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P I R A E U S B A N K
INVESTOR UPDATE
London, 15 July 2019
TODAY’S AGENDA
10:00 Welcome
10:00-10:30 Christos Megalou Chief Executive Officer
10:30-10:50 Elias Lekkos Chief Economist
10.50-11:20 Theodore Gnardellis | George Christopoulos Piraeus Legacy Unit Strategy | Asset Sales
11:20-12:00 Q&A
12:00-12:10 Break
12:10-12:30 Eleni Vrettou Corporate & Investment Banking
12:30-12:50 George Georgakopoulos Piraeus Legacy Unit | NPE Servicer
12:50-13:20 Q&A
13:20-13:30 Christos Megalou Chief Executive Officer
13:30 Closing
Additional participants in Q&A: Tom Arvanitis (Piraeus Financial Markets), Chryssanthi Berbati (Investor Relations)
Discussion Items
STRATEGIC OVERVIEW 01
GREEK ECONOMY & OUTLOOK 02
NPE STRATEGY & EXECUTION 03
CIB PERFORMANCE & TRENDS 04
NPE SERVICING AGREEMENT 05
STRATEGIC OVERVIEW
01
1.1 OUR DEVELOPMENTS | AT A GLANCE
5 |
01
STRATEGIC OVERVIEW
2018 Capital Strengthening Plan CompletionA
Strategic Partnership with Intrum on NPE ServicingC
New Roadmap “Agenda 2023”D
2015 Restructuring Plan Completion E
NPE Strategy Execution on TrackF
New Business Picking-Up & Positive JawsG
B Enhancement of Capital Buffers by Recent Tier 2 Issue
1.2 OUR DEVELOPMENTS | CAPITAL
6 |
2018 Capital Strengthening Plan CompletionA
• The internal capital actions of 2018 have been concluded €0.5bn
• A 10NC5 Tier 2 was issued on 26 June 2019 €0.4bn
• Additional initiatives are executed (eg NPE servicing agreement) €0.4bn
STRATEGIC OVERVIEW
01
€1.3bn
1.3 OUR DEVELOPMENTS | TIER 2
7 |
Enhancement of Capital Buffers by Recent Tier 2 Issue
Allocation by Investor Type Allocation by Geography
B
STRATEGIC OVERVIEW
01
1.4 OUR DEVELOPMENTS | NPE SERVICING
8 |
Strategic Partnership with Intrum on NPE ServicingC
• New servicer company for the management of NPEs & REOs
• Market-leading independent NPE servicer
• 80% of the new servicer company will be held by Intrum & 20% by Piraeus Bank
• Expectation for a material boost to the execution of Piraeus’ de-risking strategy
STRATEGIC OVERVIEW
01
1.5 OUR DEVELOPMENTS | STRATEGY
9 |
New Roadmap “Agenda 2023”D
• Piraeus Bank introduced its new strategic roadmap with the following targets:
Cost-to-Income ratio at low 40s
Non Performing Exposures at single-digit ratio
Return on Tangible Equity at high single-digit
Regulatory Capital ratio at ~200bps above requirement
STRATEGIC OVERVIEW
01
1.6 OUR DEVELOPMENTS | RESTRUCTURING PLAN
10 |
2015 Restructuring Plan Completion E
• Greek operations commitments completed (eg headcount, branches, costs, LDR)
• International divestments concluded (eg Serbia, Romania, Albania, Bulgaria)
STRATEGIC OVERVIEW
01
1.7 OUR DEVELOPMENTS | NPE REDUCTION
11 |
NPE Strategy Execution on TrackF
• 6M.19 NPE reduction as per target
• NPE sales of €2.3bn GBV completed in one year, €0.7bn NPE sale at BO phase
• More than €2bn RRE-based securitization in preparation, planned for early 2020
STRATEGIC OVERVIEW
01
1.8 OUR DEVELOPMENTS | PROFITABILITY
12 |
New Business Picking-Up & Positive JawsG
• Healthy business demand emerging in sectors geared to growth and exports
• Target for €4bn new loans in 2019 vs €3bn in 2018; €1.9bn in H1.19
• Credit decisions based on the Bank’s Adjusted Returns Tool (“ART”)
• Earnings capacity supported by both top line and OpEx improvement
STRATEGIC OVERVIEW
01
1.9 2018 CAPITAL ENHANCEMENT PLAN
13 |
Actions Announcement StatusRWARelief
>> Avis [operating leasing company] Q1.18 ~€0.2bn
>> Serbia [banking subsidiary] Q2.18 ~€0.3bn
>> Romania [banking subsidiary] Q2.18 ~€0.6bn
>> Amoeba [secured NPL portfolio] Q2.18 ~€0.4bn
>> Arctos [unsecured NPL portfolio] Q2.18 ~€0.1bn
>> Albania [banking subsidiary] Q3.18 ~€0.4bn
>> Bulgaria [banking subsidiary] Q4.18 ~€0.7bn
>> Other de-risking actions [non-core assets de-risking] Q4.18 ~€0.6bn
>> Nemo [secured NPL portfolio] Q2.19 ~€0.3bn
Total ~€3.6bn
The €3.6bn RWA Relief is Equivalent to €0.5bn Capital Enhancement for the Bank
STRATEGIC OVERVIEW
01
14 |
1.10 2019 CAPITAL ENHANCEMENT PLAN
Management Actions Targeted Capital
Improvement
A. Tier 2 debt issuance ~85bps
B. Sale of operations, non-core subs & participations ~80bps
C. Review of high capital-consuming businesses
D. Enhanced organic revenue generation
E. Accelerated cost efficiency actions
F. Balance sheet optimization | RWA management
Capital Position Strengthening through a Number of Additional Initiatives
Issued 26 Jun.19
NPE servicing agreement
160-200 bps
total initial guidance
STRATEGIC OVERVIEW
01
1.11 CAPITAL TRAJECTORY POST RECENT TRANSACTIONS
15 |
Total Regulatory Capital (%, phased-in) Total Regulatory Capital (%, fully loaded)
Recent Transactions, Coupled with Return to Profitability, Strengthen Capital Position
STRATEGIC OVERVIEW
01
1.12 PROJECTED CAPITAL EVOLUTION
16 |
Total Regulatory Capital (%)
+0.9% +0.8% +0.4%
e: estimate; f: forecast
Organic Capital Generation Supports Capital Development Going Forward
14.0% to 14.5% OCR
STRATEGIC OVERVIEW
01
1.13 GREEK MARKET NPE TRAJECTORY
17 |
48% <20%
a: actual; f: forecast
NPE ratio 48% 47% 45%
NPE
GDP
NPE/GDP
€185bn €184bn €187bn €191bn €202bn
58% 57% 51% 43% 13%
STRATEGIC OVERVIEW
01The 3-year NPE Targeted Reduction Equals ~30% of GDP; Ambitious yet Feasible
1.14 REAL ESTATE MARKET TREND
18 | STRATEGIC OVERVIEW
01Outlook for Real Estate Prices Embedded in Existing Plan
2017a 2018a 2019e 2020f 2021f
Non-residential real estate price change 1.6% 5.0% 4.0% 3.6% 3.6%
Residential real estate price change -1.0% 1.5% 2.6% 3.2% 3.6%
a: actual, e: estimate, f: forecastSource: Piraeus Economic Research, baseline scenario
Upside Potential to Collateral Valuations from Acceleration of Real Estate Price Recovery
• Current Run-Rate of Non-Residential RE prices at +6% and Residential at +4% yoy
• Piraeus Bank has €23bn of real estate assets as underlying collateral for loans and €3bn οf own
assets. Almost €11bn relates to NPE portfolio
• For every 100bps incremental shift in Real Estate prices, estimated value improvement is
approximately at €50-100mn
1.15 IMPROVED LIQUIDITY PROFILE
19 |
Domestic Deposits | €bn Liquidity Coverage Ratio (%)
>95%
Satisfactory Liquidity on the back of Deposit Restoration and Macroeconomic Stabilization
LDR c.85%
STRATEGIC OVERVIEW
01
1.16 LOAN BALANCES
20 |
Gross Loans (€bn) New Loans (€bn, %)
Non performing exposures to be reduced as per plan
Performing exposures: €15bn new loans and €2bn netcurings to be offset by €7bn amortization and other
Business lending is the driver of loan growth
~5
~6
5348
NPE
PE
~4
3.1-15
+10
e: estimate; f: forecast
Loan Evolution Incorporates the Parallel Dynamics of De-risking and Healthy Loan Growth
STRATEGIC OVERVIEW
01
1.17 ADJUSTED RETURNS TOOL
21 |
Adjusted Returns Tool Developed for Risk-Based Pricing, Fully Adopted by the Bank’s Business Units
STRATEGIC OVERVIEW
01
Cost of Credit Risk
Cost of Capital
Cost of Liquidity
Operating Expenses*
Ancillary Revenues**
Hurdle Rate
Cost Spread
Profit Margin
Final Yield/ Spread
ARoC
* Operating expenses soon to be introduced into the methodology** Ancillary revenues have a positive contribution, thus reducing the Hurdle rate
The overall methodology aims at:
optimizing capital allocation
establishing a hurdle rate for every loan decision
capturing term profitability, focusing on return maximization and credit loss mitigation
enhancing the risk culture across the Bank
1.18 REVENUES & OPEX| POSITIVE JAWS
22 |
• Xxx
• Xxx
• Xxx
Operating Jaws (€bn)
a: actual; e: estimate; f: forecast
1.2
Positive Jaws Supported by Frontloaded Cost Cuts and Revenue Increase post 2020
STRATEGIC OVERVIEW
01
1.19 NET INTEREST INCOME
23 |
(€mn) 2018a 2019e
Interest Income 1,874 1,830
Loans & Bonds 1,770 1,715
Other 105 115
Interest Expense 465 430
Deposits 199 180
Interbank Funding 50 15
Debt Securities 6 25
Other 210 210
Net Interest Income 1,410 1,400
Current NII run rate at mid single digit increase
NII going forward growing at low single digit pace per
annum: yield from new assets will outpace increasing
debt securities issuance costs
Loan income to move into positive trajectory in line
with new healthy disbursements
●
●
●
Resilient NII Going Forward as Improvement on the Asset Side Offsets Debt Issuance Costs
a: actual; e: estimate
STRATEGIC OVERVIEW
01
(€mn) Q1.2019 % Assets
Loans 13.1 0.09%
Acquiring 12.1 0.08%
Funds Transfer 11.9 0.08%
Cards Issuance 9.5 0.07%
Bancassurance 8.4 0.06%
Letters of Guarantee 8.3 0.06%
Payments 6.1 0.04%
AM & Brokerage 5.5 0.04%
FX Fees 3.8 0.03%
Deposits 1.6 0.01%
Other 7.7 0.05%
Total Fee Income 88.0 0.61%
1.20 FEE & COMMISSION INCOME
24 |
Enhancement initiatives implemented to
boost fees from all areas of business at par
with gradual macroeconomic recovery
Fees stemming from transaction banking,
credit cards, payments and asset
management / brokerage are expected to
perform in line with our strategy
●
●
above 0.8% in the medium term
STRATEGIC OVERVIEW
01NFI to Grow Along with the Macro Recovery & Increasing Penetration to Specific Areas of Business
1.21 G&A COSTS
25 |
(€mn) 5M.18 5M.19 yoy
Rents 17 15 -12%
Maintenance 14 11 -22%
IT 13 10 -28%
Third Parties 25 20 -22%
Promotion, Subscriptions 14 12 -19%
Taxes 56 48 -14%
Other 18 12 -34%
Total G&A Costs 158 126 -20%
Current run rate of more than 15% reduction yoy
Going forward, high single-digit pace of reduction
Efficiencies to be further increased along with
increasing digitalization, as well as the
implementation of the NPE servicing agreement
●
●
●
Preliminary data for 5M.19
STRATEGIC OVERVIEW
01G&A Costs Running at -20% Reduction Rate Boosting the Bank’s Efficiency Ratio
1.22 REVAMP OF GOVERNANCE & CONTROLS
26 |
• Reshuffling of Top Management
• Revamp of Internal Policies and Controls
• Adjusted Return on Capital Methodology and Process
• Cultural Transformation: work- in-progress as of 2017
• Roadmap for the Future
STRATEGIC OVERVIEW
01
1.23 LATEST FINANCIAL TRENDS
27 |
€1bn customer deposits increase in Q2.19
LDR at ~ 85%; LCR at ~ 95% Deposit cost further contained
NPE movement on track with the yearly 2019 target
More than €2bn RRE-based securitization in preparation, placement in 2020
Positive tailwinds from real estate collateral revaluation
Performing loan book increased in 6M.19 by more than €500mn (€1.9bn new loans)
Resilient new loan production yields
OpEx running at high single digit reduction pace yoy
STRATEGIC OVERVIEW
01
GREEK ECONOMY & OUTLOOK
02
Can the New Government Revive the Greek “Animal Spirits”?
2.1 ECONOMIC RECOVERY
29 |
02Since 2017, the Greek Economy has been Range-bound Between 1.5%-2.0%
GREEK ECONOMY & OUTLOOK
2019e 1.6%
Source: ELSTAT, Piraeus Bank Research
2.2 NEW GOVERNMENT’S PLAN
30 |
Fiscal Stimulus
The New Government’s Plan to Reach “Escape Velocity”
Investment “Shock” Escape Velocity
Fiscal Neutrality€6bn €6bn
€60bn€0.5bn corporate tax rates cut in 2-years
€0.45bn dividend tax rate cut
€2.6bn personal income tax rate cut (up to €10,000)
€0.8bn increase in the tax free income threshold by €1,000 for each child
€1.02bn VAT rate cuts
€0.3bn business fee gradual abolishment
€0.4bn special solidarity levy gradual cut
€0.4bn ENFIA (property tax) cut in 2-years
Special incentives (doubling of the time foroffsetting losses, 200% over-depreciationnew investments)
€12bn in infrastructures
€20-€25bn in tourism and shipping
€15-€20bn in primary sector and foodprocessing manufacturing
€9bn in energy and the environment
€10bn in R&D, Industry, logistics and PPP
Efficiency Savings
4.0% Real GDP = €4.0bn tax revenues
€0.2bn public consumption spending cut
€1.19bn rationalization & improvement inDEKO & General Government Legal Entities
€0.14bn interest payments cut for T-bills
€0.15bn no public sector wage increase
€0.3bn hiring / retirement ratio (1/5)
€0.02bn unused real estate exploitation
€4bn
€2bn
GREEK ECONOMY & OUTLOOK
02
Source: ND Elections 2019 Programme, Piraeus Bank Research
2.3 INVESTMENTS ENVIRONMENT
31 |
Investments & Net Capital Stock (€bn)
For 2.0% Average GDP Growth we Need to “Crowd-in” €325bn of Investments
Non Financial Corporations
Net vs Gross Fixed Capital Formation (€bn, current prices)
GREEK ECONOMY & OUTLOOK
02
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
Gross Fixed Capital Formation Net Fixed Capital Formation
Disinvestment
through depreciation
Stock 1989 Stock 2027Capital Consumption
GFCFCapital
ConsumptionGFCF
Capital Consumption
GFCFCapital
ConsumptionGFCF
Source: ELSTAT, Piraeus Bank Research
1990 - 1999 2000 - 2008 2009 - 2018 2019 - 2027
2.4 ANIMAL SPIRITS
32 |
But after a Long Recession “Animal Spirits” are Dormant
GREEK ECONOMY & OUTLOOK
02
Source: EC DG ECFIN, Piraeus Bank Research
2.5 GREEK CORPORATES (i)
33 |
outperformers(7.9%)
a
668
b
2,985
c
3,477
d
1,289
good performers(35.5%)
medium performers(41.3%)
underperformers(15.3%)
Despite Popular Belief, Greece has a Substantial “Bankable” Corporate Universe
GREEK ECONOMY & OUTLOOK
02
Source: ICAP DATA, Piraeus Bank Research
2.6 GREEK CORPORATES (ii)
34 |
EBITDA margin Total liabilities to equity Net debt to EBITDA
a. 24.7%
a. 33.0%
a. 24.9%
b. 14.8%
b. 13.0%
b. 14.7%
c. 7.1%
c. 6.9%
c. 7.1%
d. -8.3%
d. 1.8%
d. -8.1%
-20% -10% 0% 10% 20% 30% 40%
SMEs
Large
Total
a. 0.5
a. 0.7
a. 0.5
b. 1.2
b. 1.2
b. 1.2
c. 2.7
c. 3.6
c. 2.8
d. 3.6
d. 4.0
d. 3.6
0 1 2 3 4
SMEs
Large
Total
a. 0.1
a. 2.2
a. 0.1
b. 3.8
b. 4.1
b. 3.8
c. 13.7
c. 11.6
c. 13.6
d. 24.9
d. 26.4
d. 25.0
0 10 20 30
SMEs
Large
Total
Dormant “Animal Spirits” Drive Defensive Corporate Balance-sheets to Extremes
GREEK ECONOMY & OUTLOOK
02
Source: ICAP DATA, Piraeus Bank Research
2.7 CREDIT ENVIRONMENT
35 |
Corporate Loans (annual % change)
But Corporate Credit is Recovering…
Corporate Loans (net flows €bn) Corporate Loans by sector (annual % change, Apr.19)
GREEK ECONOMY & OUTLOOK
02
Source: Bank of Greece, Piraeus Bank
Manufacturing, Mining & Quarrying
Electricity, Gas & Water Supply
Accommodation & Food Service Activities (Tourism)
Storage & Transportation other than shipping
Professional, scientific, technical, administrative &
support activities
18.8
51.5
2.8 REAL ESTATE ENVIRONMENT
36 |
Residential Real Estate Prices (annual % change) Non Residential Prices (annual % change) Real Estate FDI in Greece (€mn)
…as well as Real Estate Valuations
GREEK ECONOMY & OUTLOOK
02
Source: Bank of Greece, Piraeus Bank
4.0%
6.4%
-100.0
0.0
100.0
200.0
300.0
400.0
500.0
Q1
/07
Q4
/07
Q3
/08
Q2
/09
Q1
/10
Q4
/10
Q3
/11
Q2
/12
Q1
/13
Q4
/13
Q3
/14
Q2
/15
Q1
/16
Q4
/16
Q3
/17
Q2
/18
Q1
/19
€392mn
2.9 TRENDS & OPPORTUNITIES
37 |
With Plenty of Entry Points for New Capital
Greece needs to reorient itself from a consumption-based to an export-based
economy
Emphasis on export-oriented sectors: Tourism, farming, food processing, oil
refining, basic metals & minerals, chemicals, pharmaceuticals
Even in sectors with a competitive advantage Greece needs infrastructure
upgrades, ie 5-star resorts, yachting, convention centers, marketing &
branding
In sectors with less stellar prospects such as retail and wholesale trade, fish-
farming, passenger shipping, telecoms, consolidation will create sectoral
champions with improved margins
Regulatory pressures to liberalize industries such as electricity, natural gas,
waste processing & management, renewable energy
Greece has a number of competitive advantages but needs to move up
the Value Added Chain
In several sectors and for a variety of reasons, a massive consolidation process
has started
More funding, either in the form of equity or loans, will be required
Privatized assets & natural resources development will require substantial
investment (equity or loans)
Clusters can be created around privatized assets, ie ship-repair zone, logistics, cargo
management, cruise tourism
Banks commitment to reduce NPLs & Non Core Assets will create opportunities in
real estate, insurance and leasing, hotels and in over-indebted but viable
companies
Greece is facing regulatory pressures to liberalize and privatize a number of sectors
Greek banks have committed to reduce NPLs and restructure their balance sheets
GREEK ECONOMY & OUTLOOK
02
Source: Piraeus Bank Research
NPE STRATEGY & EXECUTION
03
3.1 OUR WORK UNTIL NOW
39 | NPE STRATEGY & EXECUTION
03
Group NPE Development (€bn)
Coverage
96%
NPE Reduction of €5.5bn in 2018, the Largest Annual Reduction in the Greek Market
Restructuring Volumes (€bn)
-€12.0bn
3.3 GROUP NPE UP TO 2021
40 |
Inflows: €6.1bn
NPE STRATEGY & EXECUTION
03
amounts in €bn
NPE Reduction of €15bn until YE.21, of which Almost Half via Inorganic Actions
o/w Securitizations €6.0bn
• loss budget already embedded in CoR guidance
• >100% coverage by provisions and collateral
3.2 NPE MOVEMENT DECOMPOSITION
41 |
03
GeorgeHandji
nicolaou
Re-defaults
Defaults
NPEs | Bank data (€bn)
Curings,Collections,Liquidations
Write-offs
Required effort per quarter on average until
Dec.2021
Q2.19 - Q4.21
Sales
Q1.18
30.8 28.3
Q2.18 Q3.18
27.5 26.4
Q4.18 Q1.19
25.9
Average Q1.18-Q1.19
Curings (0.6)Collections (0.2)Liquidations (0.1)
Average Q2.19-Q4.21
Curings (0.6)Collections (0.1)Liquidations (0.2)
NPE STRATEGY & EXECUTION
3.4 SIGNIFICANT CURING POTENTIAL
42 | NPE STRATEGY & EXECUTION
03
(€bn) 0 dpd 1-89dpd >90dpd Denounced NPEs
Business 5.6 1.9 2.0 8.4 17.9
Mortgages 0.9 0.8 0.8 3.8 6.2
Consumer 0.2 0.2 0.5 1.8 2.8
TOTAL 6.7 2.8 3.3 14.1 26.9
NPEs per Bucket (Mar.19)
NPΕ mix 25% 10% 12% 52% 100%
[1] [2] [3] [1+2+3+4][4]
25% of NPEs have 0days of Arrears; Pace of NPE Exits from Curings at €0.6bn per quarter
Cash Coverage Ratio (Mar.19) Forborne Loans (€12.3bn, Mar.19)
3.5 COVERAGE BY SEGMENT
43 | NPE STRATEGY & EXECUTION
03
Mortgages
Business
Consumer
Mortgages
Business
Total 95%
Total NPE coverage at
96%
Total NPL coverage at
121%
Consumer
Total 100%
Total 94%
Total 130%
Total 108%
Total 104%
3.6 SYSTEMIC SOLUTIONS UNDER CONSIDERATION
44 | NPE STRATEGY & EXECUTION
03Asset Protection Scheme
• Sponsored by the HFSF and the Ministry of Finance
• Similar to the Italian GACS scheme introduced in 2016
• NPL portfolio Securitisation with Senior notes retained
by the Bank and Mezzanine sold to third party
investors
• Hellenic Republic provides guarantee to Senior notes
subject to conditions
• Favourable risk-weighting of the retained Senior notes
• Facilitates the execution of larger transactions volumes
• Complementary to the Bank of Greece proposal
• Proposal expected to get clearance by DGComp
• Implementation anticipated in 2020
Asset Management Company
• Sponsored by the Bank of Greece
• Transfer of NPE portfolio along with part of the
deferred tax credits (DTCs) to SPV
• SPV funded through Securitisation issue (Senior,
Mezzanine, Subordinated)
• Subordinated notes will be subscribed by the Banks
and the Greek State
• Private investors will absorb Senior and Mezzanine
notes
• Merit of the scheme is that combines NPE deleverage
with improvement in quality of capital
• Implementation anticipated in 2020
3.7 DE-RISKING STRATEGY
45 | NPE STRATEGY & EXECUTION
03
Other assets
Cash, Securities, Interbank
Asset Mix
Net NPEs
Net PEs
100%
Interbank & Debt Securities
Deposits
Equity
Other liabilities
2018 2023
100%
Liability Mix
100% 100%
12%20%
23%5%
42% 60%
24% 15%
9% 10%
72%75%
12%12%
7% 3%
2018 2023
3.8 NPE CLEAN-UP TARGETS
46 | NPE STRATEGY & EXECUTION
03
NPE PLAN 2021
Gross NPE Ratio
Net NPE Ratio
2018
53%
27%
Single-digit NPE ratio in 2023Through a mix of organic and inorganic actions
Agenda 2023
More outflows and less inflowsSupported by c.€20bn restructuring volumes in 2017-2021
Scheduled inorganic actions Securitizations and NPE disposals
2023
~9%
~5%
Group NPE Balances (€bn)
3.9 NPE SALES
47 | NPE STRATEGY & EXECUTION
03Project Amoeba: €1.4bn GBV, €2.0bn legal claim• Secured large SME and corporate loans
• Sale agreed with Bain Capital Credit LP in May
2018 and concluded near end of Oct. 18
Project Arctos: €0.4bn GBV, €2.2bn legal claim• Unsecured personal loans and credit cards
• Sale agreed to consortium led by APS
Investments Capital s.r.o. in Jun. 2018 and
concluded at the end of Oct.18
Project Nemo: c.€0.5bn GBV, equal legal claim• Secured shipping loans
• Sale agreed with Davidson Kempner Capital
Management LP in Jun.19 and concluded in
early Jul.19
Project Iris: c.€0.7bn GBV, €1.7bn legal claim• Personal loans and credit cards, small
business loans, leasing exposures
• Virtual Data Room opened in Mar.19
• Non-binding offers in Apr.19; BOs in Q3.19
2019
completed
2018
completed
completed
Amoeba Arctos Nemo Total
Gross Book Value (€bn) 1.4 0.4 0.5 2.3
Price over GBV (%) 30% 13% 47% 30%
Provision Coverage (%) 73% 90% 45% 70%
RWA (€bn) 0.4 0.1 0.3 0.8
Collateral (€bn) 0.5 n.a. 0.3 0.8
Discount over Collateral Value (%) 15% n.a. 4%
Buyer Bain Capital APS DK
3.10 KEY DATA OF COMPLETED NPE SALES
48 | NPE STRATEGY & EXECUTION
03All 3 Sales Transactions have been Capital Accretive for Piraeus Bank (~25bps in total)
CIB PERFORMANCE & TRENDS
04
4.1 CIB | WHO WE ARE
50 |
04Largest Greek Systemic Bank
Uniquely Positionedto Capture Growth in
Greece
Customers: 10k companies
Exposure: €15bn
Deposits: €7bn
Leading Market Position
Leading position in Corporate and SME banking
Pioneer in Greek Agriculture business; leading market share in Leasing
Ranked 1st in Brokerage services
Our Strengths
Strong liquidity and disciplined capital management approach
Longstanding relationships with proven resilience over the crisis
Highly skilled professionals with deep knowledge of local market dynamics and products
Low cost-to-income ratio at high 20s% opportunity to invest
CIB PERFORMANCE & TRENDS
4.2 OUR BUSINESS
51 |
We serve all major sectors of the Greek economy providing full range of products and services through the largest network in Greece
1Segments
Large, Structured Finance, Real Estate, Hotel & Tourism, Shipping, SME & Agri
3Subsidiaries/
Non Bank ProductsFactoring, Leasing
& Securities
2Bank
Product factories
Syndications, TxB, Investment Banking,
Green Banking
CIB PERFORMANCE & TRENDS
04
4.3 CIB TODAY
52 |
New Loans Generation
Front book yield is significant higher than
yield of stock portfolio (+40bps)
Pipeline: stands at €2bn, out of which
€0.8bn is already credit approved
50% of 2019 target achieved
Revenues
Revenues of Q1.19 in line with 2019 budget
Aggressive target for 2019 NFI (+15% yoy)
Net fees +14% y-o-y in Q1.19
NII (€mn)
Fees(€mn)
New loans(€bn)
CIB PERFORMANCE & TRENDS
04
• Revenues• Profitability• Market Share
• Processes• Systems
• Credit• Capital• Operational Risk
4.4 OUR STRATEGY
53 |
Grow, Streamline, Protect
Protect Grow
Streamline
The Customer
Our Peopleat the center
of what we do
CIB PERFORMANCE & TRENDS
04
4.5 OUR STRATEGIC PRIORITIES
54 |
1Achieve Sustainable Profitable Growth, Placing the Customer at the Epicenter of What We Do
Grow
Streamline
Protect
Improve cross selling by taking fair share of wallet on clients’ ancillary business Invest in Transaction Banking products Focus on sectors of Bank’s excellence: SME, Agri and Green Claim leading underwriting position Support FDI with acquisition financing expansion
Automate processes Remove duplication and re-design lending process to reduce time to money / time to new product Commit on SLAs Innovate new ways of doing things
Credit Risk minimize new NPE formation Capital Risk prudent and disciplined RWA management Liquidity penetrate non-lending relationships Operational Risk management
CIB PERFORMANCE & TRENDS
04
4.6 DIGITAL TRANSACTION BANKING
55 |
An integrated business model that will create a connected corporate banking experience and uninterruptedtransaction flow
Transaction Banking Suite
Collections
Simplify bookkeeping
Payments
All-in-one
A better grip on cash flow
Cash Management
Trade Finance
Smarter financing
Factoring
Safeguard cash flow
Treasury
Maximize cash performance
Analytics
Deep dive into data
CIB PERFORMANCE & TRENDS
04
4.7 NEW STRATEGIC PARTNERSHIP
56 | CIB PERFORMANCE & TRENDS
04Collaboration for Solutions to Greek Shipping Companies
In its effort to expand revenue capacity and bettermanage balance sheet, the Bank is currentlyexploring to enter into a strategic partnership witha major Asian Pacific financial conglomerate
The focus of the partnership will be on providingtailored and competitive funding solutions toGreek shipping companies
The agreement if conducted, would incorporateboth a one-off fee paid to the Bank for its servicesand a recurring annual fee for ancillary services tobe provided over the tenure of each facility
Business Rationale for the Strategic Partnership
The opportunity relates with the effort to:
increase fees and expand market share in avital sector for the Greek economy
possibility to increase access to capital andother services for the shipping sector
optionality with regards to expansion in otherbusiness areas via the deepening of therelationship with the said conglomerate
The agreement allows Piraeus to leverage on itspartner’s balance sheet and lower cost of capitalallowing a more efficient and profitable use of itsexperience and resources in the shipping sector
4.8 THE WAY FORWARD
57 |
Our Ambition
Become the most profitable CIB franchise in Greece Defend and grow market share at the sectors of focus
Grow revenues generate sustainable, sticky fee income
Improve portfolio returns
Enhance customer experience by developing digital capabilities
Leverage our client relationships and balance sheet to lead key transaction and support the Greek economy
Our Targets
Positive Economic Value Added across all segments
Cost-to-Income ratio: low 30s%
New loan generation: >10% yoy
Optimize capital allocation
CIB PERFORMANCE & TRENDS
04
NPE SERVICING AGREEMENT
05
5.1 PIRAEUS AND INTRUM JOIN FORCES
59 | NPE SERVICING AGREEMENT
05• Piraeus Bank and Intrum enter into a strategic partnership for the management of non-performing assets
• Establishment of the market-leading independent NPE servicer in Greece
• The servicer will manage Piraeus’ existing NPEs and REOs, as well as new inflows
• Two servicer companies, one for NPEs and one for REOs, comprising one operating platform
• The platform will also manage non-performing assets of third parties
• Piraeus’ and Intrum’s top management will join the new companies’ Board of Directors
• The NPE servicer company will be licensed and regulated by the Bank of Greece
• The transaction is subject to customary conditions, regulatory approvals and the consent of the HFSF
5.2 BENEFITS OF THE TRANSACTION
60 | NPE SERVICING AGREEMENT
051 Facilitation of sizeable
inorganic actions
2 Enhanced operating efficiency
3
Performance Culture
4
Bank retainsupside potential
5 Re-focus on core banking
Leverage with Intrumexpertise
Enhancement of Piraeus’ NPE recovery prospects, facilitating theoutperformance of NPE reduction targets
Participation in the enterprise value growth of the servicer companies;Piraeus retains assets and proceeds on its balance sheet
PPI savings (cost relief minus fixed AuM fees) of c.€50mn per annum in2020-2021; overall boost of effectiveness in the management of NPEs
Independent servicer with the scale and capabilities to service largeportfolios, facilitating future securitizations and systemic solutions
Management team will re-focus on core banking activities, yieldingimproved results for the Group
5.3 BUSINESS LOGIC AT A GLANCE
61 | NPE SERVICING AGREEMENT
05Strong business logic behind the long-term strategic partnership -
creating value for other stakeholders
RBU Employees
Core business
Short and long-term development opportunities
Centre of excellence
Clients & Customers
More tools and solutions
Fair and firm
Prospering companies
Individuals with healthy loans
Greek Society
Long-term industry player
Substantial investment capacity
Increase job opportunities
Contribute to the economy
5.4 TRANSACTION FACTSHEET
62 | NPE SERVICING AGREEMENT
05Serviced Perimeter Existing non-performing loans plus forborne / early arrears loans and REOs, as well as any new inflows
€27bn loan exposures and €1bn REOs in the perimeter (est. Q4.2019 figures)
Timeline The two parties aim for transaction closing on 1 October 2019
Board of Directors Comprised of both parties’ executives
Valuation The agreement values the 100% of the platform at €410mn. Intrum has agreed to acquire 80% for a purchase price of €328mn
Shareholder Structure 80% of the new servicer company will be held by Intrum and 20% by Piraeus Bank
Contract Duration Initial term of 10 years
Management George Georgakopoulos will assume the role of CEO in the 2 servicer companies
Employees c.1,300 people will be employed in the new servicer companies
Structure The majority of the serviced NPE portfolio to be transferred to and held by a securitization SPV
5.5 PROGRESS AT A GLANCE
63 | NPE SERVICING AGREEMENT
05
Piraeus Bank
ServiceCo
SharesRecovery Banking Unit
Step 1: Transfer of RBU Business to ServiceCo
Piraeus Bank
ServiceCo
Step 2: Sale of ServiceCo, including a long-term SLA
Intrum
Shares in ServiceCo
Consideration
Long-term SLA
80%
20%
Note: diagrams do not explicitly show the creation and sale of the REO servicing company, which follows the same structure
5.6 PIRAEUS’ RBU OVERVIEW
64 | NPE SERVICING AGREEMENT
05
~1,300FTEs
~€27bnservicing perimeter
Formal establishment of the RBU in Q4.2013,
based on internal workout and restructuring
teams, as well as top talent from the core Bank
Servicing retail and commercial exposures across
a variety of specialized sub-segments
Significant investments in the operating platform,
processes, product suite and governance
Active involvement and facilitation of previous
and ongoing NPE transactions by the RBU; the
best NPE reduction performance in 2018Collections Restructuring Legal actions
Piraeus' Recovery Banking UnitThe most advanced NPE management unit in Greece
RBU Core Activities
5.7 INTRUM OVERVIEW
65 | NPE SERVICING AGREEMENT
05• Holistic service offering, covering the entire credit
management chain; c.80k clients
• Local presence in 24 European markets -
market leader in the majority of them; 160 partner countries
• Strong operational performance and collection results
• Significant transaction and partnership experience
Intrum Key Metrics - Q1 2019 LTM (SEKmn) (EURmn)
Revenues 14,079 1,357
EBIT Adjusted 4,877 470
Cash EBITDA 10,283 991
Employees >10,000 >10,000
5.8 PREPARATIONS FRONTLOADED
66 | NPE SERVICING AGREEMENT
05
Launch implementation of the transfer of business to ensure autonomous operational continuity of the servicer companies, by:- Segregating IT systems- Separating premises- Setting up the billing processes and
calculation tools- Managing the transfer of resources- Defining Compliance / GDPR obligations
Stress-test systems and processes of servicer companies
▪ Implementation steps for the transfer of the Piraeus RBU business defined
▪ Operational readiness and set-up of 13 dedicated workstreams
▪ New servicer companies fully up and running
End of May
▪ Piraeus and Intrum have started preparations for the implementation phase of the transaction early in the process
▪ Target is for the new servicer companies to be ready by 1 October 2019
▪ The new NPE servicer company will be licensed by the Bank of Greece
SCOPE
Pre-Signing
End of September
APPROACH
Pre-Signing Post-Signing - Implementation Completion
5.9 EXECUTION
67 |
05Steering Committee
Weekly Jour FixePMO Meeting
PMO Team
Workstream Managers
Steering Committee Owners
Functions involved
Compliance & GDPR
PB Organization
& GovernanceHR
Credit & Delegated authorities
TechnologyOps set-up
(premises, facilities, branches)
Billing Engine, KPIs
Regulatory & Incorporation
Securitization and related processes
Core Processes and
Invoicing
▪ IT
▪ Organosis
▪ Corporate Governance
▪ Organosis
▪ Finance & MIS
▪ IT
▪ Organosis
▪ Credit
▪ Organosis
▪ IT
▪ Organosis
▪ IT
▪ Legal
▪ Procurement
▪ Branches
▪ Finance & MIS
▪ Legal
▪ IT Facilities
▪ HR
▪ Organosis
▪ IT
▪ Organosis
▪ Finance
▪ IT
▪ Operations
▪ Treasury
▪ Tax
▪ Accounting
▪ Corporate Servicing Unit
▪ Organosis
▪ IT
▪ Finance
▪ Regulatory Affairs
▪ Legal
▪ Strategy
▪ RBU
▪ HR
▪ Participations
▪ Finance
▪ Compliance
▪ Inv. Relations
▪ HR
▪ Legal
▪ Operations
1 65 7 82 9 1043 11
Cost Monitoring
ServiceCoset-up
12
Communication
Intrum ownership
NPE SERVICING AGREEMENT
5.10 FINANCIAL IMPACT
68 | NPE SERVICING AGREEMENT
0510-year periodUp to 20212019
NPV of the 10-year cumulative net income impact c.€100mn, including upfront consideration proceeds
This impact does not include any acceleration in the execution of Piraeus’ NPE reduction strategy
Positive impact on PPI (cost relief minus fixed AuM fees) of c.€115mncumulatively (Q4.19 to end-2021)
Success fee for the execution of the existing NPE plan expected to be booked in the CoR line
All-inclusive positive impact to capital through to 2021 of c.55-60bps as per existing NPE plan
In a scenario of 10% over-performance vs existing NPE plan, net capital result through to 2021 increases to c.100bps
Capital accretion of c.80bps will arise from the €0.4bn valuation of the NPE servicing platform
Closing expected 1 October 2019; marginal operating P&L impact from Q4.2019
5.11 BASELINE FINANCIAL PROJECTIONS
69 |
2019-2021 Net Income (€bn)2019-2021 PPI (€bn)
NPE SERVICING AGREEMENT
05The Illustrated Impact Takes into Account the Baseline Scenario of our NPE Plan Execution
CLOSING REMARKS
AGENDA 2023: KEY PILLARS
71 |
b. Satisfying Stakeholders remaining the top priority for the Bank
Value Creation by the Leading Bank in Greece
a. Strategic Targets paving the path to increasing profitability
Efficiency & Simplification
De-risking of Legacy Assets
Growth of Core Assets
c. Sustainable Solutions producing sustainable returns
CLOSING REMARKS
2023 ROADMAP
72 |
Restoration of Fundamentals in the Baseline Scenario
2018
54%
51%
losses
~200bps above the expected requirement
high single-digit return
single-digit ratio
low 40s
RoTΕ
NPE
Regulatory Capital
Cost to income
14.0%
CLOSING REMARKS
ROA DRIVERS
73 |
a: actual; f: forecast
Pre-Tax RoA Improvement Driven by Cost Efficiency
Growth anddevelopment of
the business
Efficiencyincrease andsimplification
De-risking andcost of risk
normalization
+0.1%
+0.5%
+0.2%
CLOSING REMARKS
Pre- tax RoA
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PIRAEUS BANK GROUP HEADQUARTERS4, Amerikis Str., 105 64 Athens, Greece
T. +30 210 333 5026www.piraeusbankgroup.com