Eurobank S.a. · ATHEX:EUROB
Eurobank — Eurobank Ergasias — Investor Presentation (August 2016)
35 slides from Eurobank's investor presentation, Aug 1, 2016
Slide 1: One year capital controls in Greece
One year capital controls in Greece Impact on the domestic economy & lessons from the Cypriot experience Dr. Platon Monokroussos Anna Dimitriadou Ioannis Gkionis Dr. Stylianos G. Gogos Paraskevi Petropoulou Dr. Theodoros Stamatiou Eurobank Economic Research 1 August 2016 1
Slide 2: Summary of views
Summary of views Capital controls (CCs) in Greece: o not a mechanism for balance-of-payments support, exchange rate stability or protection of FX reserves, o but a temporary policy aiming to curtail deposit outflows & safeguard domestic financial system stability, in a period of high uncertainty r
Slide 3: Summary of views continued
Summary of views continued Lessons from the Cypriot experience: o Greece needs to increase degree of programme ownership, accelerate reforms implementation and communicate more effectively to the broader population the necessity of the required adjustment o The Cypriot experience has taught us tha
Slide 4: Part 1: Capital Controls - Theoretical perspectives & empirical evidence
Part 1 Capital Controls Theoretical perspectives & empirical evidence 4
Slide 5: Capital Controls (CCs): theory & empirical evidence
Capital Controls (CCs): theory & empirical evidence “Capital controls (CCs) are measures meant to affect the cross-border movement of capital by limiting the rights of residents or non-residents to enter into capital transactions or to effect the transfers and payments associated with these transa
Slide 6: Part 2: Capital Controls in Greece - Latest changes and what applies today
Part 2 Capital Controls in Greece Latest changes and what applies today 6
Slide 7: Greece: Latest changes (introduced on 22 July 2016)
Greece: Latest changes (introduced on 22 July 2016) Cash withdrawals Cumulative cash withdrawal limit set at €840 bi-weekly, per person, per institution (from €420 weekly, per person, per institution) 30% (from 10%) cash withdrawal limit for funds that, as of July 22, 2016, are transferred fro
Slide 8: What applies today for key transactions
What applies today for key transactions Transaction What applies Cumulative bi-weekly cash withdrawal up to €840 per person, per institution 30% cash withdrawal limit for funds which, as of July 22, 2016, are transferred from abroad by means of a credit transfer to existing accounts held with a cred
Slide 9: What applies today for key transactions
What applies today for key transactions Transaction What applies Cheques may be deposited only by crediting a bank account. Cheque deposits Cheque payments by cash are prohibited. Use of credit, debit or pre-paid cards for purchases The maximum transaction amount depends on the cardholder's contract
Slide 10: What applies today for key transactions
What applies today for key transactions Transaction What applies Transactions of legal persons or independent professionals/sole proprietorships involving a transfer of funds abroad, in the context of their business activities are allowed, in an amount not in excess of €10k each, per customer, per d
Slide 11: Part 3: Capital Controls in Greece - Macroeconomic impact
Part 3 Capital Controls in Greece Macroeconomic impact 11
Slide 12: Evolution of Greek GDP & components before and after the imposition of CCs
Evolution of Greek GDP & components before and after the imposition of CCs 3 consecutive quarters of negative GDP growth… a drop in private consumption… 2.0% 3% Capital Controls 1.5% GDP (YoY%) 1% 1.0% GDP (QoQ%) -1% -1.4% -1.5% 0.5% -2.0% -2.0% 0.0% -3% -0.5% Capital Controls -0.5% -5% -1.0% Privat
Slide 13: Real economy post the imposition of CCs
Real economy post the imposition of CCs Slowdown much milder than initially expected; possible recovery from H2 2016 GDP Domestic Private Government Gross Gross Change in Net (YoY%) Demand Consumption Consumption Capital Fixed Inventories Exports Formation Capital Formation Contribution to real GDP
Slide 14: A close look at soft and hard data
A close look at soft and hard data A rather mixed picture so far… Further recovery in sentiment needed to facilitate PMI struggling to surpass boom-bust threshold… 100 switch into positive GDP growth dynamics… 52 48 95 44 90 Capital Controls Capital 40 Controls PMI 85 36 Initial Economic Initial 50
Slide 15: Positive contribution from net exports following the imposition of CCs
Positive contribution from net exports following the imposition of CCs Due to steep fall in imports and, to a lesser extent, relative resilience of goods exports excl. oil and ships 17% Exports of Goods Excluding 2015 Real Contribution to Oil and Ships (YoY%) 12% Growth real GDP Growth in ppt Import
Slide 16: Part 4: Capital Controls in Greece - Impact on the domestic banking system
Part 4 Capital Controls in Greece Impact on the domestic banking system and progress in restoring financial stability 16
Slide 17: Substitution effect: CCs boost usage of plastic money
Substitution effect: CCs boost usage of “plastic money” Capital controls have increased the relative cost of the use of paper money As a result… Transactions with cards (debit and credit) increased by 59% YoY in H2 2015 (+12% in value terms) However… Adjustment period is not without costs, giv
Slide 18: Substitution effect in numbers: some recent evidence
Substitution effect in numbers: some recent evidence Significant changes in the transaction behavior of the public due to the implementation of CCs Eurobank Data: 1. POS terminals: +49% YoY in H1:2016 (+16% in H2:2015 relative to H1:2015); 2. POS turnover: +115% YoY in H1:2016 (+103% in H2:2015
Slide 19: Gradual improvement in domestic financial conditions after last summer's turbulence
Gradual improvement in domestic financial conditions after last summer’s turbulence CCs prevented a bank-run, but need to relax further to allow a faster return of deposits Stabilization of macro environment, gradual relaxation of CCs to facilitate return of bank deposits Deposit outflows by pri
Slide 20: Households still reluctant to return their excess liquidity balances to the banking system
Households still reluctant to return their excess liquidity balances to the domestic banking system; further improvement in private depositor sentiment needed Household deposits down to €101.8bn in June 2016, from €104.2bn in June 2015 (-2.3% YoY) and €134.9bn in June 2014 ( -24.6%) On a monthly
Slide 21: Growth of domestic corporate deposits turned positive in 2016
Growth of domestic corporate deposits turned positive in 2016 Significant withdrawals of corporate deposits in the months leading to the imposition of CCs due to heightened political uncertainty & deteriorating sentiment; positive growth witnessed in more recent months Domestic corporate deposit
Slide 22: Part 5: Capital Controls - What can be learned from the Cypriot experience
Part 5 Capital Controls What can be learned from the Cypriot experience 22
Slide 23: The Cypriot experience with capital controls
The Cypriot experience with capital controls A novelty in the EMU: Cyprus has been the first economy to introduce restrictions in the free movement of capital in the context of a monetary union in late March 2013. The main purpose of capital controls was to prevent a bank run, while instrumenting
Slide 24: Greece vs. Cyprus: not the same initial conditions
Greece vs. Cyprus: not the same initial conditions… Adjustment in Greek economy in a much more advanced stage than in Cyprus when capital controls were first imposed CCs introduction: Cyprus (March 2013); Greece (June 2015) Gross Domestic Product 115 Greece Greece 112 Greece 130 (2007Q1=100) Cypru
Slide 25: Greece: further improvement of domestic sentiment expected
Greece: further improvement of domestic sentiment expected, conditional on: swift completion of 2nd programme review, rigorous implementation of agreed reforms Figure below portrays magnitude of sentiment decline (recovery) ahead of (following the) introduction of CCs To a large extent, the shock
Slide 26: Greece: potential for faster credit recovery
Greece: potential for faster credit recovery, conditional on: swift restoration of domestic confidence, more concrete progress in dealing with NPLs Domestic private-sector deleveraging in a more advanced stage in Greece, when capital controls first imposed Credit to domestic private sector (outstan
Slide 27: Greece: potential for faster recovery of banking sector deposits
Greece: potential for faster recovery of banking sector deposits Over the period October 2014 to June 2015, Greece experienced a bank-run in slow motion In Cyprus, the sharp decline of private sector deposits in Q2 & Q3 2013 was mainly due to the bail-in & the ensuing economic slowdown Resident pr
Slide 28: Greece vs. Cyprus: evolution of corporate deposits
Greece vs. Cyprus: evolution of corporate deposits Before and after imposition of capital controls Cyprus: sharp decline of corporate deposits because of the bail-in Greece: hefty outflows in H1 2015 and gradual recovery thereafter Non-financial corporate deposits to domestic MFIs in EUR thousands
Slide 29: Cyprus vs. Greece: Capital Flow Measures (CFMs) - differences
Cyprus vs. Greece: Capital Flow Measures (CFMs) Some important differences (in both cases, period right after termination of the bank holiday) CYPRUS GREECE • CFMs complemented banks’ restructuring • CFMs to avert a bank run after bailout agreed under a €10bn financial assistance negotiations breaku
Slide 30: Cyprus vs. Greece: Capital Flow Measures (CFMs) - similarities
Cyprus vs. Greece: Capital Flow Measures (CFMs) Some important similarities (in both cases, period right after termination of the bank holiday) CFMs applied in order to safeguard stability of domestic banking system Significant CFMs remained in place after termination of bank holiday, including:
Slide 31: Appendix: Historical evolution of key restrictions since imposition of capital controls
Appendix Capital Controls in Greece Historical evolution of key restrictions since the imposition of capital controls 31
Slide 32: Greece: Historical evolution of key restrictions since imposition of CCs
Greece: Historical evolution of key restrictions since imposition of CCs st 1 Phase (June 28, 2015 — July 19, 2015) • Bank holiday applied to all credit institutions operating in Greece Bank holiday • The Athens Stock Exchange remained closed • Distance transactions (via telephone banking, mobile ba
Slide 33: Greece: Historical evolution of key restrictions since imposition of CCs
Greece: Historical evolution of key restrictions since imposition of CCs 3rd Phase (August 3, 2015 — December 31, 2015) • The Athens Stock Exchange opened with permited transactions being conducted under a specific framework • Permitted capital transfers abroad up to €500 per natural person per cale
Slide 34: Greece: Historical evolution of key restrictions since imposition of CCs
Greece: Historical evolution of key restrictions since imposition of CCs th 5 Phase (as of July 22, 2016) • Cumulative bi-weekly cash withdrawal up to €840 per person, per institution • 30% cash withdrawal limit from amounts which, as of July 22, 2016, are transferred from abroad by means of a credi
Slide 35: Important disclaimer
Important disclaimer This document has been issued by Eurobank Ergasias S.A. (Eurobank) and may not be reproduced in any manner. The information provided has been obtained from sources believed to be reliable but has not been verified by Eurobank and the opinions expressed are exclusively of their a
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