PIRAEUS BANK GROUP FIXED INCOME PRESENTATION May 2018
TABLE OF CONTENTS 01 EXECUTIVE SUMMARY 02 ASSET QUALITY 03 CAPITAL 04 LIQUIDITY & FUNDING 05 2018 EU WIDE STRESS TEST OUTCOME 06 APPENDIX
01 . EXECUTIVE SUMMARY
01 1.1 PIRAEUS BANK STRENGTHS AND GOALS STRENGTHS GOALS market leader in loans and deposits reduce NPLs and NPEs to a normalised level sound capital and liquidity position maintain a strong capital base strong reinvigorated management team re-establish wholesale market funding access delivering on our transformation strategy create a profitable and sustainable business model 4 | EXECUTIVE SUMMARY
01 1.2 PIRAEUS AT A GLANCE #1 #1 €6 3.6bn in loans in deposits ❶ Assets 597 12.9k € 41.4bn ❷ Net Loans branches headcount 5.2mn € 43.1bn >1.8mn ❸ Deposits customers e-banking users ❹ 14.4% CET-1 ratio [phased-in] 11 years >510k mobile banking average length of 96% ❺ Loans-to-Deposits ratio customer relationships users * data for Group operations in Mar.18 * data for domestic operations in Mar.18 5 | EXECUTIVE SUMMARY
01 1.3 PIRAEUS BANK LEADING POSITION IN GREECE Gross Loans - Greece Customer Deposits - Greece Greek Branch Network 35% 597 in business March 30% 30% 620 26% 28% 483 21% 21% 486 21% 18% 396 55 2% 1% Source: Bank of Greece for Greek market data and financial information for banks, as of Dec.2017 6 | EXECUTIVE SUMMARY
01 1.4 ASSETS & LIABILITIES OVERVIEW amounts in €bn Asset Funding • Asset side comprised 65% by customer Mix Mix loans at the end of Mar.18 Total 63.6 63.6 Total 1.5 Cash 2.1 ELA • EFSF bonds dropped to zero as of Jan.18 2.4 Securities 4.0 ECB in the context of short term measures for Interbank Repos 2.6 the Hellenic Republic’s debt relief 0.4 Debt Securities ( € 16.8bn at the peak) • Funding mix enhanced on the back of 25.9 Sight & Savings lower ELA reliance, improved market 41.4 Net Loans Deposits access and increasing customer deposits • Increased interbank repo balances at cost lower than ELA 17.2 Time Deposits PPE 2.2 Other* 16.0 7.8 Total Equity 3.5 Other Mar.18 Mar.18 (*) other includes DTA, loans & advances to banks, intangible assets, discontinued operations 7 | EXECUTIVE SUMMARY
FINANCIAL RESULTS HIGHLIGHTS 01 1.5 Q1.2018 | PROGRESS IN ALL FRONTS Continuous Progress on Asset Quality • NPEs reduced by €3.0bn yoy and €5.6bn from peak in Sep.15; €0.7bn down in Q1.18 • Ten consecutive quarters of NPE reduction • Two portfolio sales of c.€2bn aggregated NPE gross book value to be completed in Q2.18 • NPE cash coverage at 51%, while including collateral coverage stands at 98% Improved Liquidity Profile and Enhanced Funding Mix • Deposits in Greece up by €3.4bn yoy and by €0.5bn in Q1.18 at €41.4bn • ELA reduced to € 1bn area in mid-May 2018; full elimination expected in the near term • Net Loan to Deposit Ratio of 96% in Greece vs. 118% a year ago Intensified Cost Efficiency and Cost of Risk Decrease Offsetting Lower Net Interest Income • Net Interest Income down 9% qoq, on the back of increased provisions (Q4.17, IFRS9) • Net Fee Income up 2% yoy, with expectation for acceleration in forthcoming quarters • Operating costs down by 6% for Group, 7% Greece yoy. Cost-to-Income at 56% (recurring data for Q1.18) • Cost of risk at 1.6% for Q1.18 on the back of €3bn increase in provisions since Sep.17 • Profitable Q1.18, with €32mn bottom-line for Greek operations excluding one-off costs Maintaining a Strong Capital Position • Transitional CET-1 at 14.4%, adjusted for asset disposals under way • Solid performance at the 2018 EU-wide stress test exercise • Non-dilutive capital actions in place to fortify balance sheet strength and accelerate the execution of Piraeus Group’s strategic & business plan 8 | EXECUTIVE SUMMARY
01 1.6 BALANCE SHEET IMPROVEMENT | GREECE Greece, €bn Dec.17 Mar.18 qoq 28% Assets 58.5 (1) 58.4 0% 96% LDR ratio LLRs over loans enhanced liquidity Gross Loans 56.6 (2) 55.7 -1% Net Loans 41.6 (2) 39.8 -3% € 3.0bn ELA 3% Loan Loss Reserves 15.0 15.8 5% new loan generation over assets Customer Deposits 40.9 41.4 1% budgeted for 2018 Eurosystem Funding 9.7 6.1 -37% (1) Dec.17 assets excluding seasonal agri-loan, EFSF bonds eliminated in Q1.18 and discontinued operations (2) Loans adjusted for seasonal agri-loan in Dec.17; in addition, quarterly rate adjusted for Q1.18 write-offs 9 | EXECUTIVE SUMMARY
01 1.7 OPERATIONAL PERFORMANCE | GREECE Greece, € mn Q4.17 Q1.18 qoq Net Revenues 466 434 -7% 233bps NIM 50bps NFI Operating Expenses 306 242 -21% over assets over assets Pre Provision Income 160 192 21% Impairments 1,236 148 -88% 56% C:I 160bps CoR Net results attrib. to SHs 66 -66 - down qoq at normalization trend Net results attrib. to SHs 66 32 - (recurring Q1.18) Note: assets adjusted for discontinued operations Note: P&L figures for Q4.17 and Q1.18 exclude one-time VES cost of € 16mn and € 138mn respectively 10 | EXECUTIVE SUMMARY
01 1.8 SEPARATE BUSINESS MODELS TO ENSURE VALUE CREATION Piraeus Bank Efficiency & Risk-Adjusted Return Decisive Actions on Legacy Issues “Piraeus Core Bank” “Piraeus Legacy Unit” € bn RWA ROA € bn RWA ROA Q1.18 Q1.18 29.0 1.1% 21.2 <0% FY.17 FY.17 28.6 1.1% 21.9 <0% 11 | EXECUTIVE SUMMARY
01 1.9 ASSET QUALITY TRACK RECORD Group NPE Development ( € bn) € 3.0bn On track with 37.7 98% 35.8 NPE reduction 2018 NPE 32.9 32.2 in the last 12 months reduction target 15 collateral €5. 6bn - €0.7bn NPE reduction 16 provisions Q1.18 ΝPE quarterly from Sep.15 peak reduction Sep.15 Dec.16 Dec.17 Mar.18 Coverage 12 | EXECUTIVE SUMMARY
01 1.10 NPL & NPE OPERATIONAL TARGETS € 30.8bn € 25.9bn 11.1 € 20.3bn NPE Piraeus aims to further reduce parent stock of 10.9 9.9 NPEs by 34% from Mar.18 to Dec.19 19.7 14.9 NPL 10.4 Mar.2018a Dec.2018f Dec.2019f Reduction will be achieved through: 2019 reduction target will be met through: • restructurings • debt forgiveness - € 7.0bn - €3.5bn 24.3 • collections 20.0 • write-offs 19.8 -20.3 • liquidations • sales 0.0 Dec.17 organic effort inorganic effort 2020 restructurings, curings, sales liquidations, collections 13 | EXECUTIVE SUMMARY
01 1.11 ΙΜΜΙΝΕΝΤ NP Ε SALES Project Project “ARCTOS” “AMOEBA” • Sale of c. €2 .3bn legal claim • Sale of c. €2.2bn legal claim secured large unsecured denounced consumer SME and corporate -mainly denounced- NPLs (c. € 0.4bn gross book value) NPLs (c. € 1.6bn gross book value) • Unsecured personal loans and credit cards • Servicing entity established by the Bank, available for sale to capital providers • 132k borrowers; 43% of accounts in €1 -5k • 180 borrowers; 1,737 properties bucket • UBS acts as financial advisor • EY acts as financial advisor • c.23 signed NDAs with international • c.30 signed NDAs with international investors investors • Non binding offers submitted on 14 March • Non binding offers submitted on 9 February by 6 investors by 12 investors 14 | EXECUTIVE SUMMARY
01 1.12 IMPROVED LIQUIDITY & FUNDING POSITION Domestic Deposits ( €bn ) market share: 28.8% 28.6% (Mar.18) (private sector) (Dec.17) 49.5 +0.5 41.4 40.9 39.3 36.1 35.1 • Positive deposit movement in Q1.18 • Consisted deposit inflows Dec.14 Jun.15 Dec.15 Dec.16 FY.17 Q1.18 Mar.18 ELA Funding ( €bn ) 22.2 • Eurosystem funding decreased by €3.6 bn in Q1.18 16.7 11.9 • Repos in Q1.18 with non-ECB eligible collateral at € 2.3bn 5.7 • ELA use has dropped further to €1 bn area in mid May.18 2.1 0.0 -3.6 Dec.14 Jun.15 Dec.15 Dec.16 FY.17 Q1.18 Mar.18 15 | EXECUTIVE SUMMARY
01 1.13 UPGRADED OPERATING EFFICIENCY Cos ost sa savings s of of mor ore tha han € 20 200m 0mn for or the 3-year pe period 20 2018 18-202 020 • “Project Horizon” was commenced in Q4.17 Effects of cost initiatives € bn, 2017-2020 to re-invent the operational model of the Bank 1.6 • 16 key initiatives to reduce the cost base in 1.3 Greece by > € 200mn during period 2018-2020 1.1 ~0.9 €200mn initiatives in place €80 mn actions already taken Retail Wholesale Reshape Redesign Procurement 2013 2016 2017 2020 € 35mn admin expenses efficiency efficiency corporate core efficiency gains gains functions processes gains € 45mn VES 16 | EXECUTIVE SUMMARY
01 1.14 PIRAEUS BANK’S STRATEGIC FOCUS 2017 2019 - 2020 2018 Significant strides forward in Streamlining of business to Improved PPI and normalized pave the way for continuing using our strong capital base provisioning to show earning to strengthen reserves de-risking power • • Best-in-class NPL reduction • Medium-term targets to be Restructuring Plan conclusion • achieved, as per the “Agenda 2020” Q4 provisioning clean-up • ELA reliance elimination strategic plan • IFRS9 boost to coverage ratio • Inorganic initiatives for NPLs • Strong potential for growth on the • Viable restructurings & increased • Growth in Core Bank back of new loan generation collections for NPE/NPL portfolio • • Cost optimisation Sustainable healthy returns • Satisfactory deposit growth • Digitisation acceleration 17 | EXECUTIVE SUMMARY
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