Q2.19 results of NBG Group

Q2.19 results highlights

Group PAT from continuing operations increases to €253m in H1.19 (€48m in H1.18)

- H1.19 NII up by 6% yoy to €598m, driven by securities interest income following the replacement of the Greek State IRS with GGBs in mid-February 2019; Q2.19 NII increases for a 2nd straight quarter, by €19m qoq to €309m (+6% qoq). NBG loan disbursements towards Greek corporates accelerate to €0.8bn in Q2.19 from €0.6bn in Q1.19

- Trading and other income recovers to €151m in H1.19 against losses of €19m in H1.18, incorporating one off gains relating to the Greek State swap arrangement booked in Q1.19
(€59m) and Grand Hotel disposal in Q2.19 (€30m) 

- H1.19 OpEx 7% lower yoy to €408m, driven by both staff (-6% yoy) and non-staff cost reduction (-7% yoy); as a result, C:I ratio declined to 47% in H1.19 from 66% a year ago (C:CI ratio at 57% from 64% in H1.18)

- Core PPI up for a 3rd quarter in a row to €165m (+14% qoq); H1.19 Core PPI at €310m (+26% yoy)

- Loan impairments at €204m in H1.19 imply a CoR of 136bps, slightly up from the H1.18 underlying CoR of 132bps

- H1.19 PAT from discontinued operations benefits from the capital gain associated with the sale of Pangaea 

NPE reduction of €2.5bn ytd bodes well for the delivery of our ambitious 2019 NPE target 

- NPE sales of secured SBLs and small SMEs (Project Symbol) and unsecured retail, SBLs and small SMEs in Greece (Project Mirror) already agreed; both transactions for a combined c€1.8bn GBV are capital accretive 

- NPE reduction picks up in Q2.19 (-€1.4bn qoq), driven by Project Mirror (€1.0bn) and negative formation before write-offs (€0.4bn) 

- Remaining effort to attain the €4.3bn FY.19 NPE reduction target settles at €1.8bn; this will be achieved via the sale of a secured corporate and SBL portfolio, sales of shipping and Cypriot and Romanian loan portfolios and further restructurings and liquidations

- NPE coverage of 56% combines with an NPE ratio of 37% in Greece, facilitating the ongoing shift towards closure actions (sales & liquidations) on a contained loss budget 

- Strong liquidity profile

- Domestic deposits reach €41.6bn (+6% yoy), as the country is moving closer to the full lift of capital controls; c60% of the pre-capital control outflows have already been recovered

- LCR and NSFR at 171% and 113%, respectively, remain comfortably above regulatory requirements

- Eurosystem funding (TLTRO) at €2.25bn; interbank exposure cut by €2.7bn ytd to €0.9bn, reflecting further funding cost optimization 

CET1 ratio at 16.0% 

- NBG successfully issued in July 2019 a €400m Tier II bond at a yield of 8.25% enhancing its capital structure, providing room for capital accretive allocation of its large liquidity pool and taking the first step towards facilitating future MREL requirement

- Pro forma for the H1.19 PAT and the impact of agreed divestments, CET1 ratio stands at 16.0%, with Total Capital ratio at 17.0% (including the Tier II bond). Both ratios are
comfortably above SREP capital requirements for 2019 and 2020, absorbing the Q2.19 switch to STD approach, on the back of strong H1.19 PAT and bond valuation gains (FVTOCI) 

- The upcoming divestment of Ethniki Insurance will enhance capital ratios further

The Q2.19 results build on the positive trend of Q1.19, rewarding the Bank’s persistent efforts to return to normalcy; to be a bank with strong profitability and a
healthy balance sheet. Indeed in H1.19, core operating profitability increased by c21% yoy (+51% qoq in Q2.19), supported by an expansion of NII and Fees (5% yoy),
including through the continued recovery of loan disbursements, but also reflecting cuts in operating expenses (7% yoy). Strong trading gains supported total income for
a 2nd quarter in a row, resulting in operating profit of c€260m in H1.19 (> 100% yoy).
In addition, major steps were taken to strengthen the balance sheet. First, the second major NPE sale in 2019 has helped reduce NPEs by €2.5bn ytd. Moreover, it is very
encouraging that restructurings have accelerated markedly, boding well for an acceleration in the organic reduction of NPEs. Second, the total capital ratio has been
enhanced further, well above regulatory thresholds, following the Tier II bond issuance in July, to 17.0%. This will facilitate a faster than planned reduction in NPEs.
With the new management team already creating a strong performance track record, a Business Plan validated by the investor community and Greek macroeconomic
conditions rapidly improving, all the pieces are in place for its efficient execution.
Activity, as well as loan demand, will be provided a further boost from the envisaged acceleration of reforms by the new Government, thus facilitating the implementation
of the Business Plan.

Athens, August 29, 2019
Paul Mylonas
Chief Executive Officer, NBG 

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