In an economic environment characterized by high uncertainty and negative growth rates, ATEbank has managed to preserve for another quarter its profitability and significantly grow its business. ATEbank sustained throughout the first half of 2009 higher loan growth rates compared to the sector average, while in parallel it further increased provisions against possible non-performing loans. Following the Bank’s decision to participate in the government’s measures to boost liquidity in the economy, ATEbank maintains a high capital base.

Net interest income amounted to € 338.8 million, up by 8.4% compared to H1 08, mainly due to wider margins. Interest income from loans has increased further (+12.7% y-o-y and +11.8% q-o-q), as a result of improved spread management and timely repricing. Interest income from bonds was €20 million lower in the end of June 2009 compared to June 2008, as the Bank sold in Q2 09 bonds it held until then (the gains of € 61.3 million are booked in the net trading income line).  

On the other hand, interest expense continued to decline compared to previous quarters, reaching € 251.8 million, an increase of just 2.0% y-o-y (Q1 09 y-o-y increase stood at 22.9%). Following the sharp drop in deposit interest rates and consequently lower demand for time deposits, interest expense in Q2 09 stood at € 111.0million, € 29.8million lower than in Q1 09.

As a result of the above positive developments on both sides of net interest income, net interest margin, after declining for several quarters, has improved reaching at the end of June 2009 the level of  2.69% (March 09 : 2.61%).

Despite the difficult market environment, net fee and commission income increased by 10.8%, reaching € 38.6 million, mainly as a result of loan book growth.

Other operating income (i.e. excluding net interest and fee & commission income) reached € 166.6 million, compared to € 51.2 million in H1 2008, mainly due to the positive turnaround by € 141.5 million in the trading and investment gains income, €85.5 million of which were from the sale of various debt instruments.

Operating expenses increased by 8.3%, reaching € 300.8 million in H1 2009 compared to € 277.6 million in H1 2008. Personnel expenses in H1 2009 show a seasonal increase by 7.9% compared to the respective period last year, as due to the late implementation of the 2008 collective bargaining agreement the related salary increases had not been included in the H1 2008 wage bill. Other operating expenses reached €73.8 million in the first half of 2009, an increase of 8.4% y-o-y,  mainly affected by the negative results of the subsidiary Hellenic Sugar.

Despite the above, due to the good performance of the income side, the cost to income ratio at end of June 2009 dropped to 55.3% vs. 57.6% at the end the previous quarter and 69.7% at the end of June 2008.

Total loans before provisions reached € 21.9 billion, an increase of 22.9%, compared to an increase of 7.6% for the entire banking sector. It should be noted that the loan portfolio includes the €675million special debt instruments that the Bank received from the Greek State in the context of the share capital injection in the form of preferred stock. Excluding these, loan book growth was 19.1%. Loans and advances to customers after provisions increased by 24.7% y-o-y reaching € 21.0 billion.

Specifically, loans to households increased by 19.1%, well above the market rate of 6.2%, reaching € 8.2 billion. The mortgage portfolio increased by 15.7% to € 6.5 billion vs. a market increase of 6.0%, while consumer lending, including outstanding credit card balances, continued expanding at high rates, by 33.1%, albeit from a low base, compared to a market rate of 7.1%.

Lending to SMEs increased by 61.6% y-o-y to € 2.5 billion compared to € 1.5 billion at end-June 2008.  This way-above-market performance is partly due to ATEbank’s dynamic involvement in the working capital bank lending program launched by the Small and Very Small Enterprises Guarantee Fund (S.VS.E.G.F.), as part of the government’s policy measures aimed at boosting bank lending to SMEs. Specifically, H1 2009 disbursements related to S.VS.E.G.F. have reached € 723mn. As a result of the above, the SMEs’ share in ATEbank’s total loans portfolio reached 11.2%, up from 8.6% in H1 2008, confirming the successful implementation of ATEbank’s strategy to significantly increase its share in the SMEs market.

Despite the economic downturn, the NPL ratio decreased from 7.3% in H1 2008 to 7.0% in H1 2009. ATEbank’s strong emphasis on asset quality issues paid off during Q2 2009 given that the increase of loans in arrears has decelerated. Nevertheless, because of current economic conditions, the Bank intends to continue its increased provisioning, as a shield against a possible rise in non-performing loans. As a result, ATEbank booked a further € 85.9 million impairment charges in Q2 2009 (vs. € 56.8 million in Q1), maintaining its provisioning coverage ratio at the satisfactory level of 60.6%. It must be noted that total coverage exceeds 100% if one also takes into account tangible collaterals related to the NPL portfolio.

Total customer deposits increased by 5.2% in H1 2009, to € 21.1 billion.

The y-o-y growth of term deposit balances continued to decelerate sharply for a second consecutive quarter. This, in conjunction with the drop in the respective interest rates, has contributed significantly to lowering the total average cost of attracting deposits to 1.45% (Q1 09 at 1.95%, Q4 08 at 2.31%). It is expected that the gradual repricing until the year-end of a large amount of high-interest term deposits will contribute significantly to the further decline of the Group’s average deposit gathering cost.

The loans to deposits ratio, excluding the €675million special debt instruments, decreased to 100.7% compared to 103.3% as at 31/12/2008.

ATEbank’s capital adequacy and liquidity are both at satisfactory levels following the Bank’s participation in the Greek state’s € 28 billion package. In addition to the realized increase of the Bank’s capital base by € 675 million in the form of preferred stock and the €71.3million profits, the Group’s capital base has been positively affected by the €109.8million revaluation increase of the AFS reserve following the recovery in equity markets. As at 30 June 2009, ATEbank’s Total Capital Adequacy ratio stands at 13.2% and the Tier I ratio at 11.1%

Notwithstanding the unfavourable economic environment and the fact that the very recent capital injection has not yet been fully invested, ATEbank has managed to maintain a comparatively satisfactory performance, as key financial ratios indicate. At end-June 2009, R.O.A.E., after minority interest, stands at 12.5%, and R.O.A.A. at 0.50% vs. 10.6% and 0.57% respectively in H1 2008.

Overall, during a severe financial crisis and in a deteriorating economic environment, ATEbank has succeeded in maintaining a solid capital base and adequate liquidity and in sustaining satisfactory profitability levels on the back of increased volumes of business, particularly in the retail banking markets.

Looking, ahead, ATEbank will continue to implement its long-term strategic aim: further improve its competitive position in the Greek banking system both in terms of financial performance and market presence. In the shorter term, ATEbank will focus on supporting the real economy and on organic growth through lending to credit-worthy businesses and households.

The positive results of the first half of 2009 point to continuing good performance for the rest of the year. The Bank expects to exceed its initial target for 2009 credit expansion of at least 10% and, at the same time, it is implementing appropriate policies to minimize the negative impact of a still-worsening external environment on the quality of its balance sheet.

Dimitrios Miliakos

Chairman of the Board

• Financial Data 2009