"The momentum of Piraeus Bank Group has been kept at a high pace, and has resulted in total assets of Euro29 bn at the end of September 2006 compared to Euro22 bn a year ago, increased by 32%. Deposits and debt securities amounted to Euro21 bn and loans to Euro20 bn, recording an annual increase of 27% and 31% respectively. Net profit for the 9month period of 2006 reached Euro342 mn, a performance that leads us to the estimation of net profit of over Euro400 mn for the full year 2006. We also anticipate strong growth in profitability for the following year, as our 3-year business plan is being implemented smoothly, targeting at total assets of Euro55 bn at the end of 2009. The increase in profitability led to the BoD resolution on the distribution of an interim dividend of Euro0.32 per share".
Michalis Sallas, Chairman & CEO
KEY POINTS OF 9m 2006 PERFORMANCE:
- Increase of Group''s net profit after tax and minority interests to Euro342.1 mn against Euro136.2 mn for 9m 2005, increased by 151%. Excluding the ING''s capital gain net profit reached Euro236.6 mn
- Profit before tax excluding trading gains totalled Euro264.2 mn against Euro144.2 mn, increased by 83%
- Rise of after tax earnings per share by 134% to Euro1.30 versus Euro0.56 last year
- Rise of net interest income by 26% and net commission income by 29% versus last year
- Maintenance of NIM (net interest income on average interest earning assets) above 3.20%
- Improvement of "cost to income" ratio to 46.6% down from 56.8% last year
- Enhancement of RoE to 29.9% up from 19.5% and RoA to 1.68% up from 1.20% in 9m''05 respectively
- Significant improvement of asset quality with NPLs ratio of 2.44% from 3.80% last year
- Branch expansion to 490 branches in Sept.''06 from 418 branches in Sept.''05. Out of the total of 490 branches 25% have been established in the last two years, which grow at a rapid pace to reach "maturity" status. Creation of 1,015 new jobs: 354 in Greece and 661 abroad.
PIRAEUS GROUP BALANCE SHEET:
At the end of September 2006, the Group''s assets amounted to Euro28,719 mn against Euro21,768 mn in September 2005, i.e. increased by 32%. Loan portfolio posted a significant rise, climbing at the end of September ''06 to Euro19,667 mn with an annual growth of 31%, much higher than the Greek market (19% estimate).
Mortgage lending reported higher increase than the growth rate of the Greek market on an annual basis, i.e. 37%, with balances up to Euro4,157 mn in September 06 against Euro3,036 mn a year ago. Consumer loan portfolio grew by 30% y-o-y, reaching Euro2,836 mn at the end of September ''06 versus Euro2,178 mn a year ago. Total loans to individuals constituted 36% of the loan portfolio at the end of September ''06 versus 35% a year ago.
Loans to small and medium-sized enterprises both in Greece and abroad, a segment in which the Group holds strong position, advanced by 34%, amounting to Euro8,123 mn at the end of September 2006, compared to Euro6,069 mn a year ago. This segment accounts for 41% of the Group''s total loan portfolio.
Loans to medium-large corporates, including shipping, constitute 23% of the total loan portfolio and amounted to Euro4,552 mn at the end of September ''06 versus Euro3,698 mn a year ago, up by 23%.
The loan portfolio quality recorded significant improvement as non-performing loans (NPLs) were 2.44% of gross loans against 3.80% a year ago and 3.41% in December ''05, hence accomplishing the target for NPLs ratio below 2.5% a year earlier. This is an outcome of the implementation of a prudent credit policy, the effective management of the problematic loan portfolio and the write-offs of claims (Euro117 mn in 9m''06 in addition to Euro138 mn write-offs in the full year ''05) against existing provisions (Piraeus Bank, according to Bank of Greece guidance, proceeded to write-offs of consumer loans pasear, a part of which, statistically, is expected to be recovered gradually). The coverage ratio of NPLs is one of the highest in the Greek banking system, reaching 76%, significantly higher than the respective EMU average ratio (65% for Dec.''04).
Deposits, including retail bonds issued that are being sold to customers through the branch network, reached Euro16,869 mn, raised by 23% on a yearly basis, again significantly higher than the Greek market (12% estimate). Savings deposits posted an annual increase of 7%, sight deposits 17% and time deposits, repos and retail bonds issued 32%.
Senior bonds issued by the Bank (through ECP and EMTN programmes), as well as mortgage backed securities reached Euro4,538 mn at the end of September ''06 from Euro2,856 mn a year ago, up by 59%. Subordinated debt and hybrid bonds amounted to Euro1,000 mn at the end of September ''06 compared to Euro600 mn a year ago.
The high growth rate of new customer funds led to a ratio of "loans to customer deposits" equal to 114.4% in Sept. ''06 versus 105.5% in Sept. ''05, while including the debt securities held by institutional investors, mainly abroad, the ratio stands at 90.6% from 86.0% last year.
Total equity of the Group amounted to Euro1,664 mn at the end of September ''06 as opposed to Euro1,380 mn last year (+21%). Shareholders'' funds at the end of September 2006 were enhanced by Euro484 mn (+51%), rising to Euro1,441 mn against Euro957 mn at the end of Sept. 05, due to the significantly increased profitability (+Euro279 mn) and the absorption of Hellenic Investment Company (+Euro205 mn). Total Regulatory Capital of the Group amounted to Euro2,337 mn (estimate) at the end of September ''06, while the capital adequacy ratio is estimated at 11.5% with Tier I at 7.8%.
INCOME STATEMENT ANALYSIS OF PIRAEUS GROUP [Piraeus Bank Beograd (former Atlas Bank) and Piraeus Bank Bulgaria (former Eurobank in Bulgaria) have been acquired and recorded in the Group''s 2005 consolidated financial statements since the beginning of June 2005 and so has Piraeus Bank Egypt (former Egyptian Commercial Bank) since the end of June 2005]
The Group''s net profit after tax and minorities recorded an increase of 151% amounting to Euro342.1 mn, i.e. exceeding by 30% the profit of full-year 2005 (Euro263.8 mn). After tax earnings per share, based on the average number of shares during 9m ''06, were Euro1.30 versus Euro0.56 in 9m ''05, up by 134%.
Piraeus Group''s pre-tax profit for 9m ''06 amounted to Euro423.4 mn compared to Euro203.1 mn for 9m ''05, advanced by 108%. This significant improvement in profitability is mainly attributed to the Group''s organic growth arising from recurring operations, with profit before tax excluding net trading gain and gains from investment securities amounting to Euro264.2 mn versus Euro144.2 mn in 9m ''05, increased by 83%.
Total net revenues excluding net trading gain and gains from investment securities amounted to Euro730.4 mn in 9m ''06 compared to Euro563.2 mn of last year''s 9m period, up by 30%. Including this amount, total net revenues reached Euro889.6 mn, boosted by 43%. Net interest income rose by 26%, amounting to Euro500.5 mn compared to Euro397.2 mn in 9m ''05. Net interest margin (net interest income on average interest earning assets) stood at 3.29% in 9m ''06 against 3.31% in 9m ''05.
Net commission income totaled Euro131.7 mn compared to Euro102.0 mn in 9m ''05, an increase of 29%.
Dividend income reached Euro11.1 mn versus Euro17.1 mn last year, as a consequence of the significant reduction of the trading equity portfolio of the Group.
Net trading income and gains from investment securities reached Euro159.2 mn in 9m ''06 versus Euro58.9 mn a year ago. It should be mentioned that from 2000 onwards, Piraeus Bank Group books Euro90 mn trading gains annually on average, an amount that is expected to be exceeded in the following two years. come, which includes revenues both from other banking and real estate activities, amounted to Euro87.1 mn against Euro46.8 mn for 9m ''05, increased by 86%. The Group''s investments in real estate sector have already begun to bear fruits, constituting 72% of other operating income in 9m ''06 and are expected to continue to generate steady and enhanced revenues in the following years. The remainder 23% of other operating income stems from financial companies and 5% from other subsidiaries.
Operating cost on a comparable basis amounted to Euro384.4 mn versus Euro344.5 mn in 9m ''05, increased by 12%. Total operating cost reached Euro414.2 mn versus Euro353.6 mn a year ago (+17%) including the expenses related to new acquisitions. The rise of cost is mainly due to the dynamic expansion of Piraeus Bank Group in Greece and abroad. In 12-month period, 72 new branches (33 in Greece and 39 abroad) and 1,015 employees (354 in Greece and 661 abroad) were added in the Group.
Staff expenses on a comparable basis amounted to Euro207.5 mn compared to Euro185.7 mn in the previous year, raised by 12%, due to the organic branch network expansion by 17% y-o-y. If the cost of the new banks acquired during the previous year is included, total staff costs amount to Euro218.1 mn versus Euro189.8 mn last year, i.e. raised by 15%. It is noted that, in order to cover the staffing needs of the new branches, which are planned to open in the next quarter - mainly abroad - several employees have been hired and are being trained.
General administrative expenses on a comparable basis in 9m ''06 equalled Euro147.1 mn, versus Euro133.3 mn last year, showing a rise of 10%. This increase is mainly due to the enlargement of the Group''s branch network, in addition to the significant enhancement of activities. With the cost of the newly acquired banks, total G&A expenses amounted to Euro163.4 mn versus Euro137.3 mn last year, rising by 19%.
Profit/loss from property and equipment disposal, which according to IFRS is included in operating expenses, equalled to Euro9.2 mn of profit against Euro4.4 mn of profit last year.
Depreciation expense was Euro41.9 mn versus Euro30.8 mn last year, increased by 36%, mainly related to the amortization of the intangible assets realized by the acquisition of the new banks, reducing respectively the goodwill of the new acquisitions.
The efficiency ratio "cost to income" stood at 46.6% versus 56.8% last year, as a result of the significantly higher revenue growth rate as compared to expenses.
Impairment losses on loans and advances were Euro53.7 mn in 9m ''06 against Euro66.6 mn a year ago, decreased by 19%. This is the outcome of the Group''s prudent credit expansion; the effective loan portfolio management coupled stabilized with business environment have resulted in the improvement of its portfolio quality.
After-tax and minorities ROE reached 29.9% versus 19.5% last year, while after-tax ROA amounted to 1.68% versus 1.20% a year ago.
LATEST DEVELOPMENTS:
On October 10, 2006, Standard & Poor''s has upgraded the long-term credit rating of Piraeus Bank S.A. to BBB+ from BBB, while short-term rating was sustained at A-2. According to the credit agency''s press release, the upgrade "reflects the positive position of the Bank, its successful growth strategy and healthy profitability".
In mid-October 2006, Piraeus Bank proceeded to the issue of a new 5-Year senior bond in the amount of Euro500 mn, under its Euro Medium Term Note (EMTN) Programme.
Recently a real estate investment, City Link building block was completed and by the end of this year it will become fully operational. The Group''s total real estate portfolio is not expected to increase in the following period; the management of the existing portfolio is going to generate increasing revenues in the forthcoming periods.
The stake in Bank of Cyprus is held in the "available forfolio, and has generated a capital gain of more than Euro100 mn, based on yesterday''s closing share price.
PIRAEUS BANK''S SHARE DATA:
In the last twelve months, the closing price of Piraeus Bank''s share fluctuated between Euro23.00 (Adjusted prices, according to the new number of shares of the Bank after the distribution of 1 free share for every 4 old shares, that took place in June 2006), (maximum, on Monday November 6th, 2006) and Euro13.52 (minimum, on 30.11.05). The Bank''s market capitalisation on 07.11.06 was Euro6.1 bn, ranked 8th in ATHEX. The number of outstanding shares of Piraeus Bank at the end of September ''06 was 268,588,043, while the weighted average number of the shares traded during 9m 2006 (excluding treasury stock) was 263,256,466. The liquidity of Piraeus Bank stock in ATHEX remains particularly high, with a percentage of 75.0% (Sept. ''05 - Sept. ''06) compared to 61.2% of the banking index respectively.
INTERIM DIVIDEND DISTRIBUTION:
Piraeus Bank''s Board of Directors on its today''s meeting has resolved to distribute an interim dividend for 2006 period of Euro0.32 per share. It is reminded that the adjusted dividend per share for 2005 was Euro0.40. The record date for the 2006 interim dividend is the November 30, 2006 (ex-dividend the December, 1, 2006) and payment date will be started the 8th December, 2006.