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AGRICULTURAL BANK OF GREECE S.A.
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Announcement
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May 27, 2008 Net Profits stood at euro 30.3m - Net Customer Loans grew by 12.7% - Household lending expanded above market rate (at 28.7%) and SME portfolio increased by 24.2% - Deposits grew by 3.2% at relatively low cost (2.10%) - Loans/ Deposits ratio remained low (at 84.2%), ensuring adequate liquidity for future growth - Operating expenses grew at moderate rates (+3.7%) - NPLs continued to decline reaching 7.8% in Q1 08 vs 10.3% in Q1 07 - The bank achieved full compliance with Basel II while Tier I ratio remained at satisfactory levels (at 8.21%) ATEbank's consolidated profits after tax and minority interest reached euro 30.3 million in the first 3-months of 2008 compared to euro 74.6 million in the respective period of 2007. The profitability of Q1 2008, compared to the corresponding period in 2007, was affected both by the turbulence in the debt and equity markets as well as by the fact that last year's first quarter results included significant non recurring gains. Interest income from loans reached euro 259.5 million at the end of March 2008, a 12.3% increase compared to euro 239.2 million at the end of March 2007, as a result of the credit expansion. Net interest income reached euro 144.9 million, compared to euro 157.9 million in the corresponding period in 2007, affected by the following factors: - the significant increase of interest expenses as a result of the growth of higher interest rate time deposits, - the pressure in loan spreads due to competition, and- the lower, compared to 2007, average balances of funds placed in the interbank market. As a result, the Net Interest Margin stood at the end of March 2008 at the level of 2.90%. Net fee and commission income reached euro 15.1 million compared to euro 20.0 million in 31 March 2007, when the bank had received significant seasonal income fees. ATEbank is already implementing various measures which are expected to impact positively on future interest and fee income generation while at the same time continue to expand its share in better margin banking segments, such as in retail and SME loans. Other non-interest and non-fee income was negatively affected by weaker equity markets, reaching euro 15.4 million compared to euro 62.5 million during the first 3 months of 2008. This reduction was mainly due to significant differences on net trading income and net gains on disposals of the available for sale portfolio between the two reporting periods. More specifically the main differences include: losses of euro 13 million due to the revaluation of the trading portfolio, a euro 4.4 million reduction in the foreign exchange position and euro 11.4 million from the non-recurring capital gains from the sale of available for sale shares in Q1 2007. ATEbank's cost containment policy continues to bear positive results. As a result, operating expenses showed an increase of 3.7% compared to the corresponding period last year, reaching euro 138.5 million. Total operating expenses would have been even lower if ATE Insurance had not accounted a non-recurring expense of euro 3.5 million, related to a receivable write-off. Despite the moderate cost growth, the Group Cost to Income ratio, increased to 78.9%, due to the low growth of revenues. Total loans before provisions reached euro 16.9 billion at the end of the first quarter of 2008, an increase of 9.2% compared to the end of the first quarter of 2007. It should also be noted that if adjusted for the euro 455 million loan write-offs, during the period April 2007 to March 2008, the underlying expansion of the loan book would have been 12.1%. Net customer loans at the end of March 2008 reached euro 15.9 billion, an increase of 12.7% compared to end of March 2007. The household loan portfolio continued its impressive growth reaching as of 31 March 2008 euro 6.5 billion compared to euro 5.1 billion as of 31 March 2007, an increase of 28.7%, significantly higher than the market growth. The mortgage loan portfolio increased at steady rates, at 25.4%, reaching euro 5.3 billion. The increase of the consumer loan portfolio accelerated further, to 51.3%, reaching euro 884.4 million, while credit card lending accelerated also, by 32.2%, well above market rates, reaching euro 341.4m. Efforts to increase SME loans are starting to show positive signs, with the portfolio growing at 24.2% and reaching euro 1.3 billion. The continuous increase of the household and SME loans' share in the bank's overall portfolio (46.5% in Q108 compared to 39.6% in Q107) indicates the ability of ATEbank to become a major player in areas which until a few years ago it had small presence. The aim is to maintain this pace in order to gain further market share in sectors which can produce relatively higher returns both in interest as well as fees and commissions income. Total NPL ratio dropped from 10.3% in 31 March 2007 to 7.8% in 31 March 2008. The continuous improvement of the loan quality enabled the impairment losses on loans to remain at steady levels, at euro 15.8 million in the first three months of 2008 compared to euro 15.0 million in the corresponding period in 2007, while the provisioning coverage ratio, despite the euro 455 million of write-offs, stood at an adequate level of 75.3%. Customer deposits increased by 3.2% at euro 20.0 billion, resulting in a loans to deposits ratio of 84.2%. Such a ratio, together with the relatively low cost of funding (2.10%), constitutes a significant advantage, especially in the present challenging credit conditions. The negative effects of the financial environment are reflected in the financial ratios of the first quarter of 2008. The Return on average Assets stood at 0.51%, while the Return on average Equity at 8.82%. Since 1st January 2008, ATEbank is fully compliant with Basel II directives. As such, at the end of March 2008, the Tier I Ratio stood at 8.21%. Undoubtedly, ATEbank's 1st quarter 2008 profitability was affected by the negative developments in the debt and capital markets, especially if compared with the corresponding period in 2007 when the Bank had significant non-recurring revenues and trading gains. Nevertheless, during this first quarter ATEbank presented a remarkable growth in all retail lending segments gaining market share, continuous improvement of its loan quality and moderate cost growth. These achievements combined with sufficient liquidity and relatively low cost of funding provide the necessary means to promote profitability in the near future in order to achieve the Group's challenging business plan targets for 2010.
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