National Bank of Greece: Covered Bond Issuance. October 2017

Transcription

1 National Bank of Greece: Covered Bond Issuance October 2017

2 Important Notice Forward Looking Information This document is being provided to you for information purposes only and on the basis of your acceptance of this disclaimer. No representation or warranty, express or implied, is or will be made in relation to, and no responsibility is or will be accepted by National Bank of Greece (the Group) as to the accuracy or completeness of the information contained in this presentation and nothing in this presentation shall be deemed to constitute such a representation or warranty. Although the statements of fact and certain industry, market and competitive data in this presentation have been obtained from and are based upon sources that are believed to be reliable, their accuracy is not guaranteed and any such information may be incomplete or condensed. All opinions and estimates included in this presentation are subject to change without notice. The Group is under no obligation to update or keep current the information contained herein. In addition, certain of these data come from the Group s own internal research and estimates based on knowledge and experience of management in the market in which it operates. Such research and estimates and their underlying methodology have not been verified by any independent source for accuracy or completeness. Accordingly, you should not place undue reliance on them. The information presented herein is an advertisement and does not comprise a prospectus for the purposes of EU Directive 2003/71/EC, as amended, (the Prospectus Directive). The information herein has not been reviewed or approved by any rating agency, government entity, regulatory body or listing authority and does not constitute listing particulars in compliance with the regulations or rules of any stock exchange. Certain statements in this presentation constitute forward-looking statements. Such forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially. These risks and uncertainties include, among other factors, changing economic, financial, business or other market conditions. As a result, you are cautioned not to place any reliance on such forward-looking statements. Nothing in this presentation should be construed as a profit forecast and no representation is made that any of these statement or forecasts will come to pass. Persons receiving this presentation should not place undue reliance on forward-looking statements and are advised to make their own independent analysis and determination with respect to the forecast periods, which reflect the Group s view only as of the date hereof. 1 Legal Disclaimer

3 Table of Contents 1 NBG Overview and Financial Highlights 2 Funding and Capital 3 Asset Quality 4 NBG Mortgage Business 5 NBG Covered Bond Programme II and New Issuance 6 Greece Macro Update 7 Appendix

4 NBG Overview and Financial Highlights 1

5 NBG at a glance Over 170 years of history Premium brand of choice in Greece 1 st Greek Bank to repay state aid More than 90% of the restructuring plan already completed Leader in low-cost savings deposits and mortgages Lowest gross NPEs and highest coverage levels among peers Best in class liquidity position with clear path to ELA elimination Uniquely positioned to tap the Greek recovery potential 4 Overview and Financial Highlights

6 NBG holds a leading position in Greece Reputational excellence in Greece: premium brand of choice Deeply rooted customer relationships 2 Core deposit market share (2Q17) (2) Bank of reference in Greece for over 170 years Total deposits/ 74,6m 59,8m 56,6m 54,2m Best Reputation (Survey) (1) Most Trustworthy (Survey) (1) branch 31,5% 30,3% 33% 28% 22% 17% 33% 26% 22% 19% 21,2% 17,0% NBG Peer 1 Peer 2 Peer 3 NBG Peer 1 Peer 2 Peer 3 NBG Peer 1 Peer 2 Peer 3 The first Greek Bank to have repaid State aid 2 Strong digital channels : outstanding : repaid Peer 1 Peer 2 Peer 3 Outstanding Outstanding Outstanding Outstanding E-banking users Electronic transactions Pillar I (State Preference Shares) Pillar II (State Guaranteed Bonds) Pillar III (Greek Government Bonds) 870K 1,123K 1,340K 1,474K 14,7m 17,6m 25,0bn 25,8bn 28,9m 40,3bn 33,2m 48,4bn CoCos not issued not issued H H17* 1 Based on C.A.P.I. tracking study during the period April-June Banks financials statements, Banks investor presentations *1H annualized 5 Overview and Financial Highlights

7 NBG Shareholder structure as at September 2017 Other 0,4% Internationall Institutionals 49,4% Hellenic Financial Stability Fund 40,4% Domestic legal entities 1,0% Domestic institutionals 2,4% Domestic retail 6,5% Domestic investors: 10,9% Source: NBG H1 Financials 6 Overview and Financial Highlights

8 NBG has delivered most of medium term targets envisaged in the 2015 capital raise Funding Cost Improvement Business Mix Optimization & Income growth Greece 2Q15 2Q17 Δ Time deposits repricing (bps) Reduction of ELA ( b) 17,6 3,8-13,8 Elimination of Pillar bonds ( b) 8,7 0,0-8,7 Deposit inflows ( b) ,9 Efficiency Improvement Gross Corporate loans / Total loans (%) Cost of risk evolution Greece 2Q15 1 2Q17 3 Δ 39,7 40,1 +40bps Lending yield 2 (bps) Net Interest Income ( m) Net Interest Margin (bps) Fee Income / Assets (bps) Greece 2Q15 1 2Q17 3 Δ # of employees (in 000s) 12,4 9,8-2,6 Employee wage bill ( m, ann.) Cost-to-Core income (%) ppts Greece FY14A FY16A 2Q17A CoR (bps) P&L charge ( m, annualized) 1, Q15 figures include the NBG Insurance 2. Down due to restructuring impact 3. Excludes the NBG Insurance, agreed to be sold in 2H17 4. Expected inflows in the 2 years following the imposition of capital controls at c. 3-4b, actual experienced at 0,9b 7 Overview and Financial Highlights

9 All major strategic objectives since the 2015 recapitalization have been completed medium term targets are attainable Consistently delivering on all strategic objectives Medium term targets are attainable Q H H Recapitalization following the AQR results Restructuring plan approval by European Commission Revised strategy and changed leadership Completed divestments in line with the restructuring plan Increased NPE and NPL coverage to the highest levels among peers Set the basis for OPEX reduction Optimized collateral and liquidity management Significantly improved financial performance across key metrics Exceeded NPE and NPL reduction targets Repaid all outstanding State-aid 1H.17 Group PPI increases by +19% yoy 1H.17 Group OpEx declines by 9% yoy 1H.17 Group PAT breaks even* Continued to exceed NPE reduction targets Consistently maintaining NPE coverage levels to the area of 55% Completed 95% of the divestment plan, ongoing divestments expected to enhance further capital and liquidity position a b Improve asset quality Enhance core income growth Increase exposures in commercial lending, benefiting NII and NIM through mix improvement Capitalize on leading position to increase transaction fees Utilize high coverage and capital levels to work through NPEs Achieve all asset quality KPIs agreed with SSM Clear path towards ELA exposure elimination in the short to medium term 0,7b new loan disbursements to corporates during 1H.17 c Normalize liquidity position Disengage from ELA funding Return to primary wholesale funding markets activity Capitalize on leading franchise position to attract any deposit inflows *pro forma for the NBG Insurance sale 8 Overview and Financial Highlights

10 1H17 Group PPI increases by +19% yoy in 1H 2017 P&L Highlights Group P&L Driven by domestic operations, 1H17 group core PPI reaches 471m, up by 17% yoy reflecting: Increasing group core income (+3% yoy) Lower group OpEx (-8% yoy) More specifically: NII down by 2% yoy, reflects 1H17 continuing deleverage of the loan portfolio in light of 1H uncertainty in the domestic market Net fee growth reflects significant improvements in the Bank s liquidity profile, allowing for the elimination of state aid related funding costs, resulting in net fee increase of 66% relative to 1H16 OpEx reduction (-8,3% yoy at the group level), is driven by domestic personnel costs (-12,6% yoy), reflecting the success of the 2016 VES involving c10% of domestic FTEs Credit risk charges reduce by 14% qoq to 243bps, keeping coverage ratio constant despite write offs 1H17 Group PAT breaks even UBB sale CET1 impact, partially offset by impairments on Romania and Serbia reflecting agreements to sell below book (-38bps) Apart from the NBG Insurance capital impact, the RWA deconsolidation impact of BROM, Vojvo and SABA (- 1,8b), expected in 2H17, will boost capital m 1H17 1H16 YoY 2Q17 1Q17 QoQ NII % % Net Fees & Commissions % % Core Income % % Trading & other income (74) (69) +7% (73) (1) >100% Income % % Operating Expenses (463) (505) -8% (232) (231) +0% Core PPI % % PPI % % Provisions (433) (326) +33% (200) (233) -14% Operating Profit (37) 6 n/m (41) 5 n/m Other impairments (7) (44) -85% (1) (6) -92% PBT (43) (37) +16% (42) (1) >100% Taxes (17) (5) >100% (10) (7) +49% PAT (cont. ops) (60) (42) +43% (52) (8) >100% PAT (discont. ops) (67) (2 912) -98% (97) 30 n/m Minorities (16) (21) -22% (7) (9) -22% NIC n/m n/m PAT 0 (2 975) n/m (13) 13 n/m 1. NIC: pro forma capital gain from the sale of NBG Insurance 9 Overview and Financial Highlights

11 1H17 personnel costs decline 13% yoy, leading cost to core income below 50% Group OpEx by category ( m) Domestic cost-to-core income evolution Greece Group 1H17 1H16 yoy 1H17 1H16 yoy Personnel ,6% ,6% 56% 54% 54% G&As ,3% ,0% Depreciation ,7% ,0% 48% 49% Total ,8% ,3% 2Q16 3Q16 4Q16 1Q17 2Q17 Domestic OpEx evolution ( m) Headcount evolution ( 000) G&A & other Staff SEE & Other Greece 25,1 10,1 15,0 20,1 19,8 7,9 7,8 12,2 12,0 11,81 11,8 1 11,7 1 1,9 1,9 1,9 9,9 9,9 9,8 2Q16 3Q16 4Q16 1Q17 2Q17 FY09 1 FY14 FY15 FY16 1Q17 2Q17 1. Excludes NBG Insurance, UBB, BROM & Vojvo employees 10 Overview and Financial Highlights

12 NPEs decline for a 5 th quarter in a row adding up to a total reduction of 3,3b since end 2015 Parent NPE reduction targets (SSM perimeter) ( b) NPE operational targets for 2017 are attainable NPEs NPLs 21,5 21,5 6,4 20,6 0,0 6-0,9 5,6-1,0 19,6 4,7 15,2 15,3 15,0 15,0-8,5-0,9 4,7-0,2 4,6-0,3-0,1 14,0 13,9 near FY.17 target due to 0,7b buffer 18,7 18,5 18,2 18,1 5,0 13,6 12,6 13,1 Operational targets submitted to the SSM contain a reduction of NPLs and NPEs by 7,4b and 8,5b over the period , equal to a reduction of c.50% and 40% respectively Upon achieving these targets in 2019, NBG will have reduced its NPL and NPE ratios by c.15ppts, with NPE coverage around the 50% mark Already achieved reduction by 3,3b, overshoots the 2017 target by 0,7b, providing operating flexibility Remaining NPE reduction at 5,1b ( b) Total targeted: - 8,5b 7,7 21,5-3,3-5,1 13,1 FY15 Done Remaining FY19 NPE reduction target 11 Overview and Financial Highlights

13 NPE performance significantly ahead of target, liquidity continues to improve substantially, divestments on track Liquidity, Asset Quality & Capital Highlights Key Ratios - Group Domestic NPE stock reduction continues for a 5th consecutive quarter NPE reduction continues in 2Q17, with the stock reduced by 0,3b, reflecting zero gross formation and fully provided write offs Liquidity 1H17 1Q17 FY16 Net NPE reduction achieved since end-2015 stands at 3,3b Excluding write offs, NPE reduction results place NBG 0,7b ahead of the 2Q 2017 SSM target Domestic NPE and NPL coverage remains at sector leading levels (56% and 75%), combining with the lowest NPL and NPE levels among domestic banks ELA elimination in sight ELA exposure continues on a downward trend, reaching 2,6b in August The agreed transactions of NBG Insurance, Banca Romanesca and Vodvodjanska will provide an additional 1,7b of liquidity Execution of remaining capital actions and other initiatives, expected during the next few months, will permit NBG to fully disengage from ELA Superior liquidity position and lowest funding cost among local peers, imply NBG is best positioned to satisfy demand for corporate credit, expected to pick up in 2H17 CET1 ratio at 16,5% 1 or 16,3% 1 on a CRD IV FL basis Group RWAs at 39,0b 1 of which 34,8b in Greece (phased in) Agreed capital actions will complete in 2H.17 boosting capital Equity of remaining SEE assets to be divested at 0,5b, RWAs at 2,4b Loans-to-Deposits ratio 86% 87% 87% ELA exposure ( b) 3,8 5,6 5,6 Profitability NIM (bps) Cost-to-Core income 49% 48% 55% Asset quality NPE ratio 45,0% 3 44,9% 44,9% NPE coverage ratio 55,7% 56,0% 55,9% Cost of Risk (bps) Capital CET1 phased-in 16,5% 1 16,0% 2 16,3% 2 CET1 ratio CRD IV FL 16,3% 1 15,8% 2 15,8% 2 RWAs ( b) 39,0 1 41,3 2 41, Excludes the impact from the agreed sales of SABA, NBG Insurance, BROM and Vodjvodjanska 2. Excludes the impact from the agreed sales of UBB, Interlease & SABA 3. Excluding the deleveraging impact, NPE ratio in 2Q is 67bps lower qoq 12 Overview and Financial Highlights

14 Funding and Capital 2

15 Best in class liquidity and lowest cost of funding place NBG at an advantageous position to satisfy demand for credit from healthy corporates Peer group analysis: liquidity position (Group) Peer Group: Domestic funding cost 2 ELA/ Assets 1 4% 13% 15% 17% 8,5 9,1 9,9 0,46% 0,59% 0,67% 0,66% 2,6 NBG Peer 1 Peer 2 Peer 3 Domestic L/D ratio evolution NBG Peer 1 Peer 2 Peer 3 NBG domestic deposit flows per quarter ( b) Peer domestic L/D ratio 3 141% 138% 134% 130% 130% 128% 0,3 0,8 0,0 0,3 0,9 0,2 0,5 NBG Greece 91% 91% 89% 86% 87% 85% 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 L/D ratio provides upside for selective credit growth -2,2-0,9-3,6-4,8-10,6 b + 1,3 b -0,8 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Qtd 1. Excl. EFSF & ESM bonds 2. Estimated based on latest available funding balances & yields 3. Peer average data excluding NBG, based on latest available data 14 Funding and Capital

16 Total Eurosystem exposure reduced by c. 20,8b and ELA reduced by c. 15b on the back of the divestment plan, interbank funding and deleveraging Eurosystem and Interbank funding evolution (all amounts in b and cash equivalents) ECB ELA Interbank 27,6 17,6 25,6 10,0 10,0 15,6 11,5 Collateral optimization 24 23,7 0,9 11,0 12,5 11,8 Interbank funding -4,0b Eurosystem exposure 19 Sinepia +0,3b cash 17,1 17 4,0 3,8 4,7 6,1 5,1 Pillars 5,6 cancellation Waiver 8,9 Reinstatement 8,2 6,7 Correlated assets repos -1,2b Eurosystem exposure 15,4 5,2 5,6 12,8 Increase of correlated assets repos 11,7 10,3 4,4 4,2 3,5 3,8 3,1 2,6 4,6 4,6 4,4 4,2 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Jul -17 Aug -17 ELA reduction Key items (all amounts in b and cash equivalents) ELA June 2015 Divestment plan Net Loans Net Intragroup Funding Net Interbank Repos (Correlated) Net Deposits Net Bond Redemptions Waiver Reinstatement Net Cash Recapitalisation Cash Collateral Other Covered Bond Maturity ELA August ,2 3,0 17,6 2,1 2,0 1,6 1,1 1,1 0,5 0,8 0,4 0,1-0,9 2,6 15 Funding and Capital

17 Ongoing initiatives can provide for ELA disengagement in early 2018; further capital markets access will be based on a medium term strategy Ongoing initiatives that can be completed in 2017 All amounts in b and cash equivalents 1,7 0,28 0,65 2,6 0,75 Vojvodanska BROM NBG Insurance - Announced and agreed divestments are expected to enhance bank liquidity position by c. 1.7b. - A covered bond issuance can pave the way for ELA disengagement in early 2018 ELA Exposure: Aug-17 Divestment plan proceeds Covered Bond issuance ELA pro-forma exposure, FY ,5 0,4 - Further actions can provide for a convincing ELA exit Medium term strategy for capital markets access Covered bond issuance Subordinated and Senior Issuances - Signal NBG s return to the capital markets with a bail-in exempt instrument - Disengage from ELA - Expand investor base - Establish pricing benchmark - Build-up capital structure with cheapest alternative - Fill MREL bucket - Provide buffer to senior debt - Rebuild senior curves - Increase reliance on capital markets funding - Widen investor base and increase liquidity on the secondary market Q Funding and Capital

18 Time deposit yields stabilize, reflecting a bottoming out of the front-book spread; front-back book gap narrowing, along with ELA reduction, to support NII in 2H17 Greek deposit yields (bps) Greek deposits evolution ( b) % 69% 69% 69% 69% Core deposits/total ,4% qoq New production yield at 70 bps Time 35,7 36,0 36,8 36,1 36,2 Time Total 11,1 11,1 11,3 11,3 11,1 6,8 7,2 7,6 7,0 7,2 Sight & other Savings Core 17,8 17,7 18,0 17,8 17,9 2Q17 Mkt share 36%, +1,2 ppts yoy 2Q16 3Q16 4Q16 1Q17 2Q17 2Q16 3Q16 4Q16 1Q17 2Q17 17 Funding and Capital

19 Acceleration of divestiture plan enhances capital and liquidity substantially and underlines NBG s commitment to the successful implementation of the restructuring plan CET 1 ratio Divestments: latest developments 16,0% 16,5% 16,3% NBG Insurance closing expected in H2.17; impact of: c110bps in capital and c 770m in liquidity CET1: 6,6b DTC: 4,8b CET1: 6,5b 8,75% OCR: 12,25% CET1: 8,75% CET1: 6,4b 1Q17 2Q SREP CRD IV fully loaded Following the transaction NBG retains a 25% stake along with an exclusive bancassurance agreement UBB and Interlease highly capital accretive and liquidity enhancing transactions completed Banca Romaneasca, Vojvodjanska, NBG Leasing (Serbia) and SABA to close in H2.17, RWA deconsolidation impact of c80bps in capital, offsetting the 2Q 38bps negative impact arising from agreeing to sell at a discount to book; liquidity impact of c 1b Excluding completed and agreed transactions, equity of remaining SEE assets to be divested stands at 0,5b; RWAs at 2,4b RWAs ( b) 41,3 39,0 39,0-1,8b ΔRWAs qoq from the sale of UBB/Interlease 18 Funding and Capital

20 Asset Quality 3

21 NBG stands out in asset quality compared to peer group Peer Group 1 : NPE & Coverage (Group) Peer Group 1 : 90dpd & Coverage (Group) Peer Group 1 : net NPLs vs TBV (Group) 52% 54% NPE ratio 45% 44% 90dpd ratio 34% 37% 38% 35% 6,6 7,3 9,0 5,8 TBV ( b) Coverage ratio 56% 45% 48% 51% Coverage ratio 74% 68% 69% 65% -3,8-7,3-6,9-6,0 Unprovided NPLs ( b) NBG Peer 1 Peer 2 Peer 3 NBG Peer 1 Peer 2 Peer 3 2,8b - 0,0b 2,1b - 0,2b NBG Peer 1 Peer 2 Peer 3 TBV less net NPLs ( b) 1. Latest available data, Banks financials and investor presentations 20 Asset quality

22 Zero net NPE formation in 2Q and fully provided write offs, keep the NPE stock on a declining trend Domestic NPE stock per category 2Q17 ( b) Domestic NPE stock movement ( b) FNPE & other impaired 90dpd 7,0 1,4 5,6 2,6 2,5 0,3 0,3 2,3 2,2 6,5 2,7 3,8 18,7 13,9 22,0-0,6-0,3 21,1-0,7-0,2 20,1 19,2+0,05 19,0 18,7-0,2-0,7-0,2-0,01-0,3 Mortgages Consumer SBL Corporate Domestic NPE stock evolution ( b) NPE ratio 47,9% 46,4% 45,1% 45,1% 45,2% FNPEs & other impaired 90dpd 21,1 20,1 5,9 4,8 19,2 19,0 18,7 4,8 4,7 4,8 +16bps reported basis -67bps qoq excluding deleveraging impact 15,1 15,3 14,4 14,3 13,9 2Q16 3Q16 4Q16 1Q17 2Q17 21 Asset quality

23 Lowest 90dpd and NPE ratios in Greece combined with the highest cash coverage Domestic 90dpd ratios per segment Domestic 90dpd NPE bridge ( b) 51% 62% SEE & other: 90dpd ratio: 35% Coverage: 55% 13,9 3,3 0,8 0,6 18,7 34% 93% 78% 23% 33,7% 33,8% Cash coverage 43% 111% 75,4% 74,2% Mortgages Consumer SBL Corporate Total GRE Group 90dpd FNPE <30 FNPE Other impaired NPEs Domestic NPE ratios and coverage per segment Domestic forborne stock breakdown ( b) Collateral coverage 1 76% 9% 52% 53% 55% 58% 71% SEE & other: NPE ratio: 42% Coverage: 46% FPE 2,9 FNPE<30 dpd 3,3 42% 82% 68% 39% 45,2% 45,0% 10,2 Cash coverage 34% 65% 56,2% 55,7% Mortgages Consumer SBL Corporate Total GRE Group FNPE >90dpd 3,2 FNPE 31-90dpd 0,8 Provisions/ Gross loans 14% 47% 48% 25% 25% 1. Bank level 22 Asset quality

24 Large scale Special Asset (Corporate) and Retail Collection Units Corporate NPL Management Overview of Portfolio Special Assets Unit ( SAU ) is a centralised unit with end-to-end responsibility for the management of corporate NPLs with: Vertically integrated management to ensure single point accountability and efficient decision making Dedicated SAU RMs and separate Credit Committees Clear prioritisation strategy based on ageing, size, collateralisation levels and legal status Internally developed tools to prioritise alternative strategies and assess debtors viability Short-term and longer-term target setting and RM productivity monitored monthly Certain corporate exposures are managed by the business unit Retail Collections Unit Retail Collections Unit ( RCU ) is an independent unit focused on management of retail NPLs and collections Centralised unit with end-to-end responsibility Strategy differentiated by customer segmentation: collecting in early buckets, restructuring subsequently, legal actions according to selection criteria, and settlements for >360dpd New restructuring products designed to ensure solution sustainability based on PTI and on client s disposable income after subtracting reasonable living expenses Tight performance monitoring of internal collection center and external agents and lawyers through comprehensive KPIs Champion/challenger tactics frequently employed to test new segment strategies based on cohort attributes (profession, income, dpd, collateral) Corporate Balance ( b) of which (denounced) Retail Balance ( b) Treatment Clients ( 000) FTE Mortgages 9,1 Collections Consumer 2,8 Restructuring Micro-SBL 1,2 Legal/ Settlements Total 13, Branches (execution) 807 Various support functions 133 c. 2,000 FTEs deployed in collections and NPL management #Clients Large Corporates & Shipping 2,4 0, SMEs 2,5 1,3 4, (2) SBL 1,1 0,5 6, of which (1) (3) & (4) Denounced (Admin.) n.a n.a. (5,596) 66 Legal, Control & Operational 64 Total 6,0 11, FTEs (1) SME: small & medium enterprises (2) SBL: small business loans 23 Asset quality (3) Denounced: legal procedures have been initiated. (4) Clients with all contracts denounced

25 NBG Mortgage Business 4

26 Business Banking & Retail Loans Division is managing the mortgage portfolio Business Banking & Retail Loans Head of Approval Center Head of Mortgage Loans includes approvals Quality Control team Underwriting Center A Underwriting Center B Underwriting Center C Underwriting Center D Product Development After-sales support Unit/ Helpdesk Mortgage Portfolio Analysis Operational Support Reception, validation, processing and underwriting of new loan applications including mortgages, consumer loans & credit cards Processing of restructuring / rescheduling applications Fraud checks Credit cards physical file review Proposal for new product development Product pricing Preparation of circulars Participation in the preparation of legal contracts Product parameterization (IRIS) Internet and intranet material support Handling customers requests and complaints Branches after sales support Network s compliance with internal audit findings Litigation support Reporting/ MIS Portfolio analysis Target setting & monitoring Budget preparation & monitoring Analytics Credit Policy review Quality control (post approval review) Systems support Compliance issues management Compliance, Operational Risk and Environmental policy management Source: National Bank of Greece 25 NBG Mortgage Business

27 in co-operation with other bank units duties clearly segregated through the cycle risk appetite definition product factory customer facing units credit defines overall credit policy sets credit limit authorities sanctions larger exposures reviews and authorizes new products in accordance with the credit policy business unit product design underwriting branch network sales & customer service application origination portfolio management disbursement risk campaign management retail collections designs, develops and monitors all credit decision engines incl.: origination rating behavioral rating LGD rating model risk based pricing centralized services legal / technical support collections restructuring legal actions Source: National Bank of Greece 26 NBG Mortgage Business

28 All products are discrete, well defined and monitored independently All products are discrete, well defined and monitored independently New originations Financing products overview Commitment through borrower s higher equity participation (max LTV: 75%) Stricter assessment of borrower s repayment capacity New originations always require principal repayment Risk-based pricing Maturities offered take into account the financing purpose and the size of the loan The Bank offers a wide range of mortgage products: Lending purposes: 1. purchase, construction, completion, extension or repair of residential premises 2. purchase of land for building Interest rates: floating or fixed to floating (introductory for 3 or 5 years) Floating rate mortgages are indexed based on three month Euribor, plus a spread depending predominately on the customer s credit profile and loan characteristics (i.e. LTV and PTI ratios, loan purpose, score) Collaterals: loans are secured by a 1 st lien mortgage over the subject property or other acceptable collateral Duration: up to 30 years and 15 years in case of repairs or improvements, subject to an individual s age Discontinued products The Bank has discontinued the following products: (a) guaranteed / subsidized; (b) transfers from other banks Source: National Bank of Greece 27 NBG Mortgage Business

29 Corrective measures have been taken as a response to the crisis all amounts in b measures disbursements to new customers Stricter underwriting criteria Discontinued products with high default rages 1 st generation restructuring products 1,42 2 nd generation restructuring products Further tightening of underwriting criteria 0,30 Further tightening of underwriting criteria 3 rd generation restructuring products Approval authority levels decreased 4 th generation restructuring products which take into consideration the financial situation of the customer New originations considering the total relationship of the customer with the Bank Adjustment to legislative framework of Code of Conduct 5 th generation restructuring products Review of new origination products offered, for better monitoring New approval authority levels Reorganization of Retail Lending to increase efficiency and synergies New application system embedding risk-based pricing 0,05 0,03 0,04 0,06 0,05 0,01 outstanding balances 20,5 19,7 18,9 18, ,4 16,7 16,5 90+ dpd % 27% 30% 34% 34% 34% 24% 15% 10% Q1 New Origination Q2017 WA Payment to Income of 25% WA LTV 56% NPL ratio 0,6% Source: National Bank of Greece 28 NBG Mortgage Business

30 Mortgage loans are approved under a strict set of criteria and controls Key metric Approval Criteria Additional checks / Comments score card based on bespoke scorecard credit scoring includes the assessment of customers' demographics and relationship with the bank PTI <35% 1 1 officially 40%, however effectively 35% - taking into consideration customer s depository or investment relationship within the Bank verification of income through electronic tax system LTV up to 75% assessment of collateral's quality and compulsory borrower s self participation in advance Tiresias score customer behaviour credit bureau scoring based on financial behaviour of borrowers Internal risk based customer segmentation Rating based on the weighted behavior of score of customers' different loan products specific high risk customer categories are rejected customers with restructured products always risk based pricing considering LTV, PTI, application score & financing purpose embedded in the application system Source: National Bank of Greece 29 NBG Mortgage Business

31 approval authority Clear system of credit authority levels for all mortgage approvals approval level total exposure ( k) Level 1 Level new approval authority levels effective from March 2017 Level Level greater involvement of the Credit Division in the approval process Credit Centre Head & Retail Credit Risk representative 750 credit threshold lowered from 750k to 300k (Retail Credit Risk involvement necessary above this limit) Retail Credit Risk Head & Mortgages Division Head 2,000 Group CCO & Retail GM 2,000+ Source: National Bank of Greece 30 NBG Mortgage Business

32 pre-disbursement post-disbursement final decision Underwriting is done centrally, driven by product type and a number of controls are in place both pre and post disbursement 2-stage evaluation of loan applications respecting 4-eye principle and approval limits; checks embedded in supporting IT systems approval authority levels based on: 1. applicants total exposure in NBG retail products 2. requested amount Branch Processing Center Underwriting Team Credit Decision branch customer application data collection & input new originations evaluation in accordance with the credit authorities matrix disbursement control description control description underwriting system built-in controls automated controls built in the application workflow system on application score, PTI, LTV, credit authorization limits credit division controls monitoring of the credit evaluation process to ensure Group Credit Policy alignment, reviewing of loan files sample mortgage division controls daily post approval pre-disbursement on a 2% random sample; audit & evaluation of processing & underwriting procedure internal audit controls independent and objective audit activity, providing advisory work, ensuring the implementation of policies and regulation centralized loan administration mortgage, legal, property value validation, confirmation of credit preapproval Sarbanes-Oxley 404 yearly self assessment and certification of procedures and controls which are publicly disclosed Source: National Bank of Greece 31 NBG Mortgage Business

33 Robust models are used for underwriting and monitoring of the mortgage portfolio Mortgages PD models (2) Description statistical model, automatically run on a monthly basis 2 sub-models, one for Young and one for Mature accounts used in capital adequacy and provisioning assesses all accounts since date activation Factors maturity delinquent amount initial Loan amount delinquency patterns product type application score Behavioral scorecards (3) statistical models, automatically run on a monthly basis 3 different models, for Current, Cycle 1 and Cycle 2 accounts models examine account behavioral patterns in the 12-months most recent history models predict probability of 60+ Identify them early approach used in customer rating MoB delinquency patterns maturity Application scorecard statistical model, automatically run when a new loan application is assessed model predicts probability of 90+ in the next 18 months applicant demographics (age, marital status, education) occupation income loan characteristics(term, purpose) Credit Bureau information Source: National Bank of Greece 32 NBG Mortgage Business

34 Centralized delinquency management under Retail Collections ( RC ) from 1+dpd 568 Number of FTEs 1100 Number of other personnel 290 Number of external resources Deputy CEO Retail Collections Head External collection agencies 175 Delinquent Retail Underwritting 49 Retail Collections Strategy and Support 152 Retail Collections Operations 366 External law offices Branch network: personnel dedicated to RC Strategic Planning Business Requirement Analysis Restructuring & Debt Settlement Management Operations Support State Guarantee & Subsidized Loan Management Internal Retail Collections Management Retail Collections Agencies Management Legal Management Auction Administration Administration Strategy and Support main responsibilities Operations main responsibilities Collections strategy and portfolio segmentation Budgeting/ forecasting, target setting and legal processes support Performance monitoring and reporting Process reengineering and IT system requirements Individual insolvency borrowers management (L.3869) BoG Code of Conduct management Loan restructuring and debt settlement special issues management and approvals External agencies invoicing Claim payments stemming from State guarantees Management and training of internal collection center teams Monitoring and management of external collection agencies Customer complaints management Legal case assignment External law offices management Administration of auction procedures General administration Source: National Bank of Greece 33 NBG Mortgage Business

35 Three main remedial actions are utilized to manage delinquent assets Collections is the first step for all delinquent accounts and the preferred remedial action in order to minimize the inflow of accounts in the NPEs. Restructuring is the next step for delinquent accounts. By the use of an algorithm, a viable restructuring solution is calculated based on the client s capacity to repay. Legal enforcement is the last remedial action. By utilizing legal actions, NBG aims to maximize recoveries through collateral enforcement, increase collateral coverage through forced prenotation, incentivize uncooperative customers and address risks related to moral hazard. Days past due Not Forborne Collections Restructuring Legal Enforcement Forborne 1 Collections Restructuring Legal Enforcement 1. Forborne: Exposures for which forbearance measures have been extended according to EBA ITS technical standards on Forbearance and Non-Performing Exposures Source: National Bank of Greece 34 NBG Mortgage Business

36 Clear target setting and restructuring schemes implemented to pursue collections Collections Restructuring Headcount Stage Target Headcount Target Debt Collections Agencies ( DCAs ) 3 DCAs with a total headcount of 175 FTEs Early Collections: 11-60dpd Roll rate 1 Branches 830 FTEs dedicated to restructuring efforts Roll rate 1 Exits from 90+dpd through cash collections for buckets 4-6 Internal Collection Center ( ICC ) 104 FTEs Late Collections: dpd for Forborne or dpd for not Forborne Exits from 90+dpd through cash collections or restructuring Internal Collection Center ( ICC ) 92 FTEs collection rate 2 and restructuring rate 3 1. For example, the roll rate from bucket 1 (i.e. 1-30dpd) to bucket 2 (i.e dpd) is defined as the portion of balances that were in bucket 1 at the beginning of the assignment which migrated to bucket 2 at the end of the assignment, i.e. in the next billing; more simply, it is the percentage of clients paying less than one instalment within a month 2. Collection rate is defined as cash collections within a month over balance assigned at the beginning of the month 3. Restructuring rate is defined as restructurings disbursed within a month over balance assigned at the beginning of the month Source: National Bank of Greece 35 NBG Mortgage Business

37 Description Legal enforcement process leading to collateral liquidation <1 month 6 months <1 month 7-8 months* 2-8 months* Extrajudicial letter Payment order Forced prenotation Seizure Auction Receipt of Auction Proceeds Issue extrajudicial letter and serve it to customer by bailiff Apply for Court payment order Issue payment order through Court and serve it to customer by bailiff Legally force prenotation on property as claim on consumer loans Court payment order is a prerequisite Selection criteria consider overall balance owed, real estate property value, LTV and privileged claims Seize real estate property A payment order is a prerequisite May accept down payment from client to suspend auction Set minimum bid (may repeat auction if not met) Specific timeline of the repetition of the auctions The ranking of claims is served to the Bank within 2-3 months and the hearing in court of any objections is determined in 2 months Speed up for 2017: 140 properties seized up to Jun.17 out of ~1000 that expected to be done for this year * Timeline estimation based on recent legislation changes, without taking into account potential operational effects (e.g. e-auctions introduction) Source: National Bank of Greece 36 NBG Mortgage Business

38 NBG Covered Bond Programme II and New Issuance 5

39 Rationale and investment highlights for a new Covered Bond issuance by National Bank of Greece Reintroduction to the capital markets with a bail-in exempt instrument Signal of a mid-term commitment to the capital markets as part of a wider funding strategy Rationale Disengagement from the Emergency Liquidity Assistance (ELA), providing for a clear credit differential compared to peers Reestablishment of pricing benchmarks that can be used for further debt instruments in the future Expansion of investor base Higher rating compared to sovereign bonds albeit currently capped at the country ceiling Rating upside due to the conditional pass through structure Investment Highlights Resistant to market volatility Bonds structured in accordance with the criteria of the exception set for the participation under CBBP3 of Greek non-investment grade covered bonds Potential participation of Official Institutions 25% contractual OC commitment Source: National Bank of Greece 38 Covered Bond Programme II and New Issuance

40 The Greek Covered Bonds Framework: Overview Key areas Description Cover Assets Residential Mortgages 80% LTV 1 Commercial Mortgages 60% LTV 1 Shipping Loans 60% LTV 1 Residential and commercial mortgage loans may only be included in the cover pool if the property subject to the mortgage is situated in Greece Derivatives may also be included in the cover pool to the extent that they are used exclusively to hedge interest rate, FX or liquidity risk. The valuation of properties must be performed at or below the market value and must be repeated every year in relation to commercial properties and every three years in relation to residential properties. Mandatory overcollateralization 5% OC Banks Requirements Aggregate regulatory capital of at least 500 million Euros and a capital adequacy ratio of at least 9%. Banks need to meet minimum risk management and internal control requirements including suitable policies and procedures for the issuance of covered bonds, organizational requirements, IT infrastructure and a policy for the reduction and management of risks deriving from covered bond issuance Statutory Tests (a) The nominal value of the covered bonds including accrued interest may not exceed at any point in time 95% of the nominal value of the cover assets including accrued interest; (b) (c) The net present value of obligations to holders of covered bonds and other creditors secured by the cover pool may not exceed the net present value of the cover assets including the derivatives used for hedging (assuming a parallel movement of the yield curves by 200 basis points). The amount of interest payable to holders of covered bonds for the next 12 months must not exceed the amount of interest expected to be received from the cover assets over the same period. Cover pool monitor Reporting duties of the issuer The compliance with statutory tests, mentioned above, is audited by independent auditors. Such audit reports, as well as the quarterly compliance reports by the issuer are submitted to the Bank of Greece. Disclosure requirements to the BoG: (a) results of annual AUP by the independent auditor; (b) Detailed data of the cover pool assets along with the revaluation of the real estate Segregation of cover assets Bankruptcy remoteness Set-off risk Residual Recourse The cover assets are segregated from the remaining estate of the credit institution through a pledge constituted by operation of law (statutory pledge). The relevant legislation creates an absolute priority of holders of covered bonds and other secured parties over the cover pool. The statutory pledge supersedes the general privileges in favour of certain preferred claims (such as claims of employees, the Greek state and social security organizations). The covered bonds are not affected by the commencement of any insolvency proceedings against the issuer and covered bonds do not automatically accelerate upon insolvency of the credit institution. In case of insolvency of the issuer, the Bank of Greece may appoint an administrator if the trustee does not do so. the claims constituting cover assets are not subject to set-off. The relevant legislation provides for dual recourse both to the cover pool as secured creditors and to the remaining assets of the credit institution ranking as unsecured and unsubordinated creditors. 1 Loans with a higher LTV ratio may be included in the cover pool, but they are taken into account for the calculation of the statutory tests only up to the amount indicated by the LTV cap. Source: National Bank of Greece 39 Covered Bond Programme II and New Issuance

41 Greek framework fully complies with 12/15 EBA recommendations EBA recommendations Description Greek Framework 1 Dual Recourse Full alignment reflects that the dual recourse is considered a sine qua non of the concept of a covered bond as defined in Article 52(4) of the UCITS Directive. Fully aligned 2 Segregation of the cover assets Segregation of the cover assets by way of their registration in the Pledge Registry Fully aligned 3 Bankruptcy remoteness of the covered bond Remoteness of the covered bond from the bankruptcy of the issuer and a preferential claim of the covered bond investors on cover assets. Fully aligned 4 Administration of the covered bond programme post the issuer s insolvency or resolution Upon the issuer s insolvency or resolution, the covered bond programme is managed in an independent manner and in the preferential interests of the covered bond investor. Fully aligned 5 Composition of cover pools Cover pools should consist exclusively of one primary asset class; limited to EEA jurisdictions Partially aligned 6 LTV limits Maximum LTV parameters to determine the percentage portion of the loan that contributes to the requirement for coverage of liabilities of the covered bond programme (soft LTV limits). Fully aligned 7 LTV measurement and frequency of revaluation The value of the property securing a particular loan must be updated on at least a yearly basis Fully aligned 8 Coverage principles and overcollateralisation The liabilities of the covered bond programme are sufficiently covered by cover assets Fully aligned 9 Use of derivatives Derivative instruments are allowed in covered bond programmes exclusively for risk hedging purposes Fully aligned 10 Liquidity buffer Means of liquid assets are available at all times to cover the cumulative net outflows of the covered bond programme over a certain time frame Partially aligned 11 Stress testing Stress test exercises on the calculation of the coverage requirement Partially aligned 12 Appointment of the cover pool monitor At the establishment of a given covered bond programme, a cover pool monitor is appointed Fully aligned 13 Supervision of the covered bond issuer Clear and sufficiently detailed illustration of the duties and powers of the competent authority regarding the ongoing supervision of covered bond issuers Fully aligned 14 Duties and powers of the national authority in a scenario of the issuer s insolvency Existence of a sufficiently detailed description of what the duties and powers of the competent authority in a scenario of the issuer s insolvency. Fully aligned 15 Scope of disclosure Issuers should disclose aggregate data on the credit risk, market risk and liquidity risk characteristics of cover assets and covered bonds Fully aligned Sources: National Bank of Greece, EBA-Op Covered Bond Programme II and New Issuance

42 Key features of NBG s Covered Bond Programme II Key features NBG Covered Bond Programme II Issuer Originator Servicer Programme size Currency Format Issuer rating Ratings Country Ceilings Collateral National Bank of Greece S.A. National Bank of Greece S.A. National Bank of Greece S.A. 15 billion EUR Conditional pass-through RD/Caa2/CCC+ (Fitch/Moody s/s&p) B/B3 (Fitch/Moody s) B/B3 (Fitch/Moody s) Prime Greek residential mortgage loans Contractual minimum OC level 25% Legal minimum OC level 5% Asset Monitor Back-Up Servicer Ernst & Young Alpha Bank A.E. CBPP3 eligibility Issuer s assessment NBG Covered Bond Programme II General Criteria 1 1) Covered bonds eligible for monetary policy operations in line with section of Annex I to Guideline ECB/2011/14; 2) and in addition, fulfil the conditions for their acceptance as own-used collateral as laid out in section (fifth paragraph) of Annex I to Guideline ECB/2011/14; 3) and are issued by credit institutions incorporated in the euro area For covered bonds which currently do not achieve the CQS3 rating in Greece and Cyprus 1 1) Programmes rated at country ceiling 2) Monthly reporting of pool and asset characteristics 3) Minimum committed OC of 25% 4) Currency hedges or at least 95% of assets are in euro 5) Claims must be against debtors domiciled in the euro area 1 Decision of the European Central Bank of 15 October 2014 on the implementation of the third covered bond purchase programme (ECB/2014/40) (2014/828/EU) Source: National Bank of Greece 41 Covered Bond Programme II and New Issuance

43 Fitch: Assessment of NBG Covered Bond Programme II Summary of Rating Agency Considerations Rating Inputs Issuer Default Rating (IDR) Potential notching above Long-Term Issuer Default Rating for Greek CB Issuers Source: Fitch reports Viability Rating (VR) Provisions to take into account BRRD Fitch Restricted Default (RD) Potential Uplift Yes, IDR + 2 possible Sovereign Rating Ceiling Effective Uplift Hellenic Republic Rating B- OC consistent with current rating 0% 1 Payment continuity uplift ranges from 6 to 8 notches depending on the programme ccc IDR + [8-10] 1 B IDR + 2 NBG s Viability Rating (VR) is ccc upgraded by Fitch from f with other Greek issuers on 19th June 2017 reflecting banks improved liquidity and expectations for reduction in political risk and strengthening of depositor and investor confidence following the completion of the second review of Greece s third economic adjustment programme The starting point in the ratings process is the ccc VR. Fitch then considers the available protection to investors, mainly in the form of OC, and assesses whether it is sufficient to compensate for credit and interest-rate risk at the respective instrument rating There is up to 2 notches uplift over the IDR assigned to programmes in jurisdictions with advanced resolution frameworks where CBs and secured debt are exempt from bail-in (applicable in Greece) Payment Continuity Uplift (PCU) of up to 8 notches if there are satisfactory liquidity protection mechanisms in place for payments on CBs to be met timely in case of enforcement of recourse against the cover pool Fitch has assigned the Programme an IDR uplift of 2 notches and a PCU of 8 notches but this is not a driver of the rating as the B assigned to NBG Programme II is capped by the Greek Country Ceiling The B- assigned to Greek CB programmes is at the Greek Country Ceiling Recovery prospects driven by the maximum asset percentage (which is a minimum 25% contractual overcollateralization for NBG Programme II) There have been no missed payments on interest or principal that have become due on Greek covered bonds, which continue to be performing obligations of the Issuers 42 Covered Bond Programme II and New Issuance

44 Moody s: Assessment of NBG Covered Bond Programme II Illustrative Greek Covered Bond Programme Rating CRA Rating CB Anchor TPI Country Ceiling Uplift for BRRD Region Outcome TPI Assessment Outcome (Greece) Max. CB Rating Min. CRA Needed for B3 Caa2(cr) BRRD Region YES +1 notch Probable +0 notches B3 B3 Caa2(cr) Rating Rationale Moody s utilizes its standard two-step process to determine the ratings of NBG Covered Bond Programme II: expected loss analysis and a timely payment indicator (TPI) On 27th June 2017 Moody s upgraded the ratings of the NBG Covered Bond Programme II to B3 This follows (a) the upgrade by Moody s of Greece s long-term issuer rating to Caa2 from Caa3 on 23rd June 2017 and a change in outlook to Positive from Stable ; this action reflected the successful conclusion of the second review under Greece s adjustment programme, improved fiscal prospects and early signs of economic stabilization; and (b) the upgrade of NBG s baseline credit assessment to Caa2 with a positive outlook. Following the upgrade of the sovereign rating of the Hellenic Republic, the country ceiling for structured finance transactions was increased to B3 The CB anchor for the NBG Programme II is the CR Assessment plus one notch (i.e. Caa1), with a current TPI assessment of Probable and leeway of limited or none this means the minimum CRA required to support the current B3 rating is the current level of Caa2(cr) Given the linkage to the sovereign rating, additional upgrades in Greece s sovereign rating may result in an upgrade in the ratings of covered bond programmes, provided there is enough overcollateralization available to cover credit risk, in line with the current TPI assessment of Probable. Source: Moody s 43 Covered Bond Programme II and New Issuance

45 NBG Covered Bond Programme II: Why a Conditional pass-through structure NBG Covered Bond Programme II Conditional Pass Through Features The Conditional Pass-Through structure ensures an orderly wind-down of the Cover Pool and avoids the risk of a fire sale and crystallization of losses for the investors The Covered Bonds are bullet obligations of NBG. Non-payment of the bullet obligation will result in a payment default for NBG, triggering cross-default provisions for other liabilities and an Issuer-Event under the Programme. Following an Issuer Event, the Pass-Through repayment mechanism is activated: All cash flows received by the Replacement Servicer in respect of the Cover Pool can be used to pay down the relevant outstanding Pass Through Covered Bonds Every six months an attempt will be made to sell (a randomly selected part of) the Cover Pool The sale can only proceed if the price achieved is at least equal to the Adjusted Required Redemption Amount During the Pass-Through phase, the OC is expected to increase as a result of the pay down of the outstanding Covered Bonds, and a sale of the Cover Pool becomes more likely Comparison of Covered Bond structures Hard bullet Soft-bullet Firesale Extension of typically up to 1 year Firesale Conditional pass-through Extension as per the Extended Final Maturity Date Orderly wind-down Through sales of cover pool assets and natural amortization Source: National Bank of Greece 44 Covered Bond Programme II and New Issuance