Balance sheet and profit and loss account for financial year 2007 At its meeting on 17 March 2008, the General Council of the Bank of Greece approved the Bank's audited Annual Accounts for the year ending 31 December 2007.
The Bank's net profits in 2007 amounted to euro284.7 million, compared with euro244.6 million in 2006, thus increasing by 16.4%. The total dividend per share that will be proposed to the General Meeting of the Bank's shareholders for distribution comes to euro3.20, compared with euro2.90 for financial year 2006 (+10.3%).
On the basis of the closing price of the Bank's share on 31 December 2007 (euro92), the dividend to be proposed for distribution corresponds to a return of 3.5%.
An amount of euro36 million from the profits of 2007 has been allocated to the extraordinary reserve, which came to euro55 million.
Analysis of the profit and loss account for 2007
Income
The Bank's total net income in 2007 was slightly lower than in the previous financial year (having decreased by 0.6% to euro825.5 million, from euro830.9 million in 2006).
This result was primarily due to the decrease in profits from swap transactions, which, as in the previous year, were carried out following an approval by the ECB in order to increase the special provision for the Bank's future liabilities to its personnel social security funds. Reduced profits from swap transactions (euro93.4 million in 2007, compared with euro204.4 million in 2006) were the main determinant of the decrease in the total net result from financial transactions (euro104 million in 2007, from euro241.7 million in 2006).
By contrast, net interest income, being the Bank's primary source of income, recorded a significant increase of 27%. Net income from commissions increased by 8.1%, while other income increased by 18.4%.
Specifically:
- Net interest income came to euro540.9 million, from euro426.0 million in 2006, due to the high returns on the assets included in the Bank's portfolios.
- Net income from commissions came to euro131.7 million, from euro121.8 million in 2006. This income mainly concerns commissions received by the Bank from the Greek State for transactions conducted on the latter's behalf, as well as commissions from the management of the Common Capital of Legal Persons in Public Law and Social Security Funds.
- Other income came to euro48.9 million, from euro41.3 million in 2006. They concern income from the activities of the Banknote Printing Works (IETA) of the Bank of Greece, income from participating interests, as well as the amount from the reallocation of the Eurosystem's monetary income. It should be noted that other income does not include income arising from the Bank's allotted share in the ECB's income on euro banknotes in circulation and in the ECB's net profits, since the ECB, in 2007 as in previous financial years, retained the full amount of its surplus, including income from its share (8%) in the total value of euro banknotes in circulation issued on its behalf. This surplus was set aside in a provision against future foreign exchange rate, interest rate and gold price risks.
Expenses
Total expenses in 2007 were lower than in the previous financial year (having decreased by 7.7% to euro540.8 million, compared with euro586.2 million in 2006).
Reduced provisions contributed decisively to this development. Specifically:
- Total provisions made during financial year 2007 came to euro148.1 million, compared with euro227.6 million in 2006. This decrease concerns the Bank's provision for future liabilities to its personnel social security funds, which came to euro93.4 million, from euro204.4 million in 2006. These sums concern profits from swap transactions conducted with the ECB's specific approval.
- The Bank's operating expenses excluding provisions (staff costs, pensions, administrative and other expenses, depreciation) increased by 9.5% to euro392.7 million (2006: euro358.6 million, with an increase of 11%). Operating expenses were substantially affected by:
- the increase in payments for staff retirement. As in the previous financial year, a significant number of employees retired in 2007 (158);
- the increased depreciation of euro banknote printing costs;
- the increase in other expenses, including the Bank's aid to fire victims. It should be noted that the increase in expenditure for wages and other staff payments was contained at 6.7%, despite the extraordinary expenses for the reorganisation of the Bank. The corresponding increase in 2006 was 6.1%. Major developments in the Bank's balance sheet items during financial year 2007 Gold
The Bank's total reserves in international standard gold amount to 4.6 million ounces (143.2 tonnes), having recorded a slight increase of 25 thousand ounces compared with the previous financial year. The increase in the value of gold in euro was more substantial, having come to euro2.6 billion on 31 December 2007, from euro2.2 billion on 31 December 2006.The increase of euro406 million is associated with the rise in the price of gold.
The total amount resulting from the continuous rise in the price of gold in the past few years comes to euro961.3 million. This amount, which has been transferred and kept in an adjustment account, represents a buffer reserve for future potential adverse developments in the price of gold.
Euro banknote circulation
In financial year 2007 the Bank's share in total euro banknotes in circulation increased by euro1 billion and came to euro16.3 billion on 31 December 2007, compared with euro15.3 billion on 31 December 2006. This increase is attributed to the rise of euro50 billion in the total value of euro banknotes in circulation, which came to euro677 billion on 31 December 2007. This change had a positive effect on the Bank's results, since it is associated with the substantial decrease of euro2.5 billion (annual average decrease in 2007) in the Bank's liabilities to the ECB from the TARGET account balance and, therefore, with the decrease in interest paid by the Bank in 2007 on these liabilities.
Portfolio management In financial year 2007 the bulk of the Bank's managed portfolios continued to consist of Greek government bonds and euro-denominated government paper issued by other euro area countries. This choice resulted in limited exposure to foreign exchange risks and risks of changes in the price of securities, taking into account the conditions that prevailed in the markets in 2007, especially the continuing appreciation of the euro vis-a-vis the major foreign currencies.
Monetary policy conduct
In the context of the single monetary policy conduct in the euro area countries, the Bank provided the necessary liquidity to the credit system, the average level of which amounted to euro4.7 billion in the course of 2007. Adjustment of the value of real estate
The Bank adjusted the book value of its real estate to its reasonable (market) value, as determined by independent appraisers. The resulting surplus value (euro71.5 million) was transferred to a special reserve created by the adjustment of the value of real estate, which amounted to euro541.6 million. Reorganisation of the Bank
The administration of the Bank of Greece, taking into account the new conditions created within the Eurosystem, made in agreement with the association of the Bank's employees, organisational adjustments to its units.
The arrangements made in 2007 concerned organisational changes to Head Office units and a reduction in the network of the Bank's Branches and Agencies. Similar arrangements will be made in the coming years.
It should be noted that almost all other national central banks of the Eurosystem have made organisational adjustments and significant reductions of their branch network.
Balance sheet as at 31 December 2007