National Bank of Greece
2014 Comprehensive Assessment Results
NBG achieves a €2bn capital surplus
Athens
Sunday, October 26 2014
00
IMPORTANT DISCLAIMER :
This presentation and all information contained hereto (the “Presentation”) has been prepared by National Bank of Greece SA (hereafter
“NBG”) and/or its subsidiaries (together with NBG, the “NBG Group”) in order to explain in more detail the outcome of the Comprehensive
Assessment (“CA”) pursuant to Article 33(4) of Council Regulation (EU) No 1024/2013 and should not be used for any other purpose. This
Presentation should be viewed solely in conjunction with, the official announcement and template for the CA outcome for NBG as it will be
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1
Table of Contents
EXECUTIVE SUMMARY
3-5
STRESS TEST ASSUMPTIONS AND METHODOLOGY
6-8
ASSET QUALITY REVIEW
9 - 14
STATIC STRESS TEST
15 - 18
DYNAMIC STRESS TEST
19 - 21
DEFERRED TAX CREDITS
22 - 23
2
EXECUTIVE SUMMARY
2014 EU-wide stress test – no further capital action required of NBG
•
EU-wide stress test of 130 banks under very severe, uniform rules
•
The Adverse Dynamic Balance Sheet (DBS) Stress Test results in a 8.9% CET I ratio at end
2016, and a capital surplus of €2.0bn and
− 340 basis points above the 5.5% minimum
− The DBS takes into account NBG’s 2014-18 Restructuring Plan agreed on 23.7.14 with the
European Commission.
•
The Adverse Static Balance Sheet (SBS) stress test results in a capital shortfall of €0.9bn1
− SBS stresses 2013 – a particularly challenging year for NBG
− Already NBG’s 2014 profitability and actions to Sept. 14 fully mitigate this
•
Asset quality review resulted in a €1.7bn impact, originating mainly from the Greek retail
loan portfolio, and the severe assumptions regarding the valuation of real estate collateral
•
All above results do not include the impact of the new Deferred Tax Credit law voted on
16.10.2014, of approx. €0.7 – 1.2bn (110 – 220 bps).
•
No further capital action required of NBG.
1
including the Share Capital Increase (SCI) completed in May 2014
4
Adverse Dynamic Balance Sheet stress results in a capital surplus of € 2.0 bn
at end 2016
Adverse scenario
CET 1, € bn
CET 1 ratio, %
€2.5bn
€6.3bn
4.2%
-10.9%
€6.0bn
€2.0bn capital
surplus
€3.1bn
10.7%
€5.3bn
€2.0bn
8.9%
3.4%
Does not include
DTC
2.0
3.2%
€3.3bn, 5.5% 
1.1
minimum
threshold
Dynamic BS
RWA’s in €bn
1
2
1.8%
Completed RP
actions2
2013
CET I
May 14
SCI
Static BS
CA1
Dynamic
BS CA
56.7
57.9
57.9
60.0
CA = Comprehensive Assessment, incorporates Asset Quality Review, Stress Test and AQR join-up
Already completed Restructuring Plan actions, see also page 18
CA result
60.0
Surplus
end 2016
60.0
5
STRESS TEST ASSUMPTIONS AND METHODOLOGY
Overview of major assumptions /methodology for the adverse scenarios
Line item
Static Balance Sheet (SBS)
Volumes
•
Net Interest Income
•
•
•
•
Dynamic Balance Sheet (DBS)
•
Loan and deposit total volumes as per
Restructuring Plan (RP)
Loan mix as at 31.12.13
NII not higher than 2013
Pass through of sovereign spread shock to funding costs
50% of increase of funding costs applied to mortgage lending rates
(75% for other loans)
NII not higher than that derived from top-down ECB model
•
same as SBS except NII ceiling as per RP
As at 31.12.13
•
Trading
•
1x standard deviation of last 3 historical values plus 2x standard
deviation of last 5 historical values (thus including Greek PSI and
Grexit fears impact on trading losses)
•
RP figure for baseline plus 2x standard deviation
of last 5 historical values (includes Greek PSI
and Grexit fears impact on trading losses)
Fees & Commissions
•
Cap on ratio of F&C /Total Assets at level of 2013,
the 6th year of recession
•
same as SBS
Opex
•
Not lower than 2013 level, which includes staff cost of 2,490 staff
that departed in Dec-13
•
Not lower than 2013 ratio to Total Assets,
after excluding the 2,490 staff
Credit Risk
•
•
•
Loss rate not lower than top-down ECB model
Loss rate adjusted for AQR results
Apply similar LGD shock for defaulted and non-defaulted assets
•
same as SBS
DTA
•
•
•
Phase out as per CRR IV
DTC law not yet enacted
Excludes DTA recognised in H1.2014
•
same as SBS
7
Macro assumptions for Greece double up on steep recession of 2009-13
on bonds and house prices vs the periphery
Gov’t bond adverse valuation haircut
3Y, loss rate,%
GDP adverse deviation
2009 – 2016, Base = 2009 (100)
16.5
10.2
8.1
Ø8
2.2
Greece
Spain
2.1
Ireland
Residential House Price inflation
2009 – 2016, Base = 2009 (100)
H: Historical , F: Forecasts (EBA adverse scenario)
Portugal
Italy
Unemployment Rate
2009 – 2016, %
8
ASSET QUALITY REVIEW
AQR impact resulting mainly from Greek Mortgage and SME loan portfolios
• AQR workblock has reviewed 11 Greek and Turkish loan portfolios, with gross
balances in excess of €60 bn
− 79% of total loans
• Challenger model resulted in € 2.2 bn additional regulatory provisions, of which
€2.0bn in Greek mortgage and SME portfolios
• Greek Mortgage loans
− No impact from credit file review
− Provision gap resulting from severe collateral valuation assumptions
• Greek SME loans
− € 0.6 bn in a € 12.0 bn portfolio re-classification to NPE
− Majority of NPE’s classified as “gone concern”
− Provision gap resulting from severe collateral valuation assumptions
• Insignificant provision gap in all Turkish portfolios
• NBG transparency on troubled assets validated
10
Increase of mortgage provisions following severe collateral mark downs and
rigid treatment of rescheduled loans
NBG estimates*
Defaulted loans
Re-scheduled loans
• AQR Challenger model used severe liquidation
•
•
assumptions
Discount vs. 2013 PropIndex valuation of 8%
Forward HPI -4% per annum vs. NBG -2% per annum
Time to liquidation 3 years vs. NBG 5 years
Forced sale haircut ~20% vs. NBG 10%
No re-classification from extensive credit file review
Corresponds to an increase of ~€ 650 m in provisions,
of which ~€ 330 m are already provided for by IRB
regulatory provisions
•
•
•
•
IFRS LLA’s
*
Performing Rescheduled NBG loans as NPE, resulting
in an increase of ~€ 400m in provisions
• EBA definition of NPE includes all rescheduled
loans, but AQR applies very high PI’s to NPE’s
irrespective of actual performance
• An alternative classification to High Risk and High
Risk Cure segments would result in
~€ 400m less provisions
Stratification of NPE EBA by delinquency
90+ LLA’s*
€m, Dec-13 balance
820
• AQR Challenger model classified ~€ 2.9 bn
1,150
Regulatory
LLA’s
1,475
Challenger*
model
Risk
bucket
Balance
€ bn
Nil
1.9
1-29 dpd
30-59 dpd
0.4
60-89 dpd
0.4
<90 dpd
2.9
0.2
Probability of
impairment
ΝPG = 9 - 43%
AQR* = 70 - 100%
NBG estimates, back-solving Comprehensive Assessment AQR Challenger model with limited high level input from ECB. Actual parameter values may vary
11
Retail SME: Severe collateral haircut led to higher provision charges
NBG estimates*
Provision calculation for NPE loans – Retail SME
€m, Dec-13
• Greek Retail SME loans
− No NPE re-classification /impact
2,994
c.40%
from credit file review
− Provision gap resulting from severe
collateral valuation assumptions
for secured NPE’s
c.55-60%
1,647
1,269
• Valuation haircuts:
− NBG 40% on average
− AQR* Challenger model implicit
valuation haircuts of ~55-60%
Nominal
value of
tangible
collateral
*
NBG
Collateral
haircut
AQR*
Challenger
Model
Collateral
haircut
Provision
gap
• NPE coverage post AQR @55%
NBG estimates, back-solving Comprehensive assessment Challenger model with limited high level input from ECB. Actual parameter values may vary
12
SME increase of provisions is due to reclassified NPE’s and severe
collateral haircuts
NBG estimates*
Performing loans re-classification
Collateral under gone concern
• Net additional NPE exposure of ~€ 620m was identified
(7% of total book)
• For the majority of the cases the driver for
reclassification was a debt service coverage ratio <1.1 in
2013 in the 6th year of Greece’s severe recession (-25%
of GDP during 2008-13)
• Majority of NPE’s were assessed under “gone concern”
rather than “going concern”, leading to provisions
based on liquidation value
Coverage
ratio
43%
37%
4,707
4,085
NPE Pre-AQR
*
54%
47%
vs. NBG’s c.30%
• Collateral treatment prior to haircuts led to a 6%
reduction in NBG reported collateral value
• Sales haircuts and discounting averaged 29% for
gone concern debtors
NPE Provisions in €m; Dec. 13
NPE balances in €m, Dec. 13
NPE
ratio
• AQR Challenger model reduced collateral values by 35%
622
AQR
impact
2,023
1,526
NPE Post-AQR
NPE Pre-AQR
497
AQR
impact
NBG estimates, back-solving Comprehensive assessment Challenger model with limited high level input from ECB. Actual parameter values may vary
NPE Post-AQR
13
Post AQR NPEs in line with IFRS reported impaired loans
NBG transparency on troubled assets validated
NBG estimates*
Post-AQR NPEs in line with IFRS reported impaired loans1, 2
% of
total
GroupBalances
Balancesas
asat
at31.12.2013
31.12.2013 33
% of
total
Group
NPE
NPE
%
%
22.5%
22.5%
1.5%
1.5%
8.2%
8.2%
32.2%
32.2%
2.3%
34.4%
34.4%
Restructured loans clearly
marked as such (even
while below 90+ days past
due) and receive proper
impairment treatment.
1.071
NPLs
Other
impaired
Performing
Restructured
NPE
PreAQR
AQR NPE
NPE Post-AQR
Reclassification
As included in NBG’s 2013 Annual Report, Note 4.2.7 “Loans and Advances to Customers”.
“Titlos” excluded from loan balances.
3 ECB disclosure templates refer to EAD on exposures reviewed.
* NBG estimates, back-solving Comprehensive Assessment challenger model with limited high level input from ECB. Actual parameter values may vary.
1
2
14
STATIC STRESS TEST
Adverse Static Balance Sheet Stress results in a capital shortfall of €0.9bn
end 2016, covered by actions already implemented in 2014
Adverse scenario
€ million
2,500
6,305
6,058
Do not include DTC
5.5%
€3,186m 
933
*
See page 18
3,367
3Q.14 PPI
2,253
minimum
threshold
Static BS
RWA’s in €bn
1,114
DTC
2013 CET I
capital
SCI
CA
impact
Stress
Test result
Shortfall
56.7
57.9
57.9
57.9
57.9
CA result
Actions
completed* adjusted for
completed
actions
57.9
57.9
16
The Static Balance Sheet Stress test is especially severe both on credit losses
and PPI, despite EBA’s expectations for improved GDP and unemployment
by 2016
€ million
40% less than
1H14* every
year 2014-17
16.9% on
Greek sov. risk
-1,710
32% more than
1H14* every
year 2014-16
+2,970
-5,600
+1,890
-1,400
-200
-6,300
Other
Capital
CA
impact
30% except
AQR at 26%
AQR
*
1H14 annualised
Credit
losses
Sovereign
risk
PPI
Tax
DTA
derecognised
17
The Adverse Static Balance Sheet stress test shortfall is covered by
measures already implemented in the first 9 months of 2014
2014 Realization and capital actions
€ million
• Actual H1’14 Pre Provision Income almost
double the 1H14 Stress Test result
– the difference is considered a capital action
DTC
• NBG Pillar 1 Bonds of €1,485m repaid in
2014, which had been subject to 16.9%
haircut
– Repayment included in the Restructuring Plan
3Q.14 PPI
933
• Voluntary Exit Scheme (VES) was taken up
by 2,490 employees and completed in
Dec-13; ST methodology requires
continuation of salary expense for above
mentioned staff in 2014-16
• SPA for Astir Palace disposal was signed
on September 17, 2014
PPI
(1H.14)
Sovereign
Bonds
VES
Astir
Disposal
Total
Stress
Test
shortfall
(static)
• Conversion of DTAs to DTCs as per current
Law (passed through Greek Parliament on
16.10.14) results in an incremental
positive impact
18
DYNAMIC STRESS TEST
The Adverse Dynamic Balance Sheet stress test (DBS) results in a capital
surplus in excess of € 2.0 bn.
The DBS stresses the 2014-17 Restructuring Plan agreed with the European Commission
on 23 July 2014
Adverse scenario
€ million
2,500
-3,236
4.2%
-5.9%
€2.0bn
capital surplus
6,058
5,322
10.7%
2,022
8.9%
3.4%
€3,300m 
minimum
threshold
Dynamic BS
RWA’s in €bn
Does not include DTC
2013
CET I
SCI
May 14
CA
impact
Stress
Test
result
Surplus
56.7
57.9
60.0
60.0
60.0
20
The Dynamic Balance Sheet (DBS) reverses the majority of the Static
Balance Sheet (SBS) result with improved profitability and capital actions
Adverse scenario
CET 1, € million
CET 1 ratio, %
-6,300
-10.9%
1,560
5,320
8.9%
1,500
€3.3bn, 5.5% 
minimum
threshold
Dynamic BS
3.4%
170
940
Static BS
CA1
1
2,020
Improved
DBS
profitability
CA = Comprehensive Assessment, incorporates Asset Quality Review, Stress Test and AQR join-up
DBS
Capital
Actions
CA result
Surplus
end 2016
21
DEFERRED TAX CREDIT
The new Deferred Tax Law would improve the stress test results
by €0.7- 1.2bn
Legal Framework
•
•
•
Effective from 1st January 2015
Income Tax attributable to:
— Unutilized amount of the PSI loss; and
— Accumulated provisions for credit losses on loans
granted as at 31.12.2014 for which DTA has been
recognised
can be converted to a receivable (Tax Credit) from the
Greek State, upon Accounting (IFRS) losses after tax1,
Unused Tax Credit2 is replaced with a claim on the
Greek State. In exchange, the Bank issues ordinary
shares3 with value equal to 110% of the unused
amount
NBG actions
• An Extraordinary General Assembly has been
convened for 7.11.14 to enable NBG to convert DTA
amounts into DTCs, i.e. Deferred Tax not dependent
on future profitability and not subject to CRD IV caps.
Impact on capital adequacy
Capital Adequacy
• Impact on CET 1 under 2024 CRD IV rules on the 30.6.14
position :
The new law prevents the eventual derecognition of
approximately €2.6bn.
Stress Test
• Impact on Adverse Static BS results (period to end 2016) :
The new law enables the recognition of approximately
€1.2bn of capital or 220 bps
• Impact on Adverse Dynamic BS results (period to end 2016) :
The new law enables the recognition of approximately
€0.7bn of capital or 110 bps
1 or
resolution of the entity
if not settled against Corporate Tax due for the year
3 at the VWAP of the last 30 days
Conversion
of DTAs to DTCs as per current Law (passed through Greek Parliament on 25.09.14) results into an
2
incremental positive impact of €810m against Stress Test Static (adverse) scenario.
23
National Bank of Greece
Contact details
Paul Mylonas
Paula Hadjisotiriou
Deputy CEO
Deputy CEO
+30210 334 1521
[email protected]
+30210 334 3051
[email protected]
Apostolos Kazakos
Greg Papagrigoris
Assistant General Manager
Group Strategy
+30210 334 3071
[email protected]
Head of IR
+30210 334 2310
[email protected]
[email protected]