National Bank of Greece

Transcription

1 National Bank of Greece 2014 Comprehensive Assessment Results NBG achieves a 2bn capital surplus Athens Sunday, October

2 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

3 Table of Contents EXECUTIVE SUMMARY 3-5 STRESS TEST ASSUMPTIONS AND METHODOLOGY 6-8 ASSET QUALITY REVIEW 9-14 STATIC STRESS TEST DYNAMIC STRESS TEST DEFERRED TAX CREDITS

4 EXECUTIVE SUMMARY

5 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 Restructuring Plan agreed on 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 , of approx bn ( bps). No further capital action required of NBG. 1 including the Share Capital Increase (SCI) completed in May

6 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, % 2.5bn 4.2% 6.3bn -10.9% 2.0bn capital surplus 3.3bn, 5.5% minimum threshold Dynamic BS 6.0bn 10.7% 3.1bn % % 5.3bn 8.9% 2.0bn 3.4% Does not include DTC Completed RP actions CET I May 14 SCI Static BS CA 1 Dynamic BS CA CA result Surplus end 2016 RWA s in bn CA = Comprehensive Assessment, incorporates Asset Quality Review, Stress Test and AQR join-up 2 Already completed Restructuring Plan actions, see also page 18 5

7 STRESS TEST ASSUMPTIONS AND METHODOLOGY

8 Overview of major assumptions /methodology for the adverse scenarios Line item Volumes Static Balance Sheet (SBS) As at Dynamic Balance Sheet (DBS) Loan and deposit total volumes as per Restructuring Plan (RP) Loan mix as at 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 same as SBS except NII ceiling as per RP Trading 1x standard deviation of last 3 historical values plus 2x standard deviation of last 5 historical values (thus including Greek PSI and Grexit fears impact on trading losses) RP figure for baseline plus 2x standard deviation of last 5 historical values (includes Greek PSI and Grexit fears impact on trading losses) Fees & Commissions Cap on ratio of F&C /Total Assets at level of 2013, the 6 th year of recession same as SBS Opex Not lower than 2013 level, which includes staff cost of 2,490 staff that departed in Dec-13 Not lower than 2013 ratio to Total Assets, after excluding the 2,490 staff Credit Risk Loss rate not lower than top-down ECB model Loss rate adjusted for AQR results Apply similar LGD shock for defaulted and non-defaulted assets same as SBS DTA Phase out as per CRR IV DTC law not yet enacted Excludes DTA recognised in H same as SBS 7

9 Macro assumptions for Greece double up on steep recession of on bonds and house prices vs the periphery Gov t bond adverse valuation haircut 3Y, loss rate,% 16.5 GDP adverse deviation , Base = 2009 (100) Ø Greece Spain Ireland Portugal Italy Residential House Price inflation , Base = 2009 (100) Unemployment Rate , % H: Historical, F: Forecasts (EBA adverse scenario) 8

10 ASSET QUALITY REVIEW

11 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

12 Increase of mortgage provisions following severe collateral mark downs and rigid treatment of rescheduled loans NBG estimates* Defaulted loans AQR Challenger model used severe liquidation assumptions Discount vs PropIndex valuation of 8% Forward HPI -4% per annum vs. NBG -2% per annum Time to liquidation 3 years vs. NBG 5 years Forced sale haircut ~20% vs. NBG 10% No re-classification from extensive credit file review Corresponds to an increase of ~ 650 m in provisions, of which ~ 330 m are already provided for by IRB regulatory provisions Re-scheduled loans AQR Challenger model classified ~ 2.9 bn Performing Rescheduled NBG loans as NPE, resulting in an increase of ~ 400m in provisions EBA definition of NPE includes all rescheduled loans, but AQR applies very high PI s to NPE s irrespective of actual performance An alternative classification to High Risk and High Risk Cure segments would result in ~ 400m less provisions 90+ LLA s* m, Dec-13 balance 820 IFRS LLA s 1,150 Regulatory LLA s 1,475 Challenger* model Stratification of NPE EBA by delinquency Risk bucket Balance bn Nil dpd dpd dpd 0.4 <90 dpd 2.9 Probability of impairment ΝPG = 9-43% AQR* = % * NBG estimates, back-solving Comprehensive Assessment AQR Challenger model with limited high level input from ECB. Actual parameter values may vary 11

13 Retail SME: Severe collateral haircut led to higher provision charges NBG estimates* Provision calculation for NPE loans Retail SME m, Dec-13 2,994 c.40% 1,269 c.55-60% 1,647 Greek Retail SME loans No NPE re-classification /impact from credit file review Provision gap resulting from severe collateral valuation assumptions for secured NPE s Valuation haircuts: NBG 40% on average AQR* Challenger model implicit valuation haircuts of ~55-60% Nominal value of tangible collateral NBG Collateral haircut AQR* Challenger Model Collateral haircut Provision gap NPE coverage post * NBG estimates, back-solving Comprehensive assessment Challenger model with limited high level input from ECB. Actual parameter values may vary 12

14 SME increase of provisions is due to reclassified NPE s and severe collateral haircuts NBG estimates* Performing loans re-classification Net additional NPE exposure of ~ 620m was identified (7% of total book) For the majority of the cases the driver for reclassification was a debt service coverage ratio <1.1 in 2013 in the 6 th year of Greece s severe recession (-25% of GDP during ) Majority of NPE s were assessed under gone concern rather than going concern, leading to provisions based on liquidation value Collateral under gone concern AQR Challenger model reduced collateral values by 35% vs. NBG s c.30% Collateral treatment prior to haircuts led to a 6% reduction in NBG reported collateral value Sales haircuts and discounting averaged 29% for gone concern debtors NPE balances in m, Dec. 13 NPE Provisions in m; Dec. 13 NPE ratio 47% 54% 4,707 4, Coverage ratio 37% 43% 2,023 1, NPE Pre-AQR AQR impact NPE Post-AQR NPE Pre-AQR AQR impact NPE Post-AQR * NBG estimates, back-solving Comprehensive assessment Challenger model with limited high level input from ECB. Actual parameter values may vary 13

15 Post AQR NPEs in line with IFRS reported impaired loans NBG transparency on troubled assets validated NBG estimates* Post-AQR NPEs in line with IFRS reported impaired loans 1, 2 % of % of total total Group Group Balances Balances as as at at NPE NPE % 22.5% 22.5% 1.5% 1.5% 8.2% 8.2% 32.2% 2.3% 34.4% 34.4% Restructured loans clearly marked as such (even while below 90+ days past due) and receive proper impairment treatment. NPLs Other impaired Performing Restructured NPE Pre- AQR AQR NPE Reclassification NPE Post-AQR 1 As included in NBG s 2013 Annual Report, Note Loans and Advances to Customers. 2 Titlos excluded from loan balances. 3 ECB disclosure templates refer to EAD on exposures reviewed. * NBG estimates, back-solving Comprehensive Assessment challenger model with limited high level input from ECB. Actual parameter values may vary. 14

16 STATIC STRESS TEST

17 Adverse Static Balance Sheet Stress results in a capital shortfall of 0.9bn end 2016, covered by actions already implemented in 2014 Adverse scenario million 2,500 6,305 6,058 Do not include DTC DTC 5.5% 3,186m minimum threshold Static BS 2, ,114 3,367 3Q.14 PPI 2013 CET I capital SCI CA impact Stress Test result Shortfall Actions CA result completed* adjusted for completed actions RWA s in bn * See page 18 16

18 The Static Balance Sheet Stress test is especially severe both on credit losses and PPI, despite EBA s expectations for improved GDP and unemployment by 2016 million 16.9% on Greek sov. risk 40% less than 1H14* every year ,710 +2,970 32% more than 1H14* every year ,600 +1,890-1, ,300 30% except AQR at 26% AQR Credit losses Sovereign risk PPI Tax DTA derecognised Other Capital CA impact * 1H14 annualised 17

19 The Adverse Static Balance Sheet stress test shortfall is covered by measures already implemented in the first 9 months of Realization and capital actions million Actual H1 14 Pre Provision Income almost double the 1H14 Stress Test result the difference is considered a capital action DTC NBG Pillar 1 Bonds of 1,485m repaid in 2014, which had been subject to 16.9% haircut Repayment included in the Restructuring Plan 933 3Q.14 PPI Voluntary Exit Scheme (VES) was taken up by 2,490 employees and completed in Dec-13; ST methodology requires continuation of salary expense for above mentioned staff in SPA for Astir Palace disposal was signed on September 17, 2014 PPI (1H.14) Sovereign Bonds VES Astir Disposal Total Stress Test shortfall (static) Conversion of DTAs to DTCs as per current Law (passed through Greek Parliament on ) results in an incremental positive impact 18

20 DYNAMIC STRESS TEST

21 The Adverse Dynamic Balance Sheet stress test (DBS) results in a capital surplus in excess of 2.0 bn. The DBS stresses the Restructuring Plan agreed with the European Commission on 23 July 2014 Adverse scenario million 2,500-3, % -5.9% 2.0bn capital surplus 6, % 5, % 2, % 3,300m minimum threshold Dynamic BS Does not include DTC 2013 CET I SCI May 14 CA impact Stress Test result Surplus RWA s in bn

22 The Dynamic Balance Sheet (DBS) reverses the majority of the Static Balance Sheet (SBS) result with improved profitability and capital actions Adverse scenario CET 1, million CET 1 ratio, % -6, % 1,560 5, % 2, % 3.3bn, 5.5% minimum threshold Dynamic BS 1, Static BS CA 1 Improved DBS profitability DBS Capital Actions CA result Surplus end CA = Comprehensive Assessment, incorporates Asset Quality Review, Stress Test and AQR join-up 21

23 DEFERRED TAX CREDIT

24 The new Deferred Tax Law would improve the stress test results by bn Legal Framework Impact on capital adequacy Effective from 1 st January 2015 Income Tax attributable to: Unutilized amount of the PSI loss; and Accumulated provisions for credit losses on loans granted as at for which DTA has been recognised can be converted to a receivable (Tax Credit) from the Greek State, upon Accounting (IFRS) losses after tax 1, Unused Tax Credit 2 is replaced with a claim on the Greek State. In exchange, the Bank issues ordinary shares 3 with value equal to 110% of the unused amount NBG actions An Extraordinary General Assembly has been convened for to enable NBG to convert DTA amounts into DTCs, i.e. Deferred Tax not dependent on future profitability and not subject to CRD IV caps. Capital Adequacy Impact on CET 1 under 2024 CRD IV rules on the position : The new law prevents the eventual derecognition of approximately 2.6bn. Stress Test Impact on Adverse Static BS results (period to end 2016) : The new law enables the recognition of approximately 1.2bn of capital or 220 bps Impact on Adverse Dynamic BS results (period to end 2016) : The new law enables the recognition of approximately 0.7bn of capital or 110 bps 1 or resolution of the entity 2 if not settled against Corporate Tax due for the year 3 Conversion at the VWAP of of DTAs the last to 30 DTCs days as per current Law (passed through Greek Parliament on ) results into an incremental positive impact of 810m against Stress Test Static (adverse) scenario. 23

25 National Bank of Greece Contact details Paul Mylonas Deputy CEO Paula Hadjisotiriou Deputy CEO Apostolos Kazakos Assistant General Manager Group Strategy Greg Papagrigoris Head of IR