PIRAEUS BANK INVESTOR UPDATE - London, 15 July 2019 - Piraeus Bank Group
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PIRAEUS BANK
INVESTOR UPDATE
London, 15 July 2019
TODAY’S AGENDA 10:00 Welcome 10:00-10:30 Christos Megalou Chief Executive Officer 10:30-10:50 Elias Lekkos Chief Economist 10.50-11:20 Theodore Gnardellis | George Christopoulos Piraeus Legacy Unit Strategy | Asset Sales 11:20-12:00 Q&A 12:00-12:10 Break 12:10-12:30 Eleni Vrettou Corporate & Investment Banking 12:30-12:50 George Georgakopoulos Piraeus Legacy Unit | NPE Servicer 12:50-13:20 Q&A 13:20-13:30 Christos Megalou Chief Executive Officer 13:30 Closing Additional participants in Q&A: Tom Arvanitis (Piraeus Financial Markets), Chryssanthi Berbati (Investor Relations)
Discussion Items
STRATEGIC OVERVIEW 01
GREEK ECONOMY & OUTLOOK 02
NPE STRATEGY & EXECUTION 03
CIB PERFORMANCE & TRENDS 04
NPE SERVICING AGREEMENT 0501 STRATEGIC OVERVIEW
01 1.1 OUR DEVELOPMENTS | AT A GLANCE
A 2018 Capital Strengthening Plan Completion
B Enhancement of Capital Buffers by Recent Tier 2 Issue
C Strategic Partnership with Intrum on NPE Servicing
D New Roadmap “Agenda 2023”
E 2015 Restructuring Plan Completion
F NPE Strategy Execution on Track
G New Business Picking-Up & Positive Jaws
5 | STRATEGIC OVERVIEW01 1.2 OUR DEVELOPMENTS | CAPITAL
A 2018 Capital Strengthening Plan Completion
• The internal capital actions of 2018 have been concluded €0.5bn
• A 10NC5 Tier 2 was issued on 26 June 2019 €0.4bn
• Additional initiatives are executed (eg NPE servicing agreement) €0.4bn
€1.3bn
6 | STRATEGIC OVERVIEW01 1.3 OUR DEVELOPMENTS | TIER 2
B Enhancement of Capital Buffers by Recent Tier 2 Issue
Allocation by Investor Type Allocation by Geography
7 | STRATEGIC OVERVIEW01 1.4 OUR DEVELOPMENTS | NPE SERVICING
C Strategic Partnership with Intrum on NPE Servicing
• New servicer company for the management of NPEs & REOs
• Market-leading independent NPE servicer
• 80% of the new servicer company will be held by Intrum & 20% by Piraeus Bank
• Expectation for a material boost to the execution of Piraeus’ de-risking strategy
8 | STRATEGIC OVERVIEW01 1.5 OUR DEVELOPMENTS | STRATEGY
D New Roadmap “Agenda 2023”
• Piraeus Bank introduced its new strategic roadmap with the following targets:
Cost-to-Income ratio at low 40s
Non Performing Exposures at single-digit ratio
Return on Tangible Equity at high single-digit
Regulatory Capital ratio at ~200bps above requirement
9 | STRATEGIC OVERVIEW01 1.6 OUR DEVELOPMENTS | RESTRUCTURING PLAN
E 2015 Restructuring Plan Completion
• Greek operations commitments completed (eg headcount, branches, costs, LDR)
• International divestments concluded (eg Serbia, Romania, Albania, Bulgaria)
10 | STRATEGIC OVERVIEW01 1.7 OUR DEVELOPMENTS | NPE REDUCTION
F NPE Strategy Execution on Track
• 6M.19 NPE reduction as per target
• NPE sales of €2.3bn GBV completed in one year, €0.7bn NPE sale at BO phase
• More than €2bn RRE-based securitization in preparation, planned for early 2020
11 | STRATEGIC OVERVIEW01 1.8 OUR DEVELOPMENTS | PROFITABILITY
G New Business Picking-Up & Positive Jaws
• Healthy business demand emerging in sectors geared to growth and exports
• Target for €4bn new loans in 2019 vs €3bn in 2018; €1.9bn in H1.19
• Credit decisions based on the Bank’s Adjusted Returns Tool (“ART”)
• Earnings capacity supported by both top line and OpEx improvement
12 | STRATEGIC OVERVIEW01 1.9 2018 CAPITAL ENHANCEMENT PLAN
The €3.6bn RWA Relief is Equivalent to €0.5bn Capital Enhancement for the Bank
RWA
Actions Announcement Status
Relief
>> Avis [operating leasing company] Q1.18 ~€0.2bn
>> Serbia [banking subsidiary] Q2.18 ~€0.3bn
>> Romania [banking subsidiary] Q2.18 ~€0.6bn
>> Amoeba [secured NPL portfolio] Q2.18 ~€0.4bn
>> Arctos [unsecured NPL portfolio] Q2.18 ~€0.1bn
>> Albania [banking subsidiary] Q3.18 ~€0.4bn
>> Bulgaria [banking subsidiary] Q4.18 ~€0.7bn
>> Other de-risking actions [non-core assets de-risking] Q4.18 ~€0.6bn
>> Nemo [secured NPL portfolio] Q2.19 ~€0.3bn
Total ~€3.6bn
13 | STRATEGIC OVERVIEW01 1.10 2019 CAPITAL ENHANCEMENT PLAN
Capital Position Strengthening through a Number of Additional Initiatives
Targeted Capital
Management Actions
Improvement
Issued
A. Tier 2 debt issuance 26 Jun.19
~85bps
NPE servicing
B. Sale of operations, non-core subs & participations agreement
~80bps
C. Review of high capital-consuming businesses
D. Enhanced organic revenue generation
E. Accelerated cost efficiency actions
F. Balance sheet optimization | RWA management
160-200 bps
total initial guidance
14 | STRATEGIC OVERVIEW01 1.11 CAPITAL TRAJECTORY POST RECENT TRANSACTIONS
Recent Transactions, Coupled with Return to Profitability, Strengthen Capital Position
Total Regulatory Capital (%, phased-in) Total Regulatory Capital (%, fully loaded)
15 | STRATEGIC OVERVIEW01 1.12 PROJECTED CAPITAL EVOLUTION
Organic Capital Generation Supports Capital Development Going Forward
Total Regulatory Capital (%)
+0.9% +0.8% +0.4%
14.0% to 14.5% OCR
e: estimate; f: forecast
16 | STRATEGIC OVERVIEW01 1.13 GREEK MARKET NPE TRAJECTORY
The 3-year NPE Targeted Reduction Equals ~30% of GDP; Ambitious yet Feasible
NPE ratio 48% 48% 47% 45%01 1.14 REAL ESTATE MARKET TREND
Upside Potential to Collateral Valuations from Acceleration of Real Estate Price Recovery
Outlook for Real Estate Prices Embedded in Existing Plan
2017a 2018a 2019e 2020f 2021f
Non-residential real estate price change 1.6% 5.0% 4.0% 3.6% 3.6%
Residential real estate price change -1.0% 1.5% 2.6% 3.2% 3.6%
a: actual, e: estimate, f: forecast
Source: Piraeus Economic Research, baseline scenario
• Current Run-Rate of Non-Residential RE prices at +6% and Residential at +4% yoy
• Piraeus Bank has €23bn of real estate assets as underlying collateral for loans and €3bn οf own
assets. Almost €11bn relates to NPE portfolio
• For every 100bps incremental shift in Real Estate prices, estimated value improvement is
approximately at €50-100mn
18 | STRATEGIC OVERVIEW01 1.15 IMPROVED LIQUIDITY PROFILE
Satisfactory Liquidity on the back of Deposit Restoration and Macroeconomic Stabilization
Domestic Deposits | €bn Liquidity Coverage Ratio (%)
LDR c.85%
>95%
19 | STRATEGIC OVERVIEW01 1.16 LOAN BALANCES
Loan Evolution Incorporates the Parallel Dynamics of De-risking and Healthy Loan Growth
Gross Loans (€bn) New Loans (€bn, %)
~6
53 ~5
48
-15 ~4
NPE
3.1
PE +10
Non performing exposures to be reduced as per plan Business lending is the driver of loan growth
Performing exposures: €15bn new loans and €2bn net
curings to be offset by €7bn amortization and other e: estimate; f: forecast
20 | STRATEGIC OVERVIEW01 1.17 ADJUSTED RETURNS TOOL
Adjusted Returns Tool Developed for Risk-Based Pricing, Fully Adopted by the Bank’s Business Units
Cost of Cost
Credit Risk ARoC
Spread
Cost of
Capital
Cost of Hurdle Profit Final Yield
Liquidity Rate Margin / Spread
Operating
Expenses*
The overall methodology aims at:
Ancillary optimizing capital allocation
Revenues** establishing a hurdle rate for every loan decision
capturing term profitability, focusing on return
maximization and credit loss mitigation
* Operating expenses soon to be introduced into the methodology enhancing the risk culture across the Bank
** Ancillary revenues have a positive contribution, thus reducing the Hurdle rate
21 | STRATEGIC OVERVIEW01 1.18 REVENUES & OPEX| POSITIVE JAWS
Positive Jaws Supported by Frontloaded Cost Cuts and Revenue Increase post 2020
Operating Jaws (€bn)
• Xxx
• Xxx
1.2
• Xxx
a: actual; e: estimate; f: forecast
22 | STRATEGIC OVERVIEW01 1.19 NET INTEREST INCOME
Resilient NII Going Forward as Improvement on the Asset Side Offsets Debt Issuance Costs
(€mn) 2018a 2019e
● Current NII run rate at mid single digit increase
Interest Income 1,874 1,830
Loans & Bonds 1,770 1,715 ● NII going forward growing at low single digit pace per
Other 105 115 annum: yield from new assets will outpace increasing
Interest Expense 465 430 debt securities issuance costs
Deposits 199 180
● Loan income to move into positive trajectory in line
Interbank Funding 50 15
with new healthy disbursements
Debt Securities 6 25
Other 210 210
Net Interest Income 1,410 1,400
a: actual; e: estimate
23 | STRATEGIC OVERVIEW01 1.20 FEE & COMMISSION INCOME
NFI to Grow Along with the Macro Recovery & Increasing Penetration to Specific Areas of Business
(€mn) Q1.2019 % Assets
● Enhancement initiatives implemented to
Loans 13.1 0.09%
boost fees from all areas of business at par
Acquiring 12.1 0.08%
with gradual macroeconomic recovery
Funds Transfer 11.9 0.08%
Cards Issuance 9.5 0.07%
Bancassurance 8.4 0.06% ● Fees stemming from transaction banking,
Letters of Guarantee 8.3 0.06% credit cards, payments and asset
Payments 6.1 0.04% management / brokerage are expected to
AM & Brokerage 5.5 0.04%
perform in line with our strategy
FX Fees 3.8 0.03%
Deposits 1.6 0.01%
Other 7.7 0.05%
Total Fee Income 88.0 0.61% above 0.8% in the medium term
24 | STRATEGIC OVERVIEW01 1.21 G&A COSTS
G&A Costs Running at -20% Reduction Rate Boosting the Bank’s Efficiency Ratio
(€mn) 5M.18 5M.19 yoy
Rents 17 15 -12% ● Current run rate of more than 15% reduction yoy
Maintenance 14 11 -22%
● Going forward, high single-digit pace of reduction
IT 13 10 -28%
Third Parties 25 20 -22% ● Efficiencies to be further increased along with
Promotion, Subscriptions 14 12 -19% increasing digitalization, as well as the
Taxes 56 48 -14% implementation of the NPE servicing agreement
Other 18 12 -34%
Total G&A Costs 158 126 -20%
Preliminary data for 5M.19
25 | STRATEGIC OVERVIEW01 1.22 REVAMP OF GOVERNANCE & CONTROLS
• Reshuffling of Top Management
• Revamp of Internal Policies and Controls
• Adjusted Return on Capital Methodology and Process
• Cultural Transformation: work- in-progress as of 2017
• Roadmap for the Future
26 | STRATEGIC OVERVIEW01 1.23 LATEST FINANCIAL TRENDS
€1bn customer deposits increase in Q2.19
LDR at ~ 85%; LCR at ~ 95%
Deposit cost further contained
NPE movement on track with the yearly 2019 target
More than €2bn RRE-based securitization in preparation, placement in 2020
Positive tailwinds from real estate collateral revaluation
Performing loan book increased in 6M.19 by more than €500mn (€1.9bn new loans)
Resilient new loan production yields
OpEx running at high single digit reduction pace yoy
27 | STRATEGIC OVERVIEW02
GREEK ECONOMY & OUTLOOK
Can the New Government Revive the Greek “Animal Spirits”?02
Since 2017, the Greek Economy has been Range-bound Between 1.5%-2.0%
2.1 ECONOMIC RECOVERY
2019e
1.6%
Source: ELSTAT, Piraeus Bank Research
29 | GREEK ECONOMY & OUTLOOK02
The New Government’s Plan to Reach “Escape Velocity”
2.2 NEW GOVERNMENT’S PLAN
Fiscal Stimulus Investment “Shock” Escape Velocity €4bn
€0.5bn corporate tax rates cut in 2-years €60bn 4.0% Real GDP = €4.0bn tax revenues
€0.45bn dividend tax rate cut Special incentives (doubling of the time for Efficiency Savings €2bn
offsetting losses, 200% over-depreciation
€2.6bn personal income tax rate cut (up new investments) €0.2bn public consumption spending cut
to €10,000)
€12bn in infrastructures €1.19bn rationalization & improvement in
€0.8bn increase in the tax free income DEKO & General Government Legal Entities
threshold by €1,000 for each child €20-€25bn in tourism and shipping
€0.14bn interest payments cut for T-bills
€1.02bn VAT rate cuts €15-€20bn in primary sector and food
processing manufacturing €0.15bn no public sector wage increase
€0.3bn business fee gradual abolishment
€0.4bn special solidarity levy gradual cut €9bn in energy and the environment €0.3bn hiring / retirement ratio (1/5)
€0.4bn ENFIA (property tax) cut in 2-years €10bn in R&D, Industry, logistics and PPP €0.02bn unused real estate exploitation
€6bn €6bn
Source: ND Elections 2019 Programme, Piraeus Bank Research
Fiscal Neutrality
30 | GREEK ECONOMY & OUTLOOK02
For 2.0% Average GDP Growth we Need to “Crowd-in” €325bn of Investments
2.3 INVESTMENTS ENVIRONMENT
Non Financial Corporations Investments & Net Capital Stock (€bn)
Net vs Gross Fixed Capital Formation (€bn, current prices)
20.0
1990 - 1999 2000 - 2008 2009 - 2018 2019 - 2027
15.0
10.0
5.0
0.0
Disinvestment
-5.0
through depreciation
-10.0 Capital Capital Capital
Stock 1989 Capital GFCF GFCF GFCF GFCF Stock 2027
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Consumption Consumption Consumption Consumption
Gross Fixed Capital Formation Net Fixed Capital Formation
Source: ELSTAT, Piraeus Bank Research
31 | GREEK ECONOMY & OUTLOOK02
But after a Long Recession “Animal Spirits” are Dormant
2.4 ANIMAL SPIRITS
Source: EC DG ECFIN, Piraeus Bank Research
32 | GREEK ECONOMY & OUTLOOK02 2.5 GREEK CORPORATES (i)
Despite Popular Belief, Greece has a Substantial “Bankable” Corporate Universe
outperformers a
(7.9%)
668
good performers b
(35.5%)
2,985
c
medium performers
(41.3%) 3,477
d
underperformers
(15.3%) 1,289
Source: ICAP DATA, Piraeus Bank Research
33 | GREEK ECONOMY & OUTLOOK02
Dormant “Animal Spirits” Drive Defensive Corporate Balance-sheets to Extremes
2.6 GREEK CORPORATES (ii)
EBITDA margin Total liabilities to equity Net debt to EBITDA
d. 3.6 d. 25.0
d. -8.1%
c. 2.8 c. 13.6
c. 7.1% Total Total
Total b. 1.2 b. 3.8
b. 14.7%
a. 0.5 a. 0.1
a. 24.9%
d. 1.8% d. 4.0 d. 26.4
c. 6.9% c. 3.6 c. 11.6
Large Large Large
b. 13.0% b. 1.2 b. 4.1
a. 33.0% a. 0.7 a. 2.2
d. -8.3% d. 3.6 d. 24.9
c. 7.1% c. 2.7 c. 13.7
SMEs SMEs SMEs
b. 14.8% b. 1.2 b. 3.8
a. 24.7% a. 0.5 a. 0.1
-20% -10% 0% 10% 20% 30% 40% 0 1 2 3 4 0 10 20 30
Source: ICAP DATA, Piraeus Bank Research
34 | GREEK ECONOMY & OUTLOOK02
But Corporate Credit is Recovering…
2.7 CREDIT ENVIRONMENT
Corporate Loans (annual % change) Corporate Loans (net flows €bn) Corporate Loans by sector (annual % change, Apr.19)
Manufacturing,
Mining & Quarrying 18.8
Electricity, Gas &
Water Supply
Accommodation & Food
Service Activities (Tourism) 51.5
Storage & Transportation
other than shipping
Professional, scientific,
technical, administrative &
support activities
Source: Bank of Greece, Piraeus Bank
35 | GREEK ECONOMY & OUTLOOK02
…as well as Real Estate Valuations
2.8 REAL ESTATE ENVIRONMENT
Residential Real Estate Prices (annual % change) Non Residential Prices (annual % change) Real Estate FDI in Greece (€mn)
6.4% €392mn
500.0
4.0%
400.0
300.0
200.0
100.0
0.0
-100.0
Q1/07
Q4/07
Q3/08
Q2/09
Q1/10
Q4/10
Q3/11
Q2/12
Q1/13
Q4/13
Q3/14
Q2/15
Q1/16
Q4/16
Q3/17
Q2/18
Q1/19
Source: Bank of Greece, Piraeus Bank
36 | GREEK ECONOMY & OUTLOOK02
With Plenty of Entry Points for New Capital
2.9 TRENDS & OPPORTUNITIES
Greece needs to reorient itself from a Greece has a number of competitive In several sectors and for a variety of
consumption-based to an export-based advantages but needs to move up reasons, a massive consolidation process
economy the Value Added Chain has started
Even in sectors with a competitive In sectors with less stellar prospects such
Emphasis on export-oriented sectors: as retail and wholesale trade, fish-
advantage Greece needs infrastructure
Tourism, farming, food processing, oil farming, passenger shipping, telecoms,
upgrades, ie 5-star resorts, yachting,
refining, basic metals & minerals, consolidation will create sectoral
convention centers, marketing &
chemicals, pharmaceuticals champions with improved margins
branding
More funding, either in the form of equity Greece is facing regulatory pressures to Greek banks have committed to reduce
or loans, will be required liberalize and privatize a number of sectors NPLs and restructure their balance sheets
Banks commitment to reduce NPLs & Non
Privatized assets & natural resources Clusters can be created around privatized
Core Assets will create opportunities in
development will require substantial assets, ie ship-repair zone, logistics, cargo
real estate, insurance and leasing, hotels
investment (equity or loans) management, cruise tourism
and in over-indebted but viable
Regulatory pressures to liberalize companies
industries such as electricity, natural gas,
waste processing & management,
Source: Piraeus Bank Research renewable energy
37 | GREEK ECONOMY & OUTLOOK03 NPE STRATEGY & EXECUTION
03 3.1 OUR WORK UNTIL NOW
NPE Reduction of €5.5bn in 2018, the Largest Annual Reduction in the Greek Market
Group NPE Development (€bn)
96%
Restructuring Volumes (€bn)
-€12.0bn
Coverage
39 | NPE STRATEGY & EXECUTION03 3.3 GROUP NPE UP TO 2021
NPE Reduction of €15bn until YE.21, of which Almost Half o/w Securitizations €6.0bn
via Inorganic Actions • loss budget already
embedded in CoR guidance
• >100% coverage by
provisions and collateral
Inflows: €6.1bn
amounts in €bn
40 | NPE STRATEGY & EXECUTION03 3.2 NPE MOVEMENT DECOMPOSITION
NPEs | Bank data (€bn) Required effort
per quarter on
30.8 28.3 27.5 26.4 25.9 average until
Dec.2021
Re-defaults
Defaults
Average Average
Q1.18-Q1.19 Q2.19-Q4.21
Curings, Curings (0.6) George Curings (0.6)
Collections, Collections (0.2) Collections (0.1)
Liquidations Liquidations (0.1) Handji Liquidations (0.2)
Write-offs
nicolao
u
Sales
Q1.18 Q2.18 Q3.18 Q4.18 Q1.19 Q2.19 - Q4.21
41 | NPE STRATEGY & EXECUTION03 3.4 SIGNIFICANT CURING POTENTIAL
25% of NPEs have 0days of Arrears; Pace of NPE Exits from Curings at €0.6bn per quarter
NPEs per Bucket (Mar.19) Cash Coverage Ratio (Mar.19) Forborne Loans (€12.3bn, Mar.19)
[1] [2] [3] [4] [1+2+3+4]
(€bn) 0 dpd 1-89dpd >90dpd Denounced NPEs
Business 5.6 1.9 2.0 8.4 17.9
Mortgages 0.9 0.8 0.8 3.8 6.2
Consumer 0.2 0.2 0.5 1.8 2.8
TOTAL 6.7 2.8 3.3 14.1 26.9
NPΕ mix 25% 10% 12% 52% 100%
42 | NPE STRATEGY & EXECUTION03 Business
3.5 COVERAGE BY SEGMENT
Business
Total 95% Total 130%
Mortgages Mortgages
Total NPE Total NPL
coverage at coverage at
96% 121%
Total 100% Total 108%
Consumer Consumer
Total 94% Total 104%
43 | NPE STRATEGY & EXECUTION03 3.6 SYSTEMIC SOLUTIONS UNDER CONSIDERATION
Asset Protection Scheme Asset Management Company
• Sponsored by the HFSF and the Ministry of Finance • Sponsored by the Bank of Greece
• Similar to the Italian GACS scheme introduced in 2016 • Transfer of NPE portfolio along with part of the
deferred tax credits (DTCs) to SPV
• NPL portfolio Securitisation with Senior notes retained
by the Bank and Mezzanine sold to third party • SPV funded through Securitisation issue (Senior,
investors Mezzanine, Subordinated)
• Hellenic Republic provides guarantee to Senior notes • Subordinated notes will be subscribed by the Banks
subject to conditions and the Greek State
• Favourable risk-weighting of the retained Senior notes • Private investors will absorb Senior and Mezzanine
notes
• Facilitates the execution of larger transactions volumes
• Merit of the scheme is that combines NPE deleverage
• Complementary to the Bank of Greece proposal
with improvement in quality of capital
• Proposal expected to get clearance by DGComp
• Implementation anticipated in 2020
• Implementation anticipated in 2020
44 | NPE STRATEGY & EXECUTION03 Asset Mix
3.7 DE-RISKING STRATEGY
Liability Mix
100% 100% 100% 100%
Cash, 9% 10% Interbank &
12% Debt Securities
Securities, 20%
Interbank
5%
Net NPEs 23%
75% Deposits
72%
Net PEs 42% 60%
Other
24% 12%
15% 12% Equity
assets
7% 3% Other
liabilities
2018 2023 2018 2023
45 | NPE STRATEGY & EXECUTION03 3.8 NPE CLEAN-UP TARGETS
Group NPE Balances (€bn) Agenda 2023
2018 2023
Gross NPE Ratio 53% ~9%
Net NPE Ratio 27% ~5%
Single-digit NPE ratio in 2023
Through a mix of organic and inorganic actions
More outflows and less inflows
Supported by c.€20bn restructuring volumes in 2017-2021
NPE PLAN 2021 Scheduled inorganic actions
Securitizations and NPE disposals
46 | NPE STRATEGY & EXECUTION03 3.9 NPE SALES
completed completed
Project Amoeba: Project Nemo:
€1.4bn GBV, €2.0bn legal claim c.€0.5bn GBV, equal legal claim
• Secured large SME and corporate loans • Secured shipping loans
• Sale agreed with Bain Capital Credit LP in May • Sale agreed with Davidson Kempner Capital
2018 and concluded near end of Oct. 18 Management LP in Jun.19 and concluded in
early Jul.19
2018 2019
completed
Project Arctos: Project Iris:
€0.4bn GBV, €2.2bn legal claim c.€0.7bn GBV, €1.7bn legal claim
• Unsecured personal loans and credit cards • Personal loans and credit cards, small
• Sale agreed to consortium led by APS business loans, leasing exposures
Investments Capital s.r.o. in Jun. 2018 and • Virtual Data Room opened in Mar.19
concluded at the end of Oct.18 • Non-binding offers in Apr.19; BOs in Q3.19
47 | NPE STRATEGY & EXECUTION03 3.10 KEY DATA OF COMPLETED NPE SALES
All 3 Sales Transactions have been Capital Accretive for Piraeus Bank (~25bps in total)
Amoeba Arctos Nemo Total
Gross Book Value (€bn) 1.4 0.4 0.5 2.3
Price over GBV (%) 30% 13% 47% 30%
Provision Coverage (%) 73% 90% 45% 70%
RWA (€bn) 0.4 0.1 0.3 0.8
Collateral (€bn) 0.5 n.a. 0.3 0.8
Discount over Collateral Value (%) 15% n.a. 4%
Buyer Bain Capital APS DK
48 | NPE STRATEGY & EXECUTION04 CIB PERFORMANCE & TRENDS
04 4.1 CIB | WHO WE ARE
Largest Greek Systemic Bank Customers: 10k companies
Uniquely Positioned Exposure: €15bn
to Capture Growth in
Greece Deposits: €7bn
Leading position in Corporate and SME banking
Leading Market Position Pioneer in Greek Agriculture business; leading market share in Leasing
Ranked 1st in Brokerage services
Strong liquidity and disciplined capital management approach
Longstanding relationships with proven resilience over the crisis
Our Strengths
Highly skilled professionals with deep knowledge of local market dynamics and products
Low cost-to-income ratio at high 20s% opportunity to invest
50 | CIB PERFORMANCE & TRENDS04 We serve all major sectors of the Greek economy providing full range of
4.2 OUR BUSINESS
products and services through the largest network in Greece
Segments
1 Large, Structured Finance,
Real Estate, Hotel & Tourism,
Shipping, SME & Agri
Bank
2
Product
factories
Syndications, TxB,
3
Investment Banking, Subsidiaries/
Green Banking Non Bank Products
Factoring, Leasing
& Securities
51 | CIB PERFORMANCE & TRENDS04 4.3 CIB TODAY
NII
(€mn)
Revenues of Q1.19 in line with 2019 budget
Revenues Aggressive target for 2019 NFI (+15% yoy)
Fees
Net fees +14% y-o-y in Q1.19 (€mn)
Front book yield is significant higher than New loans
yield of stock portfolio (+40bps) (€bn)
New Loans Pipeline: stands at €2bn, out of which
Generation
€0.8bn is already credit approved
50% of 2019 target achieved
52 | CIB PERFORMANCE & TRENDS04 Grow, Streamline, Protect
4.4 OUR STRATEGY
• Credit • Revenues
• Capital Protect Grow • Profitability
• Operational Risk • Market Share
The Customer
Our People
at the center
of what we do
Streamline
• Processes
• Systems
53 | CIB PERFORMANCE & TRENDS04 4.5 OUR STRATEGIC PRIORITIES
1
Achieve Sustainable Profitable Growth, Placing the Customer at the Epicenter of What We Do
Improve cross selling by taking fair share of wallet on clients’ ancillary business
Invest in Transaction Banking products
Grow Focus on sectors of Bank’s excellence: SME, Agri and Green
Claim leading underwriting position
Support FDI with acquisition financing expansion
Automate processes
Remove duplication and re-design lending process to reduce time to money / time to new product
Streamline
Commit on SLAs
Innovate new ways of doing things
Credit Risk minimize new NPE formation
Capital Risk prudent and disciplined RWA management
Protect
Liquidity penetrate non-lending relationships
Operational Risk management
54 | CIB PERFORMANCE & TRENDS04 Transaction Banking Suite
4.6 DIGITAL TRANSACTION BANKING
An integrated business model that will create a connected corporate banking experience and uninterrupted
transaction flow
Payments Trade Finance Treasury
All-in-one Smarter Maximize cash
financing performance
Simplify A better grip Safeguard Deep dive
bookkeeping on cash flow cash flow into data
Collections Cash Management Factoring Analytics
55 | CIB PERFORMANCE & TRENDS04 4.7 NEW STRATEGIC PARTNERSHIP
Collaboration for Solutions to Greek Business Rationale for the Strategic
Shipping Companies Partnership
In its effort to expand revenue capacity and better The opportunity relates with the effort to:
manage balance sheet, the Bank is currently increase fees and expand market share in a
exploring to enter into a strategic partnership with vital sector for the Greek economy
a major Asian Pacific financial conglomerate
possibility to increase access to capital and
The focus of the partnership will be on providing other services for the shipping sector
tailored and competitive funding solutions to
optionality with regards to expansion in other
Greek shipping companies business areas via the deepening of the
The agreement if conducted, would incorporate relationship with the said conglomerate
both a one-off fee paid to the Bank for its services The agreement allows Piraeus to leverage on its
and a recurring annual fee for ancillary services to partner’s balance sheet and lower cost of capital
be provided over the tenure of each facility allowing a more efficient and profitable use of its
experience and resources in the shipping sector
56 | CIB PERFORMANCE & TRENDS04 4.8 THE WAY FORWARD
Become the most profitable CIB franchise in Greece
Defend and grow market share at the sectors of focus
Grow revenues generate sustainable, sticky fee income
Our Ambition
Improve portfolio returns
Enhance customer experience by developing digital capabilities
Leverage our client relationships and balance sheet to lead key transaction and support the Greek economy
Positive Economic Value Added across all segments
Our Targets Cost-to-Income ratio: low 30s%
New loan generation: >10% yoy
Optimize capital allocation
57 | CIB PERFORMANCE & TRENDS05 NPE SERVICING AGREEMENT
05 5.1 PIRAEUS AND INTRUM JOIN FORCES
• Piraeus Bank and Intrum enter into a strategic partnership for the management of non-performing assets
• Establishment of the market-leading independent NPE servicer in Greece
• The servicer will manage Piraeus’ existing NPEs and REOs, as well as new inflows
• Two servicer companies, one for NPEs and one for REOs, comprising one operating platform
• The platform will also manage non-performing assets of third parties
• Piraeus’ and Intrum’s top management will join the new companies’ Board of Directors
• The NPE servicer company will be licensed and regulated by the Bank of Greece
• The transaction is subject to customary conditions, regulatory approvals and the consent of the HFSF
59 | NPE SERVICING AGREEMENT05 5.2 BENEFITS OF THE TRANSACTION
1 Facilitation of sizeable Independent servicer with the scale and capabilities to service large
inorganic actions portfolios, facilitating future securitizations and systemic solutions
2 Enhanced PPI savings (cost relief minus fixed AuM fees) of c.€50mn per annum in
operating efficiency 2020-2021; overall boost of effectiveness in the management of NPEs
3 Bank retains Participation in the enterprise value growth of the servicer companies;
upside potential Piraeus retains assets and proceeds on its balance sheet
4 Leverage with Intrum
Performance Enhancement of Piraeus’ NPE recovery prospects, facilitating the
expertise
Culture outperformance of NPE reduction targets
5 Re-focus on
core banking
Management team will re-focus on core banking activities, yielding
improved results for the Group
60 | NPE SERVICING AGREEMENT05 5.3 BUSINESS LOGIC AT A GLANCE
Strong business logic behind the long-term strategic partnership -
creating value for other stakeholders
RBU Employees Clients & Customers Greek Society
Core business More tools and solutions Long-term industry player
Short and long-term Fair and firm Substantial investment capacity
development opportunities Prospering companies Increase job opportunities
Centre of excellence Individuals with healthy loans Contribute to the economy
61 | NPE SERVICING AGREEMENT05 5.4 TRANSACTION FACTSHEET
Serviced Perimeter Existing non-performing loans plus forborne / early arrears loans and REOs, as well as any new inflows
€27bn loan exposures and €1bn REOs in the perimeter (est. Q4.2019 figures)
Contract Duration Initial term of 10 years
Shareholder Structure 80% of the new servicer company will be held by Intrum and 20% by Piraeus Bank
Valuation The agreement values the 100% of the platform at €410mn. Intrum has agreed to acquire 80% for a purchase price of €328mn
Timeline The two parties aim for transaction closing on 1 October 2019
Board of Directors Comprised of both parties’ executives
Management George Georgakopoulos will assume the role of CEO in the 2 servicer companies
Employees c.1,300 people will be employed in the new servicer companies
Structure The majority of the serviced NPE portfolio to be transferred to and held by a securitization SPV
62 | NPE SERVICING AGREEMENT05 5.5 PROGRESS AT A GLANCE
Step 1: Transfer of RBU Business to ServiceCo Step 2: Sale of ServiceCo, including a long-term SLA
Shares in
ServiceCo
Piraeus Bank Piraeus Bank Intrum
Recovery Consideration
Banking Shares 80%
Unit Long-term SLA
ServiceCo ServiceCo
20%
Note: diagrams do not explicitly show the creation and sale of the REO servicing company, which follows the same structure
63 | NPE SERVICING AGREEMENT05 Piraeus' Recovery Banking Unit
5.6 PIRAEUS’ RBU OVERVIEW
The most advanced NPE management unit in Greece
Formal establishment of the RBU in Q4.2013, ~1,300
based on internal workout and restructuring
FTEs
teams, as well as top talent from the core Bank
Servicing retail and commercial exposures across
a variety of specialized sub-segments
~€27bn
servicing perimeter
Significant investments in the operating platform,
processes, product suite and governance
RBU Core Activities
Active involvement and facilitation of previous
and ongoing NPE transactions by the RBU; the
best NPE reduction performance in 2018
Collections Restructuring Legal actions
64 | NPE SERVICING AGREEMENT05 5.7 INTRUM OVERVIEW
• Holistic service offering, covering the entire credit
management chain; c.80k clients
• Local presence in 24 European markets -
market leader in the majority of them; 160 partner countries
• Strong operational performance and collection results
• Significant transaction and partnership experience
Intrum Key Metrics - Q1 2019 LTM (SEKmn) (EURmn)
Revenues 14,079 1,357
EBIT Adjusted 4,877 470
Cash EBITDA 10,283 991
Employees >10,000 >10,000
65 | NPE SERVICING AGREEMENT05 End of
5.8 PREPARATIONS FRONTLOADED
End of
May September
SCOPE APPROACH
Pre-Signing Pre-Signing Post-Signing - Implementation Completion
▪ Piraeus and Intrum have ▪ Implementation Launch implementation of the transfer of ▪ New servicer
started preparations for steps for the business to ensure autonomous operational companies fully
the implementation transfer of the continuity of the servicer companies, by: up and running
phase of the transaction Piraeus RBU - Segregating IT systems
early in the process business defined - Separating premises
- Setting up the billing processes and
▪ Target is for the new
servicer companies to be ▪ Operational calculation tools
readiness and set- - Managing the transfer of resources
ready by 1 October 2019
up of 13 dedicated - Defining Compliance / GDPR obligations
▪ The new NPE servicer workstreams
company will be licensed Stress-test systems and processes of
by the Bank of Greece servicer companies
66 | NPE SERVICING AGREEMENT05 Steering Committee
5.9 EXECUTION
Weekly Jour Fixe Cost
PMO Team
PMO Meeting Monitoring
Intrum ownership
1 2 3 4 5 6 7 8 9 10 11 12
PB Credit & Core Ops set-up Securitization
Regulatory & Billing Engine, Compliance Communicati ServiceCo
Organization Delegated Processes and Technology HR (premises, facilities, and related
Incorporation branches) KPIs & GDPR on set-up
& Governance authorities Invoicing processes
Steering Committee Owners
Workstream Managers
▪ Corporate ▪ Regulatory ▪ Credit ▪ Organosis ▪ Organosis ▪ IT ▪ Branches ▪ IT ▪ IT ▪ IT ▪ Inv. Relations
Governance Affairs ▪ Organosis ▪ IT ▪ IT ▪ Organosis ▪ Finance & MIS ▪ Organosis ▪ Operations ▪ Organosis ▪ HR
▪ Organosis ▪ Legal ▪ IT ▪ Finance ▪ Legal ▪ Legal ▪ Finance ▪ Treasury ▪ Legal
Functions ▪ Finance & MIS ▪ Strategy ▪ Procurement ▪ IT Facilities ▪ Tax ▪ Operations
▪ RBU ▪ HR ▪ Accounting
involved
▪ HR ▪ Organosis ▪ Corporate
▪ Participations Servicing
▪ Finance Unit
▪ Compliance
67 | NPE SERVICING AGREEMENT05 5.10 FINANCIAL IMPACT
2019 Up to 2021 10-year period
Capital accretion of c.80bps Positive impact on PPI (cost relief NPV of the 10-year
will arise from the €0.4bn minus fixed AuM fees) of c.€115mn cumulative net income
valuation of the NPE cumulatively (Q4.19 to end-2021) impact c.€100mn, including
servicing platform upfront consideration
Success fee for the execution of the
Closing expected 1 October proceeds
existing NPE plan expected to be
2019; marginal operating booked in the CoR line This impact does not
P&L impact from Q4.2019 include any acceleration in
All-inclusive positive impact to capital the execution of Piraeus’
through to 2021 of c.55-60bps as per NPE reduction strategy
existing NPE plan
In a scenario of 10% over-
performance vs existing NPE plan,
net capital result through to 2021
increases to c.100bps
68 | NPE SERVICING AGREEMENT05 5.11 BASELINE FINANCIAL PROJECTIONS
The Illustrated Impact Takes into Account the Baseline Scenario of our NPE Plan Execution
2019-2021 PPI (€bn) 2019-2021 Net Income (€bn)
69 | NPE SERVICING AGREEMENTCLOSING REMARKS
AGENDA 2023: KEY PILLARS
a. Strategic Targets paving the path to increasing profitability
b. Satisfying Stakeholders remaining the top priority for the Bank
c. Sustainable Solutions producing sustainable returns
De-risking Growth Efficiency &
of Legacy Assets of Core Assets Simplification
Value Creation by the Leading Bank in Greece
71 | CLOSING REMARKS2023 ROADMAP
Restoration of Fundamentals in the Baseline Scenario
2018
Cost to income 54% low 40s
NPE 51% single-digit ratio
RoTΕ losses high single-digit return
~200bps above the
Regulatory Capital 14.0%
expected requirement
72 | CLOSING REMARKSROA DRIVERS
Pre-Tax RoA Improvement Driven by Cost Efficiency
Pre- tax RoA
+0.2%
+0.5%
+0.1%
Growth and Efficiency De-risking and
development of increase and cost of risk
the business simplification normalization
a: actual; f: forecast
73 | CLOSING REMARKSDisclaimer The accompanying presentation has been prepared by Piraeus Bank S.A. and its subsidiaries and affiliates (the “Bank” or “We”) solely for informational purposes. For the purposes of this disclaimer, the presentation that follows shall mean and include materials, including and together with any oral commentary or presentation and any question-and-answer session. By attending a meeting at which the presentation is made, or otherwise viewing or accessing the presentation, whether live or recorded, you will be deemed to have agreed to the following restrictions and acknowledged that you understand the legal and regulatory sanctions attached to the misuse, disclosure or improper circulation of the presentation or any information contained herein. This presentation does not constitute an offer to sell or a solicitation of an offer to buy or a recommendation to buy or invest in any form of security issued by the Bank or its subsidiaries or affiliates nor does it constitute an offer or commitment to lend, syndicate or arrange a financing, underwrite or purchase or act as an agent or advisor or in any other capacity with respect to any transaction, or to commit capital. This presentation is not intended to provide a basis for evaluations and does not constitute investment, legal, accounting, regulatory, taxation or other advice and does not take into account your objectives or legal, accounting, regulatory, taxation or financial situation or particular needs. No representation, warranty or undertaking is being made and no reliance may be placed for any purpose whatsoever on the information contained in this presentation in making any investment decision in relation to any form of security issued by the Bank or its subsidiaries or affiliates or for any other transaction. You are solely responsible for forming your own opinions and conclusions on such matters and for making your own independent assessment of the Bank. You are solely responsible for seeking independent professional advice in relation to the Bank and you should consult with your own advisers as to the legal, tax, business, financial and related aspects and/or consequences of any investment decision. No responsibility or liability is accepted by any person for any of the information or for any action taken by you or any of your officers, employees, agents or associates on the basis of such information. 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Certain statements contained in this presentation that are not statements of historical fact, including, without limitation, any statements preceded by, followed by or including the words “targets,” “believes,” “expects,” “aims,” “intends,” “may,” “anticipates,” “would,” “could” or similar expressions or the negative thereof, constitute forward-looking statements, notwithstanding that such statements are not specifically identified. Examples of forward-looking statements include, but are not limited to, statements which are not statements of historical fact and may include, among other things, statements relating to the Bank’s strategies, plans, objectives, initiatives and targets, its businesses, outlook, political, economic or other conditions in Greece or elsewhere, the Bank’s financial condition, results of operations, liquidity, capital resources and capital expenditures and development of markets and anticipated cost savings and synergies, as well as the intention and beliefs of the Bank and/or its management or directors concerning the foregoing. Forward-looking statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions which are difficult to predict and outside of the control of the Bank. Therefore, actual outcomes and results may differ materially from what is expressed in such forward-looking statements. We have based these assumptions on information currently available to us, and if any one or more of these assumptions turn out to be incorrect, actual market results may differ significantly. While we do not know what impact any such differences may have on our business, if there are such differences, our future results of operations and financial condition, could be materially adversely affected. You should not place undue reliance on these forward-looking statements. Forward-looking statements speak only as of the date on which such statements are made. The Bank expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement to reflect events or circumstances after the date on which such statement is made, or to reflect the occurrence of unanticipated events.
PIRAEUS BANK GROUP HEADQUARTERS
4, Amerikis Str., 105 64 Athens, Greece
T. +30 210 333 5026
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