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Balance sheet and profit and loss account for financial year 2007

14/04/2008 - Press Releases

At its meeting on 17 March 2008, the General Council of the Bank of Greece approved the Bank's audited Annual Accounts for the year ending 31 December 2007.

The Bank's net profits in 2007 amounted to €284.7 million, compared with €244.6 million in 2006, thus increasing by 16.4%.

The total dividend per share that will be proposed to the General Meeting of the Bank's shareholders for distribution comes to €3.20, compared with €2.90 for financial year 2006 (+10.3%).

On the basis of the closing price of the Bank's share on 31 December 2007 (€92), the dividend to be proposed for distribution corresponds to a return of 3.5%.

An amount of €36 million from the profits of 2007 has been allocated to the extraordinary reserve, which came to €55 million.

Analysis of the profit and loss account for 2007

Income

The Bank's total net income in 2007 was slightly lower than in the previous financial year (having decreased by 0.6% to €825.5 million, from €830.9 million in 2006).

This result was primarily due to the decrease in profits from swap transactions, which, as in the previous year, were carried out following an approval by the ECB in order to increase the special provision for the Bank's future liabilities to its personnel social security funds. Reduced profits from swap transactions (€93.4 million in 2007, compared with €204.4 million in 2006) were the main determinant of the decrease in the total net result from financial transactions (€104 million in 2007, from €241.7 million in 2006).

By contrast, net interest income, being the Bank's primary source of income, recorded a significant increase of 27%. Net income from commissions increased by 8.1%, while other income increased by 18.4%.

Specifically:

  • Net interest income came to €540.9 million, from €426.0 million in 2006, due to the high returns on the assets included in the Bank's portfolios.

  • Net income from commissions came to €131.7 million, from €121.8 million in 2006. This income mainly concerns commissions received by the Bank from the Greek State for transactions conducted on the latter's behalf, as well as commissions from the management of the Common Capital of Legal Persons in Public Law and Social Security Funds.

  • Other income came to €48.9 million, from €41.3 million in 2006. They concern income from the activities of the Banknote Printing Works (IETA) of the Bank of Greece, income from participating interests, as well as the amount from the reallocation of the Eurosystem's monetary income. It should be noted that other income does not include income arising from the Bank's allotted share in the ECB's income on euro banknotes in circulation and in the ECB's net profits, since the ECB, in 2007 as in previous financial years, retained the full amount of its surplus, including income from its share (8%) in the total value of euro banknotes in circulation issued on its behalf. This surplus was set aside in a provision against future foreign exchange rate, interest rate and gold price risks.

Expenses

Total expenses in 2007 were lower than in the previous financial year (having decreased by 7.7% to €540.8 million, compared with €586.2 million in 2006).

Reduced provisions contributed decisively to this development.

Specifically:

  • Total provisions made during financial year 2007 came to €148.1 million, compared with €227.6 million in 2006. This decrease concerns the Bank's provision for future liabilities to its personnel social security funds, which came to €93.4 million, from €204.4 million in 2006. These sums concern profits from swap transactions conducted with the ECB's specific approval.

  • The Bank's operating expenses excluding provisions (staff costs, pensions, administrative and other expenses, depreciation) increased by 9.5% to €392.7 million (2006: €358.6 million, with an increase of 11%).

Operating expenses were substantially affected by:

- the increase in payments for staff retirement. As in the previous financial year, a significant number of employees retired in 2007 (158);

- the increased depreciation of euro banknote printing costs;

- the increase in other expenses, including the Bank's aid to fire victims.

It should be noted that the increase in expenditure for wages and other staff payments was contained at 6.7%, despite the extraordinary expenses for the reorganisation of the Bank. The corresponding increase in 2006 was 6.1%.

Major developments in the Bank's balance sheet items during financial year 2007

Gold

The Bank's total reserves in international standard gold amount to 4.6 million ounces (143.2 tonnes), having recorded a slight increase of 25 thousand ounces compared with the previous financial year. The increase in the value of gold in euro was more substantial, having come to €2.6 billion on 31 December 2007, from €2.2 billion on 31 December 2006.The increase of €406 million is associated with the rise in the price of gold.

The total amount resulting from the continuous rise in the price of gold in the past few years comes to €961.3 million. This amount, which has been transferred and kept in an adjustment account, represents a buffer reserve for future potential adverse developments in the price of gold.

Euro banknote circulation

In financial year 2007 the Bank's share in total euro banknotes in circulation increased by €1 billion and came to €16.3 billion on 31 December 2007, compared with €15.3 billion on 31 December 2006. This increase is attributed to the rise of €50 billion in the total value of euro banknotes in circulation, which came to €677 billion on 31 December 2007. This change had a positive effect on the Bank's results, since it is associated with the substantial decrease of €2.5 billion (annual average decrease in 2007) in the Bank's liabilities to the ECB from the TARGET account balance and, therefore, with the decrease in interest paid by the Bank in 2007 on these liabilities.

Portfolio management

 In financial year 2007 the bulk of the Bank's managed portfolios continued to consist of Greek government bonds and euro-denominated government paper issued by other euro area countries. This choice resulted in limited exposure to foreign exchange risks and risks of changes in the price of securities, taking into account the conditions that prevailed in the markets in 2007, especially the continuing appreciation of the euro vis-?-vis the major foreign currencies.

Monetary policy conduct

In the context of the single monetary policy conduct in the euro area countries, the Bank provided the necessary liquidity to the credit system, the average level of which amounted to €4.7 billion in the course of 2007.

Adjustment of the value of real estate

The Bank adjusted the book value of its real estate to its reasonable (market) value, as determined by independent appraisers. The resulting surplus value (€71.5 million) was transferred to a special reserve created by the adjustment of the value of real estate, which amounted to €541.6 million.

Reorganisation of the Bank

The administration of the Bank of Greece, taking into account the new conditions created within the Eurosystem, made in agreement with the association of the Bank's employees, organisational adjustments to its units.

The arrangements made in 2007 concerned organisational changes to Head Office units and a reduction in the network of the Bank's Branches and Agencies. Similar arrangements will be made in the coming years.

It should be noted that almost all other national central banks of the Eurosystem have made organisational adjustments and significant reductions of their branch network.

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