BANK1

Chairman's Statement

1993 WAS A DIFFICULT YEAR FOR MOST EUROPEAN ECONOMIES,UNFORTUNATELY HUNGARY WAS NO EXEPTION. DESPITE IMPORTANT FURTHER ACHIEVEMENTS IN MODERNIZING AND TRANSFORMING HER ECONOMIC AND SOCIAL STRUCTURE, HUNGARY DID NOT REACH THE PATH OF SUSTAINED GROWTH. THIS WAS THE KEY ELEMENT OF THE PAST YEAR FOR OUR BANK.

THE OVERALL SITUATION IN 1993 WAS CHARACTERIZED BY ANOTHER DECLINE IN GNP, CONTINUING INFLATION IN EXCESS OF 20%, A GROWING DEFICIT IN THE BALANCE OF TRADE, AND NEGATIVE TRENDS IN AGRICULTURE, PRIVATIZATION DID NOT MOVE RAPIDLY AHEAD.THESE FACTORS WERE NOT OUTWEIGHED BY MODEST INCREASES IN CERTAIN INDUSTRIAL SECTORS AND A SLIGHT DECLINE IN STILL HIGH UNEMPLOYMENT.

THE GENERAL BANKING AND TRUST COMPANY EXPERIENCED A VARIETY OF CHALLENGES AS A RESULT OF THIS MACRO-ECONOMIC SITUATION. HOUSEHOLD SAVINGS AND THUS DEPOSITS GREW AT A SLOWER PACE. MONETARY POLICIES PUT DOWNWARD PRESSURES ON INTEREST SPREADS. THE NUMBER OF BANKRUPT BUSINESSES INCREASED AD DID THE COMPETITION AMONG BANKS FOR THE LIMITED POOL OF FINANCIALLY SOLID CLIENTS.

TAKING INTO CONSIDERATION ALL OF THESE FACTORS, THE GENERAL BANKING AND TRUST COMPANY PERFORMED WELL IN 1993.

THERE WAS SIGNIFICANT GROWTH IN BOTH ASSETS AND AFTER-TAX PROFITS. MODERNIZATION OF THE BANK'S TECHNOLOGY CONTINUED APACE. A RANGE OF NEW SERVICES WERE INTRODUCED. YET ANOTHER WELL-LOCATED BRANCH WAS OPENED.

LOOKING TO THE FUTURE, HUNGARY, THE CZECH REPUBLIC AND POLAND SHOULD CONTINUE TO STAY AT THE FOREFRONT OF THE COUNTRIES IN TRANSITION. IN 1994-5 THEY ALL SHOULD BENEFIT FROM THE GROUNDWORK DONE TO DATE WHICH IN THE CASE OF HUNGARY INCLUDES USD 7 BILLION IN FOREIGN INVESTMENT, MORE THAN THE OTHER TWO COMBINED.THE GRADUAL IMPROVEMENT IN THE ECONOMIES OF HUNGARY'S MAJOR TRADING PARTNERS, PARTICULARLY GERMANY, ALSO SHOULD STIMULATE GROWTH. IT IS HOPED THAT THE NEW HUNGARIAN GOVERNMENT WILL ATTACK THE COUNTRY'S PROBLEMS WITH FRESH ENERGY AND DETERMINATION.

THE GENERAL BANKING AND TRUST COMPANY'S GOALS ARE CLEAR. IT MUST CONTINUE TO ATTRACT A GROWING SHARE OF HUNGARY'S MOST SUCCESSFUL FIRMS AND INDIVIDUALS, TO DEVELOP ITS SPECIAL POSITION-NOT TO BE THE BANK WITH LARGEST NUMBER OF BRANCHES AND CUSTOMERS BUT TO BE THE HIGHEST QUALITY BANK WITH THE BEST SERVICES AND THEREFORE THE BEST CLIENTS.

MARK PALMER
CHAIRMAN OF THE BOARD OF DIRECTORS

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