IFRS has minor effect on banks

The introduction of International Financial Reporting Standards (IFRS) has had a minor impact on Greek banks, according to a comparison of their end-2004 statements using IFRS with the old accounting standards, which had been based on a Greek law from 1920. On the other hand, IFRS had a significant impact on most listed insurance firms, an analysis of their first quarter results demonstrates. IFRS became mandatory this year and the transition to the new regime took the affected firms a great deal of time. Publication of results according to IFRS is mandatory for firms listed on the stock market. Among other things, it requires them to disclose the sums set aside for severance and pension payments, which did not formerly appear in financial statements. In National Bank, Greece’s largest, the biggest impact of IFRS was on net after-tax profit. Using the old Greek standards, it reached 294.8 million euros in 2004, whereas this shrank to 265.9 million using IFRS. This 28.9-million-euro difference stems mostly from the reduction of revenue from interest by 50 million euros. Alpha Bank saw its equity capital reduced by 364 million under IFRS because of its provisions for pensions and severance payments. On the other hand, the impact on profit was far smaller. This was the result of deficits in its employees’ auxiliary pension fund, created mostly when Alpha acquired former state-run Ionian Bank, back in 1999. EFG Eurobank Ergasias, which faced no problems with its employees’ funds, saw 2004 profit shrink by 7.6 percent under IFRS, but equity capital was boosted by 55 million euros. A similar boost, 55 million euros, was noted at Piraeus Bank, whereas the impact on profit is very minor. Emporiki Bank is the one most heavily affected by IFRS, since its employees’ auxiliary fund was in the worst shape. No comparison using 2004 results is visible, since the bank has not made its provisions public. The bank yesterday announced that it will publish its first-quarter results, the first using IFRS, next Tuesday, after the Athens Stock Exchange closes. Market insiders are eagerly awaiting the results in order to gauge the prospects of a further investment by France’s Credit Agricole, which already owns an 11 percent stake in the bank. Credit Agricole officials have long said they will make no further investment in Emporiki if the issue of the pension fund liability is not resolved. A law passed last week by the government paves the way for the incorporation of the auxiliary pension fund into a new state-controlled one, which would cover all 11 banks concerned. In a radio interview yesterday, Emporiki chairman and CEO Giorgos Provopoulos said that he estimates the banks’ liabilities to be «well below» 1.5 billion euros. He predicted that the bank’s planned cash capital increase will range between 450 and 500 million euros and added that Emporiki will also seek capital in other forms, such as hybrid financing and higher-risk capital. Provopoulos hailed the new government law on pension funds for erasing a major competitive disadvantage, as Emporiki paid almost 10 times as much as its competitors for social security contributions. Asked about the partnership with Credit Agricole, he said that the French bank is one of Europe’s largest, with strong liquidity, and that he thought a possible merger would have a dramatic impact on the domestic banking sector.

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