27 February 2006

FULL YEAR 2005 FINANCIAL RESULTS

According to International Financial Reporting Standards (IFRS)

- Operating income growth of 7.4% (euro820m)
- Flat operating expenses due to cost containment efforts (euro507m)
- Net profit of euro139m, implying Return on equity of 13.7%
- Tier I capital adequacy ratio of 12.0% following euro1.25bn rights issue
- Provisioning coverage ratio increased to 87.5%

ATEbank announces increased profitability for the full year 2005 compared to 2004, primarily due to increased interest income, but also due to the containment of the rate of growth of operating expenses. In particular, consolidated profits after tax and minority interest for the year 2005 reached euro139 million.

Net interest income increased by 8.9% reaching euro603 million. It should be noted that 2004 net interest income includes non-recurring income of euro60 million that was recognised pursuant to the restructuring of loans under the law 3259/04 on "Panotokia". On a recurrent basis, net interest income grew also by 8.9% reaching euro543 million.

Non-interest income increased by 3.5% reaching euro217 million.

As a result, operating income increased by 7.4% to euro820 million on a reported basis, and by 7.3% to euro760 million on a recurrent basis.

Crucial in the development of the consolidated operating results was that operating expenses increased by just 0.2% versus 2004 reaching euro507 million. This was the result of the cost containment policy that is being implemented throughout the ATEbank Group of companies. As a result, the Group cost income ratio was 61.8% in 2005, compared to 66.3% in 2004 on a reported basis, and 66.7% compared to 71.5% on a recurrent basis.

The size of the loan book as of 31 December 2005 was flat compared to 31 December 2004 at euro14.3 billion. However, it should be noted that the underlying expansion of the loan book, i.e. adjusted for write-offs of loans, was 3.4%. The lower than expected growth rate is primarily due to a 7.9% drop in the volume of public sector lending compared to 2004. Other factors included the occupation of a significant proportion of employees in the implementation of the Panotokia law during the first half of 2005 and the employee strike in June 2005.

It should, however, be noted that as a result of the increased focus on the mortgage lending market through the introduction of new competitively priced products and aggressive marketing campaigns, the mortgage book grew by 41% compared to 2004 and average monthly mortgage disbursements in H2 2005 increased by 179% compared to H1 2005 reaching euro126 million. Over the next years, ATEbank aims to leverage its widespread branch network, in order to gain market share in retail and SME lending.

The Net Interest Margin (recurrent net interest income over average total assets) stood at 3.04%, notwithstanding the 115% increase in low yielding interbank loans to euro2.4 billion that was primarily due to the euro1.25 billion share capital increase that was completed at the end of June 2005.

As a result of a restatement of the historical accounts, which increased historical provisions by euro496 million, the provisioning coverage ratio reached 87.5% as of 31 December 2005. At the same time, ATEbank proceeded with euro717 million of loan write-offs, of which euro409 million pursuant to the restructuring of loans under the Panotokia law. Pursuant to the aforementioned initiatives and other loan restructuring actions, the quality of the Bank?s loan book has significantly improved, with the total NPL ratio dropping from 18.7% as of 31 December 2004 to 13.7% as of 31 December 2005. Further improvement in asset quality is expected in 2006 due to loan restructurings and write-offs.

Impairment losses on loans amounted to euro127 million, compared to euro110 million in 2004. However, it should be noted that euro60 million of these provisions were undertaken pursuant to the aforementioned restructuring of loans under the Panotokia law. In light of the strong provisioning level following the aforementioned restatement, ATEbank plans to reduce its annual provision charge going forward to less than euro80 million, improving the expected profitability of the Group.

Customer deposits increased by 3.6% compared to 31 December 2004 at euro17.6 billion, resulting in a loans to deposits ratio of 81.1%.

The cost containment coupled with the significant increase in revenues led to robust growth in profits attributable to shareholders that amounted to euro139 million (euro145 million on a recurrent basis), implying EPS of euro0.15. Return on average Assets stood at 0.71% (0.74% on a recurrent basis), while the Return on average Equity, adjusted for the euro1.25 billion share capital increase, reached 13.7% (14.3% on a recurrent basis).

Following the completion of the euro1.25 billion rights issue, ATEbank has restored its capital adequacy. At the end of December 2005, the Total BIS Ratio stood at 13.8% and the Tier I ratio reached 12.0%.

The evidenced positive development in the financial figures of the Bank and the turnaround of all the companies in the Group into profitability are the result of an intensive effort that is being made throughout the Group at an operational and organizational level, within the framework of the ongoing restructuring and growth initiatives of Management.

As a result of the strong financial performance of the Bank and the Group of Companies, ATEbank has revised its business plan and has set the following financial targets for the Group for the 3-year period 2006-2008:
- Return on adjusted equity of 19-21%
- Tier I ratio in excess of 10%
- Cost income ratio of 50-53%
- NPL ratio of 6-7%