Financial Results for the 9-month period 2003
NBG Group profit before tax and minorities amounted to 387.4 million euros, an increase of 40% compared with the same period in 2002. Accordingly, the Group's profit after minorities posted growth of 38.4%, totaling 382.5 million euros in the first 9 months of 2003. This improvement in the Group's profit reflects the 10.6% increase in core operating income and the containment of staff costs and administrative expenses at 2002 levels.
Quarter-on-quarter, Group profitability maintained momentum. Core operating income for the quarter was maintained at the highest level of recent years (429.4 million euros). Profit before tax and minorities amounted to 125.3 million euros, down from 150.7 million euros, principally due to the decline in trading gains in Q3 2003.
Group net interest income rose by 9.5% to 960.6 million euros, as compared with 876.9 million euros in the first three quarters of 2002. Despite the 50 bp reduction in ECB interest rates in June 2003, Group net interest margin in Q3 2003 remained at the historic high of the first half of the year (263 bps), a substantial improvement on 2002 (243 bps). This reflects the ongoing improvement in the mix of the Group?s loan portfolio, with retail lending portfolios gaining in importance.
There has been a very marked improvement in net commission income, up 14.9% vis-a-vis the same period in 2002, totaling 285.7 million euros in the first 9 months of 2003. It is notable that commissions growth has accelerated, underlined by the fact that both H1 2003 growth vis-a-vis H1 2002 growth was 7.9%, and q-o-q growth was 8%. This dynamic performance reflects a broadening of loan activity, mainly in retail banking. The contribution of trading gains to total income declined to just 3.4% in Q3 2003, from 7.1% in Q2. This means that recurring sources of income stood at 94.4% of total income in the first 9 months of 2003, compared with 93.3% in H1 2003, implying a further reduction in the volatility of the Group's results. The restrained increase in operating expenses, by just 0.5% in the first three quarters of 2003 compared with the corresponding 9 months of 2002, was another significant contributing factor to the Group's strengthened profit.
Specifically, staff costs were broadly unchanged relative to 2002 (9-month 2003: 541.8 million euros, 9-month 2002: 540 million euros). In addition, other expenses rose marginally by 0.8% vis-a-vis the first 9 months of 2002. Accordingly, the Group's efficiency ratio for the first 9 months of 2003 stood at 66.5% as compared with 71.7% in 2002; excluding trading gains, the efficiency ratio shows a further improvement to 70.4% in the first 9 months of 2003 from 75.1% in the corresponding period in 2002.
Group lending stood at 21.9 billion euros, up 9.5% on an annualized basis since the end of 2002. Indeed, growth in the retail banking loan portfolio has accelerated further. Total consumer credit (credit cards and loans) increased on an annualized basis by 22.5% vis-a-vis the end of 2002, while mortgage loans grew by 18.5%.
Loan generation in the retail-banking segment has also continued to be brisk. For instance, disbursements of consumer loans grew q-o-q by 30%, and mortgages rose by 21%. In total, consumer loans in the first 9 months of 2003 were in the region of ?700 million, up 27.5% over the corresponding period in 2002. Likewise, mortgage disbursements increased to around 1 200 million euros, up 29% over the corresponding period in 2002.
Lending to small business and professionals posted growth of about 50% on an annualized basis, with the credit balance exceeding 700 million euros. NBG's customer base in this segment has been growing at similar rates. It should be noted that, at the end of Q3 2003, retail lending (mortgages, credit cards, consumer loans and lending to professionals) exceeded corporate lending for the first time in the history of NBG. This serves to underline the success of the Bank's strategic decision to strengthen its retail banking operations.
Furthermore, lending to medium-sized enterprises has posted a substantial 19% increase on an annualized basis since the beginning of the year. The number of customers in this segment has grown by 12% over the same period.
Growth in the loan portfolio has been accompanied by an improvement in its quality, reflected by the reduction in the absolute level of non-performing loans. This performance has led to a further reduction in the ratio of NPLs to total Group loans to 6.5% in the first 9 months of 2003, compared with 7.0% at end-2002. At the same time, the percentage of NPLs covered by provisions (provisions coverage) rose from 70.9% at end-2002 to 75.1% in Q3 2003.
Group funds under management stood at 47 billion euros in September 2003, up 6.6% ytd, despite the reduction in interest rates. Sight and savings deposits grew by 2.8% ytd, while the 7.3% decline in time deposits and repos was wholly offset by the impressive growth in the Group?s mutual fund assets (up 72% ytd), within the context of the Bank?s strategy to offer the public alternative savings and investment products. As a result of this policy, NBG?s share in the mutual funds market grew substantially from 16 .7% at end-2002 to 24.2% in September 2003.
The Group's international network made a substantial contribution to earnings, which, after minority rights, amounted to ?89 million, or 23% of total Group profits.
The Group's capital adequacy ratio (Τier I) stands at approximately 9.7%, boosted by the ?350 million hybrid Tier I note issue in July 2003 and the use of an internal Value-at-Risk model, recently approved by the Bank of Greece, for the calculation of market risk capital requirements. The total capital adequacy ratio, including Tier II capital, is estimated at 12.9% compared with 10.4% at the end of 2002.
Given these results, Group after-tax return on average equity is calculated at 14.0% compared with 8.7% in 2002, while before-tax ROAE has improved from 14.3% to 20%. Group return on average assets rose to 97 bps in the first 9 months of 2003, from 66 bps in 2002.