Greek banks at an · The impact of the crisis –brief macroeconomic overview 3 Greek Banking: Liquidity 10 Greek Banking: Asset Quality 15 Greek Banking: Capital 19 Greek Banking:

Greek banks at an inflection point18 OCTOBER 2019

ANTONIOS KOULEIMANIS

SENIOR MANAGER - TRANSFORMATION SECTOR

GROUP STRATEGY

EUROBANK

Table of contents2

Table of Contents Page

The impact of the crisis – brief macroeconomic overview 3

Greek Banking: Liquidity 10

Greek Banking: Asset Quality 15

Greek Banking: Capital 19

Greek Banking: Profitability 24

Disruptive technology 32

The impact of the crisis

3

BRIEF MACROECONOMIC OVERVIEW

198206

217228 230

243251 250

239226

205190 184 186 185 184 187 191

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Severe economic repercussions4

Real GDP drops by 26.5% (2007-2013) - € bn

-26.5%

Source: AMECO

Fiscal and C/A imbalances corrected

Fiscal primary balance turns to surplus

C/A deficit virtually eliminated

5

-5.4

-10.1

-5.3

-3.0-1.5

0.4 -0.1 0.7

3.7 4.2 4.3 4.1 3.9

-15.1

-12.3-11.4

-10.0

-3.8-2.0-1.6-0.8

-1.7-1.8-2.9-2.7-2.6

% GDP % GDP

Source: AMECO Source: AMECO

Competitiveness improving6

Nominal unit labor cost

101.1100.0

83.4

2010 2011 2012 2013 2014 2015 2016 2017 2018

Euro area

Greece

Index 2010=100

Source: AMECO

Asset prices collapsed but now on recovery trend

Residential Real Estate Price Index

ATHEX Composite Price Index

7

260.2

152.1163.7

-42%

5,179

440895

-90%

Source: BoG Source: Bloomberg

Greek benchmark yields narrow significantly

8

Greek 10yr bond yields jump on fears of Grexit

37.1

19.2

1.6

Grexit fears peak

Capital controls

(%)

Source: Bloomberg

Main challenges for ongoing economic growth

Remain true to fiscal commitments while negotiating lower

primary surpluses

Make Greece a more attractive investment destination, aligning

the growth model to rely on exports, FDIs and investment

Continue with the Privatization commercialization of State assets

Continue with and accelerate public administrative reforms

Restore confidence in the banking system

Improve policy credibility lowering Greek risk premium

9

Greek Banking: Liquidity

10

DEPOSIT FLOWS

DELEVERAGING

EUROSYSTEM DEPENDENCY

Liquidity squeeze triggered by Grexit concerns

11

Deposits gradually return after unprecedented flight242.0

Jun-12150.6

Sep-14164.7

Jul-15120.8

Apr-17119.0

Aug-19139.7

Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18

2nd program stabilization

Grexit fears build-up leading to

double elections

Grexit fears renewed leading

to capital controls

3rd program stabilization

Gradual recovery

Source: BoG

Deleveraging slows and Eurosystem support normalizes

Banks deleverage albeit at declining rate

Loans-to-deposits ratio well below 100%

12

253.4257.7248.5227.7 217.9 212.0204.3195.2 184.0 170.3 161.2

4.1%

1.7%

-3.2%-4.0%-3.9%

-3.1%-2.0%-1.5%-0.8% -1.1%

-0.2%

Credit balances

Total credit expansion

Ba

lan

ces

(€b

n)

Gro

wth

ra

tes

(yo

y%)

126.5

110.7

97.894.6

120.0116.9 118.7 117.3

4Q16 4Q17 4Q18 1H19Greece Euro-area

(%)

Source: BoG Source: ECB

Eurosystem support diminishes13

ELA reached zero for the entire sector

45 4356

107

127 121108102

8775

6759 54

4234

2513 12 11 8 8

2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q18 2Q18

ELA

ECB

€bn

Source: BoG

Liquidity at an improving trend

Main drivers

Deleveraging

Return of deposits

Interbank

Capital raisings

Sale of assets

Covered bond and Tier II issuances

Declining trend still there

ELA exposure at zero

Deposits return still

Deleveraging continues albeit at slower pace

Further Tier II issues probable

14

Greek Banking: Asset Quality

• NPE EVOLUTION

• BANKS’ TARGETS TO REDUCE NPE BALANCES

• SECTOR-WIDE INITIATIVES

15

Asset quality deteriorates… 16

NPEs explode to more than 50% of the loan book

25.638.4

52.368.0

90.9 97.7106.5 104.8

94.481.8 75.4

10.1%14.9%

21.1%

29.9%

41.7%46.1%

52.1% 53.7% 51.3% 48.0%43.6%

Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Jun-19

NPEs

NPE ratio

€bn

Source: BoG

106.7

81.7 79.973.2

25.7

0

20

40

60

80

100

120

Jun-16 Dec-18 1Q19 Dec-21

Total market Systemically significant banks (solo)

-€47.5bn

… but banks vow to reduce NPEs by €47.5bn by 2021

17

Significant banks to reduce NPEs to c. €25bn by 2021

1

1. Based on significant banks’ FY18 and 1Q19 reporting. Includes Euriobank’s accelerated NPE reduction plan

Source: BoG, Greek significant banks’ reports

“Hercules”: a plan to relieve banks’ B/S from the NPE burden

“Hercules” is designed to assist banks in securitising and moving non-performing loans off their balance sheets.

Greek State will be remunerated in line with market conditions for the risk it will assume by granting a guarantee on securitised non-performing loans.

Under the scheme, an individually managed, private securitisation vehicle will buy non-performing loans from the bank and sell notes to investors.

The State will provide a public guarantee for the senior, less risky notes of the securitisation vehicle. In exchange, the State will receive a remuneration at market terms.

The objective is to attract a wide range of investors and to support the banks in their ongoing efforts to reduce the amount of non-performing loans on their balance sheets.

18

Asset Protection Scheme (APS) not considered State Aid

Greek Banks: Capital

• BANKS WENT THROUGH THREE CYCLES OF RECAPITALIZATION

• LATEST STRESS TEST (2018) DID NOT LEAD TO FURTHER CAPITAL RAISINGS

• GREEK BANKS APPEAR ADEQUATELY CAPITALIZED CURRENTLY

19

Dec 20121st stress test

(by BoG )

Apr 20131st

recapitalization

Mar 20142nd stress test

(by BoG)

Apr 20142nd

recapitalization

Oct 2014 3rd stress test

(by ECB)

Oct 2015 4th stress test

(by SSM)

Nov-Dec 2015 3rd

recapitalization

1st

Re

cap

ita

liza

tio

n

- Piraeus Bank: € 8.4bn- National Bank:€ 9.8bn- Alpha Bank : € 4.6bn- Eurobank : € 5.8bn

2n

d

Re

cap

ita

liza

tio

n

- Piraeus Bank: € 1.8bn- National Bank:€ 2.5bn- Alpha Bank : € 1.2bn- Eurobank : € 2.8bn

3rd

Re

cap

ita

liza

tio

n

- Piraeus Bank: € 4.6bn- National Bank:€ 4.5bn- Alpha Bank: € 2.6bn- Eurobank : € 2.0bn

Banks recapitalize three times…20

€ 64bn from private and State sources

21

Capital raisings of the 4 Greek Significant banks

28.6

8.3

13.7

50.6

Capital raisings

2015

2014

2013

Incl. non-core banks of the first recap , total capital raised stood at: €64bn

HFSF contribution: € 22.5bn(shares with special voting rights)

HFSF contribution: € 5.4bno/w:Common shares: € 1.4bnCoCos: € 4.1bn (o/w € 2.0bn repaid)

No HFSF contribution

5th stress test doesn’t lead to capital increases

22

Greek banks pass, even under the adverse scenarioStress test 2018 results

BankCET1 ratios starting level (end-2017, IFRS

restated figures)

Estimated 2020 CET1 ratio under

baseline scenario

Estimated 2020 CET1 ratio under adverse scenario

Capital depletion under adverse

scenario

Alpha Bank 18.25% 20.37% 9.69% -8.56pps

Eurobank 17.93% 16.56% 6.75% -8.68pps

NBG 16.48% 15.99% 6.92% -9.56pps

Piraeus Bank 14.85% 14.52% 5.90% -8.95pps

Greek banks adequately capitalized

23

CET1 ratio 100bps above EU average – asset quality a concern

9.0%

15.8%14.3%

12.7%11.9%

12.7%

18.6%

Greece EU Italy Spain Portugal Ireland

DTC (57%)

Source: ECB, Greek significant banks’ reporting1. ECB provides a number of 15.3% - however the Greek banks reporting derives the number depicted above

1

Greek Banking: Profitability

• DELEVERAGING

• BANKS’ TARGETS TO REDUCE NPEBALANCES

• SECTOR-WIDE INITIATIVES

24

Credit to private sector contracts25

Diminishing balances as a result of reduced demand and write-offs; However, rate of decline decelerates

253.4 257.7 248.5 227.7 217.9 212.0 204.3 195.2 184.0 170.3 159.9

4.1%1.7%

-3.2% -4.0% -3.9% -3.1%-2.0% -1.5% -0.8% -1.1% -0.1%

Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Aug-19

Credit balances Total credit expansion

Ba

lan

ces

(€b

n)

Gro

wth

ra

tes

(yo

y%)

Source: BoG

10,838 10,752 10,1098,422 9,160

8,332 8,082 8,145 7,8275,926

3,351

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1H19

(€ m)

Post-sector consolidation

Core income stagnant26

Significant banks’ core income suffers from deleveraging, NPE management

Pre-sector consolidation

Source: Significant banks’ reporting

Operating expenses decline27

Significant banks respond to weakening revenues by reducing costs

6,066 5,777 5,630 5,439

6,681

5,382 5,096 4,708 4,291 3,901

1,870

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1H19

(€ m)Post-sector consolidation

Pre-sector consolidation

Source: Significant banks’ reporting

Employees and network downsize

Employee evolution (‘000) Branch network evolution

28

65.763.4

60.057.0

51.2

45.7 46.142.641.7

39.4

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

4,0794,005

3,8473,629

3,109

2,6882,547

2,3322,168

1,980

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: BoG

Cost of Risk (CoR) declines as NPE flows stabilize

283

200189 189

211

169

191

FY17 1Q18 1H18 9M18 FY18 1Q19 1H19

29

Despite the decline to below 200bps, CoR1 shows resilience

(bps)

Source: Significant banks’ reporting, own calculations1. Defined as loan loss provisions over average net loans

Pre-provision Income stagnant30

Despite OpEx and CoR reduction, PPI remains close to 2016 and 2017 levels

6,0745,256

3,677

2,150 2,4072,752 2,763

3,836 3,8253,179

1,942

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1H19

(€ m)Post-sector consolidation

Pre-sector consolidation

Source: Significant banks’ reporting, own calculations

Pre-tax earnings pick-up31

Slight rise in income coupled with OpEx and CoRcontainment leads to an increase in EBT

2,438 1,081

-32,584

-6,195 -5,173-7,591

-10,671

69

-985

484 560

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1H19

(€ m)Post-sector consolidation

Pre-sector consolidation

Source: Significant banks’ reporting, own calculations

Disruptive Technology

• NEW TECHNOLOGIES CHALLENGE TRADITIONAL OPERATING MODEL

• NEW CHANNELS, PRODUCTS AND CUSTOMER EXPERIENCE

32

Digital banking here to stay

New regulation (PSD2) allows disrupting FinTech to invade the banking space

Banks respond with large-scale investment to mitigate the threat

Customer preferences change:

Mobile banking number of transactions up 2,096% since 2014

E-banking number of transactions up 161% since 2014

Only 20% of cash transactions go through the branch vs. 40% in 2014

39% of cash transactions are done electronically (e or m) vs. only 19% in 2014

Ironically, capital controls accelerated the use of electronic channels – especially among older age groups

33

Disruptive technologies create a new competitive environment

Main challenges for Greek banks

Improve asset and capital quality (NPEs & DTA) via various

initiatives

Restore credit ratings and tap unsecured bond market

Utilize improving liquidity to support the growth of the Greek

economy

Reverse deleveraging trend and boost profitability

Address new competitive environment

34

Summing up

Today we touched upon:

1. The impact of the crisis on the banking sector

2. The state in which the sector is today

3. The main challenges and opportunities for Greek

banks going forward

THANK YOU FOR YOUR ATTENTION

35