Eurobank S.A. · ATHEX:EUROB
Eurobank — Eurobank Investor Forum July 2014
33 slides from Eurobank's conference presentation, July 2014
Slide 1: Greece: On the road to recovery
Greece On the road to recovery Adjustment program success stories, investment opportunities & challenges lying ahead Dr. Platon Monokroussos Chief Market Economist Eurobank July 2014
Slide 2: Adjustment program success stories & socioeconomic costs
Adjustment program success stories & socioeconomic costs Δ 2013/2009 Success stories 2009 2013 (improvement) General government balance (% GDP) -15.6 -3.2 12.4 ppts General government primary balance (% GDP) -10.5 0.8 11.3 ppts Interest expense (euro bn) 12.3 7.2 5.1 billion Current account balance
Slide 3: Real sector developments
Real sector developments Summary of views improvement in sentiment indicators increasingly reflected in hard economic data real GDP growth to shift into positive territory from Q3 2014 onwards upside risks to the troika forecasts for private consumption & imports growth tourism, energy, manu
Slide 4: Tourism sector contribution
Tourism sector contribution 16.5% in GDP (GVA); 18.5% of total employment 2014(f): 19mn visitors; >13bn direct revenue Incoming passenger traffic: January-May 2014, YoY% 2021 target: 22-24mn visitors; €18-19bn in 60 53.3 direct revenue 50 40 34.4 34.2 26.6 25.7 Travel receipts ( EUR bn) 30 15.2 12.0
Slide 5: Industrial sector contribution
Industrial sector contribution Industry (incl. construction) 16% in GDP (GVA); manufacturing 10% in GDP 10.0% Industrial & manufacturing output (YoY, %, 3mma) 60 Greek Manufacturing PMI (3mma) boom-bust threshold 55 50 5.0% 45 40 0.0% 35 Mar-08 Mar-11 Mar-07 Sep-10 Mar-05 Sep-11 Sep-12 Sep-13 Mar-06
Slide 6: Trade contribution
Trade contribution Retail & wholesale19% in GDP (GVA) &18% in total employment; retail 7% in GDP 20 50 Retail trade indicators 40 Road Motor Vehicles (%, YoY) 40 15 20 0 30 10 -20 20 -40 5 -60 10 -80 Jan-10 May-07 Sep-10 Jan-11 Sep-11 Jan-12 Sep-12 Jan-13 Sep-13 May-08 Jan-14 May-09 Jan-08 May-10 Ma
Slide 7: Construction sector contribution
Construction sector contribution GVA: 3.5% vs.16.3% in 2006 Eurobank Research VECM model for explaining residential housing Gross investment components (EURmn, s.a., prices in Greece 2005=100) (realizations & forecasts, YoY %) 60,000 Other Baseline Adverse 50,000 Other construction 40,000 2008 0.3 0
Slide 8: Eurobank GDP Nowcasting model
Eurobank GDP NOWcasting model Q2 2014 estimate & short-term forecasts 3.0% 5.0% Real GDP YoY growth Real GDP realised (QoQ %, s.a.) 2.0% (realizations & short-term forecasts) Nowcasting model fitted values 1.0% 3.0% 1.1% 0.0% -1.0% 1.0% -2.0% -1.0% -3.0% -0.3% -0.9% -1.1% -4.0% -3.0% -2.3% -5.0% -2.
Slide 9: Labor market conditions
Labor market conditions Unemployment still unacceptably high, but gradual improvement already underway Source: EL.STAT, Ministry of Labour , ERGANI, IMF (June 2014), Eurobank Global Markets Research 9
Slide 10: Greek GDP realizations and forecasts
Greek GDP realizations and forecasts Components, contributions & risks GDP components & risks Contributors to real GDP growth (realizations & forecasts) YoY growth 2008-2012 2013 2014(f) 2015(f) Risks Net exports GCF Private 5.0 Public consumption Private consumption -20.6% -6.0% -1.8% 1.7% consumpt
Slide 11: Potential sources of long-term economic growth
Potential sources of long-term economic growth Additional annual GVA (in EURbn) over 10-year horizon Tourism 18.0 Energy 9.0 Manufacturing - Food processing 6.5 Agriculture - Crops agriculture 4.5 Retail and wholesale 4.3 Major Sectors ----------------------------------------------------------------
Slide 12: Fiscal developments
Fiscal developments Summary of views fiscal adjustment unpredicted by historical standards State budget execution data support attainability of full-year fiscal target full coverage of projected financing gap achievable up to at least 2020 public debt more sustainable now than in 2009 new
Slide 13: Fiscal adjustment unprecedented by historical standards
Fiscal adjustment unprecedented by historical standards Adjustment mainly driven by the expenditure side 4 4 Cumulative improvement in 2009-2013 Fiscal Adjustment in Revenues, 2008-13 General gvnt balance: 12.4ppts-of-GDP 3 (percent of potential GDP) 3 General gvnt primary balance: 11.3ppts-of-GDP 2
Slide 14: Public debt more sustainable now than in 2009
Public debt more sustainable now than in 2009 That is, despite the rise in the debt ratio by ca 45.5ppts over the period 2009-2013 Evolution of Greek public debt ratio Nominal interest rate on debt 2013-2018 (%) Scenario analysis based on different assumptions regarding 5.0 4.4 4.7 a) size & degree
Slide 15: Eurobank new debt relief proposal
Eurobank new debt relief proposal: GLF swap into 50yr amortizing bond with 10yr grace on interest payments and fixed interest of ca 0.6% Interest expense with & without new debt relief (EURbn) Evolution of Greek public debt ratio 140 126.7 Current projection 120 109.3 200 troika baseline After debt
Slide 16: Full coverage of projected financing gap up to 2020
Full coverage of projected financing gap attainable up to at least 2020 without recourse to a new aid package from official lenders Projected evolution of general government borrowing needs & funding sources (EURbn, cumulative amounts) Source: IMF (June 2014), Eurobank Global Markets Research 16
Slide 17: External sector developments & competitiveness
External sector developments & competiveness Summary of views Summary of views surplus CA for the first time on record improvement mainly driven by huge imports contraction, higher services exports and lower interest payment on public debt (PSI & DBB) cumulative losses in post EUR-entry wage c
Slide 18: A surplus current account in 2013 for first time on record
A surplus CA in 2013 for the first time on record Improvement mainly driven by the sharp contraction of imports, higher services exports (tourism) and lower interest payments on public debt (PSI & DBB) Greece’s current account (% GDP) Greece’s current account as a savings-investment Balance-of-payme
Slide 19: Export & import trends
Export & import trends Lingering concerns as to the performance of merchandise exports despite the rapid improvement in wage cost competitiveness Annual growth of export s & imports Merchandise exports and imports excluding (YoY %, 12mma) fuel and ships purchases (% GDP) Exports of goods & services
Slide 20: Wage adjustment offsets wage cost competitiveness losses
Wage adjustment has fully offset the wage cost-based competitiveness losses accumulated post the EUR entry However, Greece’s CPI-based REER remains overvalued by more than 10% Greece – REER cumulative growth Minimum wage (euros per month) (vs. 37 major trade partners) 1,900 Greece 1,750 UCL-based 1,
Slide 21: Greece competitiveness
Greece competitiveness Performance vs. major trading partners (39 exporter EU & OECD countries as well as 56 others including emerging market economies) Estimate of the Greek sector Estimate of the Greek competitiveness gap by year (%) competitiveness 21
Slide 22: Financial sector developments
Financial sector developments Summary of views domestic financial conditions improving; deposit rates record significant decline since mid-2012 peak; loan rates ease, though to a lesser extent than deposit rates banking system reduces dependency on ECB liquidity measures; ELA funding close to ze
Slide 23: Bank recapitalization and normalization of liquidity conditions
Bank recapitalization, gradual normalization of domestic liquidity conditions should allow switch to positive credit creation from 2015/16 onwards *,** Interest rates on new euro-denominated Eurosystem funding to Greek banks deposits with agreed maturity up to 1 year (ppts) (outstanding amounts in E
Slide 24: Rise in Greek NPLs ratio due to recession
Rise in Greek NPLs ratio due to recession, rather than bank lending practices Of total NPLs 60% corporate (SMEs); 16% consumer; 24% mortgages Greece’s NPLs ratio Cumulative real GDP contraction vs. change in 35.0 31.9 NPL ratio 30.0 from through to peak (2008-2013) 30 25.0 20.0 Δ NPL RATIO (TROUGHT
Slide 25: Political environment, structural reforms & troika review
Political environment, progress on structural reforms & upcoming troika review Summary of views coalition majority may rise further in the upcoming presidential vote a number of steps have been taken in fulfilling privatisation targets prior actions to the June 2014 EFSF loan disbursement fulf
Slide 26: Ruling coalition controlling slim parliamentary majority
Ruling coalition controlling slim parliamentary majority Majority of at least 180 in-favor votes needed for the upcoming election of the President of the Hellenic Republic Ruling coalition currently controls 2-seat majority in the Allocation of seats in the Hellenic Parliament 300-seat Parliament.
Slide 27: Privatisation program
Privatisation program Progress so far & issue on the agenda in the upcoming program review Even if with delays, a number of steps have been taken in fulfilling privatisation targets Greece: Privatization Proceeds (2011-2020) —16 privatisation projects already completed, e.g. sale of 4.0 24.5 Yearly
Slide 28: Prior actions to the June & July 2014 EFSF tranches
Prior actions to the June & July 2014 EFSF tranches June 2014 EFSF tranche (€1bn) Completed Pending Adoption of outdoor trade law √ Adoption of investment licensing & spatial planning laws √ Issuance of ministerial decree for integration of debt collection to tax administration √ Update of nuisance
Slide 29: Next (5th) program review: key issues
Next (5th) program review Key issues on the agenda Key issues on the agenda Measures for the coverage of projected fiscal gaps (1.0%-of-GDP in 2015 & 0.75%-of-GDP in 2016) Measures for the coverage of projected financing gap (H2 2015 & 2016) Labor market reform (collective dismissals, industrial act
Slide 30: Disclaimer
www.eurobank.gr/research DISCLAIMER This report has been issued by Eurobank Ergasias S.A. and may not be reproduced in any manner or provided to any other person. Each person that receives a copy by acceptance thereof represents and agrees that it will not distribute or provide it to any other perso
Slide 31: Funding gap fully covered on a 12-month forward basis
ANNEX 1 Funding gap fully covered on a 12-month forward basis Strategies sought for the full coverage of the financing gap over the next 12 months re-access to international capital markets intra-general government borrowing through short-term repo operations (up to €3 bn ) use of idle resources ava
Slide 32: Disbursements under 2nd adjustment program
ANNEX 2 Greece – Disbursements under 2nd adjustment program (EURbn) Pending EFSF loan tranche Loan tranches disbursed so Total disbursements nd following completion of 4th far under 2 adjustment Future disbursements under 2nd adjustment program review (subject to program program fullfilment of certa
Slide 33: Greece – Timeline of key data & events
ANNEX 3 Greece – Timeline of key data & events Source: EU Commission, local press, Eurobank Global Markets Research 33