COMMENTARY. GROUP RESULTS for the six-month period ended 30 June 2016

Transcription

1 COMMENTARY GROUP RESULTS for the six-month period ended 30 June 30 August

2 TABLE OF CONTENTS Page 1. Fix and Build strategy is delivering results 3 2. Strategic targets and outlook Results Overview Income Statement Statement of Financial Position Appendix Group Income Statement Group Statement of Financial Position Commentary - Group Results for the six-month period ended 30 June 2

3 1. FIX AND BUILD STRATEGY IS DELIVERING RESULTS Fix elements Reduced for three quarters in a row; NPE ratio at 58%. 334 million restructurings 1 in the first six months of. 50,2% NPE coverage ratio; supports actions for resolving problematic loans. Build elements 152 million of new lending were approved in the first half. Year-on -Year increase of NIM to 2,1%. Continuous investment in digital transformation; continuous internet banking upscaling, provision of digital customer solutions Results 1,1 million profit for the period ended 30 June. 13,92% Common Equity Tier 1 (CET 1) ratio, above the 11,75% minimum required by the SSM. A stable net loans to deposits ratio of 50,5% allowing for further growth. 2. STRATEGIC TARGETS AND OUTLOOK The Bank s strategy focuses on two aspects: Fix and Build. The Fix aspect of the strategy predominantly relates to the reduction of the high level of NPEs. The Build aspect of the strategy relates to the growth of the loan portfolio and furthering the customer relationships, be those of a deposit or lending nature. It also relates to advancements in technology and enhancement of the customer service, as well as simplification of procedures and processes. The Bank is continuing repositioning its International Banking Division strategy reflecting the changing regulatory environment with specific focus on anti-money laundering issues. Further, in order to meet the challenges of the competitive environment and streamline/empower the Executive Committee, the Bank revised its Group organisational structure. Cyprus exited the Memorandum of Understanding at end of March having successfully completed the Economic Adjustment Programme agreed with the country s international lenders in March The commitment regarding the implementation of the Economic Adjustment Programme has been the cornerstone in steering the economy out of recession. The successful implementation of Cyprus macroeconomic adjustment program has significantly enhanced confidence in the Cypriot economy, both domestically and internationally. Also, significant progress has been made under the program to restructure and restore confidence in the Cypriot financial system. However, the banking system still faces the challenge of restoring normal lending to the economy and addressing the high level of Non-Performing Exposures (NPEs). The high private indebtedness levels that have led to deleveraging and increased Non-Performing Exposures, continue to pose significant risks to the stability of the domestic banking system and to the outlook of the economy, especially via developments in property prices. As part of implementing its strategic targets, the Group is focused on supporting the economy s recovery and contributing towards sustainable economic growth. The Bank maintains sufficient liquidity to exploit opportunities while maintaining its focus on organic growth. In order to undertake this, a key priority is to address the high level of Non-Performing Exposures which remain at unprecedented levels. Unavoidably, the high level of NPΕs causes an erosion of the Banks income and may cause additional provisions and effectively reduce profitability. At the same time the Bank recognises that the real estate market which is a significant driver of the provisions for impairment of customer loans continues to be subdued and puts further pressure on the profitability. Improvement in the level of NPEs in the economy has been slow. The economic recovery is expected to 1 Client basis (distressed). Commentary - Group Results for the six-month period ended 30 June 3

4 accelerate the pace of improvement, which nonetheless still remains volatile and partly dependent on real estate prices. Within the framework of tackling the Bank s loan portfolio quality, the Group is focusing on restructuring loans in a sustainable manner and on mutually beneficial terms using a toolset of sustainable solutions, such as debt to asset swaps, balance reductions, extensions of maturity and instalments amount reduction, grace periods, servicing support, etc. The Bank has managed to navigate successfully through the banking crisis. It has maintained throughout the crisis its reputation for stability and trust and is concentrating on strengthening and better focusing of its market positioning. Through its focus on its Fix and Build initiatives, the Group has all the ingredients to continue the implementation of its strategy. At the same time the environment remains fragile and volatile and the Bank will remain vigilant of developments to turn them into opportunities both in Cyprus and internationally. 3. RESULTS OVERVIEW Profit for the six-month period ended 30 June amounted to 1,1 million (6M-2015: 0,5 million). The Group s profitability before impairment losses and provisions to cover credit risk, improved both on Year on Year (YoY) as well as on a Quarter on Quarter (QoQ) basis, mainly due to the gain of 14 million from the disposal of the shares in VISA Europe Limited held by the Bank, since the transaction was completed at the end of 2Q. Income Statement ( 000) 6M- 6M Q 1Q QoQ Profit from ordinary operations before impairment losses and provisions to cover credit risk % % Taxation (8.897) % (8.453) (444) % Profit/(loss) for the period from continuing operations Profit from discontinued operations (4.283) -126% % % - - Profit for the period % % Profit attributable to the shareholders of the parent company % % 0% Profit from ordinary operations before impairment losses and provisions to cover credit risk for the six-month period ended 30 June amounted to 58,7 million out of which 36,0 million relate to 2Q results and 22,7 million to 1Q results registering an increase of 58% from 1Q to 2Q. Compared to the results of the six-month period ended 30 June 2015 there was an increase of 40%. In both cases the increase was mainly due to the gain from the disposal of the VISA Europe Limited shares. Profit attributable to the Bank s shareholders for the six-month period ended 30 June amounted to 0,7 million (6M-2015: 0,1 million). In the six-month period ended 30 June 2015, profit attributable to the Bank s shareholders includes a profit of 4,8 million from discontinued operations that related to the disposal of a building owned by the Group in Moscow, following the sale of its Russian banking subsidiary in During the 2Q the Bank derecognised a deferred tax asset of 8,5 million arising from tax losses. Commentary - Group Results for the six-month period ended 30 June 4

5 Basic Financial Position highlights ( million) 30 June FY2015 Gross loans % % Loans (net of provisions for impairment) % % Investment assets % % Total assets % % Deposits % % Shareholders Funds % 640-2% Risk Weighted Assets (RWA) % % As at 30 June, the Group s total assets amounted to 7,1 billion and indicated a decrease of 4% compared to 31 December This was mainly due to the decrease of the deposits with other banks as well as the Bonds portfolio. Key performance Indicators 30 June FY2015 Common Equity Tier 1 (CET 1) 13,92% 13,81% +11 bps 14,75% -83 bps Non performing Exposures (NPEs) (%) of gross loans 57,7% 58,3% -63 bps 59,2% -151 bps Coverage ratio 50,2% 49,1% +109 bps 50,1% +13 bps Net Interest Margin 2,1% 2,1% +1 bps 2,01% +13 bps Cost to income ratio 2 55,2%/61,8% 61,9% -10 bps 59,3% // 3 4. INCOME STATEMENT 4.1 Net interest income (NII) Net Interest Income ( 000) 6M- 6M Q 1Q QoQ Interest income % % Interest expense (18.767) (37.089) -49% (9.597) (9.170) +5% Net interest income % % Net interest income for the six-month period ended 30 June reached 74,7 million, a 2% increase compared to the corresponding period ended 30 June Net interest income in 2Q is generally in line with 1Q with a minor decrease of 2% reflecting the competitive interest rate environment. The Group s net interest margin for the six-month period ended 30 June amounted to 2,1% (6M-2015: 2,0%). 4.2 Non-interest income Non-interest Income ( 000) 6M- 6M Q 1Q QoQ Net fee and commission income % % Net gain on disposal and revaluation of foreign currencies and financial instruments % % Other income % % Total non-interest income % % 2 Cost to income ratio adjusted for the 14m profit from the sale of the investment in Visa Europe: 61,8%, non adjusted 55,2%. 3 // : non comparable Commentary - Group Results for the six-month period ended 30 June 5

6 Total non-interest income for the six-month period ended 30 June amounted to 56,3 million, registering an increase of 24% compared to the corresponding period ended 30 June This increase was mainly due to the increase in Net gain on disposal and revaluation of foreign currencies and financial instruments which is explained with the gain of 14 million from the disposal of the shares in Visa Europe Limited included in the sixmonth period ended 30 June. Excluding the gain of 14 million, total non-interest income amounted to 42,3 million and is in line with corresponding period ended 30 June 2015 after deducting a gain on disposal of financial instruments amounting to 2,9 million. Total non-interest income in 2Q amounted to 34,3 million and increased by 56% compared to the 22 million of 1Q mainly again due to the gain of 14 million from the disposal of the shares in Visa Europe Limited, as the transaction incurred in 2Q. 4.3 Expenses Expenses ( 000) 6M- 6M Q 1Q QoQ Staff costs % % Administrative and other expenses % % Depreciation and amortisation % % Total expenses % % The total expenses for the six-month period ended 30 June decreased by 6% compared to the respective six-month period ended 30 June Total expenses for 2Q decreased by 5% compared to 1Q. The reduction was mainly attributable to decreases in administrative and other expenses both on YoY as well as on a QoQ basis. Staff costs for the six-month period ended 30 June represented the 56,3% of the Group s total expenses (30 June 2015: 50,9%), showing an increase of 4% compared to the respective six-month period ended 30 June The increase was mainly due to the increase in the number of employees from to 1.611, mainly due to recruitment of additional employees at the Arrears Management, Business, Technology and Risk Management Unit. Staff costs for 2Q represented 57,0% (1Q: 55,7%) of the Group s total expenses showing a 2% decrease compared to 1Q. Total administrative and other expenses for the six-month period ended 30 June amounted to 28,7 million, and were reduced by 19% compared to the 35,4 million for the corresponding six-month period ended 30 June 2015 mainly due to the decrease of the cost of advisory services. The administrative and other expenses for 2Q amounted to 13,7 million, showing a decrease of 8% compared to 1Q. The decrease was mainly attributable to the provision for impairment of stock of properties held for sale of 2,4 million included in 1Q. This decrease was partly offset by a penalty 4 of 1 million imposed by the Central Bank of Cyprus (CBC), included in 2Q (1Q: nil), resulting in a net decrease of 1,4 compared to 1Q. During 2Q, besides the CBC penalty mentioned above, the administrative and other expenses also included cost of advisory services from international advisory firms of 1,1 million (1Q: 1,8 million, 6M-2015: 9,3 million) and provisions for pending litigations or complaints of 0,4 million (1Q: 0,2 million, 6M-2015: 3,8 million). The cost to income ratio for the six-month period ended 30 June was 55,2% compared to the 64,7% for the six-month period ended 30 June For 2Q, the cost to income ratio was 49,5% compared to 61,9% in 4 CBC financial penalty relating to controls omissions and weaknesses in the implementation of due diligence measures and customer identification procedures identified in 2014 and related to preceding years. The penalty does not relate to any identification of incidents of suppression of proceeds from any illegal activities. Hellenic Bank has made significant progress in rectifying these issues, following an independent review and subsequent restructuring of part of its business initiated since 2014 and overseen by the Board of Directors. At the same time, the Bank is continuing repositioning its International Banking Division strategy reflecting the changing regulatory environment with specific focus on anti-money laundering issues. Commentary - Group Results for the six-month period ended 30 June 6

7 1Q. Adjusting for the gain on disposal of the Visa Europe Limited shares, the cost to income ratio for the six-month period ended 30 June was 61,8% and for 2Q was 61,6%. 4.4 Impairment losses and provisions to cover credit risk Impairment losses and provisions ( 000) Impairment losses on the value of loans and advances Provisions to cover credit risk for contractual commitments and guarantees 6M- 6M Q 1Q QoQ % % (2.948) % 763 (3.711) -121% Total impairment losses and provisions % % For the six-month period ended 30 June, the total provision charge for impairment losses to cover credit risk amounted to 48,8 million showing an increase of 4% in comparison to the respective six-month period ended 30 June The provision charge for impairment losses to cover credit risk for 2Q amounted to 27,2 million and for 1Q to 21,6 million. The cost of risk for the six-month period ended 30 June was 2,4% (31 December 2015: 2,3%, 6M-2015: 2,1%). 5. STATEMENT OF FINANCIAL POSITION 5.1 Deposits and Loans The Bank maintained a net loans to deposits ratio of 50,5% as at 30 June (31 December 2015: 50,4%) Deposits Customer deposits amounted to 6,1 billion as at 30 June (31 December 2015: 6,1 billion). They comprised of 4,6 billion deposits in Euro and 1,5 billion deposits in foreign currencies, mostly US Dollars. The Group s focus in the deposit market is in attracting deposits which are sticky. Total deposits recorded a 1% decrease from 31 December The Bank s deposits market share 5 as at 30 June was 13,1% (31 December 2015: 13,5%). The composition of the customer deposits portfolio by currency was as follows: Deposits by currency 30 June FY2015 Euro 75% 75% - 73% +200 bps US Dollars 21% 21% - 23% -200 bps GBP 2% 2% - 2% - Rubles 1% 1% - 1% - Other currencies 1% 1% - 1% - The composition of the customer deposits portfolio by deposit category was as follows: Composition of customer deposits portfolio 30 June FY2015 Demand Deposits 48% 48% - 49% -100 bps Time Deposits 40% 40% - 39% +100 bps Savings Deposits 9% 9% - 9% Notice Deposits 3% 3% - 3% Source: Central Bank of Cyprus and Hellenic Bank. Commentary - Group Results for the six-month period ended 30 June 7

8 The composition of the customer deposits portfolio based on the customer s country of origin was as follows: Deposits by depositors country of origin 30 June FY2015 Cyprus 52% 51% +100 bps 50% +200 bps Russia 20% 21% -100 bps 23% -300 bps Other countries of European Union 16% 16% - 16% - Other European countries 7% 7% - 6% +100 bps Other countries 5% 5% - 5% Loans Total new lending for the six-month period ended 30 June reached 152 million. The Bank continued providing lending to creditworthy businesses and households while examining other growth opportunities. Gross loans as at 30 June amounted to million (31 December 2015: million). As of 1 st January, gross values of impaired loans are booked on a non-interest accrual basis. The amount of contractual interest that was not accrued for the six-month period ended 30 June amounted to 86,5 million. In previous years gross impaired loans included contractual interest accrued. The Bank s loan market share 6 as at 30 June was 7,9% (31 December 2015: 7,0%). During the six-month period ended 30 June exposures of 76 million were written off. Adjusting for this amount, gross loans suggest a decrease of 0,2% compared to 31 December The composition of the loans and advances to customers was as follows (net of provisions for impairment): Composition of loan portfolio 30 June FY2015 Retail 29% 29% - 30% -100 bps Construction and Real Estate 24% 24% - 24% - Other 17% 17% - 17% - Trade 15% 16% -100 bps 15% - Manufacturing 7% 7% - 7% - Tourism 8% 7% +100 bps 7% +100 bps 5.2 Loan Portfolio Quality Non Performing Exposures Non-Performing Exposures (NPEs)* (in million) 30 June FY % % NPEs (%) of gross loans 57,7% 58,3% -63 bps 59,2% -151 bps Coverage ratio 50,2% 49,1% +109 bps 50,1% +13 bps * including suspended interest not recognised in the income statement. In 1Q and 2Q, impaired loans were booked on non interest accrual basis. Committed efforts to resolve problematic loans continued. The level of NPEs has been reduced for a third quarter in a row. As at 30 June, NPEs decreased by 2% to million compared to million as at and by 4% compared to the figure as at 31 December Terminated loans included in NPEs amounted to million as at 30 June (31 December 2015: million). Gross loans with forbearance measures as at 30 June amounted to million (31 December 2015: million). 6 Source: Central Bank of Cyprus and Hellenic Bank. Commentary - Group Results for the six-month period ended 30 June 8

9 During the six-month period ended 30 June the Bank continued focusing on the restructuring of its NPEs, using a toolset of sustainable solutions, such as debt to asset swaps, balance reductions, extensions of maturity and instalments amount reduction, grace periods, servicing support, etc. An amount of 334 million 7 relating to total customers exposures, was restructured during the six-month period ended 30 June, while an amount of 76 million was written off. The stock of properties held for sale, which are mostly from customers debt settlement, amounted to 70,4 million as at 30 June ( : 68,9 million, 31 December 2015: 71,2 million). The ratio of NPEs to gross loans as at 30 June was reduced to 57,7% ( : 58,3%, 31 December 2015: 59,2%). Including the contractual interest on impaired loans not accrued of 86,5 million, the ratio of NPEs to gross loans was 58,5% ( : 58,7%). Accumulated impairment losses, amounted to million as at 30 June ( : million, 31 December 2015: million) and represented 29,0% of the total gross loans ( :28,6%, 31 December 2015: 29,6%). The coverage of the NPEs by provisions (coverage ratio) was 50,2% as at 30 June ( : 49,1%, 31 December 2015: 50,1%). The financial effects of collaterals 8 on NPEs amounted to million which together with the total impairment losses result to a coverage of 114,2%. The NPEs as at 30 June based on the counterparty sector are analysed below: Analysis of Non- Performing Exposures (NPEs) 30 June Provisions Coverage (% of NPEs) FY 2015 million % of total million % of total million % of total Total Non-Performing Exposures % 50% % % of which Non-financial corporations: % 48% % % Construction % 44% % % Wholesale and retail trade % 57% % % Real estate activities 168 7% 46% 168 7% 181 7% Accommodation and food service activities 154 6% 36% 161 6% 181 7% Manufacturing 116 5% 49% 117 5% 117 5% Other sectors % 55% % 243 9% of which Households: % 55% % % of which Residential mortgage loans % 40% % % of which Credit for consumption 138 6% 76% 141 6% 143 5% Note: Numbers may not add up due to rounding 5.3 Investment Assets The total value of investment assets amounted to 3,7 billion (31 December 2015: 4 billion) and represented 52,7% of the total assets of the Group at 30 June (31 December 2015: 54,2%). Investment assets are comprised of cash and balances with Central Banks, placements with other banks, investments in bonds, investments in shares and collective investment units. 7 Client basis (distressed). 8 Based on open market values (capped at client exposure and legally collectible amount). Commentary - Group Results for the six-month period ended 30 June 9

10 The Group s cash and placements with other banks and Central Banks amounted to 2,8 billion at 30 June ( : 3,1 billion, 31 December 2015: 2,9 billion), and included a placement of 1,9 billion with the European Central Bank ( : 2,1 billion, 31 December 2015: 1,9 billion). Most foreign currency placements were with P1 rated banks 9. The Group s investments in bonds at 30 June amounted to 0,9 billion (31 December 2015: 1,0 billion), which represented 13% of total assets (31 December 2015: 14%). They comprised mainly of Cyprus Government Bonds and supranational organisations debt securities. The 41% of debt securities were Aaa rated 10. The Cyprus Government bonds held by the Group at 30 June amounted to 516 million (31 December 2015: 394 million) of which 329 million will mature within 5 and 10 years, 30 million within 1 and 5 years and the remaining 157 million within a period of less than 1 year. At 30 June, the carrying amount of investments in bonds, based on their issuer, is analysed as follows: Investment in Bonds - million Governments Bonds - million Cyprus Supranational USA - 81 Canada - 14 Banks 23 Government656 Germany - 20 Netherlands Israel Amounts due to Central Banks The Bank participated in the targeted longer-term refinancing operations (TLTRO) program in December 2014 by borrowing 236 million at an interest rate of 0,15% for 4 years. On 29 June, the Bank proceeded with the full early repayment of the TLTRO borrowing. 5.5 Capital Base and Adequacy The Capital Adequacy Ratios of the Group and the Bank as at 30 June under Pillar I (transitional basis) were as follows: Capital Adequacy Ratios 30 June Group FY June Bank FY2015 Capital Adequacy Ratio 17,15% 17,05% 18,13% 17,10% 17,03% 18,12% Tier 1 Ratio 16,90% 16,74% 17,68% 16,85% 16,73% 17,66% Common Equity Tier 1 (CET 1) 13,92% 13,81% 14,75% 13,88% 13,79% 14,73% 9 Prime-1 short term rating by Moody s. 10 Moody s ratings or Moody s ratings equivalents - based on the CRR 575/2013 and CRD IV 2013/36/EU for the RWA calculation (as per Section 4, Article 138 of the regulation). Commentary - Group Results for the six-month period ended 30 June 10

11 The increase in Common Equity Tier 1 Ratio compared to 1Q was mainly due to the decrease in risk weighted assets as a result of the reduction of the balance of the NPEs. The decrease in Common Equity Tier 1 Ratio compared to FY2015 was mainly due to: - gradual elimination of transitional provisions towards full phase application of Regulation (EU) No 575/2013 on the calculation of Own Funds (effect of 37 basis points), - increased risk weighting classification due to adoption of the Central Bank of Cyprus s recommendation (5 April ) and respective European Banking Authority s (EBA) recommendation, regarding the risk weight to be assigned to high risk exposures (effect of 78 basis points). The Group s risk weighted assets (RWA) amounted to million as at 30 June ( : 4.106, 31 December 2015: million). The additional RWA stemming from the increased risk weighting classification mentioned above, amounted to 214 million (out of the RWA as at 31 December 2015). According to Regulation No.2015/62 of the European Parliament and Council dated 10 th of October 2014, as at 30 June the Leverage Ratio for the Group was 9,24% (Bank: 9,23%) compared to 8,76% (Bank: 8,75%) as at and 9,05% (Bank: 9,04%) as at 31 December The CET 1 ratio on a fully loaded basis for the Group was formed at 13,18% (Bank: 13,14%) compared to 13,02% (Bank: 13,00%) as at and 13,53% (Bank: 13,51%) as at 31 December The leverage ratio on a fully loaded basis for the Group was formed at 9,00% (Bank: 8,98%) compared to 8,46% (Bank: 8,45%) as at and 8,60% (Bank: 8,59%) as at 31 December As from 20 November 2015 the Bank is required to maintain, on a consolidated basis, a Common Equity Tier 1 (CET1) capital ratio of 11,75%, as such ratio is defined in Regulation (EU) No 575/2013 of the European Parliament and of the Council. Notification to ECB is required if the Bank does not, or is likely not to, exceed by 25 basis points the CET1 minimum capital requirement of 11,75% listed in the ECB notification. In addition, the Bank is prohibited from paying out dividends to shareholders until 31 December. The decision was based on the Supervisory Review and Evaluation Process (SREP) conducted pursuant to Article 4(1)(f) of Regulation (EU) No 1024/2013 on the information available on 31 December 2014, and any other relevant information received after that date. The supervisory review and evaluation process has been conducted under the lead of the ECB. The supervisory authorities are currently carrying out their SREP with reference date the 31 December 2015 financial results. The results of this exercise are expected to be finalized by the year end. The minimum CET 1 ratio set by the ECB for Hellenic Bank Group of 11,75% is covered by the Group s CET1 ratio of 13,92%. The CET 1 ratio of 11,75% includes: (i) the minimum Common Equity Tier 1 ratio required to be maintained at all times under Article 92(1)(a) of Regulation (EU) No 575/2013; (ii) the Common Equity Tier 1 ratio required to be held in excess of that minimum Common Equity Tier 1 ratio and to be maintained at all times in accordance with Article 16(2)(a) of Regulation (EU) No 1024/2013; and (iii) the capital conservation buffer required under Article 129 of Directive 2013/36/EU as implemented in the national law of the Republic of Cyprus. The Bank within the framework of the Bank Recovery and Resolution Directive (BRRD) is subject to the minimum requirement for own funds and eligible liabilities (MREL). The regulatory authorities are currently in the process of establishing the MREL requirement on a case-by-case basis. The first preliminary MREL requirement and the relevant transitional provisions (compliance timetable) is expected to be communicated to the Bank before the year end. Other Systemically Important Institution (O-SII) buffer will also be introduced gradually over four years, starting from 1 st January The Bank must maintain an O-SII buffer of 1,5% of CET 1 capital (2022) of its total risk exposure amount calculated in accordance with Article 92(3) of Regulation (EU) No 575/2013, on an individual and consolidated basis. The Central Bank has set the counter-cyclical capital buffer at 0% for the period 1 July to 30 September. Commentary - Group Results for the six-month period ended 30 June 11

12 6. APPENDIX GROUP INCOME STATEMENT ( million) 6M- 6M Q 1Q QoQ Interest income 93,5 110,4-15% 46,6 46,9-1% Interest expense (18,8) (37,1) -49% (9,6) (9,2) +5% Net interest income 74,7 73,3 +2% 37,0 37,7-2% Fee and commission income 27,7 30,1-8% 13,4 14,2-5% Fee and commission expense (2,4) (2,5) -6% (1,1) (1,2) -7% Net fee and commission income 25,3 27,6-8% 12,3 13,0-5% Net gains/(loss) on disposal and revaluation of foreign currencies and financial instruments 20,7 6,9 +199% 17,0 3,7 +358% Other income 10,3 11,1-7% 5,0 5,3-6% Total net income 131,0 118,9 +10% 71,3 59,7 +19% Staff costs (40,7) (39,1) +4% (20,1) (20,6) -2% Depreciation and amortisation (2,8) (2,4) +19% (1,4) (1,4) +2% Administrative and other expenses (28,7) (35,4) -19% (13,7) (15,0) -8% Total expenses (72,3) (76,9) -6% (35,3) (37,0) -5% Profit from ordinary operations before impairment losses and provisions to cover credit risk 58,8 42,0 +40% 36,0 22,7 +58% Impairment losses and provisions to cover credit risk (48,8) (47,0) +4% (27,2) (21,6) +26% Profit/(loss) before taxation 10,0 (5,0) -299% 8,9 1,1 +680% Taxation (8,9) 0, % (8,5) (0,4) % Profit/(loss) for the period from continuing 1,1 (4,3) -126% 0,4 0,7-40% operations Profit for the period from discontinued operations after 4,8-100% 0% tax Profit for the period 1,1 0,5 +103% 0,4 0,7-40% Non-controlling interests (0,4) (0,5) -15% (0,0) (0,4) -88% Profit attributable to the shareholders of the parent company 0,7 0,1 +841% 0,4 0,3 +10% Note: Numbers may not add up due to rounding Commentary - Group Results for the six-month period ended 30 June 12

13 6. APPENDIX GROUP STATEMENT OF FINANCIAL POSITION ( million) 30 June FY2015 Cash balances with Central Banks % Placements with other banks % Loans and advances to customers % Debt securities % Equity securities and collective investment units % Property, plant and equipment % Intangible assets % Deferred tax asset % Other assets % Total assets % Deposits by banks % Amounts due to Central Banks % Customer deposits and other customer accounts % Tax payable % Deferred tax liability % Other liabilities % Loan capital % Share capital % Reserves % Non-controlling interest % Total liabilities and equity % Note: Numbers may not add up due to rounding Notes to the Group results for the six-month period ended 30 June : The Condensed Consolidated Financial Statements have been prepared in accordance with International Accounting Standard (IAS) 34 Interim Financial Reporting as adopted by the European Union and should be read in conjunction with the Audited Consolidated Financial Statements for the year ended 31 December The Condensed Consolidated Financial Statements for the six-month period ended 30 June have not been audited by the external auditors of the Group. The external auditors of the Group have conducted a review in accordance with the International Standard on Review Engagements 2410, Review of Interim Financial Information performed by the Independent Auditor of the Entity issued by the International Auditing Assurance Standards Board. The Condensed Consolidated Financial Statements and the presentation of the financial results for the six-month period ended 30 June have been posted on the Group s website on the internet at the page (Investor Relations). Commentary - Group Results for the six-month period ended 30 June 13