Concept & Design MNP Actualization, Layout & Production Management Easy dot Printing Pressious Arvanitidis

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2 The collection and presentation of the content in the 2016 Business Report are the product of the work of all units of Piraeus Bank and its subsidiaries in Greece and abroad. Concept & Design MNP Actualization, Layout & Production Management Easy dot Printing Pressious Arvanitidis The 2016 Business Report of Piraeus Bank was printed on Munken Kristall paper, obtained by environmentally-friendly processes. FSC (Forest Stewardship Council ). Its mission is to promote environmentally responsible, socially beneficial and economically viable management of the world s forests. The 2016 Business Report of Piraeus Bank is available online at: and as an ios & Android tablet Application at Piraeus Group Kiosk. Hard copies of the Report are available upon request to the Investor Relations Unit: 4, Amerikis Str., GR , Athens, Τ: , Investor_Relations@piraeusbank.gr Last update of Piraeus Bank Business Report: May 31, 2017

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5 A new day for the world. Scheduled to last 24 hours, destined to be the day after yesterday, the day before tomorrow. Rising with new light, new colours. And a new century for Piraeus Bank. One hundred years of such new days, successive beginnings every 24 hours, whose colours set the tone and chart a course that is steady, a bright course - almost dazzling. And tomorrow, we will be here again, full of admiration for whatever dawns, ready to start the next day, the next future.

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7 Contents 13 Historical Course 17 Vision and Values 18 At a Glance 29 Chairman s Letter to the Shareholders 37 Group s Financial Data Analysis 45 Economy Developments 47 Market Review 50 Targets and Outlook 57 Operations in Greece 95 International Operations 105 Technology, Organization and Central Operations 131 Risk Management

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13 Historical Course The early years 1916: founding of Piraeus Bank. 1918: listing of Piraeus Bank shares on the Athens Stock Exchange (ATHEX). 1963: Piraeus Bank is integrated in the Group of Emporiki Bank of Greece. 1975: Piraeus Bank, as part of Emporiki Group, comes under state control Growth and creation of "critical mass" 1991: privatisation of Piraeus Bank. 1992: reorganisation, rationalization and growth. 1993: establishment of Piraeus Leasing, Piraeus Mutual Funds and Piraeus Insurance Agency. 1996: founding of Tirana Bank in Albania. 1997: absorption of assets and liabilities of Chase Manhattan Bank in Athens. Acquisition of 30% of Sigma Securities with an agreement for the future acquisition of an additional 21%; Acquisition completed in : acquisition of Macedonia-Thrace Bank. Acquisition of Credit Lyonnais Hellas. Agreement for the acquisition of a majority stake in Xiosbank (deal completed in the beginning of 1999). Agreement for the acquisition of a 56% stake in Marathon National Bank of New York (deal completed in mid-1999). 1999: absorption of assets and liabilities of National Westminster Bank in Greece. Operational and administrative integration of the three commercial banks of the Group (Piraeus Bank, Macedonia-Thrace Bank and Xiosbank). Acquisition agreement for Pater Credit Bank in Romania (integrated in the Group in April 2000, as Piraeus Bank Romania). Establishment of London Branch. Business Report 13

14 Integration of IT systems and processes 2000: completion of merger by absorption of Xiosbank and Macedonia-Thrace by Piraeus Bank. Creation of winbank, the first integrated e-banking platform in Greece. 2001: completion of reorganisation of asset management and investment banking sectors, with merger of similar mutual funds, and absorption of Xios Securities and Macedonia-Thrace Securities by Sigma Securities SA. Agreement for the acquisition of ETVAbank. Extension of the Group s market shares in banking, leasing and third-party wealth management. 2002: completion of a 57.8% acquisition of ETVAbank. 2003: merger by absorption of ETVAbank by Piraeus Bank, of Piraeus Investment SA by Hellenic Investment Company and of ETVA Leasing by Piraeus Leasing SA Strong domestic presence and international expansion 2004: merger by absorption of Devletoglou Securities SA by Sigma Securities SA, and of ETVA Insurance Agency by Piraeus Insurance Agency. 2005: acquisition of 99.7% of Bulgarian Piraeus Eurobank AD (renamed Piraeus Bank Bulgaria AD). Acquisition of 80% of Serbian Piraeus Atlas Banka AD (renamed Piraeus Bank Beograd AD). Acquisition of 69.3% of Egyptian Commercial Bank (renamed Piraeus Bank Egypt). 2006: merger and operational integration of Piraeus Bank branch network in Bulgaria with Piraeus Bank Bulgaria. 2007: acquisition of International Commerce Bank in Ukraine (renamed JSC Piraeus Bank ICB). Acquisition of Arab Bank s branch network in Cyprus. Renewal of the cooperation with the international ING Group in the field of bancassurance in Greece. Completion of the Bank s Share Capital Increase by 1.35 bn. 2008: establishment of Piraeus Bank Cyprus Ltd Responding to the first phase of the financial crisis 2009: issuance of non-voting preferred shares, to the amount of 370 mn, in favour of the Hellenic Republic, pursuant to Greek Law 3723/2008 (L. 3723/2008). Agreement with Victoria General Insurance Company SA, subsidiary of ERGO International in Greece and member of the Munich Re Group, for the implementation of a ten-year exclusive cooperation in the general insurance field. 2010: creation of winbank Direct ( the first online channel for the delivery of banking services in Greece. 2011: completion of a Share Capital Increase of 0.8 bn. Issuance of additional non-voting preferred shares, to the amount of 380 mn, in favour of the Greek State, pursuant to L. 3723/2008. Participation in the PSI programme with total eligible bonds amounting to 7.7 bn; the total impairment recognized in the financial year 2011 amounted to 5.9 bn before taxes. 14 Business Report

15 Safeguarding the balance sheet and participation in the consolidation of the sector 2012: acquisition of the "healthy" part (selected assets and liabilities) of ATEbank, which was placed under special liquidation at the time. Sale of the participation (98.8%) in Marathon Banking Corporation. Acquisition of the total participation of Societe Generale (99.1%) in Geniki Bank. Participation in the Greek Government Bond (GGBs) Buyback Programme for the reduction of public debt. 2013: acquisition of deposits, loans, branches and employees in Greece of Bank of Cyprus, Cyprus Popular Bank and Hellenic Bank. Agreement for the sale of Piraeus Bank s stake (93.72%) in the share capital of ATEbank Romania SA. Agreement with Millennium BCP for the acquisition of the capital share of Millennium Bank Greece SA. Share capital increase of 8,429 bn. Integration of the information systems of former ATEbank, Hellenic Bank, Bank of Cyprus and Cyprus Popular Bank in the uniform IT environment of Piraeus Bank. Legal merger and integration of IT systems of Millennium Bank Greece SA, completing the integration of all banking activities that were acquired by Piraeus Bank, with the exception of Geniki Bank. 2014: issuance and placement of 0.5 bn three-year senior bonds in the international markets, in order to obtain medium-term liquidity. Share capital increase of 1.75 bn. Redemption of Greek State s Preferred shares in the amount of 750 mn (L.723/2008). Approval of the merger of Piraeus Bank with Geniki Bank SA, by acquisition of the latter by the former and completion of the Geniki Bank s systems integration in the uniform IT environment of Piraeus Bank Group. 2015: acquisition of the "healthy" part of Panellinia Bank SA. The integration of its systems was completed in July Return to the Public Debt Management Agency (PDMA) of the sum of special bonds issued to the Bank within the framework of Pillar III of L. 3723/2008, with a total nominal value of 2.2 bn. Liability Management Exercise (LME) involving the exchange of securities for cash or shares (or any combination thereof) in respect of the senior unsecured bonds and preferred securities of 500 mn with a fixed interest rate maturing in 2017, of 400 mn with a floating interest rate maturing in 2016 and of 200 mn with a floating interest rate and indefinite duration. The LME was conducted in order to strengthen the Bank s capital base. The bond holder general meetings approved the exchange for all the securities. ECB Banking Supervision conducted a comprehensive assessment of the four Greek systemic banks. Agreement for sale of its stake in the subsidiary Piraeus Bank Egypt SAE. Completion of the book-building process regarding the offering of new common shares in cash amounting to 1.34 bn. The Bank s revised Restructuring Plan was approved by the European Commission. Completion of raising funds to the amount of 4.7 bn, with a share capital increase with cash, capitalisation of liabilities via cash payments and contribution in kind of ESM bonds, and issuance of contingent convertible bonds (CoCos) that were covered solely by the Hellenic Financial Stability Fund (HFSF). Business Report 15

16 2016 The Single Resolution Mechanism (SRM) for Eurozone banks, to whose supervisory jurisdiction Piraeus Bank falls under, became fully operational. Piraeus Bank s last remaining guarantees of the Hellenic Republic (Pillar II), issued under the framework of L. 3723/2008, used for liquidity purposes, were redeemed. Piraeus Bank had already repaid the Preferred Shares (Pillar I) held by the Government in the Bank's share capital in May 2014, while it returned the "Special Bonds" (Pillar III) to the Government in September Upon redemption of Pillar II bonds, Piraeus Bank no longer had any reliance on the measures of L. 3723/2008, and therefore was no longer subject to the restrictions of the support scheme, which, among others, required the appointment of a Greek State representative on its Board of Directors (BoD). Announcement by Piraeus Bank regarding agreement for the sale of shares in its subsidiary in Cyprus, Piraeus Bank Cyprus Ltd (PBC) for a consideration of 3.2 mn. Decision by the former Non-Executive Chairman of Piraeus Bank, Mr. Michalis Sallas not to participate in the new BoD of Piraeus Bank. Mr. Sallas was awarded the title of Chairman Emeritus of Piraeus Group, after unanimous resolution of the BoD. Following the resignation of Mr. Michalis Sallas, the BoD of Piraeus Bank elected Professor Mrs Charikleia Apalagaki, as interim Chairman. In November the BoD elected Mr George Handjinicolaou as new Chairman. Announcement by Piraeus Bank regarding the transfer of 100% of the share capital of ATE Insurance to Ergo International AG, a subsidiary of Munich Re, following the fulfilment of all the conditions under the relevant agreement. At the end of 2016, Piraeus Bank was the first bank to launch into the Greek market a new model of a fully automated e-branch offering a range of full-service banking transactions. 16 Business Report

17 Vision and Values Piraeus Bank defines its vision taking fully into account where it is today: in the first place. With the trust of its customers, Piraeus Bank will contribute to the restart of the domestic economy, offering innovative banking solutions to customers, while at the same time operating effectively and using its supervisory capital prudently. Piraeus Bank Group sets out targets with a sustainable outlook, promotes innovative and sustainable entrepreneurship, guides its people with integrity, empowering them with continuous training, provides high quality service to its customers, ensures transparency and builds relations of trust in all its operations. The vision of Piraeus Bank is to be the most trusted Bank in Greece, creating value for its shareholders, its customers and its employees. The Bank's values include customer focus, management accountability, performance driven culture and business sustainability. Business Report 17

18 At a Glance Market leader in Greek banking market, and active in 7 other countries, 4 of which are members of the European Union. 921 branches 1, 660 in Greece and 261 abroad. 18,075 employees 1, 14,492 in Greece and 3,583 abroad, young in age (41 years old is the average), familiar with technology, fully-trained, flexible regarding the adoption of new methods and practices. Pioneer in supporting agricultural and green entrepreneurship. Pioneer in environmentally-friendly and user-friendly electronic banking through its winbank web-banking platform. 5.6 mn customers 1 in Greece and the other countries it operates in. Constantly among the top-ranking banks in Greece, regarding customer satisfaction and loyalty. Contribution to society, culture and environment through a systematic and defined framework of actions and initiatives. 1 Data as at Business Report

19 Group Total Assets ( bn)* * The evolution of volumes incorporates divestment of operations, in accordance with the approved Restructuring Plan of Piraeus Bank.

20 Group Net Loans ( bn)* * The evolution of volumes incorporates divestment of operations, in accordance with the approved Restructuring Plan of Piraeus Bank.

21 Group Deposits ( bn)* * The evolution of volumes incorporates divestment of operations, in accordance with the approved Restructuring Plan of Piraeus Bank.

22 Group NPL ratio* % 36.6% 38.8% 37.5% * NPL ratio does not include the seasonal agri loan facility to OPEKEPE.

23 Group Pre Provision Profit ( bn)

24 Group Operating Costs ( bn)

25 Group Branch Network* Total , , , International Operations Greece * The evolution of the branch network incorporates divestment of operations, in accordance with the approved Restructuring Plan of Piraeus Bank.

26 Group Human Resources* Total , , , ,075 5,952 5,705 3,680 3,583 16,558 15,539 15,599 14,492 International Operations Greece * The evolution of the number of employees incorporates divestment of operations, in accordance with the approved Restructuring Plan of Piraeus Bank.

27 Group Common Equity Tier % 17.0% 13.9% 12.0%

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29 Chairman s Letter to the Shareholders 2016 was marked by a series of positive developments for the Greek economy, such as the successful conclusion of the first review for the third Economic Adjustment Programme, the further relaxation of capital controls, the reinstatement of the waiver for Greek Government Bonds (GGBs), i.e. making GGBs once again eligible as collateral for ECB monetary policy operations, and the short-term debt relief measures for Greece announced at the end of the year. Even though developments had a positive impact on limiting uncertainty and improving the economic sentiment, the economy failed to regain its momentum and return to positive growth. In 2016, the Greek GDP remained relatively stable, following a recession of -0.3% in 2015, based on seasonally adjusted data. In the second and third quarters of the year, GDP grew with positive rates, but in the fourth quarter recorded a negative quarterly change of -1.1%. Overall, in 2016 domestic demand had a positive contribution, mainly due to the increase in private consumption, whereas the contribution of international trade was negative. In the first quarter of 2017, real GDP grew by 0.4% both on an annual and a quarterly basis. Meanwhile, in 2016 inflation remained in negative territory, albeit its deflating trend following a slower pace (2016: -0.8%, 2015: -1.7%). However, in December 2016 Greece emerged from 45 months of deflation, turning to a zero inflation rate annually. The unemployment rate stood at 23.5% in 2016 versus 24.9% in 2015, as employment increased by 1.7% and the number of unemployed decreased -5.5%. In 2016, the current account balance posted a deficit of bn (-0.6% of GDP), compared to a surplus of around 0.2 bn (0.1% of GDP) in In the first quarter of 2017, the current account deficit widened by 160 mn compared to the corresponding quarter of 2016 and stood at bn. In 2016, tourism revenues were down 6%, a decline that was attributed to the reduction in average expenditure per trip by 11%, since the number of arrivals from abroad posted a 5% increase. On a fiscal level, 2016 had a positive performing. The general government balance (excluding the impact of financial institutions support) showed a 0.7% of GDP surplus in 2016, against a deficit of -3.2% of GDP in 2015, while the corresponding primary surplus reached 3.9% versus 0.4% in At the end of 2016, the Economic Sentiment Index (ESI) stood at 91.8 points, compared to 89.7 points in However, the protracted negotiations for the conclusion of the second programme review led to a renewed heightened uncertainty and to the decline of the ESI during the beginning of Therefore, critical parameters to the path towards economic recovery in 2017, at macroeconomic and fiscal level, remain the conclusion of the second programme review, the timely disbursement of the programme instalments for debt repayment and for the reimbursement of state arrears to private sector suppliers and the implementation of debt relief measures. Business Report 29

30 The Greek banking system, following the successful recapitalization at the end of 2015, has formed significant buffers of additional capital that shielded the Greek banks' balance sheets, despite the prevailing conditions in the domestic economy. Addressing the high level of non-performing loans represents the biggest challenge for the Greek banking system. In late November 2016, the Bank of Greece (BoG) in cooperation with the Single Supervisory Mechanism (SSM) of the European Central Bank (ECB) set operational targets for the reduction of non-performing exposures (NPEs) of Greek banks, which are accompanied by key performance indicators. Quarterly operational targets were set from June 2016 up until the end of 2017 and annual targets for 2018 and These operational targets have been incorporated in the banks business plans. Within this framework, the sector is estimated to reduce its NPEs by approximately -38%, from approximately 107 bn in September 2016 to approximately 67 bn by the end of The downward trend in NPEs was evident during the first two quarters of implementing the operational targets (third and fourth quarters of 2016). This reduction was achieved mainly due to the implementation of effective restructuring arrangements, which reinstated exposures in arrears to normal servicing status, and due to the write-offs of non-recoverable exposures. With respect to loans in the Greek banking market, the annual adjusted reduction rate of domestic retail sector financing in December 2016 stood at -1.5% ( 195 bn) from -2.0% in The loans to deposits ratio for the Greek banking market improved to 120% in December 2016 from 128% in December Deposits in the domestic market (private and public sector on a comparable basis) increased 4% and amounted to 139 bn. The Greek banking system s total reliance on the Eurosystem was limited in December 2016 to 67 bn, from 108 bn a year earlier, of which 44 bn were covered through the Emergency Liquidity Assistance (ELA) mechanism (- 25 bn year-on-year) and 23 bn from ECB refinancing (- 16 bn year-on-year). On , the ECB Governing Council decided to reinstate the waiver for GGBs, i.e. making GGBs once again eligible as collateral for ECB monetary policy operations. The suspension entered into force on Greek banks participated in the ECB s Targeted Longer-Term Refinancing Operations II programme (TLTROs), which was launched on , conditional on the existence of eligible collateral. The TLTRO II programme has a four-year maturity, with the possibility to participate on four different dates, the first of which was in June 2016 and the final one in March In addition, a significant development that occurred in 2016, was the fact that the European Financial Stability Facility (EFSF) has allowed Greek banks, which had received its notes as part of their recapitalization and the consolidation of the industry during the previous years, to sell the notes under ECB s Quantitative Easing programme (QE). Taking into account the implementation of the Economic Adjustment Programme and the gradual relaxation of capital controls since the end of July 2016, and the prospect of the completion of the second programme review, it is estimated that Greek banks are in a position to gradually improve their funding profile and strengthen their deposit base, as long as the second review negotiations are completed swiftly and successfully. The most important corporate events for Piraeus Bank Group during 2016 were the following: Moody s upgraded the credit rating of the senior debt of Piraeus Bank to "Ca" with a stable outlook from "C", and affirmed the credit rating of its deposits to "Caa3", changing the outlook to stable from negative. S&P Global Ratings upgraded the credit rating of Piraeus Bank to "CCC+" with Stable outlook from "SD" previously. Following EFSF s decision in April 2016, Greek banks that had previously received EFSF notes for their recapitalisation and/or the consolidation of the banking sector, were able to participate in the Quantitative Easing programme (QE) established by the ECB, by selling the respective notes. Up to Piraeus Bank had sold EFSF notes with a nominal value of 3.7 bn within the framework of the QE programme. Piraeus Bank s last remaining guarantees of the Hellenic Republic (Pillar II), issued under the framework of L. 3723/2008, used for liquidity purposes were redeemed. Piraeus Bank had already repaid the Preference Shares (Pillar I) held by the Government in the Bank's share capital in May 2014, and had returned the "Special Bonds" (Pillar 30 Business Report

31 III) to the Government in September Upon redemption of Pillar II bonds, Piraeus Bank no longer had any reliance on the measures of L. 3723/2008, and therefore was no longer subject to the restrictions of the support scheme, which, among others, required the appointment of a Greek State representative on its BoD, as was the case during the last seven years. Piraeus Bank has fully repaid all the Pillars of L. 3723/2008, without any loss to the Greek State as to the guarantees and capital it offered, while the Greek State has earned approximately 675 mn in fees from Pillars II & III. Piraeus Bank sold its 28.7% equity stake in the share capital of European Reliance General Insurance Co. SA, following its successful recapitalization in December The transaction was carried out as part of the Bank s disposal of non-core assets as prescribed in its Restructuring Plan. In the context of implementing its Restructuring Plan, Piraeus Bank entered into an agreement with Wert Red S..r.l., a Luxembourg-based company, wholly owned by V rde Partners, for the sale of 18,551,880 shares in its subsidiary Trastor REIC. The ECB s decision on to reinstate the waiver affecting the eligibility of marketable instruments issued or fully guaranteed by the Hellenic Republic as collateral for the supply of liquidity subject to special haircuts, resulted in the reduction of Piraeus Bank s funding from the ELA mechanism by approximately 1 bn. Piraeus Bank entered into an agreement for the sale of shares in its subsidiary in Cyprus, Piraeus Bank Cyprus Ltd (PBC) for a consideration of 3.2 mn. This, in combination with a concurrent share capital increase by PBC of 40 mn, which was fully-subscribed by private investors resulted in the reduction of Piraeus Banks participation in PBC s share capital to 17.7%. Piraeus Bank completed the agreement for the sale of 100% of the share capital of ATE Insurance to Ergo International AG - a subsidiary of Munich Re. ERGO International AG paid a consideration of 90.1 mn in cash for the total stake of Piraeus Bank in ATE Insurance s share capital. The results of the Asset Quality Review (AQR) and of the Stress Test which were carried out by the Bulgarian National Bank (BNB) were announced. The results showed that Piraeus Bank Bulgaria, a subsidiary of Piraeus Bank, is very well capitalized even under the adverse scenario of the exercise. Piraeus Bank announced that it is exploring strategic alternatives regarding its participation in the share capital of its subsidiary "Olympic Commercial and Tourism Enterprises SA", including a potential sale of its stake, a process still in progress. The first quarter of 2017 is undoubtedly a period of uncertainty for the domestic economic and banking environment. The projected reforms defined in Greece's Economic Adjustment Programme are expected to accelerate the recovery and restructuring of the economy, while most international organizations and agencies estimate a positive GDP growth rate in 2017, though lower than the initial estimate of growth above 2%. A prerequisite is the successful conclusion of the second review of the Economic Adjustment Programme, which is expected to have a significant positive impact on restoring confidence in the Greek economy. In the context of its business planning, Piraeus Bank focuses on all the possibilities and opportunities for recovery. Key issues for 2017 remain: a) improving asset quality through the consistent implementation of active NPL management and the use of new solutions legislated in 2016 or expected to be legislated in 2017, so as to honour its commitments to ECB, b) improving liquidity through the gradual return of deposits, and the reduction in ELA funding, and c) returning to profitability, through the continuous improvement of sources of revenue and of operational efficiency. Business Report 31

32 Furthermore, the further deleveraging mainly of foreign assets is expected to continue, in accordance with the commitments depicted in Piraeus Bank's Restructuring Plan. Finally, the appointment process of the Bank s new CEO was concluded at the beginning of March 2017, with the election of Mr. Christos Megalou, marking a major step towards the formation of a strong BoD, with the expertise, the experience and the determination to successfully address current challenges and ensure that the Bank can successfully confront the operating and corporate governance challenges, as stipulated by best international practices and ECB s recommendations. George Handjinicolaou Chairman of the Board of Directors 32 Business Report

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37 Group s Financial Data Analysis Volumes Evolution At the end of December 2016, the Group s total assets amounted to 81,501 mn down from 87,934 mn in December The Group s gross loans before adjustments at the end of December 2016 amounted to 66,648 mn, including the disbursement of a seasonal agri-loan facility of 1.7 bn to OPEKEPE (Greek Payment and Control Agency for Guidance and Guarantee Community Aid) for the payment of EU agricultural subsidies to approximately 700 thousand Greek farmers, which was repaid in full in the beginning of Total loans in Greece were 62,998 mn and loans from international operations amounted to 3,650 mn. Following the great decline in the Group s total deposits in 2015 due to the uncertainty about Greece, there was a gradual increase during the second half of At the end of December 2016, Group deposits amounted to 42,365 mn, with the increase stemming mainly from Greece, where deposits increased to 39,322 mn. Piraeus Bank s Group reliance on the Eurosystem declined in 2016, ending at 20.9 bn in December 2016, down from 32.7 bn by the end of Financing through the ELA was reduced to 11.9 bn at the end of 2016 from 16.7 bn at the end of In addition, access to the interbank Repo market improved in 2016, with a balance of 5.9 bn at the end of December 2016 versus 1.7 bn a year earlier. Regarding the Group s loans breakdown by customer at year-end 2016, the total business portfolio amounted to 44,213 mn, with retail loans amounting to 22,435 mn. Business loans represent 66% of total Group loans, with retail loans at 34% (24% for mortgages and 10% for consumer loans). Based on December 2016 data, Piraeus Bank holds the first position in the Greek banking sector, with a 30% market share in terms of loans. Net loans amounted to 49,708 mn, with Piraeus Group s loan to deposits ratio in December 2016 having improved to 117% at December 2016 from 129% at year-end Gross Loans per Category Amounts in mn Change Loans to Businesses 44,213 44,525-1% Retail Loans 22,435 23,546-5% Total Loans 66,648 68,071-2% Greece 62,998 63,922-1% International Operations 3,650 4,149-12% Business Report 37

38 Deposits per Category Amounts in mn Change Sights Savings 26,186 24,780 6% Time 16,179 14,577 11% Total Deposits 42,365 39,358 8% Greece 39,322 36,547 8% International Operations 3,043 2,810 8% Loan Portofolio Quality The Group s NPLs ratio decreased to 37.5% (or 36.6% including OPEKEPE), at the end of December 2016 from 40.1% (or 39.5% including OPEKEPE), a year earlier. NPLs declined by 2.5 bn year-on-year, settling at 24.4 bn in December This trend is a result of the combination of negative formation of new NPLs and write-offs. The formation of new NPLs in 2016 continued its downward trend of recent years. Specifically, the Group's NPL formation was negative in all quarters of 2016, with significant deleveraging in Greece, mainly in business loans. For Group retail loans, the negative NPL flow had started in the last quarter of The improvement in this category is mainly due to the active management of the loans in arrears portfolio by the Recovery Banking Unit (RBU). NPEs declined to 36.2 bn from 36.9 bn, at a slower pace compared to NPLs due to EBA rules regarding classification as NPEs for a specific period following restructuring. As part of the submission of operational targets for asset quality to ECB and BoG, Piraeus Bank has committed to reduce its NPEs, over the June 2016-December 2019 period by 41%, and its NPLs over 90 days past due (NPLs>90 days) by 58% over the same period (at the parent level). The relevant targets for , both for NPEs and NPLs have been achieved. Provisions of 1,015 mn were booked in 2016, with total cumulative provisions at year-end 2016 amounting to 16,941 mn. The Group s NPLs>90 days coverage by cumulative provisions stood at 69% at year-end 2016, higher than December 2015 (65%). Per geographical region, the relative ratio stood at 70% in Greece and at 64% abroad. Including tangible collateral and guarantees, coverage reaches 135%. The Group s cumulative provisions to gross loans ratio at year-end 2016 reached 25%, with 29% for business loans, 11% for mortgages, 39% for consumer loans and credit cards, from 26% in December Capital Adequacy As at , the Group s total equity amounted to 9.8 bn from 10.0 bn a year earlier, mainly due to the payment of approximately 166 mn interest for the CoCos of 2,040 mn ( 118 mn net of tax). The Group s Basel III total capital adequacy (CAD) ratio stood at 17.0% at the end of December 2016, equal to the Common Equity Tier 1 (CET1) ratio. The amount of deferred tax assets which is included in the Group s regulatory capital in accordance with the provisions of L. 4172/2013, L. 4302/2014, L. 4340/2015 was 4.1 bn at 31 December The Group s fully-loaded CET1 (to be implemented in 2024) stood at 16.2%. Following the conclusion of the Supervisory Review and Evaluation Process (SREP) for 2016, the ECB informed Piraeus Group of its total capital requirement, valid from According to the decision, Piraeus Bank has to maintain, on a consolidated basis, an overall capital requirement ratio of 13.0%, which includes: (a) the minimum Pillar I total capital requirements (Basel) as per article 92(1) of Regulation (EU) No. 575/2013; (b) the additional Pillar II capital requirement (Basel) as per article 16(2) of Regulation (EU) No. 1024/2013; and (c) the transitional capital conservation buffer of Regulation (EU) No. 575/2013, which for 2017 is set at 1.25%. Group Results Evolution The Group s net interest income amounted to 1.8 bn during 2016 versus 1.9 bn in 2015, despite the improvement from the drop in the cost of funding, due to asset deleveraging, a slight decrease in average loan spreads, as well as the decline of Euribor, the base for pricing most assets. Net commission income amounted to 0.3 bn, up 7% year-on-year, mainly due to commercial banking activities. Total net revenues for 2016 were 2.4 bn, at similar levels as in In 2016 financial results include an amount of mn from the Bank s participation in ECBs quantitative easing (QE) 38 Business Report

39 programme through the sale of EFSF bonds, in accordance with the aforementioned. Moreover, there was a 77 mn oneoff gain from the participation in VISA, resulting from the sale of VISA Europe to VISA Inc. on The Group s total operating expenses in 2016 stood at 1.3 bn from 1.5 bn in 2015, while excluding the voluntary exit scheme (VES) expense recognized in 2015 ( 111 mn), on a comparable basis, the annual decline in operating expenses for the Group for 2016 was 3%, resulting from the cost containment efforts implemented by Piraeus Bank. As a result of the above, Group pre-tax and provision profits for 2016 amounted to 1.0 bn from 0.9 bn in The results of 2016 were burdened by loan provisions of 1.0 bn, significantly lower than 3.5 bn in 2015, in line with the decline in NPLs, thus safeguarding the Group's balance sheet and bringing the cumulative provisions at the end of 2016 to 16.9 bn. The high level of cumulative provisions enables the Bank to address effectively the NPLs problem with long-term solutions, already implemented by the RBU. In addition, other receivables and assets were impaired by 0.2 bn versus 0.4 bn in The Group s pre-tax result amounted to a loss of 168 mn, while the net result from continuing operations attributable to shareholders amounted to a loss of 4 mn in 2016 compared to losses of 1,858 mn in 2015, positively affected from the recognition of deferred tax in the impairments on the value of participations, for which there exists a commitment to sell or liquidation is foreseen in the near future. The following table presents selected Balance Sheet and Results. The figures for the period include the results of ATE Insurance Romania SA, Piraeus Bank Cyprus Ltd (PBC) group of companies and ATE Insurance SA until the day of its disposal ( ). Additionally, a loss of 27.6 mn is included from the disposal of the ATE Insurance SA, based on the agreed sale price, which is subject to the standard adjustments. The figures for the period include the results of the aforementioned companies and Piraeus Bank Egypt SAE group of companies until the date of their disposal ( ). Business Report 39

40 Consolidated Data (amounts in mn) Δ% yoy Selected Balance Sheet Figures Assets 81,501 87,934-7% Deposits 42,365 39,358 8% Gross Loans before Adjustments 66,648 68,071-2% Cumulative Provisions 16,941 17,480-3% Total Equity 9,824 10,021-2% Selected P&L Results FY 2016 FY 2015 Δ% yoy Net Interest Income 1,811 1,877-4% Net Fee & Commission Income % Net Trading & Inv. Securities Income % Other Operating & Dividend Income % Net Revenues 2,366 2,393-1% - excl. one-off items 2,289 2,393-4% Personnel Expenses (628) (772) -19% Administrative Expenses (584) (589) -1% Depreciation & Amortization (111) (112) -1% Total Operating Expenses (1,322) (1,473) -10% - excl. one-off items (1,322) (1,361) -3% Pre Provision Income (PPI) 1, % - excl. one-off items 967 1,032-6% Impairment Losses on Loans (1,015) (3,487) -71% Impairment Losses on Other Assets (179) (351) -49% Associates' Results (18) (13) - Pre-Tax Result (168) (2,930) - Income Tax 159 1,069 - Net Result Attributable to Shareholders, Continued Operations (4) (1,858) - Non-Controlling Interest, Continued Operations (5) (3) - Net Result from Discontinued Operations (31) (35) - 40 Business Report

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45 Economy Developments Greek Economy 2016 was marked by the successful conclusion of the first review for the third Economic Adjustment Programme and the adoption of additional fiscal adjustment measures, the further relaxation of capital controls and the reinstatement of the waiver for GGBs, making GGBs once again eligible as collateral for ECB monetary policy operations. In 2016, the real GDP remained practically stable at 2015 levels, but at the fiscal level Greece achieved a sizeable primary general government surplus. During 2016, the real GDP, based on seasonally adjusted data, remained flat following a -0.3% decline in In addition, the economic sentiment index improved to 91.8 points, from 89.7 points in In the first quarter of 2017, real GDP grew by 0.4% both on an annual and a quarterly basis. Meanwhile, in 2016 the inflation rate was -0.8% (2015: -1.7%). However, for the first time after a 45-month deflating trend, inflation was 0.0% in December 2016, while it entered into positive territory in the first quarter of The unemployment rate stood at 23.5% in 2016 down from 24.9% in In 2016, the current account balance posted a deficit of bn (-0.6% of GDP), compared to a surplus of 206 mn (0.1% of GDP) in In the first quarter of 2017, the current account deficit widened by 160 mn compared to the corresponding quarter of 2016 and stood at bn. In 2016, the Greek economy had a robust fiscal performance. General government balance posted (excluding support for financial institutions) surplus of 0.7% of GDP in 2016 from a 3.2% deficit in 2015, while the corresponding primary surplus reached 3.9% of GDP, compared with 0.4% in Based on the Economic Adjustment Programme methodology, which sets the targets to be met by the Greek government, the primary surplus is estimated at 4.2 % of GDP, significantly above the target for 0.5% of GDP. On a macroeconomic and fiscal level, the conclusion of the second review for the third Economic Adjustment Programme and the timely disbursement of the programme instalments for debt repayment and for reimbursement of state arrears as well as the implementation of debt relief measures are crucial for the course of the economy in The conclusion of the review, combined with the anticipated debt relief measures over time, is expected to lead to a gradual improvement in the economic sentiment, alongside with privatizations, the further relaxation of capital controls, the return to positive GDP growth rates and the participation of Greek bonds in the ECB's QE programme. Global Economy In 2016 the course of the global economy was mainly affected by political developments and the interventions of Central Banks. Global GDP growth was 3.1% in 2016, with developed economies at 1.7%, and emerging and developing economies at 4.1%. For 2017, the global economy is forecast to grow 3.5%, with a similar estimate for developed economies (2.0%), as well as developing economies (4.5%). In more detail, the GDP growth rate of the US economy slowed down to 1.6% in 2016 (from 2.6% in 2015), while inflation accelerated to 1.3% (from 0.1%). In its December 2016 meeting, the Federal Reserve (FED) increased its base Business Report 45

46 rate (from 0.25%-0.50% to 0.50%-0.75%) and in March 2017 it proceeded with another increase (to 0.75% -1.00%). For 2017, GDP growth is anticipated to accelerate to 2.2% mainly due to the fiscal stimulus expected to be initiated by the new administration. The FED is expected to proceed with two further base rate increases (25 basis points each). The Eurozone s economy GDP growth rate slowed down to 1.7% in 2016 (from 1.9% in 2015), while inflation remained at a very low level for a third consecutive year. For 2017, Eurozone s GDP growth rate is projected to remain at 1.7%, with inflation to pick up to 1.5%. The ECB will continue to implement its QE programme until the end of 2017 (with monthly purchases of 60 bn). However, the initiation of processes for the "Brexit" and the upcoming elections in major European countries create severe political concerns about the cohesion of the European Union. In addition, the acceleration of inflation will be exerting pressure to ECB to reduce the size of its QE programme. The GDP growth of China s economy decelerated to 6.7% during 2016 (from 6.9% in 2015), which is the lowest growth rate since The significant reduction of foreign exchange reserves (by $320 bn during 2016 or by $830 bn over the period), which supported the Chinese currency, reflects the risks lurking for China s economy. For 2017, the GDP growth rate of the Chinese economy is expected to slow down even further (to 6.5%) and the Central Bank of China will continue supporting its currency and taking actions to prevent the steep deceleration of the economy. Thus, 2017 is expected to be characterized by the policies followed by the major central banks (the FED is anticipated to continue its return to the "normalcy" of its policy, whereas the ECB and the Central Bank of Japan will continue their QE policies), the fiscal stimulus to be initiated by the new US administration, and the political developments in the European Union. Southeast Europe In 2016, SEE economies maintained the dynamics of the previous year by posting higher positive growth rates than the region and their European partners. The increased presence of foreign companies and investments in production units in most of these countries maintained production levels, employment rates and exports at increased levels. As a result, real GDP grew further in 2016, with similar signs of improvement evident in nominal GDP. Deflationary pressures continued in 2016 following the European trend, with most countries remaining in negative annual rates of change. However, the last few months of the year witnessed a reversal of the trend, with inflation expected to re-emerge in the first half of As a result of GDP increase, there has been a significant increase in consumer spending, while the re-launching and improved absorption of European funds are expected to improve the growth prospects for the next two years. The aforementioned combined with the significant fiscal consolidation achieved over the period will contribute to maintaining public debt at sustainable levels. However, growing political uncertainty in some countries, such as Romania and Ukraine, may slow down the required structural reforms, jeopardize investments and curb the reduction of the budget deficit. The key challenges for SEE in 2017 are the preservation of growth momentum, the combating of inflationary trends, the management of non-performing loans, as well as the safeguarding of the sustainability of the public sector. 46 Business Report

47 Market Review Equity markets saw positive performances during 2016, as the prices of US equities (based on S&P500 Index) rose by 9.5%, the prices of British equities (based on FTSE100 Index) by 14.5% and the prices of developing countries equities by 8.5%. At the same time, the prices of European equities (based on Euro Stoxx 600 Index) fell marginally (by -1.1%) and the prices of Japanese equities (based on NIKKEI 225 Index) increased marginally (by 0.5%). In total, share prices (based on MSCI World Index) rose by 5.3%. The US government bond yields surged due to the rising expectations following the outcome of the US presidential elections in November By way of illustration, the 10-year US Treasury yield rose by 17 basis points (to 2.44% by the end of 2016). On the other hand, yields on German government bonds dropped 42 basis points (to 0.21% at the end of 2016), due to the ECB's QE programme and the growing political risk within the EU. At the same time, the spread of US corporate bond yields (as compared to 10-year US Treasury yield) declined by 97 basis points (according to Moody s Corporate Bond ΒAA Index). The BofA Merrill Lynch Euro Corporate Index started in 2016 at 102 basis points and declined to 72 basis points at the end of the year, very close to the historical average of 77 basis points. The international energy prices increased significantly during 2016, as the price of American crude oil rose by 45% and that of Brent by 53%. In addition, the prices of industrial metals (based on the S&P GS Industrial Metals Index) increased by 19% and of gold by 8%. Overall, the prices of commodities (based on the S&P GS Commodities Index) increased by 28% and of freight rates (based on the Baltic Dry Index) by 101%, remaining however at a relatively low level. The USD was strengthened by 2.5% (trade-weighted exchange rate) during 2016, while the Euro dropped by 1.1% (trade-weighted exchange rate). More specifically, the Euro dropped by 3.3% in relation to the USD, which in turn dropped 2.7% in relation to the Yen. Following the result of the British "Brexit" referendum, the GBP fell 16.5% against the USD and 13.5% against the Euro. Despite the liquidation of a significant part of the currency reserves by the People s Bank of China, the USD was up 7% against the Chinese Yuan. Following the election of the new president in the United States, the possibility of the international economy moving away from the monetary model has grown considerably. Focus is being drawn to the real economy, with priority to fiscal stimulus. This shift has led to significant euphoria in the markets, as the new model is projected to lead to a more balanced and sustainable global economic acceleration. The investment sentiment for 2017 (and thereafter) will depend on whether market expectations, as well as significant leading indicators, will be at least partially self-fulfilled and on whether the transition to the new model will be smooth or if an excessive strengthening of the USD and a parallel rise in the USD cost of money will be inhibiting factors. At the same time, 2017 is a year of significant elections in Eurozone countries, which increase political uncertainty. Piraeus Bank Share On , the Bank s share capital amounted to 2,619,954,984 divided into 8,733,183,280 ordinary registered voting shares, at a nominal value of 0.30 each. Common shares of Piraeus Bank are intangible and listed on Athens Exchange. In accordance to the regulations of L. 3864/2010 and Ministers Council Acts 38/2012 & 6/2013, the HFSF issued Business Report 47

48 843,637,022 warrants to the private investors that participated in the 2013 capital increase. Pursuant to par. 1, article 16C of L. 3864/2010 the acquisition of treasury shares by the Bank is not permitted, without the approval of HFSF, for as long as the HFSF is a shareholder of the Bank. The purchases and sales of treasury shares in 2016, as well as the treasury shares owned as of , are related to transactions carried out by the Group's subsidiary Piraeus Securities SA as part of its activities as a market maker. Intense volatility and variations were present for most of Piraeus Bank's share closed at on (-25% yoy). The corresponding annual change for the banking index in 2016 was -29%. Piraeus Bank shareholder structure presents great diversity. The total number of common shareholders was 83,000 in December The HFSF held 26% of the outstanding common shares and the remaining 74% was held by the private sector, 68% by legal entities and 6% by individuals. More specifically, Piraeus Bank's shareholder structure was as follows: 48 Business Report

49 Shareholders' Structure Individuals 6% Legal entities 68% HFSF 26%

50 Targets and Outlook Piraeus Bank Group, maintaining a prominent position in the Greek banking market, has assumed a key role in the reconstruction of the Greek economy. At the same time, Piraeus Bank continues to maintain its character as a bank specializing in providing services to medium and small businesses. With its strong capital base, Piraeus Bank seeks to contribute actively in providing liquidity to businesses and households while at the same time to support the financing of creditworthy investment plans. The first quarter of 2017 presented several challenges for the domestic financial and banking environment. The anticipated reforms of Greece's economic support programme are expected to accelerate the recovery and restructuring of the economy, while the expectations of most international and institutional bodies are estimating a positive GDP growth rate in The successful conclusion of the second evaluation of Greece s financial facility programme, is expected to have positive influence on the restoration of confidence in the Greek economy. Piraeus Bank Group, under its new Chief Executive Officer Christos Megalou, announced in late May 2017, its Strategic Plan by 2020 entitled "Agenda 2020", aiming to make Piraeus Bank the most trusted bank in Greece, creating value for shareholders, customers and employees. "Agenda 2020" aims to set distinct strategic priorities in the medium-term that will enhance the confidence of shareholders, customers and employees in the prospects of Piraeus Bank, while at the same time supersede its current goals. Thus Piraeus Bank will be able to meet the big challenge of substantially supporting the restart of the Greek economy. "Agenda 2020" is based on the following key goals and objectives: reduce NPLs and NPEs to internationally accepted levels; create a profitable and sustainable business model, with attractive returns for shareholders over the medium-term; maintain a strong capital base; re-establish wholesale market funding access. "Agenda 2020" comprises six specific strategy enablers: De-risk the Balance Sheet, to be achieved by separating the Group into two operating pillars to maximise value from the core businesses of the Group and focus on realising value from legacy holdings. With this split, Piraeus Bank aims to streamline its operations and enhance organic capital generation. The two pillars are: a. Piraeus Bank, which will focus on the competitive advantages of its core domestic customer 50 Business Report

51 business, having risk weighted assets of 28.4 bn currently. It will focus on financing healthy borrowers, while aiming to maintain its leading market position in customer deposits. Piraeus will remain a prominent SME & corporate Bank, along with increased generation of retail loan products under a risk-adjusted approach. b. Piraeus Legacy Unit (PLU), comprising of non-core assets that also include attractive long-term businesses with strong market positions that, however, do not meet the targeted return profile of the Group. A dedicated management team will seek to maximise value by executing value-generating disposals or pursuing additional transformational opportunities. These businesses and assets will initially include the Recovery Banking Unit (RBU) loans, stakes in non-core domestic assets, repossessed real estate properties (REO) and international operations included in the Bank s Restructuring Plan. Total risk weighted assets of PLU currently equal 24.7 bn. By the end of 2020, it is expected that total Group assets will be reduced to c. 70 bn, with more than 80% contribution by Piraeus Bank (core) assets vs. c.65% currently. PLU loans will decrease from 37 bn currently to below 20 bn, while PLU RWAs will reduce from c. 25 bn by approximately half. The Group s cost-to-income ratio will be improved to mid-forties, while the Group s return on assets (RoA) will increase to levels above 1.0%. Resize and Focus by conducting a disciplined review of all existing businesses, in order to maximise resources deployed in the areas that Piraeus has a historically dominant position. This will include a simplified Group structure and effective cost rationalisation measures, as well as further optimisation of our branch network and targeted investments in digitalisation. Implement a Profitable and Sustainable Business Model, leveraging existing valued core client relationships, and focusing on greater cross-selling opportunities, as well as feegenerative activities. Piraeus Bank aims to continue developing innovative products, marketing to selected customer segments through a multi-channel distribution strategy, while deploying a targeted and risk-based credit policy, and implementing advanced riskbased pricing methodologies to ensure sustainably attractive returns on its core operations. Optimise Capital Allocation through the implementation of a risk appetite framework that includes a portfolio-based approach to capital allocation. Piraeus plans to maintain a wellcapitalised balance sheet, able to withstand unexpected external shocks, yet still provide superior returns to its shareholders. Strengthen Risk Monitoring and Controls. Piraeus Bank places particular emphasis on effective monitoring and risk management, with a view to maintaining stability and continuity of our operations. Piraeus will further strengthen its support and control functions (Audit, Compliance, Credit Risk, Finance, Legal, and Operational Risk Management) consistent with the three lines of defence principle. Adopt Superior Governance Standards. Piraeus Bank has already executed on specific requirements as per the HFSF law, and has revised RFA and Restructuring Plan requirements on corporate governance. The Bank has also concluded the re-composition of its Board of Directors, while ensuring uninterrupted Board and Committee meetings. Piraeus now has a Board of Directors with well-esteemed international members, who bring with them significant, diverse experience in banking, risk, and NPL management. "Agenda 2020" establishes a clear set of strategic priorities that, in conjunction with focused and effective execution, will provide a clear and visible path to a full recovery for Piraeus Bank. Business Report 51

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57 Operations in Greece Piraeus Bank Group is the largest banking institution in terms of assets, loans and deposits in Greece playing a leading role in the provision of banking services and credit to SMEs with an annual turnover of 2.5 mn- 50 mn. Moreover, the Bank is among the key providers of banking services to individuals and one of the main providers of advisory services for capital markets, investment banking, leasing and shipping banking in Greece. The Group also has a leading position in electronic banking services and applications, in financing environmentally friendly projects (green banking), as well as in funding the agricultural sector with products and services adapted to each customer s needs. Piraeus Bank was one of the first institutions to participate in the restructuring of the domestic banking system and is now one of the four systemic banks in Greece. The majority of Piraeus Bank Group s banking activities is targeted at the Greek market and includes retail, commercial and investment banking, as well as capital management. At year-end 2016, approximately 93% of the Group s total assets was composed of domestic assets. Domestic activities constituted 92% of total net revenues for the financial year ending on % of Group loans to customers involved borrowers in the domestic market. Piraeus Bank continues to have a broadly dispersed presence in various sectors of the economy, while its credit exposures are significantly secured with collaterals and guarantees, in addition to cumulative provisions. With regard to 2016 financial performance, gross loans of Piraeus Bank and its subsidiaries in Greece amounted to 63.0 bn, of which approximately 1.7 bn, which was repaid in early 2017, was related to a seasonal agri-loan facility to OPEKEPE, enabling the disbursement of EU subsidies funds to approx. 700 thousand farmers. The business portfolio constitutes 66% of total portfolio, while loans to individuals 34%. In Greece, the NPLs over 90 days past due of total loans ratio was 37.5% at the end of 2016 (or 36.5% including OPEKEPE) from 40.0% (or 39.4% including OPEKEPE) in Group deposits in Greece amounted to 39.3 bn, increasing 8% year on year. Piraeus Bank is the leading bank in Greece in terms of deposit market share, 29% at the end of 2016, while its loans market share stood at 30%. Business Report 57

58 Basic Figures in Greece Change Gross Loans ( mn) 62,998 63,922-1% Customer Deposits ( mn) 39,322 36,547 8% Branches (#) % Employees (#) 14,492 15,599-7% Customer deposits in Greece, following a significant decline in 2015 due to uncertainty in the country, recovered by 2.8 bn mainly during the second half of 2016 assisted by the Greek State's reimbursement of state arrears and the relaxation of capital controls, combined with the Bank s targeted customer campaigns and product offerings. The declining trend in the cost of time deposits continued throughout 2016, with the cost of new time deposits standing at 0.65% in December 2016, compared with 0.95% in December Retail Banking The Group s domestic operations in Retail Banking are conducted through the Bank and its branch network, as well as through digital service channels, such as the winbank e-banking platform and the winbank mobile application. In 2016 the Bank's Retail Banking division focused on developing and delivering a comprehensive network of channels, services and products to customers, in order to cover the whole range of their needs, offering an overall multi-channel and unique experience with the Bank. Following the greatest ordeal of recent years in 2015, due to the severe liquidity deterioration resulting from the uncertainty regarding the developments about the country s financing, the bank holiday and the imposition of capital controls, the Greek banking system, including Piraeus Bank, stabilized in The consequences of the previous year proved to be manageable. The domestic customer deposits outflow from Greek banks was reversed, leading to a 4% increase in private sector domestic deposits in the domestic banking system at , compared to Retail Banking, combining market knowledge and years of experience and know-how, continues to support responsibly and actively private individuals and businesses at every step. It invests significantly in the use of innovative technology and of modern methods for using large datasets, in a way that the services offered are affordable and improve the customers' daily routines, by adding value to their business plans. The Bank s retail banking customers are offered a wide range of different types of deposit, credit and investment products, including savings or current accounts, time deposits, investment products, consumer loans and mortgages, credit cards, bancassurance and insurance products, as well as a wide spectrum of banking services. Emphasis is placed on digital service networks. Piraeus Bank has focused on the innovative design and configuration of 24/7 customer service infrastructure through sophisticated and easy-to-use web and mobile banking and easy ATM access. At the same time, it supported the increasing use of digital channels so as to ensure a single excellent experience is provided through all available channels. Innovation and the use of new technologies, within the framework of the Bank's integrated digital strategy, aim at simplifying the customers' daily transactions and minimizing time, in order to transform the branch's role from a transaction and simple request processing channel to a product promotion and integration and advisory service channel. In 2016, these top e-banking services as well as the Bank's payment systems were utilized by a large number of customers, which helped to improve the transaction service and reduce operating costs. Aiming to provide quality service and keeping the customer at the core of its strategic decisions, Piraeus Bank retained the largest coverage in Greece in 2016, focusing on areas of high economic and commercial dynamics. For another year, the Bank focused on honest communication with its depositors, insisting on providing substantial information, providing access to the Bank s customers so as to ensure and facilitate smooth transactional activity, as much as possible. The Bank's positive impressions on customers and the market in general is reflected in customer satisfaction surveys, where the Bank remains firmly in the first place. With the implementation of new international standards, 2017 is expected to become another milestone for Retail Banking, and Piraeus Bank will actively contribute to restoring customer confidence in the Greek banking system and will support entrepreneurship and the restart of the Greek economy. Retail Banking Operations Development Branch Network Piraeus Bank s branch network consistently and methodically operates within the new Global Bank Environment, respecting the customers ever-changing needs and improving its efficiency. 58 Business Report

59 Since May 2016 and following detailed planning of actions aligned with the Bank's Strategic Goals, Pilot Actions were implemented in selected branches, aiming for the following expected benefits: Optimization of Branch operational efficiency. Transition from traditional cash transactions towards Digital Networks. Optimization of Branch Network footprint. Increase of customer loyalty and efficiency, through actions boosting commercial activity at a branch level. The results of the pilot actions were highly encouraging and full implementation by the entire Branch Network will be rolled out during In the context of optimizing Branch Network footprint and increasing efficiency, 47 branches were merged during 2016, resulting in a total of 660 branches at the end of Mass Retail Segment The Bank s Mass Retail Segment includes approximately 5 million private customers holding a significant percentage of deposit, investment and loan balances. The Mass Retail Segment aims for retail customers to develop a relationship with the Bank through the expansion of their portfolio, so that Piraeus Bank becomes their first choice. The Bank s priority for 2017 is the formulation of a holistic commercial approach for each of the major sub-segments of the Mass Segment, as well as the creation of the appropriate infrastructure for the reception, the deepening of relationships and the preservation of the Bank's customers. An additional goal is the development of a multi-channel banking behaviour in customers and the migration of banking transactions from physical to digital channels. In this context, during 2016, Branch Network employees attended training courses in their branches so as to provide in-branch education of customers regarding the use of digital channels. It is worth noting that Piraeus Bank excelled in the National Customer Service Awards in the "Customer Service Training" category for the design and implementation of these training programmes. The training programmes will continue throughout 2017 and will be enriched with targeted promotions to support the multi-channel behaviour of Mass Segment customers. Affluent Banking Segment In 2016, the Affluent Banking Segment strengthened and consolidated its actions to support strategic goals, by attracting deposits, increasing commission income, deepening the relationship with affluent customers, and promoting Personal Banking services. In terms of results, the participation of affluent customers in the Bank's actions for deposit inflow and recovery was remarkable, as a result of targeted actions. In addition, the upward trend in the percentage of life insurance products held by affluent customers continued. There was an increase in credit card issuance, and in new Winbank users, as a result of an attempt to migrate banking transactions to digital channels. The cross-selling index in the Affluent Segment stood at 5.60 at The performance of Personal Banking Officers proved catalytic to these results, with sales to affluent customers significantly higher than sales in branches without the relevant personnel. In 2016 the most notable initiatives and services carried out include: A specialized page for Personal Banking customers has been created in the Bank's renewed e-banking (winbank) platform, with access to information concerning them. The Personal Banking website has been enhanced with tools that bring out the benefits to users of this service model, as well as targeted updates for services and products tailored to their needs. Personal Banking Officers and their immediate superiors have received educational material and specialized updates on how to detect and react to customer concerns, to market and competition-related issues. Two new cycles were added to the 18-month School for Personal Banking Officers. Business Report 59

60 Personal Banking senior executives successfully completed the six-month training plan. The advantages and synergies from the vertical integration of the Segment s organizational structure were fully understood, with particular emphasis placed on strengthening commercial interaction. The support tools used by Personal Banking Officers were upgraded to include new functionalities, allowing for a more comprehensive and speedier monitoring of sales processes, and of customer relationships. The Personal Banking Customer Service at Piraeus Direct Services (PDS) has been strengthened to provide the customer with the best and fastest service. Joint actions with Bank units and external parties were carried out to improve targeted product promotion and to inform customers of special partnerships and services. Promotional initiatives were implemented on cutting-edge products and the marketing material was customized for Personal Banking customers. Finally, during the year, pilot projects were carried out to assess how customers respond to alternative initiatives and service channels. At the end of 2016, Piraeus Bank's Personal Banking served customers in 271 Network branches, with most of the Bank's Affluent Clients having their own Personal Banking Officer. Small Business Banking Segment The SBB Segment (Small Businesses & Professionals with a turnover of up to 2.5 mn) is a significant part of the Bank's total deposit and loan portfolio. Recognizing the value of these customers and, at the same time, the margins and the importance of developing relationships with them, the Bank operates under a specific model of commercial development and sale promotion, so as to focus more effectively on understanding and covering their particular needs. In 2016, important steps were taken for improving commercial development and upgrading the infrastructure, including the following: The holistic banking business model was set up, providing services to "premium" customers in 230 branches (mainly legal entities and sole ownerships, with significant value and growth prospects). The model, which promotes extroversion and active management of customer relationships, includes the provision of up-to-date service and advice by experienced and trained executives (Small Business and Professional Partners - SBPPs) regarding the entire range of business activities (banking products and businessrelated services, development programmes, value-added services). Commercial offers were enriched with the inclusion of innovative products and services: Piraeus Open Business Working Capital POS: a flexible financing tool connected to point-ofsale terminals (POS) transactions. "Teiresias TSEK" Service: a service by Teiresias SA aimed at businesses and traders, providing them with information on the solvency of their customers and suppliers and therefore providing additional protection against transaction risks. New e-banking platform for businesses (winbank for Business) with upgraded functionality. Launch of a dedicated premium customer service line. Initiatives for rationalization, enrichment and customer analysis have been implemented, enhancing commercial efficiency. The level of knowledge and skills of SBPPs has been strengthened to improve customer service. In 2016 more than 250 executives were trained in the special "SBPPs School", 60 Business Report

61 using a variety of training tools and the relevant support material was circulated. Their training and guidance are continued through the group of Small Business Sales Managers. The management reporting systems and processes and available customer relationship management (CRM) tools were upgraded. With regard to the improvement of the quality of the corporate loan portfolio, ad hoc and recurring actions were carried out, leading to a decline in short-term NPL ratios and negative NPL formation. In terms of results, Piraeus Bank has a strong presence in the merchant acquiring market, and has witnessed an increase in deposits and credit card sales to SBB Segment customers. In addition, the Bank has improved its relationship with premium customers, as reflected by a 7% increase in the cross-selling ratio. Finally, the SBB Segment contributes significantly to the Bank's commission income. Retail Planning, Quality of Service & Performance Monitoring The Retail Planning, Quality of Service & Performance Monitoring Unit has assisted in setting and coordinating a common framework for the design, synthesis and systematic monitoring of the Retail Banking, Branch Network and Deposits segment. More specifically, the Unit actively participated in the development, coordination, support and regular monitoring of Retail Banking's overall business and commercial plan. It coordinated systematically major projects and initiatives by all Retail Banking units and undertook initiatives for the continuous upgrading of Branch Network operations in cooperation with the relevant units of the Bank and for monitoring their effectiveness. The Unit also actively participated in formulating and monitoring the consolidated and detailed Budget of Revenues and Expenses for Retail Banking, as well as in designing performance monitoring reports. During 2016, the "PYXIDA" Branch Network Performance Monitoring Mechanism was upgraded with additional views for selected customer groups (Affluent Clients and Small Businesses & Professionals), the implementation of which - at the beginning of will strengthen the essential communication between Management, the Branch Network and the Segments. In addition, cooperation with Group companies was commercially exploited and the benefits of these synergies were enhanced, both in terms of achieving business goals and in forming an integrated value proposition to customers - Individuals, Small Businesses and Professionals. The Unit was responsible for coordinating the work of the new Committees the "Retail Committee" and the "Campaign Planning Committee" aiming at aligning the commercial operations with the overall Retail Banking strategy, enhancing horizontal partnerships and encouraging dialogue. More specifically, the "Retail Committee", which consists of the Retail Segment Management Team, the Group Marketing & Communications Unit and the Press Office, finalizes the overall commercial and marketing plan of Retail Banking and the individual commercial initiatives. Current competition activity and the results of recent surveys are decoded. Respectively, the "Campaign Planning Committee" aims to prioritize and schedule campaigns across the Bank's Networks, as well as an overview of the results of past campaigns, aiming to continuously enhance commercial effectiveness and ensure full harmonization with Retail Banking's overall business plan. The Unit participated actively in planning and coordinating the range of marketing and corporate sustainable development actions of Retail Banking, by encouraging initiatives and sponsorship proposals at local level, thereby enhancing the links of Retail Banking with cultural institutions inside and outside the Group. Customer Experience & Loyalty In 2016, aiming at achieving Customer Experience Excellence, the Customer Experience & Loyalty team continued to focus on strategic management processes and the ongoing improvement of customer experience. In this context, the yellow reward scheme was successfully launched on , offering tangible and emotional value to the client, enhancing profitability and revenue inflow into Retail Banking. The new yellow reward scheme is related to the overall relationship between retail customers and the Bank and ultimately creates a "live" banking experience, making this relationship more substantial, thus enhancing customer loyalty to the Bank. In particular, the customer-member of the programme gains yellows for simple daily transactions with the Bank. The yellows may be redeemed at the 18 Partners of the Programme: Attica, Avis, Henry Durant, e-food.gr, Grecotel, Heron, Hondos Center, Intersport, Masoutis, Media Markt, Public, Shell, Sklavenitis, Ticket365.gr, Travelplanet24, Health Club, Wind and Chalkiadakis and, of course, through the Group s renewed offer service, yellowday. Business Report 61

62 The response from customers and the network was impressive. By the end of 2016 the yellow reward scheme had 280,000 members and the marketing campaign, launched on , had a positive and effective impact on people. To ensure the customer's best online experience, the yellowday service the Bank's website for buying consumer goods is now the main electronic channel for redeeming yellows and the Bank s competitive edge in bank loyalty schemes. In 2016, significant brands were added to the service s partners, there was an increase of 70% in users (90,000 active), the gross commission income doubled, while operating costs were reduced by approximately 30%. The bottom-line result of the service improved by 55%, on the back of all modern optimization and marketing techniques. In the context of the needs of Retail Banking strategic planning and of the individual product groups, the most upto-date User Experience (UX) methods, such as "one-to-one user testing", "customer journey maps", "A/B testing" were applied in order to acquire deep capabilities in "user experience" and user interfaces across the Bank s digital - and not only - processes. Using the findings from applying the above methods, the specialized UX team worked methodically and efficiently, making "key" changes to the Bank s digital, mainly, channels. The successful completion of the redesign of Piraeus Asset Management SA portal, the redesign of yellowday.gr and the yellowday app, as well as the participation of the team in the design of the information portal about "360 o Funding" financial support programmes, are factors that have a positive impact on customer satisfaction and brand awareness. The trained Websites Management team that manages and supervises the digital content of Piraeus Bank's website made a significant contribution in the implementation of the changes in the Piraeus Bank Group website, always aiming at the end-user's positive experience. In 2016, this team handled around 2,000 requests from various Bank's product groups. Moreover, management of the digital communication of the Bank's websites continued to be successful, resulting in a 34% increase in the total traffic of (44 million hits), a 36% increase in search engine traffic and a 13% increase in winbank Facebook followers/ "fans". With regard to social media customer service, the Digital Presence Management team, in cooperation with Contact Centre, handled approximately 1,500 user messages and queries, with an average response time of 20 minutes. Always focusing on improving customer experience, the Voice of the Customer expert team continued its measurement in 2016, using the most advanced text analytics technologies that were integrated into its Enterprise Feedback Management Project, to be able to manage and analyse large volumes of text data from all of the Bank s available sources, to seek and create business knowledge, to optimize processes. All this wealth is disseminated to all Retail Banking Divisions on a quarterly basis. More specifically, in 2016 Voice of the Customer team measured the experience of 132,000 customers at 31 Moments of Truth, analysed 605,000 spontaneous comments received from all channels (e.g. surveys, , chats, complaints platform, etc.), drawing more than 400 improvement suggestions. Of these, 25% have been implemented, while 22% are either assessed for the prospect of implementation or are already in progress. The goal of Customer Experience & Loyalty for 2017 is to significantly strengthen Piraeus Bank's strong competitive advantage in improving its customer experience through the continuation and enrichment of the yellow reward programme and the implementation of a new Loyalty Programme for other customer segments. An additional aim is to maximize the use of advanced technologies for analysing customer experience, linking quality indicators to the Bank's main financials (e.g. profitability, revenue, etc.), as well as reducing operating costs through the optimization of its internal processes. Customer Value Management In 2016, focusing on the continuous improvement of customer experience, the Bank used the results of detailed surveys aimed at identifying the special characteristics and needs of the customers, at evaluating the dynamic development of specific customer segments and at recognizing the events in a customer s life that call for the Bank s direct involvement. Combining modern analytics such as multidimensional behavioural segmentation, predictive modelling and event-triggered marketing with earnings data, the Customer Value Management Unit has structured a customer development and marketing plan implemented primarily through the Bank's internal channels. As a result, targeted messages were communicated to approximately 2.1 million customers (7% increase versus 2015), resulting in a very positive response. Specifically: 25% of customers responded to the below-the-line marketing and promotional initiatives implemented by Retail Banking, with the new product market increasing by 65% compared to as a result of promotions. In order to improve the customer experience in implementing below-the-line marketing and promotional initiatives, the channels and the time that customers choose to carry out their banking activities were used primarily. In addition, the 62 Business Report

63 Retail Banking marketing plan for 2016 has increasingly used digital channels. By way of example, approximately 8 times more s were sent out compared to 2015, replacing more traditional and cost-intensive communication channels, such as letters. Additionally, the strategic decisions of Retail Banking were based on the customer-targeted actions through specialized analyses, while innovative reporting instruments were used to evaluate the results from strategic projects, permitting the visualization of the results and the easier extraction of detailed findings. Deposit Products Despite initial estimates for deterioration of the economic sentiment in 2016, the conclusion of the first review for the third Economic Adjustment Programme and the relaxation of capital restrictions shaped the climate which allowed the system to recapture the funds it had lost since November 2014 in the second half of the year, at a slow but steady pace. Throughout the year the Bank implemented a detailed plan for recovering its deposit base, focusing on the recovery of outflows. The plan included the promotion of competitive products with strong marketing support, detailed planning of targeted actions and close monitoring of results. This strategy, coupled with the strong deposit culture of the Bank's executives, led to the growth targets set for the year. In particular, retail deposits stood at 30.0 bn, up by 1.7 bn year-on-year. This effort was assisted by the development of appropriate and competitive deposit products, in particular the availability of the new "Cash Back" Time Deposit to attract cash stashed away outside the system, as well as weekly issues of structured deposits with a guaranteed interest rate and the possibility of additional return, depending on the performance of specific indicators. Despite the volatile environment, the Bank continued its systematic effort to reduce the average cost of deposits, which dropped further in 2016, laying the foundations and prerequisites for achieving its long-term goals. Finally, 2016 marked the beginning of developing important service infrastructures, with emphasis on mobilizing specific customer behaviours to make the Bank the customers primary bank. Mortgage and Consumer Credit In the context of improving the quality of service to retail and mortgage customers, in 2016 the Bank implemented the optimization programme for existing systems and processes, adopting quantitative and qualitative rules, in accordance with international quality standards. This initiative was designed in 2015 with the help of internationally recognized consultants, and in 2016 their qualitative and quantitative redesign continued. These initiatives were designed to improve customer experience and to reduce operating costs. Following the Bank s implementation of the Value Based Management model, Value Cells are better equipped in recognizing cost reduction opportunities, increasing financial/commercial performance, optimizing the operating model, and ultimately strengthening customer-perception indicators. In 2016, loans through partners continued to constitute an important area in the development of consumer loans. Targeting specific markets, redefining Business Development & Monitoring Policies, and developing new collaborations and enhancing existing ones have been the key pillars of the Bank s business strategy. In this direction, responding to the evolving needs of its partners, the Bank designed and implemented "Key2business", an innovative and interactive application for loan application management. In the context of "green growth", there has been a direct response and collaboration with the competent bodies for the faster and more efficient allocation of resources through the interim "Energy Efficiency at Household Buildings" Programme, in early September Piraeus Bank actively participated, successfully managing approximately 3,500 applications, which accounted for 41% of the total number of applications approved from all the banks that participated in the programme. To date, it is estimated with certainty that more than 15,500 households have implemented the interventions required to save energy. Focusing on improving customer service experience and managing operating costs more effectively, the main objective for 2017 is to complete a customer-centric analysis model that will assist in applying advanced customer segmentation, based on risk and return characteristics. Through this model, customer trends and behaviours will be analysed in order to create the optimal offer per customer, one that will meet their needs, enhance their value for the Bank and will be provided through all of the Bank's service channels. Domestic loans at the end of 2016 amounted to 15.7 bn for housing loans and 4.6 bn for consumer loans (excluding credit cards), and the Bank's market shares at the end of December 2016 stood at 26% and 21%, respectively. Business Report 63

64 Card Issuing 2016 was a very important year for the card market, given the large increase in volume and value transactions, as a result of introducing "plastic" in the mind of the average consumer as a basic means of payment. More specifically for Piraeus Bank, debit cards followed a spectacularly upward trend compared to 2015, increasing by 182% in number of transactions and by 145% in volume of purchase transactions. For credit cards, the respective percentages increased by 34% and 21%, while for prepaid cards the respective annual changes were 9% and 2%, as a result of the capital controls restrictions, which are still applicable to a certain extent to this category of cards. New products, such as the Private Banking debit card, designed specifically for High Net Worth Individuals and the Credit Agro-Carta (credit card for Farmers), which covers the modern needs of the average farmer, in an effort to strengthen the agricultural sector. In addition, in 2016, a new prepaid card for the credit of the "Social Solidarity Income" allowance to the beneficiaries was issued. More than 100 product promotion and operations development initiatives were implemented, many of them in partnership with strategic partners and sports clubs, offering significant reward benefits for cardholders, maintaining competitiveness and increasing the Bank s market share in the relevant product portfolio. At the same time, being consistent with the customers-card holders in offering value-added services and keeping in touch with the ongoing trends in bank card usage internationally, in 2016 Piraeus Bank became the first bank to offer en masse in Greece the new service of making contactless payments taking advantage of the HCE (Host Card Emulation) technology. At the same time, 2016 was very important at the operational level as the migration of credit cards issued by the ex-geniki bank and the former Panellinia Bank into a unified system was completed, thus completing the 7-bank merger cycle, achieving a reduction in operating costs and improving Customer service. Lastly, initiatives are continuously taken for the digitization and integration of new card technologies so as to maintain the leading position in innovation issues and to enhance the overall experience of each customer. Merchant Acquiring In 2016 the Bank, capitalizing on the investments made at the end of 2015, in infrastructure (new applications management/workflow) and innovative products and services (mobile POS, easypay POINT service, MasterPass Wallets), and because of the increased demand for card acceptance by commercial businesses, succeeded in becoming the primary choice of most merchants. With a full range of card acceptance solutions, Paycenter POS, epos and mpos solutions, the Bank successfully covered a business s every need. As a result, the Bank more than doubled its card acceptance business. This increase was twice as high as the corresponding increase in the Greek card acceptance market. In particular, for "card present" transactions, the corresponding increase was three times the market increase. The total portfolio of businesses collaborating with the Bank grew by 91% and the Bank s installed POS terminals were up 88%, with all new terminals supporting "contactless" transactions. The Bank responded to the very high number of requests for the installation of new terminals by approving requests in real time and installing POS terminals within 3 days. ecommerce transactions, where the Bank is the market leader in the Greek market, increased and new partnership agreements were signed. Transactions through the epos platform increased by 13% compared to the previous year and turnover increased by 23%. epayments/easypay POINT In 2016 payments towards third parties through the Bank s payment channels (branches and digital channels) were an important customer interface segment and source of commissions. During yet another year, the Bank incorporated the largest number of collaborations with DIAS, assisting businesses in modernizing their payment receipt processes and laying the foundations for multifaceted cooperation. Specifically, new interbank collaborations for credit transfer increased by 39% while for direct debit the increase was 30%. The number of transactions increased by 25% and their value by 11%. In 2016, the MyBank service was launched through the epos Paycenter platform, so that Greek businesses can use the pan-european Preta S.A.S. service for online payments, as an alternative to the card payment acceptance and clearance circuit. Easypay POINT service, which offers the opportunity for bill and debt collection at the premises of third parties partnering with the Bank, posted significant growth rates of its customer base in In the same year, hundreds of small businesses, mainly from the retail sector, joined the service, offering their customers bill-payment services through the 64 Business Report

65 Bank, increasing their store traffic and securing a significant additional income. At the same time, the Bank continued to enter collaborations with payment institutions and retail chains, offering the easypay POINT service under various partnership business models. In 2016, dozens of new organizations were included in the range of supported payments, with emphasis on Municipal Water Supply and Sewerage Enterprises, and the foundations for new innovative services were laid. Retail Banking Fraud Management (RBFM) In 2016 Retail Banking Fraud Management (RBFM) was placed under Digital Entrepreneurship, in the Retail Banking Division. Its primary responsibility is to prevent and preserve the security of transactions for the areas of responsibility overseen in Retail and Electronic Banking. Maintaining the innovation of continuous operation (24/7), the RBFM managed fraud incidents, which were up 49% compared to 2015, maintaining the financial loss stable, while raising the savings rate by 47% ( 9.4 mn). Of the total 9.4 mn saved, more than 7 mn came from the unit s operation outside banking hours, strengthening the Bank customers sense of security and confidence. Following the Bank's strategic goal for installing new POS terminals in 2016, RBFM rated 31,000 new terminal requests for risk, 21% more than the terminals rated in As part of the development of new safeguards/services and the upgrading of existing rules and policies, a number of projects were implemented, the most important of which were the following: New card transactions dispute system: dispute process was automated and an additional channel for contests was created through the Contact Centre. ATM e-learning: implementation of the first training programme for Branch Network staff in ATM security, card skimming and fork trapping issues. "Stop Payment": developing new functionality in the Equation system, to avoid loss from wire transfers in case of phishing attacks outside banking hours. At the same time, the team provided consultancy services on security issues of major Retail Banking projects such as winbank mobile, winbank wallet, and yellow. "The priority of the RBFM is to protect the Bank's customer transactions. Its constant goal is to search for and adopt new methods for fraud prevention and protection against fraud, in order to enhance customer experience & service". The continuous and required alignment with fraud trends relies on the integration of existing infrastructures, and the search for and development of new innovative solutions to enhance transaction security. Consumer Credit In 2016, Consumer Credit was certified with IS0 9001:2015 by TUV Hellas for the consumer and mortgage credit approval services. This continued certification is proof of the Bank s commitment to provide qualitative and effective services and to ensure customer satisfaction, focusing on the modern and responsible management of their needs. This certification enhances the unit s image and business performance, and creates a competitive advantage. Additionally, the certification enhances the effective management of business risk, helps in reducing operating costs and in resource-saving, and increases employee satisfaction and sensitization. Certification under the new standard, following the certification of consumer credit approval services in 2013, emphasizes, inter alia, leadership, objectives, measurement and management of change, continuous and two-way communication, and finally documentation of information no matter where it comes from. Steady to the fundamental principle of its credit philosophy for responsible lending, in 2016 Piraeus Bank continued to support households by covering their needs in the best possible way. Particular emphasis was placed on developing new instruments and models for the assessment of incoming ap- Business Report 65

66 plications, incorporating the rules and practices of Credit Policy. The goal was twofold; On the one hand, the maximum automation of the approval process, limiting operational risk and production costs, and, on the other hand, a significant improvement in response time. A constant goal is meeting the needs and desires of customers in the best possible way, so as to achieve and maintain a mutually beneficial relationship. Bancassurance Products and Insurance Brokerage Bancassurance The Group s total portfolio under management amounted to 322 mn in 2016, with total profits from insurance brokerage activities amounted to 42.5 mn. Piraeus Bank established its Bancassurance Unit in 2008 aiming to offer its customers in Greece and abroad a range of insurance products, through its branch network, as well as through alternative service channels (call centre, winbank e-banking platform). With its specialized know-how, innovative products and optimal quality of service, the Bank aims to make use of its strategic partnerships with insurance companies NN and ERGO, maximizing value for the Bank and its customers. In collaboration with its subsidiary Piraeus Insurance Agency SA and other bank units, the Unit develops integrated bancassurance products, and mechanisms for automated customer management and service. The key issues for improvement and monitoring include the following: Effective sale of bancassurance products, combined with proper, quality and prompt servicing of customers, through motivation and coaching of branch sales staff. Constant development of insurance sale and management systems and processes, for monitoring the quality of sales and sustainability of the Bank s portfolio. Development of tools and automation of processes for faster customer service. Restructuring of existing products and development of new customized and flexible products to meet the needs of different segments, always offering the best service. Full support for Contract Farming & Livestock rearing products and partnerships. Constant development of the Bancassurance team and, above all, Sales Coaches so as to provide the best service and support to the Branch Network with regard to processes and sales. In 2016, similarly to the Bank s other segments, the Bancassurance unit capitalized fully on the Bank s customers, the dynamics of the Branch Network, as well as the Group s management team. Customers can choose the innovative insurance products and services that meet their needs. Network insurance specialists are present in every branch to assist customers in understanding and selecting the insurance programmes that cover their needs. Following the Bank's growth spurt in recent years and its strategic focus on promoting insurance products, Piraeus Bank s Bancassurance retained a leading market share in Greece in 2016 of almost 40%, increasing the sense of responsibility for developing new products in General Insurance, as well as in the growing Health and Life Insurance segments. Aiming to enhance its sales and responding to the customers growing needs for innovative and flexible bancassurance products, the unit designed in collaboration with leading insurance companies four new products in 2016 in the fields of Life and General Insurance. Piraeus Insurance Agency SA Using its know-how and experience in managing and providing technical support to insurance programmes, as well as in organizing customer service systems, Piraeus Insurance Agency SA in cooperation with the Bank s Bancassurance unit manages the Bank s exclusive partnerships with insurance companies NN (Life insurance), & ERGO (Claims insurance), as well as the Group s insurance coverage (e.g. property insurance, insurance coverage for employees, etc.). In collaboration with the Bank s Bancassurance unit and the two aforementioned insurance companies, Piraeus Insurance Agency SA develops innovative products, capitalizing on the Bank s customers and the Group s needs, and aims to combine the products offered through the branch network and alternative service channels with the maximum benefits, so as to make them effective, innovative and attractive to customers. 66 Business Report

67 Piraeus Insurance and Reinsurance Brokerage SA Piraeus Insurance and Reinsurance Brokerage SA, a wholly-owned subsidiary of Piraeus Group, offers a complete range of insurance products and services for businesses, fully covering their insurance coverage needs. The company s main aim is to capitalize on the Bank s partnerships with healthy and active businesses, offering solutions for risk prevention, with specialized and innovative insurance products and services, thus ensuring their operation and sustainability in case of insurance risk in the form of damages or financial loss. The company's turnover for 2016 amounted to 8 mn and profit before tax to 5 mn, ranking Piraeus Insurance and Reinsurance Brokerage SA among the top companies in the industry. Through continuous improvement of the quality and services offered, with specialized executives, experience and profound knowledge of the insurance market, the company develops customized solutions that meet the needs of every business, on competitive terms and conditions. Business Banking In Greece, the Group has historically held a strong position in providing financial services to businesses operating in all sectors of the economy. It offers a wide range of deposit and funding products to businesses, including financial and investment advisory services and loans (in euro and other currencies), foreign exchange services, insurance products, custodial services and import/export services. The Bank s focus of attention is on selecting high quality customers and systematically monitoring them by means of the most advanced risk management tools. At the same time, particular attention is paid to: exposure to the most promising sectors of the economy, ensuring that its lending is with strong collateral and guarantees, pricing relative to risk assumed, and continuous efforts to increase cross-selling. In this direction, the Group s Credit unit has an important role and participates actively and systematically, through teams of experienced and specialized executives, in the effort to manage the credit risk from the Group's corporate loan portfolio by applying a single credit Policy and practice, as well as adhering to the processes of approval, renewal and closely monitoring credit limits. With the aim of safeguarding the Group s balance sheet, in 2016, strict evaluation criteria for the corporate portfolio (large, medium and small businesses) were applied. Efforts to restructure, rationalize regulatory measures, enhance collateral and consolidate the NPLs portfolio were intensified. In particular, in 2016, the Credit unit focused on developing optimal NPLs management policies and further enhancing approval processes through automation and fast track processes. The objective remains to ensure a balance between the Bank's credit risk and the significant support it offers to Greek companies due to its dominant position in the market. Large Business Credit The Unit participates in the approval process for Large Business, Shipping Finance, Structured Finance and Corporate & Shipping Recovery portfolio as well as the business portfolio of foreign-owned subsidiaries and the risk-taking limits of international financial institutions. In 2016 the Unit also focused on providing credit to selected sectors of the economy, on providing financial support to viable Greek companies and on making the right choice in restructuring NPEs. In collaboration with external consultants, the unit actively participated in major projects concerning the optimal management of NPLs as well as in projects aimed at improving the efficiency of credit risk approval, management and monitoring processes. Medium Business Credit Due to the prolonged recession in Greece and its negative impact on the development of entrepreneurship, in 2016 it was necessary to apply strict assessment criteria on the SME portfolio and ensure its cautious development. The Unit focused mainly on approving new lending requests from viable businesses, making use of development programmes in which the Bank participated and utilizing the co-funding and risk-sharing tools that they provided. In addition, the Unit participated in a number of projects aimed at improving processes and computer applications used in business lending. Business Report 67

68 Small Business Credit The Small Business Credit Unit has an internal structure that allows for the extensive knowledge of various types of its customers (small businesses, professionals, farmers), ensuring the immediate provision of funding to key sectors of the Greek economy that has been particularly affected by the economic crisis. In 2016, the unit participated in joint initiatives with other Bank units for the improvement and automation of the application approval processes and the monitoring of its portfolio, with a view to increasing efficiency, improving response times and reducing costs. In 2016, special emphasis was placed on settling loans in arrears, contributing to the restructuring of the portfolio, through the smooth reclassification of sustainable clients into the healthy portfolio. Business Deposits The positive change in the country's economic sentiment also contributed to the improvement of business deposits during Business deposits in Greece grew by 16% to 9.7 bn. The Bank continues to build on its know-how in partnerships with legal entities in the wider public sector. In 2016, it participated in tender offers for broad collaboration with municipalities, municipal enterprises, prefectures, hospitals, secondary and tertiary education institutions, pension funds, and other legal entities, which resulted in the initiation of a satisfactory number of new collaborations and deposits, the enhancement of its customer base and the significant growth potential for cross-selling. In 2016 the Bank s Public Sector Unit continued as well to offer innovative products and services to cover the financial needs of the narrow and wider Public Sector entities and of non-profit institutions. Focusing on improving service quality and on using multi-channel services, a broad range of products and services were offered covering all their financial operations (cash management, investments, payroll, automated collection and payment systems, e-banking services, etc.). In 2016 the Unit focused on the needs of the particular customer base developing a comprehensive commercial approach (products, services, multi-channel service, offering the proper tools, remodelling processes), aiming at improving overall customer service experience. Together with other relevant Bank units, in 2016 the unit participated in over 600 tender offers for broad collaboration with Legal Entities, ensuring a multitude of new partnerships as well as significant amounts of deposits. All the Bank s strategic partnerships (collaboration with the Ministry of Foreign Affairs and the Athens Bar Association) were supported and enhanced in the most efficient way. The unit also made a definitive contribution to the Bank s efforts to attract and manage new public and private sector payrolls as well as adjusting existing customers to the new supervisory framework for such transactions, as set out in Directive (EU) No. 260 on Payment Services. Business Loans and Advances Piraeus Bank Group holds a strong position in business financing in the domestic market, with considerable diversity in all sectors of the economy and emphasis on services to SMEs. At , total loans to businesses in Greece amounted to 41.5 bn. Business loans are granted, primarily, in the form of credit lines with floating interest rates. In addition, the Group provides letters of credit and guarantees for its customers. It has granted loans to all business sectors, with particular emphasis on commerce, industry, craft industry, construction, energy, infrastructure, tourism, shipping and agricultural production. Corporate Banking Piraeus Bank Group s Corporate Banking provides banking services, funding of structured finance transactions, project financing, real estate financing, financial advisory services related to debt restructuring and infrastructure advisory. Group's Corporate and Structured Finance The Group's Structured Finance Unit offers specialized banking services, it organizes and participates in Structured Finance transactions, in the fields of Transportation, Infrastructure, Real Estate, Energy, and Telecoms; and, the provision of advisory services to large infrastructure projects, in Public Private Partnerships (PPPs) and in EU co-funded development projects. 68 Business Report

69 The key factor that shapes the Group's Structured Finance policy is the creation of added value for the Bank and its customers through the effective management and further development of its portfolio, based on a tailor-made approach for each transaction. Moreover, the unit aims to capitalize on synergies and undertake projects with other Bank units, in the framework of a holistic approach to customer needs. In 2016 the Structured Finance unit took on the planning and management of the "Development Banking" service. Development Banking is the Bank s initiative for financing viable investment plans and projects with multiple socio-economic benefits and growth prospects, which will constitute the springboard for restarting the Greek economy. The Bank offers the candidate investment projects an integrated, specialized package of loan and/or capital financing solutions, utilizing European financing instruments and consulting services. The new service was welcomed by the domestic market, with an important pipeline of investment projects already gathered in the first months of implementation. The aforementioned initiative was included in the Group's Structured Finance business strategy for 2016, which was aligned with the market conditions and moved on the following axes: further expansion of portfolio to the financing of green entrepreneurship investments taking into consideration the sector s optimistic prospects and the multiple economic and social benefits, in the context of promoting a growth model for Greece, adapted to modern international trends and demands, pursuit of active participation in the financing of large infrastructure and privatization projects, utilization of alternative co-funding instruments in the framework of EU programmes and mechanisms, dynamic monitoring of existing structured finance portfolio combined with assessment and promotion of restructuring plans, utilisation of the Bank s leading role to attract additional business in all financed projects. In this framework, in 2016 the Group's Structured Finance unit extended the financing of investments in important sectors of the economy, such as: in Renewable Energy Sources, providing to finance projects with a total capacity of 200 MW, mainly wind and hydroelectric parks, also evaluating to finance applications in a portfolio of projects with a total capacity of 180 MW, in the framework of implementation of the JESSICA initiative, in collaboration with the European Investment Bank, completed the financing of four (4) projects for the construction and operation of biogas power plants, while the process of financing of an additional four (4) projects in Central Macedonia and Thessaly, thus contributing significantly to the utilization of EU funds (94% absorption) and the support of sustainable investments which strengthen the Greek economy and entrepreneurship on a local-periphery level, has significantly supported the financing of motorway projects, with construction expected to be completed in 2017, while as the main financer of these projects among other Greek and foreign banks, it supported all the funded projects, building on its knowhow and its leading role, taking all necessary steps to avoid deviations in the construction schedules and the consequences of delays in financing by foreign lenders. On the basis of the above, in 2016 the Group's Structured Finance unit managed to expand its portfolio of finance, maintaining its high quality, to preserve its customer deposit balances, and at the same time to achieve an overall increase in interest and commission income, which are expected to increase further in Business Report 69

70 Shipping Finance Piraeus Bank has a longstanding presence in loans to the shipping sector, offering a wide and comprehensive range of financial services to Greek shipping companies. The services provided by the Shipping Finance unit mainly focus on financing ship acquisitions (dry bulk cargo ships and tankers), financing the specialized operating needs of shipping companies (issuance of letters of guarantee, working capital financing, cash management, web banking, currency conversions). At the same time, emphasis is placed on the development of additional services and the promotion of all the Bank's products was an extremely critical year for the dry cargo industry. Vessel surplus combined with weak demand for international transport resulted in a drop in the dry bulk shipping industry at historically low levels in the first quarter of the year, with the Baltic Dry Index (BDI) hitting a record low of 290 points. After that, the dry cargo industry improved steadily throughout the year, albeit with constant fluctuations and intense nervousness. Uncertainty is expected to continue in 2017 due to the planned number of new ship deliveries and the state of the economy on a global scale. However, the significant decline in new orders and the maintenance of a high scrapping rate brings about a spec of optimism. By contrast, following a very strong 2015 the tanker market moved slightly downward in During the year there was an increase in delivery of new-build ships and market expectations for a slower oil price recovery than originally expected, which led to a reduction in the chartering of vessels for use as floating storage facilities and the containment of stockpiling, events that had contributed to the market s strong performance in The market for 2017 will be determined, inter alia, by the course of oil prices in an intense geopolitical environment. In this context, the Bank's approach remains conservative, focusing on the optimal management of its existing portfolio, improving its quality with selective new financing to existing and new customers. A key strategy remains to pool the portfolio of selected and acclaimed customers, who demonstrate their continued support in all phases of the maritime business cycle. Medium and Small Business Banking Piraeus specializes in offering banking products and services to Small and Medium Enterprises (SMEs) and has been doing so diligently for almost two decades in Greece. The Bank offers services in both fields of SMEs. Through the special Small Businesses and Professionals Unit customers with an annual turnover of up to 2.5 mn are supported, while the Bank s 14 specialized Business Centres provide services across the country to SMEs with an annual turnover ranging from 2.5 mn to 50 mn. The prolonged recession in Greece has significantly affected the growth of SMEs. The slump in demand affected negatively the turnover of the companies, which in conjunction with the limited liquidity and the uncertainty about the economic developments, render the environment unfavourable for business activity. However, accessing the particular market segment creates numerous opportunities for the promotion of new product and services. The Bank s specialized business centres and its branch network cover all SMEs. By investing heavily in enhancing the know-how of its executives and designing simplified processes and digital solutions to carry out day-to-day operations, the Bank aims to provide high quality service to the specific customer segment. At the same time, compliance with the credit criteria and improved loan quality control are ensured. Finally, the Bank's business centres are also responsible for evaluating requests for companies, the funding applications of which are of a special or complex nature (through Development Programmes, Greek State guarantees or Joint Ministerial Decisions). The main pillars of the 2016 business objective that incorporate both the commercial strategy and the holistic product development of the Small Business and Professionals segment are the following: Loans Emphasis on the substantial redesign of the process for submitting and completing funding applications, taking into account the market's demands for speed, flexibility, innovation, as well as the Bank s strategic goals. Providing targeted financing to healthy businesses through the specialized network of Small Business and Professionals Partners of the Branch Network, while restraining the average new lending rate and related commissions. Creating new financing instruments focused on modern business needs. In particular, the new innovative product "Piraeus Epixeirein Working Capital POS" combines financial 70 Business Report

71 liquidity with POS terminal sales, providing liquidity to businesses 24 hours a day, through all channels (Branch, winbank, ATM). Enriching "Green Epixeirein" product line with the new Net Metering systems installation financing tool. Products & Services "Packages" - "Solutions 360 " At the end of 2015, Bundled Products under the brand name "Solutions 360 " were launched, targeting sectors of the economy that are on a growth path and share common characteristics and needs. The first pilot implementation was in the Tourism sector with "Piraeus Tourism 360 ", which includes products and services that cover the whole range of business needs (deposits, capital movement, loans, consultancy services, insurance products). More than 4,000 enterprises had participated by the end of The second bundle, "Piraeus Epixeirein 360 ", which was completed in 2016, fully covers the needs of businesses that have included their investment projects in the NSRF programmes, offering consulting services and specialized financing instruments for the implementation of investment plans. At the same time, liquidity management services are provided. Focusing on improving customer service experience, the main objective for 2017 is to complete a customer-centric model that will assist in applying advanced customer segmentation, based on risk and return characteristics. Through this model, customer trends and behaviours will be analysed in order to create the optimal offer per customer, one that will meet their needs and enhance their value for the Bank. Development Programmes Acknowledging the financing needs of SMEs and given the market difficulties, Piraeus Bank entered a series of strategic partnerships to ensure the smooth and unhindered provision of liquidity to them. The financing instruments to be offered by the Bank were mainly co-funding and risk-sharing tools and financing lines in the form of global loans. In the context of these collaborations, Piraeus Bank has secured financing products in co-operation with the Hellenic Fund for Entrepreneurship and Development (ETEAN SA), the European Investment Bank (EIB), the European Investment Fund (EIF) and the Hellenic Investment Fund (IfG), as well as the European Bank for Reconstruction and Development (EBRD). Also, in December 2016, the Bank's proposals to the European Investment Fund (EIF) to act as financial intermediary in the COSME Loan Guarantee Facility (LGF) and the Innovfin Guarantee Facility were accepted. The Development Programme Unit is responsible for the creation and management of financing products in co-operation with the aforementioned institutions. The financing instruments provided by the Bank, utilizing its national and international partnerships, are the following: Business Restart Initiative ETEAN SA Co-funded loans are offered to SMEs of all sectors with particularly favourable interest rates and with a duration relevant to the aim of the financing. All loans are co-financed by Piraeus Bank and ETEAN with equal participation. The loans can be granted either as working capital loans, ranging between 10,000 and 300,000, or loans financing business investment plans, of up to 800,000. Island Entrepreneurship Initiative ETEAN SA This initiative provides low or zero interest-rate financing (for islands with a population of less than 3,100 inhabitants) to businesses that are based on the islands and are active in the field of tourism or in tourism-related services. These loans, ranging from 10,000 to 30,000, cover part of the capital required for the implementation of business plans. ETEAN is the sole provider of the funds, Piraeus Bank is involved in evaluating the selection criteria and managing the financing. In 2016 Piraeus Bank granted loans of approximately 50 mn, as part of this initiative. Business Report 71

72 Guarantee Fund European Investment Bank (EIB) The Guarantee Fund provides financing to SMEs active in processing, commerce and service sectors, with liquidity provided by the EIB. The loans can be given either in the form of working capital or for investment financing with particularly favourable interest rates. The initiative s total budget amounts to 90 mn, while in the last phase of the programme in the second half of the year, 36.2 mn were disbursed. At the end of the year, ΕΙΒ launched a new programme of 1 bn for SMEs and MidCaps companies. On , the Bank signed a 100 mn agreement with the EIB aiming to absorb the funds in the first half of Trade Finance Facility Programme European Investment Bank (EIB) The programme is implemented in cooperation with the European Investment Bank (EIB). The EIB provides guarantees to selected foreign correspondent banks to cover their risk for letters of credit and letters of guarantee with an expiration date of up to 36 months, issued by Piraeus Bank. This programme enhances the commercial activity of companies that trade with foreign markets. For 2016 Piraeus Bank used 12 mn in guarantees. Trade Facilitation Programme European Bank for Reconstruction and Development (EBRD) Through the programme the European Bank for Reconstruction and Development (EBRD) provides guarantees to Piraeus Bank for the promotion of foreign trade (export and import) business operations. This programme is applicable where foreign banks do not take on the risk of the Issuing Bank. The EBRD provides guarantees to the Confirming Bank, taking the payment risk of international trade transactions undertaken by the Issuing Bank. There are more than 100 Issuing Banks and more than 800 Confirming Banks worldwide participating in the programme. The agreement between Piraeus Bank and EBRD programme was reached at the end of November 2016 and the first transaction was completed in December. Jeremie Initiative European Investment Fund (EIF) The JEREMIE Initiative (Joint European Resources for Micro to Medium Enterprises) offers small businesses of all sectors access to co-funded loans with especially favourable interest rates. The loans can be given either in the form of working capital or for investment financing. The size of the funding ranges from 10,000 to 2,000,000 per enterprise. In every financing action Piraeus Bank and EIF participate with equal amounts. The programme ended in 2016, with total disbursements of 45.6 mn of the 50 mn of the Initiative s total budget. Hellenic Investment Fund (Institute for Growth - IfG) The loan financing provided by the Hellenic Investment Fund, which is funded by the Greek State and the German development bank Kreditanstalt f r Wiederaufbau (KfW), in collaboration with Piraeus Bank are aimed at businesses active in the fields of processing, commerce and services. The budget of the initiative for Piraeus Bank was 99.3 mn and these loans include both working capital loans and investment loans with very favourable financing terms. New Development Law This is an innovative service, which consists of providing comprehensive advisory services to businesses, to prepare, submit and monitor investment plans for inclusion in the new Investment Law (L. 4399/2016). As part of this service, the Bank assists companies by providing consulting services: complete and reliable information about the new Development Law, eligibility check for the company and the investment plan, advisory support for choosing the scheme that suits every business, proposal preparation & submission services, development of economic and technical feasibility study in accordance with the terms and requirements of the respective aid scheme, monitoring of the project s evaluation process with continuous information and guidance of the investor and monitoring and support services throughout the duration of the investment. This service can be combined with lending Banking products, such as a Letter of Intent, Loan to Cover Private Participation or even a loan instead of a grant. 72 Business Report

73 Integrated Framework Support This is an innovative Piraeus Bank service, which concerns customers who have joined subsidized programmes. The objective is to provide liquidity on preferential terms so that the company successfully completes its investment plan. In addition, the Bank Monitors the compatibility and consistency of expenditure with the technical annexes of the investment plans and mediates the proper payment of the invoices. The Integrated Support Framework includes the issuance of letters of guarantee for the grant advance receipt and the granting of an investment loan with favourable collaterals. At the same time, the Bank, as an intermediary for NSRF programmes, has undertaken to monitor compliance with the long-term commitments by the enterprises supported under the First National Action Plan (NSRF) Initiative and the Professionals to be completed in Restructuring and Management of Troubled Portfolio and Task Force Unit/ Merchant Banking Managing the troubled portfolio was one of the Bank's strategic priorities in 2016, with the Non-Core Business & Restructuring Portfolio developing its high-standard operating model and successfully reducing troubled loans and fulfilling related SSM objectives. To this end, the division has enriched the available restructuring programmes with specialized long-term solutions for businesses and farmers, upgraded its infrastructure and systems to improve performance, response times and tracking (MIS), and strengthened human resources at key positions throughout the country. Taking advantage of the continuous improvements in the operating model and despite the continuation of the adverse economic and political conditions, the delay in the changes in the institutional and regulatory framework and the gradual recovery of the Greek economy, the Non-Core Business & Restructuring Portfolio division exceeded its 2016 objectives for SSM and the Bank's BoD, implementing total restructurings of 6.9 bn and reducing NPLs by 1.3 bn (before write-offs). As a result, Piraeus Bank achieved the second best NPLs ratio, compared to the fourth position it held in early At the same time, the division completed the development of a new model of target-setting and forecasting the course of NPEs for the period , in line with the guidelines provided by the ECB's SSM Framework Regulation to all Greek Banks. A new forecast and target mechanism for all kinds of NPEs was developed with the assistance of a specialized consultant, using macroeconomic models, risk indicators and specific actions envisaged in the strategy for each portfolio segment. This target-setting was accompanied by a detail record of strategy and management methodology, which is the guide for the Recovery Banking Unit (RBU) teams for Task Force The Task Force-Merchant Banking (TF) team is RBU's primary channel of communication and cooperation with international institutional investors (e.g. Private Equity Funds, Hedge Funds, independent servicers, Investment Banks, Insurance Companies and Sovereign Wealth Funds). In 2016, the team focused on initiatives that were strategic to RBU and the Bank in general, aiming at the more effective management of the RBU portfolio in partnership with investors and independent managers with an international presence and recognized experience in managing troubled exposures. In particular, TF examines the viability and benefits of a possible partnership with one of the major independent NPL and real estate managers in Europe. The aim of this cooperation is to bring to the Bank the know-how and experience that will lead to the optimization of its operational model and the acceleration of achieving its restructuring objectives. At the same time, it will gain access to the secondary market for troubled exposures, which the wider Greek banking system currently lacks, precisely because of the lack of independent managers in the local market. Additionally, TF examines transactions with institutional investors in co-managing portfolios of troubled loans to large corporates. These schemes aim to maximize the Bank's recoveries through the experience of these investors in similar transactions as well as the introduction of liquidity to these companies. The team also looks at structured transactions aimed at the immediate deleveraging of the RBU portfolio. Finally, in 2016 the TF team advised on various of the Bank strategic projects. Financial and Operating Leasing Financial Leasing Piraeus Leasing SA (Piraeus Leases) Piraeus Leasing SA manages the leasing activities of Piraeus Bank in Greece. The size of the portfolio under management, including the operations of Cyprus Leasing SA and CPB Leasing SA, approaches 2.6 bn and corresponds to a 40% market share. Business Report 73

74 New production for 2016 amounted to 93 mn, while the leased assets of financial and commercial leasing for Piraeus alone amounted to 992 mn, while for the sum of the managed portfolios it amounted to 2.3 bn. In 2016, the company s objective was to manage NPLs, which is also one of the Group s strategic objectives. Net Interest Income of Piraeus Leasing settled at 6.8 mn in 2016 from 9.6 mn the previous year (-29%), net revenues at 13.2 mn from 14.6 mn (-10%) and profits before tax and provisions amounted to 7.0 mn from 8.3 mn (-15%). In particular, the active management of the recovered property and its commercial exploitation in 2016, led to a 32% increase in commercial lease income to 4.0 mn from 3.0 mn in An increase of new production is budgeted for 2017 and a corresponding improvement of results, while the intensive and effective management of the NPL and recovered assets portfolios will continue. Operating Leases Olympic Commercial And Tourist Enterprises S.A. (AVIS) Olympic Commercial and Tourist Enterprises SA operates under the AVIS Rent a Car, Budget Rent a Car and Payless Car Rental trademarks and is active in short and long-term vehicle leasing, as well as sale of used cars. Despite the great crisis the automobile sector faced in Greece from increased taxation, the company still has the largest market share in long-term leasing. The total company fleet at the end of 2016 reached 31,400 vehicles. The company posted a rise in turnover from long-term rentals, as new car orders were up 29%, while turnover from short-term rentals increased by 15%. In 2016 the company purchased 8,600 new cars, 11% of car registrations for 2016, while passenger car sales increased by 14%. In 2016, the company s turnover increased to mn, while it posted a significant increase in profits of 46%, as earnings before tax amounted to 19.4 mn, compared to 13.3 mn in In 2016, the company invested 7 mn in infrastructure and technologies for restructuring its network and continuous improvement of its services, while its overall investment plan and the modernization of its fleet exceeded 160 mn. According to the most recently published data, the company is the largest in the car rental sector in terms of the number of vehicles it owns, as well as turnover from all rentals. In the first quarter of 2017 the company was classified as discontinued, in line with Piraeus Bank's Restructuring Plan. Business Factoring Piraeus Factoring SA, a wholly-owned subsidiary of Piraeus Bank, was founded in 1998 and is a member of Factors Chain International (FCI), with partnerships with the leading factoring companies abroad, which are subsidiaries of Banks. It is also a member of the Hellenic Factors Association, with representation both on its BoD and its individual Committees. Piraeus Factoring SA provides the full range of import and export factoring services to businesses by financing their accounts receivables, ensuring the efficient management and ongoing assessment of the solvency of existing or new ventures and providing credit risk insurance coverage. Piraeus Factoring SA aims to increase its profitability and market share in 2017, by developing existing and new products and maintaining a low rate of bad debts (4.2%). Its goals will be achieved by supporting economically sound and dynamic businesses that will contribute to the growth of the Greek economy and the creation of new jobs through their exports. In 2016 accounts receivable subject to factoring amounted to 1.8 bn and financing to 1.2 bn from 1.0 bn in 2015, up 28%. Total Assets in 2016 amounted to mn from mn in 2015 up 25% and shareholders equity amounted to 37.1 mn from 30.7 mn in 2015, up 21%. Turnover in 2016 stood at 21.1 mn from 19.6 mn in 2015, up 8%, profit before tax in 2016 stood at 9.1 mn from 7.6 mn in 2015, up 20%. Group Digital Banking winbank 2016 was a crucial year for winbank as the web service was radically redesigned and split into winbank for Individuals and winbank for Business, to cover the specific needs of specific customer groups. The new winbank is now the first fully responsive e-banking service in Greece, i.e. its content can be updated according to the screen used by the customer. This means that it is accessible from all devices (computers, tablets, smartphones - ios & Android) without discounting functionality and user friendliness. In this way, the customer has a unique winbank 74 Business Report

75 experience regardless of the device used, and at the same time has access to the full winbank functionality even from mobile devices. The redesign of winbank platform has not stopped the ongoing effort to improve customer service. Functionality improved substantially through a significant number of improvements, the main ones being: Capability to register at winbank without the need to visit a branch, through the use of powerful remote customer authentication keys. Support for IRIS online payments, accelerating money transfer to other banks. Through this service, sending money to another Greek bank can be completed within minutes. New debt payments were added, covering customers' need for easy, 24/7 payment of their debts Support for the new loyalty programme (yellow), whereby customers can register online via winbank and monitor their use. Enhancement of business information provided to businesses. Manage money transfers-remittances to other banks. Piraeus Bank, true to the continuous improvement of customer services, certified winbank for the 13th consecutive year according to ISO 9001:2008. Group Digital Banking Selected Indicators 2016 winbank web banking winbank phone banking winbank mobile banking 34% increase in average monthly active users 50% increase in average monthly cash transactions 50% increase in active users 58% increase in cash transactions 48% increase in active users 128% increase in cash transactions The following percentage of total Bank transactions per category was made through the Bank s electronic channels (web/mobile/atm/aps): Payments of Bills 55% Transfers/Remittances 78% Withdrawals 86% Deposits 34% Passbook Update 40% Total 67% Awards In 2016, winbank e-banking and mobile apps received significant distinctions and awards both in Greece and abroad. Cyta Mobile Excellence Awards one touch for winbank mobile banking App: SILVER award in Mobile App Usability. winbank wallet: GOLD award in Mobile Wallet. Check in Class: GOLD award in Mobile Sales/Promotions Services Applications. Global Finance Awards Best Consumer Digital Bank in Western Europe. Business Report 75

76 Business IT Excellence (ΒΙΤΕ) Awards one touch for winbank mobile banking App: BRONZE award in Mobility & Mobile Applications. winbank Private Banking App: SILVER award in Banks/Insurance Companies. Lighthouse E-volution Awards: The redesigned winbank won: SILVER award in webpage Redesign SILVER award in Innovative Bank services GOLD award in Usability & UX Optimization GOLD award in Mobile Banking GOLD award in Design Aesthetics winbank Web Banking The average monthly number of new registered web-banking users in 2016 was 21,000. The average monthly number of active users increased by 34% since 2015, and the average monthly volume of money transactions by 50%. The average monthly volume of money transactions per user increased by 7%. winbank Phone Banking The average number of new registered phone banking users increased in 2016 was 25,000. Active users increased by 50% since 2015 and money transactions by 58%. Payments Through winbank Web Banking and In 2016, payments for public utilities and bills through winbank and easypay increased by 52% compared to 2015, while the penetration of e-payments in the Bank reached 46%, posting a 20% increase compared to It is worth mentioning that 995 payments are available through winbank web-banking and winbank Mobile Banking Active mobile banking users increased significantly by 48%, with a 128% increase in the volume of money transactions. In addition, approximately 110,000 users activated the quick login functionality, resulting in an increase in the use of mobile banking by 63%, since it is estimated that this functionality helped the increase of average logins from 8 to 13 per month. "Instant Cash" winbank Service The innovative "Instant Cash" service (web/phone/mobile/atm cash transfer and cash withdrawal without a card from an ATM) continued its upward course in Approximately 95,000 Bank customers used the service, resulting in a total increase of 64% in the volume of transactions compared to 2015, with the amounts transferred exceeding 42 mn. Piraeus Direct Services Piraeus Direct Services (PDS) aims to provide services to the Group s customers and associates through all available distribution channels. PDS s main target is to provide the Bank with quality and innovative services to improve communication with its customers. In 2016 the company supported various of the Bank s initiatives. Indicatively: The new winbank site for individuals and businesses. Support to new services: Yellow, Remote Registration, winbank wallet, My Bank, Bank in Office, Key2Business, Development Banking programme, Iris Payments, Easypay. 76 Business Report

77 Outgoing call campaign for installing POS terminals to partnering merchants. Setting up of group and special POS terminal network & merchant line. Creation of a special service line for Small Businesses and Professionals. Servicing the "Agro-carta" in cooperation with the Branch Network and creation of a special card activation line for the Branches. Completion of the migration of previous Geniki bank cards to Piraeus Bank systems. Cross-selling of insurance products. At the same time, PDS supported the mechanism for recording customer satisfaction in Retail Banking by placing a number of phone calls to customers, as soon as they completed a transaction or purchase of a product/service, thereby capturing the client's "experience" immediately after his interaction with the Bank (Voice of the Customer). It also supported the Bank's communication with its customers, carrying out a variety of informative and promotional campaigns. In order to respond to the increase of incoming calls (+6% compared to 2015), PDS stepped up the response and support teams. It has made a special effort to improve customer service and satisfaction indicators across all service channels. For these reasons, emphasis was placed on the training and development of people, as well as the enhancement of the company s IT infrastructure. The quantitative indicators improved significantly over the previous year and would have been even better if there had not been a huge number of calls in the last weeks of the last four months of 2016, due to massive public sector dues settlements via Web and Phone Banking. More specifically, the indicators were as follows: 68% of the calls were answered within 20 seconds compared to 54% in Average speed of answer was reduced to 43 seconds from 82 seconds in Despite the increased number of calls, the quality indicators remained high, e.g. credit card retention (76%) and customer satisfaction (86%). Finally, in the context of the uninterrupted and immediate continuation of business as usual, the creation of the Disaster Recovery Data Centre was completed, and the transition of business for one weekend was carried out successfully. Self-Service Banking In 2016, improvements were made to the Bank's ATMs, to extend and upgrade the services provided. The most important improvements were: Instant activation of prepaid Social Solidarity Income Cards provided by the state to financially weak fellow citizens. Support of the Bank s new loyalty programme (yellows) enabling customers to be informed about their balance in yellows. Support of the Bank's new recycling ATMs. At the same time, the effort of extending services provided by easypay kiosks continued: Option for paying bills by card, increasing the customer's options for settling his debts through the easypay kiosks and simplifying the whole process. Instant issuance and charging of prepaid gift cards with pickup from the easypay kiosk. The Bank's self-service machines, with their wide functionality, are an important and integral part of the Bank's e-branch equipment, which started operating in Business Report 77

78 e-branch At the end of 2016, Piraeus Bank was the first to launch into the Greek market a new model of a fully automated e-branch offering a range of full-service banking transactions, in three locations in the region of Attica. The first e-branch, located in Ampelokipi opened for the public in early December, while the other two opened a month later in Chalandri and Spata (McArthurGlen Athens Designer Outlet Shopping Centre), respectively. The Bank's objective is to create "Modern Banking Experience" Branches to better serve its customers and improve their overall experience through the provision of innovative services. Combining in a unique way modern architecture and technological innovations, it designed and implemented a friendly, familiar and modern environment that provides smart banking services and transactions. The new branches have extended operating hours on weekdays and on Saturdays, confirming once again the high-quality service and the customer-centred character Piraeus Bank has been showing for many years, offering a significant competitive advantage. Inside the e-branch individuals as well as businesses and professionals can perform their transactions with security, speed and simplicity, since no special knowledge or digital skills are required. Facilitators (branch staff) are available during operating hours to assist with customers queries, to provide information about the services provided and instructions on how to use the Bank s machines & digital services, as well as assistance in every transaction. The main piece in technology development and flagship of the e-branch, is the "Remote Cashier", a VTM (Video Teller Machine), which is a customer interaction model that facilitates all banking, with customers feeling exactly the same service experience. AΤΜ At the end of 2016, Piraeus Bank Group s ATM network in Greece amounted to 1,880 machines, out of which 796 were installed within branches of the Bank and 1,084 in points outside the branch network, making it the largest ATM network in Greece, with a market share exceeding 34%. In 2016, the ATM network supported 86% of the Bank s cash withdrawals and 14% of the total deposit transactions. In the second quarter of the year, the "Piraeus free Wi-Fi" service was activated in over 1,300 ATMs, and was warmly welcomed by the public, showing ever-increasing use. easypay Kiosks Easypay kiosks are one of the Bank s important service channels, with a market share of 41%. There are 563 easypay kiosks installed within the branch network and outside, with extended opening hours and access for the public. Transactions in the kiosks increased by 4% compared to 2015; 20% of deposit inflows, 34% of credit card payments, 21% of loan payments and 40% of bankbook updates were conducted in the kiosks, proving that they significantly contribute to the discharge of branch cashier desks, apart from providing speedier customer service. Green Banking The Path Towards Green Banking In 2016, even though political and social developments in Greece prolonged economic uncertainty, Greece's commitments to the EU guidelines brought about further changes in the legislative and regulatory framework affecting several areas of sustainable development, such as Renewable Energy Sources (RES), energy savings in buildings (private and business), the agricultural world (through subsidies), the tourism industry, etc. New standards are introduced in many of these sectors, such as the new Electricity Market model, where the supervisory framework adapts to the particularities of each technology and to their market penetration. This model will work within the framework of the energy union promoted by the European Commission in recent years to defend the long-term economic interests of the Member States and to pursue the path towards sustainable development. By means of Community directives, specific environmentally-friendly and socially sensitive policies are promoted for the Member States, modifying their respective supervisory framework accordingly. Through Green Banking, Piraeus Bank follows developments in the energy sector, which is the most important part of the Group's green portfolio, and in all areas contributing to the sustainable development model. The areas actively promoted by the Bank since 2009 are RES, energy saving, proper water and waste management, organic farming, agrotourism, ecotourism, green transport and green chemistry. Green Banking is committed to the creation and modernization of loan products, the financial and technical assessment of the sustainability of investment projects, the gradual inclusion in corporate lending processes of business loans 78 Business Report

79 from the environmental and social management system and the monitoring and reporting of the green loan portfolio. Green Banking and Market Green Products and Services The Group's specialized green products and services aim to serve the aforementioned sectors and aim at promoting clean technologies to serve investment options for business and private customers. Following the modification in the supervisory framework for RES electricity generation in 2015 and the substantial market restart after the period , when there was a suspension of licensing of new photovoltaic projects, Green Banking proceeded to the creation and modernization of existing and new loan products. Under the umbrella of the "Piraeus Green Business" group, whereby Small and Medium Businesses and Professionals are funded with favourable conditions and flexible processes, another "green energy" product has been added, "Piraeus Green Net Metering". The new product highlights the benefits of energy autonomy and pushes businesses towards environmentally friendly choices, such as installing photovoltaic systems, aiming to offset the electricity they produce with what they consume. "Piraeus Green Business", also includes the loan product "Energy Upgrade" since This product aims to create favourable conditions for energy upgrade of business facilities. Along with the renewal of the equipment, businesses benefit from a reduction in their operating expenses and from the comfort created in their space, while applying environment-friendly practices. Thus, despite the unfavourable economic sentiment in Greece, the Bank has remained on the path of supporting green entrepreneurship, especially RES projects. In addition to green products for Small and Medium Businesses and Professionals, in 2016 high-power capital intensive projects were funded, with emphasis on wind energy. These projects were evaluated on their individual characteristics, for the Bank to provide the businesses with the appropriate financial instruments. With regard to energy-conservation, in 2016 the Ministry of the Environment and Energy published additional decisions for inclusion in the "Energy Efficiency at Household Buildings" programme. As a result of the new decisions, the Bank handled approximately 3,500 customer applications out of a total of 8,500 applications. This allowed additional energy saving projects to be carried out in household buildings additional to the 13,000 customers who had been funded until the programme ended in late It is important to note that the Bank continues to provide Green Loans to Individuals on favourable terms, so that they can cover the energy needs of their household buildings (construction and/or installation of equipment), irrespective of the subsidized programmes. In 2016 particular emphasis was placed on the green services provided by the Group through its subsidiaries in Greece (Centre of Sustainable Entrepreneurship Excelixi SA and ETVA Industrial Parks SA). Advisory services on environmental management system, EMAS, ISO & Green Key certifications, as well as energy efficiency, carbon footprint, waste and water management, were offered by Green Banking, with the participation of the Branch Network and the Group s subsidiaries. Green services provide businesses with the ability to monitor and record their environmental impacts as a result of their activity. They show ways to improve business operations while offering multiple benefits such as protecting the environment by reducing their carbon footprint, reducing their operating expenses by upgrading equipment or improved management of their operations, enhancing reputation, etc. Businesses bearing these certifications have a further competitive advantage, since the European model increasingly imposes certification of products and services. Results Green Portfolio Piraeus Bank has adopted a detailed monitoring process of its green portfolio, and marks regularly its positive contribution to sustainable growth. The goal of Green Banking Operations is to inform all interested parties continuously regarding the quantitative and qualitative data of the portfolio and its operation in the most transparent way. At the same time, the accuracy of data is ensured through audits by independent certified bodies. At the end of 2016, Piraeus Bank Group approved limits exceeding 1.7 bn, demonstrating its strong commitment to financing new green business projects with an emphasis on RES, providing funding from the early stages of the investment plan up until completion. The total number of green customers (private and business) funded increased 12% since 2015 to over 23,000 at the end of 2016, highlighting its effort to support a number of businesses and individuals rather than individual cases. At the end of 2016, active loans outstanding of the green portfolio stood at 1.05 bn, retaining its qualitative characteristics for another year. More specifically, by the end of 2016, approximately 20,700 individuals, with outstanding loans of more than 82.5 mn, were financed by the Bank in order to realise their investment. Most of them have installed more than 4,300 roofmounted photovoltaic systems ( 56 mn). However, the majority of private customers come from the "Energy Efficiency at Business Report 79

80 Household Buildings" programme, which was concluded in In 2016, and following the inclusion of additional beneficiaries in the programme by the Ministry of Environment and Energy, approximately 2,500 individuals implemented building interventions in their homes so as to reduce their energy needs. During a difficult financial period ( ), the Bank supported more than 15,500 beneficiaries in their effort to upgrade the energy efficiency levels of their households and thereby reduce expenses in their household budget through bank lending. The majority of the beneficiaries belonged to lower income ranges (with personal income less than 12,000 or a family income less than 20,000 per annum). With regard to the additional cases included in 2016, Piraeus Bank selected 3,500 applications as initially eligible, with a total budget of 40 mn. In total, Piraeus Bank accounted for 41% of the aggregate entries/participations in the programme. In total, until the end of 2016, 2,650 companies were financed by the Group to implement their green entrepreneurship projects. Green financing to businesses by the units of Small Business, Business Centres, Large Businesses and Piraeus Leasing exceeded 932 mn, corresponding to 89% of the green portfolio. The largest part of loans was allocated to RES projects. The total capacity of projects financed by Piraeus Bank (including those already repaid) at the end of 2016, amounted to 1,017 MW, making up for a 19.4% market share of the total installed capacity from RES in Greece. Specifically, more than 7,600 photovoltaic systems of total capacity 535MW have been financed until the end of 2016, with the majority of them being up to 100KW. Financing of wind parks was also noteworthy, reaching a total capacity of 405MW, or 17.1% of total wind parks operating in Greece, with active loan balances reaching 256 mn at the end of The Bank has also financed 20 small hydro-electric stations, with active loan balances reaching 69 mn. Finally, the Bank financed biomass/biogas projects with 47 mn, generating a total capacity of 19MW. The total capacity of RES projects that have been funded by Piraeus Bank averted the annual emission of 2.1 million tons of CO 2 into the atmosphere, a quantity that would require 159 million trees for its absorption. Res Project Figures Change Capacity from Financed RES (MW) 1, % Prevented CO 2 Emissions (thousand tonnes) * 2,120 1,967 ** 8% Green Financing Limits ( bn) % Green Financing Balances ( bn) % * The calculations for the CO 2 amount prevented from being emitted due to the funding of Piraeus Bank Group, are based on the average CO 2 emission coefficient, the conventional Greek power generation and the average annual power generation per RES technology, according to the latest published data of LAGIE (Operator of Electricity Market). ** The amount of CO 2 emission that was prevented was revised for The change is due to the update of the CO 2 emission coefficient for substituting fossil fuel. Green Investments In 2016 the contract for the financing of a biogas project in Thessaly was signed under the JESSICA initiative. The project concerns the construction and operation of electricity and thermal energy biogas biomass power plant of a 1.5 MWe capacity in the Municipality of Farsala. This project is added to the 5 additional projects for which contracts have already been signed during the previous years in Central Macedonia and Thessaly with a total capacity of 9.2 MWe. In addition, a contract was signed in 2016, once again under the JESSICA initiative, to finance a project undertaken by the Municipality of Thessaloniki for the energy upgrade of the street lighting system on selected roads and parks, so as to improve the energy management of the electricity network and reduce the Municipality's energy expenses, while at the same time improve the urban landscape, through aesthetically upgrading areas and road axes. Piraeus Bank manages 40 mn of JESSICA funds ("Joint European Support for Sustainable Investment in City Areas") to finance urban development projects in its capacity as an Urban Development Fund (TAA) for the Central Macedonia and Thessaly regions. In addition, Piraeus Bank co-finances the projects with 16.8 mn from its own resources and/or other private resources. Finally, the Hellenic Fund for Sustainable Development, a venture capital fund, is a wholly-owned subsidiary of ETVA, one of Piraeus Bank Group s subsidiaries. Its aim is to facilitate entrepreneurs by covering their participation in new investment proposals related to sustainable development (RES production, waste treatment and utilization, etc.), using measurable social contribution and environmental indicators, thus participating in the growth of the Greek economy on a stable basis. 80 Business Report

81 Project Support In order to offer the best possible service to the Bank s customers, Green Banking operations focused on supporting the Bank s network and central units. Financial Sustainability Assessment and Implementation of the Environmental and Social Management System in Business Financing One of the main pillars of the Green Banking unit is the financial and technical sustainability assessment of projects in all sectors of green entrepreneurship. The green experts team assesses the new projects, closely scrutinizing the proposed technology, the experience of the installer, the dimensions and estimated productivity of the project. In addition, the viability of the projects is considered, taking into account a variety of parameters, while the licensing process is monitored throughout the investment, in accordance with national legislation and European standards. The financial and technical sustainability assessment has been extended to re-evaluate projects that have already been funded. During the annual revision of lending limits, Green Banking also reviews the projects to ensure the continued and uninterrupted operation of the installed equipment and its productivity. The ultimate goal of sustainability assessment at this stage is to prevent any failures in the operation of the projects, protecting both the customer and the Bank. The total number of green projects that have been evaluated by Green Banking at any stage of their implementation reaches 4,000. The staffing of the Green Banking unit combined with years of experience in financing projects with a positive environmental impact has been the comparative advantage for the immediate adoption of the Environmental and Social Management System (ESMS). ESMS includes the existing Environmental Management System related to the risks that may arise from the Bank s internal operation - certified under EMAS & ISO in 2011, and the Environmental and Social Risk Management System for risks that may arise from the business activities of its funded customers. In line with the "ESMS Policy" adopted by the Bank's Executive Committee, the Group's Credit Policy has been amended and Business Credit Criteria have been enriched with new Environmental and Social Criteria. At the same time, in 2016 the Group's Environmental Policy Review was launched. As part of the design and implementation of the ESMS, specific parameters relating to the assessment and management of the environmental and social risk of any business financing are gradually included into the existing loan approval processes, and will be followed in examining any new or existing business financing, based on Group Credit Policy and the relevant International Standards. In 2016 the necessary modifications were made to the Bank's IT systems to automate checks. The implementation of the ESMS includes the adoption by the Bank of a list of excluded activities, a due diligence on the environment, health, safety and society, in accordance with the national supervisory framework and, in some cases, with the International Standards, and finally a draft of corrective action plan were required by a specific implementation timetable. The Bank monitors and evaluates on a regular basis the environmental and social performance of funded projects, businesses and organizations. In line with the general standards of a management system s operation and governance, in 2016 the Bank appointed the Group ESMS Officer and the Group ESMS Coordinator to coordinate the implementation of the system in Greece and in subsidiaries abroad, and will set up a Steering Committee and a Working Group for the programme s immediate implementation. In order to monitor the business portfolio s environmental and social risk and to ensure the system s proper, efficient and optimal operation, the results (qualitative and quantitative) will be recorded at regular intervals in order to draw the necessary conclusions. Collaborations and Participations Green Banking has actively participated in meetings, conferences and scientific research covering the whole spectrum of green entrepreneurship, so as to maintain open communication with market players, inform the investors about the Bank's products and services, and inform executives about new technologies and changes to the supervisory framework. By way of example, in 2016 Green Banking participated in: The BIOFACH 2016 exhibition in Nuremberg, Germany, where meetings were held with investors and companies active in the organic and responsible agriculture sector both in Greece and internationally. At the same time, as part of BIOFACH, Green Banking attended the 4-day International Conference on Organic Agriculture and Alternative Business Report 81

82 Development of the Countryside at the International Level. The UNEP FI Group, which is responsible for creating "Positive Impact Principles". Its main objective is to fund projects with a positive impact on society. Gaia Business conference on the developments in the agriculture sector, the New CAP and its environmentally friendly approaches, and participation in the Copa Copega meeting in Greece. The Travelife Seminar for the certification of alternative tourism services. Food for Business Pitching event of "Innovathens Innovation and Entrepreneurship in the Technology of the Municipality of Athens", where business opportunities connected to and supported by the implementation of new technologies and innovation were presented for the agri-food industry. World Sustainable Tourism Council in Berlin, the main objective of which is to promote sustainable tourism at a global level. Colloquia organized by the Centre for Renewable Energy Sources (CRES) and the Institute of Agricultural Sciences on the use of biomass as a driving force for market development and the standardization and certification of olive oil respectively. The Greek-French Innovation and Entrepreneurship Forum. In addition, workshops were organized with local operators and entrepreneurs, in cooperation with local chambers and municipalities, to support one of the most dynamic sectors in the country, Tourism, so as to present the opportunities offered through the Bank s products and services. For example, Green Banking executives participated in workshops: The Chamber of Evia in cooperation with the Union of Hoteliers of Evia. The Professional Association of Aegina in cooperation with the Municipality. The Chamber of Commerce of Thassos in cooperation with the Municipality. Green Banking Advisor The Green Banking Advisor has been present in the Branch Network since 2010 and for yet another year was the direct link with the Bank's customer base, providing information about the opportunities offered by the Group in these fields. The Advisors participated in events and workshops organized by institutional bodies as well as by the local business community, aiming at their direct information on issues related to green entrepreneurship and, above all, supporting the local market in this approach. Training For Piraeus Bank staff training on environmental and social issues is a key factor in supporting green entrepreneurship and maintaining its healthy portfolio, and thus training was provided to specific executives. Particular emphasis was placed on training the Branch Development Partners in the Branch Network to fully serve the needs of green business enthusiasts, informing them about the choices amongst the Group s green products and services. More specifically, in addition to 19 days of classroom training, a Green Banking executive visited 33 Partners throughout the Bank s branch network in Greece, offering targeted on-the-job training. The main purpose was to strengthen their knowledge of green entrepreneurship and to familiarize the partners with the products and services provided. A total of 103 man-hours of training were recorded. Additionally, for the wider dissemination of information, unit executives participated in the training of Small Business & Professional Associates at the Network Branches. The training material for the associates included information about the opportunities created by the modifications of the supervisory framework in the areas of interest, their connection with the Group s green products and services and the benefits for the Bank's customers. A total of 51 employees attended the module with 1,632 man-hours of training. In addition to the Bank's Branch Network's partners, Business Centres managing larger portfolios were also informed of the opportunities. The purpose of these meetings is to provide uniform information to all those serving customers regarding investment opportunities, the services provided by the Group to cover these investments, as well as the spe- 82 Business Report

83 cial funding framework for the Green entrepreneurship sectors. A total of 105 employees attended the module with 365 man-hours of training. In 2016 special seminar cycles were designed for the implementation of the ESMS. The seminars were considered necessary to train senior executives who are responsible for supervising and coordinating the business lending process on the new policies and processes required by ESMS, as well as on the modifications made to the Bank's systems. Senior executives of the Group s subsidiaries, in Greece and abroad, were also informed about the new ESMS requirements, in order to co-ordinate the work of integrating the system into the subsidiaries. Thus, a total of 62 executives received 372 man-hours of ESMS-related training. Finally, e-learning seminars on environmental issues and issues of green entrepreneurship continued. Thus, 20 more participants had 195 man-hours of training. Internet For the fourth consecutive year Piraeus Bank supported an innovative internet communication channel, the Green Banking Portal ( Through the website, leading environmental companies and not only have the opportunity to promote their products/services and their good practices, strengthening their market position. In addition, the portal is a training tool on the basic concepts of green entrepreneurship, aimed at informing and raising awareness on environmental issues. Following Green Banking's concerted actions, businesses that were posted on the portal at the end of 2016 were 60% more than those at the end of The presence of Green Banking on social networking sites, such as facebook, twitter, youtube and flickr, continued for the sixth consecutive year. The Bank thus demonstrates its strong will to keep open another window of communication with society to inform the public on environmental and social issues. More specifically, in 2016, emphasis was placed on issues of biodiversity, climate change, environmental social initiatives and innovative ideas for green entrepreneurship. At the end of 2016, more than 32,000 "Think Green" friends from Greece and abroad followed 483 related facebook posts. Similarly, on twitter the followers remain above 1,000 with the relevant page tweets rising to 350. Agricultural Banking The Agricultural Sector at the Heart of the Bank Piraeus Bank, as the leading bank of the agricultural sector, has strategically chosen an integrated approach to providing banking services and financing of the agrofood sector, encouraging the creation of synergies and supporting entrepreneurship in all agrofood chain, from the producer and his suppliers of goods and services to the businesses and the cooperatives that process, trade and export the agricultural produce. Piraeus Bank provides targeted financing and quality services of high added value to every link of the chain as well as solutions to all its customers. New Products & Operational Framework By financing the agricultural sector, the Bank aims to - in addition to the provision of liquidity - contribute to solving the sector s significant longstanding structural problems. In this context, the Bank designed and offered a range of new products and services. In particular, Piraeus Bank issued the Agro-carta and provided liquidity on time to tens of thousands of producers in the first cultivation period of 2016, a transitional period for the implementation of the new common agricultural policy and the new structure of direct payments, enabling early partial payment of these payments to farmers to cover their short-term needs. At the same time, in order to better serve the farmers investment needs, it offered leasing facilities through its subsidiary Piraeus Leasing, covering the needs for fixed assets, such as agricultural cars, tractors, collectors, milking machines, etc., and taking into account the real needs of farmers based on the capacity of their farms and the seasonality of their cash flows, and providing for the most appropriate repayment terms. In addition, in order to smoothly implement the investment plans under the Rural Development Programme, the Bank has developed a comprehensive package of solutions, which includes, besides the investment loan, the Letter of Guarantee and the loan instead of a grant, so that there is a total coverage of the needs for timely completion of the investment. In addition, in cooperation with the Group s subsidiaries, the Bank focused on creating comprehensive specialized bancassurance products for farmers and presented in cooperation with ATE Insurance, member of ERGO Group, the new crop insurance product, "Safe Agricultural Production". It is a complete product for farmers that provides insurance coverage and privileges for their entire business. Business Report 83

84 Finally, the Bank continued to support agricultural producers by enabling them to cope with extraordinary production problems and continue the smooth repayment of their obligations. Contract Farming The "Contract Farming & Livestock Breeding" programme has been in operation for four years and is an integrated banking model of targeted financing and coordination of commercial/processing businesses and of individual farmers/livestock breeders with a clear footprint in the country's agricultural economy. This form of financing is a comprehensive proposal for servicing the agri-food sector, which contributes to the creation of synergies between the parties involved, while at the same time helping to rationalize agricultural production, modernize the trading circuit and create an expanded retail network for agri-food, supporting the development of local markets. The programme s success is evident given the increase in the number of commercial enterprises/cooperatives/producer groups from all over the country participating in it, as well as its extension to other sectors of the economy, such as fisheries. Through its development and extension, the Contract programme further enhances its support to the country's rural sector and to the Greek economy in general, as it contributes to the extroversion of Greek enterprises, to stimulating employment in rural areas, to enhancing the sustainability of industries of the rural economy with an important contribution to maintaining the country s social structure in remote island regions as well as in exploiting its natural wealth. In 2016, following market trends and needs, the Bank enriched the programme with additional opportunities for producers, such as covering the labour costs through the possibility of buying out insurance coverage and paying premiums for their agricultural production, their farm equipment and agricultural machinery. Also, in 2016, through the extended Contract Farming programme, the Bank carried out its next step, which concerns the holistic approach to the value chain of the Greek agri-food sector, by financing both production cost factors and those related to distribution and retail sale of products. More specifically, Piraeus Bank, capitalizing on its accumulated know-how, which it develops on a daily basis, recognized the need to intervene in the agri-food chain and implemented its next step in the field of agri-food. With the Contract Banking Agribusiness Scheme, the Bank is expanding its integrated approach to the agri-food value chain. In order to contribute to the reduction of agricultural production costs, the Bank financially supports agricultural supplies stores with working capital and further develops the range of services and products it offers to support the agricultural and agri-food sector. The basic philosophy of the programme is to enhance the liquidity of agricultural supplies stores, in order for them to be able to pay for the necessary supplies from wholesalers in cash, thereby achieving the maximum possible discount, part of which is passed on to producers. Furthermore, in the context of the extended Contract Banking Programme, in 2016 the Bank implemented the sectoral link between the primary sector and the hotel industry. The Bank financed hotels to purchase, on contract, certified Greek products from companies and cooperatives participating in the Contract Farming & Livestock Breeding programme, contributing to the promotion of products to tourists visiting our country. In this way, it enhances the export orientation of the agricultural sector and provides support to exporting businesses. Support Actions of Agricultural Bodies The cooperation between the Bank and institutions of the agricultural sector continued successfully in A range of significant and value-added products and services was offered to agricultural institutions/organisations, agricultural cooperatives and businesses involved in agriculture. The Bank has developed and offers a full range of specialized services and transactions for farmers and other businesses involved in agriculture through its extensive branch network and centrally. In particular, for services relating to the payment of Communal Agricultural Aid and State aid to producers and enterprises, the Bank is certified through the Quality Management System under the EN ISO 9001:2008. The certification was renewed in 2016, satisfying the quantitative and qualitative evaluation criteria set at the inspection by the competent body. The same certification was also renewed for the payment service of the Early Retirement Programme for Farmers, which the Bank manages on behalf of the Ministry of Rural Development and Food. The Bank remains the leader in the agricultural payment service and is the only bank in Greece certified to dispense subsidies to producers, proving that it is specialized in the provision of high quality services both to the paying institutions and to their beneficiaries. The Bank s role in making aid payments is crucial for the correct and rapid service of producers, agricultural businesses and all parties involved in the process. 84 Business Report

85 Throughout the year, a large number of payments were successfully executed for Pillar I direct payments and for Pillar II measures of the Common Agricultural Policy, with substantial amounts being directed to basic and green aid and to actions for young farmers, modernization of farms, the transition to organic farming, agro-environmental aid, etc. Payments of Community and State aid, which were carried out smoothly and successfully in 2016 in the whole rural world, amounted to a total of 3.6 bn. Funding by the Bank to the Special Guarantee Account for Agricultural Products amounting to 2.8 bn was crucial for the timely payment of aid to beneficiaries. With the main objective of serving the needs of the rural world and providing high quality products and services, the Bank continues to support the primary sector of the Greek economy and to prioritize its development. Actions and Initiatives In addition to financial support, the Bank provides multi-faceted support to farmers. The Bank's modern perception of integrated support for farmers is implemented through the Entrepreneurship Centres, which operate in areas with significant farming activity. The centres are in a position to offer thorough information about specialized banking products that cover the needs of producers for financing, as well as about their opportunity to make use of co-funded programmes both by the State and under the new Rural Development Programme In addition, Piraeus Bank continues to focus on updating farmers regarding practical issues. This aim is served with validity, specialisation and reliability by the special publication "Epi Gis", which presents important issues in the agricultural sector. In addition, recognizing its dominant role in the agricultural sector, the Bank participated in conferences, workshops, educational programme and events related to the agri-food sector. Investment Banking Piraeus Bank provides financial consultancy services in the fields of mergers and acquisitions (M&A), as well as consultant and underwriting services throughout the Capital Market product spectrum. In 2016 Piraeus Bank continued to participate in projects of privatization, acquisitions, mergers, capital increases etc. Specifically, in 2016, in its capacity as financial advisor to the Hellenic Republic Asset Development Fund, Piraeus Bank successfully completed the most significant privatizations in the country, such as the sale of Piraeus Port Authority SA and of Astir Palace Hotel in Vouliagmeni, as well as the sale of important real estate properties abroad (New York, Washington and Ljubljana), and submitted a proposal for the exploitation of ten (10) Port Organizations. The Bank also continued to act as a financial advisor to the Hellenic Republic Asset Development Fund on some other important privatization projects, such as the sale of Thessaloniki Port Authority SA, the utilization of the grounds of the former Athens Airport (Ellinikon) and the development of real estate in Afandou region in Rhodes. In the private sector, Piraeus Bank successfully provided consulting services to clients of various sectors of the economy such as fish-farming (SELONDA AQUACULTURE SA) and real estate (TRASTOR REIC), while it also provided financial advisory services to the BoD of KLEEMANN HELLAS SA in the mandatory public offer for the acquisition of its shares by MCA Orbital Global Holding Ltd. Stock Exchange Operations - Piraeus Securities SA In 2016, Piraeus Securities SA once again participated in the capital market developments, maintaining its position in the spectrum of brokerage services, despite adverse economic conditions and, in particular, in trading shares on international stock exchanges, in bond trading, in research and analysis, as well as in derivatives markets. In particular, for yet another year, the Group ranked fourth in terms of trading, with a market share of 11.4%. The company s main activities include intermediation for the trading of Greek and international shares and derivatives, state and corporate bonds, the provision of margin accounts, the processing of stock market transactions. Private investors may also complete their transactions in the Greek and international markets, rapidly and safely via the fully renovated electronic transaction platform. Due to the successful long-term cooperation Piraeus Securities has with foreign institutional investors, most international organizations with a presence in Greece have chosen to use it for their brokerage business. The company s Analysis Department is considered one of the best in the Greek market and has received several awards from international organizations for the excellence of its products. Piraeus Securities was the first brokerage firm to become involved in trading derivative products. Its Market Making division closely cooperates with the Sales division to maintain a continuous presence in most derivative products, holding one of the top positions in the relevant rankings. The International Markets Division offers specialized investment services that cover the needs of investors on an international scale. Business Report 85

86 Participations In 2016, the most significant changes in the Group's holding portfolio were: In the context of providing capital support to its subsidiaries, the Group participated in share capital increases of up to approximately 72 mn In the context of selling Group participations, Piraeus Bank: divested 33.8% of its subsidiary,trastor SA. proceeded to the divestment of its total shareholding, 28.6%, in the European Reliance SA. concluded the sale of 100% of its subsidiary ATE Insurance SA. proceeded to the divestment of 25.9% of its subsidiary, Piraeus Bank Cyprus Ltd. sold its stake in Piraeus Leasing Bulgaria AD. placed its subsidiary, Olympic Commercial and Tourism Enterprises SA, in the Held-for-Sale (HFS) Portfolio. Non Core Assets The Group has participations in a number of non-banking companies. In the context of its commitments to the European Competition Commission (DGComp), the Group must restrict activities that are not of a purely banking nature. In 2016 the Group hired financial advisers and initiated the process of selling, amongst others, Hellenic Seaways and AVIS. The Group's other main participations are Marfin Group, Henry Dunant Hospital, Selonda, Nireus, Astakos, Merlin, Euroterra and Picar. Asset Management Treasury Piraeus Financial Markets (PFM) is responsible for the effective management of the Group's liquidity in order to optimize the financing of the Group's operations. At the same time, after the operational consolidation of the divisions specializing in the money and capital markets, PFM is the central hub providing investment products and services to the Bank's customers. As a result, the bank benefits from the maximum use of synergies and economies of scale, as well as offering a holistic approach to Customers. In 2016, the effective management of the Bank's liquidity was at the heart of the Division s activities, with emphasis placed on reducing the Bank s reliance on the Eurosystem (ELA and ECB), which had increased significantly in 2015, mainly because of the outflow of deposits from the domestic banking system and the lack of access to the interbank market. The Bank's reduced reliance on funding from the Eurosystem resulted from the increase in deposits, the resumption of access to the Repos interbank market and the re-acceptance of Greek Government Bonds and Treasury Notes acceptance as collateral by the ECB. As far as the cost of deposits is concerned, efforts to reduce it even further continued throughout the year, converging to the European averages. In addition, the annual update of the EMTN programme and the covered bond programme were successfully completed, to ensure operational readiness for direct issuance of bonds on international financial markets, when circumstances permit it. Throughout the year the Bank actively participated as a key negotiator in all auctions of quarterly and semi-annual Greek Treasury interest-bearing notes, contributing to the unimpeded financing of the country's short-term needs. Piraeus Bank participated in the ECB's QE programme, beginning in April 2016, with the sale of EFSF bonds with a nominal value of 3.7 bn, posting significant financial results. Special mention should be made of the fact that Piraeus Bank was the first systemic bank to exit from L. 3723/2008 restrictions in April 2016, when the last remaining guarantees of the Hellenic Republic under Pillar II were redeemed. PFM continued to constitute the basic point of access for the Bank s customers to the international money and capital markets, offering a wide range of investment products and services, as well as customized solutions on Asset and Liabilities management and hedging for companies, with competitive pricing. In the context of actions to further enhance and support the activity on investment products and services, and in the light of particular events in the domestic and international environment, projects were carried out relating to business planning, enrichment of the range of products and services offered, upgrading of the existing or creation new technological infrastructures, review of internal processes to comply with the requirements of the institutional and regulatory framework. 86 Business Report

87 For example, Piraeus Bank and The Royal Mint agreed to expand their cooperation - dating back to into a strategic alliance for the distribution of the gold bullion Sovereign coins across Greece. This agreement ratified the Bank's leading position as it is the only commercial bank in Greece that has been offering its clients a comprehensive range of gold products and services over a period of ten years. In order to attract and maintain existing deposits, Piraeus Bank expanded the range of deposited products, indicatively through the issue of Dynamic Returns Deposits (investment product with guaranteed capital). Furthermore, in the context of further enriching the product range, the "Life Goals" (Savings/Investment product with regular payments to Piraeus Asset Management Mutual Funds) was launched by the Network of Stores. In the high-net-worth-individual management (HNWI), the main objective was to maintain and capitalize on the existing customer base by adopting solutions tailored to developments in the domestic and international markets, as well as to exploit new technological opportunities. At the same time, aiming to enhance the corporate image of Private Banking and to promote the high level of services offered and the values that govern its operation, a new corporate identity was created, with the adoption and application of a new logo. A series of promotional initiatives followed, with informative presentations, a brochure publication, advertising in magazines, etc. An indication of the reliability and quality of asset management services is the fact that the Economic Analysis and Investment Strategy Unit has been certified with ISO by the T V Hellas for its methodology for developing Bond, Share, Mutual Funds, and Investment Portfolio valuation models (with a combination of the above investment options). Based on the rating of the last comparative valuation carried out as part of the annual review, an absolute score is achieved over the other MFs evaluated. Additionally, in December 2016, five new Piraeus sub-funds were set up by Piraeus Asset Management Europe (PAME), a Luxembourg-based subsidiary of the Group, and launched by the Branch Network. In particular, PAME has enriched its Fund with three new International Funds of Funds, corresponding to all risk profiles (conservative, balanced, aggressive) and two new Liquidity (Enhanced Liquidity EUR, Enhanced Liquidity USD), now owning seven Mutual Funds. Apart from its management by the specialized executives of Piraeus Asset Management Mutual Fund, it is worth noting that the key advantage for the final customer-investor is the issue of registered shares directly in a Luxembourg institution. Regarding the provision of asset management services, Piraeus Asset Management Mutual Fund Management (AEDAK) is now active in the management of individual Sub-Funds (UCITS) -21 in Greece and seven in Luxembourg- as well as in portfolio management services for private and institutional clients, with a significant market share. Indicative of the specialized knowledge and long experience of asset managers of Piraeus Asset Management Mutual Fund is the fact that 22 out of the 28 Mutual Funds managed had a positive return in 2016, while all institutional portfolios outperformed the corresponding benchmark on , reinforcing both customer confidence and company revenue. In addition, the company submitted a request to the Hellenic Capital Market Commission for the extension of its license to Alternative Investment Fund Management (AIFM), while it still continues its efforts to support and develop the market of Occupational Insurance Funds (OIF) and other Insurance Companies. In this direction, a conference was held on the "Management of Pension Funds Reserves", which brought together for the first time in Greece all the Insurance Companies in a discussion about the professional management of their reserves. The organization of such conferences will become an institution, to take place on a recurring basis. Finally, the Bank holds a leading position in the Greek market in the Clearing and Settlement Services of exchange transactions, as well as in the Custody and Administration of Securities, both to domestic and foreign institutional investors. In recognition of its performance the Custody and Administration of Securities was named "Market Outperformer" and "Category Outperformer" by internationally renowned Global Custodian magazine, for its performance in the most important areas of custody services in the Greek market, following a relevant survey of Custody service providers. As part of the effort to further develop sales and enhance investment products and services, actions for standardizing custodian services were carried out, combined with the provision of access to selected investment products, through an integrated and flexible product, addressed to final customers of Greek Investment Services Firms (AEPEY). There are already 18 Greek AEPEYs customers of the Custody & Securities Services, with the potential for further development of operations and expansion of partnerships. With respect to the next years, the PFM will continue to assist in the implementation of the Group's strategic objectives with concrete actions and initiatives, such as, but not limited to reducing dependence on the Eurosystem and pushing up revenues from investment products and services, offering qualitative and meaningful solutions to customer needs. Business Report 87

88 Real Estate Development and Management Picar SA The company has undertaken the development and use of the 65,000 m 2 City Link complex until The City Link complex covers the building block between Stadiou, Voukourestiou, Panepistimiou and Amerikis streets in the centre of Athens. City Link users are among the most trustworthy and well-known companies in the Greek and global market, thus adding prestige to the complex and the company. City Link is home to Piraeus Bank headquarters, which occupy an area of 13,000 m 2, to the Attica Department Store, which cover an area of 25,000 m 2, and to various fully renovated department stores, theatres and restaurants. Piraeus Real Estate SA Piraeus Real Estate SA provides a full range of real estate design, development and management services. The company s main field of activity is the provision of integrated real estate services in real estate development, administrationmanagement of project construction, integrated property management on behalf of owner-investors, advisory services on utilization-management of real estate, investment advisory services to companies and capital invested in real estate, valuations, intermediation. In 2016 the three property development projects in Arta were completed, with a total revised budget of 6.5 mn. The company provided appraisal services with a total revenue of 3 mn. The consultancy services regarding the programmes analysed below amounted to total fees of 302,000. The company provides property & facility management in Greece for the City Link complex in the centre of Athens, for the Limani Business & Commercial Centre in Thessaloniki, and the Kosmopolis Park Commercial & Entertainment Centre in Komotini for Trastor REIC, with total fees of 894,000. The company also provides administrative and financial services to 16 of the Group s domestic real estate companies with a total property value of approximately 600 mn. The total fees for the company from the provision of administrative and financial services amounted to 345,000 in Since 2014 Piraeus Real Estate, in cooperation with Piraeus Bank, has been implementing contracts with the European Investment Bank for the management of the JESSICA Urban Development Funds for the Central Macedonia and Thessaly Regions (fund management with approximately 40 mn from the EU Structural Funds and 16.8 mn from Piraeus Bank). The commission for 2016 amounted to 110,000 and Piraeus Real Estate's total commission over the programme s lifespan is estimated at approximately 1.6 mn. Piraeus Real Estate, in partnership with Piraeus Bank and other companies, continued to honour its contracts for the provision of financial consultancy services to the Greek State/Hellenic Republic Asset Development Fund SA (HRADF) with regard to matters of recording, public property utilization and privatizations. In summary, Piraeus Real Estate, through agreements with the Group s Real Estate companies in Greece and abroad, manages real estate property of a total value of approximately 670 mn. The total gross revenue for the Group from the operation of Real Estate companies amounts to approximately 30 mn per annum. ETVA Industrial Parks SA ETVA Industrial Parks SA was founded in 2003 following the carve-out of the Industrial Parks sector from ETVAbank, during its acquisition from Piraeus Bank Group. Piraeus Bank Group has a 65% participation and the Greek State holds a 35% stake. The company s main scope of activity is the design, development and use and management of Industrial Areas (Industrial Areas/VIPE - Industrial and Entrepreneurial Areas/VEPE - Small Business Park/VIOPA) and Business Parks (EP). ETVA Industrial Parks SA is the basic agent of industrial and professional Real Estate in Greece. The company s mission statement today is the effective management and use of industrial areas, the creation of modern and sustainable industrial parks and the provision of high quality conventional and innovative services, with the goals of: the creation of a viable and profitable organization for Piraeus Bank Group and the Greek State with modern environmental standards, the support of already established companies and the facilitation of business synergies and networking between them, the creation of opportunities and the attraction of new business activities in the existing 88 Business Report

89 and new Industrial Areas, for the country s local and regional development, the determinant role in matters of the country s industrial and business growth, and more specifically in issues regarding the development of industrial parks and related business initiatives, as well as in issues of applied technologies on environmental and agricultural innovation, at a national and international level, as well as the "export" of gained experience and know-how, through the provision of high quality services, to other companies, institutions and organisations in Greece and Southeast Mediterranean. Today, ETVA Industrial Parks operates 26 industrial areas and industrial parks with modern and transparent processes, improving processes and rationalising operating costs. Approximately 1,500 businesses operate in the company s areas of responsibility, with over 30,000 employees. The turnover of these businesses reaches 9 bn, corresponding to approximately 5% of the country s GDP. ETVA Industrial Parks, in collaboration with Piraeus Bank, also promotes investments aiming at the development of new innovative initiatives in the context of green economy and driven by social reciprocity. The company s development and investment plan is moving on the strategic axes of the Logistics industry as well as in supporting Businesses located in the Industrial Areas by designing and offering services to facilitate their operation. A key role will be played by the Hellenic Fund for Sustainable Development (ETVA FUND), a subsidiary of ETVA Industrial Parks founded in March ETVA FUND was set up to participate in sustainable high-value-added investments, which at the same time have the characteristics that will ensure high and measurable social and environmental indicators in the future. In August 2016, ETVA Industrial Parks, in cooperation with GOLDAIR Cargo, submitted a bid to build and run a new rail freight terminal (Commercial Park) in Thriasio. The JV was awarded the project as a Temporary Contractor at the end of According to the schedule of preliminary project actions, the start date of the Concession is estimated to be in the first quarter of The development of the Park will be carried out in two phases with a total budget of 120 mn. The participation of ETVA Industrial Parks will amount to 80%. Using the existing experience and know-how of ETVA Industrial Parks and its employees, the optimal use of the existing industrial land, as well as the cooperation with the specialized financial experience of Piraeus Bank Group, in particular the Environmental Banking Unit, as well as the institutional responsibility of the Greek State, the company is expected to prescribe a positive development path. Business Report 89

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95 International Operations Piraeus Group's international network consists of five Banks in Southeast Europe, a branch in London, one in Frankfurt and a representative office in Moscow. The five banks have their headquarters in Albania, Bulgaria, Romania, Serbia and Ukraine, with a total of 261 branches, total assets of 5.4 bn, total net loans of 2.7 bn and total deposits of 3.0 bn. The negative sentiment towards the Greek Banks in 2015 due to the imposition of capital controls and the macroeconomic and political instability in Greece was reversed in the first few months of A significant contribution was made towards this effect by the successful share capital increase of Piraeus Bank at the end of the previous year. Thus, confidence in the domestic banking system was restored significantly and there was an inflow of 200 mn in deposits to the overseas banks of Piraeus Group, at a lower cost due to the continuous decline in interest rates. The increase in deposits, coupled with the restrained credit expansion, created excess liquidity of over 400 mn, which is returned to the parent to cover domestic needs at significantly more favourable financing costs for the Group. Even though most countries in which Piraeus Bank is present had a positive rate of growth in 2016 and a general improvement in their economic indicators, this did not necessarily go hand in hand with their credit expansion. The main reasons for this are the stricter supervision by the central banks of each country, the high borrowing rate of mainly large companies, and the general unfavourable economic sentiment that hinders retail banking. In 2016 Romania experienced GDP growth of 5%, with low interest rates, low public debt and increased domestic consumption, with tax cuts and wage rises. Credit expansion, however, remained at 1%. Bulgaria maintained its public debt at below 30% of GDP, enjoyed a growth rate of 3% and unemployment of 8%. It continued to manage its budgets with care, thus achieving a zero budget deficit. The credit expansion rate in 2016 stood at 3%. Serbia s real GDP grew by 2.5%, with particularly low inflation rates (0.3%) and unemployment declining. The relatively low credit expansion in these countries, in conjunction with the general economic sentiment in Europe and the tendency of European banks to curve their activities locally, leads those banks that invested in the region to reexamine their model and to select the countries in which they will continue to have a presence. Greek Banks are even more restricted due to the obligations they have undertaken in the context of the implementation of the Restructuring Plan, as approved by the European Commission for Competition. In this context, in 2016 the Group s subsidiary Piraeus Bank Cyprus Ltd was recapitalized by Holding M. Sehnaoui SAL and a number of other investors, with 40 mn. The transaction was completed in December 2016, after receiving all regulatory approvals from the supervisory authorities and the HFSF. Following the acquisition of shares by the investors, Piraeus Bank's stake in its subsidiary stood at 17.7%. As a result of the transaction, Piraeus Group's Common Equity Tier 1 capital (CET 1) ratio improved by about 15 basis points. In addition to Piraeus Bank Cyprus, in 2016 the Group completed the sale of Bulgaria Leasing to a local buyer. In addition, in June 2016 the Group sold a Romanian portfolio of written-off loans to the amount of 165 mn at very lucrative terms. In 2016 the Bulgarian National Bank (central bank) carried out an Asset Quality Review (AQR) of all banks operating in Business Report 95