Interview given by Mr. Panos Tsoupidis, President of the Greek Postal Savings Bank to Mr. Leotsakos from the «Isotimia» newspaper

Panos Tsoupidis, President

What are the goals of GPSB after being listed on the Athens Stock Exchange?

Our basic aim is to transform our assets.
We aim to transform our loan to deposit ration from 16%, as it was two years ago, to 80% by 2008. Our goal is for our loan financing to reach the 8 billion euro mark.
Amounts deposited at the GPSB were basically invested in bonds.
Our aim now is that these should finance the expansion into the retail market.
The yields we are achieving from loans will be 210-220 base points higher than the cost of money; compared to 100-110 base points which are the corresponding yields from bonds.
This also lengthens the performance duration of portfolios.
Loans have a duration of 20-25 years, while treasury investments average approximately 6 years.
In 2004 the GPSB granted 150 million in new loans, in 2005 the amount was approximately 1 billion euros and in 2006 our goal is that the amount should exceed 1,5 billion euros.
The Postal Savings Bank is in 7th position in the market and aims to conquer a 10% market share in granting retail loans, compared to the 5% it currently holds.

These goals can be met by 2008 if we complete installation of our data processing facilities and hire 600-700 people by 2007.

What goals have you set as an administration concerning capital returns and other basic economic figures?

By the end of 2007, beginning of 2008, when all the initiatives have been completed, the ratio of expenditure to revenues should be around 30-35% and share capital returns around 25%. In 2005 GPSB had 14% returns on share capital due to high capital.

The ratio of expenses to revenues is a basic index, however, it is not indicative for GPSB during this phase, as revenues have not yet matured.

Additionally, expenses are high due to the restructuring, data processing etc. However, the ratio of expenses to assets is around 1,1% for GPSB compared to 2,2% for other banks.

GPSB has a high capital adequacy with the basic index ranging around 13%, while it is also carrying out high forecasts, and this policy will not be altered for reasons of security.

The Postal Savings Bank is profitable and its savings accounts constitute 77% of deposits, as interest rates on savings accounts have not changed, despite an increase in the cost of money, because they are already at high levels.

How have returns on the investment / stock portfolio developed?

The overall portfolio amounts to 280 million euros. Approximately 130 million euros are the portfolio for sales and approximately 150 million euros are the trading portfolio. The sales portfolio also includes participations by Bank of Attica and Hellenic Exchanges S.A. It should be noted that the sale of 19% of Bank of Attica will write-down GPSB capital by approximately 80 million euros. Overall during the first four months, GPSB has sold significant holdings and achieved noteworthy profits. Yields on our portfolios in current prices are borderline higher than at the end of 2005.

GPSB remains the most attractive takeover target in Greece. Does the Ministry of Economy and Finance intend to sell the Savings Bank or to sell a new packet of shares on the Athens Stock Exchange?

According to the government GPSB will remain State controlled. I do not know whether the State share will decrease from 70% to 33%. However, I cannot preclude the sale of a new packet of GPSB shares even during 2006; however, these decisions will be taken by the majority shareholder, the State.

Recently important changes have taken place in the banking sector. What part will GPSB play in these developments?

This parameter is very significant. GPSB is moving in a free market environment without subsidies. At the same time there are specific problems, e.g. staff are public servants, however, I cannot fail to recognise that employees have played a catalytic role in the Savings Bank’s achievements. In this environment, therefore, GPSB has to compete with other banks on market economy terms and not on political terms. Monopolies no longer exist.

Do market economy terms of operation for GPSB mean that the pricing policy will change and that strategic alliances will be examined?

The Ministry of Economy and Finance has never intervened in pricing policy nor does it operate politics through the GPSB. However, on issues of strategy, matters have taken a different turn. GPSB is in seventh position, and if there are mergers in the sector, GPSB cannot remain outside developments. In effect, the Savings Bank will either takeover or be taken over, however, there are no plans at this moment.

Would GPSB enter into a strategic alliance?

Policy in a bank is exercised by the shareholders in conjunction with management; and in GPSB the State has first say. If developments between banks accelerate, the Savings Bank could merge with another bank. This new bank would avoid becoming “state-owned” by a parallel sale of a large percentage of the State’s holding on the market, e.g. to institutional investors. In what is a volatile environment for the banking sector, SPSB and its majority shareholder will have to evaluate facts and should not find themselves before a fait accompli. In 2-3 years, when margins have shrunk both mergers and acquisitions will be necessary.

What form could an agreement or collaboration with another bank take for GPSB?

First and foremost GPSB would maintain its working-class character. The Savings Bank will seek out synergies and policies. Our main priority is that the Savings Bank should not become the victim of developments, but should participate in developments or create developments. Our duty as management is to maximise value for the shareholders. If the market ascertains that GPSB is not involved in buyouts and mergers, it will distance itself and this could potentially lessen its value to shareholders. GPSB has a surplus of deposits, approximately 1,8 million customers with zero cross-selling. It should be easy to sell 500 thousand cards. Some form of collaboration would help.

The Savings Bank needs more personnel, whereas other banks have excess employees. There therefore exists complementarity between GPSB and another bank, e.g. in personnel composition. This complementarity, however, is connected to the amount of deposits and cutting costs. Banks with loans approximately equal to deposits, such as Alpha, Eurobank, Piraeus Bank, could be targets for the Savings Bank. Furthermore, cost cutting is decisive. GPSB will have to hire 600-700 members of staff, when most banks have excess employees.

Does Eurobank have an advantage compared to the competition for an alliance with GPSB?

These scenarios are completely unrealistic. No single bank holds a comparative advantage for the Savings Bank and in the case at hand certainly Eurobank holds no such advantage. As I already mentioned, GPSV will take initiatives and will not be last in developments.

If GPSB seeks out a strategic alliance with a Greek bank, how will it maintain its unique nature?

In the past when dissimilar banks merged, the results were not positive. In contrast when similar banks merged, they achieved much better results. GPSB has unique characteristics. However, the Savings Bank wishes to create developments and not be forced to follow. We must defend GPSB’s position and its nature.

What do you consider responsible for the stock's volatility on the Stock Exchange?

The financial results are positive and expectations of a deal also contribute to volatility. Foreign institutional investors are steadily increasing their holdings. From the day we were listed to recently, small shareholders have sold 1/5 or 20% of their participation. Minor shareholders hold a 9% compared to 11,5% initially, while both foreign and domestic institutional investors have upped their percentage stake.

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