ANNUAL REPORT 2004 CONTENTS THE YEAR IN REVIEW 4 31 WEALTH MANAGEMENT Financial Highlights 4 31 Mutual Funds Letter to Shareholders 6 31 Insurance Members of the Strategic Planning Committee and the Executive Committee 8 32 Asset Management Financial Review 14 32 Private Banking The EFG Eurobank Ergasias Share 16 34 INTERNATIONAL PRESENCE RETAIL BANKING 19 34 Bulgaria Branch Network 19 35 Romania Alternative Networks 20 35 Serbia-Montenegro Consumer Lending 20 Mortgage Lending 21 37 OTHER ACTIVITIES OF THE GROUP 2 3 Small Business Banking 22 37 Securities Services ................... ................... 37 Payment Services CORPORATE BANKING 25 37 Payroll Services Large Corporates 25 37 Real Estate Medium-sized Enterprises 25 38 e-Commerce Shipping 26 38 e-Banking & Internet Services Leasing 26 Factoring 27 39 RISK MANAGEMENT 45 APPENDICES INVESTMENT BANKING & CAPITAL MARKETS 45 Financial Statements 2004 Investment Banking 29 46 Consolidated Balance Sheet and Income Statement Equity Brokerage 29 50 Balance Sheet and Income Statement Treasury 30 55 EFG Group and EFG Eurobank Ergasias Group EFG Eurobank Ergasias ANNUAL REPORT 2004 THE YEAR IN REVIEW FINANCIAL HIGHLIGHTS Consolidated Figures of EFG Eurobank Ergasias € (Amounts in million euro) Net Profit (in m.) Loan Growth in 2004 2004 2003 Change 35% 368.2 29.3% BALANCE SHEET 28.2% Loans and Advances to Customers (comparable basis) 21,707 16,782 29.3% 272.6 Deposits 18,209 17,309 5.2% Total Shareholders’ Equity 1,940 1,793 8.2% Total Assets 31,939 28,030 13.9% 16.5% PROFIT AND LOSS Net Interest Income 1,038 849 22.2% Net Fee and Commission Income 362 310 16.9% Core Income 1 1,400 1,159 20.8% Total Operating Income 1,484 1,215 22.1% Total Operating Expenses 729 664 9.8% 2003 2004 Group Loans Loans in Greece Greek Market Provisions for loans and contigent liabilities 213 157 36.1% EFG Eurobank Core Profit 2 458 338 35.4% Profit before tax after minorities 513 373 37.5% Profit after tax and minorities 368 273 35.1% 1. Net Interest Income + Net Fee and Commission Income 2. Core Income - Operating expenses - Provisions 4 5 ROE after Tax and Minorities Dividend per Share (€) 2004 2003 ................... ................... 19.7 % 20% 0.72 FINANCIAL RATIOS ROA (after tax) 1.3% 1.1% 15.1 % 0.60 ROE (after tax) 19.7% 15.1% Net Interest Margin 3.4% 3.2% Cost / Income Ratio 49.1% 54.6% Tier I Ratio 8.8% 10.4% Total Capital Adequacy Ratio 10.6% 10.4% Non-Performing Loans Ratio 2.9% 3.3% Coverage Ratio 87.0% 85.0% 2003 2004 2003 2004 DATA PER SHARE Earnings per Share (€) 1.19 0.89 Dividend per Share(€) 0.72 0.60 Dividend Yield 2.8% 3.9% (year-end price) RATINGS Long-Term Financial Strength Short-Term Moody’s A2 C+ P-1 Standard & Poor’s* BBB+ - A-2 Fitch A- B/C-2 F2 * Positive Outlook EFG Eurobank Ergasias ANNUAL REPORT 2004 LETTER TO SHAREHOLDERS Dear Shareholders, tive and flexible products, EFG Eurobank is able to sustain than income growth rates, through technological infrastruc- end of 2004. Institutional investor participation in our share growth rates that exceed the market’s average by far. It is in- ture initiatives aimed at further automation of procedures, im- capital increased to 22.2%, proving that our share has become It is beyond doubt that 2004 was a landmark year for Greece, dicative that, in 2004, we increased our loans by 29.3% (on provement of centralised procurement management, as well which managed to rise successfully to the huge international an attractive option for international investment portfolios. a comparable basis) at Group level and by 28.2% in Greece, challenge of hosting the Olympic Games, by mustering up the as rationalisation of premises. i.e., 11.7% faster than the Banking sector (16.5%). In this way The Bank’s performance for 2004 allows us to recommend entire potential of its society. Today, in the post-Olympic era, Our Group’s strategy also focuses on the regional dimension, we increased our share in the loan market by 1.2 percentage to the Annual General Meeting the distribution of a total divi- we are all prompted to be equally successful in utilising the aiming to establish a strong presence in a promising and de- € points, to 15%. More specifically, household lending increased dend of 0.72 per share (including the interim dividend of benefits we reaped and to create a modern growth model € by 43%, and business lending by 20%. Thus, core income veloping market of more than 50 million people. We have al- 0.30 per share), i.e., an increase of 20% as compared to aimed at the long-term improvement of the country’s status, growth spearheads total operating income growth for the Bank, ready been well placed in Bulgaria, Romania and Serbia - Mon- the dividend for the year 2003. the steady increase in living standards, and the acceleration laying excellent foundations for sound and sustainable prof- tenegro, and we have laid the groundwork for strong growth of convergence with European norms. Such a background The success and dynamic growth of our Bank during 2004 itability in the future. through the implementation of our successful domestic busi- poses challenges for all, especially for the banking system, ness model. The region shows significant growth rates, which enabled us to increase our social contribution and expand ac- which is called upon to perform a new, creative role, and be- Strong growth rates came along with further improvement of should be sustainable in the years to come, since these coun- tivities that demonstrate our inspired participation in the so- come the catalyst of the growth process. loan portfolio quality, which is ensured through strict controls tries are undergoing the transition to free-market economies. cial process. Hence, we remained actively involved in major and an effective, streamlined credit risk management policy. initiatives in the crucial fields of Education, Culture, Sport and As far as our Banking Group is concerned, 2004 has been a In fact, Romania and Bulgaria are expected to enter the Euro- Moreover, the Bank pursues a strict provision policy to ensure the Environment. year of strong growth, new major achievements and interna- pean Union by 2007. full protection against contingencies. tional acclaim. These accomplishments confirm the sound- EFG Eurobank’s growth drive, along with the high quality and The year 2005 has begun very favourably for our Banking ness of our strategy, which aims at establishing EFG Eurobank The strong growth rates for 2004 translated into leading mar- comprehensiveness of its services, were confirmed once again Group. We have mastered the ability to implement unhindered as a strong financial group, a leader in both Greece and the ket shares in sectors highly attractive in terms of both growth by a multitude of distinctions for its performance in 2004, a flexible vigorous growth strategy with a long-term perspec- surrounding region. and profitability, such as consumer credit (30%), mortgages awarded by the most prestigious international and Greek me- tive, regional orientation, sustainable and sound profitability, (12.5%), mutual funds (35.2%) –excluding money market mu- During the past year, EFG Eurobank continued to reinforce its dia: Best Bank in Greece for 2004 by Global Finance, Bank of and targets directly comparable to those of the most efficient tual funds– equity brokerage services (15.3%) and insurance pre-eminence in all sectors of the domestic financial system, the Year 2004 in Greece and Romania by The Banker, Best and successful international banks. services (16%). and in the face of fierce competition showed growth rates that Bank in Greece in Private Banking by Euromoney, Best Do- In the challenging environment that emerges in the Greek econ- 6 outperform by far the market’s average, constantly capturing Our position in wealth management was likewise enhanced – 7 mestic Custodian 2004 by the Global Custodian, Best Phone omy, EFG Eurobank sustains its high growth rates, based on new market shares and attracting thousands of new cus- assets under management reached € 30 billion. By acquir- Banking Service 2004 by the Teleperformance CRM Grand most sophisticated international standards. With accounta- ................... tomers. ing Intertrust, (the firm responsible for managing the mutual ................... Prix, Best E-bank 2004 be RAM Magazine and PC Magazine. bility and confidence in its people’s skills, the Bank is able to funds of leading insurer Interamerican) with funds under man- Moreover, the Bank continued to create the best and most se- play a leading role in the development process and in the do- agement of € 1.8 billion, we consolidated our competitive ad- Our sound prospects for domestic and regional growth, as well cure conditions for establishing its presence in South-East- mestic financial sector, as a partner, supporter of, and par- vantages and further established our leadership in the field of as our strong capital base, engender the brightest outlook for ern Europe, where it is already a key player in the banking sec- mutual fund management. Moreover, our Bank retains its lead- long-term, robust profitability and are acknowledged by Greek ticipant in all current needs of both its retail and corporate tors of the countries in which it operates. ing role in the Private Banking business, as verified by its re- and foreign investors and analysts alike, whose confidence is clients. At the same time, the Bank will continue to justify the Vigorous growth is based on solid and sound foundations, cent nomination by the international magazine Euromoney as reflected on our share price: in 2004 it increased by 64.4%, trust of its shareholders, to create enduring and long-stand- which result from sustaining a strong capital base, ensuring the best Greek bank in this field.