em
08
financia
l sta t
eme
nts
for
th
e
ye
ar
en
de
d
31
c de
0 r2 e b
Piraeus Bank Romania Annual Report 2008
Piraeus Bank Romania - Annual Report 2008
Annual Report 2008
Contents Letter from the Chairman............................................................ Key Figures 2008....................................................................... Corporate Profile......................................................................... The Executive Management....................................................... Macroeconomic Environment..................................................... 2008 Business Overview............................................................. Corporate Banking 2008............................................................. Retail Banking............................................................................. SME Sector................................................................................. Branch Network.......................................................................... Treasury Operations................................................................... Human Resources...................................................................... Outlook for the future.................................................................. Subsidiaries................................................................................ Financial Statements prepared in acordance with IFRS
2 3 4 5 6 8 14 16 19 20 20 23 29 31
1
Piraeus Bank Romania - Annual Report 2008
2
Letter from the Chairman Dear Shareholders, Dear Customers, Dear Employees, The past year 2008 turned out to be a crucial year, with negative macroeconomic developments and high volatility for the world economy. Despite the fact that the first signs of the international crisis made their appearance during the second half of 2008, Piraeus Bank Romania managed to foresee the upcoming turmoil and take the relevant preventive measures so as to minimize any risks, both for the bank and its customers. The network of Piraeus Bank Romania amounted to 180 branches in 2008, a 64% increase compared to the 110 branches operating in 2007. This fact constitutes a solid base for the future growth of a Bank based on excellent customer service. The network expansion, coupled with the creation of SME–targeted and retail products, laid the foundation for the Bank’s development with a direct impact on the growth of its balance-sheet and Net Income. Therefore, apart from its lending expansion, the Bank also achieved a remarkable increase of its deposit base by 82% throughout the year, fully aligned with the Group’s liquidity strategy. The total assets of the Bank increased by 41% yoy in 2008, while the growth in loans significantly outperformed the sector’s growth in 2008. Concerning the subsidiaries of Piraeus Bank Romania, Piraeus Leasing Romania continued to grow in 2008 with total assets amounting to €345mn and loans to €265mn. Furthermore, there was a significant growth of the operations of Piraeus Insurance Reinsurance Brokerage Romania, and Piraeus Securities Romania. The 2008 success story has mainly resulted from the industrious Management efforts, in parallel with the high quality and spirit of our personnel. From a wider perspective, Piraeus Bank Group maintains its considerable geographic dispersion of activities outside Greece with established presence in 9 countries, with four of them being European Union members. The Romanian subsidiary is the largest foreign subsidiary of the Group as it currently holds approximately 10% of the Group’s total assets with a large and constantly growing customer base. Throughout 2008, Piraeus Bank Romania has successfully maintained one of the top positions among all financial institutions in Romania. In 2009, the Bank will realise its commitment for steady and intense progress, enrichment of product portfolio, new alternative channels of business activities as well as continue to respond in full to its customers’ needs. Piraeus Bank Romania is a well-established, dynamic, flexible and customeroriented Bank in the Romanian market. With the highest sense of responsibility, we will keep upgrading and updating our products and services so as to thoroughly meet the enhanced requirements of our clientele. The successful implementation of the objectives set for 2008, the dynamism of the Bank, the high expertise of our human resources in combination with our customers’ trust constitute a guarantee for our consistent progress within 2009 as well. In conclusion, as Piraeus Bank Romania continues to implement its strategy, I would like to thank you and all the dedicated and skilled employees of Piraeus Bank Romania, for the invaluable support during this journey of growth and their key role in achieving all our good results.
Stavros Lekkakos Chairman
Piraeus Bank Romania - Annual Report 2008
3
Key Figures 2008 2008 €MN
2007 €MN
109.26
60.02
net fee and commission income
34.80
22.98
net trading income
40.08
14.72
1.01
2.47
operating income
185.14
100.19
loan loss provisions
35.77
21.78
operating expenses
95.31
55.10
profit before tax
54.06
23.31
7.83
5.97
46.24
17.34
2008 €MN
2007 €MN
2,372.70
1,697.44
4,349.14
2,874.30
total loans
1,671.37
1,160.46
assigned loans
1,976.44
1,176.86
total loans, including the assigned loans 3
3,647.81
2,337.32
due to customers
1,000.97
550.56
290.00
272.99
INCOME STATEMENT
1
net interest income
other net operating income
income tax net profit for the year
BALANCE SHEET
2
total assets total assets, including the assigned loans
shareholders’ equity 1) 2) 3)
3
The € equivalent of income statement figures has been calculated using the RON/€ average exchange rates published by the National Bank of Romania for 2007 and 2008 (i.e. 2007: 3.3373 RON/ 1€; 2008: 3.6827 RON/ 1€). The € equivalent of balance sheet figures has been calculated using the RON/€ year end exchange rates published by the National Bank of Romania (i.e. Dec.31, 2007: 3.6102 RON/ 1€; Dec.31, 2008: 3.9852 RON/ 1€). Assigned loans are loans originated in Piraeus Bank Romania and assigned to Piraeus Bank- London Branch; Piraeus Bank Romania continues to administrate those loans, being remunerated for the services provided.
Piraeus Bank Romania - Annual Report 2008
2008 %
2007 %
51.48%
54.99%
3.21%
2.05%
return on average equity
15.67%
9.11%
return on average assets
2.06%
1.77%
12.10%
19.21%
2008 1,946 180
2007 1,394 110
RATIOS cost-income ratio 4 loan provision ratio
5
capital adequacy ratio, Tier II 6 STAFF & NETWORK employees 7 branch offices 4) 5) 6) 7)
4
Cost-income ratio as a percentage of operating expenses (staff, administrative and depreciation expenses); there were no exceptional expenses which might influence the level of this efficiency ratio. Loan loss ratio as a percentage of the loan provisions in total loans (excluding the assigned loans); for the assigned loans also the risk has been transferred. Statutory figures. Full-time employees
Corporate Profile Piraeus Bank Group is one of the most dynamic and active financial organisations in Greece today. Founded in 1916, Piraeus Bank went through a period of state-ownership and management (1975-1991) before it was privatised in December 1991. Since then, it has continuously grown in size and activities. Along with its organic growth, Piraeus Bank made a series of strategic moves with the goal of establishing a strong presence in the domestic market. Thus, in 1998, the Bank absorbed the activities of Chase Manhattan in Greece, took over controlling interest in Macedonia-Thrace Bank and acquired the specialised bank Credit Lyonnais Hellas. At the beginning of 1999, the Bank acquired Xiosbank and absorbed the activities of National Westminster Bank Plc in Greece. In June 2000, the Bank unified its three commercial banks in Greece (Piraeus Bank, Macedonia-Thrace Bank and Xiosbank), creating one of the three largest private sector banks in Greece. In early 2002, Piraeus Bank acquired the Hellenic Industrial Development Bank (ETBAbank). ETBAbank was absorbed by Piraeus Bank in December 2003. Also, at the beginning of 2002, a strategic alliance agreement for the Greek market was signed between Piraeus Bank Group and ING Group, focused in the field of bancassurance, which was renewed for 10 more years in October 2007. In early 2005, Piraeus Bank Group, implementing its strategy for expansion in Southeastern Europe and Eastern Mediterranean markets, acquired the Bulgarian Eurobank (renamed into Piraeus Bank Bulgaria), strengthening its presence in Bulgaria, while the merger of Piraeus Bank branches in Bulgaria with Eurobank was completed in March 2006. Furthermore, in 2005, it entered into the Serbian market by acquiring Atlas Bank (renamed into Piraeus Bank Beograd), and into Egyptian market by acquiring Egyptian Commercial Bank (renamed into Piraeus Bank Egypt). Finally, in 2007, Piraeus Group expanded its international presence in Ukraine by acquiring the International Commerce Bank (renamed into Piraeus Bank ICB) and in Cyprus (Piraeus Bank Cyprus) by getting the approval to operate a banking institution and by the acquisition of the Arab Bank Cypriot network.
Piraeus Bank Romania - Annual Report 2008
5
Today, Piraeus Bank leads a group of companies covering all financial and banking activities in the Greek market (universal bank). Piraeus Bank possesses particular know-how in the areas of retail banking, small and medium-sized enterprises (SMEs), capital markets and investment banking, leasing. These services are offered through the Bank's nation-wide network and also through the electronic banking network of winbank. The latter was launched in the beginning of 2000, as the first complete electronic banking service in Greece, offering a full set of services through four different channels of distribution (Internet, mobile phone, call centre and ATMs). Piraeus Bank Group has a growing international presence, focused in Southeastern Europe and Eastern Mediterranean, but also in the financial centres of London and New York. In particular, the Group is present in the USA through Marathon Bank, based in New York with 14 branches, in London with a branch of Piraeus Bank, in Albania through Tirana Bank with 45 branches, in Romania through Piraeus Bank Romania with 180 branches, in Bulgaria with 94 branches of Piraeus Bank Bulgaria, in Serbia with 47 branches of Piraeus Bank Beograd, in Ukraine with 85 branches of Piraeus Bank ICB, in Cyprus with 14 branches of Piraeus Bank Cyprus and in Egypt with 57 branches of Piraeus Bank Egypt. The main medium term goals of Piraeus Bank Group are to maintain a balanced growth in terms of loans and deposits, achieve high efficiency and sustain superior asset quality. Piraeus will continue to focus on SMEs and retail banking segments, where it holds strong expertise, while capitalizing on its young branch network, both in Greece and abroad. The Group's fundamental policy direction for human resources development is based on the efficient management of human resources, leading to the creation of skillful and dedicated personnel able to function within the framework of the competitive EU banking market. At the end of December 2008, the Group employed 14,255 people. At the end of December 2008, Piraeus Bank Group had a network of 895 branches (358 in Greece and 537 abroad) and its equity capital amounted to €3,025 mn. The clients' deposits, repos and retail bonds issued amounted to €31,294 mn, loans reached €39,016 mn and total assets were €54,890 mn.
The Executive Management Mr. Stavros Lekkakos, Executive General Manager (CEO - until June 4, 2008) Mr. Catalin Parvu, Executive General Manager (CEO - starting June 4, 2008)
Board of Directors: Mr. Stavros Lekkakos, Chairman of the Board of Directors Mr. Ilias Milis, Member Mr. George Papaioannou, Member Mr. Spyridon Papaspyrou, Member Mr. Alexandros Manos, Member Mr. Catalin Parvu, Member Mr. Emanuel Odobescu, Member Mr. Michail Lachanas, Member Mr. Constantin Degeratu, Member
Piraeus Bank Romania - Annual Report 2008
6
Macroeconomic Outlook Benefiting from a very strong performance in the first three quarters, Romania’s GDP grew by 7.1% YoY in 2008, driven by significant advances in the construction (26.1% YoY) and agricultural (21.4% YoY) sectors. Final consumption maintained a high pace of growth - 8.0% YoY, driven by households’ consumption (9.2% higher YoY). Gross fixed capital formation increased by 19.3% YoY, with the investments in the construction sector playing an important part in this development. After posting a 9.0% YoY growth at the end of the first three quarters, Romania’s economy lost thrust towards the end of the year, preparing for a rather forced landing. The 4Q08’s GDP growth of only 2.9% YoY showed that the difficulties experienced by the developed economies were about to negatively weight also on Romania. The 4Q08’s slowdown was triggered mainly by sluggish domestic demand that fell for the first time since 1990, by 1.3% YoY, as the final consumption went down by 2.8% YoY. The households’ consumption posted the first drop in the last nineteen years, retreating by 4.7% YoY as consumers were adjusting their behaviour to the bleak economic conditions worldwide. The gross fixed capital formation also reacted to the new economic conditions, posting a modest increase of only 2.8%YoY in 4Q08 - a significant slow down from the 27.7% growth in the first nine months of the year. With the local currency depreciating at a brisk pace, exports maintained an upward trend posting a 1.6% growth YoY in the forth quarter while imports decreased by 10.2% YoY as both households and companies were constrained to reduce their demand for imported goods. Industry was the most hit among all GDP contributors as besides the slowdown of internal demand, the deterioration of the conditions in the Eurozone economies diminished the demand for the Romanian products. The industrial output decreased by 2.8% YoY in October, by 11.5% YoY in November and by 18.0% YoY in December. The diminished economic pace of growth from the autumn months of 2008 was accompanied by a reversal in the unemployment trend. After almost two years of work force shortage in many sectors of the economy, the total number of registered unemployed individuals at the end of 2008 grew by 9.68% YoY to 403,441, taking the unemployment rate to 4.4% at the end of December. The year 2008 ended with a 6.3% annual inflation, down from the 9.1% peak recorded at the middle of the year but exceeding again the upper limit of the fluctuation band set around the central bank’s inflation target of 3.8%. The excess demands fuelled by salary increases unmatched by productivity gains, the alert pace of growth of nongovernmental loans, and the lax fiscal policy as well as heighten inflation expectations are the main causes for missing the inflation target. Following an aggressive tightening cycle in the first half of 2008 when the key rate was increased by 275 bps, the NBR kept unchanged the key interest rate at 10.25%. At the end of 2008, NBR chose to defend the EUR/ RON to the detriment of interest rates. The price paid for keeping the EUR/RON under 4.0000 was however pretty high, as interest rates jumped and the loans activity –already contracting, suffered even more strains, amplifying the deterioration of the economic conditions. Romania ended 2008 with a higher than expected budget deficit of 5.2% of GDP, a clear proof of the lax and pro-cyclical fiscal policy. The budget gap widened rapidly in the last two months of the year, dragged by government’s populist policies ahead of the parliamentary elections. The high spending months came after a rather good evolution in the first part of the year, with end-October budget deficit touching only 1.7% of GDP. Romania’s 2008 trade deficit totalized EUR 18.2 bn, positioning almost at the same level as in 2007, with exports dynamics outpacing for the first time since 2002 the imports pace of growth. The services balance improved, recording a surplus of EUR 836 mn from EUR 477 mn at the end of 2007, on the back of transportation services. In line with expectations - because of the increased repatriation of funds as both international and local conditions deteriorated, the income balance deficit widened in 2008 by 33.2% to EUR 5.53 bn. With the trade deficit as the main driver, Romania’s C/A deficit widened by a 1.2% YoY in 2008 to EUR 16.9 bn,
Piraeus Bank Romania - Annual Report 2008
7
respectively 12.3% of GDP. The trade deficit started to show clear signs of correction in the last months of the year as the domestic demand began to adjust to the new economic conditions. NBR’s foreign reserves totalized EUR 28.3 bn at the end of 2008, covering 5.4 month of imports. The hard currency reserve declined by 4% YoY, reaching EUR 26.2 billions still offering the central bank significant power to fight against the depreciation pressures on the local currency, in the context of increased risk aversion at international level. Country Rating Profile Moody’s: Baa3 Standard & Poor’s: BB+ Fitch: BB+
Banking market After several years of aggressive expansion of branch networks and of loan portfolios’ impressive growth, banks shifted focus in 2008 to quality and caution rather than on quantity and boldness. The forty-two banks operating in Romania in 2008 managed at the end of the year assets of €79 billion, accounting for 62% of the GDP. The banking system’s assets expanded by 23% YoY in 2008 - at a lower pace than in the previous year, as the global financial meltdown eroded in the last quarter banks’ assets. The largest five banks in the system managed 54% of the total assets, percentage in line with the EU average. According to the data provided by the National Bank of Romania, the nongovernmental loans advanced in 2008 by 25.8% in real terms, which is still a significant growth although around half the growth registered in 2007. Foreign currency loans increased by 29% in real terms in 2008, accounting for a share of 58% of the total nongovernmental loans. While corporate loans expanded by 30% in real terms households loans went up by 39% in 2008.
Piraeus Bank Romania - Annual Report 2008
8
2008 Business Overview Last quarter of 2008 comes with high challenges for the world wide financial industry. The Romanian market – a significant member of the Emerging Markets Region – had been also touched by the wave of financial turmoil lunched by the one of the most notable event from the Great Depression till now – the collapse of an important bank at mid of September 2008. On the local market, the national regulator takes an effective set of measures to react promptly into the market in order to establish a state of calm and allow the trust sentiment between banks to step in. The major focus areas were increasing deposits and sharp reduction of lending activity in order to assure a high level of liquidity on the market. Based on a sound assets quality, good liquidity levels and an adequate capital base, 2008 stands for the most performing year of Piraeus Bank Romania. The bank recorded a gross profit of over € 54.1 million (increase of 131.9% compared with previous year) on a total asset volume of €2,372.7 million (increase of 39.8%) and on an aggressive extending of the Branch Offices network till 180 units (increase with 70 new offices). The following comments should be read in conjunction with the IFRS financial statements and the related notes. The financial statements of the Bank for the years 2008 and 2007 have been audited by PricewaterhouseCoopers Audit SRL.
Piraeus Bank Romania - Annual Report 2008
9
Balance Sheet Developments Assets In line with one of the strategic objectives that target a place in Top 10 banks on Romanian market – In terms of assets volumes - Piraeus Bank Romania finished the year 2008 with a total assets amounting of €2,372.7 million against €1,697.4 million by 31 December 2007. In addition to the above, assets in amount of €1,976.4 million have been committed on behalf of Piraeus Bank – London Branch following the policy of active cost management and distribution of assets. During the whole year Piraeus Bank Romania acted as an agent, managing the external portfolio while the risk and related income laying with London Branch.
Assets under PBR's Administration (EUR million) 5000
4000
1976.4
3000
1176.8
2000
Assigned Loans, under PBR's administration
PBR Assets 2372.7
1000
1697.4 0
D
. ec
20
07
c. De
20
08
Assets - Currency Structure (EUR million)
3000
2400
It should be emphasized that the managed loans are associated with Piraeus Bank Romania’s efforts in terms of customer relationships, portfolio build-up, and initial risk assessment. Furthermore, Piraeus Bank Romania continues to serve the clients by covering their operational needs with in cautious approach and more risk oriented, focusing on healthy and well collateralized businesses with good profitability and positive prospects.
FCY Assets 1800
1601.9 1200
986.7
600
LCY Assets 770.8
710.7 0
0 20 c. De
7 D
. ec
08 20
Thus, at year-end 2008 Piraeus Bank Romania had under its administration assets amounting €4,349.1 million (+51.3% increase), by combining its own loans with those belonging to Piraeus Bank- London Branch. The currency structure of the assets shows a slight raise in local currency +8.5% (€770.8 million in 2008 against €710.7 million in 2007) compared with the major increase of +62.3% (€1,601.9 millions in 2008 against €986.7 millions in 2007) of foreign currency portfolio.
Loans Over the first nine month of year 2008 the bank focused its strategy on increasing the volume of loans under its direct administration targeting especially the small and medium enterprises and retail category through a sound quality product mix. Expanding the channels for the above customer categories through Chain Stores, Loans Brokerage Companies and more 70 new branches, Piraeus Bank reached a higher loan level of €223 millions for SME (+15.7% increase), over €1,332.6 millions for Retail segment presenting a significant increase of 58.8% over previews year.
Structure of Loans in Administration (EUR million) 4000
3000
1355.1
382.4
2000
838.9
1000
Individuals
SMEs
192.7 1910.4
Corporate
1305.7 0
07 20 c. De
08 20 c. De
Piraeus Bank Romania - Annual Report 2008
10
As the 2008 was a higher GDP year, having as main driven factor the increase in retail consumptions and a large volume of investment into Romanian market, the total bank’s loan portfolio align on present market conditions and reached €3,647.8 million considering also the loan assign to London Branch. The major weight in overall loan portfolio is taken by the Corporate Loans portfolio with over €1,910.3 millions (52.4% from total loans) followed by the Retail segment with over € 1,355.1 millions (37.2% from total loans). The last three months of 2008 faced the financial crisis and forced the Bank to review the medium term strategic objectives. With respect to the new market conditions the bank considered a more cautious and risk oriented approach for both old and new customers, and took into account a contraction of loan portfolio expansion. The bank re-prices the loan portfolio in order to reflect the new interest rate environment and new macroeconomic risks and encourages credit activity only for business with parallel fee-generating income and high turnover.
4000
Loans under PBR's Administration (EUR million)
3000
1976.4
Assi gned Loans, under PBR's administration
2000
1176.8
PBR Loans
1000
1671.4 1160.5 0
07 20 c. De
08 20 c. De
Loans Portfolio - Customer Brakedown (%) 1
All in all, the 3 business lines – Corporate, SME and House Holds – jointly contributed to the outstanding accomplishments of year 2008, Piraeus Bank Romania underlining its objective to position in Top10 players of Romanian banking sector. Capturing the cross-selling opportunities in the market, the Bank succeed to be in present the choice of over 381,000 customers by offering high quality services through custom – driven financial solutions.
Retail 35.9%
37.2%
8.2%
10.5%
SME
55.9%
52.4%
Corporate
0
07 20 c. De
08 20 c. De
Beyond the IFRS figures, the lending performances for the whole year 2008 should be completely understood by taking into consideration as well the efforts made for the expand of the loans committed by Piraeus Bank – London Branch which increased with over 67,9% until €1,976.4 millions compared with € 1,176.8 million in 2007. Compared with previous years, in 2008, the bank’s efforts towards SMEs and Retail had as results an increasing weight in total portfolio. Retail slightly increased from 35.9% (2007) to 37.2% (2008) and SMEs grow to 10.5% (2008) compared with 8.2% (2007). The bank continues to target a sound growth in term of assets through a superior efficiency of various network channels and a proactive management of portfolio quality. Consistent with the changes in the lending policy the volumes continued to grow in the retail area. The straightforward approach focused toward individual clients resulted in a significant increase of +61.5% in Retail loans, with a remarkable growth trend in both mortgage (+83.2%) and consumer (+59.3%) segments. The Retail segment’s development was sustained by the improved presence of the Bank into the market through an extended branch network as well as through a more diversified offer of retail lending products, with special results for the new credit card “Shop & Cash” that give a boost of +133% for credit card business line.
Individuals Loans Structure (EUR million)
1500
Other (Personal & Consumer)
1000
1253.9 500
783.7
0
101.2
55.2 c De
0 .2
07
c. De
08 20
Mortgage
Piraeus Bank Romania - Annual Report 2008
11
The dynamic growth of the Bank in terms of assets volume and network Branch offices in line with the new challenging macroeconomic environment established at the end of year 2008, require a very attentive and pro-active management of liquidity through a vigilant control of asset quality, further improvement of risk management framework and an aggressive deposit seeking campaign. The Bank attends to limit the dependency of mother’s bank funding by diversification of the resources through increasing the usage of alternative channels and branch network sales effectiveness. Loan loss provisions ratio slightly increased from 2.05% as of 2007 to 3.21% of total loans as reported in IFRS figures as a result of deterioration of general macroeconomic environment. The currency structure of loan portfolio shifted between foreign currency (62.1% as of 2007 to 66.7% as of 2008) and local currency (37.9% as of 2007 to 33.3% as of 2008).
PBR's own loans Analysis by sector as of Dec.31, 2008
PBR's own loans Currency analysis as of Dec.31, 2008
Trade 8% Other 1%
FCY loans 67%
Tourism 1%
Manufacturing 8%
Construction 3% Transport 1% Mortgage 6%
LCY loans 33%
Consumer 76%
Liquid assets Consistent with its liquidity policy and compliant with the Central Bank requirements during 2008 the Bank continued to secure an adequate management of its liquidity. The Cash and balances with Central Bank position grew from €419.93 millions as of December 2007 to €619.38 millions as of December 2008 (+47.50% increase). The significant increase in cash position was mainly driven by the higher volumes developed under very attentive supervision of liquidity indicators and also due to the growth of the drawn sources under the reserve requirement (current and term deposits from customers) During the last months of 2008 the money market faced a squeeze of liquidity that pushed the rates to new picks.
Tangible and Intangible Assets As part of its 2008 impressive growth, in order to secure an adequate base for business processes, the Bank sustained important investments in tangible and intangible assets category. Important funds have been channelled toward the investments required by the opening new 70 branches, branding of rented locations in line with the group standards.
Piraeus Bank Romania - Annual Report 2008
12
According to the strategic objective of cost optimization aligned to real operational needs an operational centre was located into new Caramfil Office Building that integrates IT, Operations & Data Centre for a more effective bank’s internal flow of activity and embraces the custom needs of our clients. By the end of 2008 the properties and the equipments of the Bank reached €51.79 million from €58.3 million mainly due to the impact of local currency depreciation. The intangible assets followed a steep increase amounting €3.15 million (showing a growth of 65.76% vs. previous year).
Liabilities & Equity The overall evolution of liabilities reflects the efforts of the Bank to diversify its financing resources in order to sustain the business development needs and also to be in line with the strategically objective that target a low dependency of the abroad funding offered in favourable conditions by the mother company. The development of the branch network as well as the interest policy of the Bank promoted over the year was crucial for the success in attracting new customer deposits. During 2008 the Bank aligned its deposits interest policy with the market trends, by positioning itself within the medium to top range and within reasonable limits. In addition to the attractive interest rates, the boost in customers’ deposits was stimulated by confirmed high quality services and a diversified and customer-friendly offer of saving products.
Liabilities Structure (EUR million)
3000
2500 290.0 48.8 15.1
2000
1500
1000
272.9 53.1 15.1
1001.0
Equity
Other Liabilities Subordinated Loan
550.6 Due to Customers
500 805.7
1017.8 Due to Banks
0 07 20 c. e D
08 20 c. e D
The new market demands of the 2008’s last quarter raised the competitions in retaining and increasing the volume of national currency deposits. As a proactive approach to the local market conditions and based on a proficient incentive scheme, the bank launched a new deposit product “Piraeus 100” that addresses to different customer layers. The customer deposits as of December 2008 reached the level of € 1,001 millions pointing a significant increase of 81.81% versus €550.6 million as of December 2007. To build assets and gain market share fast, the Bank sustained its growing efforts also through resources attracted from the mother bank. Deposits from banks increased in 2008 by 26.32%, from €805.7 million in December 2007 to €1,017.8 million by the end of 2008. Consistent to its business philosophy according to which the Bank leads its operations within a prudential framework, focusing the optimum convergence of profitability criterion with banking processes associated risks, the Bank constantly acted for maintaining an adequate capital base. The total equity figure increased with 6.23% from €273 millions (December 2007) to €290 millions (December 2008). New capital inflows are planned for 2009.
Piraeus Bank Romania - Annual Report 2008
13
Income Statement The operating profit (i.e. profit before provisions and tax) was doubled, reaching €89.83 million at the end of December 2008 from €45.1 million in the previous year. In the same time the profit after tax increased to €46.2 million in 2008 from €17.3 million in 2007 following the growing volumes, the network development and the cost control. The growth in the operating income of the Bank (i.e. advanced with €85 million) successfully covered the increases of the operating costs (i.e. increased by €40 million). Facing an increased competition as well as with the burden of the reserve requirements the Bank attentively managed the interest rates, matching both its profitability requirements as well as the clients’ needs. In spite of the continuous decrease of the interest margins and the tough impact of the customers deposits interest rates from the last quarter (accompanied by the liquidity crisis), the net interest income (i.e. €109.3 million) were higher by €49 million from the previous year (i.e. a increase of 82%), holding a share of 59% in the 2008 operating income.
Operating Income (EUR million) 200
150
40.1
34.8
100
The lending related interest income was up to 93.2% of 2008 total interest income versus 92.8% in 2007. The higher level of resources both in local and in foreign currencies led to an increase in interest expenses of €96.8 million, out of which €42.4 million was due to the increase of the customers’ deposits. Following the funds structural changes (i.e. a shift from inter-bank funds to customers’ deposits) in 2008 the share of customers’ deposits in total interest expenses grew up to 41.7% from 35.2% in 2007.
Net Trading Income
Net Fee and Commission Income
14.7 50
22.9
109.3
Net Interest Income
60.1 0 7 00 c2 De
8 00 c2 De
Subsequent to the business expansion, the net fee and commission income grew to €34.8 million from €23 million in 2007 (i.e. an increase of 51.3%). The increase in fee and commission income was mainly driven by the management fees charged for the administration of the loans belonging to Piraeus Bank-London Branch, which reach to €24.7 million comparing with €15 million at the end of 2007. In addition, money transfer commissions had an increased trend (i.e. an increase of 14% amounting €1.3 million), benefiting from the enlarging of the operations and branch network of the Bank.
Piraeus Bank Romania - Annual Report 2008
14
The net trading income was up by €29.1 million in 2008 from the previous year (i.e. an increase of 186%). The net trading income consists in the revenues of the Bank from foreign currency exchange operations with customers, currency swaps, as well as from the inter-bank transactions. Operating Expenses (EUR million)
The increased volume and complexity of the operations of the Bank, the development of the branch network, accompanied by the increase in staff number, boosted the operating expenses to €95.3 million in 2008, from €55.1 million in 2007.
8.1
Depreciation
49.0
Administrative Exp.
0
0
Staff expenses were in amount of €38.2 million with an increase of €13.8 million as compared to 2007, mainly explained by the organic growth in staff number which followed the network and business general development. The staff expenses share in total operating expenses slightly decreased in 2008 to 40% from 44.3% in 2007.
Staff Expenses
4.1 0
26.6 38.2
0
24.4 0
07 20 c. De
07 20 c. De
Due to the continuous effort of the Bank to enhance the efficiency, the cost to income ratio improved from 54.9% in 2007 to 51.5% in 2008.
Corporate Banking 2008 Conducts Romanian wholesale banking activities addressed to local companies as well as to Greek owned businesses present on local market. Corporate Banking Division provides comprehensive financial solutions to large sized companies, multinational corporations, financial sponsors and institutional investors. The primary focus is to prudently develop profitable relationships across stable businesses in which the Bank has developed industry expertise over the years. 3.1%
2.9%
CAR DEALERS LEASING
3.7%
2.2%
TRADE
3.1% 2.8%
6.7%
CHEMICAL OTHER
9.9% 4.5%
6.5%
RETAIL CONSTRUCTION
7.5%
PHARMA TRANSPORT FOOD
0.9% 46.2%
REAL ESTATE
HOTEL
Limit as of 31.12.2008
INDUSTRY
Piraeus Bank Romania - Annual Report 2008
15
Corporate banking achieved very good results in 2008 with value added businesses delivering profitable growth. Intensifying client relationship was further improved and simplified after a number of top corporate companies were identified as priority clients and allocated additional resources, including a streamline team of highly experienced bankers. Thus, the Corporate Division was restructured, 4 new teams being added in order to focus on the growing the existing portfolio as well as toward achieving new businesses and strengthening the follow-up process on existing customers country wide. Piraeus Bank Corporate Banking adapted its policy to a continuously changing environment, capitalizing on changes in the regulatory practice, to help ensure that it applies the highest standards across all our businesses and are up to the excellent reputation. Towards the end of the year, under the auspices of the existing financial crisis, the Corporate Department focused on following up the activity of the existing customers, and towards supporting their financial and operational needs. This was done in order to help our customers to pass over the hardships generated by the crisis. Thus the evolution of the loans granted by the Corporate Department (including syndications) is presented below:
47.84%
50.00% 45.00% 40.00%
33.03%
35.00% 30.00% Growth
25.00% 20.00% 15.00% 10.00% 5.00% 0.00% June 2008 versus December 2007
December 2008 versus December 2007
Piraeus Bank Romania - Annual Report 2008
16
Retail Banking Individuals sector The year 2008 Piraeus Bank continued the focus on offering to individuals compelling products and services, adapted to their needs, the bank consolidating its position of important player on the retail market. In a highly dynamic environment, Piraeus Bank continued to outgrow the market due to its easy to understand and straightforward products, but also to the novelty brought to the market by the products created. Thus, the “Happy End” personal needs loan launched in February 2008, was the only consumer loan on the market guaranteeing a 20% reduction of the interest rate on the last third of the lending period, particularly interesting feature in the Romanian price-driven market. The flexible and innovative approach triggered an over 500 million EUR increase of the retail lending portfolio, the personal needs loans remaining the leading category, with the highest net increase of the outstanding balances. The good sales performance that lead to the further increase of Piraeus Bank market share for retail loans (5.4% at the end of 2008 compared with 4.2% the previous year) was the result of the combined efforts of all the sales forces available: expanding branch network, internal direct sales agents and important intermediaries (credit brokers) network.
973.1
1,000,000
Dec-07
900,000
Dec-08
800,000 700,000
659.7
600,000 500,000 400,000
264.3
300,000 117.2
200,000
54.9
100,000
99.6
0 Personal Loans
Home Equity Loans
Mortgage Loans
Even if not matching the retail loans increase, the individual’s savings added in 2008 more than 100 million EUR to the existing portfolio (54% increase). The results were possible due both to the newly launched products and to the constant communication of the general offer. The “star” product of the year was the “Ideal” savings account, which registered an exponential increase (360%), powered by the media campaign build around the 1.000.000 RON awarded at the end of the year and the 1.000 monthly prizes consisting of the interest doubling, attributed through lucky draws.
Piraeus Bank Romania - Annual Report 2008
17
Other newly launched products (“Star” and “Piraeus 100” term deposits – simple term deposit with attractive interest rate – and “Crescator” deposit – longer term deposit with monthly increasing interest rate) made also a difference in an aggressive prize driven market, especially in the last quarter of the year. 250,000
Dec-07 203.9
200,000 150,000
Dec-08
124.7 85.3
100,000 61.8 50,000 0
Current + Savings Accounts
Term Deposits
Cards business registered an increase of more than 50.000 new issued cards in 2008, both debit and credit. The most spectacular increase in sales was registered in the debit cards area (100 % growth compared to 2007). In absolute numbers the increase is from 15.769 debit cards issued at the end of 2007 to 47.193 end of 2008. The growth of the main debit card product of Piraeus Bank– Visa Shop & Cash card – was achieved due to the focus on payroll conventions. Credit card sales’ growth was sustained by intensive cross selling campaigns to retail loans customers in general and personal needs loans in particular. 2008 was the year of the first usage campaign for credit cards that registered 40% increase in the number of transactions and 50% increase in the volumes transacted. The campaign which lasted from End of March to End of August had a simple and straightforward mechanism: “Use your credit card for purchases of more than 150 RON and win a participation in the lucky draw for an AUDI A4 or one of 10 LCD TV or 30 mobile phones”. The promotion was broadcasted in all the important TV stations and created brand awareness for Piraeus Visa Classic credit card and the Bank. 2008 marked the beginning of Merchant acquiring activity. The service was launched at the End of August and by YE the merchants’ network counted already 337 POS machines. By launching the new service Piraeus Bank completed the cards product and services range thus offering holistic solutions to all customer segments. The off-site ATM network increased by more than 100% compared to 2007, from 22 to 50 ATMs.
Piraeus Bank Romania - Annual Report 2008
18
Internet Banking / Fast Money Transfer Services Following the same customer oriented approach, Piraeus Bank continued to offer its clients new facilities through Piraeus Online Banking, such as better cut-off times for payments and the possibility to view details of the recently implemented deposit products and credit accounts linked to corporate customers’ products. Furthermore discussions were initiated with utilities providers of in order to give the Piraeus Bank clients the possibility to pay without charges their phone, television or electricity invoices through Piraeus Online Banking application. In order to decrease the time necessary to effect such payments, specially designed menus will be created giving the option to the client to predefine the subscribers for which the payments will be performed. During 2008, the number of internet banking customers continued its upward trend so that around 2.500 new individuals and 2.000 new corporate clients were enrolled. More and more customers are becoming aware of the easiness of performing their daily payments online this being reflected in the higher weight of online transactions in the total payment transactions of the Bank. In this respect, the 2008 number of transactions performed through this channel averaged to 34% of total RON payments and 25% of total foreign currency payments. The Bank provides the international Western Union fast money transfer service. Western Union enables the public to receive or remit money without opening an account with the Bank, to any Western Union facility located in more than 200 countries.
Piraeus Bank Romania - Annual Report 2008
19
SME Sector Even though the SME business in Romania represents the vast majority of the companies operating in Romania, these have been significantly affected by the economical crisis that started at the end of 2008. Based on the financials at December 2008, more than half of the total of 615,000 SMEs reported a reduction of the activity, 24 percent operate within the same parameters and 15 percent went bankrupt. Just 4 percent of the economic agents boosted their activity. In the development of Piraeus Bank Romania’s strategy the SME segment still represents a strategic segment due to the high dispersion of credit risk, increased margins and revenues, as well as an important market for increasing liabilities through turnovers, cross-selling and deposits. The Piraeus Bank’s strategy for SME’s, while functioning under the principles of caution and adaptation to the current economic conditions, follows four main directions: ■ Increase the exposures on the existing customer base in the cases where this is permitted from risk point of view; ■ Target specific industries that are not significantly affected by the crisis while focusing on increasing turnovers, commissions and deposits; ■ Improving sales force effectiveness and turning even more towards the SME’s as counseling partners; ■ Keeping the portfolio clean but being proactive and offering solutions to our customers that help them maintain and increase their businesses and provide restructuring solutions that help the SMEs get through the crisis. Piraeus Bank Romania kept improving the product portfolio in order to adapt to the changing market conditions and to provide the best solutions and resources for the SME business. These products address both short term working capital financing needs as well as medium term financings for the permanent working capital needs and long term loans designed to finance investment projects.
Piraeus Bank Romania - Annual Report 2008
20
Branch Network Every year that followed 2004 – the year when the bank has decided to boost the Retail business – became the most important year in terms of network expansion. Consistent to the promise to its existing and potential clients, during 2008 the bank had the most dynamic expansion in terms of network, strengthening its position on the local market. While in 2007 the bank was operating on the Romanian market with 110 branches, during 2008 the bank has opened 70 new more units, reaching 180 operational branches by the end of the year. Out of the new branches which became operational during 2008, 18 were opened in Bucharest and 52 in the country side. At the end of the year the bank has a consolidated presence in all the counties in Romania, besides a strong coverage of Bucharest (58 branches in Bucharest - 32% and 111 branches outside of Bucharest - 68%). Considering the fast expansion of the network over the last years, the main challenge for 2008 was to rapidly integrate the new branches into the production system of the bank. In order to complete this goal, the bank had strengthen the role of the 10 regional centers, responsible for the local management (3 in Bucharest and 7 outside Bucharest), along with a constant development of the banking skills of its employees in order to be able to deliver fast and high quality services that fits to the customers’ profile. Strong presence on the market, focus on customers’ needs and effective sales have had a direct impact in increasing the brand awareness and the overall business of the bank.
Treasury Operations 2008 represented a very challenging year for the Romanian Banking Sector, as significant volatility appeared in all the asset markets, with the global financial crisis starting to make its presence felt in Romania as well in the second half of the year. However, 2008 was for the Treasury of Piraeus Bank Romania a very successful one, as the Bank grew rapidly in the first three quarters and accordingly, the profits generated by increased transaction volumes. The October crisis found the Bank with a very good liquidity position that allowed over passing the difficult market conditions and contributed to increased profitability and improved image in the interbank market. The assets of the Bank rose by more than 50% and the number of branches as well. Most of the Treasury’s activities in 2008 were focused on offering the necessary financing for the Bank’s growth and on servicing the customers’ needs. The Treasury strategy was oriented in providing stable financing for the Bank, increasing the customer deposits base, finding new funding sources that proved to be a conservative approach during the liquidity crisis. Continuing previous year’s strategy, less emphasis was put on own account trading and more on providing value to both Treasury’s and Bank’s customers, managing also the liquidity of the Bank. The continuous growth of the Bank and the professionalism of our team determined a substantial increase of customer transactions.
Piraeus Bank Romania - Annual Report 2008
21
In order to accommodate this development, the Treasury Sales Desk expanded, reaching at the end of the year a double number of professionals compared to previous one, that offered reliable in-time quotations for FX, MM and FI products. The Treasury Sales Desk continued to offer support to all bank’s business units through high quality services and competitive pricing for a variety of products. In 2008, the Sales Desk continued to improve its infrastructure for both Corporate & Retail Sales Desk and Institutional Sales Desk, in order to actively monitor and maintain the relationship with its customers and to increase the FX, MM and FI transactions volumes. The development of the Institutional Sales desk implied the continuous expansion during the year of the customers’ portfolio, covering all types of financial institutions: investment funds, insurance companies, pension funds. The year was marked by the appearance of the private pension funds that will develop further in terms of assets under management and products traded. Emphasis was put on attracting important liquidity from such customers and as well on the fixed income activity with them (sells, buys, repos and reverse repos). The range of products offered to both corporate and retail customers was enriched with new hedging and investment products. As the FX volatility increased significantly and the companies have begun to understand the potential impact of the FX movements on their balance sheet, the volume of forward transactions performed by corporate customers increased. Interest rate swaps were also performed by customers to protect against the adverse evolution of the interest rates. For the special type of customers that wanted to benefit from the evolution of the foreign exchange moves, the bank offered such investment products.
PBR Market Share Foreign Exchange Trading (FX) -%12.5
15
13
12
11
11
13
11.5
10
10
PBR Market Share Money Market (MM) in terms of daily transactions -%-
15
PBR Market Share Fixed Income(FI) -%-
10
8
10
6.2 8 5.9 4.5
5
6
6.5
1.2
0.9
20 10
20 09
(f) 20 10
20 09
20 08
20 07
20 06
20 05
20 04
20 03
(f) 20 10
20 09
20 08
20 07
20 06
20 05
20 04
20 03
20 08
0
0
20 03
0
20 07
3
4.5
3
3
20 06
3
4 3.26
2.87
4 2.5
4.8
5
5
20 05
5
5.3
20 04
7
8
The increased volatility in EUR/RON for the whole 2008, but especially in the last quarter provided good opportunities for PBR’s FX Trading Desk that managed to fulfill its budgeted targets and contribute to the bank’s profitability while expanding the market presence, increasing the traded volumes and the number of counterparty and customer banks. New products were developed together with the Sales Desk, especially hedging solutions for the customers with significant interest rate and FX exposures. Furthermore, sound analysis and market projections were offered to both internal and external customers. The Money Market Desk maintained its role in Bank’s Assets & Liabilities Management, identifying new funding structures for the Bank and supporting its business initiatives.
Piraeus Bank Romania - Annual Report 2008
22
Piraeus Bank Romania intensified it’s presence as an active player both in the deposit market as well as in the currency swap market up to 1 year. Piraeus Bank continued the development of solid relations with the local banks, and became sought after in the deposit market by offering competitive prices in tight spreads, although the year end brought a RON liquidity crisis. Although the crisis brought downward adjustments to the counterparty limits, both those of Piraeus Bank with other market players and the reciprocal ones, the market presence was very strong and the market share increased. In 2008, aggressive monetary policy tightening has put RON bond yields on a rising trend, which kept demand for long term placements subdued as undeveloped markets in repo and interest rate derivatives made it very difficult to take short bond positions or hedge existing long bond positions. As a result, the liquidity of the Romanian Fixed Income market decreased compared with 2007. The Ministry of Finance debt issuance concentrated in the 3 and 5 years benchmark bonds for most of 2008, with the 10 years maturity disappearing for lack of demand. At the end of the year, strong risk aversion related to the global financial crisis and a RON liquidity crisis have limited demand further and pushed bond yields even higher. The Ministry of Finance was forced to increase debt issuance in the last quarter of the year in order to finance budget expenditures when tax receipts were falling due to the crisis. However, due to the high bond yields demanded by the market amid significant uncertainty, most of the issuance was in short term paper – T-bills with maturities of up to six months. Piraeus Bank consolidated its presence in the domestic Fixed Income Market, acting as a market maker for all benchmark bond issues and being one of the most active players in the secondary market. Its market share in 2008 was 4.5 percent, maintaining a very good local presence and a strong relationship both with the other banks in the market and with the institutional players. Although not yet a Primary Dealer, Piraeus Bank also participated in the primary market, subscribing around 1% of the issued amounts. The main objective of Piraeus Bank for 2009 is to continue to develop its presence in the Romanian Fixed Income market, also by supporting the development of repo transactions with RON securities. Finally, 2008 Treasury’s activity continued to grow along with Piraeus Bank Romania’s fast expansion strategy, maintaining its primary goal of supporting financially and informational all the activities and business of our bank.
Piraeus Bank Romania - Annual Report 2008
23
Human Resources Aiming to consolidate the image of the Bank in the Romanian Banking System as a flexible organization, representing its customers and its employees, Piraeus Bank management kept the focus on a healthy organizational growth. Our main objective is to bring out the potential of people and ensure their commitment to achieve excellent results and to be able to overcome challenges within a fast changing environment. In 2008 the main challenge of the Human Resources Development was to maintain a strong team of professionals capable of operating effectively within the competitive environment of the banking market, being, in the same time, an attractive employer. This is achieved by modernizing organizational structures, training systems and rational management of human resources, focused on building a culture among staff members, with the following main features: “passion” for the customer, team spirit, professionalism, effectiveness, entrepreneurial vision, and emphasis on learning – change.
Piraeus Bank Romania - Annual Report 2008
24
Number of people employed to implement business goals At the end of 2008, Piraeus Bank Romania employed 1946 people compared to 1394 in 2007, recording an increase of 40%. The personnel’s qualitative and quantitative growth was successfully achieved due to ensuring adequate recruitment procedures free of discrimination, utilizing specific candidate selection systems, by using modern appraisal and selection tools. These tools may vary according to the candidate’s educational and experience level and include both competencies and professional tests. Increased number of personnel during the year was due to continuous development of branch network that reached 186 branches at the end of 2008. It is worth nothing that due to the organic development of the Bank, it was given the opportunity to internal promotions, both inside the network but also to employees from Headquarter since new departments have been established or existing ones have been extended in order to support the development of the branch network.
2500
Staff Number 1946
2000 1394
1500 1000
713 417
500 66
89
140
2001
2002
2003
219
0 2004
2005
2006
2007
2008
Piraeus Bank Romania - Annual Report 2008
25
Human resources distribution by Gender, Age, Education and Area 74% of total Bank employees are female while 26% are male; at the senior level management there are 47% female representatives and 53% male representatives, Piraeus Bank Romania being committed to offer equal opportunities to its employees. Gender distribution Female
Male
Male 26%
Female 74%
The age distribution of employees represents a major advantage of Piraeus Bank Romania. The age composition is such that favors the introduction and implementations of new technologies, methods and targets, as the majority of our people are up to 30 years old.
Age distribution
Female
Male
>=56 1 2
Age(years)
46-55
37 16
257
36-45
84
702
26-35
443
