Bank of Greece profits increased slightly in ’03 to 218.3 million euros

The Bank of Greece, the country’s central bank, increased its profits last year to 218.3 million euros from 213.2 million in 2002. Yesterday, the bank proposed a dividend of 2.5 euros per share, up from 2.2 euros in 2002. According to the bank this modest (2.4 percent) increase in profits is considered satisfactory, given that last year was an especially difficult one for all central banks. The reason was the significant depreciation of the US dollar against the euro. This led to a depreciation of central banks’ assets, whose value is expressed in dollars, even for the eurozone banks. Another factor that kept the rise in profit modest was the decline in domestic and international interest rates. Other factors that affected the Bank of Greece’s results were a significant increase in net income from interest; a decrease in income from financial transactions; a slight decrease in income from commissions, participations and other sources; a cut in operational expenses and a reduction in asset depreciation. Specifically, net income from interest increased from 121.2 million euros in 2002 to 270.8 million in 2003. To a great extent, this reflects the higher yield of investments in euros which substituted for investments in foreign currency, especially US dollars. Also, transactions within the Eurosystem of eurozone central banks resulted in a reduction of interest paid to the European Central Bank (ECB) by 74.1 million euros. Net income from financial transactions declined steeply, to 27.9 million euros, in 2003, from 146 million in 2002, especially due to a reduction in foreign transactions. Income from commissions, participations and other sources dropped to 230.7 million in 2003, from 286.7 million in 2002. This reflects mainly less income deriving from the ECB – which suffered losses in 2003 – and the transfer of a significantly smaller amount of drachma banknotes which the bank estimates will not be exchanged for euros by the final deadline for exchange, which is January 3, 2012. Expenses on personnel increased just 2 percent in 2003, compared to 8.6 percent in 2002. Finally, asset depreciation declined by 66 percent, because there is no more carry-over from the cost of printing drachma banknotes. The bank’s shareholders’ assembly, to take place in late April or early May, is expected to approve the dividend proposal. No top personnel exchanges are expected to take place in the AGM. The new government has assured Bank of Greece Governor Nicholas Garganas that he will keep his post until the end of his term, in 2008. No changes in deputy governors are expected either.