Investor Presentation Merger of Grivalia into Eurobank to create undisputed Leader in Banking and Real Estate Market in Greece.

Transcription

1 Investor Presentation Merger of Grivalia into Eurobank to create undisputed Leader in Banking and Real Estate Market in Greece 26 November

2 This presentation has been prepared by Grivalia Properties REIC (the Company ). The information contained in this presentation has not been independently verified and no representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or opinions contained herein. None of the Company, shareholders or any of their respective affiliates, advisers or representatives shall have any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this document or its contents or otherwise arising in connection with this document. Unless otherwise stated, all financials contained herein are stated in accordance with International Financial Reporting Standards ( IFRS ). This presentation does not constitute an offer or invitation to purchase or subscribe for any shares and neither it or any part of it shall form the basis of, or be relied upon in connection with, any contract or commitment whatsoever. The information included in this presentation may be subject to updating, completion, revision and amendment and such information may change materially. No person is under any obligation to update or keep current the information contained in the presentation and any opinions expressed in relation thereof are subject to change without notices. This presentation is subject to any future announcements of material information made by the Company in accordance with law. This presentation does not constitute a recommendation regarding the securities of the Company. 2

3 Please join us for our investor conference call which will be held at: Date: Today, 26 November 2018 Time: 11am Greek Time / 9am UK Time Dial-in details: code: 2579# 3

4 Key Transaction Highlights & Rationale Value Creation Overview Next Steps Q&A 4

5 5 Key Transaction Highlights & Rationale

6 Significant value creation from multiple pockets for Grivalia s shareholders, including upfront dividend payment and an attractive investment entry point Opportunity to benefit from an unprecedented repositioning of the New Group in the market Grivalia s team to manage & maximize value from a substantially larger and growing asset pool Addresses structural inefficiencies in the existing real estate tax laws while drawing on the bank s large stock of Deferred Tax Assets (DTAs) Retaining upside in the mezzanine tranche of the upcoming securitisation Grivalia s shareholders also benefit from a more liquid holding 6

7 A landmark strategic combination that will transform Grivalia while creating substantial value for its shareholders Description Merger by absorption of Grivalia by Eurobank (the Merger ) Substantial acceleration in the reduction of Eurobank s Non-Performing Exposure (NPEs) to c.15% NPE ratio in 2019 and single digit NPE ratio by 2021 (the Acceleration Plan ) Establishment of a real estate management company ( Grivalia Management Company ) by key management personnel of Grivalia to manage all of Eurobank s real estate assets Key Terms of Merger 15.8 (1) new Eurobank ordinary shares to be issued for every 1 existing Grivalia ordinary share Cancellation of Grivalia s outstanding treasury shares Capital return of 40.5m (or 0.42 per share) to Grivalia s shareholders via a share capital reduction pre Merger Distribution of 13.7m to Grivalia s employees and BoD members representing accrued bonus payments and BoD fees for 2018, deferred bonuses of previous years and partial vesting of long term incentive plan The exchange ratio plus the pre-transaction distribution represent a premium of 9% over the share price of Grivalia, based on the closing prices as of Friday, 23 November 2018 PF Ownership Structure Pro-forma ownership of the enlarged share capital will be 59% by existing Eurobank shareholders and 41% by existing shareholders of Grivalia Fairfax Financial Holdings, which currently holds a 18.2% stake in Eurobank and a 51.4% stake in Grivalia, will hold a 32.9% stake in the combined entity Governance Upon completion of the merger: Mr. Nikolaos A. Bertsos, currently Chairman of the BoD of Grivalia, will be proposed to be nominated as non-executive member of the BoD of Eurobank Mr. George Chryssikos, currently non-executive director of Eurobank, will be proposed to be nominated as nonexecutive Vice Chairman of the BoD of Eurobank and will join the Strategic Planning Committee 7 Note: (1) In particular, every 1 Grivalia ordinary share will be exchanged for new Eurobank shares.

8 Best-in-class companies in their respective sectors Strengths Premier listed real estate manager in Greece Diversified portfolio with growing presence in the most attractive segments (e.g. hospitality sector) Strong and sustainable profitability and cash flow generation Outstanding track record in managing one of the most important CRE portfolios in Greece & CEE Best in class Management Strengths Leading bank in Greece with best-in-class efficiency Superior profitability profile vs. competitors Unparalleled track record in NPE reduction Consistently effective delivery in all challenges faced by the bank Materially improved funding profile Most privately owned bank with the strongest shareholder base facing challenges to deliver their full potential Challenges Recent unfavorable legislative reforms have imposed a significant tax burden on Greek REICs, reducing their attractiveness for international investors Limited opportunities to realize returns above current rates Challenges NPE stock still large DTCs on balance sheet not allowing for an efficient clean up trade joining forces creates a compelling investment proposition and optimizes shareholder value 8

9 Merger Acceleration Plan Share issuance Step 1 Eurobank will securitize NPEs with Gross Book Value (GBV) of 7.0bn, into three tranches consisting of a Senior (A), a Mezzanine (split into two classes B1 and B2), and a Junior (C) Note Grivalia 15.8 Eurobank shares for every Eurobank Securitized portfolio: ~41% comprised of Corporate loans and 59% of Retail loans (1) ~75% represents denounced exposures, reducing the ratio of denounced NPEs in the remaining portfolio to ~30% Transaction to take place under the tax efficient Greek securitisation law (Law 3156/2003) 1 Grivalia share The SPV will be deconsolidated through a combination of distribution of notes to shareholders and auctions of notes to the market Step 2 (As of Sep-18) SPV (L.3156/03) Legal merger & SLA on real estate assets Assets 57.3bn Liabilities & Equity 57.3bn Assets Liabilities 9 Eurobank (post Merger) SLA Fees Grivalia Management Company (ex-grivalia management) Merger by absorption of Grivalia by Eurobank Establishment of Grivalia Management Company to manage Eurobank s Real Estate assets Grivalia Management Company to manage: Existing Grivalia portfolio Bank s own use, investment properties & REO flows Pro-Forma RE portfolio of 2.2bn as of 30 September year SLA 70% of Grivalia Management Company to be held by GC Market level management fees, to be capped at 12m p.a. before VAT representing a net 3.5m increase in New Group costs Note: (1) Includes small business, mortgage and consumer loans. Other assets (incl. performing Loans and DTC) Other NPEs NPEs Gross BV: 7.0bn Equity Liabilities Securitised perimeter NPEs to be managed by independent servicer Gross BV: 7.0bn Class B1 (Mezz.) Class A (Senior) Class C (Junior) Class B2 (Mezz.)

10 Components of premium received Exchange ratio Eurobank per Grivalia share 6% 9% Exchange ratio 15.8 Spot ratio % Market Agreed Exchange ratio uplift Pre-Closing Dividend Total Premium Price ( ) Description 15.8 Eurobank shares of per Grivalia share 0.42 per Grivalia share Nov-16 Feb-17 May-17 Aug-17 Nov-17 Feb-18 May-18 Aug-18 Nov Source: FactSet as of 23 November 2018.

11 Key financials (annualized, 9M 2018 Eurobank, 9M 2018 Grivalia) (in m) Eurobank Grivalia Adjustments (3) Combined Net interest income 1,417 1,417 Banking fee and Commission income Other income Operating income 1, ,917 Staff costs (485) (6) 6 (485) Other OpEx (1) (385) (16) (8) (409) FV gain from revaluation of properties (2) 8 8 Pre-provision income (2) 1, PPI per share Loan provisions (684) (684) Other items 2 2 PBT (2) 383 Net profit (recurring) (1) earnings per share (recurring) 11 Notes: (1) Grivalia includes interest income and interest expense. (2) Grivalia includes fair value gain from revaluation of properties. (3) Adjustments include: staff cost savings, interest cost savings and fees paid to Grivalia Management Company.

12 Key financials (Q Eurobank, Q Grivalia) (in m) Eurobank Grivalia Adjustments (3) Combined Balance sheet Shareholders' equity 5, (50) 5,874 Tangible book value 4, (50) 5,705 Real Estate assets 1, (4) 2,169 Total assets 57,255 1,119 (50) 58,323 Capital - fully-loaded Basel III CET1 capital (1) 4, ,344 Risk Weighted Assets (2) 37,693 1,119 (50) 38,761 CET1 ratio (%) 11.7% n.a. 13.8% Implied valuation (23-Nov-18) Combined real estate portfolio of c. 2.2bn to be managed by a real estate management company The merger is capital and earnings accretive, with additional 943m CET1 allowing for accelerated NPE reduction plan CET1 contribution adjusted for pre-transaction distribution and gain from 10% threshold 100% risk weight applied to Real Estate assets Market cap (based on total # of shares) 1, Notes: (1) Grivalia s CET1 refers to Shareholders' equity. (2) Grivalia s RWAs refer to Total Assets. (3) Equity and RWA adjustments for pre-transaction distribution; CET1 adjustment for pre-transaction distribution and gain from threshold. (4) Excludes investments in JV s.

13 After the Merger Robust capital position Enhanced capital generation capability De-risked Balance Sheet Eurobank will hold the highest Total Capital ratio (from #2 currently) and 2 nd highest Fully Loaded CET1 ratio (from #3) in the Greek market Eurobank will further increase Pre Provision Income Eurobank is the only bank that has completed its restructuring plan commitments and has an ambitious NPE reduction plan CET1 ratio FL Total capital ratio latest reported 11.7% 17.1% 19.0% 18.5% 16.3% NPE ratio (%) 14.0% 9M 2018 Pro-Forma Peer 2 Peer 3 Peer 1 39% 13.8% PPI annualized 9M 18 Eurobank, H1 18 Grivalia ( m) H1 annualized for Peer 1, 2 and 3 (1) 1, , ~15% 9M 2018 Current 2021 target 15.5% 12.9% 10.6% Eurobank Grivalia Pro-Forma Peer 2 Peer 1 Peer 3 55% 52% 42% Peer 1 Peer 2 Peer 3 Private shareholders Eurobank has the largest proportion of private shareholding among Greek banks Pro-Forma shareholding structure Fairfax 32.9% Other 65.7% 13 After the Acceleration Plan Front-loaded clean-up Source: Company filings. Note: Peers include NBG, Piraeus, Alpha Bank. Notes: (1) Includes adjustment of 2m. Eurobank will accelerate by 2 years its NPE reduction plan and aim to reach single digit NPE ratio by 2021 NPE reduction plan ratio ~30% ~15% ~15% <10% Current Plan 1.4% HFSF Acceleration Plan

14 Today Post Merger & Acceleration Plan 15.8 Eurobank shares 7.40 as of 23 November 2018 ( per Eurobank share) 1 Grivalia share 7.17 as of 23 November 2018 Upfront DPS 0.42 per Grivalia share Mezzanine Notes and Junior Notes 14

15 15 Value Creation Overview

16 Illustrative - Not to scale Upside Current Grivalia market cap Premium received Tax Synergy Incremental Real Estate upside Re-rating Additional value enhancement Total potential value 16 Comments 9% premium on current share price 7-10m of tax savings per annum ( m net of Grivalia Management Company incremental costs) 41% benefiting Grivalia shareholders > 1bn additional real estate assets to be managed by Grivalia team Eurobank currently trading below regression Higher RoTE after portfolio cleanup Acceleration Plan leading to market leading NPE ratio Value recovered from mezzanine and junior notes as part of Acceleration Plan Re-inclusion in MSCI index

17 Regression analysis P/TBV 2018E 2018E P/TBV 0.8x 1.80x R² = 87% 0.2x 0.2x 0.4x 1.60x Eurobank Greek Banks Italian Banks Iberian Banks 1.40x P/E 2019E 1.20x 1.00x 4.7x 6.5x 6.6x 8.7x 0.80x 0.60x 0.40x Eurobank Greek banks Italian banks Iberian banks P/E 2020E 7.9x x Eurobank New Group Target RoTE: 10% 0.00x 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 2020E RoATE 3.4x 3.9x 5.6x Eurobank Greek Banks Italian Banks Iberian Banks Source: Factset as of 23 November Note: Peer set includes Greek banks: NBG, Alpha Bank, Piraeus, Italian banks: Intesa, Unicredit, Mediobanca, UBI Banca, Banco BPM, Monte dei Paschi, Iberia banks: Santander, BBVA, Caixabank, Bankia, Bankinter, Sabadell, Millenium BCP.

18 Combined ( m, 9M 2018) Investment property = 1,320 Owned assets = 342 Real Estate Owned (REOs) = 507 JVs / Equity investment = 56 Total 1,055 1,170 2,225 Immediate access to an enlarged pool of Real Estate assets 18

19 19 Next Steps

20 Approvals and timeline Indicative summary timeline 26/11 Announcement of the Merger 22/02 Approval of draft merger agreement and merger balance sheet 08/04 Approval of the Merger by General Meetings 15/04 Approval of the Merger by Ministry of Economy, Development and Tourism Completion of the Merger 24/04 Trading of new shares 20

21 21 Q&A

22 22 Appendix

23 Description Loan portfolio & deposit mix in Greece (9M 2018) Eurobank Group is one of the four systemic banks in Greece, with strong international presence in Cyprus, Luxembourg, Serbia, Bulgaria and UK Eurobank is mainly focused on retail banking, while it is also engaged in equity brokerage, asset management, securities services and private banking Gross Loans: 38.9bn Consumer 8% Business 53% Deposits: 27.5bn Time 46% Core 54% Eurobank s Greek footprint counts 350 retail branches, while its headcount amounts more than 9,000 employees Mortgages 39% Shareholder structure Greek systemic banks market shares (H1-2018) Fairfax 18% Net Loans Deposits 29.1% 30.0% 26.7% 28.2% Capital Group 8% 22.6% 22.7% 19.2% 21.5% HFSF 2% Other 72% Piraeus Bank Alpha Bank Eurobank NBG 23 Source: Eurobank results presentations

24 Gross loans evolution ( bn) Deposits evolution ( bn) Net interest income ( bn) M M M 2018 Pre-provision income ( bn) NPE ratio CET1 ratio (fully loaded) NPE coverage 47.8% 52.1% 50.6% 50.4% 53.7% 39.3% 43.8% 46.0% 42.6% 39.0% 13.0% 13.1% 13.8% 15.3% 11.7% M M M

25 Luxembourg Total Assets ( bn) 1.4 Srbija Serbia Total Assets ( bn) 1.4 Net Loans ( bn) 0.5 Deposits ( bn) 1.1 Net Loans ( bn) 1.0 Deposits ( bn) 0.8 Branches (#) 80 Luxembourg Bulgaria Total Assets ( bn) 4.0 Net Loans ( bn) 2.7 Deposits ( bn) 3.4 Branches (#) 174 Srbija Serbia Greece Bulgaria Cyprus Cyprus Cyprus Total Assets ( bn) 5.3 Net Loans ( bn) 1.6 Deposits ( bn) 4.6 Private Banking Centers (#) 8 Cyprus 25 Note: Data as of Q

26 Acquisition of Hellenic Postbank 2.9bn re-ipo Sale of Bancpost (Romania) Sale of 1.5 bn NPE portfolio (first NPE portfolio sold in Greece) Merger with Grivalia Acceleration Plan Targets RoTE >10% by 2020 Key transactions By YE 19 FL CET1 >12% by bn capital raising Acquisition of Alpha Bank Bulgaria Sale of 80% of Eurolife ERB (insurance) Repayment of State preference shares with Tier 2 bond Full execution of restructuring plan ahead of schedule Sale of 1.1bn NPE portfolio Acquisition of Piraeus Bank Bulgaria Launch of 2.0bn mortgage NPE securitization NPE ratio <10% by 2021 The merger of Eurobank and Grivalia and the Acceleration Plan will enable healthy shareholder returns 26