Lawlessness threatens to turn heart of Athens into no-go zone

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Athens Stock Exchange General Index 3,280 3,250 3,220 3,190 3,160 3,130 3,143.92 3,275.08 3,276.56 5 8 9 SEPTEMBER 10 -2.55% 11.09.2008 3,213.54 3,131.60 11 Euro Exchange Dollar 1.430 1.4249 1.424 1.418 1.412 1.396 1.390 1.4229 ATHENSPLUS • FRIDAY, SEPTEMBER 12, 2008 ECONOMY & FINANCE 5 8 9 10 11 SEPTEMBER Sterling 0.8090 0.8070 0.8050 0.8030 0.8010 0.7990 0.8086 0.8030 0.8020 0.7937 5 8 9 10 11 SEPTEMBER Yen 151.00 151.51 Adverse economic conditions prompt change of plan for lenders Banks keep expansion abroad on priority list but now opting for autonomous growth BY YIANNIS PAPADOYIANNIS Greek banks are revising their expansion plans abroad due to the changing market conditions created by the credit crisis. Limited liquidity, the rising cost of money and uncertainty concerning the effect of the crisis on the banking system and its secondary effects on economies have prompted lenders to adopt a more defensive stance. Therefore, expanding abroad via acquisitions is no longer a priority. In today’s difficult environment, maintaining solid capital bases and proper risk management are basic priorities for banks. Additionally, due to the current adverse conditions, sellers – be they governments or private investors – are less willing to do so due to today’s lower valuations. With an eye on the previous higher valuations, sellers are adopting a wait-and-see attitude until the end of the crisis cycle and the return of better days for the region’s economies. Within this climate, National Bank is in no rush to implement its strategic aim of expanding in Russia. Eurobank has been concentrating on its autonomous development in mar- A slight dip in inflation last month may not provide much relief for consumers; however economists see a further deceleration on the cards in the coming months. Greece’s headline inflation rate eased slightly in August, moving away from a 10-year high, mainly due to falling energy prices. The National Statistics Service (NSS), Greece’s statistics office, said on Monday, September 8, that inflation decelerated in August to 4.7 percent year-on-year from 4.9 per- 10 1.4144 1.4094 1.3935 Expansion in the region is still among the priorities of Greek banks. [AFP] Plans on ice Sellers are waiting until the end of the crisis and the return of an improved economic forecast cent previously. The figure, however, remains almost a full percentage point above the eurozone average, which stood at an estimated 3.8 percent last month. Housing costs, including rentals and maintenance fees, rose 10.8 percent last month and transport charges advanced 6.5 percent. Food and non-alcoholic beverages advanced 4.5 percent, while a further breakdown shows bread and pasta prices shot up by 17 and 27 percent respectively in the same period. 0.8067 kets such as Poland for a number of months, while Alpha Bank has moved ahead with the purchase of a small bank in Ukraine. Piraeus Bank had been examining the acquisition of a second bank in Ukraine but is believed to have put those plans on ice, awaiting a better purchasing opportunity Among the few items to show a price drop were fresh vegetables, which retreated almost 18 percent, and the cost of cars, which fell by almost 2 percent. “Over the next few months, inflation is expected to fall, especially in the last quarter of the year, as long as global oil prices remain at their present levels,” said an economist at one of Greece’s leading banks Greece’s EU-harmonized inflation rate for August retreated slightly to 155.00 153.00 150.00 149.00 154.54 152.90 150.52 148.65 Swiss Franc 1.6100 1.6040 1.5980 1.5920 1.5860 1.6051 1.5889 1.5995 1.5928 1.5856 148.00 1.5800 5 8 9 10 11 5 8 9 10 11 SEPTEMBER SEPTEMBER on the back of the credit crisis. The most recent moves of Greek interest were the buyouts of two Russian banks by the Bank of Cyprus group and Marfin Popular Bank. BoC, which had been concentrating efforts in recent years on the Greek market, took advantage of market conditions by purchasing a significantly large Russian bank. Marfin Popular also expanded into Russia by acquiring a small lender, while at the same time it has boosted its presence in Romania, Ukraine and Serbia. This conservative stance does not mean that expansion abroad is no longer a top priority for Greek banks. The prevalent idea today is for banks to achieve growth by further expanding in markets in which they already operate, that is, through independent expansion. Over the last 12 months – despite the credit crisis – National Bank has opened 66 new branches in Turkey, boosting its network to 418, while another 127 branches opened in the rest of Southeastern Europe. Eurobank in the last 12 months has inaugurated 101 new branches in Ukraine, 97 in Poland and boosted its Romanian operations with another 45 branches. Inflation drops, with further retreat expected August index eases to 4.7 percent year-on-year as a result of lower energy prices 4.8 percent from 4.9 percent in July. The government recently revised its inflation forecast for the year, expecting it to average out at 3.5 percent from a previous 2.8 percent, to reflect stronger-than-expected upward price pressures. The Development Ministry has put together a list of 41 measures to battle inflation, including stepping up price checks to catch profiteers. Violators have been threatened with hefty fines and being placed on a black list. Telecom sector in for a shake-up Conditions appear to be ripe for changes in the country’s telecoms landscape, with speculation of Wind Hellas, owned by Weather Investments, changing hands and the sector’s smaller alternative operators struggling in the highly competitive environment. According to press reports, Orascom Telecom Holding, also owned by Weather Investments, is reported to be in merger talks with Telekom Austria (TA). Neither of the two sides have denied the press reports. Although there has been no direct news so far of Wind Hellas, Greece’s third-largest mobile phone operator, being involved in a possible deal, market sources said it is unlikely the Greek company will be unaffected by the merger. Meanwhile, the price war that has been raging between the country’s alternative telecom providers is costing the sector heavily. Data indicate that in 2007, telecom companies are estimated to have incurred losses of more than 200 million euros, while their liabilities reached 900 million euros. The companies have been spending big to promote their services as they plow more money into infrastructure. “Every time an offer takes place, it is like we are shooting ourselves in the foot,” said a senior industry source. Recent promotions that have taken place include offers made by On Telecoms, a company that reported earnings of 10 million euros in its first year of operations as well as a loss of 23 million euros. On Telecoms recently offered new customers who sign up for any package by the end of September three months free of charge. Other offers have come from Hellas Online (HOL), which is tempting customers by offering unlimited local and long-distance calls along with free calls to 26 countries for 19.90 euros per month. Sources say sector participants can only stay afloat by attracting a growing customer base. Poor financial results, however, have started to have an impact on company valuations and share performance. Shares in Lannet are no longer traded on the Athens bourse, while companies such as HOL have lost almost 50 percent of their market valuation in less than three months. Meanwhile, the valuation of Forthnet, the first company to provide Internet services in Greece, has fallen below the value of its recent Nova acquisition.
ATHENSPLUS • FRIDAY, SEPTEMBER 12, 2008 ECONOMY & FINANCE Bank deposit returns looking up Growing competition and ECB decision are likely to prompt higher interest rates Metka chosen for Syrian power plant construction Lenders may increase interest rates on bank deposits by up to half a percentage point in coming months due to growing competition in the sector and the European Central Bank’s (ECB) recent decision to limit liquidity in the credit system. However, the impact on interest rates applicable on loans may also be large, as lenders are expected to roll over the higher finance cost onto clients in a bid to keep spreads unchanged. Spreads are the difference between the interest rate a bank charges a borrower and the interest rate a bank pays a depositor. Lenders are also coming under growing pressure from central banks to price in risks more effectively, which means adopting a more conservative stance through interest rate policies and loan criteria. The increase in bank deposit interest rates is expected to be gradual and will vary depending on each bank’s balance sheet. Lenders that have made extensive use of facilities offered by the ECB will need to find other The holiday home market on Rhodes seems to be stagnating, although the Dodecanese island remains one of the most popular tourist destinations year after year. Giorgos Pipinos, a local realtor, suggests that the small decline in visitor arrivals has also affected demand for properties by foreign buyers. “The British and the Germans remain active, although the latter are showing less interest than in previous years. By contrast, the Russians are buying more, this being a market that is developing with excellent prospects,” he says. Newly built detached houses and apartments range from 2,500 to 3,000 euros per square meter. Plots in town-planning areas cost between 600 and 950 euros/sq.m., while those outside town-planning areas can reach up to 100 euros/sq.m. if they are located by the sea. Available seaside plots are however virtually absent from the market. Prices are showing a rise of 15- 20 percent over 2007 as the quality of construction has also improved significantly. Banks may soon make it more attractive to invest in term deposits. [ANA] Gradual change An increase in deposit interest rates is expected to be gradual, depending on bank balance sheets sources of liquidity through customer deposits or by raising the necessary capital from international markets. Up until now, the ECB offered valuable liquidity by taking into account assets offered by lenders (e.g. home loans) along with a small margin (2 percent). If a bank wanted to secure finance reaching 1 billion euros, it backed it up with assets reaching 1.02 billion euros. Following a recent ECB decision, the 2 percent limit is being raised to 12 percent. This is expected to create pressure on smaller lenders which do not have access to alternative forms of finance from which their larger peers can benefit. Mixed bag A possible rise in interest rates on deposits will help boost returns HOME & PROPERTY on accounts already showing some of the highest returns in the eurozone. Twelve-month term deposits in Greece pay households 5.08 percent, the second highest after Cyprus (5.36 percent), according to data made public by the ECB earlier this week. The cost of obtaining a mortgage is also cheaper in Greece than in many of its European Union peers. ECB figures showed that home loans with a floating rate in Greece were priced at 5.30 percent, the third cheapest in the eurozone. The most expensive country for home loans is Slovenia (6.79 percent) while the eurozone average in July stood at 5.66 percent. Data on consumer loans show that Greeks have to dig deeper to support their shopping habits. Consumer loans (variable rate) in Greece were offered on average at 8.89 percent, with the most expensive in Portugal and Spain, where the interest rate was at 12.21 and 9.50 percent respectively. The cheapest new consumer loans to households were offered in Luxembourg at a rate of 6.28 percent, data showed. Stagnant market on Rhodes, while Kos stirs Different trends on the two main islands in the Dodecanese as demand is patchy Demand is low for holiday houses on Rhodes and Kos, but Kos is seeing a surge in main residences. [ANA] Slim pickings Few seaside plots are available on Rhodes For a house with a view of the sea one would need to search in the island’s south, at Gennadi, Kalathis, Pefki and Lahania. In Lindos, however, demand is too high. Nearby Kos has its own peculi- arities. This beautiful island to the north of Rhodes is not seeing any great demand for holiday houses, but is seeing a surge as far as main residences are concerned. According to Nikos Parveris, of Parveris Real Estate, the market depends on locals or people who originate from families on the island, as “there are but a few who are active in the holiday house market.” Most people on Kos live within town-planning limits, with plots there costing between 100 and 320 euros/sq.m. Plots outside townplanning areas range from 20 to 25 euros/sq.m. Preference is mainly for maisonettes of 70-100 sq.m. that are located around the main town of Kos. Newly built maisonettes cost between 1,600 and 1,800 euros/sq.m. IN BRIEF Greece’s biggest builder of electricity plants, Metka, and Italy’s Ansaldo Energia have been chosen to build a 650-million-euro, 700megawatt gas-fired power station in Syria. “This project is the biggest in Metka’s history,” the company said in a statement. “Our backlog is now strengthened.” The contract – involving the design, supply and construction of the plant – brings Metka’s order book to 1.3 billion euros. Analysts described the deal as being important, helping Metka meets its targeted backlog of 1.0 to 1.5 billion euros for the full year. ● ●●● Foreign investors trim stock holdings in August Foreign investors reduced their positions in Greek equities by 262.4 million euros in August, according to data made public by Hellenic Exchanges, the group that operates the Athens bourse. Greek players, both institutional and private investors, were buyers last month, pouring almost 250 million euros into stocks. The average daily trading volume in August fell to 181.6 million euros from 247 million in July and 424 million in the same month a year earlier. ● ●●● Tourist arrivals flat in January-August period Tourist arrivals in the first eight months of the year were unchanged from last year’s levels despite slower global economic growth and the appreciation of the euro, according to a tourism employer group. The Association of Greek Tourist Enterprises (SETE) said data from 13 of the country’s main airports – which account for 95 percent of arrivals – showed a 0.7 percent year-on-year drop in incoming visitors to 8.467 million tourists. “If we also take into account the increase in tourists driving in from Bulgaria and Romania, mainly to areas in northern Greece, then we can conclude that arrivals this year will be the same as last year,” SETE said. ● ●●● Four in 10 hotels in the red but profitability improving More than four in 10 Greek hotels were in the red in 2007 but profitability in the sector has improved in recent years, according survey results made public this week. The report, put together by research group StatBank, found that 334 hotels, out of a total of 795 surveyed, showed a loss in 2007. The country’s largest 795 hotels jointly reported profits of 82 million euros in 2007, up from profits of 1 million euros in 2006 and losses of 23.2 million in 2005. [ANA] 11
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Lawlessness threatens to turn heart of Athens into no-go zone

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