- Resilient core business performance despite deteriorating global economic environment - Net profits stood at euro 27.8m affected by pre-emptive increase in provisioning and financial crisis - Total loans grew by 21.9% - Household lending expanded above market rate by 26.4% and SME portfolio accelerated further to 61.9% - Deposits grew by 1.6%, due to controlled growth of higher-cost term deposits - Operating expenses grew at moderate rates (+5.7%) - NPL ratio at historical low levels (5.6% vs 7.3% in Dec 07) - Pro-forma Capital Adequacy and Tier I ratios (13.8% and 11.4% respectively) confirm a solid capital base
In a year of extraordinary turmoil for the global economy ATEbank has exhibited a resilient core business performance. In such an uncertain environment, ATEbank's main priority is to preserve the quality of the balance sheet, to sustain a solid capital base and to maintain a satisfactory liquidity position.
ATEbank's consolidated profits after tax and minority interest reached euro 27.8 million in 2008 compared to euro 241.4 million in 2007. The decrease in profitability was mainly affected by: i) the pre-emptive increase in provisions due to worsening macroeconomic conditions, ii) the negative result in trading income due to the turbulence in the financial markets and iii) the fact that last year's results included significant non recurring gains.
Interest income from loans reached euro 1220.1 million at the end of December 2008, a 20.7% increase compared to euro 1011.2 million at the end of December 2007, as a result of credit expansion and significant interest revenues from bonds. Net interest income reached euro 625.4 million, compared to euro 614.9 million in the corresponding period in 2007, up by 1.7%, affected by the significant increase of interest expenses as a result of the growth of higher interest rate time deposits and the exceptionally high interest rates in the interbank market especially during the last quarter of the year. As a result, the Net Interest Margin stood at the end of December 2008 at the level of 2.86%.
Net fee and commission income reached at the end of December 2008 euro 89.4 million, an increase of 5.8%, including a non-recurring amount of 8.4 million in Q3 2008.
Other non-interest and non-fee income was negatively affected by weaker equity markets, reaching euro 92.0 million compared to euro 251.3 million during 2007. This reduction was mainly due to significant differences on net trading income between the two reporting periods (total difference euro 73.5 million) and non-recurring capital gains of euro 71.1 million on disposals from the available-for-sale portfolio in 2007.
Operating expenses were 5.7% higher compared to last year, reaching euro 600.4 million. This was mainly attributed to a 19.9% increase in other operating expenses mainly due to the cost of the move of the IT center to new offices and higher third party fees. As a result, the Group Cost to Income ratio stood at 74.4%.
Total loans before provisions reached euro 21.7 billion at the end of December 2008, up by 21.9% compared to the end of December 2007 and well above market. Net customer loans at the end of 2008 reached euro 20.9 billion, an increase of 24.5% compared to 2007.
Total household loan portfolio continued its impressive growth reaching euro 7.8 billion as of 31 December 2008 compared to euro 6.2 billion as of 31 December 2007, an increase of 26.4%, significantly higher than market growth.
The mortgage loan portfolio increased satisfactorily, at 20.8%, reaching euro 6.1 billion. The rate of increase of the consumer loan portfolio slowed down marginally in Q4, to 55.4%, reaching ?1.2 billion, while credit card lending growth also decelerated slightly in Q4, to 46.5%, reaching ?451.7m. Growth of SME loans gained further momentum, with the portfolio increasing by 61.9% to ?1.8 billion, albeit from a low base. High penetration of the SME segment will intensify further in 2009 as ATEbank has a leading position in granting loans via the credit guarantee fund for small businesses (the so-called TEMPME) as it has approved since December 2008 7,500 applications for working capital loans worth ?563 million.
The sustained high rates of increase of the household and SME loans (they now represent 44% of the bank's overall portfolio vs 41% in 2007) indicate the determination and ability of ATEbank to become a major player in markets where until a few years ago it had a very small presence. During the current unstable economic conditions, the aim is to maintain and if possible to gain further targeted market share in sectors which can produce relatively higher returns, without however compromising loan quality which remains a major strategic priority for ATEbank.
Total NPL ratio continued its downward trend reaching in the end of December 2008 the historical low level of 5.6% compared to 7.3% in the end of December 2007. Despite the steady decline of the NPL ratio, ATEbank increased pre-emptively in Q4 2008 the impairment losses, by euro 134 million, raising the annual 2008 provisions to euro 204.2 million compared to only euro 79.9 million in 2007. In 2009, ATEbank plans to sustain a high, but evenly distributed among quarters, average level of cost of risk, bolstering its defenses against the unavoidable negative impact of the deteriorating environment on loan quality. Moreover, the increase will contribute maintaining a satisfactory provisioning coverage ratio, which, due to the euro 412 million of write-offs during the period December 2007-December 2008, declined slightly to 66.0%. It must be noted, though, that due to write-offs of NPLs which carried limited collaterals, the ratio of NPL collaterals over the total remaining NPLs has significantly increased.
Customer deposits increased by 1.6% to euro 21.0 billion, mainly affected by ATEbank's reluctance to follow the competition in offering very high rates on time deposits. As a result of the moderate increase of deposits and the high year end seasonal bridge finance public sector loan for the distribution of agricultural subsidies, the loans to deposits ratio stood at the end of December 2008 at 103.3%. However, it must be noted, that since February 2009 the ratio has dropped again below 100%. For 2009, ATEbank aims at a more balanced increase between loans and deposits in order to sustain a loans to deposits ratio which will allow funding asset growth mainly with customer deposits.
ATEbank, following the issuance of euro 675 million preference shares to the Greek State, under the Government's euro 28 billion package for banks, enjoys a strong capital and liquidity position. Pro-forma Tier I capital ratio is estimated at 11.4% and total capital adequacy ratio at 13.8%.
Undoubtedly, ATEbank's profitability in 2008 was strongly affected by the pre-emprive increase of provisions and the negative developments in the debt and capital markets, especially if compared with 2007 when the Bank had significant non-recurring revenues and trading gains. Nevertheless, ATEbank presented in 2008 a resilient performance and growth in its core business, gaining market share in the retail segment and further improving its loan quality. ATEbank has the capacity and capability, with steady and safe steps, to face successfully the difficult economic environment and help stimulate economic activity by predominantly financing households and small enterprises.
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