ANNUAL REPORT 2004 Piraeusuk 1 26.Qxd 13/04/05 14:39 “ Æ1
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Cover_UK.qxd 07/04/05 13:25 “ Æ2 ANNUAL REPORT 2004 PiraeusUK_1_26.qxd 13/04/05 14:39 “ Æ1 CONTENTS BRIEF OVERVIEW 2 PIRAEUS GROUP: A DYNAMIC GROWTH COURSE 3 CHAIRMAN’S REPORT 5 DEVELOPMENTS IN THE INTERNATIONAL AND GREEK ECONOMIES 9 CONSOLIDATED FIGURES OF PIRAEUS GROUP 10 FIGURES OF PIRAEUS BANK 11 ANALYSIS OF FIGURES AND RESULTS OF PIRAEUS GROUP 12 RETAIL BANKING 18 CORPORATE BANKING 23 E-BANKING (WINBANK, ATM) 29 INTERNATIONAL ACTIVITIES 30 INVESTMENT BANKING 35 ASSET MANAGEMENT 39 REAL ESTATE DEVELOPMENT AND MANAGEMENT 42 TECHNOLOGY AND INFRASTRUCTURES 44 RISK MANAGEMENT 47 HUMAN RESOURCES 51 CORPORATE GOVERNANCE 55 SOCIETY AND ENVIRONMENT 59 CUSTOMER RELATIONS 65 SHARE PRICE DEVELOPMENT AND PERFORMANCE 67 ADOPTION OF THE INTERNATIONAL FINANCIAL REPORTING STANDARDS 70 GROWTH GOALS AND PROSPECTS OF PIRAEUS BANK GROUP 72 CONSOLIDATED FINANCIAL STATEMENTS AS AT 31 DECEMBER 2004 74 ANALYSIS OF FIGURES AND RESULTS OF PIRAEUS BANK 78 FINANCIAL STATEMENTS AS AT 31 DECEMBER 2004 82 DOMESTIC BRANCH NETWORK 86 DOMESTIC SUBSIDIARIES 93 NETWORK OF BRANCHES AND SUBSIDIARIES ABROAD 94 PiraeusUK_1_26.qxd 13/04/05 14:39 “ Æ2 BRIEF OVERVIEW 1916 ñ Establishment of Piraeus Bank 1918 ñ The shares of Piraeus Bank were listed in the Athens Stock Exchange 1963 ñ Piraeus Bank was integrated into Emporiki Bank Group in Greece 1975 ñ Piraeus Bank came under state control within Emporiki Bank Group 1991 ñ Privatisation of Piraeus Bank 1992 ñ Year of restructuring, reform and growth ñ Participation in Private Investment SA, which was renamed Piraeus Investment SA (1995) 1993 ñ Establishment of Piraeus Leasing SA, Piraeus Mutual Funds SA and Piraeus Insurance Agency SA 1994 ñ Establishment of Piraeus Finance SA 1996 ñ Establishment of Tirana Bank 1997 ñ Absorption of the assets and liabilities of Chase Manhattan Bank in Greece ñ Acquisition of 30% of Sigma Securities SA and agreement on the acquisition of an additional 21% (1998) 1998 ñ Acquisition of Macedonia-Thrace Bank and Credit Lyonnais Hellas Bank ñ Agreement on the acquisition of a majority stake in XiosBank (completion early 1999) ñ Agreement on the acquisition of a 56% stake in the Marathon National Bank of New York (completion in mid 1999) ñ Establishment of Piraeus Factoring SA, Piraeus Multifin SA and Multicollection SA 1999 ñ Absorption of the assets and liabilities of National Westminster Bank in Greece ñ Agreement on the acquisition of Pater Credit Bank in Romania (consolidated in April 2000 renamed as Piraeus Bank Romania). Setting up of the London branch 2000 ñ Merger through the absorption of Macedonia-Thrace Bank and XiosBank by Piraeus Bank ñ Establishment of new network units in Greece (26 new branches) and abroad ñ Creation of Winbank, the first integrated e-banking platform in Greece 2001 ñ Expansion of the branch network in Greece with the opening of 18 new branches ñ Acquisition of OTE Leasing SA 2002 ñ Acquisition of a 57.8% stake in ETBAbank through bidding offer ñ Strategic alliance agreement with ING on joint venture activities in the fields of bancassurance, employee benefits and asset management ñ New branches in Albania, Romania and Bulgaria 2003 ñ Merger through absorption of ETBAbank by Piraeus Bank, Piraeus Investment Company by Hellenic Investment Company and ETBA Leasing SA by Piraeus Leasing SA ñ Creation of ING Piraeus Asset Management SA and ING Piraeus Life SA ñ Development of the network in Greece (23 new branches) and abroad 2004 ñ Acquisition of Interbank NY by the subsidiary Marathon Banking Corporation in New York and merger through absorption of Interbank by Marathon Bank ñ Merger through absorption of Devletoglou Securities SA by Sigma Securities SA, ETBA Insurance Agency SA by Piraeus Insurance Agency SA and absorption of Piraeus Finance SA, Piraeus Investment Consulting SA and Piraeus Equities Holding SA by Piraeus Bank ñ Expansion of the network in Greece (28 branches) and abroad (24 branches) 2 PiraeusUK_1_26.qxd 13/04/05 14:39 “ Æ3 PIRAEUS GROUP: A DYNAMIC GROWTH COURSE Assets (€ billion) Loans market share (%) 20 12 11.0 10.3 16.6 10.0 10 14.7 14.7 15 8.1 12.4 8 7.6 10.5 6.2 10 6 8.1 3.9 4 5 3.8 2 0.08 0.3 0 0 1991 1998 1999 2000 2001 2002 2003 2004 1991 1998 1999 2000 2001 2002 2003 2004 Personnel Branches 6,000 350 5,358 309 4,896 5,000 4,743 300 4,333 4,302 257 241 3,938 250 4,000 214 196 200 3,000 2,677 164 150 118 2,000 100 1,000 50 215 12 0 0 1991 1998 1999 2000 2001 2002 2003 2004 1991 1998 1999 2000 2001 2002 2003 2004 3 PiraeusUK_1_26.qxd 13/04/05 14:39 “ Æ4 PiraeusUK_1_26.qxd 13/04/05 14:39 “ Æ5 CHAIRMAN’S REPORT Dear Shareholders, The year 2004 was a good one for Greek banks and a record year for Piraeus Bank in particular which achieved its historically highest profitability by enhancing its status and presence in the domestic banking system. Asserting the strengthening of the Group, the international rating agencies ªoody’s and Standard & Poor’s upgraded the Bank's credit rating to Baa1 and the Bank’s outlook to positive, accordingly, reflecting Piraeus Bank's improved position in the market and its successful growth strategy. In the previous year the Group’s regulatory capital was enhanced through bond issues (subordinated and hybrid bonds), Group participation increased in subsidiary companies with activities associated to the Bank's core business, while the non-financial participation portfolio of the Bank was gradually decreased, to cut down on costs and improve capital performance. Moreover, during 2004 the Group proceeded to a series of strategic moves, such as stepping up its presence in Balkan countries, resulting in an agreement on the acquisition of two small yet dynamic banks in Bulgaria and Serbia in the beginning of 2005. At the same time, Interbank New York was absorbed by Marathon Bank and Devletoglou Securities S.A. was merged by absorption into Sigma Securities S.A. The Group’s performance and profitability were boosted through the increase in the operating income and the containment of operating expenses, with an emphasis on profit from commercial banking operations. As a result, the efficiency ratio ("cost to income") improved to 58.6% versus 63.1% last year. Net profit after tax and minority interests increased by 40.4%, amounting to €142.5 mn, historic high for the Bank's profitability. Thus, the Bank’s Board of Directors will propose to the General Meeting of Shareholders to distribute a dividend of €0.40 per share, i.e. increased by 33% compared to the year before, which is equal to a 4.0% dividend yield based on the average share price throughout 2004 and 3.1% based on the end-of-year share price. The improved profitability was also reflected on the Piraeus Bank’s share price, which increased by 33.5% in 2004, following an increase of 62.9% already scored in 2003. In 2004 the Group’s expansion was pursued. The network grew by 52 new units, currently numbering 309 branches. The branch network grew by 28 units in Greece, 16 of which are located in Attica where the Bank is still lagging behind the competition. 5 new branches were added to the network of Piraeus Bank in Bulgaria reaching 13 units, in Romania 8 new branches were opened raising the number of Piraeus Bank Romania branches to 14, while in Albania the addition of 7 new branches established a network of 22 Tirana Bank branches. Finally, the network of Marathon Bank in New York grew to 10 branches, resulting from the integration of the 4 branches of the absorbed Interbank New York. The Group’s expansion strategy to South-eastern Europe markets was marked by the signing of an agreement on the acquisition of 99.7% of the Bulgarian Eurobank, with a network of 48 branches and assets of €220 mn, as well as 80% of the Serbian Atlas Banka, with a network of 9 branches and assets of €63 mn, in the beginning of 2005. 5 PiraeusUK_1_26.qxd 13/04/05 14:39 “ Æ6 Along with the growth of the branch network, which is the main distribution channel, the development of complementary channels was pursued focusing on e-banking for the distribution of the Group's products and services. Winbank, the Group’s e-banking platform, enriched with new services, holds a leading position in the market with more than 130,000 users and high customer satisfaction rates. In addition, 84 new units were added to the ATM network currently numbering 449 in total, out of which 199 are in selected off-site locations. In 2004, Piraeus Bank Group achieved a major increase in all its main figures. The Group’s assets rose to €16,591 mn, increased by 12.6% compared to 2003, with a boost to its most profitable items, such as loans, which accounted for 73.9% of total assets compared to 69.8% in December 2003. Total assets under management (deposits, retail bonds issued, mutual funds under management excluding money market funds and interbank) amounted to €15,497 mn against €13,669 mn at the end of 2003, showing an increase of 13.4%. Customer deposits excluding repos, in particular, rose by 16.5% due to the major increase in savings (23.2%) and sight deposits (27.6%). Loans and advances before provisions rose to €12,685 mn up from €10,681 mn in December 2003, increased by 18.8%, with mortgage loans (41.8%) and loans to small and medium-sized enterprises/SMEs (35%) marking the fastest growth rates.