Geniki Bank not meeting expectations

Three years after Geniki Bank’s promising takeover by the robust French group Societe Generale, growth prospects for the bank now appear to be doomed. Though the big French group’s entry into the domestic market gave rise to strong expectations, not only regarding the growth potential of the ailing smaller bank but also the overall qualitative upgrading of domestic market competition, the outcome has been rather disappointing. Geniki has been posting sizable losses, its loan portfolio in particular trouble, forcing the French group to go ahead with another share capital increase (-220 million) in order to bring the bank’s capital adequacy ratio up to the levels prescribed by the Bank of Greece. The French have so far spent around -500 million (including the latest share capital increase), which has proven ineffectual in saving the bank from its declining path. Geniki recorded losses of -104.7 million in 2004, -39.4 million in 2005, -72.1 million in 2006, and -10.3 million in the first quarter of 2007, all due to increased provisions for bad debts. Total provisions made in the three-year period 2004-2006 amounted to -215 million, as well as an additional -10.3 million in the first quarter of 2007. An indication of the state of the bank’s loan portfolio is the fact that provisions are equivalent to 13 percent of the bank’s total credit portfolio. Things have been made even worse by Geniki’s poor results in new loans, as well as by a considerable increase in its operating costs, because of its restructuring efforts. In a booming period for the banking sector, Geniki in 2006 posted operating outlays of -169 million, up 9.4 percent, and operating revenues of -168.5 million, down 5.4 percent. Radical changes in Geniki’s administrative structure were recently decided in Paris, in an effort to halt the bank’s decline, despite the considerable funds made available by the French group. Some reports even speak about a likely sale of Geniki being considered, but Geniki officials rejected such rumors, saying that SOCGEN’s expansion into Greece has been a significant strategic move. However, strong criticism has been voiced by minority shareholders, who are questioning the sincerity of the French. Immediately after taking over Geniki, officials of the French group had publicly declared that they were planning an immediate and radical restructuring of the credit institution.

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