FORM 6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Report of Foreign Private Issuer
Pursuant to rule 13a-16 or 15d-16 of
The Securities Exchange Act of 1934

For the month of March 2007

National Bank of Greece S.A.

(Translation of registrant’s name into English)

86 Eolou Street, 10232 Athens, Greece

(Address of principal executive offices)

[Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F)

Form 20-F x             Form 40-F o

[Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes o             No x

[If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-            ]

 

NATIONAL BANK OF GREECE S.A.

Management’s report

for the financial year 2006

March 2007

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National Bank of Greece

Management’s Report 2006

 

Management’s report

on the consolidated financial statements of National Bank of Greece

for the financial year 2006

Dear Shareholder,

2006 was a favorable year for the international economy, with global growth topping 5.1% mainly due to growth in the emerging economies of China and India, as well as the economies of the US and Japan. Likewise, there have been clear signs of growth in Europe. Within an environment of high oil prices, the monetary authorities around the world (some earlier, some later) proactively pushed up their interest rates in an effort to contain inflationary pressures without putting a brake on growth rates.

In the EU, GDP grew by 2.8% from 1.6% in 2005, while in the euro area growth was in the region of 2.8%, reflecting for the most part domestic consumption rather than net exports. The fiscal position of the member countries whose deficits exceeded the targets have improved thanks to the gradual reduction in the high deficits, thereby strengthening margins for further growth.

In Greece, the economy continued for yet another year to grow at rates well above the European average, reaching 4.2% as compared with 3.7% in 2005. This growth reflected both the increased domestic demand and a recovery in investments and exports of goods and services. The stronger domestic demand was boosted mainly by lower interest rates and rapid growth in household and business credit, with the average consumer price index dropping from 3.5% in 2005 to 3.2% in 2006. In the sphere of public finance, the deficit showed an improvement compared with the previous year, with the General Government deficit falling from 5.2% of GDP in 2005 to 2.6% in 2006, while the corresponding debt declined to 104.1% of GDP.

The favorable macroeconomic outlook for the country, together with the growth dynamic presented by the banking sector in Greece, is reflected in the high valuations of the major Greek banks, their robust capital adequacy and strong profitability. Thanks to the fast growth of the Greek economy and the expansion in household and business credit, Greek banks have moved beyond the domestic market and are broadening their activities in Southeast Europe, becoming key players in the region.

Over the past two years, the NBG Group has strengthened its position, implementing major restructuring while also forging a broader international profile, both in terms of its shareholder base and its business activities. The Bank aspires to become a strong financial group that will lead the banking market in the region of SE Europe, delivering superior value to its shareholders. The historic performance of 2006, with net profit after tax and minority interests reaching almost €1 billion, serves to vindicate the strategic choices of the Bank in Greece and the wider region.

Financial results

Group net profit after tax and minority interests grew to €990.1 million in 2006, up 36.1% on the previous year. This figure includes €89.8 million profit of Finansbank, at a Group share of 55.7% for the 135 days from the completion of the acquisition of the majority shareholding on 18 August 2006 through to the end of the year. Finansbank’s total profits over the same period amounted to €159.6 million. If Finansbank`s share and the one-off €100.6 million tax payment on the Bank’s reserves are excluded from the results, the Group’s profitability in 2006 totals €1,007 million, up 38.4% on 2005. As a result of the Group’s strong

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profitability, return on equity in 2006 reached 28.7%. This performance puts the Group among the top of Greek and European banks in terms of return on equity.

The spectacular increase in profitability in 2006 reflects the dynamic growth posted across all sources of income and the ongoing reorganization and broadening of the Group’s activities, which leads to a gradual decline in operating costs. As a result, the Group’s core income grew by around 31.3%.

The main growth driver for the Group’s core income has been the steadily strengthening interest income. Group net interest income in 2006 totalled approximately €2.1 billion, up 33.5% on the previous year. The momentum in interest income is reflected in the 10% growth posted in Q3 and Q4, pushing net interest income in 2006:Q4 to the level of €526 million, excluding Finansbank It is notable that, excluding Finansbank, net interest margin rose to a record high of 3.76% at the end of 2006:Q4 compared with 3.50% in Q3 and 3.16% for the whole previous year. This was due to the ongoing improvement in the asset mix and the dynamic growth in the Group’s loan book, particularly retail.

Net commission income in 2006 rose to €548.2 million compared with €425.1 million in 2005, up 29.0% y-o-y. Although intense and generalized competition in Greece had an adverse impact on retail commissions, the positive contribution of other fees and commissions, particularly mutual fund commissions, more than offset the difference.

A key strategic objective of the Bank is to strengthen its position in the mutual funds market, particularly high value-added funds. In the face of adverse conditions, the Group managed to increase its market share in mutual funds overall to 29%, taking first place in the domestic market. Particularly encouraging was the increase in market share of equity and bond funds from 10.9% to 12.7% in 2006.

In 2006, insurance business posted a 6.0% improvement, rising to over €106 million. This reflects the structural changes in the Group’s insurance operations, principally at Ethniki Insurance, and the more intensive marketing of insurance products to the large customer base of NBG via its extensive branch network.

Total Group lending amounted to €44.1 billion at the end of 2006, up 44.1% y-o-y. Over the same period retail lending posted spectacular growth of 37.0%, meaning that retail credit now accounts for 57.9% of total lending.

Mortgages surged by 29.9%, with mortgages outstanding exceeding €15.3 billion at the end of the year and corresponding to 34.8% of total Group lending. This result confirms the supremacy of NBG in the local mortgage lending market where it enjoys a market share of 24%. In 2006, disbursements of new mortgage loans exceeded €3.5 billion, of which €1.1 billion were disbursed in Q4, up
22% q-o-q.

Consumer loans outstanding totalled €7.2 billion at the end of the year, up 51.4% y-o-y, playing a key role in the performance of commissions deriving from consumer credit, which grew by 33.0% during the year.

Substantial growth was also posted by Group lending to businesses and professionals, which reached to €21.5 billion at year end. A key role was played by domestic financing for professionals and businesses with turnover below €2.5 million and SMEs with turnover of €2.5-€50 million that, after excluding Finansbank, reported impressive growth of 45% and 25% respectively. The corporate loan book topped €9.6 billion, up 10% y-o-y. Further growth in this loan book is planned by leveraging cross selling potential, with an emphasis on profitable categories of Project Finance and Cross Border Trade, tapping the synergies offered by corresponding specialized units at Finansbank.

The ratio of non-performing loans to the total loan book declined to 4.0%, from 4.7% in December 2005. NPLs after provisions for bad and doubtful debt today account for just 0.6% of the total loan book. The sound loan growth of recent years reflects ongoing discipline in implementing strict credit approval rules coupled with the adoption by the Group of state-of-the-art procedures and systems for controlling and managing credit risk.

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Total Group deposits in 2006 grew by 22.8% to over €53 billion. Savings and sight deposits grew by 3.2% reaching €31 billion, while time deposits presented growth of over 80%. NBG’s large market share of deposits gives it a strong competitive advantage since this facilitates the smooth financing of the Group’s expanding activities and investment plans in Greece and the wider region.

Although lending continued to increase at a rapid pace, the fast growth in deposits in 2006 helped maintain the Group’s balance-sheet leverage (ratio of loans to deposits) at the low level of 83% approximately.

Group operating costs grew by 19.7% on an annual basis, reflecting mainly the expansion of the Group’s business in SE Europe and Turkey as well the increased staff expenditure due to the one-off cost of voluntary early retirement programmes at various Group subsidiaries and the cost of compliance with Basel II rules and the Sarbanes-Oxley Act. The Group’s efficiency (cost/income) ratio, excluding Finansbank, stood at 50.3%, improved by 3 percentage points on the previous year, reflecting the emphasis that has been placed on keeping operating costs on a tight rein.

The NBG Group in SE Europe

Despite the considerable cost of expanding Group business in SE Europe, all our units made substantial improvements in their profits. In 2006, Group net profit after tax in SE Europe grew by approximately 57% over the previous year’s results. The key driver behind growth in the region was business in Bulgaria and Romania via the local subsidiaries United Bulgarian Bank and Banca Romaneasca, as well as expansion into the Serbian market with the acquisition of Vojvodjanska Banka.

At the beginning of the year, the NBG Group completed its acquisition of Alpha Insurance Romania from the Alpha Bank Group, thereby broadening its presence in the insurance market of Romania. The company was renamed “NBG Asigurari S.A.” and has signed a cooperation agreement with Alpha Bank Romania for the next five years.

Exploiting the strong position enjoyed by United Bulgarian Bank, the Group set up life insurance and general insurance companies in Bulgaria, with Ethniki Insurance teaming up with American International Group Inc. (AIG).

NBG strengthened its position in the Serbian market with the acquisition of Vojvodjanska Banka.  Vojvodjanska is the sixth largest Serbian bank in terms of assets, and runs the second largest branch network in the country. Following this acquisition, NBG’s market share in the Serbian market stands at around 8% vis-à-vis deposits and 6% vis-à-vis loans, thus ranking it among the top banks in the country.

With the addition of Vojvodanska’s 168 units plus the opening of 95 new branches by other SE Europe subsidiaries, the Group now runs a total of 520 fully functional branches, almost the same as the Bank’s network in Greece. Group lending in the region grew by a robust 44.0% in 2006 to €3.1 billion. Yet again, retail banking led the way, with the total retail loan book expanding at the impressive rate of 52% annually. It is particularly encouraging that over the course of the year the expanding loan book has been accompanied by a relative decline in non-performing debt to a ratio of less than 4%.

Acquisition of Finansbank

For National Bank, the expansion of its activities into Turkey is an integral part of its overall strategy, and has been vindicated by the strong performance of Finansbank, which was consolidated by the NBG Group for the first time. The net profit of the Finansbank Group for the 135 days between the signing of the acquisition agreement and the end of the year totalled €159.6 million. The profit corresponding to NBG on the basis of the consolidation ratio (55.7%) prior to the recent public tender offer to minority shareholders amounted to €89.8 million. Note that 43.4% of the minority shareholders responded positively to the public tender offer, which was completed recently, thus bringing the NBG Group’s total stake in Finansbank to 89.4%. This strong performance by Finansbank reflects the dynamic course of its business, with retail banking comprising the principal lever for growth. At the same time, the bank’s network is expanding fast.

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In 2006, 101 new branches opened, 45 of these from August onwards, thus bringing the total number of Finansbank branches to 309 at 31 December 2006.

Risk management

The Group operates in a fast growing and changing environment and acknowledges its exposure to banking risks as well the need for effective risk management. Risk management and control consist an integral part of the Group’s commitment to providing continuous and high quality returns to shareholder.

To this effect, the Group has developed an overall strategic direction, addressing the core issues regarding its fundamental attitude towards risk and risk management, driven by business objectives and targeting the creation of shareholder value.

Particularly, the Group Risk Strategy:

·                  Lays the foundation on which the Group builds its risk culture, terminology, policies and procedures;

·                  Describes the Group’s risk management governance structure within a framework of three lines of defence (risk-taking units, Group Risk Management unit, Group Internal Audit unit);

·                  Defines the Group’s risk management principles;

·                  Defines the Group’s risk appetite and profile, as well as its risk-bearing capacity.

During 2006, the Group achieved significant progress on the implementation of the “Basel II” programme. The programme targets both the Group’s compliance with the new capital adequacy regulatory requirements and, further, the enhancement of risk and capital management capabilities. The “Basel II” programme currently consists of 140 projects, which are expected to exceed 200 after the incorporation of Finansbank and Vojvodjanska Banka.

Credit risk

The Group pays particular attention to implement the highest standards of credit risk management and control. Credit risk arises from an obligor’s (or group of obligors) failure to meet the terms of any contract established with NBG or NBG’s subsidiary. The Group employs credit risk rating systems, which are especially designed to meet the specific characteristics of its various loan exposures (e.g. the Moody’s Risk Advisor for the corporate loans portfolio, internal rating models for the retail loans portfolio etc.). The objective for using a credit risk rating system is to appropriately classify an obligor to a particular credit rating class and then to estimate the parameters of expected and unexpected loss, with the ultimate goal of protecting the profitability and the capital of the Group. The protection against credit risk is achieved through:

·                  The application of maximum limits for exposures to a particular obligor, a group of associated obligors, obligors that belong in the same economic sector etc.;

·                  The use of credit risk mitigation techniques (collaterals, guarantees);

·                  The incorporation of risk metrics in the pricing of products and services;

·                  The use of contemporary financial techniques for hedging credit risk.

Market risk

To effectively measure market risk, which is the risk of loss attributed to adverse changes in market driven factors such as the foreign exchange rates, the interest rates, the equity prices and the prices of derivative products, the Group applies the Value at Risk (VaR) model taking into account the sum of all trading and available for sale (AFS) positions in all currencies. The Group has established a framework of VaR limits in order to control and manage more efficiently the risks to which it is exposed, capturing both the individual risk factors (interest rates, foreign exchange rates, equity price risk) and the total level of market risk exposure.

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Operating risk

A particular section of the “Basel II” programme refers to the development and the implementation of an integrated operational risk management framework, in accordance with the new regulatory requirements and the international best practices. During the year 2006, NBG completed the development of:

·                  The operational risk strategy, policies and methodologies;

·                  A “pilot implementation” of the new framework at NBG level;

·                  The timeline for the gradual implementation of the framework to all Group activities.

Liquidity and interest rate risk

Furthermore, the Group systematically estimates and manages interest rate risk in the loan book as well as the liquidity risk, through:

·                  The analysis of repricing and liquidity gaps arising from its balance sheet structure;

·                  The measurement of balance sheet and net interest income sensitivity to possible and less possible shifts in the yield curves and

·                  The establishment of relevant limits.

Capital adequacy

The Group manages actively its capital base by taking advantage of the contemporary means for raising capital, with the objective to sustain its high capital adequacy ratios and, at the same time, to improve the weighted average cost of capital to the benefit of its shareholders. In this light, the Group has issued hybrid capital instruments as well as subordinated debt, eligible for inclusion in the regulatory capital base of the Group. The Total and the Tier I Capital Adequacy Ratios on 31.12.2006 stood at 15.6% and 12.4% respectively, comparing to 15.2% and 12.3% in 2005. The Group’s Capital Adequacy Ratios stand at a significantly higher level to the minimum regulatory limits that have been established by the Bank of Greece (8% and 4% for the Total and the Tier I Capital Adequacy Ratio respectively).

Corporate governance

NBG has embraced all international and Greek rules for corporate governance at Board level and runs Audit, Human Resources and Corporate Governance Committees. In December 2006, the Bank’s Board of Directors approved a Code of Conduct for the Bank and its Group. The newly formed Group Compliance Division is responsible for monitoring the implementation of the Code of Conduct. Also in 2006, the Bank activated all the procedures to meet Sarbanes-Oxley Act, as required by the Securities and Exchange Commission (“SEC”) of US.

Dividend policy

Given the positive picture presented by the Group’s profitability, the Bank’s Board of Directors proposes to the Annual General Meeting of Shareholders that €1 dividend per share be distributed, totalling €475 million comparing with €339 million in 2005, up 40% y-o-y. This amount will result from current and prior years results (€374.2 million) and taxed reserves (€100.8 million). On the basis of the closing price of the share at 31 December 2006, this figure represents a dividend yield of 2.9%.

Recognizing the crucial contribution of the staff in achieving these results and wishing to reward effort and efficiency, the Bank’s Board of Directors intends to propose to the Annual General Meeting of Shareholders that €32 million of the profit be distributed to the staff of the Bank. A further amount of €19 million will be distributed by the Bank’s subsidiary companies in Greece and abroad to their staff, raising the total distribution of profit to Group staff to €51 million, or 5% of net Group profit.

In November 2006, the Bank’s Board of Directors activated its Stock Options Programme for the staff of the Bank and its subsidiaries as approved by the General Meeting of Shareholders last year. In line with the Programme, Management approved the issue of 2,992,620 stock options for officers and staff of the Bank

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strictly on the basis of merit. The aim of the Programme is to link, on a long-term basis, pay with Group performance, as well as to enhance the value delivered to the Bank’s shareholders.

Takis Arapoglou
Chairman and CEO

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Supplementary Report

To the Annual General Meeting of Shareholders

Of National Bank of Greece

pursuant to article 11a of Law 3371/2005

Pursuant to article 30 of Law 3461/106 A/30-5-2006 aligning national legislation with European Council Directive 2004/25/EC, article 11a was included in Law 3371/2005, which states that listed companies must submit a supplementary report to the General Meeting of Shareholders providing detailed information on specific issues. This Board of Directors’ report to the General Meeting of Shareholders contains the additional information required by article 11a of Law 3371/2005.

A) Share capital structure

NBG’s share capital amounts to €2,376,436,095 divided into 475,287,219 ordinary registered shares with voting rights, of a par value of €5.00 each NBG shares are listed for trading on the Athens Exchange (“ATHEX”).

NBG shareholders’ rights issuing from its share depend on the share capital portion that corresponds to the paid up value of their shares. Each share embodies all the rights and obligations provided for by law and the company’s Articles of Association. Specifically:

·     The right to participate in and vote at the General Meeting of Shareholders.

·     The right to a dividend from the Bank’s profit for the year ended, or from liquidation, which amounts to 35% of the net profit following allocation of statutory reserves, or 6% of the paid-up capital (whichever is higher). This is annually distributed to shareholders as first dividend, whereas distribution of supplementary dividend is subject to General Meeting resolution. Entitled to a dividend are shareholders whose names appear in the Register of NBG’s Shareholders on the date the dividend beneficiaries are determined, and a dividend on each share owned by them is paid within 2 months of the date of the General Meeting of Shareholders that approved the Bank’s annual financial statements. The dividend payment method and place are announced in the press. After the lapse of five (5) years from the end of the year in which the General Meeting approved the dividend, the right to collect the dividend expires and the corresponding amount is forfeited in favor of the Greek state.

·     The preemptive right to each share capital increase in cash and issue of new shares.

·     The right to receive a copy of the Bank’s financial statements and of the chartered auditors’ report and the Board of Directors’ report.

·     The General Meeting of Shareholders maintains all of its rights during liquidation proceedings (pursuant to Article 38 of the Bank’s Articles of Association).

Shareholders’ liability is limited to the nominal value of the shares owned by them.

B) Restrictions on transfers of shares

Transfers of the Bank’s shares are carried out as prescribed by law and are not subject to any restrictions pursuant to the Bank’s Articles of Association.

C) Significant direct and indirect holdings as per PD 51/1992

There are no significant direct or indirect holdings as per PD 51/1992, i.e. of a direct or indirect participation percentage higher than 5% of the aggregate number of the Bank’s shares.

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D) Shares with special control rights

There are no shares with special control rights.

E) Restrictions to voting rights

There are no restrictions on voting rights issuing from the shares pursuant to the Bank’s Articles of Association.

F) NBG Shareholders’ agreements

To the Bank’s knowledge there are no shareholders’ agreements pursuant to which restrictions apply to transfers of, or to the exercise of voting rights issuing from, the Bank’s shares.

G) Rules regarding the appointment and replacement of Board members and amendments to Articles of Association

The provisions of the Bank’s Articles of Association regarding the appointment and replacement of members of the Board of Directors and amendments to the Articles of Association are the same as the corresponding provisions of the Companies’ Act 2190/1920.

H) Board of Directors’ authority for the issue of new shares or the purchase of own shares

1) Pursuant to the provisions of Companies’ Act 2190/1920 Article 13 par. 1(b), by General Meeting resolution, subject to the publication requirements provided for under Companies’ Act 2190/1920 Article 7b, the Board of Directors can increase the Bank’s share capital through the issue of new shares by resolution adopted on a two-third-majority basis. In that case, pursuant to Article 5 of the Bank’s Articles of Association the Bank’s share capital may increase up to the amount of capital paid up as at the date the Board of Directors’ is authorized to do so by the General Meeting. The said authorization may be renewed, each time for a period of up to 5 years.

2) In accordance with Companies’ Act 2190/1920 Article 13 par. 9, pursuant to a General Meeting resolution a Stock Options Programme may be launched for the management and the staff in the form of options to acquire shares of the Bank as per the terms of the resolution. The General Meeting resolution determines the maximum number of shares to be issued if the beneficiaries’ stock options are exercised, which by law cannot exceed 1/10 of the Bank’s existing shares, as well as the purchase price and the terms of allocation of the shares to the beneficiaries.

Other details not provided for otherwise under the General Meeting resolution are determined by resolution of the Board of Directors, which provides for the issue of the stock option certificates, in December of each year issues the shares to the beneficiaries who have exercised their options, increasing the Bank’s share capital accordingly and certifying the said increase.

Pursuant to the said provisions, on 22 June 2005 the General Meeting approved a stock options programme for executive members of the Board of Directors, senior management, and the staff of the Group. The programme (as amended by the second repeat General Meeting of 1 June 2006) is of 5-year duration, expiring 2010. The stock options may be granted one-off or in parts, at the discretion of the Board, at any time. The maximum number of shares to be issued on the basis of the said programme is 3.5 million. The options exercise price was determined within the range of €5 and 70% of the average stock market price of the share in the period from January 1 of the year in which the stock options were granted through the first day of their exercise.

In November 2006, the Bank’s Board of Directors approved the issue of 2,992,620 stock options, and the exercise price was set at €23.8 per share. During the first options exercise period (6-15 December 2006), 310,043 options were exercised and the aggregate amount paid was €7,379,023. Subsequently, at its

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meeting of 27 December 2006 the Board decided to increase the Bank’s share capital by €1,550,215 through the issue of 310,043 new registered voting shares of a par value of €5.00 each, and the amount of €5,828,808.40 was transferred and credited to the share premium account. As expressly provided for under Companies’ Act 2190/1920 Article 13 par. 9, the said share capital increase does not constitute an amendment to the Articles of Association.

By resolution of the Bank’s second repeat General Meeting of 1 June 2006, a new stock options programme was approved at Group level. The new programme, of 5-year duration and expiring 2011, provides for the issue of a maximum of 3.5 ordinary registered shares to be allocated to Board members, officers and staff of the Group, at a purchase price within the range between the par value (currently €5) and 70% of the average stock market price of the share from the date after the General Meeting (2 June 2006) until the first day of the exercise of the beneficiaries’ options. No options under the said programme have yet been exercised.

3) In accordance with Companies’ Act 2190/1920 Article 16 par. 5-13, pursuant to a General Meeting resolution companies listed on the ATHEX may purchase up to 10% of their own shares (“treasury shares”) via ATHEX to support the stock market price of their share, subject to the specific terms and procedures provided for under the Article. On 27 April 2006, the Annual General Meeting, utilizing the said option afforded by law, decided to purchase, from 2 May 2006 until 27 April 2007, up to 10% treasury shares via the ATHEX at a purchase price of between €5 and €60.

I) Significant agreements that come into effect, are modified or terminated in the event of a change in control following a public offering

There are no agreements that shall come into effect, be modified or terminated in the event of a change in control of the Bank following a public offering.

J) Agreements with Board members or officers of the Bank

In the case of the executive members of the Board of Directors and the highly ranked officers, the Bank reserves the right for groundless termination of their employment contracts by paying specific levels of compensation. The compensation may reflect the entitled salaries for the remaining period of the contract.

For the Bank’s Board of Directors

Takis Arapoglou
Chairman and CEO

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NATIONAL BANK OF GREECE S.A.

Consolidated Financial Statements

31 December 2006

In accordance with

International Financial Reporting Standards

March 2007

Table of Contents

Note				Page
		Auditor’s Report		3
		Consolidated income statement		5
		Consolidated balance sheet		6
		Consolidated statement of changes in equity		7
		Consolidated cash flow statement		8
		Notes to the consolidated financial statements:
1		General information		9
2		Summary of significant accounting policies:
		2.1 Basis of presentation		10
		2.2 Adoption of International FinancialReporting Standards (IFRS)		10
		2.3 Group Accounts		12
		2.4 Foreign Currency translation		13
		2.5 Regular way purchases and sales		14
		2.6 Derivative financial instruments and hedging		14
		2.7 Offsetting		15
		2.8 Interest income and expense		15
		2.9 Fee and commission income		15
		2.10 Financial assets at fair value though profit and loss		15
		2.11 Sale & repurchase agreements		16
		2.12 Securities borrowing and lending		16
		2.13 Investment securities		17
		2.14 Loans & receivables		17
		2.15 Impairment losses on loans & advances		18
		2.16 Property & equipment		18
		2.17 Investment property		19
		2.18 Goodwill & other intangible assets		19
		2.19 Insurance operations		20
		2.20 Leases		20
		2.21 Cash & cash equivalents		21
		2.22 Provisions		21
		2.23 Financial guarantee contracts		21
		2.24 Employee benefits		21
		2.25 Income taxes		22
		2.26 Borrowings		22
		2.27 Share capital & treasury shares		22
		2.28 Segment reporting		23
		2.29 Assets and liabilities held for sale and discontinued operations		23
		2.30 Related party transactions		23
		2.31 Fiduciary and trust activities		23
		2.32 Earnings per share		23
3		Critical accounting policies, estimates & judgments		24
4		Financial risk management		28
		4.1 Credit risk		28
		4.2 Market risk		30
		4.3 Interest rate risk		31
		4.4 Liquidity risk		33
		4.5 Foreign exchange risk		35
		4.6 Fair values of financial assets & liabilities		36
		4.7 Capital adequacy & Credit ratings		37
5		Segment reporting		38
6		Net interest income		43
7		Net fee & commission income		43
8		Net premia from insurance contracts		43
9		Dividend income		44
10		Net trading income		44
11		Other operating income		44
12		Personnel expenses		44
13		Retirement benefit obligations		46
14		General & administrative expenses & other provisions		49
15		Depreciation, amortisation and impairment charges		49
16		Other operating expenses		49
17		Impairment losses on loans and advances		49
18		Tax expense		49
19		Earnings per share		50
20		Cash & balances with central banks		50
21		Treasury bills & other eligible bills		50
22		Due from banks (net)		51
23		Financial assets at fair value through P&L		51
24		Derivative financial instruments		51
25		Loans & advances to customers (net)		52
26		Investment securities		53
27		Investment property		54
28		Investments in associates		55
29		Goodwill & other intangible assets		56
30		Property & equipment		57
31		Deferred tax assets & liabilities		58
32		Insurance related assets & receivables		58
33		Other assets		58
34		Assets and liabilities held for sale and discontinued operations		59
35		Due to banks		60
36		Due to customers		60
37		Debt securities in issue		61
38		Other borrowed funds		61
39		Insurance related reserves & liabilities		62
40		Other liabilities		64
41		Contingent liabilities & commitments		65
42		Share capital, share premium & treasury shares		66
43		Reserves & retained earnings		67
44		Minority interest		68
45		Preferred securities		68
46		Dividends per share		69
47		Cash & cash equivalents		69
48		Related party transactions		70
49		Acquisitions, disposals & other capital transactions		71
50		Group consolidated companies		75
51		Post balance sheet events		77
52		Reclassifications		77
53		Foreign exchange rates		77

 

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INDEPENDENT AUDITOR’S REPORT

To the Shareholders of the NATIONAL BANK OF GREECE S.A.

Report on the Financial Statements

We have audited the accompanying consolidated financial statements of National Bank of Greece S.A. (“the Bank”) and its subsidiaries (on a consolidated basis “the Group”), which comprise the consolidated balance sheet as of 31 December 2006, and the consolidated income statement, statement of changes in equity and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes.

We did not audit the financial statements of Finansbank Anonim Sirketi (a consolidated subsidiary acquired by the Bank on 18 August 2006) and its subsidiaries for the period from acquisition to 31 December 2006, which statements reflect total assets and total revenues constituting 13.78% and 12.17%, respectively, of the related consolidated totals for the year ended 31 December 2006.  Those statements were audited by KPMG Akis Bagimsiz Denetim ve Serbest Muhasebeci Mali Müsavirlik AS, the Turkish member firm of KPMG International, whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Finansbank Anonim Sirketi and its subsidiaries for the period from acquisition to 31 December 2006, is based solely on the report of KPMG Akis Bagimsiz Denetim ve Serbest Muhasebeci Mali Müsavirlik AS, the Turkish member firm of KPMG International.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with the Greek Auditing Standards which are harmonised with the International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained and the report of KPMG Akis Bagimsiz Denetim ve Serbest Muhasebeci Mali Müsavirlik AS, the Turkish member firm of KPMG International, are sufficient and appropriate to provide a basis for our audit opinion.

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Opinion

In our opinion, based on our audit and the report of KPMG Akis Bagimsiz Denetim ve Serbest Muhasebeci Mali Müsavirlik AS, the Turkish member firm of KPMG International, the consolidated financial statements present fairly, in all material respects, the financial position of the Group as of 31 December 2006, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as these were adopted by the European Union.

Report on Other Legal and Regulatory Requirements

The content of the Director’s Report is consistent with the above consolidated financial statements.

Athens, 20 March 2007

The Certified Public Accountant Auditor

Nikolaos C. Sofianos
RN SOEL 12231

Hadjipavlou Sofianos &
Cambanis S.A.
Assurance & Advisory Services
RN SOEL E120
250 - 254 Kifissias Ave.
GR - 152 31 Halandri
Athens

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Consolidated Income Statement

				Year ended
€ 000’s		Note		31.12.2006			31.12.2005
Continuing Operations
Interest and similar income				3.503.182			2.426.266
Interest expense and similar charges				(1.372.078		)	(830.506		)
Net interest income		6		2.131.104			1.595.760
Fee and commission income				606.278			455.810
Fee and commission expense				(58.029		)	(30.759		)
Net fee and commission income		7		548.249			425.051
Earned premia net of reinsurance				671.957			551.990
Net claims incurred				(565.537		)	(451.609		)
Net premia from insurance contracts		8		106.420			100.381
Dividend income		9		9.646			13.760
Net trading income		10		18.791			67.522
Net result from investment securities		26		122.465			127.679
Other operating income		11		193.117			161.693
Total operating income				3.129.792			2.491.846
Personnel expenses		12&13		(1.048.535		)	(877.307		)
General & administrative expenses & other provisions		14		(427.795		)	(335.512		)
Depreciation, amortisation and impairment charges		15		(126.159		)	(114.551		)
Other operating expenses		16		(32.265		)	(38.828		)
Total operating expenses				(1.634.754)			(1.366.198)
Impairment losses on loans and advances		17		(267.197		)	(226.259		)
Share of profit of associates		28		40.462			43.700
Profit before tax				1.268.303			943.089
Tax expense		18		(221.101		)	(221.157		)
Tax on untaxed reserves		18		(100.607		)	—
Profit for the period from continuing operations				946.595			721.932
Discontinued operations
Profit for the period from discontinued operations		34		118.074			29.020
Profit for the period				1.064.669			750.952
Attributable to:
Minority interests		44		74.617			23.590
NBG equity shareholders				990.052			727.362
Earnings per share- Basic & Diluted from continuing & discontinued operations		19		€	2,20		€	1,96
Earnings per share- Basic & Diluted from continuing operations.		19		€	1,92		€	1,87
Earnings per share- Basic & Diluted from continuing operations excluding one-off tax on reserves		19		€	2,16		€	1,87

 

Athens, 15 March 2007

THE CHAIRMAN AND CHIEF EXECUTIVE OFFICER		THE DEPUTY CHIEF EXECUTIVE OFFICER		THE CHIEF FINANCIAL AND CHIEF OPERATING OFFICER		THE CHIEF ACCOUNTANT
EFSTRATIOS-GEORGIOS A. ARAPOGLOU		IOANNIS G. PECHLIVANIDIS		ANTHIMOS C. THOMOPOULOS		IOANNIS P. KYRIAKOPOULOS

 

The notes on pages 9 to 77 form an integral part of these consolidated financial statements

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Consolidated Balance Sheet

€ 000’s		Note		31.12.2006		31.12.2005
ASSETS
Cash and balances with central banks		20		3.874.210		2.431.287
Treasury bills and other eligible bills		21		367.758		177.023
Due from banks (net)		22		4.781.215		4.085.204
Financial assets at fair value through P&L		23		12.684.410		13.667.471
Derivative financial instruments		24		371.074		309.030
Loans and advances to customers (net)		25		42.624.536		29.528.178
Investment securities		26		4.191.192		2.833.661
Investment property		27		123.373		126.506
Investments in associates		28		272.780		249.152
Goodwill & other intangible assets		29		2.515.257		65.911
Property & equipment		30		2.041.938		1.885.713
Deferred tax assets		31		262.209		217.417
Insurance related assets and receivables		32		741.448		637.916
Other assets		33		1.718.252		1.479.888
Assets classified as held for sale		34		—		2.732.203
Total assets				76.569.652		60.426.560
LIABILITIES
Due to banks		35		6.232.438		5.060.850
Derivative financial instruments		24		404.572		302.698
Due to customers		36		53.233.724		43.350.120
Debt securities in issue		37		822.696		175.297
Other borrowed funds		38		2.197.387		956.988
Insurance related reserves and liabilities		39		1.953.618		1.734.249
Deferred tax liabilities		31		100.918		102.359
Retirement benefit obligations		13		212.568		207.725
Other liabilities		40		2.578.827		1.960.701
Liabilities classified as held for sale		34		—		2.259.165
Total liabilities				67.736.748		56.110.152
SHAREHOLDERS’ EQUITY
Share capital		42		2.376.436		1.696.347
Share premium account		42		2.263.725		—
Less: treasury shares		42		(26.826	)	(22.680	)
Reserves and retained earnings		43		1.983.890		1.450.163
Equity attributable to NBG shareholders				6.597.225		3.123.830
Minority Interest		44		610.554		109.997
Preferred securities		45		1.625.125		1.082.581
Total shareholders’ equity				8.832.904		4.316.408
Total equity and liabilities				76.569.652		60.426.560

Athens, 15 March 2007

THE CHAIRMAN AND CHIEF EXECUTIVE OFFICER		THE DEPUTY CHIEF EXECUTIVE OFFICER		THE CHIEF FINANCIAL AND CHIEF OPERATING OFFICER		THE CHIEF ACCOUNTANT
EFSTRATIOS-GEORGIOS A. ARAPOGLOU		IOANNIS G. PECHLIVANIDIS		ANTHIMOS C. THOMOPOULOS		IOANNIS P. KYRIAKOPOULOS

 

The notes on pages 9 to 77 form an integral part of these consolidated financial statements

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Consolidated Statement of Changes in Equity

		Attributable to equity holders of the parent company										Minority
€ 000’s		Share capital		Share premium		Treasury shares		Reserves & Retained earnings		Total		Interest & Preferred securities		Total
At 1 January 2005		1.492.090		32.393		(210.128	)	1.041.348		2.355.703		1.134.470		3.490.173
Adoption of IAS 39 & IFRS 4		—		—		—		(110.761	)	(110.761	)	(31.739	)	(142.500	)
At 1 January 2005 restated		1.492.090		32.393		(210.128	)	930.587		2.244.942		1.102.731		3.347.673
Movement in the available for sale securities reserve, net of tax		—		—		—		(81.930	)	(81.930	)	(3.435	)	(85.365	)
Currency translation differences		—		—		—		(1.323	)	(1.323	)	20.576		19.253
Profit/(loss) recognised directly in equity		—		—		—		(83.253	)	(83.253	)	17.141		(66.112	)
Net profit/(loss) for the period		—		—		—		727.362		727.362		23.590		750.952
Total		—		—		—		644.109		644.109		40.731		684.840
Merger through absorption of subsidiaries		204.257		(32.393	)	—		37.428		209.292		(209.292	)	—
Issue of preferred securities		—		—		—		(3.423	)	(3.423	)	230.000		226.577
Dividends paid to preferred securities		—		—		—		(45.999	)	(45.999	)	—		(45.999	)
Share capital issue costs net of tax		—		—		—		(1.065	)	(1.065	)	(312	)	(1.377	)
Dividends paid to ordinary shareholders		—		—		—		(193.230	)	(193.230	)	—		(193.230	)
Acquisitions, disposals & share capital increases of subsidiaries/associates		—		—		—		(6.650	)	(6.650	)	28.695		22.045
Purchases/ disposals of treasury shares & preferred securities		—		—		187.448		88.406		275.854		25		275.879
Balance at 31 December 2005		1.696.347		—		(22.680	)	1.450.163		3.123.830		1.192.578		4.316.408
At 1 January 2006		1.696.347		—		(22.680	)	1.450.163		3.123.830		1.192.578		4.316.408
Movement in the available for sale securities reserve, net of tax		—		—		—		(20.406	)	(20.406	)	5.874		(14.532	)
Currency translation differences		—		—		—		17.146		17.146		(18.797	)	(1.651	)
Cash flow hedges		—		—		—		(8.140	)	(8.140	)	—		(8.140	)
Profit/(loss) recognised directly in equity		—		—		—		(11.400	)	(11.400	)	(12.923	)	(24.323	)
Net profit/(loss) for the period		—		—		—		990.052		990.052		74.617		1.064.669
Total		—		—		—		978.652		978.652		61.694		1.040.346
Share capital increase		678.539		2.321.960		(7.042	)	—		2.993.457		—		2.993.457
Share capital issue costs net of tax				(64.064	)	—				(64.064	)	—		(64.064	)
Stock options exercised		1.550		5.829		—		—		7.379		—		7.379
Issue of preferred securities		—		—		—		(3.323	)	(3.323	)	559.909		556.586
Dividends paid to preferred securities		—		—		—		(70.905	)	(70.905	)	—		(70.905	)
Dividends paid to ordinary and minority shareholders		—		—		—		(338.558	)	(338.558	)	—		(338.558	)
Share based payments		—		—		—		6.383		6.383		—		6.383
Acquisitions, disposals & share capital increase of subsidiaries/associates		—		—		—		(38.696	)	(38.696	)	421.498		382.802
Purchases/ disposals of treasury shares & preferred securities		—		—		2.896		174		3.070		—		3.070
Balance at 31 December 2006		2.376.436		2.263.725		(26.826	)	1.983.890		6.597.225		2.235.679		8.832.904

 

Detailed analysis of the changes in equity is presented in notes 42 to 45 of these consolidated financial statements

The notes on pages 9 to 77 form an integral part of these consolidated financial statements

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Consolidated Cash Flow Statement

				Year ended
€ 000’s		Note		31.12.2006		31.12.2005
Cash flows from operating activities
Profit for the period from continuing operations				946.595		721.932
Adjustments for:
Non-cash items included in profit and other adjustments:				249.605		214.084
Depreciation, amortisation & impairment on fixed assets & invest. property				126.159		114.550
Share based payment				6.383		—
Impairment losses / (recoveries) on investments				(2.538	)	664
Amortization of premiums / discounts of investment securities				10.654		10.109
Provisions for credit and other risks				304.803		257.614
Equity income of associates				(40.462	)	(43.700	)
Deferred tax expense / (benefit)				36.492		32.802
Dividend income from investment securities				(7.182	)	(6.136	)
Net (profit) / loss on sale of fixed assets & investment property				(64.777	)	(23.476	)
Net (income) / expense on investment securities				(119.927	)	(128.343	)
Net (increase) / decrease in operating assets:				662.527		(4.153.541	)
Net due from / to banks				3.673.323		616.377
Financial assets & liabilities at fair value through P&L				1.064.925		(3.786.769	)
Acquisition / Proceed of sale of treasury bills and other eligible bills				(95.987	)	1.443
Net derivative financial instruments				95.675		(102.103	)
Net loans and advances to customers / due to customers				(3.850.297	)	(910.083	)
Other assets				(225.112	)	27.594
Net increase / (decrease) in operating liabilities:				(46.211	)	475.396
Income taxes paid				(294.538	)	(154.595	)
Other liabilities				248.327		629.991
Net cash flow from / (used in) operating activities from continuing operations				1.812.516		(2.742.129	)
Net cash flow from / (used in) operating activities from discontinued operations				(2.268	)	(348.793	)
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired				(2.419.746	)	(12.470	)
Disposals of subsidiaries, net of cash disposed				358.455		—
Acquisitions of associates, net of cash				(5.072	)	(2.051	)
Disposals of associates, net of cash				1.825		2.857
Dividends received from investment securities & associates				27.758		16.051
Purchases of fixed assets				(179.119	)	(146.373	)
Proceeds from sale of fixed assets				146.233		74.852
Purchases of investment property				(2.183	)	(1.539	)
Proceeds from sale of investment property				3.239		2.434
Purchases of investment securities				(8.216.444	)	(4.043.969	)
Proceeds from redemption and sale of investment securities				8.179.444		4.496.142
Net cash from / (used in) investing activities from continuing operations				(2.105.610	)	385.934
Net cash from / (used in) investing activities from discontinued operations				286		129.993
Cash flows from financing activities
Share capital increase				3.000.836		—
Proceeds from borrowed funds and debt securities				1.664.557		347.467
Repayments of borrowed funds and debt securities				(2.581.049	)	—
Issuance of preferred securities				559.905		230.000
Proceeds from sale of treasury shares				72.793		327.966
Repurchase of treasury shares				(68.725	)	(52.110	)
Dividends to ordinary shareholders				(338.558	)	(193.230	)
Dividends to preferred securities				(70.905	)	(45.999	)
Minority interest				(9.255	)	28.408
Share capital issue costs				(87.782	)	—
Net cash from / (used in) financing activities from continuing operations				2.141.817		642.502
Effect of foreign exchange rate changes on cash and cash equivalents				(30.521	)	129.581
Net increase/(decrease) in cash and cash equivalents				1.816.220		(1.802.912	)
Cash and cash equivalents at beginning of period				3.127.261		4.930.173
Less: cash & cash equivalents at period end from discontinued operations				—		(62.515	)
Cash and cash equivalents at end of period		47		4.943.481		3.064.746

 

The notes on pages 9 to 77 form an integral part of these consolidated financial statements

8