FINANCE UPSWING IN ECONOMY AND BANKING SECTOR
A promising outlook at home is encouraging many Greek banks to investigate the developing financial markets in Southeastern Europe and beyond

Greece’s freshly restructured financial sector is registering record global returns

Backing Greece’s buoyant economy is a freshly restructured financial sector that has enabled foreign banks in the country to register some of their highest global returns. Liberalization of the banking sector has been underway since the 1990’s and is now nearly complete; lending constraints on Greek financial intermediaries have been removed and the government has liberalized access to credit resulting in a surge in consumer credit uptake.
Entry into the European Monetary Union (EMU) in 2001 marked the culmination of a remarkable transformation in the Greek economy. Furthermore, since the successful transition to the Euro, interest rates that were stratospheric only a decade ago now hover at 3.7% and have sparked an increase in consumer spending, helping the economy to expand.

Mr. Panayotis Thomopoulos, Deputy Governor of the Central Bank of Greece, explains, “The successful entry into the EMU and the opening up of the banking system played a significant role in creating a more positive environment here. Our rate of investment is now one of the highest in Europe – around 23% of GDP. This has been helped enormously by the low rates of interest stemming from our Euro zone membership.”

This upswing in the Greek economy and banking sector looks set to last. Infrastructure investments and comparative advancement in relation to neighboring states are just a few of the reasons why experts are predicting that growth will continue well into the next decade. In addition, Greece is not expected to reach the GDP rates of the more established EU members for another 10 years, which means that economic growth should remain strong throughout the period.

Mr. Iakovos G. Georganas, Vice Chairman of Piraeus Bank, comments, “We feel confident that the Greek economy will continue to do better than others in the EU and Euro zone for a number of years. Secondly, our development encourages cooperation with other countries in the region, such as the Balkan countries and those in Southeastern Europe.” Piraeus Bank has recently formed a strategic alliance with ING to focus on asset management and bank assurance. The bank also maintains a successful U.S. presence through its U.S. subsidiary, Marathon Bank, which is registering a growth of 20%.

PANAYOTIS THOMOPOULOS Deputy Governor of the Bank of Greece

IAKOVOS G. GEORGANAS Chairman of Piraeus Bank

APOSTOLOS S. TAMVAKAKIS Vice Chairman of the National Bank of Greece

The National Bank of Greece is another Greek bank with a strong international presence and a successful presence in the United States. The bank’s U.S. subsidiary, the Atlantic Bank of New York, is its largest international operation. Vice Chairman Apostolos S. Tamvakakis says that although the success of the bank’s U.S. ventures is great, the bank sees its real expansion opportunities in Southeast Europe.

He states, “The Atlantic Bank of New York is making almost $50 million in profit, operating in the New York area. We also acquired Yonkers Bank two years ago and are currently in talks with a financial institution in the Manhattan area. However, the major contributions to future earnings will come from the Balkans. From the e300 million that we have invested in the region, we have already generated a return of 12%.”

The National Bank of Greece is also the largest provider of financial products and services within Greece, controlling over one third of the retail banking market and leading the way in investment banking through their subsidiary ETEVA. Consequently, the bank has benefited considerably from the sudden increase in consumer borrowing and domestic investment in the country. Mr. Tamvakakis believes that this is a trend that will continue.
He states, “We expect household borrowing to continue to grow in double digits for many years to come. Greeks are richer now, and they are more concerned about their retirement and about their savings. For these reasons, asset management is becoming popular and we will soon be developing products on the liability side as well.”

With such a promising outlook at home, many Greek banks are now confidently looking to capitalize on the developing financial markets just beyond their borders, a fact that places the Greek sector in a position to become a regional financial center for trading in Southeastern European currencies and for the transfer of technical and financial know-how to these regions.

Greece is also set to benefit enormously as new states ascend to the European Union. Mr. Nicholas Nanopoulos, CEO of EFG Eurobank Ergasias, elaborates, “We are quite positive about the economies that have European prospects. In ten years from now when the European Union is enlarged and there are at least 25 member countries, people will not be speaking in terms of individual countries, but rather in terms of regions, so it will be the ‘region of Southeastern Europe’.”

Chief Economist of Alpha Bank Mr. George A. Provopoulos supports the view that Greece may become a ‘Gateway to the Balkans’ and says that it is Alpha Bank’s vision to become the regional leader. The bank is currently operating in Romania, Bulgaria, Albania, the Former Yugoslav Republic of Macedonia, and Serbia. “The fact that Greece is the only Euro zone member country, and the only NATO country in this region, gives it certain political and economic advantages. We also have a deeper understanding of the mentality and the environment in which business is conducted in Southeastern Europe,” he states. Alpha Bank is Greece’s second largest bank and the official bank and a Grand Sponsor for the 2004 Olympic Games in Athens.

The stock market in Greece is also continuing to grow, providing a source of private capital to rival bank credit, and Greece is leading the way in the EU on corporate governance and transparency. Strict procedures have been implemented by the Athens Stock Exchange (ASE) for its listed companies and the ASE and the Athens Derivative Exchange have recently merged in order to promote more efficient operations.

Dr. Panayotis Alexakis, President of the Athens Stock Exchange, says, “This market is at the same level as other European markets with regards to regulations and transparency, corporate governance, disclosure, and investor protection. We are very competitive and will remain so, as foreign investors, including Americans, have a strong presence in the market here. ”

The country’s economic growth is expected to remain very strong for the foreseeable future

This emphasis on good governance is transcending the nation’s borders as well, according to Mr. Panayotis Thomopoulos of the Central Bank of Greece–a bank that has been instrumental in providing assistance to other central banks in the region and forming regulatory agreements between regional supervisory authorities. Mr. Thomopoulos explains, “The Greek banks are the vehicle of integration between Greece and the Balkan countries. In some Balkan countries, Greek banks represent as much as 60-70% of the banking sector. Hence it is very important for us to have supervisory agreements. We bring stability and security to the depositors and assure a continuous flow of funds that would otherwise be difficult for these countries to achieve.”

Citibank is an example of a successful U.S. presence in the Greek financial sector. Having operated in the country for over 40 years, Citibank is the number one foreign bank in the nation in terms of exposure, number of employees, and number of branches. Mr. Christos Sorotos, Citigroup Country Corporate Officer, believes that the country offers many opportunities for American investors, and that today’s modern technology allows professionals to live and work in the location of their dreams, instead of having to wait until retirement age. He explains, “There are fund managers from New York companies living in Greece. They swim in the morning, they have lunch, they start at 4 o’clock which is New York opening time, they finish by 11 o’clock, having been at their terminals for 7 hours, and then they go for dinner.”