National Bank of Greece 2014 Comprehensive Assessment Results NBG achieves a € 2bn capital surplus Athens Sunday, October 26 2014 0 0
IMPORTANT DISCLAIMER : This presentation and all information contained hereto (the “Presentation”) has been prepared by National Bank of Greece SA (hereafter “NBG”) and/or its subsidiaries (together with NBG, the “NBG Group”) in order to explain in more detail the outcome of the Comprehensive Assessment (“CA”) pursuant to Article 33(4) of Council Regulation (EU) No 1024/2013 and should not be used for any other purpose. This Presentation should be viewed solely in conjunction with, the official announcement and template for the CA outcome for NBG as it will be published by the European Central Bank (ECB). No representation or warranty, express or implied, is made as to the fairness, accuracy or completeness of the information contained herein and no reliance should be placed on it. It has not been independently reviewed or assessed by a legal or financial advisor from a legal, regulatory, compliance or accounting and risk perspective, as appropriate. None of NBG, its affiliates, the NBG Group as a whole, nor any of their directors, partners, officers, representatives, employees, advisers or agents (the "Relevant Persons") shall be liable for any direct, indirect or consequential loss or damage suffered by any person as a result of relying on the accuracy of any information or any statement in, or errors in, or omission from, this Presentation. This Presentation is based or otherwise compiled or developed based on information provided to NBG and/or its subsidiaries from both public and non-public sources, including the outcome of the CA and the relevant templates. NBG and each of its subsidiaries assume no responsibility for independent investigation or verification of such information (including, without limitation, data from third parties) and has relied on such information being complete and accurate in all material respects. This Presentation speaks only as of the date it is given (unless an earlier date is otherwise indicated in the presentation), and the views expressed are subject to change based upon a number of factors, including market conditions and NBG's business and prospects and no responsibility or liability will be accepted by NBG, its affiliates, the NBG Group or any of their respective Relevant Persons for updating this Presentation or correcting any inaccuracies herein which may become apparent. Any estimates, projections or other forward looking statements in this Presentation, including estimates of revenue, expense, returns or performance, comments with respect to NBG’s objectives and strategies, or the results of its operations and business, or the business or prospects of domestic or foreign markets and peers or competitors are forward-looking statements based upon certain assumptions that may prove to be erroneous or influenced by factors of significant economic, business, and other uncertainties beyond the control of NBG. Therefore, and although such projections are believed to be realistic, no representations can be made as to their attainability. Actual results may vary from the projections and such variations may be material. NBG disclaims any obligation to update any forward ‐ looking statements contained herein and does not intend to amend or update this Presentation in case such estimates, projections or forward looking statements do not materialize or change in the future. This Presentation is governed by Greek law and by accepting this material the recipient agrees that the Greek Courts shall have exclusive jurisdiction to settle any disputes arising or connected with this Presentation. . 1
Table of Contents EXECUTIVE SUMMARY 3 - 5 STRESS TEST ASSUMPTIONS AND METHODOLOGY 6 - 8 ASSET QUALITY REVIEW 9 - 14 STATIC STRESS TEST 15 - 18 DYNAMIC STRESS TEST 19 - 21 DEFERRED TAX CREDITS 22 - 23 2
EXECUTIVE SUMMARY
2014 EU-wide stress test – no further capital action required of NBG EU-wide stress test of 130 banks under very severe, uniform rules • The Adverse Dynamic Balance Sheet (DBS) Stress Test results in a 8.9% CET I ratio at end • 2016, and a capital surplus of € 2.0bn and − 340 basis points above the 5.5% minimum − The DBS takes into account NBG’s 2014 -18 Restructuring Plan agreed on 23.7.14 with the European Commission. The Adverse Static Balance Sheet (SBS) stress test results in a capital shortfall of € 0.9bn 1 • SBS stresses 2013 – a particularly challenging year for NBG − Already NBG’s 2014 profitability and actions to Sept. 14 fully mitigate this − Asset quality review resulted in a € 1.7bn impact, originating mainly from the Greek retail • loan portfolio, and the severe assumptions regarding the valuation of real estate collateral All above results do not include the impact of the new Deferred Tax Credit law voted on • 16.10.2014, of approx. € 0.7 – 1.2bn (110 – 220 bps) . No further capital action required of NBG. • 1 including the Share Capital Increase (SCI) completed in May 2014 4
Adverse Dynamic Balance Sheet stress results in a capital surplus of € 2.0 bn at end 2016 Adverse scenario CET 1, € bn CET 1 ratio, % € 6.3bn € 2.5bn € 2.0bn capital surplus 4.2% -10.9% € 6.0bn Does not include € 5.3bn € 2.0bn € 3.1bn DTC 10.7% 8.9% 3.4% 2.0 3.2% € 3.3bn, 5.5% 1.1 minimum 1.8% threshold Dynamic BS Completed RP actions 2 2013 May 14 Static BS Dynamic CA result Surplus CET I SCI CA 1 BS CA end 2016 RWA’s in € bn 56.7 57.9 57.9 60.0 60.0 60.0 1 CA = Comprehensive Assessment, incorporates Asset Quality Review, Stress Test and AQR join-up 5 2 Already completed Restructuring Plan actions, see also page 18
STRESS TEST ASSUMPTIONS AND METHODOLOGY
Overview of major assumptions /methodology for the adverse scenarios Dynamic Balance Sheet (DBS) Line item Static Balance Sheet (SBS) Volumes Loan and deposit total volumes as per As at 31.12.13 • • Restructuring Plan (RP) Loan mix as at 31.12.13 • same as SBS except NII ceiling as per RP Net Interest Income NII not higher than 2013 • • Pass through of sovereign spread shock to funding costs • 50% of increase of funding costs applied to mortgage lending rates • (75% for other loans) NII not higher than that derived from top-down ECB model • 1x standard deviation of last 3 historical values plus 2x standard • RP figure for baseline plus 2x standard deviation • Trading deviation of last 5 historical values (thus including Greek PSI and of last 5 historical values (includes Greek PSI Grexit fears impact on trading losses) and Grexit fears impact on trading losses) same as SBS Fees & Commissions Cap on ratio of F&C /Total Assets at level of 2013, • • the 6 th year of recession Opex Not lower than 2013 level, which includes staff cost of 2,490 staff Not lower than 2013 ratio to Total Assets, • • that departed in Dec-13 after excluding the 2,490 staff Loss rate not lower than top-down ECB model same as SBS • Credit Risk • Loss rate adjusted for AQR results • Apply similar LGD shock for defaulted and non-defaulted assets • Phase out as per CRR IV • same as SBS • DTA DTC law not yet enacted • Excludes DTA recognised in H1.2014 • 7
Macro assumptions for Greece double up on steep recession of 2009-13 on bonds and house prices vs the periphery Gov’t bond adverse valuation haircut GDP adverse deviation 3Y, loss rate,% 2009 – 2016, Base = 2009 (100) 16.5 10.2 8.1 Ø 8 2.2 2.1 Greece Spain Ireland Portugal Italy Residential House Price inflation Unemployment Rate 2009 – 2016, Base = 2009 (100) 2009 – 2016, % 8 H: Historical , F: Forecasts (EBA adverse scenario)
ASSET QUALITY REVIEW
AQR impact resulting mainly from Greek Mortgage and SME loan portfolios • AQR workblock has reviewed 11 Greek and Turkish loan portfolios, with gross balances in excess of € 60 bn − 79% of total loans • Challenger model resulted in € 2.2 bn additional regulatory provisions, of which € 2.0bn in Greek mortgage and SME portfolios • Greek Mortgage loans − No impact from credit file review − Provision gap resulting from severe collateral valuation assumptions • Greek SME loans − € 0.6 bn in a € 12.0 bn portfolio re-classification to NPE − Majority of NPE’s classified as “gone concern” − Provision gap resulting from severe collateral valuation assumptions • Insignificant provision gap in all Turkish portfolios • NBG transparency on troubled assets validated 10
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