Greek banks have in recent years been among the top performers in the European banking sector.

Greek banks' and banking groups' pre-tax profits grew by 22.3 percent and 25.9 percent respectively in 2006, making banking one of the fastest growing sectors in the Greek economy.

While this growth has been assisted by continuing credit expansion, a favorable conjuncture in the stock exchange, containment of operating costs, and increasing profits from subsidiaries in the SEE markets, the revitalization of the Greek financial sector should first and foremost be seen in the context of the overall improvement of the domestic macroeconomic environment that has taken place under Greece's New Democracy government with George Alogoskoufis as minister of Economy and Finance.

In the words of Alogoskoufis, "Since March 2004, our government has been implementing wide-ranging reforms for the transformation of the Greek economy into a more dynamic and competitive economy."

Indeed, the Greek economy is now back on track, with the government's budget deficit reduced to 2.6 percent of GDP, GDP growth rising to 4.2 percent, and inflation stabilized at around 3 percent in 2006.

Foreign direct investment is pouring in, and the Institute for Management Development has upgraded the competitiveness of the Greek economy by eight places, an improvement only surpassed by China and India.

An important component of the government's reform package has been an ambitious privatization agenda, which in the financial sector began in 2004 with the full privatization of the National Bank of Greece, and continued in 2006 with the divestment of shares in ATEbank and the Greek Postal Savings Bank, and the full privatisation of Emporiki Bank.

When in July this year the Greek state further sold off shares in the Greek Postal Savings Bank, reducing its direct participation to 34.4 percent, the offering was approximately three times over-subscribed and with a premium, resulting in revenues for the state of 510 million euros ($683.4 million).

The figures confirm the market's trust not only in the Postal Savings Bank, but also in the modernization of Greek state banks in general.

The Greek Postal Savings Bank, which was founded in 1900 with the aim of serving people of all classes, has been undergoing a swift process of modernization spearheaded by its president, Panagiotis Tsoupidis.

"Our bank already has a very wide client base, reflecting the social values that we have inherited and are careful to preserve. But what we are aiming at is to become a more integrated, more independent, and more up-to-date bank," comments Tsoupidis.

After breaking into the retail banking market, the bank has entered a new era, and was in 2006 able to report an increase in profits before taxes of 30.6 percent.

Over the recent years, Greek banks in general have been able to improve their competitiveness and rationalize their costs despite increasing expenditures resulting from cross-border expansion into the wider region of SEE.

Greek banks operate, directly or through their subsidiaries, a network of over 1000 branches, employing 16,000 people and accounting for approximately 16 percent of the banking market share in that region.

One example of a Greek bank which has made the move into the Balkans is ATEbank (formerly The Agricultural Bank of Greece).

The bank, which was established in 1929 as a specialized credit institution with the mission of supporting the development of the country's agricultural sector, has today become a leading player in the financial sector, listed in the FTSE/Athex 20 Index and covering the entire spectrum of financial products and services offered to individuals and companies.

"In 2006 we expanded our activities in the area of Balkans with the purchase of INDbank, the permission for bancassurance operations in Romania, and the acquisition of shares in the Serbian Bank AIK BANKA" comments ATEbank Chairman-Governor, Dimitris Miliakos.

In the first six months of 2007, ATEbank recorded an increase in net profits of 61.9 percent compared to the same period last year, making it one of Greece's fastest growing banks.

(China Daily 12/13/2007 page26)