ANNUAL REPORT

Transcription

1 ANNUAL REPORT

2 Content 1. Letter from the CEO 2. Corporate Group profile 3. The Management of Piraeus Bank Romania 4. Financial overview of Market Overview 4.2. Financial Statements for Key Objectives of Human Resources evolution 6. Business Segment Activity 6.1. Branch Network 6.2. Retail Banking 6.3. Corporate Banking 6.4. SME Sector 6.5. Treasury & Financial Markets Division 6.6. Marketing 6.7. Corporate social responsibility 7. Other subsidiaries of Piraeus Bank Group 8. Financial Statements

3 1. Letter from the CEO 3

4 1. Letter from the CEO To Shareholders, Customers and Staff The best way to evaluate our company s performance in 2014 is, by all means, through the eyes of Piraeus Bank new philosophy about the true value of things. Because it takes a strong vision and strategic maturity to appreciate beyond figures the real value of a company s steps and actions. In this light, 2014 marked another complex period full of challenges and opportunities. Due to the solid experience gathered over the many years in the service of our Romanian customers, this year gave us the chance to turn a sensitive environment into a stronger strategy, and daily obstacles into valuable know-how. 4

5 1. Letter from the CEO At a macroeconomic level, one of the gladdening news of the year was the positive trend marked by the European economy increase reflected into the Romanian one which advanced by 2.8% YoY powerfully sustained by industry and services sector. Moreover, the current account deficit reduction and a stable inflation rate of 0.83%, gave a further boost to the Romanian financial sectors. In addition to that, the budget gap reduction to 1.85%, a percent successfully placed under the IMF established value, further consolidated the fiscal context. Despite the economic improvements, the banking system continued to face a fragile stability and burdened flow. Even the environment was marked by losses and intractable activity, through sustained efforts, the market managed to decrease the non-performing loans ratio by almost 7%, and the solvency rate significantly improved at a favorable level above the requested one. It is with these thoughts in mind that I would like to extend my gratitude, on behalf of our institution, to all our customers, shareholders and staff for a valuable partnership that creates the perfect ground for relevant progress and significant future business development. Cătălin Pârvu Chief Executive Officer Empowered by these results, Piraeus Bank Romania approach continued to aim at maximizing stability, ensuring profitability and consolidating the relationship with its customers through the constant quality of offers and services across all 130 offices in the country. Therefore, all the goals for 2014 have been reached with professionalism, effective management and a strong sense of strategy. Placing once again our values at the core of the business, this year was driven by a customer-oriented policy, together with operations flow improvement, specialized cost management and corporate social responsibility. This efficient mix created the accurate premises for profitability, the actual figures indicating a 2% profit increase compared to 2013, and a valuable increase in the deposits portfolio. Furthermore, 2014 marked an important moment for our Romanian visual identity, which went through an auspicious rebranding process meant to reposition our brand under a much modern logo, in line with our present-day direction and values. 5

6 2. Corporate Group profile 6

7 2. Corporate Group profile Who we are Headquartered in Athens, Greece, with more than 21th employees in offices in 10 countries mainly in South East Europe and Eastern Mediterranean, Piraeus Bank Group offers a full range of financial products and services to approximately 6 mn customers. Total assets of the Group amounted to 89.1 bn, net loans to 57.1 bn and customer deposits to 54.8 bn on December 31, Founded in 1916, Piraeus Bank operated as a private credit institution for many decades, while it went through a state ownership for the period until it was privatized in December Since then, it has rapidly grown in size and activities, representing today the leading Bank in Greece with 29% market share in terms of loans and 29% in terms of deposits. Our course Along with its organic growth during the decades of 1990 and 2000, Piraeus Bank has made a series of strategic acquisitions and mergers aiming to establish a strong presence in the domestic market. Thus, in 1998, the Bank absorbed the activities of Chase Manhattan in Greece, took over controlling interest in Macedonia- Thrace Bank and acquired the specialized bank Credit Lyonnais Hellas. At the beginning of 1999, the Bank acquired Xiosbank and absorbed the activities of National Westminster Bank Plc in Greece. In June 2000, Piraeus Bank absorbed its two commercial banks in Greece (Macedonia-Thrace Bank and Xiosbank). In 2002, Piraeus Bank acquired the Hellenic Industrial Development Bank (ETBAbank), which was absorbed in December In 2005, Piraeus Bank Group, implementing its strategy for expansion in Southeastern Europe and Eastern Mediterranean markets, acquired the Bulgarian Evrobank (renamed into Piraeus Βank Bulgaria), strengthening its 12 year presence in Bulgaria. Furthermore, in 2005, Piraeus entered the Serbian market by acquiring Atlas Bank (renamed into Piraeus Bank Beograd), and into the Egyptian market by acquiring Egyptian Commercial Bank (renamed into Piraeus Bank Egypt). Finally, in 2007, Piraeus Group expanded its international presence in Ukraine by acquiring the International Commerce Bank (renamed into Piraeus Bank ICB) and in Cyprus by establishing Piraeus Bank Cyprus through the acquisition of the Arab Bank Cypriot network. In 2012, Piraeus Bank acquired the good part of Agricultural Bank (selected assets and liabilities) and Geniki Bank, a former subsidiary of Societe Generale. In March 2013, Piraeus Bank acquired the Greek banking operations of Bank of Cyprus, Cyprus Popular Bank and Hellenic Bank. In June 2013, Piraeus Bank acquired Millennium Bank Greece, a subsidiary of BCP. These transactions comprise important steps towards the restructuring of the Greek banking system, in which Piraeus Bank has participated from the very beginning as a core pillar. In June 2013, the Bank was recapitalized following PSI implementation, achieving the highest private participation among the Greek systemic banks, in both absolute and relative terms. In addition in April 2014, Piraeus Bank successfully completed a 1.75 bn capital increase. The new shares were offered to institutional and other special investors internationally and to investors in Greece, both displaying great response, demonstrating their trust towards the prospects of Piraeus Bank and the Greek economy. The Group s Total Capital Adequacy ratio according to Basel III amounted to 12.5%, while its Common Equity Tier I ratio was 12.4% at the end of December Today, Piraeus Bank has successfully completed the integration of all the aforementioned banking operations in its systems offering to all its customers a unique banking experience. 7

8 2. Corporate Group profile What we do Piraeus Bank today leads a group of companies covering all financial activities in the Greek market (universal bank). Piraeus Bank possesses particular know-how in the areas of mediumsized and small enterprises, in agricultural banking, in consumer and mortgage credit and green banking, capital markets and investment banking, as well as leasing and factoring. These services are offered through the Group s nation-wide network of c.790 branches and 1,838 ATMs, and also through its innovative electronic banking network of winbank. Piraeus Bank Group, possesses an international presence consisting of 350 branches focused in Southeastern Europe and Eastern Mediterranean. In particular the Group operates in Romania through Piraeus Bank Romania with 120 branches, in Bulgaria through Piraeus Bank Bulgaria with 75 branches, in Albania through Tirana Bank with 45 branches, in Serbia with 33 branches of Piraeus Bank Beograd, in Ukraine with 22 branches of Piraeus Bank ICB, in Cyprus with 14 branches of Piraeus Bank Cyprus, in Egypt with 39 branches of Piraeus Bank Egypt, in London and Frankfurt with a branch of Piraeus Bank each billion Assets 57.1 billion Net Loans 54.8 billion Deposits 8

9 2. Corporate Group profile What We Stand For Piraeus Bank Group possesses a well-trained and experienced workforce. The Group s vision is the continuous development of a humane and responsible organization, where each employee, with competencies and personal inspiration works collectively and with dedication, capitalizing on diversity and creating value in every action. In the selection and utilization process of human resources, objective criteria and methodology are incorporated with specific emphasis on equal opportunities and respect for people. The Group invests in the continuous training and development of its c21,000 people with innovative measures and methods. At the same time the Group created a work environment where innovation, the exchange of ideas, creativity are supported and team spirit is promoted. Through concrete evaluation systems, the Group ensures that the performance of its people are aligned with the Group s objectives and has created the necessary framework for recognition and reward both an a individual and team level. The open communication and the necessary support of the people are enhanced, in many different areas and in different aspects of life, ensuring an organization that is both and human and dynamic. Piraeus Bank Group, combining business development and social responsibility, endorses systematically its relations with its social partners through specific actions, while special emphasis is placed on the protection of the natural environment and preservation of cultural heritage. Piraeus Bank has built significant expertise and market share in the field of green banking with dedicated branches and products, addressing both business and individual needs. At the same time, the Piraeus Bank Group Cultural Foundation carries out culture-related activities, which are part of the Piraeus Bank Group s corporate social responsibility and operates a series of thematic museums in Greece, which is constantly growing and has the ability to convey to the Greek rural regions cultural activities of high standards with effective and efficient manner. As a leading bank in Greece, Piraeus Bank takes initiatives that support sound business plans and the evolution of the Greek economy into a new model of sustainable development. 12.4% CET-1 ratio (Basel III) 1,142 Branches 21.2 thousands Employees 5.8 million Customers 9

10 3. The Management of Piraeus Bank Romania 10

11 3. The Management of Piraeus Bank Romania PIRAEUS BANK ROMANIA S.A Stavros Lekkakos Catalin Parvu Ilias Milis George Papaioannou Viorel Mischie Athanasios Psathas Konstantinos Paschalis Georgios Mantakas Pedro Miguel Weiss Catalin Parvu Madalina Otilia Teodorescu Athanasios Psathas Viorel Mischie BOARD OF DIRECTORS Chairman Member & Chief Executive Officer Member Member Member & Deputy General Manager Member and General Manager Deputy CEO Member Member Independent Member COMMITTEES EXECUTIVE COMMITTEE Chief Executive Officer General Manager (Deputy CEO) General Manager (Deputy CEO) Deputy General Manager Update: non-executive member executive member non-executive member non-executive member executive member executive member non-executive member non-executive member non-executive member Update:

12 4. Financial overview of

13 4.1 Market Overview Romanian economy advanced by 2.8% YoY in 2014 prompted by industry and services sector. Industry climbed by 3.6% YoY, helped by external orders (exports, supported also by agriculture grew by 8.1% in the same time span) while exports benefited mostly on improved households consumption. Agriculture, up by 1.5% YoY, remained a small growth contributor while construction sector inching up by 0.3% YoY was hindered by poor public investment activity. Household consumption grew by 3.7% YoY remaining the growth driver on utilization side. Gross fixed capital formation (down by 3.5% YoY) stood subdued. Current account deficit continued to shrink in 2014 reaching EUR 0.7bn from a revised EUR 1.2bn in Goods trade gap inched up by 1.4% YoY to EUR 5.52bn while the trade of services stood on 12M rolling basis above EUR 5.0bn since April, posting a good EUR 5.9bn surplus at the end of the year. Primary income gap narrowed to a negative EUR 2.9bn from minus EUR 3.1bn one year before, while secondary income balance dropped to EUR 1.8bn from EUR 2.6bn in Foreign direct investments dipped by 10.6% YoY to EUR 2.4bn yet comfortably covering current account deficit. Romania ran in 2014 a budget gap of 1.85% of GDP well below the 2.20% milestone set together with IMF. State budget balance posted RON 12.49bn deficit, versus RON 15.77bn deficit in At the end of 2014 yearly inflation rate stood at 0.83% way below the lower limit of central bank s +/- 1% corridor around the 2.5% target. NBR cut the key rate in five meetings to 2.75% from 4.00% at the beginning of the year, while minimum reserve ratios diminished to 10% from 15% on leu denominated deposits and to 14% from 20% on foreign currency denominated deposits. The exchange rate stood in 2014 in a narrow range between and driven by the constant foreign demand for Romanian sovereign debt and helped by NBR s credibility. Unemployment rate dropped by 6.37% YoY to 5.29% while unemployment computed according to International Labor Organization plunged to 6.4% from the revised figure of 7.0% reported at the end of In 2014, yields on sovereign papers had slipped excepting for August September (when paused as a result of geopolitical conditions) prompted by Central Bank s monetary policy relaxation and by foreign investors solid appetite for Romanian assets. Foreigners trust was stirred by the inclusion of the domestic debt issues in indexes bundled by top investment banks, and by the upgrade by S&P of the sovereign rating to BBB-. Currently Romania s debt is rated in investment-grade category by the three major rating agencies. As the previous years, 2014 was a difficult one for Romanian banking system. Banks earnings were dented by bad loans provisioning, the sector posting a compounded loss of RON 4.3bn although credit quality started to improve; non-performing loans ratio diminished to 13.94% from 20.39% in 2013 and lending activity improved marginally. Banking system solvency rate improved to 17.3% from 15.5% at the end of 2013, staying comfortably above the minimum requested level of 8.0%. Total net assets of credit institutions improved in 2014 by 0.52% to RON 364.1bn after a drastic decline in the first three quarters of the year driven by the operation of writing off of non-performing loans from credit institutions balances as strongly recommended by National Bank of Romania. Loans to deposits ratio per total banking sector dropped below 100% level to 91.1%. On December 31, 2014 non-governmental deposits stood at RON 231.9bn by 6.9% up than at the end of Deposits remain the main financing source of banking activities, Romanian credit institutions enjoying a higher weight of funding by non-banking clients than euro zone banks do. The non-governmental loans reached RON 211.2bn, declining by 3.3%YoY, mostly as a result of non-performing loans write off. Loans in domestic currencies remained on a positive trend while the euro denominated and other currencies loans registered significant declines both on monthly basis and annual basis. 13

14 4.2 Financial Statements for 2014 Financial statements for 2014 The financial statements of Piraeus Bank Romania SA (the Bank) for the years 2014 and 2013 were audited by PricewaterhouseCoopers Audit SRL. The following comments on the financial position and the performance of the Bank are based on the IFRS financial statements and related notes prepared for the December 31st, The equivalent in EUR of figures from the profit and loss account was calculated using the average exchange rates RON / EUR published by the National Bank of Romania for 2014 and 2013 (2014: RON / EUR 1, 2013: RON / EUR 1 ;). The equivalent in EUR of the figures in the balance was calculated using the RON / EUR exchange rates at the end of the year, published by the National Bank of Romania (December 31, 2014: RON / EUR 1, December 31, 2013: RON / EUR 1). Balance Sheet Evolution Assets Year 2014 was another challenging year for the Bank, which remained fully committed to execute its strategy, targeting longterm viability. The Bank continued to carefully manage capital and liquidity positions, but with emphasis on consolidating the income generating sources and cost reduction. During 2014 Bank continued active management of NPLs and undertook constant measures for cleaning up the balance sheet by writing off the non-performing loans fully covered with IFRS provisions. At the end of 2014, the total assets of Piraeus Bank Romania amounted EUR 2,006 million compared to EUR 2,031 million as of December 31, 2013 (a slightly decrease of 1.2% over the previous year). Also as of December 31, 2014 the Bank was managing assets amounting EUR 1,458 million on behalf of Piraeus Bank - London Branch. In terms of assets structure, for a better management of liquidity position the Bank increased the share of high liquid assets (due from banks and trading securities) and also the contribution of Net Loans in total assets, with the healthy portfolio trending up, on the back of decreased share of non-core / other assets. In the context of a slight decrease of total assets at the end of 2014 compared to 2013, the currency assets structure shows an increase of assets in local currency, namely 16.5% (EUR million in 2014 compared to EUR million in 2013), compared with a decrease of assets denominated in foreign currency, by 11.1% (EUR 1,161.1 million in 2014 compared to EUR 1,305.7 million in 2013). Liquid assets During 2014 the Bank continued to attentively manage the liquidity position providing a steady liquidity position with adequate liquidity buffers built mainly on T-bills portfolio and interbank placements (mainly intragroup related). Liquidity position of the Bank allows absorbing shocks of medium intensity. The Bank applies a balanced approach to liquidity buffers with the objective of ensuring adequate levels of liquidity, which are confirmed through regular stress tests. Carefully managing liquidity position, the Bank maintained a significant portfolio of government securities (Romanian sovereign risk), as one of the main instruments for liquidity management. The portfolio was managed dynamically and traded in accordance with the evolution of the bond market. On December 31st 2014, the Bank held a portfolio of government securities of EUR million, with a downward deviation of 10.7% from the end of the previous year (EUR 265,6 million). More than 71% of total government securities have been held for trading (EUR 169,8 million), while the rest were in the category of assets held for sale 14

15 4.2 Financial Statements for 2014 (EUR 67,4 million), with an increase share of the trading portfolio. The portfolio of securities held to maturity (EUR 22.6 million) transferred from ATE Bank during December 2013 was closed in February The outstanding of the amounts held with the Central Bank amounted to EUR million, with an increase of EUR 13.2 million compared to the previous year mainly due to higher base of customers deposits. As of December 2014, placements with other banks amounted EUR 295 million, out of which EUR 270 million (91%) were placed within the Group. The amounts were placed mainly in euro (83% of total) and on short-term tenors. Even if there is still a high dependence on funding received from the Group, this was reduced primarily based on the increase of the deposits attracted from the non-banking customers permitting the improvement of the Bank s funding profile. Ensuring a stable liquidity position with a high component of selffinancing, will remain one of the Bank s priorities. Loans Bank s total loan portfolio as of December 31st, 2014 was in amount of EUR 1,467.5 million compared to EUR 1,604.6 million at the end of previous year; the decrease (EUR 137,1 million, 8,5 %) mainly due to the large volume of loans (fully covered by provisions) written off (EUR 253 million) and receivables sale (EUR 20 million) was counterbalanced by the constant efforts undertaken at the Bank s level over the year for loans base expansion by increasing sales. Loan portfolio from companies segment increased at the end of 2014 with EUR 61million compared to the previous year (9,4%). The growth in companies segment was counterbalanced by the decrease in the retail segment of EUR 198 million, (-20.8%) compared to the end of the previous year. The companies segment (Corporate and SME) remained the most targeted area also in 2014, since it was proven it has a faster recovery potential, also being the main provider of funds at lower costs (current accounts) and has associated a greater potential to increase the commission base. In the structure of the loan portfolio, the growth of the share of companies segment to the detriment of retail segment continued also in 2014: 48.5% loans to companies (40.6% in 2013) and 51.5% (59.4% in 2013) loans to individuals. Liabilities The overall evolution of liabilities reflects the Bank s efforts to diversify the financing sources to support the development needs and also to maintain the strategic objective which aims to reduce the dependence on the Group funding. Customer s deposits continued the upward trend recorded in 2013, showing that in normal market conditions, the Bank has the ability to increase the deposits base. The Bank focused equally to increase the deposits base but, at the same time, to achieve this in the most efficient way. A balanced pricing policy was steadily promoted, covering both the needs of competitiveness and profitability objectives by aligning prices to disinflation process and the downward trend in interest rates in the local market. Customer deposits reached as of December 2014 the level of EUR 1,160 million, compared with EUR 1,068.5 million in December 2013 (a 8.6% increase). Deposits from corporate and SME segments had the highest growths. While corporate deposits increased from the previous year with EUR 26.8 million (41.2 %), deposits from SME sector increased by EUR 81.8 million (33%). Retail deposits increased by EUR 29.2 million (5.5%), while institutional ones decreased by 21.2 million EUR (11.9%). 15

16 4.2 Financial Statements for 2014 At the end of 2014, customer deposits covered 100% of the granted loans, net of provisions. In terms of deposit segmentation, at the end of 2014 retail deposits account for 48.5% of total deposits, deposits from SME sector 28.4%, while deposits of institutional clients account for 13.5% and corporate deposits 7.9%. Deposits from banks decreased in 2014 by 15.2% from EUR million in December 2013 to EUR million at the end of 2014 while the subordinated loans received from the mother bank remain at the same level as in the previous year. In 2014 the Bank continued to pursue to diversify its financing sources, including external ones and to obtain better financing conditions, performing transactions with international banks based on the trading agreements concluded from the previous year, GMRA with Nomura and ISDA / CSA with EBRD. Profit and loss account Although at the banking system level the pressure of asset quality reflected in a higher cost of risk has resulted in a loss of around EUR 0.9 billion, through careful management of its financial position the Bank managed to generate a positive result. The net profit has recorded a level of EUR 3.7 million, up with EUR 2 million compared with The increase of 2% of profit before provisions (amounting EUR 1 million) was mainly due to both an efficient cost control and a constant evolution of the net operating income. The net interest income has increased with 29% compared to previous year s figure, as a result of the decrease of interest expense related to customer deposits. During 2014, the interest income experienced a downward trend, dropping with 1% (EUR 1 million) mainly due to low remuneration of alternative investments (interbank deposits, government securities). The decrease in financing costs was significant (EUR 13.6 million), totally offsetting the reduction on the income side. The loan related interest income increased compared with the previous year with 6% (EUR 5.3 million). The increase is mainly due to the enlargement of the credit portfolio with new loans and also to changing of the currency structure by granting new facilities mainly in the local currency. The decrease of interest income from loans granted to individuals was offset by significant increases in the companies segment. Interest income related to the securities portfolio dropped with 22.5% (EUR 2.8 million) compared with the previous year. The decrease of intragroup investments was reflected in the lower income from banks with EUR 2.8 million. Interest income related to amounts placed at Central Bank slightly decreased (EUR 0.4 million), mainly due to the level of minimum reserve requirements and associated interest rate reductions. Interest rates on deposits from customers were objectively aligned to the downward trend of the market, and also to the profitability requirements. Although deposits have continued the upward trend, the associated costs have decreased compared with the previous year with 25.1% (EUR 11.4 million), validating the balanced interest rate policy promoted by the Bank, mainly through successive corrections applied to the RON deposits rates. The operational commissions income decreased compared with the previous year with 3.3% (EUR 1.4 million). The deterioration of commissions income was primarily determined by account administration commissions with 0.3mn mainly because of cleaning up measures at the level of client portfolio. The bank is committed to increase its operational commissions by both rationalization of the business (focusing on profitable relationships and activities) and a consistent expansion of the active clients base. SME segment had the largest contribution in money transfer commissions (65%), justifying the Bank s attention towards this segment. Commissions related to card transactions significantly improved (+19.6%, EUR 0.4 million) due to the acceptance activity. Western Union transfers operations generated income of EUR 0.3 million, with a flat yoy evolution. 16

17 4.2 Financial Statements for 2014 Compared to previous year, the trading result significantly dropped with 38.3% (EUR12.2million), affecting the overall profitability of the Bank. A large deterioration was recorded in profits related to financial instruments, mainly due to the lower performance of currency swaps. The result from securities trading portfolio remained at an adequate level, i.e. EUR 4.7 million, the trading being performed in accordance with market opportunities and interest rates evolution. Operating expenses (without considering the impact of one-off costs related mainly to rebranding expenses) decreased from the previous year with 2.7%. Targeting to achieve long-term profitability and to align the infrastructure to the current business needs, the Bank has continued during 2014 the optimization of processes and the branch network reduction by closing 10 branches. Staff expenses recorded an immaterial increase compared to previous year s figures (EUR 0,4 million in total, or EUR 0,1 million if the impact of one-off expenses is excluded). The bank applies an adequate policy for loan provisioning, according to both IFRS and the Group s policies. The loan related collaterals are revalued annually. The value of collaterals used in provisions is adjusted according with historical realization values. The methodology used for computing IFRS provisions is permanently adjusted in order to align with both standards requirements and behavior of the loans portfolio. Administrative expenses (without taking into account one-off expenses) have decreased with 5,4% compared to last year s figures (EUR 2 million). The contribution to the Deposits Guarantee Fund has increased considerably due to both an increase in volumes and an increase of the coefficient for supplementary contribution applied to non-guaranteed deposits. Important savings have been registered in relation to the insurance premiums expenses (EUR, 58,5%, EUR 3,9 million respectively) and telecommunications expenses (EUR 18,9%, respectively EUR 0,3 million) as a result of the rationalization measures used and better renegotiated contract clauses. Amortization and depreciation expenses have decreased with 0,1% compared to last year s figures, although the Bank has recorded expenses with accelerated depreciation resulting from closing of 10 branches. The loan related provision expenses have decreased with 15% in 2014 (by EUR 6,4 million). 17

18 4.3 Strategic objectives for The Bank set three medium-term strategic priorities for : Customer-centricity Place the customer in the heart of all activities and operate under a customer-centric business model. Promote the customer service as foundation of the relationship with our clients. Focus mid-sized companies and individuals aiming to deliver exceptional customer service. Operational Excellence Financial Strength Create strong fundamentals for sustainable profitability Promote a disciplined management of costs and risks, keeping a firm grip on liquidity and capital. Rationalize the business having the moderate risk and profitability as prerequisites. Build / preserve a stable deposit base, with special emphasis on core deposits. Promote the efficient use of the capital Achieve steady equilibriums allowing the internal creation of the capital. Secure the long-term competitiveness of the Bank by achieving operational excellence. Embed excellence in the mentality of the entire organization, keeping the people aligned to Bank s vision and strategy. Continue to streamline processes and simplify procedures in order to improve the response time to the customers and generate sustainable savings. Further rationalization of the infrastructure and the cost base, aiming to optimally align them to operational and profitability objective requirements. Build core competency in advancing information architecture and analytical skills to improve management decision making and economic performance. 18

19 5. Human Resources evolution 19

20 5. Human Resources evolution Piraeus Bank operates fully acknowledging that human resources constitute a key success factor for any organized activity aimed at achieving Group strategic goals. It perceives human resource management as a complete set of actions and operations undertaken in order to acquire, retain and utilize skilled employees who successfully and productively execute their tasks. The HR Division s actions were mainly focused on the following: - implementing internal transfers to fill vacant positions created to a great extent by the increased number of retirements, - limiting of hiring s, only covering specialized positions, - differentiating remuneration in positions where it was required or permitted according to their job weight, - reducing the cost of each training man-hours. Aiming to consolidate the image of the Bank in the Romanian Banking System as a flexible organization, representing its customers and its employees, Piraeus Bank Romania management kept the focus on a healthy organizational stability. Our main objective is to bring out the potential of people and ensure their commitment to achieve excellent results. In 2014, the main challenge of the Human Resources Development was to maintain a strong team of professionals capable to operate effectively within the competitive environment of the banking market, being, in the same time, an attractive employer. This is achieved by modernizing organizational structures, training systems and rational management of human resources, focused on building a culture among staff members, with the following main features: passion for the customer, team spirit, professionalism, effectiveness, entrepreneurial vision and emphasis on learning change. Number of people employed to implement business goal At the end of 2014, Piraeus Bank Romania employed 1540 people compared to 1617 in 2013, recording a decrease of 5 %. The active staff number recorded at December 2014 was 1461 compared to active staff number at the end of 2013 of 1527, being a decrease of 4 %. During 2014 it has been recorded a decrease with 12 % of the suspended contracts due to maternity leaves. Recruitment process is based on adequate recruitment procedures free of discrimination, utilizing specific candidate selection systems, by using modern appraisal and selection tools. These tools may vary according to the candidate s educational and experience level and include both competencies and professional tests

21 5. Human Resources evolution Human resources distribution by Gender, Age and Area % of total Bank employees are female while % are male; within Headquarter, there are 44% of employees while 56% are allocated to the Branch Network and Business Centers. Timisoara Cluj Brasov Iasi Craiova Cluj Constanta Iasi Ploiesti Timisoara Brasov Bucuresti 4 % 5 % 6 % 6 % 6 % 6 % 6 % 62 % Ploiesti Craiova Bucuresti Constanta Promoting equal opportunities for career development The Bank has a clear orientation towards the effective development of its people, enabled new managers to develop and get promoted, covering positions that arose. Regarding career advancement, irrespective of level of management, 45 persons, of which 12 men (26.66%) and 33 women (73.33%), were promoted in The age distribution of employees represents a major advantage of Piraeus Bank Romania. The age composition is such that favors the introduction and implementation of new technologies, methods and targets, as the average age of our people is 36 years. At the same time, it takes advantage of the high rate of graduate and post-graduate degree holders (83%). The Bank managed to hire high quality and educated employee, who contribute essentially to the achievement of its business objectives. 62% of total workforce (both Headquarter and Branches employees) is located in Bucharest while 38 % is distributed in branches outside Bucharest. Selecting the Right People for the Right Roles For Piraeus Bank Romania, respect of human value, ethos and integrity of character carry special weight. This is reflected in the philosophy and practices of human resources management, starting from the selection and recruitment stage. For the purpose of candidate selection and evaluation, the Bank uses a set of standard tools, which vary according to the candidate s level of education and experience and which ensure a transparent and objective recruitment procedure. 21

22 5. Human Resources evolution Piraeus Bank makes great effort to cover any hiring needs that arise with internal hiring from its existing human resources as apriority. Consequently, most business needs are covered by internal reallocations. More specifically, in 2014, the need arose to cover 401 positions at Bank level, of which 53.36% were covered with internal reallocations and promotions, achieved by means of open communication of vacancies and fully transparent selection processes. In 2014, Piraeus Bank s vacancies were filled by new hiring s by 46.63%. Of the total hiring s, 29.46% were men and 70.54% women. People continuous development Following Group s policy we consistently invest in development of the employees with the main focus to exploit the full potential of them. Learning programs developed are focusing both on internal programs held by dedicated internal trainers and external programs as well, developed to enrich employee s abilities. Main objective for the Training & Development area is to have motivated, committed and proficient employees within the Bank. man hours were realized from training on job programs and the remaining 4% training man hours were performed on webinars or phone conferences. 4% EX-E-learning 23% EX-On-class Training Manhours by Type 4% DL - Distance Learning 15% IN-On-class Total number of training man hours in 2014 was with a total number of participants in any training event of 11085, meaning an average of training man hour/ employee; 26% of total man hours was accomplished by male while 74% by female. Distribution by hierarchical level showed that 17 % of participants were at managerial level while 83 % were at operational level. Distribution of training manhours by type From the total number of training man hours,48% % represented e-learning training through internal e-learning platform, 3% represented e-learning training through external e-learning platform, 23% training man hours were performed in classroom with external training providers, 15% classroom training man hours were dedicated to internal training projects, 7% training 7% TOJ 47% IN-E-learning 22

23 5. Human Resources evolution Distribution of training manhours by category Out of the total man hours, 27% was dedicated to development of financial and banking knowledge, 16% focused on business development developing selling skills, communication and other topics related to the development of employees skills s,, 5% dedicated to managerial & leadership skills development, 30% for banking information systems and also 12% dedicated to compliance and fraud prevention. 6% was dedicated to the development of specialized technical training (courses aiming to provide specialized technical knowledge not directly connected to the core activities of the Bank). The remaining 4% represents the actions developed for corporate social responsibility area and work-life balance workshops. 4% Corporate social 12% responsibility Compliance and fraud prevention Training Manhours by Category On the e-learning platform, there are enrolled online training sessions for the employees. Through this platform it is aimed to increase employee s knowledge in Fraud Prevention, Operations, Retail Product Knowledge, Know your client, International Sanctions, Major Risks, Physical Security, and Operational Risk. Another alternative for professional skills development are the online Skillsoft courses developed by professionals, recognized internationally man hours were allocated in 2014 for e-learning courses and 1512 man hours were allocated to distance learning, such as webinars and phone conference. For a better understanding of Retail Products, Individuals Loans and Banking Operations, internal trainers provided Training On Job to employees from branches / agencies in Bucharest. Employees accessed as well in class training sessions offered by external providers. In line with this, more than 500 employees participated in at least one training session related to developing selling skills, customer care, results orientation, team work,,leading & motivating teams,, problem solving and decision making, coaching etc. In order to offer a better informational support for new comers, an induction program is offered to employees on all hierarchical levels, being presented as an interactive tool as well on the e-learning platform. Rewarding employees 30% Banking information systems 16% Business development 5% Managerial & leadership 6% Specialised technical training Piraeus Bank Romania acknowledges that has to attract and retain the appropriate people with the required knowledge and skills in order to achieve its strategic goals. Bank participates every year in salary and compensation & benefits survey in order to have access to benchmarking indicators. On the basis on the equal opportunities policy, there is established a minimum pay level salary for entry level position, with no distinguish between men and women. 23

24 5. Human Resources evolution It is noted that in all aspects of human resources the Bank integrally respects and follow legal procedures in place. Human Rights in PBR Following the Piraeus Bank Group s Human Rights framework according to the United Nation Global Compact, since 2009 Piraeus Bank Romania commits to 5 human rights principles: Forced Labor, Child Labor, Equal Opportunities, Health and Safety in the Workplace and Working Conditions. All human resources regulations are driven by human rights principles. All Piraeus Bank Romania employees acknowledged the Human Rights Policy and beneficiate of a dedicated team for guidance in case of any possible problem/issue encountered in their working environment. In 2014, no Human Rights violation complain was received from Piraeus Bank Romania employees. Performance Appraisal in PBR Performance Appraisal Process in Piraeus Bank Romania replicates the Group s models in terms of performance appraisal concept and assessment criteria. The appraisal is performed through two modern on-line systems in which both, supervisor and employee, interact besides the appraisal meeting. The managerial competences are assessed based on 360 model. The main purpose of the appraisal process is continuous development of employees by identifying the strong areas and the aspects that need improvement. The participation rate for 2014 was over 90% of the eligible employees (both managerial and non-managerial positions) proving the accountability of Bank s employees regarding their performance. This approach from our employees helps the Bank to foster a performance culture, subsequently reinforcing and supporting the Business strategy of the organization. 24

25 6. Business segment activity 25

26 6.1 Branch Network 2014 Throughout 2014, the Branch Network has been focused on increasing sales, increasing the efficiency of operations and optimization of activities in order to adapt to the market restraints, as well as preserving the customer base and acquiring new clients. The optimization process of the network has been continued for complying with the expected profit level. This was translated by reducing the number of operational territorial units to 130 (103 branches and 27 agencies). 33% of the territorial units are based in Bucharest (33 branches and 10 agencies), while the other 67% (70 branches and 17 agencies) are distributed in all the counties, covering all capital cities. In 2014, 10 territorial units have been closed in accordance with the Branch Network optimization process that is based on performance and profit criteria. The PBR Branch Network is divided in 9 regions coordinated from the level of Regional Centers, as depicted below. CENTRAL REGION (Brasov) 13 units; 10 % 5 counties Active FTE: 72; 10 % inh s; 10 % NORTH EAST REGION (Iasi) 13 units; 10 % 7 counties Active FTE: 66; 9 % inh s; 19% NORTH WEST REGION (Cluj-Napoca) 11 units; 8 % 6 counties Active FTE: 56; 8 % inh s; 12 % SOUTH EAST REGION (Constanta) 14 units; 11 % 6 counties Active FTE: 74; 10 % inh s; 12 % WEST REGION (Timisoara) 14 units; 11 % 5 counties Active FTE: 71; 10 % inh s; 12 % SOUTH REGION (Ploiesti) 12 units; 9 % 5 counties Active FTE: 66; 9 % inh s; 13 % SOUTH WEST REGION (Craiova) 10 units; 8 % 6 counties Active FTE: 54; 8 % inh s; 12 % BUCHAREST REGIONS (2), 43 units; 33 % 2 counties Active FTE: 253; 35 % inh s; 10 % 26

27 6.1 Branch Network 2014 In 2014 PBR has continued extensively the usage of Portfolio Management actions as an effective tool for increasing penetration and loyalty among the existing customers and new business generation. Various sales actions have been organized during the year in this respect. We have further implemented and developed the integrated performance assessment at the unit level (KPI s system) by allocating sales targets and closely monitoring the performance per unit and per business area. In 2014 we have continued the practice of implementing individual targets for the staff within the Network. Other actions taken at the network level with direct impact on increasing productivity, profitability and effectiveness were consisting of: Sales management actions; Exploiting synergies with other Piraeus Bank subsidiaries; Strict cost control at all levels (administrative and staff expenses); Active and constant involvement in foreclosures and selling of patrimonial executed properties; The constant follow-up and monitoring performed at Branch Network HO level has improved all areas of Audit; Initiatives to increase operational efficiency by optimizing activities and processes; Specific projects have been developed at Branch Network level in order to improve operational activity. All initiatives and actions implemented in 2014 have helped the Branch Network to achieve its goals within a frame of a complicated macroeconomic landscape that needed a fast adaptation to the various challenges and constraints of the market and of the international economic context. 27

28 6.2 Retail Banking In 2014, Retail Business Division focused on implementing projects aiming to constantly improve customers experience at all points of contact with the bank. The first step in this direction was the modification of the customer enrollment process, which became very fast and less bureaucratic. As a consequence, the relationship of an individual with the bank can start in less than 10 minutes, including the opening of the accounts, the application for a debit card and the activation of the winbank internet & mobile banking. And all these are formalized in contractual documents that are sent to the clients on the spot, reducing significantly the paperwork. We have continued with simplifications of the lending processes, streamlining them and reducing also the documentation required from the clients. A direct result of the workflow optimization was the 30% reduction of the average response time for the mortgage loans applications in TTY. All these modifications were positively perceived by the customers and contributed to the doubling of the loans sales volumes in 2014 vs The biggest sales increase came from the personal needs financing area, where Oferta cu Recompensa, the product which rewards the clients who are staying current by reducing their interest each year, brought 88% of the newly disbursed personal needs loans. This good performance in sales managed to partially offset the impact of the write-off process started in 2014 and to secure a market share on retail loans of 3.3%. The boosting of retail loans disbursements was highly helped by the emphasis placed on developing the activity of the alternative sales channels, which consequently increased 2.4 times their contribution to the overall disbursements of annuity loans. Also, the year 2014 was marked by a rethinking of the sales strategy for alternative sales channels: Direct Sales and Retail Partnerships departments were reorganized into External Sales Channels in the end of the year. Continuously interested in bringing real value to our most active customers, early adopter of new technologies, we have launched winbank mobile, an optimized version of winbank internet banking platform, accessible via mobile devices. In order to make things easier, all operations available in winbank mobile have a very similar structure to their winbank internet banking format and the application bears no extra charge for the clients. The launch of winbank mobile supported the actions aiming to move the basic payment/transfer operations from OTC to online. The media campaign with a TV spot and the sales rally that were rolled-out with the launch of winbank mobile contributed to the 16% increase of winbank users during We maintained our promise to continue to empower our customers by offering additional benefits and we launched the possibility to split in installments any purchase performed with a Piraeus Bank credit card anywhere in the world. Retail Business Division was also involved in actions supporting the branch network in convincing the customers to bring their savings to Piraeus Bank, by creating special deposit offers and initiating sales rallies. The result was an increase of the overall liabilities from retail clients with 5.5%. A bigger increase was registered for the current accounts, which grew with 17% during It was also the outcome of the strategy to address with more tailor made offers to the clients receiving their salaries in their account with Piraeus Bank. By consequence, the number of clients for which we are the home bank increased with 7.4%, in a very cluttered market, where most of the banks are trying to capitalize on this customer category. 28

29 6.3 Corporate Banking Despite several competitive forces in the corporate banking market remained relatively low in 2014, the general conditions worsened, as the pool of eligible customers narrowed, attracting most of the banks offers, which are still in great number for local market size. This implied adapting flexibility and innovation as permanent tools to support the sales force in assuring a sustainable growth and good quality customers. Targeting top-performers in several key industries remained a trait for us, whereas such partnerships can only be backed by customization, expertise and new solutions. Corporate Banking Division is the wholesale arm of our Romanian operations, addressing mid-market and large corporate customers, either local, state-owned or multinational companies. Equally, Greek owned businesses present in the local market are served in the same tailor made fashion, by a wide range of financing solutions, treasury or cash management. In the Corporate Banking prevails sectorial expertise, based on an industry split model within different departments. This in-depth understanding of industry traits and business fundamentals enables us to offer fine solutions for the complex situations a corporate customer is facing at both financing and transactional level. The innovation process that picked-up a couple of years ago was carried forward last year and new projects took shape, such as PBR AgriFinance and Factoring programs. The first was designed to address, through dedicated products and financing structures the needs from A to Z of one of the most attractive sectors, while Factoring is another strategic stance that will help the Bank meet market demands, but in the same time effectively respond to return and capital requirements. These endeavors, along with an active position of the sales force for classical products generated a wide range of new deals with both existing and new customers, with equally good effects in improving the portfolio quality. The outcome was a strong added value contribution for the Bank s results, at all levels: total assets of for Corporate Banking Division inched up by almost 24% in 2014, despite a downturn figure for the whole non-fi lending in Romania (-7%). Equally important, a focus that is expected to continue in 2015, the revenues from operational commissions boosted by more than 70% vs. 2013, achieved in difficult market conditions, by extending the number and volumes of operations at all levels, from money transfers, cards, cheques to POSs. Last but not least, as a critical variable for any banking activity, deposits raised by a robust 13%, a double digit increase that conveys the trust of the corporate customers in PBR s dependability. This accomplishment is rewarding, being achieved by dealing mainly with a mid-market segment of corporate clients, rarely as cash-rich as the large multinationals, and always in quest for new investments and development projects. Although it appears that 2015 would be a challenging year for the banking market and while such performances would be difficult to match next year, our goals and commitments remain to maintain the innovative processes and products, and primarily consolidating the relationship with existing customers. The directed focus will envisage improving the profitability on existing relationships based non-risk business (transactional) as a result of non-financing products such as customized treasury and cash-management solutions. Equally important, cross selling is expected to play the same part, through products and services of the Bank and the Group such as POS, ATM, payroll cards, insurance policies and valuation. As general undertaking, regardless of the market challenges, PBR will maintain its mission towards its partners and own values, by remaining dedicated to its customers in supporting them achieving the business plans and strategic goals, through flexibility and reactivity, in conditions of managing inherent risks. In 2014 Piraeus Bank s strategy was to strengthen its customer s portfolio with focus on financing the areas considered with good potential, like manufacturing, trade and agriculture. In line with the strategic direction of intensifying the efforts on SMEs, 2014 was the year in which Piraeus Bank opened new Business Centers addressed to SMEs segment. Eight -8- Business Centers were in total created, established in strategic areas to 29