTS The Group The Bank 2007 2006 2007 2006 Cí'000 Cí'000 Cí'000 Cí'000
Demand deposits 795.291 486.388 795.291 486.388 Savings deposits 113.746 103.503 113.746 103.503 Notice deposits 350.435 606.774 350.435 606.774 Time deposits 2.170.504 1.913.897 2.150.004 1.889.790 3.429.976 3.110.562 3.409.476 3.086.455 106 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 ANNUAL REPORT 2007 ANNUAL REPORT
27. CUSTOMER DEPOSITS AND OTHER CUSTOMER ACCOUNTS (continued)
The Group The Bank HELLENIC BANK GROUP 2007 2006 2007 2006 Cí'000 Cí'000 Cí'000 Cí'000
On demand 936.833 785.275 936.423 784.522 Within three months 1.806.784 1.696.380 1.801.238 1.690.474 Between three months and one year 562.817 554.982 548.994 537.534 Between one year and five years 123.542 73.925 122.821 73.925 3.429.976 3.110.562 3.409.476 3.086.455
The geographical analysis of the Group’s and the Bank’s total customer deposits and other customer accounts is as follows:
The Group The Bank 2007 2006 2007 2006 Cí'000 Cí'000 Cí'000 Cí'000
Cyprus 2.852.782 2.659.356 2.832.282 2.635.249 Greece 577.194 451.206 577.194 451.206 3.429.976 3.110.562 3.409.476 3.086.455
Customer deposits include deposits amounting to Cí1.282 thousand (2006: Cí3.460 thousand) that are classified as “at fair value through profit or loss” as they are managed together with assets classified under the same category.
28. OTHER LIABILITIES The Group The Bank 2007 2006 2007 2006 Cí'000 Cí'000 Cí'000 Cí'000
Deferred taxation 4.371 4.356 4.249 4.016 Taxation payable 2.998 3.647 2.471 3.156 Retirement benefit obligations 79.235 72.526 79.235 72.526 Fair value of derivatives (Note 34) 6.839 2.874 6.839 2.874 Accrued expenses 9.413 4.696 8.726 4.501 Liabilities of unit linked funds 4.155 2.800 -- -- Other accounts payable 29.875 34.722 8.223 14.814 136.886 125.621 109.743 101.887
Deferred taxation arises from:
The Group The Bank 2007 2006 2007 2006 Cí'000 Cí'000 Cí'000 Cí'000
Offset of Group companies’ losses 1.252 1.448 1.252 1.353 Surplus on revaluation of immovable property and differences between depreciation and capital allowances 2.052 2.241 1.930 1.996 Other temporary differences 1.067 667 1.067 667 4.371 4.356 4.249 4.016
Other accounts payable include provisions for pending litigation, claims or cases subject to arbitration proceedings amounting to Cí1.625 thousand (2006: Cí1.185 thousand). 107 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 29. LOAN CAPITAL The Group The Bank 2007 2006 2007 2006 Cí'000 Cí'000 Cí'000 Cí'000 Tier 1 Capital Capital Securities 24.546 24.546 25.297 25.297
Tier 2 Capital Non Convertible Bonds 2004/2009 14.700 14.700 15.000 15.000 Non Convertible Bonds 2011 18.723 18.250 18.723 18.450 Non Convertible Bonds 2016 74.300 63.000 75.000 63.000 107.723 95.950 108.723 96.450
132.269 120.496 134.020 121.747
Tier 1 Capital The Capital Securities, as well as the share capital, are considered as Tier 1 Capital by the Central Bank of Cyprus for the purposes of the calculation of the capital base.
The Capital Securities are perpetual securities with no maturity date. They may be redeemed in whole, at the option of the Bank, subject to the prior consent of the Central Bank of Cyprus, at their nominal value together with any accrued interest on 18 April 2008 or on any interest payment date thereafter and under the condition that they will be replaced with Tier 1 Capital, unless the Central Bank of Cyprus is satisfied with the Bank’s capital adequacy. The Capital Securities bear interest at floating rate, which is reviewed at the beginning of each interest payment period and is applicable to that period. The interest rate is equal to the base rate applicable at the beginning of each interest payment period plus 1,20%. For the period 1st January 2007 to 31 December 2007 the interest rate was set at 5,70% per annum. An amount of Cí751 thousand is eliminated on consolidation. The Capital Securities are non secured subordinated liabilities of the Bank. The Capital Securities are listed on the Cyprus Stock Exchange.
Tier 2 Capital The following bonds are considered as Tier 2 Capital by the Central Bank of Cyprus, for the purposes of the calculation of the Bank’s capital base.
Non Convertible Bonds 2004/2009
Non Convertible Bonds 2004/2009 have a duration of 10 years and bear interest at the rate of 7,30% for the first year and at a floating rate of interest for subsequent years. Interest is payable every six months. For the period 1st January 2007 to 30 June 2007 the interest rate was set at 4,13% per annum and for the period 1st July 2007 to 31 December 2007 the interest rate was adjusted to 4,10% per annum. An amount of Cí300 thousand is eliminated on consolidation. Repayment of the subordinated Non Convertible Bonds 2004/2009 follows in priority the claims of depositors and other creditors. The Bonds are listed on the Cyprus Stock Exchange.
Non Convertible Bonds 2011
Non Convertible Bonds 2011 of Cí17,5 million have a maturity date of 28 April 2011 and bear interest at the fixed rate of 5,75% per annum on their nominal value for the first six months. For subsequent periods they bear interest at a floating rate equal to the base rate applicable at the beginning of each interest payment period plus 0,75%. For the period 1st January 2007 to 31 December 2007 the interest rate was set at 5,25% per annum. The Bonds provide the right of reinvestment of the interest payable in additional Bonds with the same terms. The Bonds are listed on the Cyprus Stock Exchange. During the year an amount of Cí372 thousand was reinvested in additional Bonds with the same terms. 108 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 ANNUAL REPORT 2007 ANNUAL REPORT
29. LOAN CAPITAL (continued)
Non Convertible Bonds 2016 HELLENIC BANK GROUP
On 1st July 2006 the Bank proceeded with a new issue of Tier 2 Capital in the form of bonds (Bonds 2016) for up to the total amount of Cí75 million with a maturity date in 2016, according to the Prospectus dated 11 May 2006. The 2016 Bonds are issued in one to four different series which will be redeemed on 1st July 2016, irrespective of the date of issue. The Bank has the right to redeem the Bonds 2016 on any interest payment date after 1st July 2011.
The Bonds 2016 bear interest at a floating rate reviewed at the beginning of each interest payment period and applicable to that specific period. The floating interest rate is equal to the basic interest rate applicable at the beginning of each interest period, plus 0,80%. Subsequent to 1st July 2011, if the Bonds are not redeemed by the Bank, they will bear an additional interest rate of 0,70%. Therefore, the interest rate will be equal to the basic interest rate plus 1,50%. Interest is payable quarterly in arrears in cash. For the period from 1st January 2007 to 31 December 2007 the interest rate was set at 5,30% per annum.
Up to 30 September 2006, Cí38 million Series A’ Bonds were issued and listed on the Cyprus Stock Exchange, whereas on 22 November 2006 the Bank proceeded with the issue of Cí25 million Series B’ Bonds in accordance with the Second Supplementary Prospectus. On 27 April 2007 the Bank issued Cí12 million Series C’ Bonds. With the issue of the Series C’ Bonds, the issue of Cí75 million Bonds 2016 was completed according to the Prospectus dated 11 May 2006. The Bonds are listed on the Cyprus Stock Exchange.
The Bonds 2016 are not secured and in case of liquidation their repayment follows in priority the claims of depositors and other creditors. They have, however, priority over shareholders and Capital Securities holders. An amount of Cí700 thousand is eliminated on consolidation.
30. SHARE CAPITAL The Group and the Bank 31 December Number 31 December Number 2007 of shares 2006 of shares Cí'000 (thous.) Cí'000 (thous.) Authorised 600 million shares of Cí0,25 each 150.000 600.000 150.000 600.000
Issued Fully paid shares (Cí0,25 each) 1 January 60.481 241.925 59.107 236.428 Exercise of Share Warrants 10.277 41.108 937 3.748 Reinvestment of dividend 1.965 7.858 426 1.705 Issue of shares 13 52 11 44
Total issued share capital 72.736 290.943 60.481 241.925
109 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 30. SHARE CAPITAL (continued)
At 31 December 2007 there were 290.942.990 fully paid ordinary shares with a nominal value of Cí0,25 each (2006: 241.924.699 shares with a nominal value Cí0,25 each).
During the year the issued share capital was increased by 41.108.264 shares following the exercise of Share Warrants at the price of Cí0,70 each and by 52.506 shares following the issue of bonus shares to members of staff. In addition to the above, on 9 July 2007, 3.760.850 shares were granted to shareholders who reinvested the total or part of the net amount of the final 2006 dividend in Hellenic Bank shares and on 8 October 2007, 4.096.671 shares were granted to shareholders who reinvested the total or part of the net amount of the interim 2007 dividend in Hellenic Bank shares.
At 31 December 2007 there were no Share Warrants (2006: 43.510.717), since on 30 November 2007 their exercise period expired. The unexercised warrants of 2.402.453 are no longer valid according to the Prospectus filed with the Cyprus Stock Exchange. The Share Warrants were offered free of charge to shareholders registered in the Bank’s share register at 27 November 2003 (at the rate of one Share Warrant for every five shares held) and had an exercise price of Cí0,70 each. The Share Warrants were of American type and could be exercised on any working day during the exercise period from 9 January 2004 to 30 November 2007. The exercise price and the number of warrants were adjusted in cases of share split, reverse- split or reclassification of issued shares, as well as for rights issues, bonus issues, warrants issues and issues of other instruments that gave the right to purchase or convert to Bank shares.
During the Extraordinary General Meeting of the shareholders that took place on 30 May 2007, a special resolution was approved which grants authority to the Board of Directors of the Bank for a period of twelve months to issue up to 20 million new shares of Hellenic Bank at a maximum discount of 10% to the market value of the shares. This decision is associated with the strategic plans of the Group for the improvement of its position through acquisitions, strategic alliances and other actions and it aims to provide flexibility to the Board of Directors to take immediate advantage of the opportunities that may arise from time to time.
During the Extraordinary General Meeting of the shareholders of Hellenic Bank Public Company Ltd that took place on 26 March 2008, a special resolution was approved for the conversion of the nominal value of shares to euro. In particular the following resolutions were presented for approval before the Meeting:
(a) Conversion of the share capital of the Bank from Cyprus pounds to euro.
(b) Conversion and increase of the nominal value of the Bank’s shares, following the upwards rounding, from Cí0,25 per share to ú0,43 per share.
(c) Conversion of the nominal capital of the Bank from Cí150.000.000 (ú256.290.216,21) divided into 600.000.000 shares of nominal value Cí0,25 each to ú258.000.000 divided into 600.000.000 shares of nominal value ú0,43 each.
(d) Conversion and increase of the issued share capital from Cí72.735.747,50 (ú124.276.403,02) to ú125.105.485,70, divided into 290.942.990 shares of nominal value ú0,43 each. This increase was realised by the capitalisation of part of the share premium reserve.
110 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 ANNUAL REPORT 2007 ANNUAL REPORT
31. RESERVES HELLENIC BANK GROUP The Group The Bank 2007 2006 2007 2006 Cí'000 Cí'000 Cí'000 Cí'000 Revenue reserve 1 January 30.576 916 42.223 10.169 Profit attributable to shareholders 77.881 34.030 68.990 36.433 Profit from disposal of treasury shares 5.340 ------Takeover of operations of subsidiary company -- -- (1.544) -- Dividend paid (23.737) (4.798) (23.990) (4.798) Transfer from revaluation reserves (17) 428 126 419 31 December 90.043 30.576 85.805 42.223
Share premium reserve 1 January 93.394 89.224 93.394 89.224 Reinvestment of dividend 15.580 2.438 15.580 2.438 Exercise of Share Warrants 18.499 1.687 18.499 1.687 Issue of shares 140 45 140 45 31 December 127.613 93.394 127.613 93.394
Translation reserve 1 January 37 63 22 49 Exchange difference for the year 21 (26) 17 (27) 31 December 58 37 39 22
Revaluation reserves 1 January 28.053 15.994 26.604 18.087 Revaluation of equity securities 1.504 6.675 2.021 5.802 Revaluation of debt securities (12.175) (4.322) (12.132) (4.319) Transfer to income statement on impairment of debt securities 852 -- 852 -- Transfer to income statement on disposal of debt securities 249 374 249 374 Transfer to income statement on disposal of equity securities (2.436) (227) 1.003 (217) Revaluation of property -- 9.292 -- 8.309 Share of results of associate company 702 1.754 -- -- Transfer to revenue reserve 17 (428) (126) (419) Deferred taxation on revaluation of property 29 (1.059) 24 (1.013) 31 December 16.795 28.053 18.495 26.604
Total reserves 31 December 234.509 152.060 231.952 162.243
The profit from disposal of treasury shares arose from the disposal of 2.898.632 shares of Hellenic Bank Public Company Ltd held by the subsidiary company Athena Cyprus Public Company Ltd.
The takeover of operations of subsidiary company refers to Hellenic Bank (Factors) Ltd, whose operations were taken over by the Group.
111 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 32. MINORITY INTEREST The Group 2007 2006 Cí'000 Cí'000
1 January 817 570 Profit attributable to minority interest 1.072 249 Dividend paid (145) -- Acquisition of subsidiary company 8.576 -- Share of profit from disposal of treasury shares 1.519 -- Share of revaluation of debt and equity securities (156) (2) 31 December 11.683 817
33. CONTINGENT LIABILITIES AND COMMITMENTS The Group The Bank 2007 2006 2007 2006 Cí'000 Cí'000 Cí'000 Cí'000 Contingent liabilities Acceptances and endorsements 1.066 622 1.066 622 Guarantees 225.238 152.519 236.668 167.537 226.304 153.141 237.734 168.159
Commitments Undrawn formal standby facilities 626.422 479.593 626.420 479.580 Other commitments 15.564 15.085 15.564 15.085 641.986 494.678 641.984 494.665
868.290 647.819 879.718 662.824
Capital Commitments At 31 December 2007, the Group’s and the Bank’s commitments for capital expenditure, not recognised in the consolidated financial statements, amounted to Cí4.874 thousand (2006: Cí4.189 thousand).
34. DERIVATIVES The Group uses the following derivative instruments:
Foreign currency forwards: represent agreements for the purchase or sale of foreign currencies settled at a future date.
Currency swaps: represent agreements for the exchange of cash flows of different currencies.
Futures: represent agreements for the purchase or sale of a financial instrument at a fixed price on a future date.
Interest rate swaps: represent agreements where one stream of future interest payments is exchanged for another based on a notional amount and predetermined time periods.
Credit default swaps: represent agreements for the transfer of credit risk of a reporting entity from the buyer of the agreement to the seller at a price.
112 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 ANNUAL REPORT 2007 ANNUAL REPORT
34. DERIVATIVES (continued)
The Group ·nd the Bank HELLENIC BANK GROUP Nominal Fair Value Value Other Other Assets Liabilities Cí'000 Cí'000 Cí'000 At 31 December 2007 Foreign currency forwards 49.012 1.439 611 Currency swaps 255.056 1.238 2.906 Futures 15.445 327 -- Interest rate swaps 294.732 8.781 3.290 Credit default swaps 9.596 -- 32 623.841 11.785 6.839
The Group ·nd the Bank Nominal Fair Value Value Other Other Assets Liabilities Cí'000 Cí'000 Cí'000 At 31 December 2006 Foreign currency forwards 28.763 584 47 Currency swaps 208.401 1.536 929 Futures 38.840 392 27 Interest rate swaps 152.989 3.682 1.871 428.993 6.194 2.874
35. HEDGE ACCOUNTING The Group’s policy is to hedge its exposure to the fluctuations of interest rates, credit ratings and foreign exchange rates.
Fair value hedging Interest rate swaps, where the Group exchanges fixed rate with floating rate of interest, are used as fair value hedges for fixed interest rate debt securities classified as available for sale.
The fair value of the interest rate swaps used as hedging instruments is shown below:
The Group ·nd the Bank Nominal Fair Value Value Other Other Assets Liabilities Cí'000 Cí'000 Cí'000 At 31 December 2007 Interest rate swaps with fixed interest rate payments 29.649 15 1.109
At 31 December 2006 Interest rate swaps with fixed interest rate payments 30.602 49 1.540
113 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 36. CASH AND CASH EQUIVALENTS The Group The Bank 2007 2006 2007 2006 Cí'000 Cí'000 Cí'000 Cí'000
Cash and balances with Central Banks 137.931 149.855 136.888 148.686 Government securities and other eligible bills (Note 15) 30.682 21.477 30.682 21.477 Placements with other banks (Note 16) 718.188 675.236 717.500 672.487 Deposits by banks (Note 26) (247.040) (218.861) (247.040) (218.861) 639.761 627.707 638.030 623.789
37. DIRECTORS’ INTEREST IN THE SHARE CAPITAL OF THE BANK According to the Cyprus Stock Exchange Laws and Regulations, the percentage shareholdings in the Bank’s share capital owned by Members of the Board of Directors, their spouses, minor children and companies in which they control directly or indirectly at least 20% of the voting rights, are as follows:
31 December 2007 25 February 2008 A. P. Panayiotou 0,0061% 0,0061% A. M. Moushouttas 0,0053% 0,0053% I. G. Iacovou 0,1763% 0,1763% A. I. Pierides -- -- D. J. Eliades 0,0043% 0,0043% S. Z. Kallis 0,0003% 0,0003% Ch. P. Panayiotou -- -- I. Ch. Charilaou 0,0003% 0,0003% G. K. Pavlou 0,0004% 0,0004% K. E. Georgiou 0,0021% 0,0021% M. Keravnos -- -- P. Th. Theodorou 0,0434% 0,0434% K. I. Droushiotis -- --
114 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 ANNUAL REPORT 2007 ANNUAL REPORT
38. RELATED PARTY TRANSACTIONS HELLENIC BANK GROUP 2007 2006 2007 2006 Number of Directors Cí'000 Cí'000 Loans and other advances
Members of the Board of Directors and connected persons: Over 1% of the net assets of the Bank per Director 1 1 6.648 3.880 Under 1% of the net assets of the Bank per Director 10 10 364 420 11 11 7.012 4.300
Loans and advances to key management personnel that are not Members of the Board of Directors and to connected persons 594 459 Total 7.606 4.759
Tangible securities 8.659 4.868
Interest income 354 320
Deposits 5.199 1.936
Interest expense 107 32
Furthermore, at 31 December 2007, there were contingent liabilities and commitments in respect of Members of the Board of Directors and their connected persons in the form of documentary credits, guarantees and unused limits amounting to Cí6.793 thousand which exceeded 1% of the Bank’s net assets (2006: Cí6.887 thousand). There were also commitments to key management personnel who were not Members of the Board of Directors and their connected persons amounting to Cí224 thousand (2006: Cí86 thousand).
Connected persons include spouses, minor children and companies in which the Directors or key management personnel who are not Directors hold directly or indirectly at least 20% of the voting rights at a General Meeting.
All transactions with the Members of the Board of Directors and with their connected persons are made on normal business terms. A number of credit facilities have been extended to key management personnel with terms similar to those which apply to the rest of the Group’s personnel.
Fees and emoluments of Directors and key management personnel
The Group The Bank 2007 2006 2007 2006 Cí'000 Cí'000 Cí'000 Cí'000 Directors’ emoluments: Emoluments and benefits in executive capacity 148 107 146 60 Retirement benefits for the year 19 5 19 5 Total for Executive Directors 167 112 165 65 Fees for the year 207 93 140 64 Pensions 18 18 18 18
115 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 38. RELATED PARTY TRANSACTIONS (continued)
In accordance with the provisions of the code of Corporate Governance it is disclosed that, for the respective periods of the year, one Executive Director of the Bank has received remuneration for the duration of his participation in the Board of Directors between Cí0 thousand and Cí50 thousand and one Executive Director of the Bank received remuneration between Cí100 thousand and Cí150 thousand. The Group and the Bank 2007 2006 Cí'000 Cí'000 Emoluments of key management personnel who were not Members of the Board of Directors: Salaries and other short term benefits 511 458 Employer’s contributions for social insurance, etc. 32 26 Retirement benefits for the year 123 50 Total emoluments and benefits of key management personnel who were not Members of the Board 666 534
Key management personnel include the General Managers of the Bank who were not Members of the Board of Directors. The emoluments of key management personnel refer to the period of the year during which they were not Members of the Board of Directors.
Other transactions with related parties Mr. Iacovos G. Iacovou, a Member of the Bank’s Board of Directors, holds an indirect interest in the companies Iacovou Brothers (Constructions) Ltd and Iacovou Brothers Technical Constructions (Hellas) S.A. During 2005 the company Iacovou Brothers (Constructions) Ltd undertook the extension of the Bank’s information technology premises following tender procedures. The contract amounts to Cí1.063 thousand (excluding VAT). During 2007 an amount of Cí377 thousand (including VAT) (2006: Cí528 thousand) was paid for work completed. Also in 2007 an amount of Cí1 thousand (including VAT) was paid for other projects relating to the renovation of branches (2006: Cí135 thousand).
On 13 July 2007 a selling contract was signed between the company Iacovou Brothers (Constructions) Ltd and Hellenic Bank Public Company Limited for the acquisition of a plot in Larnaca. On the same date an agreement was signed with the same company for the construction of a five-storey building on the above-mentioned plot. The building will include a ground floor, a mezzanine and two underground parking spaces and will be used for the operations of the Bank in Larnaca. The transaction amounted to Cí2,1 million (excluding VAT) and was based on market values. In 2007 an amount of Cí190 thousand (including VAT) was paid according to the construction contract. The property was transferred to Hellenic Bank Public Company Ltd on 19 December 2007 and on 11 January 2008 a further amount of ú769 thousand (Cí450 thousand) was paid to Iacovou Brothers (Constructions) Ltd in relation to the acquisition of the property.
Mr. Demetris J. Eliades, a Member of the Bank’s Board of Directors, is a lawyer at the Law Office Demetris Eliades Law Office. In the course of normal business, court cases and legal proceedings against debtors/creditors of the Group are handled by external law offices. A number of such cases have been assigned to the law office of Mr. Eliades. The total cost of these cases is charged to the relevant debtors/creditors and amounts to Cí32 thousand in 2007 including expenses and VAT (2006: Cí42 thousand).
Mr. Antonis I. Pierides, a Member of the Bank’s Board of Directors, is the main shareholder of the company Antonis Pierides and Associates Limited. During 2007 there were individual participations of members of the Group’s staff to seminars organised by his company and for which the total cost of participation amounted to Cí1 thousand including VAT of Cí0,4 thousand (2006: Cí2 thousand, including VAT of Cí0,8 thousand).
116 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 ANNUAL REPORT 2007 ANNUAL REPORT
39. SHAREHOLDERS HOLDING MORE THAN 5% OF THE SHARE CAPITAL HELLENIC BANK GROUP According to the Cyprus Stock Exchange Laws and Regulations at 31 December 2007, the shareholders listed below owned 5% or more of the nominal value of the Bank’s issued share capital.
Holy Archbishopric of Cyprus 14,02% Bank of Cyprus Group 5,07% Universal Life Insurance Public Company Ltd Group 5,03%
During the period between 31 December 2007 and 30 days prior to the date of the notice convening the Annual General Meeting, the percentage holdings of shareholders owning 5% or more of the nominal value of the Bank’s issued share capital were as follows:
Holy Archbishopric of Cyprus 14,02% Universal Life Insurance Public Company Ltd Group 5,03%
On 1 February 2007, an agreement was announced between Marfin Popular Bank Public Company Limited and the Holy Archbishopric of Cyprus for the sale and transfer by the former of 17.375.330 shares in Hellenic Bank Public Company Limited that represent 7,17% of the share capital of the Bank and of 3.301.209 Share Warrants of Hellenic Bank Public Company Limited. The sale and transfer was completed on 20 April 2007.
40. FAIR VALUE Fair value represents the amount for which an asset could be exchanged for or a liability settled in an arm’s length transaction. The fair value of the Group’s and the Bank’s financial assets and liabilities, not measured at fair value, approximates their carrying amount.
The fair value of loans and advances to customers is equal to the amount shown in the balance sheet after deducting the provision for impairment losses on loans and advances.
Subsidiary companies are included in the consolidated financial statements at their net asset value in accordance with International Financial Reporting Standards. This is considered the most appropriate practical method of ascertaining their fair value.
Investments in associate companies represent the Group’s interest in the associate company’s net assets, which approximates its fair value.
41. SEGMENTAL ANALYSIS The financial position and performance of the Group are analysed as follows:
Primary Segment: The financial position and performance are presented based on their geographical organisation. The Group carries out its operations in Cyprus and abroad.
Secondary Segment: The financial position and performance are analysed in the following business segments: ñ Banking and financial services ñ Insurance services
117 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 41. SEGMENTAL ANALYSIS (continued)
ANALYSIS BY GEOGRAPHIC SEGMENT Cyprus Other Countries Total 2007 2006 2007 2006 2007 2006 Cí'000 Cí'000 Cí'000 Cí'000 Cí'000 Cí'000 The Group Turnover 286.335 222.285 44.136 36.434 330.471 258.719 Inter - segment transactions (198) -- (116) (415) (314) (415) 286.137 222.285 44.020 36.019 330.157 258.304
Profit before share of results of associate company 95.479 59.963 382 1.753 95.861 61.716 Share of results of associate company 906 2.403 -- -- 906 2.403 Profit before provisions 96.385 62.366 382 1.753 96.767 64.119 Provisions for impairment of loans and advances (3.967) (16.931) (3.487) (5.906) (7.454) (22.837) Profit/(loss) before taxation 92.418 45.435 (3.105) (4.153) 89.313 41.282
Assets 3.661.752 3.178.038 658.350 632.808 4.320.102 3.810.846 Associate company -- 11.871 ------11.871 Inter - segment balances -- (18.745) (14.045) (6.349) (14.045) (25.094) 3.661.752 3.171.164 644.305 626.459 4.306.057 3.797.623
Liabilities 3.343.022 2.960.520 658.152 630.094 4.001.174 3.590.614 Inter - segment balances (14.045) (6.349) -- -- (14.045) (6.349) 3.328.977 2.954.171 658.152 630.094 3.987.129 3.584.265
Additions of property, plant and equipment and computer software 4.652 6.679 947 354 5.599 7.033 Depreciation and amortisation of property, plant and equipment and computer software 3.419 3.301 1.388 1.710 4.807 5.011
Amortisation and impairment of goodwill 1.878 3.060 10 9 1.888 3.069
Impairment of investment securities 3.653 15 848 -- 4.501 15
ANALYSIS BY BUSINESS SEGMENT Banking and Financial Insurance Services Total Services 2007 2006 2007 2006 2007 2006 Cí'000 Cí'000 Cí'000 Cí'000 Cí'000 Cí'000 The Group Turnover 322.129 251.679 9.790 8.443 331.919 260.122 Inter - segment transactions (648) -- (1.114) (1.818) (1.762) (1.818) 321.481 251.679 8.676 6.625 330.157 258.304
Assets 4.285.333 3.778.669 29.389 24.328 4.314.722 3.802.997 Associate company -- 11.871 ------11.871 Inter - segment balances (1.593) (24.996) (7.072) 7.751 (8.665) (17.245) 4.283.740 3.765.544 22.317 32.079 4.306.057 3.797.623
Additions of property, plant and equipment and computer software 5.514 6.717 85 316 5.599 7.033 118 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 ANNUAL REPORT 2007 ANNUAL REPORT
42. APPEAL ON COURT DECISION ON STAMP DUTY LEGISLATION ISSUES HELLENIC BANK GROUP The Bank filed an appeal, which is still pending, to the Full Bench of the Supreme Court against the first instance Court judgment that was issued on 31 May 2005, according to which the first instance Court had confirmed the Stamp Duty Registrar’s decision for the imposition of stamp duties of Cí750 thousand and an extra fine of Cí150 thousand in relation to the Bank’s issue of Cí15 million Non Convertible Bonds 2004/2009. The Bank’s stand is that according to the Stamp Duty Legislation, it is only required to pay one tenth of the above mentioned amounts. The Bank has raised at first instance as well as in its appeal, a series of legal arguments and points that were not raised by third parties in cases of a similar nature in the past, on which the Full Bench of the Supreme Court will decide.
In the meantime, the Bank has applied for the suspension of the payment of the above mentioned amounts, pending its appeal, but the first instance Court with its judgment issued on 31 October 2005 decided that there were no grounds for such a suspension. As a result, the Bank paid the above amount. If the appeal is ruled in the Bank’s favour, the Stamp Duty Registrar will refund to the Bank the additional amounts paid.
43. POST BALANCE SHEET EVENTS With the introduction of the euro as the official currency of the Republic of Cyprus as from 1st January 2008, the Group’s and the Bank’s functional currency has changed from Cyprus pounds to euro. As a result, the Group’s and the Bank’s financial position on 1st January 2008 has been converted to euro based on the fixed conversion rate of ú1=Cí0,585274.
44. RISK MANAGEMENT Introduction and overview The Group has exposure to the following risks from its use of financial instruments:
ñ Credit risk ñ Liquidity risk ñ Market risks ñ Operational risks
This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for measuring and managing risk, and the Group’s management of capital.
Group risk management The management and monitoring of all Group risks is centralised under a uniform unit to which the following specialised risk management divisions report:
ñ Group Credit Risk Management ñ Group Market and Liquidity Risks Management ñ Group Operational Risks Management ñ Compliance Services
These divisions report to the Group Risk Management, which is administratively independent from other units with executive authority and reports to the Board of Directors, through the Risk Management Committee, as well as to the Chief Executive Officer.
The divisions cover all risk aspects across the Group’s operations and are intensively working towards the Bank fully conforming to the provisions of the Second Basel Accord and the Directives of the regulatory authorities. The basic aim of Management is the adoption of sophisticated methods and systems for the evaluation and management of risks undertaken by the Group.
119 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 44. RISK MANAGEMENT (continued)
Credit risk Credit risk is the risk of financial loss to the Group if a customer and/or counterparty to a financial instrument fails to meet their contractual obligations. This risk principally arises from the granting of loans and advances, trading transactions and treasury management. It may also arise from the downgrading in the credit rating of issuers of debenture loans resulting in a decrease in the value of the Group’s assets.
Group Credit Risk Management
Group Credit Risk Management is responsible for formulating the appropriate policies and procedures for detecting, evaluating and measuring credit risk, based on the strategic pursuits of the Group as defined by the Board of Directors.
To ensure the effectiveness of credit risk management, there is a continuous assessment of the Group’s credit policies and monitoring of the compliance of the relevant business units with these policies. Group Credit Risk Management also issues directions to the various business units based on the Group’s risk appetite for specific market segments, operations, as well as specific banking products and, whenever considered necessary, limits are set regarding the undertaking of new banking activities.
Regarding the continuous and systematic monitoring and management of credit risk, Group Credit Risk Management, in cooperation with Group Credit Control, are responsible for the assessment of the quality and performance of the Bank’s credit portfolio in the Retail, Commercial and Corporate Banking Sectors, in order to verify whether the impending credit risks are recognised and dealt with in an effective and timely manner.
To achieve the above, the Group uses sophisticated systems to measure credit risk as well as evaluate customers based on quantitative and qualitative criteria:
1. For Retail products, a credit risk assessment system is applied for the evaluation of the creditworthiness of individuals and the measurement of credit risk (Credit Scoring). This system covers credit cards and other retail lending products.
2. For Commercial and Corporate lending, an internal credit rating system (Credit Rating) is used, whereby companies are rated on the basis of financial data and a range of qualitative criteria such as management, competition, etc. This system contributes significantly to the Group’s effort for fair pricing of commercial lending on the basis of risks undertaken.
3. For Treasury, there is centralised management of exposures to countries, financial institutions and other counterparties. Limits are defined based on the Credit Limits Model, which is primarily based on the credit standing of the country and counterparty as determined by international credit assessment institutions and at the same time it also takes into account their international classification. For the purposes of assessing the credit capacity of counterparties not assessed by credit assessment institutions, an internal scorecard is being developed which takes into account quantitative and qualitative information regarding their credit standing.
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44. RISK MANAGEMENT (continued)
Exposure to credit risk HELLENIC BANK GROUP
Loans and advances Placements Government to customers with other banks securities and other eligible bills and debt securities 2007 2006 2007 2006 2007 2006 Cí’000 Cí’000 Cí’000 Cí’000 Cí’000 Cí’000
Carrying amount 2.180.180 1.736.923 737.734 691.469 1.091.850 1.084.769 Individually impaired: Grade 2 (medium risk) ------16.207 -- Grade 3 (high risk) 250.438 231.702 ------Provision for impairment (180.400) (184.484) -- -- (4.497) -- Carrying amount 70.038 47.218 -- -- 11.710 --
Past due but not impaired: Grade 1 (low risk) 178.624 128.587 ------Grade 2 (medium risk) 73.997 35.655 ------Grade 3 (high risk) 5.863 69.512 ------Carrying amount 258.484 233.754 ------Past due comprises: 0-30 days 133.047 74.848 ------30-60 days 30.706 50.037 ------60-90 days 16.142 4.885 ------90 days + 78.589 103.984 ------Carrying amount 258.484 233.754 ------
Neither past due nor impaired: Grade 1 (low risk) 1.667.149 1.277.224 737.734 691.469 1.080.140 1.084.769 Grade 2 (medium risk) 193.188 165.411 ------Grade 3 (high risk) 26.310 41.123 ------Carrying amount 1.886.647 1.483.758 737.734 691.469 1.080.140 1.084.769
Balances after individual impairment 2.215.169 1.764.730 737.734 691.469 1.091.850 1.084.769 Collective impairment (34.989) (27.807) ------Total carrying amount 2.180.180 1.736.923 737.734 691.469 1.091.850 1.084.769
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Impaired loans and investment securities Loans for which the Group determines that it is probable that it will be unable to collect all principal and interest due, according to the contractual terms of the loan or relevant agreement. These loans are classified under grade 3 according to the Group’s internal credit risk grading system.
They also represent investments in debt securities for which there is objective evidence of impairment as a result of one or more events occurring since the initial recognition of the investment. These events include significant financial difficulty of the issuer, default in interest or principal payments and it becoming probable that the borrower will enter bankruptcy or other financial reorganisation.
Past due but not impaired loans Loans where contractual interest or principal payments are past due but the Group believes that impairment is not appropriate on the basis of the level of security and/or stage of collection of amounts owed to the Group.
Loans with renegotiated terms Loans that have been restructured due to deterioration in the borrower’s financial position and in respect of which the Group has made concessions that it would not otherwise consider. The accounts with renegotiated terms at 31 December 2007 amounted to Cí25.109 thousand (2006: Cí30.510 thousand).
Provision for impairment The Group establishes a provision for impairment losses that represents its estimate of incurred losses in its loan portfolio. The main components of this provision are a specific loss component that relates to individually significant exposures, and a collective loan loss provision established for groups of homogeneous assets in respect of losses that have been incurred but have not been identified on loans subject to individual assessment for impairment.
Provision is also established for impairment in the value of investments held to maturity and financial assets available for sale if there is objective evidence that they have been impaired during the Group’s assessment at each balance sheet date.
Write-off policy The Group writes off loans/investment securities balances when it determines that the loans/investment securities are uncollectible. This determination is reached after considering information such as the occurrence of significant changes in the borrower/issuer’s financial position such that the borrower/issuer can no longer pay the obligation, or when proceeds from collateral will not be sufficient to pay back the entire exposure.
Collateral The Group’s policy is that the amount of credit facilities granted should not exceed the repayment capacity of the relevant counterparties. For this purpose policies are applied for the hedging and mitigation of credit risk through the holding of collateral. These policies define the types of collateral held and the methods for estimating its fair value.
The main collateral held by the Group includes mortgage interests over property, charges over business assets, government and bank guarantees as well as personal and corporate guarantees.
The fair value of collateral held against loans and advances to customers which are individually impaired at 31 December 2007 amounts to Cí90.839 thousand (2006: Cí116.428 thousand).
The Group monitors concentrations of credit risk by sector and by geographic location. An analysis of concentrations of credit risk at the reporting date is shown below:
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44. RISK MANAGEMENT (continued)
Loans and advances Placements Government HELLENIC BANK GROUP to customers with other banks securities and other eligible bills and debt securities 2007 2006 2007 2006 2007 2006 Cí’000 Cí’000 Cí’000 Cí’000 Cí’000 Cí’000
Carrying amount 2.180.180 1.736.923 737.734 691.469 1.091.850 1.084.769 Concentration by sector: Businesses 1.258.473 1.077.561 ------Personal and professional 765.398 652.134 ------Banks -- -- 737.734 691.469 720.465 673.155 Government ------356.381 377.527 Other 371.698 219.519 -- -- 19.501 34.087 2.395.569 1.949.214 737.734 691.469 1.096.347 1.084.769 Provisions for impairment (215.389) (212.291) -- -- (4.497) -- 2.180.180 1.736.923 737.734 691.469 1.091.850 1.084.769 Concentration by location: European Union 2.395.569 1.949.214 620.140 606.370 847.524 847.449 Other European countries -- -- 87.186 48.166 48.208 23.509 America -- -- 8.860 1.801 115.827 127.386 Oceania -- -- 189 169 77.586 79.842 Asia -- -- 20.118 25.412 317 619 Middle East -- -- 1.200 9.549 6.885 5.964 Africa -- -- 41 2 -- -- 2.395.569 1.949.214 737.734 691.469 1.096.347 1.084.769 Provisions for impairment (215.389) (212.291) -- -- (4.497) -- 2.180.180 1.736.923 737.734 691.469 1.091.850 1.084.769
Businesses in the above table include manufacturing, trade, tourism and construction businesses, as presented in Note 17.
Concentration by location for loans and advances to customers is measured based on the location of the Group entity holding the asset, which has a high correlation with the location of the borrower. Concentration by location for investment securities and placements with other banks is measured based on the location of the issuer of the security and the counterparty respectively.
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Market and liquidity risks
Group Market and Liquidity Risks Management
The Assets and Liabilities Management Committee (ALCO) is responsible for implementing the policy of the Bank’s Board of Directors towards risks and profitability arising from the Group’s assets and liabilities. Group Market and Liquidity Risks Management is responsible for monitoring and managing group market and liquidity risks within the framework of risk policies and limits approved by ALCO.
The Group’s approach towards managing market and liquidity risk is for all business units of the Group to concentrate these risks under local Treasury Departments. The Treasury Departments manage these risks, using a framework of activities and limits approved by ALCO. Group Market and Liquidity Risks Management is responsible for developing policies and procedures for managing the risks and for the daily monitoring of their application. These policies and procedures are re-examined at regular time intervals and are approved by ALCO.
Liquidity risk Liquidity risk is the risk of decrease in profits or capital, arising from a weakness of the Bank to meet its immediate obligations, without incurring additional costs. The Group’s approach in managing liquidity risk is to ensure, to the extent possible (considering that the main role of the Bank as an intermediary is to accept short term deposits and grant long term loans), that there is adequate liquidity in order to satisfy its obligations, when they arise, under “normal” circumstances as well as under stress testing conditions, without the Group bearing any additional costs.
The Group currently has operations in Cyprus and in Greece. The management of the liquidity of the Group’s banking units (including the observance of limits imposed by regulators), is being carried out by the local Treasury Departments. Whenever necessary, the Group’s departments support each other, with the support mainly coming from Cyprus, where the Group has its headquarters.
The Group considers as very important the maintenance of stable customer deposits, as they represent one of its basic sources of financing. This is achieved through the maintenance of good and long term relationships of trust with customers and through competitive and transparent invoicing strategies.
Regular stress testing scenarios are performed to simulate extreme conditions and the appropriate measures are taken whenever necessary.
The liquidity risk of banking units is monitored daily by the Group Market and Liquidity Risks Management. In Cyprus, the liquidity of the Cyprus pound is being monitored, as well as the liquidity of all foreign currencies as a whole. In Greece, the liquidity of all currencies is being monitored as a whole.
In managing liquidity risk for the Cyprus pound, the Group calculates and observes an internal ratio of net liquid assets over customer deposits. Net liquid assets comprise of cash, interbank deposits and government bonds net of interbank lending.
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44. RISK MANAGEMENT (continued)
The ratio of net liquid assets for the Cyprus pound was as follows: HELLENIC BANK GROUP 2007 2006 % % At 31 December 18,80 33,20 Average for the year 25,08 26,93 Maximum percentage for the year 33,20 33,20 Minimum percentage for the year 18,80 23,20
In Cyprus, the liquidity of all foreign currencies is being monitored as a whole. According to a Directive of the Central Bank of Cyprus, the Bank needs to maintain 70% - 75% of its total foreign currency deposits in highly liquid assets.
The ratio of highly liquid assets to total foreign currency deposits during 2007 and 2006 was as follows:
2007 2006 % % At 31 December 77,38 78,38 Average for the year 77,02 78,60 Maximum percentage for the year 79,88 81,28 Minimum percentage for the year 74,10 75,51
From 1st January 2008 onwards, according to the new Directive of the Central Bank of Cyprus on the Prudential Liquidity in Euro, the Bank will also calculate and monitor the ratio of liquid assets to liabilities in euro, for the Group’s banking units.
Indicatively, the above ratio for the Group’s banking units was estimated at 33,30%, based on balance sheet items at 31 December 2007, in Cyprus pounds and euro.
The tables below present the undiscounted cash flows of the Group’s liabilities based on the remaining contractual maturity dates.
Analysis of financial liabilities based on their remaining contractual maturity at 31 December 2007
Carrying Gross On Within Within Between Over amount nominal demand three three one and five years inflow/ months months five years (outflow) and one year Cí'000 Cí'000 Cí'000 Cí'000 Cí'000 Cí'000 Cí'000 Financial liabilities Deposits by banks 287.998 288.239 68.662 178.593 40.984 -- -- Customer deposits and other customer accounts 3.429.976 3.444.407 1.685.947 840.992 582.387 331.671 3.410 Derivatives 6.839 - Cash inflows (154.873) (21.288) (106.074) (27.511) -- -- - Cash outflows 158.439 21.352 108.617 28.470 -- -- Other liabilities 130.047 130.047 6.449 16.914 17.587 4.049 85.048 Loan capital 132.269 132.337 107.723 -- 24.614 -- -- 3.987.129 3.998.596 1.868.845 1.039.042 666.531 335.720 88.458
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Analysis of financial liabilities based on their remaining contractual maturity at 31 December 2006
Carrying Gross On Within Within Between Over amount nominal demand three three one and five years inflow/ months months five years (outflow) and one year Cí'000 Cí'000 Cí'000 Cí'000 Cí'000 Cí'000 Cí'000 Financial liabilities Deposits by banks 227.586 228.483 38.209 181.411 8.863 -- -- Customer deposits and other customer accounts 3.110.562 3.121.998 1.633.380 880.352 453.021 151.836 3.409 Derivatives 2.874 - Cash inflows (79.400) (21.411) (45.861) (6.130) (5.998) -- - Cash outflows 80.199 21.477 46.533 6.262 5.927 -- Other liabilities 122.747 122.747 13.701 13.406 15.220 2.369 78.051 Loan capital 120.496 120.564 95.950 -- 24.614 -- -- 3.584.265 3.594.591 1.781.306 1.075.841 501.850 154.134 81.460
Market risks Market risks derive from the change in the value of the Group’s assets and liabilities and the uncertainty in the stream of future earnings, resulting from changes in market conditions (volatility in foreign exchange, interest rates and equity prices).
The Group has defined its strategy and methods for the continuous monitoring and control of the undertaking and prudent management of market risks. More specifically this is achieved mainly through the implementation of open position and stop loss limits.
Foreign exchange risk It arises from the undertaking of an open position in one or more foreign currencies. The Group Market and Liquidity Risks Management observes foreign currency positions on an ongoing basis within the risk management framework and limits set by the Assets and Liabilities Management Committee (ALCO) and the regulatory authority. Within this framework there are nominal limits (by currency, in total, during the day, end of day), gain/loss limits and limits for Value at Risk (VaR). The limits for open positions during working hours exceed the limits for open positions during non-working hours.
VaR methodology is an important tool for the monitoring of foreign exchange risk. With this methodology, the Group calculates the maximum possible loss that may occur, as a result of changes in market conditions, using a confidence level of 99% and for a one-day period, based on the historical foreign exchange rates applicable over the past year.
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44. RISK MANAGEMENT (continued)
The table below presents the VaR for the Group’s foreign exchange risk: HELLENIC BANK GROUP 2007 2006 Cí'000 Cí'000
At 31 December 9 3 Average for the year 4 3 Maximum amount for the year 22 21 Minimum amount for the year 1 1
The limitations of the VaR methodology derive mainly from the fact that the historical data used in the calculation may not be indicative of future events.
Analysis of assets and liabilities by currency at 31 December 2007
Cyprus Euro US Dollar British Other Total pound pound currencies Cí’000 Cí’000 Cí’000 Cí’000 Cí’000 Cí’000 Assets Cash and balances with Central Banks 112.241 24.020 1.091 506 73 137.931 Government securities and other eligible bills 254.481 65.827 ------320.308 Placements with other banks 50.824 138.207 458.293 26.752 63.658 737.734 Loans and advances to customers 1.333.500 606.701 46.288 6.257 187.434 2.180.180 Debt securities 4.999 382.908 240.624 143.011 -- 771.542 Equity securities 6.994 41.019 3.722 500 -- 52.235 Property, plant and equipment 45.086 2.339 ------47.425 Intangible assets 11.383 681 ------12.064 Other assets 19.517 24.951 1.873 112 185 46.638 Total assets 1.839.025 1.286.653 751.891 177.138 251.350 4.306.057
Liabilities Deposits by banks 146.854 98.234 33.869 608 8.433 287.998 Customer deposits and other customer accounts 1.145.598 1.146.989 907.428 192.596 37.365 3.429.976 Other liabilities 124.008 4.407 6.450 44 1.977 136.886 1.416.460 1.249.630 947.747 193.248 47.775 3.854.860
Loan capital 132.269 ------132.269
Equity Share capital 72.736 ------72.736 Reserves 226.712 7.797 ------234.509 Total equity attributable to equity holders of the parent company 299.448 7.797 ------307.245 Minority interest 11.683 ------11.683 311.131 7.797 ------318.928 Total liabilities and equity 1.859.860 1.257.427 947.747 193.248 47.775 4.306.057
Total position (20.835) 29.226 (195.856) (16.110) 203.575 Nominal value of currency derivatives 3.412 (6.125) 197.276 11.307 (205.870) Net currency position (17.423) 23.101 1.420 (4.803) (2.295) 127 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 44. RISK MANAGEMENT (continued)
Analysis of assets and liabilities by currency at 31 December 2006
Cyprus Euro US Dollar British Other Total pound pound currencies Cí’000 Cí’000 Cí’000 Cí’000 Cí’000 Cí’000 Assets Cash and balances with Central Banks 130.363 12.863 5.920 581 128 149.855 Government securities and other eligible bills 220.435 103.125 ------323.560 Placements with other banks 37.844 127.338 486.692 24.879 14.716 691.469 Loans and advances to customers 1.068.965 497.693 49.477 8.221 112.567 1.736.923 Debt securities 6.014 262.159 382.416 110.620 -- 761.209 Equity securities 8.241 13.318 703 -- -- 22.262 Investment in associate company 11.871 ------11.871 Property, plant and equipment 45.246 2.833 ------48.079 Intangible assets 12.330 608 ------12.938 Other assets 19.608 16.658 2.565 297 329 39.457 Total assets 1.560.917 1.036.595 927.773 144.598 127.740 3.797.623
Liabilities Deposits by banks 8.184 183.551 24.956 10.091 804 227.586 Customer deposits and other customer accounts 1.097.619 782.660 1.049.681 157.637 22.965 3.110.562 Other liabilities 112.585 10.314 2.017 73 632 125.621 1.218.388 976.525 1.076.654 167.801 24.401 3.463.769
Loan capital 120.496 ------120.496
Equity Share capital 60.481 ------60.481 Reserves 152.060 ------152.060 Total equity attributable to equity holders of the parent company 212.541 ------212.541 Minority interest 817 ------817 213.358 ------213.358 Total liabilities and equity 1.552.242 976.525 1.076.654 167.801 24.401 3.797.623
Total position 8.675 60.070 (148.881) (23.203) 103.339 Nominal value of currency derivatives (32.649) (38.469) 150.552 23.510 (102.944) Net currency position (23.974) 21.601 1.671 307 395
Interest rate risk It arises as a result of timing differences on the interest rate repricing of assets and liabilities.
Interest rate risk is initially managed through the monitoring of the interest rate gap by currency, by time interval and in total.
Group Market and Liquidity Risks Management observes interest rate positions on a continuous basis, within the risk management framework and limits set by the Assets and Liabilities Management Committee (ALCO).
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44. RISK MANAGEMENT (continued)
Analysis of assets and liabilities based on their contractual repricing or maturity dates at 31 December 2007 HELLENIC BANK GROUP
Non interest Within Between Between Between Over Total bearing one one and three one and five years month three months five years months and one year Cí'000 Cí'000 Cí'000 Cí'000 Cí'000 Cí'000 Cí'000 Assets Cash and balances with Central Banks 24.720 113.211 ------137.931 Government securities and other eligible bills -- 33.842 15.133 37.115 31.595 202.623 320.308 Placements with other banks 36.006 679.211 16.076 3.514 2.927 -- 737.734 Loans and advances to customers -- 1.786.738 186.525 157.191 49.726 -- 2.180.180 Debt securities -- 197.355 510.182 35.073 19.789 9.143 771.542 Equity securities 52.235 ------52.235 Property, plant and equipment 47.425 ------47.425 Intangible assets 12.064 ------12.064 Other assets 46.638 ------46.638 Total assets 219.088 2.810.357 727.916 232.893 104.037 211.766 4.306.057
Liabilities Deposits by banks -- 285.038 2.960 ------287.998 Customer deposits and other customer accounts -- 2.308.671 679.394 378.788 63.123 -- 3.429.976 Other liabilities 136.886 ------136.886 136.886 2.593.709 682.354 378.788 63.123 -- 3.854.860
Loan capital -- 24.546 93.023 14.700 -- -- 132.269 Total liabilities 136.886 2.618.255 775.377 393.488 63.123 -- 3.987.129
Total position 82.202 192.102 (47.461) (160.595) 40.914 211.766 318.928 Nominal value of interest rate derivative items -- 57.090 39.688 108.908 (31.145) (174.541) -- Net position 82.202 249.192 (7.773) (51.687) 9.769 37.225 318.928
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Analysis of assets and liabilities based on their contractual repricing or maturity dates at 31 December 2006
Non interest Within Between Between Between Over Total bearing one one and three one and five years month three months five years months and one year Cí'000 Cí'000 Cí'000 Cí'000 Cí'000 Cí'000 Cí'000 Assets Cash and balances with Central Banks 20.246 125.219 -- 4.390 -- -- 149.855 Government securities and other eligible bills -- 30.915 41.931 32.483 85.327 132.904 323.560 Placements with other banks 12.870 653.885 21.096 3.560 58 -- 691.469 Loans and advances to customers 155 1.394.538 182.672 94.671 61.128 3.759 1.736.923 Debt securities -- 184.805 470.010 55.059 34.832 16.503 761.209 Equity securities 22.262 ------22.262 Investment in associate company 11.871 ------11.871 Property, plant and equipment 48.079 ------48.079 Intangible assets 12.938 ------12.938 Other assets 39.457 ------39.457 Total assets 167.878 2.389.362 715.709 190.163 181.345 153.166 3.797.623
Liabilities Deposits by banks 31 106.635 112.195 8.725 -- -- 227.586 Customer deposits and other customer accounts 1.353 2.263.249 511.212 329.189 5.559 -- 3.110.562 Other liabilities 125.621 ------125.621 127.005 2.369.884 623.407 337.914 5.559 -- 3.463.769
Loan Capital -- 24.546 81.250 14.700 -- -- 120.496 Total liabilities 127.005 2.394.430 704.657 352.614 5.559 -- 3.584.265
Total position 40.873 (5.068) 11.052 (162.451) 175.786 153.166 213.358 Nominal value of interest rate derivative items -- 16.759 58.631 87.019 (55.259) (107.150) -- Net position 40.873 11.691 69.683 (75.432) 120.527 46.016 213.358
In addition to monitoring interest gaps, interest rate risk is managed by the monitoring of the sensitivity in the value of Group assets and liabilities and net interest income under various interest rate change scenarios. The ALCO Committee has defined limits, which are revised depending on market conditions, regarding the sensitivity in the value of Group assets and liabilities by currency and geographic location. ALCO has also defined reference ratios for the sensitivity of assets and liabilities over the Group’s fundamentals (e.g. capital base). Responsibility for the monitoring of these limits and ratios lies with the corresponding units of the Group Risk Management. The interest rate change scenarios consider both parallel and non- parallel changes in the interest rate curve. Also stress testing analyses are performed.
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44. RISK MANAGEMENT (continued)
The table below presents the impact on net interest income and net present value from reasonably possible changes in HELLENIC BANK GROUP interest rates: 2007 2006 Net interest Net Net interest Net income present income present value value Cí'000 Cí'000 Cí'000 Cí'000
+50 basis points 4.765 (1.582) 3.953 (2.401) -50 basis points (4.765) 1.582 (3.953) 2.401
Price risk It derives from the undertaking of an open position in equities. The Group manages this risk through policies and procedures of setting and monitoring open position limits, stop loss limits on trading positions, as well as concentration limits by issuer.
The table below presents the impact on results and equity from reasonably possible changes in equity prices:
2007 2006 Net Equity Net Equity Profits Profits Cí'000 Cí'000 Cí'000 Cí'000
+15% change in index 3.018 6.494 233 2.361 -15% change in index (3.018) (6.494) (233) (2.361)
Operational risks Operational risks are the risks of direct or indirect loss arising from a wide range of factors relating to procedures, staff, technology and infrastructure as well as external factors, such as those arising from legal claims and compliance with laws and regulations.
The Group has adopted the principles and provisions included in the relevant guidelines of the Directives of the Central Bank of Cyprus, the European Union, the Second Basel Accord and the Committee of European Banking Supervisors (CEBS).
The Group has developed a strong framework for the management of operational risks, considering its risk-taking attitude and its tolerance to operational risk. The annual insurance cover available to the Group should also be considered, as this is regarded as an effective tool for the mitigation of operational risk.
Group Operational Risks Management is responsible for the recognition, detection, measurement, assessment, monitoring, control, mitigation and reporting of risks undertaken or likely to be undertaken by the Group, in order to manage operational risks effectively and contribute in creating sufficient business continuity plans.
Generally, the management of operational risk is performed by various lines of reporting during the normal course of the Group’s operations, through workshops, control lists, internal and external audit reports, basic risk indicators and the register for recording and monitoring the relevant risks. Also internal audits are performed which are incorporated in the daily procedures executed by staff within various departments.
Capital management The lead regulator that sets and monitors capital requirements for the Group is the Central Bank of Cyprus. The Central Bank of Cyprus is guided in its supervisory role by the recommendations of the Basel Committee and the European Union Directives on banking issues. 131 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 44. RISK MANAGEMENT (continued)
Up to 31 December 2006 the calculation of the Group’s capital adequacy was based on the Capital Adequacy Directive of the Central Bank of Cyprus (Basel I).
In December 2006 the Central Bank of Cyprus issued a Directive for the calculation of the Capital Requirements and Large Exposures of Banks (Basel II) for the purposes of harmonisation with the European Union Directives. The Group has elected to comply with Basel II as from January 2007.
Basel II comprises of three Pillars:
ñ Pillar π – Minimum capital requirements ñ Pillar ππ – Supervisory review process ñ Pillar πππ – Market discipline
Pillar π – Minimum capital requirements Pillar I sets forth the guidelines for calculating the minimum capital required for each risk component of the Bank, including credit risk, market risk and operational risk.
The Group has at first adopted the Standardised Approach for the calculation of the minimum capital against credit risk. Under this approach, exposures are classified in specified classes and are weighed using specific weights, depending on the class the exposures belong to and their credit rating. Also, Basel II suggests two methods for the recognition of collateral, the Simple Approach and the Comprehensive Approach. The Group has applied the Comprehensive Approach, as this enables the fairer recognition and more accurate estimation of the Group’s collateral.
Regarding market risk, the Group has adopted the Standardised Approach, according to which the minimum capital requirement is estimated by adding together the interest rate, equity and debt securities position, foreign exchange and price risk on derivatives, using predefined models.
The Group also uses the Standardised Approach for the calculation of the capital requirements for operational risk. According to the Standardised Approach, the Group allocates its activities over various business lines and estimates the operational risk capital requirement for each line as a specific percentage on the average sum of gross income on a three year basis.
Pillar II – Supervisory review process Pillar II provides rules to ensure that adequate capital is in place to support any risk exposures of the Group and requires appropriate risk management, reporting and governance policies. The Group has determined the additional capital required to cover credit risks which are not sufficiently covered by Pillar I requirements, such as Residual Risk, as well as risks not recognised by Pillar I, such as Credit Concentration Risk, Interest Rate Risk in the Banking Book, Business and Strategy Risk and any external factors affecting the Group.
Banks are assessing their capital needs relative to their risks with their Internal Capital Adequacy Assessment Process (ICAAP), while at the same time maintaining communication with supervisors on a continuous basis.
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44. RISK MANAGEMENT (continued)
Pillar πππ – Market discipline HELLENIC BANK GROUP Pillar III sets out required disclosures to allow market participants to assess key pieces of information relevant to the capital structure, risk exposures, risk assessment processes and hence the capital adequacy of the Group.
Based on the Central Bank Directive, disclosures by banks include information relating to their risk management objectives and policies, the composition of own funds and original and supplementary funds, their compliance with minimum capital requirements and the Internal Capital Adequacy Assessment Process.
The Group’s policy is to maintain a strong capital base, in order to maintain investor, creditor and market confidence and support the future development of the Group’s operations.
The Central Bank of Cyprus demands the maintenance of a specified total capital ratio in relation to the risks undertaken by the Bank. At 31 December 2007 the Minimum Capital Adequacy Ratio as defined by the relevant Central Bank Directive was 8% (2006: 10%).
The Group has fully complied with all capital adequacy requirements as imposed by the regulatory authorities for the years 2007 and 2006.
The Group’s regulatory capital based on the Directive is analysed as follows:
ñ Original own funds, which include share capital, share premium reserve, revenue reserve less proposed dividends, translation reserve and capital securities. The carrying amount of intangible assets and other regulatory adjustments are deducted in arriving at original own funds. ñ Supplementary own funds, which include subordinated loan capital and revaluation reserves.
At 31 December 2007 the participation in the subsidiary company Athena Cyprus Public Company Ltd, amounting to Cí33.928 thousand is deducted equally from original own funds and supplementary own funds, for the purposes of calculating the amount of permissible capital. The investments in insurance companies Pancyprian Insurance Ltd, Hellenic Alico Life Insurance Company Ltd, Hellenic Insurance Agency S.A. and Hellenic Insurance Agency Ltd, amounting to Cí23.420 thousand are deducted from the total of original and supplementary own funds. At 31 December 2006 the corresponding investments, amounting to Cí39.751 thousand were deducted from the total of original and supplementary own funds.
133 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 44. RISK MANAGEMENT (continued)
The table below presents the position of the Group’s regulatory capital at 31 December:
2007 2006 Basel ππ Basel π Cí’000 Cí’000 Own funds Original own funds 288.390 207.447 Less: Participation in Athena Cyprus Public Company Ltd (16.964) -- Total original own funds 271.426 207.447
Supplementary own funds 117.407 133.150 Less: Participation in Athena Cyprus Public Company Ltd (16.964) -- Total supplementary own funds 100.443 133.150
Total original and supplementary own funds 371.869 340.597 Less: Participation in Athena Cyprus Public Company Ltd -- (14.694) Less: Participation in insurance companies (23.420) (25.057) Total own funds 348.449 300.846
Capital requirements Pillar I: Credit risk 174.087 201.622 Market risk 8.147 10.669 Operational risk 20.992 -- 203.226 212.291 Pillar II 31.500 -- Total capital requirements 234.726 212.291
Capital adequacy ratio - Pillar π 13,7% 14,2% Total capital adequacy ratio – Pillar π and Pillar ππ 11,9% --
134 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 ANNUAL REPORT 2007 ANNUAL REPORT
45. SUPPLEMENTARY INFORMATION HELLENIC BANK GROUP HELLENIC BANK GROUP CONSOLIDATED INCOME STATEMENT IN EURO FOR THE YEAR ENDED 31 DECEMBER 2007
2007 2006 ú'000 ú'000
Interest income 448.510 342.759 Interest expense (238.716) (181.414) Net interest income 209.794 161.345
Fee and commission income 62.424 52.936 Fee and commission expense (4.876) (3.528) Net fee and commission income 57.548 49.408
Net gains on disposal and revaluation of foreign currencies and financial instruments 29.185 30.582 Other income 23.989 15.061
Total net income 320.516 256.396
Staff costs (106.131) (100.006)
Depreciation (6.500) (6.696)
Administrative and other expenses (44.096) (44.246)
Total expenses (156.727) (150.948) Share of results of associate company 1.548 4.106
Profit from ordinary operations before provisions 165.337 109.554 Provisions for impairment of loans and advances (12.736) (39.019)
Profit before taxation 152.601 70.535
Taxation (17.701) (11.965)
Profit for the year 134.900 58.570
Profit attributable to: Equity holders of the parent company 133.068 58.144 Minority interest 1.832 426 Profit for the year 134.900 58.570
Basic earnings per share (cent) 48,0 24,3
Fully diluted earnings per share (cent) 48,0 21,5
135 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 45. SUPPLEMENTARY INFORMATION (continued)
HELLENIC BANK GROUP CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE IN EURO FOR THE YEAR ENDED 31 DECEMBER 2007
2007 2006 ú'000 ú'000 Investments available for sale: Surplus on revaluation of equity securities 2.330 11.405 Deficit on revaluation of debt securities (20.830) (7.388) Share of results of associate company 1.199 2.997 Transfer to income statement on impairment of debt securities 1.456 -- Transfer to income statement on disposal of debt securities 425 639 Transfer to income statement on disposal of equity securities (4.162) (388) Revaluation of property -- 15.876 Deferred taxation on revaluation of property 50 (1.809) Foreign exchange gain/(loss) 36 (44) Net income and expense not recognised in the consolidated income statement (19.496) 21.288 Profit for the year 134.900 58.570 Total recognised income and expense 115.404 79.858
Total recognised income and expense attributable to: Equity holders of the parent company 113.839 79.436 Minority interest 1.565 422 Total recognised income and expense 115.404 79.858
136 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 ANNUAL REPORT 2007 ANNUAL REPORT
45. SUPPLEMENTARY INFORMATION (continued)
HELLENIC BANK GROUP HELLENIC BANK GROUP CONSOLIDATED BALANCE SHEET IN EURO AT 31 DECEMBER 2007
2007 2006 ú'000 ú'000 Assets Cash and balances with Central Banks 235.669 256.042 Government securities and other eligible bills 547.279 552.835 Placements with other banks 1.260.493 1.181.445 Loans and advances to customers 3.725.059 2.967.709 Debt securities 1.318.258 1.300.603 Equity securities 89.249 38.037 Investment in associate company -- 20.283 Property, plant and equipment 81.030 82.148 Intangible assets 20.613 22.106 Other assets 79.686 67.416 Total assets 7.357.336 6.488.624
Liabilities Deposits by banks 492.074 388.854 Customer deposits and other customer accounts 5.860.462 5.314.711 Other liabilities 233.884 214.636 6.586.420 5.918.201
Loan capital 225.995 205.880
Equity Share capital 124.277 103.338 Reserves 400.682 259.810
Total equity attributable to equity holders of the parent company 524.959 363.148
Minority interest 19.962 1.395 Total equity 544.921 364.543 Total liabilities and equity 7.357.336 6.488.624
Contingent liabilities and commitments 1.483.562 1.106.864
137 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 45. SUPPLEMENTARY INFORMATION (continued)
HELLENIC BANK GROUP CONSOLIDATED CASH FLOW STATEMENT IN EURO FOR THE YEAR ENDED 31 DECEMBER 2007
2007 2006 ú'000 ú'000 Cash flow from operating activities Group profit for the year 134.900 58.570 Issue of shares 263 96 Depreciation of property, plant and equipment 6.500 6.696 Amortisation of intangible assets 1.731 1.881 Impairment loss on goodwill 3.209 5.228 Share of results of associate company (1.548) (4.106) Negative goodwill (6.749) -- (Gain)/loss on disposal of property, plant and equipment (7) 5 Gain on disposal of subsidiary company (202) -- Net gains on disposal and revaluation of financial instruments (2.464) (5.105) Investment income from debt and equity securities (101.356) (79.522) Interest payable on loan capital and debenture loan 5.192 10.481 Taxation 17.701 11.965 Operating profit before working capital changes 57.170 6.189 Increase in loans and advances to customers and other assets (757.370) (447.824) Increase in customer deposits and other customer accounts and other liabilities 554.964 1.066.174 Increase in placements with other banks (5.550) (6.119) Increase in deposits by banks 54.600 14 Net cash flow (used in)/from operating activities before taxation (96.186) 618.434 Taxation paid (18.697) (4.379) Net cash flow (used in)/from operating activities (114.883) 614.055 Cash flow from investing activities Acquisition of subsidiary company (24.291) -- Disposal of subsidiary company 2.187 -- Investment income from debt and equity securities 101.356 79.522 Net acquisitions of debt and equity securities (7.872) (201.882) Net disposals/(acquisitions) of government securities and other eligible bills 21.284 (39.226) Acquisition of shares in associate company -- (724) Purchase of property, plant and equipment (6.052) (10.252) Purchase of intangible assets (3.468) (1.765) Proceeds from disposal of property, plant and equipment 748 19 Net cash flow from/(used in) investing activities 83.892 (174.308) Cash flow from financing activities Proceeds from issue of share capital 79.144 9.377 Proceeds from issue of loan capital 20.115 44.670 Repayment of debenture loan -- (88.032) Dividend paid (40.557) (7.750) Interest paid on loan capital and debenture loan (5.192) (10.481) Net cash flow from/(used in) financing activities 53.510 (52.216) Net increase in cash and cash equivalents 22.519 387.531 Effect of exchange rate fluctuations on cash and cash equivalents (1.924) (1.391) Cash and cash equivalents at the beginning of the year 1.072.501 686.361 Cash and cash equivalents at the end of the year 1.093.096 1.072.501 138 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 ANNUAL REPORT 2007 ANNUAL REPORT Declaration by the Members of the Board of Directors and the Company Officials responsible for the drafting of the Financial Statements
In accordance with article 9(3)(c) and (7) of the 2007 Law on Transparency Requirements (Securities Listed for Trading on a HELLENIC BANK GROUP Regulated Market), we the Members of the Board of Directors and the company officials responsible for the drafting of the financial statements of Hellenic Bank Public Company Ltd (the Company) for the year ended 31 December 2007, confirm that to the best of our knowledge:
(a) The annual financial statements presented in pages 68 to 138: (i) Have been prepared in accordance with International Financial Reporting Standards and the provisions of article (4), and
(ii) Give a true and fair view of the assets and liabilities, the financial position and the profits or losses of the Hellenic Bank Public Company Ltd (and of the entities included in the consolidated financial statements, as a whole) and
(b) The Report of the Board of Directors provides a fair review of the developments and performance of the business as well as the position of Hellenic Bank Public Company Ltd (and the entities included in the consolidated financial statements, as a whole), together with a description of the major risks and uncertainties that they face.
Members of the Board of Directors Dr. Andreas P. Panayiotou Non Executive Chairman Andreas M. Moushouttas Non Executive Vice Chairman Iacovos G. Iacovou Non Executive Member of the Board Antonis I. Pierides Non Executive Member of the Board Demetris J. Eliades Non Executive Member of the Board Soteris Z. Kallis Non Executive Member of the Board Charalambos P. Panayiotou Non Executive Member of the Board Ioannis Ch. Charilaou Non Executive Member of the Board Georgios K. Pavlou Non Executive Member of the Board Kyriacos E. Georgiou Non Executive Member of the Board Kyriacos I. Droushiotis Non Executive Member of the Board Makis Keravnos Executive Member of the Board Pieris Th. Theodorou Executive Member of the Board
Company official responsible for the drafting of the financial statements Maria Keleshi, Group Chief Accountant
Nicosia, 26 March, 2008
139 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 WE EMBRACE SPORTS BECAUSE THEY CULTIVATE BELIEFS AND BEHAVIOURS IN SUPPORT OF A BETTER QUALITY OF LIFE. WE SUPPORT SPORTS INITIATIVES FOR THEY ENSURE THE DEVELOPMENT OF A HEALTHY MIND IN A HEALTHY BODY WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 HELLENIC BANK GROUP Other Group Information
144 MAIN SUBSIDIARY COMPANIES 145 OFFICES AND BRANCHES 151 SHAREHOLDER INFORMATION AND INVESTOR RELATIONS WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 Main Subsidiary Companies
HELLENIC BANK (FINANCE) LTD PANCYPRIAN FINANCE PUBLIC COMPANY LTD Board of Directors Board of Directors Christodoulos Chr. Miliotis, Chairman (until 26.03.2007) Iacovos Aristidou, Chairman Andreas M. Moushouttas (Chairman as from 26.03.2007) Demetris J. Eliades Georgios Chr. Papadopoulos (resigned on 06.11.2007) Georgios K. Pavlou George Chr. Mavroudis Ioannis Ch. Charilaou Iacovos C. Constantinides Alkis Loizides Soteris I. Sergides Glafkos G. Mavros Georgios K. Pavlou Demetris Demetriades (resigned on 05.11.2007) Ioannis Ch. Charilaou Penelope Constantinou, Secretary Soteris Z. Kallis Glafkos G. Mavros (appointed on 22.01.2008) HELLENIC ALICO LIFE INSURANCE COMPANY LTD Pieris Th. Theodorou, Secretary Board of Directors Avraam L. Louca, Chairman HELLENIC BANK (INVESTMENTS) LTD Andreas E. Vasiliou, Vice-Chairman Board of Directors Pieris Th. Theodorou Andreas P. Panayiotou, Chairman Antonios I. Karpasitis Christodoulos Chr. Miliotis, Vice-Chairman (resigned on 19.03.2007) Georgios K. Pavlou Charalambos P. Panayiotou (Vice-Chairman as from 19.03.2007) Antonis I. Pierides Pieris Th. Theodorou Maria H. Vovides, Secretary George Chr. Mavroudis Yiannis Telonis ATHINA CYPRUS PUBLIC COMPANY LTD Pieris Th. Theodorou, Secretary Board of Directors Iacovos Aristidou, Chairman HELLENIC BANK TRUST & FINANCE CORPORATION LTD Panos Chr. Ghalanos (resigned on 03.12.2007) Board of Directors Christodoulos Chr. Miliotis (resigned on 30.11.2007) Georgios Chr. Papadopoulos, Chairman (resigned on 06.11.2007) Panayiotis Hadjipantelis (resigned on 30.01.2008) Pieris Th. Theodorou (Chairman as from 10.01.2008) Maria Kyriakidou (resigned on 26.11.2007) Charalambos G. Phokas Othon Pavli (resigned on 29.11.2007) Thomas P. Stylianou (appointed on 22.01.2008) Philippos Larkos (resigned on 08.06.2007) Charalambos M. Mousoulides, Secretary Marios Ioannides (resigned on 08.06.2007) Iacovos G. Iacovou (appointed on 15.02.2008) PANCYPRIAN INSURANCE LTD Soteris Z. Kallis (appointed on 15.02.2008) Board of Directors Kyriacos I. Droushiotis (appointed on 15.02.2008) Zenios Demetriou, Chairman Othon Pavli (appointed on 15.02.2008) Thanos Michael Yiannis Telonis Iacovos Aristidou Marios Christoforides (appointed on 15.02.2008) Georgios Chr. Papadopoulos (resigned on 06.11.2007) Yiannis Ioannou (appointed on 15.02.2008) Iacovos C. Constantinides Hellenic Bank (Investments) Ltd, Secretary Antonis I. Pierides Ioannis Ch. Charilaou Glafkos G. Mavros (appointed on 10.01.2008) Petros Arsalides, Secretary
144 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 ANNUAL REPORT 2007 ANNUAL REPORT
HELLENIC BANK GROUP Offices and Branches
HEAD OFFICE KENNEDY BRANCH TSERIOU BRANCH HELLENIC BANK GROUP 30 Kennedy Ave. & 25th March, 93A Tseriou Ave., 2043 Nicosia Corner Limassol Avenue 1087 Nicosia Tel: 22 501 521, Fax: 22 327 299 & 200 Athalassas Avenue Tel: 22 501 404, Fax: 22 875 307 [email protected] 2025 Strovolos, P. O. Box 24747, [email protected] 1394 Nicosia DHALI BRANCH SWIFT/BIC: HEBA CY 2N LATSIA BRANCH 1a Arch. Makarios III Str., 2540 Dhali, Nicosia Tel: 22 500000, Fax: 22 500050 79A Arch. Makarios Ave., 2223 Latsia Tel: 22 501 532, Fax: 22 524 780 Tel: 22 501413, Fax: 22 488345 [email protected] Website: [email protected] http://www.hellenicbank.com LAKATAMIA BRANCH DIGHENIS AKRITAS MAIN BRANCH 28 Arch. Makarios III Ave., E-mail: 92 Dighenis Akritas Ave. & Kritis, 2324 Kato Lakatamia, Nicosia [email protected] 1061 Nicosia Tel: 22 501 541, Fax: 22 320 986 SWIFT/BIC: HEBA CY 2N NIC [email protected] Service Line: Tel: 22 500 500, Fax: 22 500 560 8000 99 99 [email protected] PARISSINOS BRANCH For calls fron abroad: Archangelos Ave. & 7 Kalidonion Str., ++357 22 743 843 ACROPOLIS BRANCH 2410 Engomi, Nicosia 53 Acropolis Ave. & Thermopylon St., Tel: 22 501 553, Fax: 22 354 630 NICOSIA DISTRICT Strovolos 2012 Nicosia [email protected] Tel: 22 501 425, Fax: 22 319 112 PERSONAL BANKING DIVISION [email protected] LEDRA BRANCH 3 Aheon & Agamemnonos, 2413 Engomi, ELEFTHERIAS SQUARE BRANCH AGIOS ANTONIOS BRANCH Nicosia 1 Evagorou Ave., Mitsis Building 1, 12A Evgenias & Antoniou Theodotou St., Tel: 22 501 563, Fax: 22 358 029 Eleftherias Sq., 1065 Nicosia 1061 Nicosia [email protected] SWIFT/BIC: HEBA CY 2N NIC Tel: 22 501 442, Fax: 22 433 490 Tel: 22 501 000, Fax: 22 501 088 [email protected] BUSINESS SERVICES DIVISION [email protected] AGIOS DHOMETIOS BRANCH ELEFTHERIAS SQ. BUSINESS CENTER KOKKINOTRIMITHIA BRANCH 79 Gregoriou Afxentiou Str., 2368 Nicosia 1 Evagorou Ave., Mitsis Building 1, 8C Gr. Afxentiou, 2660 Kokkinotrimithia Tel: 22 501 453, Fax: 22 771 354 Eleftherias Sq., 1065 Nicosia Tel: 22 501 362, Fax: 22 835 428 [email protected] P. O. Box 21022, 1595 Nicosia [email protected] Tel: 22 501 000, Fax: 22 501 086 STROVOLOS AVE BRANCH [email protected] AYIOS DHOMETIOS BRANCH 137A Strovolos Ave., 2042 Nicosia (AIRPORT ROAD) Tel: 22 501 463, Fax: 22 316 153 DIGHENIS AKRITAS BUSINESS CENTER 22 Aristides St., 2370 Nicosia [email protected] 92 Dighenis Akritas Ave. & Kritis, Tel: 22 501 374, Fax: 22 354 870 1061 Nicosia, P. O. Box 24747, 1394 Nicosia [email protected] KAKOPETRIA BRANCH Tel: 22 500 500, Fax: 22 765 107 45 Arch. Makarios Ave., 2810 Kakopetria [email protected] ANTHOUPOLIS BRANCH Tel: 22 501 472, Fax: 22 923 461 64A St. George Street, 2304 Nicosia [email protected] ATHALASSAS AVE BUSINESS CENTER Tel: 22 501 381, Fax: 22 373 335 173 Athalassas Ave., 2025 Nicosia [email protected] PRODROMOU BRANCH P. O. Box 24529, 1300 Nicosia 25 Prodromou, 1095 Nicosia Tel: 22 501 813, Fax: 22 501 991 ATHALASSAS BRANCH Tel: 22 501 487, Fax: 22 676 881 [email protected] 173 Athalassas Ave., Strovolos, 2025 Nicosia [email protected] Tel: 22 501 800, Fax: 22 501 990 CORPORATE BANKING DIVISION [email protected] STAVROU BRANCH Corner 37 Stavrou Ave. & 2 Yiannitson Str., NICOSIA CORPORATE CENTER DEMOSTHENIS SEVERIS BRANCH 2027 Strovolos, Nicosia 173 Athalassas Ave., 2025 Nicosia 15 Demosthenis Severis Ave., 1080 Nicosia Tel: 22 501 501, Fax: 22 491 057 Tel: 22 501 886, Fax: 22 501 996 Tel: 22 501 332, Fax: 22 667 813 [email protected] [email protected] [email protected] PLATY BRANCH INTERNATIONAL BUSINESS DIVISION KANTARAS BRANCH 100A Kyrenia Ave., Platy 2114 Aglantzia, 18 Kantaras Ave., 1037 Nicosia Nicosia NICOSIA INTERNATIONAL Tel: 22 501 392, Fax: 22 435 500 Tel: 22 501 514, Fax: 22 331 504 BUSINESS CENTER [email protected] [email protected] 173 Athalassas Ave., 2025 Nicosia Tel: 22 501 832 / 501 833 / 501 835 Fax: 22 501 993 [email protected] 145 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 LIMASSOL DISTRICT ANEXARTISIAS & SP. ARAOUZOU BRANCH DHEKELIA BRANCH 137 Sp. Araouzos Ave. & Anexartisias, Amenities Village, 6370 Dhekelia PERSONAL BANKING DIVISION 3036 Limassol Tel: 24 503 351, Fax: 24 723 539 Tel: 25 502 502, Fax: 25 359 032 [email protected] ARCH MAKARIOS AVE. BRANCH [email protected] 131 Arch Makarios Ave. AYIOS NICOLAOS BRANCH & Ioanni Polemi Str., 3021 Limassol AYIA PHYLA BRANCH Ayios Nicolaos Base Area, 6370 Larnaca Tel: 25 502 300, Fax: 25 731 031 12 1st April St., Ayia Phyla, 3116 Limassol Tel: 23 504 365, Fax: 23 962 557 [email protected] Tel: 25 502 511, Fax: 25 730 181 [email protected] [email protected] AKROTIRI BRANCH DROSIA BRANCH RAF Station Shopping Centre, Princes St., KATO POLEMIDIA BRANCH 9 Gr. Dighenis Ave. & Thessalonikis, 3771 Akrotiri 105 Nicos Pattichis Ave., Kato Polemidia, 6035 Larnaca Tel: 25 502 810, Fax: 25 952 588 4155 Limassol Tel: 24 503 373, Fax: 24 655 141 [email protected] Tel: 25 502 523, Fax: 25 731 570 [email protected] [email protected] EPISKOPI BRANCH ARCH MAKARIOS III BRANCH Episkopi Garrison BFPO 59, 3370 Episkopi ACADEMIAS BRANCH 89 Arch. Makarios III Ave., Filanda Court, Tel: 25 502 824, Fax: 25 211 311 17 Spyrou Kyprianou Str., Linopetra, 6017 Larnaca [email protected] 4043 Limassol Tel: 24 503 306, Fax: 24 636 387 Tel: 25 502 837, Fax: 25 314 985 [email protected] AYIOS GEORGIOS BRANCH [email protected] 2 Promachon Eleftherias Ave., 4103 Limassol HERMOU BRANCH Tel: 25 502 801, Fax: 25 310 638 BUSINESS SERVICES DIVISION Hermou Str. & N.Rossou Str., 6022 Larnaca [email protected] Tel: 24 503 393, Fax:24 652 575 GLADSTONOS & ANAXAGORA [email protected] GLADSTONOS & ANAXAGORA BRANCH BUSINESS CENTER 52 Gladstonos & Anaxagoras Str., Corner 52 Gladstonos & Anaxagora Str., LEFKARA BRANCH P. O. Box 51474, 3505 Limassol 3505 Limassol 11 Timiou Stavrou, Pano Lefkara Sq., Tel: 25 502 000, Fax: 25 367 324 Tel: 25 502 002, Fax: 25 502 081 7700 Lefkara [email protected] [email protected] Tel: 24 503 400, Fax: 24 342 820 [email protected] PAPHOS STR. BRANCH ARCH MAKARIOS BUSINESS CENTER 15 Paphos Str., 3052 Limassol 56 Arch. Makarios III Ave., 3065 Limassol SPYROS KYPRIANOU AVE. BRANCH Tel: 25 502 844, Fax: 25 570 974 Tel: 25 502 718, Fax: 25 502 780 2 Corner Averof & Stratigou Timayia, [email protected] [email protected] 6052 Larnaca Tel: 24 503 413, Fax: 24 669 590 COURT SQUARE BRANCH CORPORATE BANKING DIVISION [email protected] Arch Makarios Ave. & Grivas Dhigenis Ave., 3105 Limassol LIMASSOL CORPORATE CENTER DIONYSOU AVE. BRANCH Tel: 25 502 604, Fax: 25 376 288 Corner 52 Gladstonos & Anaxagora Str., Dionysou & Socratous 1, Pyla Tourist Area, [email protected] 3505 Limassol 7081 Larnaca Tel: 25 502 006, Fax: 25 502 082 Tel: 24 503 420, Fax: 24 644 323 YERMASOYIA BRANCH [email protected] [email protected] 54 George A' Str., Old Rd. Lssol - Nsia, 4047 Limassol INTERNATIONAL BUSINESS DIVISION AIRPORT BRANCH Tel: 25 502 863, Fax: 25 326 121 Larnaca International Airport, 7130 Larnaca [email protected] LIMASSOL INTERNATIONAL Tel: 24 503 430 BUSINESS CENTER [email protected] MUNICIPAL MARKET BRANCH Corner 52 Gladstonos & Anaxagora Str., 10A Gregoriou Ghennadiou Str., 3505 Limassol LIVADIA BRANCH 3041 Limassol Tel: 25 502 040 43B P. Kyprianou Str., 7060 Livadia, Larnaca Tel: 25 502 873, Fax: 25 373 121 Fax: 25 371 617 / 367 324 Tel: 24 503 441, Fax: 24 662 744 [email protected] [email protected] [email protected]
MESA YITONIA BRANCH LARNACA DISTRICT DROMOLAXIA BRANCH Arch. Makarios III Ave & 43E St. Lenas Str., 2 Eleftherias Ave., 7020 Dromolaxia 4003 Limassol PERSONAL BANKING DIVISION Tel: 24 503 452, Fax: 24 425 190 Tel: 25 502 881, Fax: 25 753 864 [email protected] [email protected] ZENONOS KITIEOS BRANCH 2 Zenonos Kitieos Str., P. O. Box 40170, PHANEROMENI BRANCH FRANKLIN ROUSVELT BRANCH 6023 Larnaca 145A Phaneromenis Ave., 6031 Larnaca 138 Franklin Rousvelt Str., 3011 Limassol SWIFT/BIC: HEBA CY 2N LAR Tel: 24 503 461, Fax: 24 654 740 Tel: 25 502 895, Fax: 25 573 696 Tel: 24 503 000, Fax: 24 654 366 [email protected] [email protected] [email protected] 146 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 ANNUAL REPORT 2007 ANNUAL REPORT
ORMIDHIA BRANCH DHERYNIA BRANCH DANAE AVE. BRANCH HELLENIC BANK GROUP 15 Demokratias Str., 7530 Ormidhia 4 Demokratias Str., 5380 Dherynia, Danae Ave., 8042 Paphos Tel: 24 503 470, Fax: 24 722 782 Famagusta Tel: 26 505 160, Fax: 26 964 262 [email protected] Tel: 23 504 355, Fax: 23 730 188 [email protected] [email protected] BUSINESS SERVICES DIVISION APOSTOLOU PAVLOU BRANCH PROTARAS AREA BRANCH 27 Apostolos Pavlos Ave., P. O. Box 60074, LARNACA BUSINESS CENTER 22 Protaras Str., 5296 Protaras, 8046 Paphos Corner Gr. Afxentiou & Gladstonos Str., (Opposite Vrissiana Hotel) Tel: 26 505 616, Fax: 26 945 483 P. O. Box 40434, 6304 Larnaca Tel: 23 504 370, Fax: 23 832 539 [email protected] Tel: 24 503 000, Fax: 25 650 040 [email protected] [email protected] KENNEDY SQUARE BRANCH MONASTIRAKI AREA BRANCH Kennedy Square, 8047 Paphos CORPORATE BANKING DIVISION Arch. Makarios III Ave. & Mishaouli Tel: 26 505 172, Fax: 26 937 636 & Kavazoglou, 5330 Ayia Napa [email protected] LARNACA CORPORATE CENTER Tel: 23 504 375, Fax: 23 723 406 Corner Gr. Afxentiou & Gladstonos Str., [email protected] POSEIDONOS BRANCH P. O. Box 51474, 6023 Larnaca 90 Poseidonos Ave., 8042 Paphos Tel: 24 503 000, Fax: 25 656 919 BUSINESS SERVICES DIVISION Tel: 26 505 180, Fax: 26 951 638 [email protected] [email protected] FAMAGUSTA BUSINESS CENTER INTERNATIONAL BUSINESS DIVISION 125, 1st April Ave., 5280 Paralimni, NICODEMOU MYLONA BRANCH Famagusta 6 Nicodemou Mylona Str., P. O. Box 60200, LARNACA INTERNATIONAL Tel: 23 504 300, Fax: 23 827 045 8041 Paphos BUSINESS CENTER [email protected] Tel: 26 505 010, Fax: 26 941 484 Corner Gr. Afxentiou Ave. [email protected] & Arch. Makarios III Ave., P. O. Box 40434, CORPORATE DIVISION 6304 Larnaca POLIS CHRYSOCHOUS BRANCH Tel: 24 503 480 FAMAGUSTA CORPORATE CENTRE 2 Arch. Makarios III Ave., Fax: 24 659 101, 24 625 187 173 Athalassas Ave., 2025 Nicosia, 8820 Polis Chrysochous [email protected] P. O. Box 24529, 1300 Nicosia Tel: 26 505 191, Fax: 26 322 370 Tel: 22 501 886, Fax: 22 501 996 [email protected] FAMAGUSTA DISTRICT [email protected] KATO PAFOS BRANCH PERSONAL BANKING DIVISION PAFOS DISTRICT Poseidonos Ave. & Ay. Antonios Str., 8041 Paphos KAPPARIS BRANCH PERSONAL BANKING DIVISION Tel: 26 505 202, Fax: 26 947 456 2 Kapparis Ave., 5290 Paralimni, Famagusta [email protected] Tel: 23 504 380, Fax: 23 740 228 ELLADOS AVE BRANCH [email protected] Ellados Ave. & Xinaridou Rd., 8020 Paphos PERVOLA BRANCH Tel: 26 505 103, Fax: 26 953 077 Pafsaniou and Leonidou Strs., 8010 Paphos SOTIRA BRANCH [email protected] Tel: 26 505 213, Fax: 26 939 733 6 Heroon Str., 5390 Sotira, Famagusta [email protected] Tel: 23 504 391, Fax: 23 829 120 TOMBS OF THE KINGS BRANCH [email protected] 8 Tombs of the Kings Ave., Kato Paphos, YEROSKIPOU BRANCH 8046 Paphos Yeroskipou Square, 8201 Yeroskipou VRYSOULLES BRANCH Tel: 26 505 122, Fax: 26 946 920 Tel: 26 505 220, Fax: 26 964 622 1-4 C. Elia Ave., Syn. Ay. Georgiou, [email protected] [email protected] 5522 Vrysoulles, Famagusta Tel: 23 504 358, Fax: 23 962 878 PEYIA BRANCH COURT AREA BRANCH [email protected] Peyia Village Sq., 8560 Peyia 31 N. Nicolaides Ave., 8011 Paphos Tel: 26 505 131, Fax: 26 621 786 Tel: 26 505 231, Fax: 26 931 878 PARALIMNI BRANCH [email protected] [email protected] 85, 1st April Avenue, Paralimni, Famagusta Tel: 23 504 300, Fax: 23 827 045 / 820 780 KATO PYRGOS BRANCH CHLORAKA BRANCH [email protected] 38A' Nikolaou Papageorgiou Str., 8 Eleftherias Ave., 8220 Chloraka 2940 Kato Pyrgos Tel: 26 505 242, Fax: 26 271 757 TEFKROU ANTHIA BRANCH Tel: 26 505 140, Fax: 26 522 580 [email protected] 7 Tefkrou Anthia Str., P. O. Box 30091, [email protected] 5330 Ayia Napa, Famagusta Tel: 23 504 345, Fax: 23 722 636 ELEFTHERIOU VENIZELOU BRANCH [email protected] El. Venizelou & 33 N. Nicolaides Ave., 8021 Paphos Tel: 26 505 151, Fax: 26 949 677 [email protected] 147 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 BUSINESS SERVICES DIVISION ELEFTHERIA SQ. BRANCH NEA SMYRNI BRANCH 6 El. Venizelou & Kalapothaki, 53 Eleftheriou Venizelou Ave., PAFOS BUSINESS CENTER GR 546 24 Thessaloniki 171 23 Nea Smyrni, Attica 27 Apostolos Pavlos Ave., P. O. Box 60074, Tel: +30 2310 374500 Tel: +30 210 9374640 8046 Paphos Fax: +30 2310 244438 Fax: +30 210 9374552 Tel: 26 505 626, Fax: 26 942 228 [email protected] [email protected] [email protected] IOANNINA BRANCH PIRAEUS BRANCH CORPORATE DIVISION 20 Averof Str., 452 21 Ioannina 4 Iroon Polytechniou, 185 31 Piraeus, Attica Tel: +30 6510 69500 Tel: +30 210 4138840 PAFOS CORPORATE CENTER Fax: +30 6510 22437 Fax: +30 210 4115730 27 Apostolos Pavlos Ave., P. O. Box 60074, [email protected] [email protected] 8046 Paphos Tel: 26 505 601, Fax: 26 221 503 YIANNITSON RD. BRANCH PANORMOU BRANCH [email protected] 31 Giannitson Street & Patriarchou 68 Panormou Str., 115 23 Athens, Attica Kyrilou Street, P. O. Box 10181, Tel: +30 30 6930871 GREECE BRANCH NETWORK Balkan Centre, 546 27 Thessaloniki Fax: +30 210 6982008 Tel: +30 2310 561600 [email protected] MAIN OFFICE Fax: +30 2310 553469 11 Vasilissis Sofias & Merlin, 106 71, Athens [email protected] MONASTIRAKI BRANCH Tel: +30 210 3384800 95 Ermou Str., 105 55 Athens Fax: +30 210 3638163 NEA EGNATIA BRANCH Tel: +30 210 3258940 http: //www.hellenicbank.gr 162 Konstantinou Karamanli Ave. Fax: +30 210 3312487 [email protected] & 40 Mavromichali Str., [email protected] P. O. Box 10181, 542 48 Thessaloniki KOLONAKI BRANCH Tel: +30 2310 392100 EGALEO BRANCH 11 Vas. Sofias Ave. & Merlin Str., Fax: +30 2310 320240 214 Iera Odos, 122 42 Egaleo, Attica P. O. Box 30597, 106 71 Athens [email protected] Tel: +30 210 5319200 Tel: +30 210 3384830 Fax: +30 210 5984795 Fax: +30 210 3617802 KIFISSIA BRANCH [email protected] [email protected] 5 Miltiadou Str., 145 62 Kifissia, Attica Tel: +30 210 6283300 KALLITHEA BRANCH PANEPISTIMIOU BRANCH Fax: +30 210 8082865 195 Eleftheriou Venizelou, 39 Panepistimiou Str., P. O. Box 30597, [email protected] 176 73 Kallithea, Attica GR 105 64 Athens Tel: +30 210 9538320 Tel: +30 210 3710700 PERISTERI BRANCH Fax: +30 210 9577104 Fax: +30 210 3227428 31 Ethnarhou Makariou Str., [email protected] [email protected] 121 31 Peristeri, Attica Tel: +30 210 5706000 KOROPI BRANCH AGHIOS DIMITRIOS BRANCH Fax: +30 210 5722618 84 Vassileos Constantinou Str., 273 Vouliagmenis Ave., P. O. Box 30597, [email protected] 194 00 Koropi, Attica GR 172 36 Aghios Dimitrios Tel: +30 210 6621170 Tel: +30 210 9793751 GLYFADA BRANCH Fax: +30 210 6621008 Fax: +30 210 9768378 6 Kondili Street, P. O. Box 30597, [email protected] [email protected] 166 75 Glyfada, Attica Tel: +30 210 8986600 ILION BRANCH HOLARGOS BRANCH Fax: +30 210 8980359 4 Ilion Str., 131 22 Ilion, Attica 250 Mesogion Ave., P. O. Box 30597, [email protected] Tel: +30 210 2694000 155 61 Holargos Fax: +30 210 2610371 Tel: +30 210 6595900 NIKAIA BRANCH [email protected] Fax: +30 210 6522649 215 Petrou Ralli Ave., 184 50 Nikaia, Attica [email protected] Tel: +30 210 4257020 ASPROPYRGOS BRANCH Fax: +30 210 4257052 43 Dimokratias Ave., IRAKLION BRANCH [email protected] 193 00 Aspropyrgos, Attica 374 Iraklion Ave., P. O. Box 30597, Tel: +30 210 5881040 141 22 Iraklion Attikis NEA KIFISSIA BRANCH Fax: +30 210 5573259 Tel: +30 210 2897700 21 Ilission Str., 145 64 Kifissia, Attica [email protected] Fax: +30 210 2850931 Tel: +30 210 6206070 [email protected] Fax: +30 210 6206271 EVOSMOS BRANCH [email protected] 5 Elatis Str. & Ant Tritsi Str., 562 24 Evosmos, Thessaloniki Tel: +30 2310 588510 Fax: +30 2310 588505 evosmos@hellenicbank 148 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 ANNUAL REPORT 2007 ANNUAL REPORT
ANTHEON BRANCH PANCYPRIAN FINANCE PUBLIC HELLENIC BANK GROUP 54 Georgiou Papandreou, COMPANY LTD 54655 Thessaloniki 66 Grivas Dhigenis Ave., Third Floor, Tel: +30 2310 404000 Pancyprian Bldg, 1080 Nicosia, Fax: +30 2310 418952 P. O. Box 21352, 1507 Nicosia [email protected] Tel: 22 743 800, Fax: 22 674 604 [email protected] SYNGROU BRANCH 66 Syngrou Ave. & Diliados Str., HELLENIC BANK TRUST & FINANCE 117 42 Syngrou, Attica CORPORATION LTD Tel: +30 210 9200970 Corner Limassol & 200 Athalassas Avenue, Fax: +30 210 9217875 2025 Strovolos, P. O. Box 24747, [email protected] 1394 Nicosia SWIFT: HEBA CY 2N PATRA BRANCH Tel: 22 500 821 / 500 823, Fax: 22 500 084 45 Ay. Andreou & 3 Kolokotroni, [email protected] 262 21 Patra Tel: +30 2610 240370 REPRESENTATIVE OFFICES Fax: +30 2610 274091 [email protected] SOUTH AFRICA - JOHANNESBURG Corner 5th and Maude Str., West Tower, LARISA BRANCH 4th Floor, Sandton Sq., Sandton 1HB 2146, 35 Great Alexander, 412 22 Larisa Johannesburg, South Africa, Tel: +30 2410 539450 P. O. Box 783392 Fax: +30 2410 539446 Tel: +27 11 7830155/6 [email protected] Fax: +27 11 7830157 [email protected] SUBSIDIARY COMPANIES MOSCOW HELLENIC BANK (FINANCE) LTD 15 Savvinskaya Nab, Savvinskaya Office 15 D. Severis Ave., 1080 Nicosia, Bldg - Japan House, Moscow 119435, Russia P. O. Box 24747, 1394 Nicosia Tel: +7 495 7929988, 495 7929958, 7929989 Tel: 22 501 300, Fax: 22 374 044 Fax: +7 495 7929985 [email protected] [email protected] [email protected] HELLENIC BANK (NVESTMENTS) LTD 31 Kyriacos Matsis Ave., Second Floor, ST. PETERSBURG 1082 Nicosia, P. O. Box 24747, 1394 Nicosia 23 Professora Popova Street, Office 311, Orders: 22 500 140 / 500 145 197376 St. Petersburg, Russia Tel: 22 500 100, Fax: 22 500 110 Tel: +7 812 3130300 [email protected] Fax: +7 812 3130400 [email protected] ATHENA CYPRUS PUBLIC COMPANY LTD a. [email protected] 31 Kyriacos Matsis Ave., Second Floor, 1082 Nicosia, P. O. Box 24747, 1394 Nicosia KIEV Tel: 22 500 100, Fax: 22 500 110 8 Rybalska Street, First Floor, [email protected] Kiev 01011, Ukraine Tel: +38 067 9723568 PANCYPRIAN INSURANCE LTD [email protected] 66 Grivas Dhigenis Ave., Pancyprian Bldg, [email protected] 1080 Nicosia, P.O. Box 24747, 1394 Nicosia Tel: 22 743 743, Fax: 22 677 656 [email protected]
HELLENIC ALICO LIFE INSURANCE COMPANY LTD 38 Kennedy Ave., 1087 Nicosia P. O. Box 20672, 1662 Nicosia Tel: 22 450 650, Fax: 22 450 750 [email protected]
149 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 150 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 ANNUAL REPORT 2007 ANNUAL REPORT
SHAREHOLDER INFORMATION HELLENIC BANK GROUP The shareholders may apply to the Shares & Bonds Registry with any queries concerning dividends and interest on securities and bonds.
SHARES & BONDS REGISTRY Corner Limassol Avenue & 200 Athalassas Avenue 1st Floor 2025 Strovolos P.O. Box 24747, 1394 Nicosia, Cyprus Telephone: 22 500 650 - 51, Fax: 22 500 065 E-mail: [email protected]
INVESTOR RELATIONS Institutional investors, brokers and stock analysts may apply to the Investor Relations Service for information regarding the Company’s financial achievements and prospects. They can also apply for copies of the Group’s Annual Reports in Greek and English.
Corner Limassol Avenue & 200 Athalassas Avenue 5th Floor 2025 Strovolos P.O. Box 24747, 1394 Nicosia, Cyprus Telephone: 22 500 760, Fax: 22 500 077 E-mail: [email protected]
HEAD OFFICE Corner Limassol Avenue & 200 Athalassas Avenue 2025 Strovolos P.O. Box 24747, 1394 Nicosia, Cyprus Telephone: 22 500 000, Fax: 22 500 050
Website www.hellenicbank.com
E-mail Address [email protected]
Service Line 8000 99 99
151 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 DESIGN AND LAYOUT: Ekkeshi Consultants PORTRAIT PHOTOGRAPHY: Agisilaou & Spyrou Photography PRINTING AND BINDING: Kailas Printers & Lithographers Ltd WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432 WorldReginfo - 31cff136-7a39-4ffe-b47b-1fae5c392432