HELLENIC BANK GROUP Condensed Consolidated Financial Statements for the three month period ended
HELLENIC BANK GROUP Condensed Consolidated Financial Statements for the three-month period ended Contents Page Condensed Consolidated Income Statement 3 Condensed Consolidated Statement of Comprehensive Income 4 Condensed Consolidated Statement of Financial Position 5 Condensed Consolidated Statement of Changes in Equity 6 Condensed Consolidated Statement of Cash Flows 7 Notes to the Condensed Consolidated Financial Statements 8-23 2
HELLENIC BANK GROUP Condensed Consolidated Income Statement for the three-month period ended Continuing Operations Note Three-month period ended Turnover 109.872 118.321 Net interest income 41.807 51.496 Net income from fees, commissions, net gains on disposal and revaluation of foreign currencies and financial instruments and other income 24.728 26.777 Total net income 66.535 78.273 Total expenses (33.799) (34.476) Profit from ordinary operations before provisions 32.736 43.797 Provisions for impairment of loans and advances (56.421) (24.113) (Loss)/profit before taxation (23.685) 19.684 Taxation 5 2.727 (2.906) (Loss)/profit for the period from continuing operations (20.958) 16.778 Discontinued Operations Loss from discontinued operations after taxation 6 (10.285) (8.298) (Loss)/profit for the period (.243) 8.480 (Loss)/profit attributable to: Owners of the parent company (.685) 8.063 Non-controlling interest 442 417 (Loss)/profit for the period (.243) 8.480 Basic (loss)/earnings per share (cent) 4 (5,1) 2,6 Basic (loss)/earnings per share (cent) from continuing operations 4 (3,5) 5,6 3
HELLENIC BANK GROUP Condensed Consolidated Statement of Comprehensive Income for the three-month period ended Note Three-month period ended (Loss)/profit for the period (.243) 8.480 Other comprehensive income Surplus on revaluation of equity and debt securities 1.080 5.927 Amortisation of revaluation of reclassified debt securities available for sale 9 116 1.418 Transfer to the income statement on impairment of investments in debt and equity securities 604 -- Taxation relating to components of other comprehensive income (27) 2 Other comprehensive income for the period net of taxation 1.773 7.347 Total comprehensive (expenses)/income for the period net of taxation Total comprehensive (expenses)/income for the period net of taxation attributable to: (29.470) 15.827 Owners of the parent company (29.881) 15.7 Non-controlling interest 411 510 (29.470) 15.827 4
HELLENIC BANK GROUP Condensed Consolidated Statement of Financial Position at Assets December Note Cash and placements with Central Banks 937.720 1.094.620 Placements with other banks 1.716.035 1.698.571 Loans and advances to customers 7 4.025.011 4.744.910 Debt securities 8 844.522 939.732 Equity securities 9.954 10.2 Property, plant and equipment 10 144.786 146.478 Intangible assets 10 18.734 19.003 Tax receivable 39 40 Deferred tax asset 22.921 17.230 Other assets 90.062 84.805 Total assets 7.809.784 8.755.701 Liabilities Deposits by banks 40.678 46.706 Customer deposits and other customer accounts 6.865.395 7.766.863 Tax payable 8.213 6.495 Deferred tax liability 4.479 28.905 Other liabilities 130.735 116.971 7.049.500 7.965.940 Loan capital 304.870 304.877 Equity Share capital 11 266.466 266.466 Reserves 185.378 215.259 Equity attributable to owners of the parent company 451.844 481.725 Non-controlling interest 3.570 3.159 Total equity 455.414 484.884 Total liabilities and equity 7.809.784 8.755.701 Contingent liabilities and commitments 857.520 1.056.010 Dr A. P. Panayiotou Chairman A. M. Moushouttas Vice Chairman M. Keravnos Chief Executive Officer A. Rouvas Group Chief Financial Officer 5
HELLENIC BANK GROUP Condensed Consolidated Statement of Changes in Equity for the three-month period ended Share capital Share premium reserve Attributable to owners of the parent company Revenue reserve Translation reserve Revaluation reserves (Note 12) Total Non-controlling interest Balance 1 January 266.466 167.171 10.835 39 37.214 481.725 3.159 484.884 Total comprehensive income for the period net of taxation (Loss)/profit for the period -- -- (.685) -- -- (.685) 442 (.243) Other comprehensive income -- -- -- -- 1.804 1.804 () 1.773 Transfer of additional depreciation from revaluation of property -- -- (79) -- 79 -- -- -- 266.466 167.171 (20.929) 39 39.097 451.844 3.570 455.414 Attributable to owners of the parent company Share capital Share premium Revenue Translation Revaluation reserves Total Non-controlling Total reserve reserve reserve interest Balance 1 January 132.448 237.174 35.3 39 26.607 4.599 2.599 434.198 Total comprehensive income for the period net of taxation Profit for the period -- -- 8.063 -- -- 8.063 417 8.480 Other comprehensive income -- -- -- -- 7.254 7.254 93 7.347 Transfer of additional depreciation from revaluation of property -- -- 105 -- (105) -- -- -- 132.448 237.174 43.499 39 33.756 446.916 3.109 450.025 Total 6
HELLENIC BANK GROUP Condensed Consolidated Statement of Cash Flows for the three-month period ended Three-month period ended Cash flow from operating activities (Loss)/profit for the period (.243) 8.480 Adjustments to profit for the period 65.188 32.241 Operating profit before working capital changes 33.945 40.721 Working capital changes (922.679) 438.281 Cash flow (used in)/from operations (888.734) 479.002 Taxation paid (1.604) (2.935) Net cash flow (used in)/from operating activities (890.338) 476.067 Cash flow from investing activities Disposal of discontinued operations, net of cash disposed of (90.256) -- Income from investments in debt and equity securities 5.790 9.433 Net disposals/maturity of investment in debt and equity securities 97.461 379.492 Additions of property, plant and equipment and intangible assets less proceeds from disposal (555) (17.551) Net cash flow from investing activities 12.440 371.374 Cash flow from financing activities Interest paid on loan capital (3.624) (4.164) Net cash flow used in financing activities (3.624) (4.164) Net (decrease)/increase in cash and cash equivalents (881.522) 843.277 Effect of exchange rate fluctuations on cash and cash equivalents (155) (843) Cash and cash equivalents at the beginning of the period 2.634.274 1.648.114 Cash and cash equivalents at the end of the period 1.752.597 2.490.548 7
The condensed consolidated financial statements for the three-month period ended have not been audited by the external auditors of the Group. 1. General information The condensed consolidated three-month financial statements comprise of the financial statements of Hellenic Bank Public Company Ltd and its subsidiary companies, which together are referred to as the Group. Hellenic Bank Public Company Ltd was incorporated in Cyprus and is a public company in accordance with the provisions of the Companies Law Cap. 113, the Cyprus Stock Exchange Laws and Regulations and the Income Tax Laws. The Company s registered office is located at 200, Corner of Limassol and Athalassa Avenues, 2025 Strovolos, P.O. Box 24747, 1394 Nicosia. The principal activity of the Group is the provision of a wide range of banking and financial services, including hire purchase, leasing, investment and insurance services, as well as trustee and factoring services. 2. Accounting policies 2.1 Basis of preparation The condensed consolidated three-month financial statements have been prepared in accordance with International Accounting Standard (IAS) 34 Interim Financial Reporting as adopted by the European Union and should be read in conjunction with the audited consolidated financial statements for the year ended December. The condensed consolidated financial statements for the period ended are expressed in Euro ( ), which is the functional and presentation currency of the financial statements of the Bank and its subsidiaries in Cyprus and Greece. Any other subsidiary of the Group determines its functional currency and items included in the financial statements of each entity are measured using that functional currency. 2.2 Comparatives The comparative amounts included in the financial statements have been restated, where deemed necessary, to conform to the changes in the presentation format of the current year. 2.3 Adoption of new and revised International Financial Reporting Standards (IFRSs) and interpretations The accounting policies followed in respect of items considered material in relation to the financial statements are consistent with the accounting policies followed in the annual report and financial statements for the year ended December, except for the adoption of new and revised standards, interpretations and amendments to existing standards with effect from the 1st of January. The adoption of new and revised IFRSs, interpretations and amendments to existing standards did not have a material effect on the condensed consolidated three-month financial statements of the Group. 8
3. Segmental reporting Cyprus Greece (discontinued operations) Other countries Inter-segment transactions/balances Total Banking & financial services Three-month period ended Insurance services Three-month period ended Three-month period ended Three-month period ended Three-month period ended Three-month period ended 000 000 000 000 000 000 000 000 000 000 000 000 Turnover 107.184 117.007 7.159 6.380 10.001 13.819 847 864 (5.760) (6.836) 119.4 1.234 Net interest income 43.830 53.830 479 464 326 2.708 278 73 -- -- 44.913 57.075 Net income from fees, commissions, net gains/(losses) on disposal and revaluation of foreign currencies and financial instruments and other income 20.497 23.123 4.655 3.837 1.1 1.710 52 295 (925) (947) 25.410 28.018 Total net income 64.327 76.953 5.134 4.301 1.457 4.418 330 368 (925) (947) 70.323 85.093 Total expenses (.162) (.759) (2.124) (2.102) (3.400) (6.227) (885) (979) 401 402 (37.170) (40.665) Profit /(loss) from ordinary operations before provisions 33.165 45.194 3.010 2.199 (1.943) (1.809) (555) (611) (524) (545) 33.153 44.428 Provisions for impairment of loans and advances (43.978) (26.105) (325) (52) (5.809) (5.598) -- -- -- -- (50.112) (.755) (Loss)/profit before taxation (10.813) 19.089 2.685 2.147 (7.752) (7.407) (555) (611) (524) (545) (16.959) 12.673 Cyprus Greece Other countries Inter-segment transactions/balances Total Banking & financial services Insurance services March December March December March December March December March December March December 000 000 000 000 000 000 000 000 000 000 000 000 Total assets 8.096.458 8.381.475 96.889 91.141 38.227 661.865 53.664 54.553 (475.454) (433.333) 7.809.784 8.755.701 9
3. Segmental reporting (continued) Segmental reporting for Greece includes the results of the Branch Network in Greece until 25 th March (see note 6) as well as the results of the subsidiary Company of the Group in Greece Hellenic Insurance Agency Ltd. 4. Basic (loss)/earnings per share Three-month period ended Basic (loss)/earnings per share (Loss)/earnings attributable to owners of the parent ( thousand) (.685) 8.063 Average number of issued shares during the period (thousand) 619.689 308.020 Basic (loss)/earnings per share (cent) (5,1) 2,6 Three-month period ended Basic (loss)/earnings per share from continuing operations (Loss)/earnings attributable to owners of the parent ( thousand) from continuing operations (21.400) 17.195 Average number of issued shares during the period (thousand) 619.689 308.020 Basic (loss)/earnings per share (cent) from continuing operations (3,5) 5,6 Three-month period ended Basic loss per share from discontinued operations Loss attributable to owners of the parent ( thousand) from discontinued operations (10.285) (8.298) Average number of issued shares during the period (thousand) 619.689 308.020 Basic loss per share (cent) from discontinued operations (1,7) (2,7) 5. Taxation Following an amendment to the Income Tax Law 118(Ι)/02, the tax rate of 10% on taxable profits of companies in Cyprus increased to 12,5% with effect from 1 January. The new rate will be applicable on the taxable profits of the Bank and its Cyprus subsidiaries as from the year. Taxable profits are not subject to special defence fund contribution. Furthermore, following an amendment to Article 13 of The Income Tax Law, the provision concerning unlimited carry forward of tax losses of Cyprus companies has been abolished and any tax losses not utilized against taxable profits of other Group companies in the same year, may now be carried forward to be offset against profits of the five years following the tax year in which they are incurred. This provision applies to losses incurred from onwards. Losses incurred in the years 2006 to 2011 may be carried forward to be offset against taxable profits of the five years following 2011. 10
5. Taxation (continued) Special Levy on Credit Institutions According to the Special Levy on Credit Institutions Law of 2011, passed on 14 April 2011, a special levy, for the years 2011 and, on credit institutions was imposed at the rate of 0,095% on qualifying deposits held by each credit institution at December of the year preceding the year of taxation. Amendments passed on 21 December, for purposes of enforcing the terms of the Memorandum between the Republic of Cyprus and the lenders, provided for the indefinite extension of the validity of the relevant law, increase in the rate of the special levy to 0,11% and the deletion of a provision under which the levy paid should not exceed 20% of the total taxable profits of the credit institution assessed by the Director of Inland Revenue. A subsequent amendment to the relative law, published in the Cyprus Gazette on 29 April, provided for an increased rate of 0,15% applicable from 1 January. On 22 March, the Law on the Establishment and Operation of the Deposit Protection and Resolution of Credit and Other Institutions Scheme Ν.16(Ι)/ was published in the Cyprus Gazette.. According to this Law, the Law on the Establishment and Operation of the Independent Financial Stability Fund of 2011 was repealed, prior to settlement of the first installment of the regular contribution equal to 0,03% on the relevant obligations of a credit institution, due on 30/06/. The Deposit Protection and Resolution of Credit and Other Institutions Scheme is made up of: (a) (b) The Deposit Protection Fund, the purpose of which is the payment of compensation to depositors of covered institutions, in the event that these institutions are unable to repay their deposits, and the funding of the implementation of resolution measures as per articles 9 and 10 of the Resolution of Credit and Other Institutions Law. The Resolution of Credit and Other Institutions Fund, the purpose of which is the funding of the implementation of resolution measures as per the Resolution of Credit and Other Institutions Law. In addition to the balances of the special accounts kept at the Central Bank, on the date when Law 16(I)/ came into effect, in favour of: (a) (b) the Deposit Protection Fund as per the regulations published in accordance with article 34 of the Banking Law and the Resolution of Credit and Other Institutions Fund in accordance with article 13 of the Special Levy on Credit Institutions Law, the Committee may impose initial or special contributions, in favour of each Fund separately, in accordance with Regulations not yet published. 25/60 of the total revenue collected from the imposition of the special levy on credit institutions is deposited to a special account in favour of the Resolution of Credit and Other Institutions Fund which is a part of the Deposit Protection and Resolution of Credit and Other Institutions Scheme. Therefore, an amount of 1.114 thousand (March : 642 thousand) reflecting the above fraction, has been moved from the tax category to the category of administrative and other expenses. 6. Loss from discontinued operations after taxation On 26 March, the Bank, as a result of transnational understanding of the governments of Greece and Cyprus, at the request of Troika and according to the instructions of the Ministry of Finance and the Central Bank, consented to the sale of its Branch Network in Greece (BNG) to the Piraeus Bank SA with immediate effect. 11
6. Loss from discontinued operations after taxation (continued) Under this agreement the Bank sold the total of cash, deposits, loans, software, plant and equipment of the BNG for a total amount of 29 million and covered in cash the negative Initial Difference between the assets and liabilities sold (Initial Funding Gap), which amounted to 108 million. According to the provisions of this agreement, all of the above amounts were to be reviewed by a mutually accepted independent expert, within 21 days from the date of signing the agreement and readjusted accordingly. As a result, the Initial Funding Gap of 108 million has been adjusted to 118 million. According to the provisions of International Financial Reporting Standards, the comparative Consolidated Income Statement is re-presented as if the operations of the BNG had been discontinued from the start of the comparative year The effect of the discontinued operations on the Group s results for the period ended is presented as follows: Note Three-month period ended Discontinued operations Turnover 9.559 12.913 Net interest income 3.106 5.579 Net income from fees, commissions, net gains on disposal and revaluation of foreign currencies and financial instruments and other income 682 1.241 Total net income Total expenses Profit from ordinary operations before provisions Provisions for impairment of loans and advances Profit/(loss) before taxation Taxation 3.788 6.820 (3.371) (6.189) 417 6 6.309 (7.642) 6.726 (7.011) 25.608 (1.287) Profit/(loss) after taxation 32.334 (8.298) Loss on disposal of the Branch Network in Greece (42.619) -- Loss for the period (10.285) (8.298) Basic loss per share (cent) 4 (1,7) (2,7) 12
6. Loss from discontinued operations after taxation (continued) The loss on disposal of the BNG arose from the sale of BNG s assets and liabilities to Piraeus Bank SA under the agreement signed on 26 March. The loss constitutes the difference between the Net Payable Amount and the carrying amount of Net Liabilities transferred, as follows: Cash 11.256 Loans and advances to customers 571.819 Property, plant and equipment 1.136 Intangible assets 154 Other assets 1.086 Total Assets 585.451 Deposits and other customer accounts 6.081 Other liabilities 960 Total Liabilities 632.041 Net Liabilities 46.590 Disposal consideration 29.000 Negative Difference between the assets and liabilities acquired, calculated based on the sale agreement (118.209) Net Payable Amount 89.209 Loss on disposal of the Branch Network in Greece (42.619) The effect of the discontinued operations on the Condensed Consolidated Statement of Cash Flows was as follows: Cash flows used in discontinued operations Three-month period ended Net cash used in operating activities (59.136) Net cash used in investing activities (90.256) Net cash used in financing activities -- Net cash flows for the period (149.392) 13
7. Loans and advances to customers March December Loans and advances to customers 4.575.298 5.556.811 Provisions for impairment of loans and advances (550.287) (811.901) 4.025.011 4.744.910 The geographical analysis of the Group s total net loans and advances to customers is as follows: March December Cyprus 4.013.300 4.156.997 Greece 49 576.335 Russia 11.662 11.578 4.025.011 4.744.910 Provisions for impairment of loans and advances Income Provisions for impairment suspension account Total 000 000 000 1 January 626.514 185.387 811.901 Loans and advances written off Suspended income for the period (2.213) -- (1.940) 10.218 (4.153) 10.218 Charge for the period 50.112 3.888 54.000 Exchange difference Disposal Branch Network in Greece (2.916) (254.787) -- (63.976) (2.916) (8.763) 416.710 133.577 550.287 Income Provisions for impairment suspension account Total 000 000 000 1 January 487.023 157.876 644.899 Loans and advances written off (19.289) (18.844) (38.133) Suspended income for the year -- 46.355 46.355 Charge for the year 162.356 -- 162.356 Exchange difference (3.576) -- (3.576) December 626.514 185.387 811.901 14
7. Loans and advances to customers (continued) The total amount of net non-performing loans and advances in accordance with the Directive of the Central Bank of Cyprus at amounts to 792.194 thousand ( December : 1.044.151 thousand) (: Cyprus: 600.459 thousand, Greece: 443.692 thousand). 8. Investments in Debt Securities December Securities held for trading 1.895 1.912 Securities held to maturity 177.401 189.109 Securities classified as loans and receivables 330.181 3.825 Securities available for sale 337.239 419.221 846.716 942.067 Provisions for impairment (2.194) (2.335) 844.522 939.732 Concentration by sector: December Banks 292.071 584.715 Governments 505.256 291.243 Others 47.195 63.774 844.522 939.732 15
8. Investments in Debt Securities (continued) For the classification of a country as High Risk country, the credit ratings of the countries, the bond implied ratings which incorporate information about credit spreads of government bonds as well as other available financial data of the countries, are primarily considered. The table below shows the Group's exposure to investments in debt securities in countries of the Eurozone and the European Union with high credit risk, at the reporting date: Nominal Value Book Value Market value 000 000 000 Greece: Greek bank and other bonds 13.115 10.100 10.100 Cyprus: Cyprus Government Bonds 327.588 346.041 215.832 Cyprus bank bonds 256 261 261 327.844 346.302 216.093 Italy: Italian bank bonds 4.000 3.636 3.636 Ireland: Irish bank bonds 10.000 7.991 7.991 Slovenia: Slovenian bank bonds 500 27 27 On the Group did not hold any debt securities with issuers from Spain, Hungary and Portugal. The Group had proceeded with an impairment of Greek Government Bonds (GGB) as referred to below. Greek Government Bonds At December 2011, the Bank had in its possession Greek Government Bonds ( GGBs ) with nominal value 110 million, classified as Held to maturity and with a book value amounting to 35,1 million after the impairment. These bonds were eligible for the Voluntary participation of private plan (PSI +) to restructure the Greek debt, issued on 21 July 2011 and finalized on 21 February. As a result, and under the terms of the plan, on 12 March creditors, including Hellenic Bank, received new Greek bonds for.5% of the original value of eligible Greek bonds securities held, short-term securities issued by the European Financial Stability Fund (EFSF) for 15% of the original value of Greek bonds securities held as well as securities of the GDP of the Greek Republic. Any accrued interest on the original Greek bond securities were paid with 6months securities issued by the EFSF. Based on the difference between the carrying value of the eligible securities and the present value of new securities arising during the exchange of Greek Government Bonds on 12 March, the Bank proceeded with additional impairment of 7,3 million. The total amount for impairment of the eligible securities before the exchange accounted for 77,3% of their nominal value. The additional impairment is included in "Net income from fees, commissions, net gains/losses on disposal and revaluation of foreign currencies and financial instruments and other income" in the consolidated income statement for the three-month period ended. 16
9. Reclassification of debt securities On the 1 st of January 2009, the Group has proceeded with a review of its intension for the holding of debt securities and consequently of its policy for classifying them under the various categories. As a result of this review, a number of debt securities, which were included in the held for trading and available for sale categories were reclassified to the held to maturity and loans and receivables categories. For the years 2010 to as well as the three-month period ending, there has been no other reclassification of debt securities in other categories. Reclassification of investments held for trading In accordance with the provisions of the amended IAS 39 and considering the rare circumstances arising as a result of the international financial crisis and its continuing effects on the global economy, the Group identified the investments in debt securities that it did not intend to trade in on the 1 st of January 2009. These investments were reclassified from the held for trading to the held to maturity category. On, all Securities held for trading reclassified as held to maturity, had expired. Reclassification of available for sale investments In accordance with the provisions of the amended IAS 39, the Group has reclassified certain available for sale debt securities to loans and receivables, in view of the fact that there was no active market for these debt securities and the Group did not have the intention to sell these securities in the foreseeable future. The carrying amount and fair value of the reclassified debt securities is presented below: 1 January 2009 Carrying amount and fair value Carrying amount Fair value 000 000 000 Available for sale debt securities reclassified as loans and receivables 248.155 240.178 144.842 Had the Group not reclassified the above mentioned available for sale debt securities to loans and receivables on the 1 st of January 2009, the Group s equity would have included losses from changes in the fair value of these debt securities of 103.3 thousand that would have been included in the available for sale revaluation reserve. In addition, on the 1 st of January 2009, the Group reclassified certain available for sale debt securities, that it intends to hold to maturity to the held to maturity category. The carrying amount of these debt securities transferred on the 1 st of January 2009 amounted to 1.018.653 thousand. On the carrying value of these remaining bonds amounted to 71.407 thousand. If the Group had not reclassified debt securities available for sale to held to maturity on 1 st January 2009, the Group s equity would include gains from change in fair value of 8.933 thousand, which would have been included in the investment revaluation reserve available for sale. As a result of the above decision, for the three months ended, an amount of 116 thousand ( : 1.418 thousand) being amortization of revaluation of reclassified debt securities available for sale, was transferred from the investment revaluation reserve to the income statement. 17
10. Property, plant and equipment and intangible assets Property, plant and equipment Intangible assets Net book value 1 January 146.478 19.003 Additions less disposals 486 168 Disposal Branch Network Greece (1.136) (154) Exchange difference 145 6 Depreciation/amortisation (1.187) (289) Net book value 144.786 18.734 11. Share capital 000 Number of shares (thousand) December 000 Number of shares (thousand) Authorised 1.200 million shares of 0,43 each 516.000 1.200.000 516.000 1.200.000 Issued Fully paid shares 1 January 266.466 619.689 132.448 308.020 Issue of shares from exercise of Rights -- -- 127.228 295.879 Issue of shares from conversion of Non Convertible Capital Securities -- -- 6.790 15.790 Total issued share capital 266.466 619.689 266.466 619.689 On there were 619.689.220 fully paid shares with a nominal value of 0,43 each (December : 619.689.220 shares of 0,43 each). 18
12. Revaluation reserves Immovable property revaluation reserve Investments revaluation reserve Total 1 January 36.241 973 37.214 Revaluation of equity securities -- (380) (380) Revaluation of debt securities -- 1.491 1.491 Amortization of revaluation of reclassified debt securities available for sale -- 116 116 Transfer to the income statement on impairment of equity securities -- 604 604 Transfer to revenue reserve 79 -- 79 Deferred taxation (27) -- (27) 36.293 2.804 39.097 Immovable property revaluation reserve Investments revaluation reserve Total 1 January 39.772 (13.165) 26.607 Revaluation of equity securities -- (1.927) (1.927) Revaluation of debt securities -- 10.381 10.381 Amortization of revaluation of reclassified debt securities available for sale -- 3.060 3.060 Transfer to the income statement on impairment of equity securities -- 2.622 2.622 Transfer to the income statement on impairment of debt securities -- 2 2 Deficit on revaluation of land and buildings (5.127) -- (5.127) Transfer to revenue reserve (93) -- (93) Deferred taxation 1.689 -- 1.689 December 36.241 973 37.214 19
13. Capital and other commitments At, the Group s commitments for capital and other expenditure not recognised in the condensed consolidated three-month financial statements, amounted to 7.296 thousand ( December : 6.586 thousand). 14. Related party transactions Members of the Board of Directors and connected persons Connected persons include the spouse and minor children and companies in which directors hold, directly or indirectly, at least 20% of the voting rights at a general meeting. December Loans and other advances to Members of the Board of Directors and their connected persons 21.146 21.139 Tangible securities 23.204 28.184 Deposits 1.807 2.341 Additionally, at, there were contingent liabilities and commitments in respect of Members of the Board of Directors and their connected persons in the form of documentary credits, guarantees and unused limits amounting to 3.636 thousand which did not exceed 1% of the Bank s net assets (December : 14.826 thousand). Interest income in respect of Members of the Board of Directors and their connected persons for the period ended amounted to 233 thousand (March : 268 thousand), while interest expense in respect of Members of the Board of Directors and their connected persons amounted to 10 thousand (March : 55 thousand). Emoluments of members of the Board of Directors Emoluments of members of the Board of Directors: Emoluments and benefits in executive capacity 122 117 Employer s contributions for social insurance, etc 7 7 Retirement benefits 17 18 Total emoluments for Executive Directors Fees Other transactions with members of the Board of Directors and related parties 146 142 70 67 Mr. Iacovos G. Iacovou, a Member of the Bank s Board of Directors, holds an indirect interest in the companies Iacovou Brothers (Constructions) Ltd and Iacovou Brothers Technical Constructions (Hellas) S.A. On 13 July 2007 a sale contract was signed between the company Iacovou Brothers (Constructions) Ltd and Hellenic Bank Public Co Limited for the acquisition of a plot in Larnaca. The plot was transferred to 20
14. Related party transactions (continued) Hellenic Bank Public Company Ltd on 19 December 2007 and on 11 January 2008 the amount of 769 thousand was paid to Iacovou Brothers (Constructions) Ltd in respect of the acquisition of the relevant plot. On the same date an agreement was signed with the same company for the construction of a fivefloor building on the above-mentioned plot. The building includes a ground floor, a mezzanine and two underground parking spaces and is used for the operations of the Bank in Larnaca. The transaction was based on market values and amounts to a total of 5.986 thousand including VAT, in accordance to the agreement for the construction of the building and the agreement for additional work and includes the cost of the land. The construction of the building has been completed. During the period January March, 237 thousand (including VAT) was paid as final arrangement between the Bank and Iacovou Brothers (Constructions) Ltd (January March : no payment). Key management personnel who are not Directors and their connected persons Key management personnel are those persons who have the authority and the responsibility for the planning, management and control of the Banks operations, directly or indirectly. The Group, according to the provisions of IAS24 considers as key management personnel the General Managers of the Bank who were not Directors, members of the Asset and Liability Committee (ALCO) as well as management personnel who refer directly to the Chief Executive Officer. Connected persons include spouses, minor children and companies in which the key management personnel who were not Directors hold, directly or indirectly, at least 20% of the voting rights at a general meeting. December Loans and other advances to Key management personnel who were not Directors and their connected persons 1.040 1.441 Tangible securities 432 948 Deposits 3.251 3.788 Emoluments of key management personnel of the Group Emoluments of key management personnel who were not Directors: Salaries and other short term benefits 352 256 Employer s contributions for social insurance etc 32 23 Retirement benefits 44 32 Total emoluments and benefits of key management personnel who were not Directors 428 1 The remuneration of key management personnel relates to the period that they were not Directors. In addition, on, there were commitments to key management personnel who were not directors and their connected persons amounting to 302 thousand (December : 347 thousand). Interest income in key management personnel and their connected persons for the period ended March amounted to 10 thousand (March : 10 thousand), while interest expense in relation to key management personnel and their connected persons amounted to 35 thousand (March : 30 thousand). 21
14. Related party transactions (continued) Shareholders and their connected persons Pursuant to the provisions of IAS 24 related party among others, are considered the shareholders who have significant influence to the Bank or/and hold directly or indirectly more than twenty percent (20%) of the nominal value of the issued capital of the Bank.. Connected persons include the entities controlled by shareholders as defined above. December Loans and other advances to shareholders and their connected persons 81.214 81.552 Tangible securities 99.219 101.374 Deposits 16.541 16.261 In addition, on, there were contingent liabilities in relation to shareholders and related parties of documentary credits, guarantees and unutilised limits amounting to 9.576 thousand (December 14.003 thousand). Interest income in relation to shareholders and connected persons for the period ended amounted to 1.272 thousand (December : 5.096 thousand), while the corresponding interest expense amounted to 193 thousand (December : 854 thousand). Other transactions with Shareholders and related parties During the period ended, purchases of goods and services by shareholders as defined above, amounted to 0,1 thousand (December : 0,5 million). Connected person of the shareholders on had in its possession the Non-Convertible Bonds 2018 of the Bank amounting to 10 million. Bonds will expire on August 2018 and are part of Tier 2 Capital. The 2018 Bonds are not secured and in case of dissolution of the Bank will follow in priority to claims of depositors and other creditors. However, they have priority over the rights of shareholders and holders of Capital Securities. The 2018 Bonds are not listed on the Cyprus Stock Exchange. The interest on the Bonds 2018 is payable every three months and will be paid in cash at the end of each period. The 2018 Bonds bear a floating interest rate equal to the Euribor 3-month rate applicable at the beginning of each interest period plus 1,75%. On, the Bank owns equity securities to a connected person of the shareholders of an amount 1.572 thousand (December : 1.452 thousand). These securities are classified in the Available for sale category. All transactions with members of the Board of Directors, key management personnel, shareholders and their connected persons are at an arm s length basis. Regarding the key management personnel facilities have been extended with the same terms as for all other employees of the Group. 22
15. Economic Environment Economic Environment and Group operations in Cyprus As a result of the decisions taken at the Eurogroup on 25 March and the agreement signed between the Cyprus Government and the European Stability Mechanism (ESM) for the funding of Cyprus and the restructuring of the banking sector (Memorandum of Understanding), the government introduced new laws and amended the provisions of existing laws. Within this framework, a new economic environment has been established for Cyprus and the banking industry in particular, capital controls have been introduced and restructuring and/or resolution measures have been effected both in Laiki Bank and in Bank of Cyprus. Hellenic Bank Group is not involved in any resolution or restructuring measures. On 19 April, the Central Bank of Cyprus published the capital needs of the banking sector as established by an independent diagnostic audit conducted in by the firm Pacific Investment Management company LLC ( PIMCO ), which Hellenic Bank Group is reviewing. The diagnostic audit included the examination of the quality of the assets (bottom-up stress test) with a valuation date of 30 June. As per the Memorandum of Understanding, part of the 10 billion total funding to Cyprus will be deposited in a special account at the Central Bank of Cyprus, to be used for the recapitalisation of the cooperative credit institutions and commercial banks, other than Laiki Bank and Bank of Cyprus, which will fail to raise the required capital within the predetermined deadline. The injection of capital will be made based on the rules of state aid of the European Union and the amounts will be released in consultation with Troika. Consequences of the recent developments The changes made to the regulatory framework, the capital restrictions imposed and the general economic environment have unavoidably negatively affected the Groups activities. The Board of Directors and the Group s Management closely monitor the developments regarding the implementation of the recent decisions of the Eurogroup and the final Memorandum of Understanding for the financial assistance of Cyprus, and take the necessary possible measures for the management of any negative impact on the Group s operations that may arise from the newly-formed business and economic environment. According to PIMCO s exercise, the capital needs for Hellenic Bank Group result to an excess of 23 million under the base scenario and a shortfall of 333 million under the adverse scenario. To be noted that the capital saving from the sale of the Branch Network in Greece on 26 March was not taken into account. In order to ensure compliance with the required capital requirements within the predetermined deadline, the Board of Directors and the Group s Management are considering their options The Board of Directors and the Group s Management is unable to predict all developments which could have an impact on the Cyprus economy and consequently any effect that may have on the future financial performance, cash flows and financial position of the Group. 16. Approval of financial statements The condensed consolidated three-month financial statements were approved by the Board of Directors on May. 23