- Net Profits of euro 70.1m, characterized by significantly improved core operating results q-o-q
- Net Customer Loans growth by 16.0% - Household Lending growth well above market (+28.7%), while SME portfolio accelerates by an impressive 50.5%
- Customer Deposits increase by 5.0%, with deposit cost remaining relatively low (2.21%)
- Loans / Deposits ratio still at adequate levels (at 89.0%) to support future growth
- NPLs decline to 7.3% vs 9.7% in H2 2007
- Total capital adequacy ratio at 9.6%, well above the minimum regulatory level
ATEbank exhibited significant improvement in growth and core profitability in the second quarter of 2008. Despite the challenging financial environment, profits after tax and minorities of Q2 08 reached ?40 million compared to euro 30 million in Q1 08.
ATEbank's core profits (before tax and excluding trading income) reached in Q2 08 the record level of euro 69.5 million compared to profits euro 34.0 million in the previous quarter and euro 46.9 million in the corresponding quarter in 2007. The sound core operating performance of the second quarter 2008 was offset by the negative valuations in trading income and as a result the first half 2008 consolidated profits after tax and minority interest reached euro 70.1 million, a decrease of 47.3% compared to H1 2007 when the Bank had recorded significant non-recurring profits from its trading portfolio and sale of non-core participations.
Interest income reached ?552.1 million at the end of June 2008, a 13.3% increase compared to euro 487.5 million at the end of June 2007, as a result of the credit expansion in higher spread banking segments and also the impressive performance of bond related income (+90.1%). On the other hand, interest expenses continued to increase significantly by 33.8% at euro 246.7 million, but at lower pace compared to previous quarters. ATEbank is following a careful expansion in higher interest rate time deposits and as a result in Q2 08 the absolute amount of deposits interest expenses were marginally lower than those of the previous quarter. Because of the above, net interest income returned to positive growth (+0.8%) reaching ?305.5 million. It must be noted that the NII amount of Q2 08 (euro 165.0 million) is the highest absolute figure ATEbank has achieved since the end of 2006.
As a result, the Net Interest Margin, after consecutive quarters of decline, gained 15bps reaching at the end of June 2008 the level of 2.96%.
Net fee and commission income reached euro 34.8 million in H1 2008, which is an improvement over the previous quarter (euro 19.7 million in Q2 08 vs euro 15.1 million in Q1 08). It should be noted, that H1 2007 fees and commissions had increased by seasonal fee income due to the particular timing of the disbursement of agricultural subsidies in 2007.
Other non-interest and non-fee income continued to be impacted by the negative revaluations of trading income reaching euro 38.8 million compared to euro 110.2 million in H1 2007, during which period the Bank had recorded euro 18.5 million non-recurring capital gains from the sale of available for sale shares.
Operating expenses were contained for another quarter reaching euro 254.3 million, an increase of 3.4% from H1 2007. Despite the satisfactory performance at the cost front, the Group cost income ratio, although declined in Q2 08, remained at the high level of 67.1%, due to the slower growth of total revenues as a result of the negative impact from trading income.
According to the IFRS 5 and since ATEbank is in the process of selling a majority stake of its insurance subsidiary, the results of ATE Insurance are reported at a separate line in the Income Statement. In the first six months of 2008 ATE Insurance reported euro 0.5 million profits, however in the consolidated statement it is recorded a euro 4.9 million loss which is the result from excluding the intercompany transactions.
Total loans before provisions at the end of June 2008 reached euro 17.8 billion, an increase of 12.8% compared to the end of June 2007. It should be noted that if adjusted for the euro 366 million loan write-offs during the period July 2007 to June 2008, the underlying expansion of the loan book would have been 15.2%. Net customer loans at the end of June 2008 reached euro 16.8 billion, an increase of 16.0% compared to the end of June 2007.
Household loan portfolio continued to increase with rates significantly higher than the market and as of 30 June 2008 reached euro 6.9 billion compared to euro 5.4 billion as of 30 June 2007, an increase of 28.7%. The mortgage portfolio continued to grow at high rates, by 24.0%, reaching euro 5.6 billion. The consumer loan portfolio expanded at even higher rates by 59.9% reaching euro 959.9 million, while credit card lending growth also accelerated by 37.5%, reaching euro 370.8 million. SME borrowing, which is among the top priorities, marked an impressive 50.5% increase, and as a result the portfolio exceeded euro 1.5 billion.
The strategy of the bank is to continue to target household and SME lending which represent 47.3% of ATEbank's total loan book. Growth of these lending segments already show their positive results regarding interest income but more importantly are transforming significantly the customer profile of the Bank, foster group synergies and enhance overall value.
Total NPL ratio in H1 2008 dropped from 9.6 in H1 07 to 7.3% at the end of June 2008. This shows that the steady efforts and effective approaches ATEbank follows in dealing with an old problem are yielding positive results. As a result, impairment losses remained almost at the levels of the corresponding period in 2007, at euro 41.5 million and within the target of 45-50 bps of average loans. The provisioning coverage ratio, showed a slight improvement compared to the previous quarter standing at the adequate level of 77.4%, despite the euro 366 million of loan write-offs.
Customer deposits increased by 5% y-o-y to euro 20.1 billion, resulting in a loan to deposit ratio of 89.0% ensuring adequate liquidity for future growth. The cost of deposits remains low at 2.21%, despite the intense competition in the Greek market for deposits and the shift of clients towards higher interest time deposits. ATEbank maintains one of the higher percentages of savings deposits amongst Greek banks, at 53%, a significant advantage during periods of turbulence in credit markets.
The impact of the unsteady financial environment has definitely affected the profitability of the H1 2008, resulting in lower financial ratios. As such, the Return on average Assets stood at 0.57% and the Return on average Equity at 10.64%.
Since 1st January 2008, ATEbank is fully compliant with Basel II directives. As such, at the end of June 2008, the Tier I Ratio stood at 7.6% while its total capital adequacy ratio stood at 9.6% well above the minimum regulatory level.
The profitability during H1 2008 was significantly impacted by the turbulence in the capital and credit markets. However, the positive signs observed in ATEbank's second quarter results compared to the two previous quarters, show that the Group is absorbing the negative effects and gradually transforms the growth in new areas to increased income streams. Furthermore, the net income from its core business shows a steady improvement during the last three months.
ATEbank is adequately capitalized, has the advantage of low cost of funding, mainly through its deposits, and the dynamism of an extended branch network in relatively underbanked areas. The use of these tools together with the continuous reduction of the old problematic loans provide the necessary means in order to achieve the Group's challenging 2010 business plan targets.