Eurobank S.a. · ATHEX:EUROB
Eurobank — Debt Investor Presentation (June 2014)
67 slides from Eurobank's debt investor presentation, Jun 16, 2014
Slide 1: Presentation to fixed income investors
Presentation to fixed income investors 16 June 2014
Slide 2: Disclaimer
Disclaimer By attending the meeting where this presentation is made, or by reading the presentation slides, you agree to be bound by the following limitations: This presentation has been prepared by Eurobank. The material that follows is a presentation of general background information about Euroban
Slide 3: Agenda
Agenda Eurobank at a glance 3 Capital and liquidity 9 Asset quality 15 First Quarter 2014 results 25 Eurobank going forward 35 Appendix 43 BoG / BlackRock capital assessment 45 Summary financials 51 Macroeconomic update 55 Page 2
Slide 4: Eurobank at a glance
Qaram Eurobank at a glance
Slide 5: Eurobank at a Glance
Eurobank at a Glance Eurobank at a Glance Shareholder structure One of four systemic banks in Greece, with 21% and 17% market share in loans and deposits respectively – Established in 1990 and has selective international 35.4% presence in 6 countries HFSF – Operates in both business and retail seg
Slide 6: Greek banking sector concentration
Greek banking sector concentration Market share of top four banks(1) Gross loans market share (Greece only) Gross domestic loans (€ bn) Market share Greece as of Mar 2014 97% PeerPeer 3 3 66.6 31% Ireland 90% +38pps Portugal 60% PeerPeer 2 2 52.0 24% Greece as of 2005 59% Turkey 53% Italy 51% PeerPe
Slide 7: International presence
International presence Total Assets (€ bn) 1.1 Net Loans (€ bn) 0.5 Deposits (€ bn) 0.8 Total Assets (€ bn) 3.7 Net Loans (€ bn) 2.2 Deposits (€ bn) 1.8 Total Assets (€ bn) 1.5 Net Loans (€ bn) 0.9 Retail branches 187 Deposits (€ bn) 0.8 Retail branches 95 Total Assets (€ bn) 3.0 Net Loans (€ bn) 1.
Slide 8: Modern bank with entrepreneurial culture and spirit of innovation
Modern bank with entrepreneurial culture and spirit of innovation Entrepreneurial culture with an innovation track record Highly qualified personnel Business model innovator creating new segments and market standards Young, multi - skilled, highly educated and fully certified personnel – First b
Slide 9: Leading positions in fee generating activities
Leading positions in fee generating activities Insurance Securities Services • #3 in total insurance market (€334m • Market leader in Institutional GWP in life and non-life) with over 8% share I Custody • The sole provider in Greece offering • Market leading Bancassurance a full suite of securities
Slide 10: Capital and liquidity
Qaram Capital and liquidity
Slide 11: Capital position post capital increase
Capital position post capital increase Common equity Tier1 (CET1) Ratio Greek banks capital ratios 1Q 2014 CET1 ratio 17.7% 17.7% -0.9% -0.4% 7.7% Peer 2 15.6% 11.3% Peer 1 15.4% Peer 3 14.4% (1) 4Q2013 Capital Basel III 1Q2014 1Q2014 (Basel II) increase impact & results Highest CET1 capital ratio
Slide 12: Capital position under Basel III post capital increase
Capital position under Basel III post capital increase Basel III pro forma CET1 ratio (%) 1 17.7 -455bps 13.2 -339bps Main capital impact due to 2 (i) ~ -316bps DTA phase out 9.8 (ii) ~ -139bps minorities and other Main capital impact due to (i) ~ -345bps DTA phase out (ii) ~ +6bps minorities and ot
Slide 13: Funding
Funding 1Q 2014 Funding breakdown (€ bn) Wholesale funding breakdown EMTNs 8% Wholesale 67.4 Subordinated Interbank 0.5 42% 0.5 Repos 9.6 ELA funding 2.0 Securitised 50% 14.3 ECB funding Deposits breakdown Deposits 40.5 Sight Time & other 15% 66% Total funding Savings 19% Page 12
Slide 14: Liquidity
Liquidity Eurosystem funding (€ bn) ECB collateral by type 34.0 -64% Treasury Bill RMBS 1% Corporate 5% 0% ECB 19.0 EFSF 13% Of which €1.8bn ELA EFSF bonds GGB 9% 17.0 16.3 Loans 4% 12.3 11.4 Pillar II 68% 14.3 15.0 12.3 5.6 2.0 Jun 2012 Dec 2013 Mar 2014 May 2014 Page 13
Slide 15: Loans/Deposits
Loans/Deposits Loans/Deposits ratio (%) Loans/Deposits ratio vs. peers 1Q 2014 (%) 136 131 111 109 109 121 109 109 93 1Q2013 2Q2013 3Q2013 4Q2013 1Q2014 Peer 1 Peer 3 Peer 2 Page 14
Slide 16: Asset quality
Qaram Asset quality
Slide 17: Total assets breakdown
Total assets breakdown 1Q 2014 Total assets breakdown (€ bn) 1Q 2014 Loans breakdown Consumer 14% Wholesale 76.0 37% Mortgages 36% SB Net loans and advances to customers 44.3 14% 1Q 2014 Securities portfolio breakdown Unit linked & equity GGBs 2% 11% Corporate Securities 18.8 5% T-Bills 16% PP&E, in
Slide 18: Asset quality
Asset quality 90dpd formation (€ m) Coverage ratio 90dpd 19.6% 21.3% 22.8% 24.5% 26.3% 27.7% 29.4% 30.9% 760bps 50.3% 872 49.9% -22% 48.7% 67 767 749 805 49 701 53 685 681 44.1% 718 9 43.3% 88 696 42.7% 675 83 International 569 TT & Proton 613 535 599 acquisition 76 75 493 Greece 1Q2013 2Q2013 3Q201
Slide 19: Asset quality
Asset quality 90dpd formation (€ m) Loan loss provisions (€ m) 872 647 814 67 90 -22% 767 749 84 479 714 49 701 53 685 681 57 81 9 417 419 417 88 83 591 41 51 International 569 66 57 535 76 International 75 805 730 718 557 696 675 633 613 422 599 534 376 366 493 353 461 Greece Greece 3Q2011 4Q2011 1
Slide 20: 90dpd gross formation per segment (Greece)
90dpd gross formation per segment (Greece) Mortgages (€ m) Consumer (€ m) 245 241 227 234 221 210 214 205 201 190 171 173 138 160 162 164 117 103 122 119 115 147 149 143 100 92 135 78 78 75 79 76 56 113 43 33 100 6 82 84 82 72 54 43 55 -35 3Q2008 1Q2009 3Q2009 1Q2010 3Q2010 1Q2011 3Q2011 1Q2012 3Q20
Slide 21: Asset quality metrics
Asset quality metrics 90dpd & coverage per segment 90dpd & coverage per region Provision (1) 90dpd ratio 1Q2013 2Q2013 3Q2013 4Q2013 1Q2014 coverage Consumer 43.1% 79.1% 90dpd ratio Mortgages 20.6% 27.8% Small Business 49.0% 43.3% Greece 26.3% 28.1% 29.1% 31.1% 32.7% Corporate 29.2% 53.9% Internatio
Slide 22: Greek loan portfolio - Corporate
Greek loan portfolio - Corporate 1Q 2014 Greek Corporate portfolio Breakdown by sector Sea Farming Electrical Equip. IT, Media, Public Sector 1% 1% Telecoms Supermarkets 1% 3% Other 1% Trade - 3% Industry Automotive 12% 3% Oil Total Corporate 3% Retail Trade portfolio: €15.3bn Clothes & Apparel 10%
Slide 23: Greek loan portfolio – Small Business
Greek loan portfolio – Small Business 1Q 2014 Greek Small Business portfolio Breakdown by sector Agriculture IT Health Energy 2% 1% 3% 0% Tourism 4% Retail trade Manufacturing 29% Total Small Business 8% portfolio: €6.5bn Construction 12% Small Business 15% Wholesale trade Corporate 14% Services 34%
Slide 24: Greek loan portfolio – Household
Greek loan portfolio – Household 1Q 2014 Greek Consumer and Mortgage portfolio Greek residential real estate indices(1),(2),(3) Total Consumer portfolio: €5.9bn 105 Small Business Consumer 100 15% BoG 13% 95 EPS 90 PropIndex 85 80 75 Mortgages 70 38% 65 60 2007 2008 2009 2010 2011 2012 2013 Total Mo
Slide 25: Strategic initiatives for credit risk mitigation
Strategic initiatives for credit risk mitigation Shift from unsecured to secured lending and shorter Corporate Special Handling Unit aims to: tenors Enhance corporate remedial capabilities bringing Reduction of consumer loan portfolio together the necessary know how Release capacity of corpo
Slide 26: First Quarter 2014 results
Qaram First Quarter 2014 results
Slide 27: 1Q2014 results
1Q2014 results(1) Highlights Key financials 1 Continuing recovery of pre-provision income to €194.3m in €m 1Q2014 4Q2013 1Q 2014, up by 9.0% q-o-q Operating expenses down by 12.7% q-o-q and 11.0% Net interest income 367.2 386.0 y-o-y on a comparable basis Fee income 64.5 70.0 Further improved fu
Slide 28: Loans and deposits
Loans and deposits Gross loans (€ bn) Deposits (€ bn) Deleveraging q-o-q (€ m) -908 -468 131.3% 135.6% 53.8 52.9 52.4 111.0% 109.4% 109.3% Loans/Deposits 8.1 International 8.0 7.9 46.7 45.7 8.6 8.4 Greece 41.9 41.3 40.5 8.1 International 8.3 8.3 22.4 21.9 Business 21.8 31.9 3.1 2.1 29.9 2.1 Greece 2
Slide 29: Pre-provision income and efficiency
Pre-provision income and efficiency Pre-provision income evolution (€ m) Quarterly pre-provision income (€ m) 103% 194 777 178 International 151 64 69 56 96 95 56 61 131 Greece €461m operating income €267m OpEx 110 95 40 34 29 1Q2013 2Q2013 3Q2013 4Q2013 1Q2014 65 367 382 Cost-to-income (%) -147 71.
Slide 30: Net interest income
Net interest income NII breakdown (€ m) NII per region (€ m) Total NII 270 294 320 386 367 386 367 320 119 99 Loan margin 597 294 562 557 International 548 542 270 115 94 95 47 42 Capital & bonds 22 19 2 269 Market & Eurosystem -64 -43 -32 267 -101 -92 funding Greece 200 205 174 Deposit margin -194
Slide 31: Spreads & net interest margins
Spreads & net interest margins Lending spreads (Greece, bps) Deposit spreads (Greece, bps) 554 Savings -30 and sight Corporate -51 -50 -49 -43 520 494 498 487 -192 Total 486 472 -213 Total -240 474 456 -268 -279 -271 457 -289 Time 427 -326 -359 -353 432 423 Retail (1) (1) 1Q2013 2Q2013 3Q2013 4Q2013
Slide 32: Commission income
Commission income Commission income breakdown (€ m) Commission income per region (€ m) Total fees excluding 81 76 83 85 80 Govt. guarantees expense 69 70 70 69 64 66 65 Rental & other 66 8 8 64 65 income 9 10 10 6 13 Insurance 25 27 7 25 23 11 11 9 26 International 9 6 Mutual funds 7 8 8 8 10 4 4 7
Slide 33: Operating expenses
Operating expenses OpEx per region (€ m) OpEx breakdown (€ m)(1) 306 -13% 77 267 70 International 299 -11% 229 196 26 -14% Greece 267 25 Depreciation 4Q2013 1Q2014 110 Cost-to-income ratio (%) 95 Administrative 83.1 80.8 71.7 71.6 67.6 Group 164 65.5 147 Greece Staff 62.6 63.2 60.0 57.9 1Q2013 2Q201
Slide 34: Income statement highlights (Greece)
Income statement highlights (Greece) Operating income (€ m) Operating expenses (€ m) 229 339 327 196 275 180 167 166 207 200 (1) (1) 1Q2013 2Q2013 3Q2013 4Q2013 1Q2014 1Q2013 2Q2013 3Q2013 4Q2013 1Q2014 Provision charge (€ m) Net income before one-offs (€ m) 557 422 376 366 353 -192 -207 -238 -257 -
Slide 35: Income statement highlights (International)
Income statement highlights (International) Operating income (€ m) Operating expenses (€ m) 145 73 74 77 73 70 134 134 129 129 1Q2013 2Q2013 3Q2013 4Q2013 1Q2014 1Q2013 2Q2013 3Q2013 4Q2013 1Q2014 Provision charge (€ m) Net income before one-offs (€ m) 90 14 66 57 3 3 51 41 -4 -18 1Q2013 2Q2013 3Q20
Slide 36: Eurobank going forward
Qaram Eurobank going forward
Slide 37: 2013 results do not reflect our full potential
2013 results do not reflect our full potential PBT: 2013 vs. 20072 (€ m) Comments Sharp deterioration of profitability since 2007 peak mainly 1,094 -639 driven by: Impairments: cost of risk increased from 100bps in 2007 -247 to 402bps in 2013 +157 Lower NII mainly driven by increased cost of Gre
Slide 38: Multiple operating levers provide scope for further improvements in profitability going forward
Multiple operating levers provide scope for further improvements in profitability going forward PPI comparison 2007 vs. 1Q 2014 (€ m) Main operating levers Synergies from the TT and Proton A acquisitions 1,471 €681m represents 1Q 2014 annualized PPI before synergies realized Does not include exp
Slide 39: Integration of TT & Proton
A Integration of TT & Proton TT & Proton integration program Targeted pre-tax synergies 2015 (€ m) Phase 2: completed Funding 64 25 89 44% Already achieved Cost 86 42% 33 53 Phase 1: completed oPhase 3: completed in April 2014 Already achieved Revenue 18 9% €203m targeted pre-tax synergies in 2015
Slide 40: Continued cost containment
B Continued cost containment Track record of organic operating Operating expenses (incl. TT & Proton) (€ m) expense reduction (€ m) 1,222 1,276 1,068 ~1,100 (53) ~1,000 -26%(1) (40) 944 4Q 2013 1Q 2014 FY2014 Target Remaining cost Other cost FY2015 Target annualized annualised synergies initiatives
Slide 41: Time deposit spreads reduction
C Time deposit spreads reduction Eurobank Greek time deposits spreads (bps)(1) Crisis resulted in material deposit outflows and subsequent pricing deterioration Time deposit pricing deteriorated by 285bps since 17 4Q 2007 -41 -79 Pricing being restored due to: -204 -228 Macroeconomic environ
Slide 42: Fee & commission income recovery
D Fee & commission income recovery (1) Net fee & commission income (€ m) Due to the crisis, fee and commission income As % of 0.93% 0.53% 0.35% Total contracted from 0.92% of total assets in 2007 to Assets 0.35% in 2013 593 510 Commission income is highly dependent on 435 411 macro environment a
Slide 43: Cost of risk normalisation
E Cost of risk normalisation 90dpd formation (€ m) Cost of risk in Greece increased by 317bps on average net loans between 2007-2013 90dpd 19.6% 21.3% 22.8% 24.5% 26.3% 27.7% 29.4% 30.9% Full year 2013 provision charge in Greece of 872 67 -22% €1,652m (1Q 2014 provision charge €479m) 767 749 805
Slide 44: Appendix
Qaram Appendix
Slide 45: Preference shares
Preference shares Amount and Amount: €950m; term: perpetual regulatory Fully eligible as Core Equity Tier 1 capital until 2017, under Basel III rules (“Grandfathered State treatment Aid”) 10% non-cumulative; with 2% step up every year after 2014 Dividend payment not allowed under Corporate L
Slide 46: Appendix – BoG / BlackRock capital assessment
Appendix – BoG / BlackRock capital assessment
Slide 47: BlackRock credit loss projections
BlackRock credit loss projections Greek¹ and international² lifetime CLP/Loans Comments Greece International 30.4% Eurobank portfolio quality improved by the 28.2% 23.2% 22.2% acquisition of TT and Proton, which have been 21.8% 20.4% 18.1% acquired as “clean” banks following carve out of non 15.3% p
Slide 48: PPI assessment by BoG
PPI assessment by BoG Cumulative 3.5 years PPI based on 1Q 2014 vs. BoG assessment (€ m) 2,875 +524 2,351 1,806 Implied €516m annually 776 +46 +33 855 Implied €129m quarterly 1Q 2014 reported PPI x 4 Remaining Annual Cost synergies on actions 1Q 2014 annualized PPI 1Q 2014 annual. PPI incl. 3Q2013 +
Slide 49: Credit loss projections: Eurobank vs. Greek market
Credit loss projections: Eurobank vs. Greek market Baseline scenario Adverse scenario Greek¹ and international² CLP/Loans Greek¹ and international² CLP/Loans Greece International Greece International 36.7% 30.4% 31.1% 28.2% 29.1% 28.5% 27.2% 23.2% 25.1% 24.1% 22.2% 21.8% 20.4% 18.1% 15.3% 17.1% Peer
Slide 50: Eurobank's capital needs according to BoG stress test
Eurobank’s capital needs according to BoG stress test Bank of Greece estimated capital needs in the baseline scenario (€ m) Bank of Greece estimated + 7,000 (9,519) Eurobank’s capital needs at €4,980m assuming 5.5% Core Tier 1 ratio in December 2016 PPI & other(1) +2,106 +2,945 €2.1bn of additio
Slide 51: Capital buffer in the adverse scenario
Capital buffer in the adverse scenario Baseline scenario (€ bn) Adverse scenario (€ bn) Even in the adverse scenario, 15.3 including the €2.9bn capital 14.4 increase, the capital buffer 14.7 would fully cover the credit 2.3 2.6 losses estimated by BoG 2.9 2.9 11.8 2.1 1.9 2.1 2.1 8.2 1.2 8.2 0.9 0.9
Slide 52: Appendix – summary financials
Appendix – summary financials
Slide 53: Summary 1Q 2014 performance and key figures
Summary 1Q 2014 performance and key figures(1) Balance sheet Income statement €m 1Q2014 4Q2013 €m 1Q2014 4Q2013 Gross customer loans 52,442 52,910 Net interest income 367.2 386.0 Stock of provisions (8,151) (7,761) Fee income 64.5 70.0 Net customer loans 44,292 45,149 Operating income 460.9 483.7 Cu
Slide 54: Quarterly financials
(1) Quarterly financials Income Statement (€ m) 1Q2013 2Q2013 3Q2013(2) 4Q2013(3) 1Q2014 Net Interest Income 269.8 294.1 319.9 386.0 367.2 Net Fees & Commissions 64.4 65.5 69.2 70.0 64.5 Other Income 1.6 -25.2 15.2 27.7 29.2 Operating Income 335.7 334.5 404.2 483.7 460.9 Operating Expenses 240.2 239
Slide 55: International key figures – 1Q 2014 (€m)
International key figures – 1Q 2014 (€m) Romania Bulgaria Serbia Cyprus Lux Sum Total Assets 3,716 2,976 1,542 3,021 1,056 12,311 Total Loans (Gross) 2,659 2,630 997 1,112 477 7,875 Balance Sheet Balance Total loans (Net) 2,223 2,319 934 1,066 476 7,018 Sheet Loans +90dpd 783 593 156 106 0.5 1,639 T
Slide 56: Appendix – macroeconomic update
Appendix – macroeconomic update
Slide 57: Summary
Summary Real economy: Recent improvement in a range of key real-activity and sentiment indicators points to an ongoing stabilization of domestic economic conditions, with a switch to positive year-on-year GDP growth expected from Q3 2014 onwards Fiscal position: Greece’s fiscal adjustment has been u
Slide 58: Adjustment program success stories & costs
Adjustment program success stories & costs Adjustment program success stories 2009 2013 Improvement General government (% GDP) -15.6 -2.1 13.5 ppts General government primary balance (% GDP) -10.5 0.8* 11.3 ppts Interest expense (€ bn) 12.3 7.2 5.1 billion Current account balance (% GDP) -11.2 0.7 1
Slide 59: Greece's economic sentiment indicator at a 6-year high
Greece’s economic sentiment indicator at a 6-year high; PMI manufacturing above the boom-or-bust threshold of 50 for the first time since mid-2008 Visible improvement in investor sentiment towards Greece reflected in the sharp compression of sovereign credit spreads and the recent rally in the dom
Slide 60: Recession in domestic residential house market seen bottoming out in 2014/2015
Recession in domestic residential house market seen bottoming out in 2014/2015 In both the baseline and adverse scenario 2016 is the turning point year House prices expected to show a steeper recovery than GDP in the next years Real GDP (%, YoY) Residential house price index (%, YoY) Baseline Ad
Slide 61: External deficit closing rapidly while real GDP is slightly recovering
External deficit closing rapidly while real GDP is slightly recovering Benefiting from sharp decline in goods imports, recovering exports & lower interest payments Real GDP forecast Ratio of exports to imports of goods and services 10% 1.00 8% Real GDP YoY 6% 0.90 4% 2% 0.80 0% -2% 0.70 -4% -6% 0.
Slide 62: Greek real GDP growth and components (%, YoY)
Greek real GDP growth and components (%, YoY) Realizations & forecasts 2007 2008 2009 2010 2011 2012 2013 2014F 2015F a1. Private consumption 3.6% 4.3% -1.6% -6.2% -7.7% -9.3% -6.0% -1.8% 1.6% a2. Public consumption 7.1% -2.6% 4.9% -8.7% -5.2% -6.9% -4.1% -1.8% -2.0% Final consumption (a1+a2) 4.3% 2
Slide 63: Key domestic product markets further facilitate the price adjustment process
Key domestic product markets further facilitate the price adjustment process Post-EMU entry cumulative losses in labor cost competitiveness already eliminated Wage pass-through to domestic consumer inflation still incomplete, but accelerating lately ULC-based REER Harmonized Index of Consumer Pr
Slide 64: Labor market reform and the domestic recession lead to rapid wage adjustment
Labor market reform and the domestic recession lead to rapid wage adjustment Minimum wage (€ per month) Average earnings growth–total economy (% YoY) 1900 Greece Eurozone 1750 1600 7.2 Greece 6.6 1450 6.2 2011 5.6 5.7 5.2 1300 Now 4.7 4.6 1150 4.4 1000 3.4 € 877 2.8 2.7 2.9 2.6 2.5 2.5 850 2.2 2.2 €
Slide 65: Destruction of physical (and human) capital risks a decline of potential output
Destruction of physical (and human) capital risks a decline of potential output in the initial post-crisis years Gross fixed capital formation (2005 prices, % GDP) Unemployment rate (period average) 28.0 Greece Euro area (18 countries) 30 Euro area (18 countries) 26.0 Greece 25 24.0 22.0 20 20.0 15
Slide 66: Next EFSF disbursements & programme milestones
Next EFSF disbursements & programme milestones Schedule of disbursements Date Amount (EUR bn) Milestones — approval by the troika staff of certain st provisions/amendments to a multi-bill voted in 1 EFSF disbursement (already released) Ealy May 2014 6.3 Parliament in late March — review of third par
Slide 67: Investor Relations contacts
Investor Relations contacts Dimitris Nikolos +30 210 3337 688 E-mail: dnikolos@eurobank.gr Yannis Chalaris +30 210 3337 954 E-mail: ychalaris@eurobank.gr Christos Stylios +30 210 3337 428 E-mail: cstylios@eurobank.gr Fax: +30 210 3337 160 Group E-mail: investor_relations@eurobank.gr Address: 20 Amal