o_19heefouak9i9v4do11ac41pi7a.pdf

DEVELOPMENT BANKING IN GREECE 1963-2002
The paper is organized as follows. The next section examines the reflection of financial
development in Greece during the years 1963-2002 in the financial data of
the three banks. The third section embeds the transformation of the banks in the
context of the development of the whole economy. The final section is a conclusion.
ETBA, ETEBA and Investment Bank: financial indices
According to the literature (Ledgerwood, 1999, Koch, 1995, Murinde and Kariisa-
Kasa, 1997, Jain, 1989, and Singh, Arora and Anand, 1991), the financial performance
of the three banks can be obtained by the examination of various financial
indicators. These ratios include profitability measures such as net interest margins
(NIM), net and gross profit margins (NPM and GPM), return on total assets (RO-
TA), return on earning assets (ROEA) and return on equity (ROE). We can also obtain
solvency indicators such as the average cost of debt (ACD), loss ratios (LR) and
debt/equity ratios (DE). The analysis is embedded in a three-period classification:
the period of high growth till the mid-1970s, the crisis period between the mid-
1970s and mid-1980s, and the subsequent financial liberalization period.
Profitability ratios
The first measure of performance that we will calculate is the net interest margin
(NIM) (Koch, 1995:116), which equals the difference between interest revenue and
interest expense, over earning assets.
This is a ratio that indicates the net interest return as a percentage of available
assets. We have calculated this ratio for all three banks for the whole period of operation
by extracting the financial charges from interest income. As earning assets in
the denominator we have included the amount of long- and medium-term loans till
1991-92 and subsequently the amount of long- and short-term loans.
As shown in Figure 1 below, and excluding the outliers for the years 1964-65 for
ETEBA, the NIM for all three banks varies around almost the same level till 1990.
After this date, the indicators diverge significantly: the one pertaining to the data of
ETEBA rises until 1996, falling subsequently, whereas NIMs for ETBA and Investment
Bank fall after 1990 and 1991 respectively, even reaching negative values, although
in the case of ETBA the ratio rises again to positive values after 1996. The
small range of fluctuation in the level of the ratio until the late 1980s can be attributed
to the fact that it refers to long-term financing on concessional rates, while the
ratio after 1990 pertains to short-term loans and is generally affected by the deregulation
of banks’ lending activities.
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