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Books on Greece
REPUBLICAN REFERENCE
Area (sq km)
131,940
Population
10,665,989
Capital
Athens
Currency
Euro
President
Costas
Stephanopoulos
Private sector
% of GDP
over 60%
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Update No: 088 - (27/08/04)
Oympics now dominant factor
The Olympics, which opened on August 13th, have provided a powerful boost to the
Greek economy. Spending on roads, bridges and other infrastructure, partly
funded by more than US$40bn (€33bn) of European Union cash, has already
contributed to the rapid growth of GDP. The Olympics have helped create a more
mobile labour market and installed a modern infrastructure that will enhance
future productivity.
The games will increase tourism receipts both during and after the games, but
earlier expectations of an extra one million tourists may not be met. High
prices and security fears have deterred many, while international marketing has
been weak.
Meanwhile, the cost of preparing for the Olympics has been high because of a
legacy of past transport under-spending and demand from civil servants and the
security forces for bonuses. Tens of thousands of foreign workers had to be
drafted in at the last minute to complete several seriously delayed projects.
Credit rating under threat
Unless the government controls spending better, the country's credit rating
could come under pressure. This is the conclusion of a strongly worded review of
Greece's creditworthiness by Standard & Poor's, the largest credit rating
agency, which was published just before the start of the 2004 games.
S&P rates Greece's long-term debt at A plus with a stable outlook. This is
comfortably within the investment grade category, but is at the bottom of the
eurozone league table. The Olympic Games give Greece "an opportunity to
demonstrate how it has transformed itself from an agrarian-dominated society to
a modern, diversified and increasingly open economy," S&P said.
But to keep its credit rating it must tighten up its tax regime, rein in
government spending and reduce the size of its debt burden, the rating agency
said
The cost of financing its debt has risen from €4.6bn to more than €6.5bn
(US$8bn) while expected government borrowing this year has risen from €26.3bn
to €40bn. Debt has fallen from 110 per cent of GDP in 1993 to an expected 102
per cent in 2005, but it remains stubbornly above 100 per cent, partly because
of subsidies to state businesses.
Greece needed to reform its state-owned enterprises as well as transfer
off-balance sheet transactions on to the government's books to increase the
transparency of the fiscal account, S&P said. "Poor visibility
regarding the true fundamentals of public finances renders timely corrective
action by the authorities next to impossible."
The challenge of preparing for the Olympics had raised awareness of the need for
fiscal reform, the rating agency added. "Nevertheless, the magnitude of the
task required is still sobering and strongly suggests that there is no time to
waste if the build-up of an unsustainable imbalance in Greek public finances
over the longer term is to be avoided." Correcting the imbalances in
Greece's public finances "will make the post-Olympic fiscal clean-up more
like a marathon than a 100-metre dash," S&P said.
High potential of Greek banks, shows JP Morgan report
The potential in the Greek banking sector is highly promising, a report by
investment bank JP Morgan shows, cited by Kathimerini on July 20th.
The expert on investment banking and asset management describes the fundamentals
of the sector as being "extremely attractive," noting the high growth
rates of the Greek bank business compared with that of their European
counterparts, as well as the benefits accruing from cost-cutting.
The report notes that the fast rates of growth in the retail banking market as
well as the possibilities for further growth greatly enhance the sector's
profitability.
Greek bank lending rose by 32% in 2000, by 26% in 2001, by 22% in 2002 and 17%
in 2003. The forecast growth rate for 2004 is 18%, with the lion's share going
to mortgages and consumer loans.
According to the survey, these impressive figures are underpinned by the overall
positive economic environment. In the coming years, the banking sector is
expected to benefit from such factors as population growth (mainly due to the
settlement of immigrants), the economic impact of the Athens Olympics, European
Union investment inflows and the banks' expansion into the Southeastern European
markets.
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BANKING
National Bank records solid profit performance in H1
National Bank of Greece (NGB) recently reported a group pre-tax profit of
€312.8m in the first 6 months of 2004, representing an increase of 20%
year-on-year, New Europe reported.
Pre-tax profit for the second quarter rose 14.7% to €167.1m, the bank said in
a statement. Group core income posted an all-time high of €224.6m, up 21.4%
year-on-year, and 17.8% quarter-on-quarter, the bank added.
"The 2004 first-half results confirm our leading position in the market,
and reflect the competitive edge of the group's unique customer base. It is
particularly encouraging to see our second-quarter profits topping €167m,
return on equity reaching 20% and first-half earnings per share up to
€0.67," NGB Chairman and CEO Takis Arapoglou said in the statement.
"This quarterly performance is the best of recent years, and should serve
as a foundation for our strategy over the coming quarters: with a focus on
expanding our core operations in corporate and retail banking in Greece and SE
Europe, and further streamlining our operational infrastructure so as to achieve
the best possible returns for our shareholders," he added.
This performance led to a substantial improvement in the group's after-tax
return on equity, which in the April-June period reached a high in recent years
of 20% compared with 15.3% in 2003. The group's return on assets posted a
similar trend, rising by 17 basis points from 1.02% in 2003 to 1.19% in the
first half of 2004, the statement read.
Interest income reached an all-time high of €683.5m, up 12% year-on-year,
reflecting successful strategic expansion into higher-yielding portfolios. The
group's interest margin experienced a similar trend, rising to 2.99% in the
6-month period, up 24 basis points on 2003.
Group commission income on a consolidated basis amounted to €229.6m, up 15.2%
year-on-year, chiefly due to the ongoing expansion in retail banking (up 19.9%
year-on-year) and corporate banking operations (up 19.3% year-on-year),
underscoring the lead position of the group in these market segments. Group net
commission income grew at a somewhat slower pace, up 10.1%, due to the increase
in retail banking related operations, NGB said.
The contribution of core revenues to total income improved further in the second
quarter, reaching 95% compared with 94% in 2003, which reaffirms management's
strategy to emphasise stable and recurring sources of income. Group lending at
the end of the first half totalled €25.2bn, rising by €2.3bn over the
6-month period, an annualised rate of 20%. NBG reported impressive gains in
mortgage lending. In the first half of the year, disbursements totalled
€1.2bn, up by 68% year-on-year. The particularly strong growth in new loans
led to an annualised increase of 26% in mortgage lending outstandings.
Consumer credit reported the best performance of recent years, with
disbursements totalling €655m in the first half, up 58% year-on-year, the bank
said.
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FOOD & DRINK
CCHBC buys back its 2006 Euro bond
Coca-Cola Hellenic Bottling Co (CCHBC) is buying back its 5.5 per cent Euro
notes due in 2006 at a tender price of 104.649 per cent of face value, the banks
managing the deal announced recently, New Europe reported.
The Greek bottling company said bondholders had tendered 322m Euro worth of the
notes, of which there were 555m Euro outstanding. The tender price offered a
spread equivalent to two-year mid swaps.
On June 9th Coca-Cola HBC sold 500m Euro bond maturing in 2011, which it offered
in exchange for the 2006 notes. The new bonds were priced to give a yield of 43
basis points over mid-swaps. Credit Suisse First Boston is managing the tender
offer, while CSFB and HSBC are book runners of the new issue.
CCHBC proves its sparkling spirit despite fickle market
Coca-Cola Hellenic Bottling Co (CCHBC) recently unveiled its results for the
first six months of 2004 period ended July 2nd. Based on IFRS figures, volume
increased 5.5 per cent to 683m unit cases, New Europe reported.
EBITDA (earnings before interest, taxes, depreciation and amortisation) was up
12 per cent year-on-year, totalling 365m Euro. Operating profit (EBIT) amounted
to 159m Euro, up 18 per cent compared to the same period last year. The figure
was 27 per cent higher ahead of 2003 excluding the subsequent recognition of
pre-acquisition tax losses, the company said in a statement.
CCHBC said its earnings rose significantly, as the net profit totalled 85m Euro
compared to 48m Euro, up by more than three quarters. Cash flow generated from
operating activities less capital expenditure stood at 58m Euro for the
comparable period in 2003.
Based on US GAAP, volume rose six per cent to 679m unit cased in the reporting
period. Operating profit was 14 per cent higher, amounting to 219.3m Euro,
against 192.3m Euro seen in the first six months of 2003. According to CCHBC,
the company posted a strong rise in net income to 150.8m Euro from 107.3m.
With respect to the second quarter, the company said volume grew 1.6 per cent to
383m unit cases based on IFRS. EBITDA increased by one tenth to 253m Euro, while
operating profit amounted to 144m Euro, up 9 per cent on 2003, and 15 per cent
ahead of 2003 excluding the subsequent recognition of pre-acquisition tax
losses. Continued strengthening in earnings resulted in a net profit of 97m Euro
from a net profit of 75m Euro in the previous year, up by nearly a third, the
company said.
According to US GAAP, volume increased 2 per cent to 381 per cent year-on-year
for the second quarter. Operating profit stood at 176.7m Euro, against 161.3m
Euro, up 10 per cent form the same period last year. The company saw a huge rise
in net income, which totalled 139.9m Euro compared to 107m Euro.
CCHBC Managing Director, Doros Constantinou, welcomed the results. "Our
proven strategy continues to deliver strong revenue and earnings growth.
Despite poor weather conditions across the majority of our markets and the
short-term adverse economic impact on our developing markets resulting from EU
accession, our effective market execution enabled us to deliver a credible
volume performance," Constantinou said.
"Pricing initiatives, mix improvement, cost control and financial
management all contributed to strong earnings. We believe that these results
demonstrate how our strategy and management skills enable us to optimise
performance under difficult conditions," he added. "Trading conditions
in the third quarter appear to be improving in most of our key markets and
accordingly we remain comfortable with our current guidance for the full
year."
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TELECOMMUNICATIONS
OTEnet and WeRoam forge JV
Expanding its international presence with respect to WLAN Internet access,
WeRoam has announced that it has entered into a cooperation agreement with
OTEnet, a subsidiary of OTE (Greek Telecommunications Organisation), the number
one Internet provider in Greece, New Europe reported recently.
Founded in 1996, OTEnet hopes to dynamically develop the market for Internet and
broadband communication technologies. As a Greek pioneer of WLAN and going under
the brand name of "On Wireless," OTEnet operates Wi-Fi hotspots in
hotels, congress centres and airports for public wireless access to the
Internet.
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