Year 2005 is portrayed by the considerable effort put into the restructuring of our Bank. The restructuring has been completed, to a large extent, by the end of 2005.
The new structure has been implemented in the first quarter of 2006: Now, all of our customers, both individuals and small or large businesses have a dedicated account officer responsible for offering tailored services and products. This new commercial approach has already generated encouraging results.
However, a new and comprehensive credit portfolio review, carried out with the assistance of Societe Generale experts, revealed the need for additional provisions, amounting to euro 28.2m. These additional provisions are relating to the application of stricter credit-worthiness criteria for the assessment of retail customers and the increase of the bad debt coverage ratio for certain corporate loans. In the future, and notwithstanding an unpredicted worsening of the economic environment, the implementation of our credit monitoring policies will lead to more modest profit or loss charges for credit risk, well aligned with the production of new loans.
Substantial growth has been achieved in the retail banking segment. In particular, consumer and mortgage loans show a year-on-year increase of 22.5% and 28%, respectively. In addition, SMEs and professionals market segments have achieved the addition of 640 new customers.
As at 31 March 2006, total loans and advances, net of provisions, show a year-on-year increase of 15% (1.4% increase over 2005 year-end), amounting to euro 2.6 billion.
Total customer deposits, amounting to euro 2.4 billion, remain at the same level, approximately, with December 2005. Sales of new products, such as ΑΝΕΤΑ (3.848 new contracts) and mutual funds (euro 25.3m increase), are the leading indicators of the forthcoming increase in our volumes.
Operating income has decreased by 3.8% (2006-Q1 over 2005-Q1). This is mainly attributable to the impact of the implementation of International Financial Reporting Standards (IFRS).
Operating expenses have increased by 4.3% reflecting strict cost control on administration expenses; the modest increase is mainly attributable to significant investments for the refurbishment / expansion of our branch network. In particular, six new branches and 6 existing branches have been refurbished during the 1Q of 2006.
With the support of Societe Generale Group and based on its new structure, Geniki Bank is now stronger and ready to reap the benefits of growth in the Greek banking market.