Annual Report • Aug 2, 2023
Annual Report
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July 2023
| At a glance 3 | |
|---|---|
| Chairman's Statement 5 | |
| Chief Executive Officer's Statement 6 | |
| Certification of the Board of Directors 7 | |
| Board of Directors Report 9 | |
| Independent Auditor's Report 43 | |
| Statement of Financial Position 45 | |
| Income Statement – 6-month period 46 | |
| Statement of Comprehensive Income – 6-month period 47 | |
| Income Statement – 3-month period 48 | |
| Statement of Comprehensive Income – 3-month period 49 | |
| Statement of Changes in Equity - Group 50 | |
| Statement of Changes in Equity - Bank 51 | |
| Cash Flow Statement 52 | |
| NOTE 1 General information 53 | |
| NOTE 2 Summary of significant accounting policies 54 | |
| 2.1 Basis of preparation 54 | |
| 2.2 Going concern 54 | |
| 2.3 New and Amended Standards and Interpretations 56 | |
| 2.4 Critical judgments and estimates 57 | |
| NOTE 3 Segment reporting 59 | |
| NOTE 4 Net trading income / (loss) and results from investment securities and Gains / (losses) arising from the derecognition of financial assets measured at amortised cost 62 |
|
| NOTE 5 Credit provisions and other impairment charges 63 | |
| NOTE 6 Restructuring costs 63 | |
| NOTE 7 Tax benefit /(expense) 63 | |
| NOTE 8 Earnings per share 64 | |
| NOTE 9 Loans and advances to customers 64 | |
| NOTE 10 Property and equipment, Right of Use ("RoU") assets and lease liabilities 70 | |
| NOTE 11 Assets and liabilities held for sale and discontinued operations 70 | |
| NOTE 12 Due to banks 72 | |
| NOTE 13 Due to customers 72 | |
| NOTE 14 Contingent liabilities, pledged assets and commitments 73 | |
| NOTE 15 Share capital, share premium and treasury shares 74 | |
| NOTE 16 Tax effects relating to other comprehensive income / (expense) for the period 75 | |
| NOTE 17 Related party transactions 76 | |
| NOTE 18 Capital adequacy 78 | |
| NOTE 19 Fair value of financial assets and liabilities 80 | |
| NOTE 20 Acquisitions, disposals and other capital transactions 86 | |
| NOTE 21 Group companies 89 |
Who we are: National Bank of Greece S.A. (hereinafter "NBG" or the "Bank") was founded in 1841 and its shares have been listed on the Athens Exchange since 1880. The Bank's headquarters are located at 86 Eolou Street, 10559 Athens, Greece, (Register number G.E.MH. 237901000), tel. (+30) 210 334 1000, www.nbg.gr. By resolution of the Board of Directors, the Bank can establish branches, agencies, and correspondence offices in Greece and abroad. In its 182 years of operation, the Bank has expanded on its commercial banking business by entering into related business areas. The Bank and its subsidiaries (hereinafter the "NBG Group" or "Group") provide a wide range of financial services including mainly retail, corporate and investment banking, nonperforming management & Specialized Asset Solutions, transactional banking, leasing, factoring, brokerage, asset management, real estate management and insurance related services. The Group operates mainly in Greece but also abroad through its branch in Cyprus and its subsidiaries in North Macedonia, Cyprus, Romania, Bulgaria, Luxembourg, Netherland and U.K. Following the respective Bank's decision in 2021, the Group ceased its operation in Egypt, Malta and NBG London Branch; and therefore the NBG Egypt Branch, the NBG London Branch and the subsidiaries NBG Malta Ltd (formerly known as NBG Bank Malta Ltd) and NBG Malta Holdings Ltd are currently under liquidation.
The Bank is one of the four systemic banks in Greece and one of the largest financial institutions in Greece by market capitalization, holding a significant position in Greece's financial services sector.
In NBG, our purpose statement is "Together we create Future".
Our vision is to be the "Bank of First Choice" for customers, talent and investors.
A trustworthy, human, responsive bank that acts as a catalyst for sustainable growth and unlocks potential for households, businesses, communities and our employees.
Throughout our history, from 1841 until today, we recognize that our successful business activity is mainly based on the fact that we operate guided by our values and our principles. Those values are, and will remain, etched in our DNA in order to move forward together to the next day.
Since 2021, NBG has launched a holistic Environmental, Social and Governance ("ESG") effort to ensure compliance with evolving regulatory framework, fulfilment of its commitment to the Principles for Responsible Banking ("PRB") of the United Nations Environment Program Finance Initiative ("UNEP-FI") and implementation of ESG best practices across the organization (covering management of credit and other types of risk, business strategy, products and services, reporting, as well as efforts to reduce NBG's direct and indirect emissions footprint). As its relevant practices mature, NBG continues to further integrate ESG aspects into its business strategy and operating model.
Our ESG Management Committee, chaired by the Chief Executive Officer ("CEO"), governs all strategic decisions related to ESG, while the Board Innovation & Sustainability Committee has come into force to oversee ESG forward-looking matters. NBG has integrated the management of ESG topics across the three lines of defence, with the appointment of specific roles and responsibilities within existing organizational units, as well as the establishment of ESG related teams. In this context, the Climate & Environmental Strategy Independent Sector within the Group and Bank Transformation, Strategy & International Activities, has been set up to define, coordinate and monitor implementation of Climate & Environmental Strategy across the first line. A dedicated Group Corporate Social Responsibility & Sustainable Development Division has been established within the Group Compliance and Corporate Governance to oversee compliance and reputational risk matters pertaining to corporate social responsibility, sustainability, and climate change. Finally, a dedicated team within the Strategic Risk Management Division oversees Climate & Environment risk factors.
Key initiatives relevant to the implementation of the Climate & Environmental strategy and related risk management are being included in the Transformation Program to ensure high level of focus and execution discipline in the aforementioned critical areas (see section "Transformation Program").
In the first half of 2023, NBG continued its successful transformation journey, operating in an economic environment of rapid monetary policy tightening and a global growth slowdown. Despite the headwinds, NBG focused on growth-enhancing initiatives and further investments in technology and people. Despite the adverse international economic environment, economic activity in Greece showed remarkable strength. It grew by a robust 5.9% in 2022 and 2.1% in 1Q.23, reflecting the increased competitiveness of the Greek economy following a multi-year restructuring effort.
Expected Gross Domestic Product (GDP) growth in FY.23 is around 2.5%, more than two times higher than the euro area average. All major activity components showed robust growth with private consumption and investment on a solid upward trend. Positive wealth effects and rising collateral values due to increasing equity and real estate prices along with strong private sector liquidity buffers broadly offset the pressure on financial conditions from interest rate hikes.
The tourism sector's performance recovered more rapidly than initially expected, converging to its pre-pandemic highs of 2019. Tourism revenue will most probably reach new record levels in 2023, having a strong and positive direct and indirect impact on economic activity and employment.
The relatively rapid deceleration in headline inflation due to falling energy prices and the resilience of the labor market set the stage for real wage increases in 2023, boosting domestic demand. Moreover, declining prices for production inputs support corporate profitability, while the rapid absorption of Recovery and Resilience Facility (RRF) funds and the lagged impact of related spending will further bolster investment.
Fiscal rebalancing accelerated with Greece recording the largest fiscal improvement (in primary fiscal balance and public debt as a percent of GDP) among euro area countries in 2022. This positive fiscal momentum is maintained in 2023, supporting Greece's effort to regain investment grade status in the coming months. The combination of the positive macroeconomic backdrop, with the results of the multi-year transformation and our solid balance sheet have allowed us to deliver a strong set of results in the first half of 2023. Our profitability has been expanding strongly, underpinned by the solid expansion of our core income on the back of a sharp recovery in Net Interest Income (NII), while operating costs and credit risk charges remained relatively
contained, despite abating but still high inflationary pressures. Our capital position continues to strengthen, driven by solid organic generation, with Common Equity Tier 1 (CET1) at 17.3%. Finally, the Bank's asset quality profile remains resilient, with NPEs at 5.4%, a coverage of above 82%, and early delinquencies remaining contained and within our expectations for FY.23. During the first half of the year, our core domestic business continued to grow in line with our mission to facilitate a healthier and more sustainable future for businesses and households. In corporate banking, we launched the roll-out of a new, more centralized service model, and further enhanced our workflow to reduce time to money for our clients. We also progressed well in implementing our new Core Banking System, starting with corporate loans. In retail banking, our digital footprint continued to expand, with a new business banking application and 2.8 million active users on our mobile and internet banking platforms during the last 12 months.
In line with our strategy to build value-adding partnerships, we purchased 7.5% of the share capital of Epsilon Net S.A. We entered a long-term, exclusive cooperation for the joint development and distribution of products and solutions in the fields of business software, electronic payments, and embedded banking. Our partnership with Epsilon Net S.A. will address the digital transformation needs of Greek businesses through a seamless customer experience.
We continued to invest in further enhancing our ESG capabilities and infrastructure. In climate and environment issues, we upskilled our management and our technical working teams, detailed our strategy to capture emerging opportunities from the transition of the Greek economy to net zero, and strengthened our climate and environment risk management. For all our efforts, we received the year's Diamond ESG & Social Responsibility award by the Corporate Responsibility Institute (CRI). This is the 5th time we receive the award since it was launched 15 years ago in Greece.
Our people were at the forefront of these achievements, which would not have been possible without their strong dedication and tireless efforts. Our aim is to continue to build a modern people management framework, enabling us to attract, develop and retain the best talent in the market.
Looking forward, strong growth catalysts and reform continuity are expected to provide sufficient impetus to overcome the challenges posed by persisting geopolitical tensions, sluggish core and food inflation, energy transition challenges, and the increasing toll on euro area growth from monetary and fiscal tightening.
The substantial results of our transformation effort and the revamping of our service and operating model, including our impressive digital footprint, have put us in a position of strength in the Greek banking sector. We can support and advise our clients in achieving their targets, while promoting the sustainable growth of the Greek economy.
At NBG we aim high, work as a team, and deliver tangible results. The Bank's Purpose Statement remains pivotal to our activities: "Together We Create Future." Together with our people and our customers, we adhere to our four core values: We aspire to a Bank that is Human, Trustworthy, Responsive and a Growth Catalyst.
Athens, 31 July 2023
Gikas A. Hardouvelis Chair of the Board of Directors
The Greek economy is in a favourable and rare economic and political conjuncture as regards the improved prospects for a world recovery, combined with its own hard-won
competitiveness and solid prospects for further reform. In this positive environment, Greece's economic growth is driven by investment and exports, supported by significant Foreign Direct Investments ("FDI"), drawn by the attractiveness of the economy.
Building on the country's sustained growth momentum, NBG delivered a compelling financial performance in the first half of 2023, underpinned by the unique strength of our balance sheet and our successful transformation.
On the profitability front, core profit after tax exceeded €0.5 billion, translating into a core return on tangible equity ("RoTE") of nearly 16%. Cost to Core Income stands at 32%, with NII and fee income maintaining their positive momentum and operating costs being contained. Credit risk charges are gradually normalizing with Cost of Risk below 70 basis points ("bps").
Our strong core profitability is generating capital on a sustainable basis, with the CET1 ratio at 17.3%1 and Total Capital ratio at 18.4%1 , rising by c.80bps quarter-over-quarter (q-o-q) for a second quarter in a row.
At the same time, our liquidity position remains a strong competitive advantage, comprising of a large and stable core deposit base, while our net cash position has increased further to near €7 billion.
Our residual net Non Performing Exposure ("NPE") amounts to just €0.3 billion, while the small pick-up in mortgage arrears in 2Q.23 is comfortably within our FY.23 guidance, confirming once again the defensive nature of our loan book.
Notably, NBG successfully completed the 2023 ΕΒΑ Stress Test, with significant progress versus previous years. NBG is the top performer in the Greek banking sector and among the best across Europe, based on its CET1 depletion outcome in the Stress Test.
On the transactions´ front, we remained committed to our strategy of establishing partnerships with key players in the IT and non-IT area. In May 2023, we signed a new strategic partnership agreement with the technology company Epsilon Net S.A. specializing in Enterprise Resource Planning ("ERP") service provision to small business customers, which will support us to further expand our digital offering and develop a new distribution channel for our products and services to such customers.
For the 5th consecutive year, our Transformation Program continues to be our delivery engine, constantly improving our commercial effectiveness and operational efficiency. We aspire to improve further our product and service offering to meet the rapidly changing needs of our clients in a more efficient and customer friendly manner. I will mention just a few of its successes:
We continued enhancing our digital offering, with digital subscribers and active monthly users reaching 3.8 million (+9% year-over-year ("y-o-y")) and 2.3 million (+9% y-o-y) in 2Q.23, respectively, while digital sales surged to 1 million units compared to 0.6 million in 2Q.22.
The replacement of our Core Banking System is progressing, with the 1 st pilot for Corporate being live, getting one step closer to our vision for a state-of-the-art infrastructure, replacing legacy systems.
Centralization and automation efforts continue, in both corporate and retail fronts. Notably, a series of paperless capabilities were rolled-out in our branches, significantly eliminating new paper production.
With the heavy responsibility of our long and illustrious heritage, we have always contributed to the economy, society, and the environment. NBG maintained its leading position in Renewable Energy Sources financing, incorporated ESG criteria in its corporate credit assessment process and supported its customers' shift towards sustainable investments. Additionally, the Bank is measuring its generated emissions to enable transparency and proper target setting. Bank-wide ESG trainings are currently in progress to raise Climate & Environmental awareness across the Bank. Our sponsorship program continues with numerous initiatives supporting our society and our governance standards are recognized as following best practices. For all our efforts, we received the year's Diamond ESG & Social Responsibility award "CR Index 2022-23" by the CRI.
With leading economic indicators pointing to stronger growth for the remainder of 2023, NBG remains committed -- as the Bank of First Choice-- to play a leading role in supporting our clients as they lead the Greek economy forward.
Athens, 31 July 2023
Pavlos K. Mylonas Chief Executive Officer
1 Including profit for the period, post dividend accrual.
Certification of Chairman, Chief Executive Officer and a member of the Board of Directors pursuant to Article 5 of Greek Law 3556/07, as in force.
We, the members of the Board of Directors of National Bank of Greece S.A. certify that to the best of our knowledge:
Athens, 31 July 2023
THE CHAIRMAN OF THE BOARD OF DIRECTORS THE CHIEF EXECUTIVE OFFICER THE BOD MEMBER
GIKAS A. HARDOUVELIS PAVLOS K. MYLONAS MATTHIEU A. KISS
Economic and Financial Review Risk Management
Corporate Governance
Group Financial Results
Group Core PAT for the six month period from continuing operations at €508 million
€508 million for the six-month period ended 30 June 2023 (30 June 2022: €142 million).
Loan disbursements reach €2.5 billion, driven mainly by corporates.
Group NPE stock amounted to €1.8 billion, with NPE ratio at 5.4%.
Group deposits grew by €0.5 billion to €55.7 billion, Liquidity Coverage Ratio ("LCR") and Net Stable Funding Ratio ("NSFR") stand comfortably above regulatory requirements.
The Group's Common Equity Tier 1 ("CET1") and Total Capital ratios as at 30 June 2023 were 15.8% and 16.9% respectively, exceeding the OCR ratio of 14.53% for 2023. By including the profit of the period, post dividend accrual, CET1 and Total Capital ratios were 17.3% and 18.4%, respectively.
our efforts to accelerate onboarding & engagement and enhance the digital capabilities of our customers
The introduction of new digital capabilities in combination with campaigns to promote digital channels led to a significant acceleration of digital usage and engagement:
Economic and Financial Review Risk Management
Corporate Governance
| Key digital metrics |
New digital functionalities |
|
|---|---|---|
| Onboard | - Digital subscribers: 3.8 million (+8.6% y-o-y). - Mobile app downloads 3.9 million (+19.8% y-o-y). |
• Online Sole Proprietorship onboarding via NBG Mobile Banking. |
| Engage | - Digital active users (12 months) 2.8 million (+8.5% y-o-y). |
• Contactless Payments via Mobile Banking: NBG cards on Garmin, Mi & Zepp Pay. • New Business mobile offering. |
| - Digital active users (1 month) 2.3 million (+9.0% y-o-y). |
• Analytics tool for customer journeys monitoring. • Online business legalization enhancements. • Account security settings. • Credit card balance transfer. • Book appointments on Mobile Banking /Internet Banking. • Business express online repayment. • Display beneficiary names in domestic remittances. |
|
| Cross-sell | - Digital sales c.179 thousands items (+40.6% y-o-y). |
• New products added in the digital sales portfolio (Mutual Funds, prepaid mc etc). • Reissue business debit card. |
Digital transactions soared, supported by our efforts to accelerate onboarding & engagement and to enhance the digital capabilities of our customers.
Economic and Financial Review Risk Management
Corporate Governance
Large scale Transformation Program
NPE reduction plan
Disposal of NPE portfolios
Other transactions
Financial highlights
Regulatory developments
Building upon its long-lasting tradition of trust and contribution to the Greek economy and society, the Bank embarked on a large-scale Transformation Program (see section "Transformation Program") in the second half of 2018 to transform the Bank, responding to the challenges and tapping the business opportunities presented by the rapidly changing economic and banking landscape.
The Transformation Program addresses the strategic priorities that leverage on our strengths and address our weaknesses. Since its inception, the Transformation Program has delivered impressive results in terms of core profitability – fully in line with the Bank's financial and business targets up to 2024 – and tangible improvements to NBG's business and operating model. These results are delivered through discrete workstreams encompassing c.30+ initiatives and involving 1,000+ managers and employees of the Bank.
From December 2015 to June 2023, the Group achieved a decrease of €22.5 billion of the NPE stock through a combination of organic and inorganic actions, with Group NPE stock as of 30 June 2023 at €1.8 billion (Bank: €1.6 billion). Similarly, the NPE ratio dropped from 46.8% to 5.4% post to the Project "Frontier" derecognition and the Project "Frontier II" classification as Held for Sale. More specifically, NPE's balance remained stable in the first half of 2023, with the stock of domestic NPEs amounting to €1.7 billion.
Domestic NPE ratio slightly increased by c. 20 basis points ("bps") to 5.3% in 2Q.23, with NPE coverage at 82.1%.
Key Highlights Transformation Program Economic and Financial Review Risk Management
Corporate Governance
International NPE ratio and coverage in 2Q.23 settled at 6.9% and 81.4%, respectively.
Furthermore, as per the regular European Central Bank ("ECB") calendar, the revised NPE targets for the 2023-2025 period were submitted to the Single Supervisory Mechanism ("SSM") on 31 March 2023. The objective of the revised NPE targets is to actively pursue a credible NPE ratio improvement, leading to a level aligned with the EU average (~3%) by 2025.
On 25 November 2021, the Bank decided the disposal of a portfolio of Greek NPEs in the form of a rated securitization that will utilize the provisions of the Hellenic Asset Protection Scheme ("Hercules II", see below). The Project "Frontier II" accounted for c. €1.0 billion, in terms of gross book value as of 31 December 2021. The portfolio consists of predominantly secured Large Corporate, Small and Medium Enterprises ("SMEs"), Small Business Lending ("SBL"), Mortgage Loans and Consumer Loans.
On 29 June 2022, the Bank announced the submission of the application under Hercules II, for the securitisation of Project "Frontier II". The application relates to the provision of a guarantee by the Greek State on the senior notes of an amount up to €460 million.
Subsequently, on 29 July 2022, the Bank announced that it has entered into a definitive agreement with funds managed by Bracebridge Capital LLC, for the sale of 95% of the Mezzanine and Junior notes. NBG will retain the 100% of the Senior notes and 5% of the Mezzanine and Junior notes.
The transaction is estimated to be completed within the 2H.23, subject to required approvals.
The transaction is being implemented in the context of the Bank's NPE deleveraging strategy and is in line with the targets submitted to the SSM.
In December 2019, the Greek parliament voted for the creation of a Hellenic Asset Protection Scheme ("HAPS") (Greek Law 4649/2019) also known as the "Hercules Scheme". The Hercules Scheme will support banks on deleveraging NPEs through securitization, with the aim of obtaining greater market stability. The participation in the Hercules Scheme is voluntary and open to all Greek banks and it does not constitute state aid as guarantees are priced on market terms.
Under the Hercules Scheme, the Hellenic Republic will provide guarantees up to €12.0 billion on the senior bonds of securitizations of NPEs. The Hercules Scheme will become effective only when the originator has sold at least 50% plus one of junior tranches (and mezzanine if any) and the notes are of such amount that allows the derecognition and the Significant Risk Transfer ("SRT") of the securitized receivables.
Moreover, in July 2021, following the approval from the Directorate General for the Competition of the European Commission (the "DG Competition") on 9 April 2021 and based on the Greek Law 4818/2021, the "Hercules" Scheme (named also as "Hercules II") was extended by 18 months, with no material changes in terms.
In December 2021, the Bank decided the disposal of the nonperforming leasing exposures including: the sale of Probank Leasing S.A. shares, the sale of the Bank's leasing portfolio (ex-FBB) and the sale of NBG Leasing S.A. lease portfolio. The gross book value of the Bank's and NBG Leasing's leasing portfolios, as of 30 June 2023, amounted to €33 million.
On 25 May 2023, the Bank entered into a definitive agreement and the closing of the transaction is expected to be completed within the 2H.23.
In December 2021, the Bank decided to launch the divestment of the secured portfolio of SMEs (Project "Solar") with a gross book value c. €170 million as of 31 December 2021, through a joint securitization process under HAPS.
In August 2022, the Bank together with the other Greek financial institutions submitted to the Greek Ministry of Finance a joint application for inclusion of the senior notes to be issued in the context of the Solar Securitization in the HAPS scheme.
The transaction is expected to be completed within the 2H.23, subject to required approvals.
On 11 April 2023, the Bank announced the launch of the Reward Program for Consistent Mortgage Loan Customers by placing a cap on any variable interest rates for the next 12 months, thus protecting borrowers against future increases in reference rates. The cost of this initiative did not have a significant impact on the Interim Financial Statements.
On 16 November 2022, the Bank announced the signing of memorandum of understanding ("MoU") with Epsilon Net S.A. ("Epsilon Net") and its main shareholder. Subsequently, on 4 May 2023, the Bank announced the signing of a binding agreement for the purchase of 7.5% of the total share capital of Epsilon Net held by the main shareholder (the "Initial Transaction"), as well as the possibility of acquiring a further 7.5% from the main shareholder three years after the completion of the Initial Transaction. Lastly, on 9 June 2023 the Bank announced the completion of the Initial Transaction for the acquisition of a minority stake in Epsilon Net at a price of €7.49/share as well as the signing of a strategic cooperation agreement.
The agreement with the main shareholder also provides for the execution of a long-term, exclusive partnership agreement between Epsilon Net and NBG for the joint design, development, and distribution of products and services focusing on strengthening and supporting entrepreneurship in Greece. Among other things, it involves the direct interconnection of Epsilon Net's business software systems (ERP, Commercial & Accounting Applications) with NBG's systems, utilising NBG's sophisticated Open Banking platform in the area of Embedded Finance.
| Economic and | Corporate | |||
|---|---|---|---|---|
| Key Highlights | Transformation Program | Financial Review | Risk Management | Governance |
Group Core profit after tax ("PAT") from continuing operations reached €508 million for the six months period ended 30 June 2023, with Core Operating Profit up by €476 million y-o-y from €234 million to €710 million, reflecting core income growth of 59.6%, while operating expenses were kept contained y-o-y (up by 3.4% yo-y).
More specific, Group's Net Interest Income ("NII") increased by 75.2% y-o-y to €1,052 million, mainly supported by ECB base rate repricing. These positive drivers more than offset some loan spread compression, the pick-up in time deposit costs, as well as elevated Minimum Requirement for own funds and Eligible Liabilities ("MREL") related funding costs.
Net fee and commission income reached €178 million, expanding by 4.6% y-o-y, reflecting growth in retail and corporate businesses, driven by cards, payments, and lending related fees.
Operating expenses for the six months period ended 30 June 2023, increased by 3.4% y-o-y to €399 million, on the back of higher depreciation charges (+11.9% y-o-y), reflecting the Bank's IT strategy, which is centred around the replacement of the Bank's Core Banking System ("CBS"). Personnel expenses and general administrative and other operating expenses ("G&As") tightly managed and up by just 1.1% y-o-y, despite the sectoral wage increases in late 2022 and still high but abating inflationary pressures.
Bank's performing loan portfolio continued to expand in 1H.23 reaching €2.5 billion disbursements, driven mainly by corporates.
Eurosystem funding under TLTRO further declined in 2Q.23 to €1.9 billion as at 30 June 2023 from €5.0 billion as at 31 March 2023, and from €8.1 billion as at 31 December 2022, with the Group and Bank's liquidity buffer at cash values amounting to €25.5 billion and LCR and NSFR ratios well above 100%.
As at 30 June 2023, Group's customer deposit balance stood at €55.7 billion, an increase of €0.5 billion compared to 31 December 2022, mainly due to increased time deposits by €3.0 billion from premium and mass customers, largely offset by decreased current and sight deposits by €1.2 billion and savings deposits by €1.4 billion. Bank's secured interbank funding transactions remained at the same levels compared to 31 December 2022 and amounted to €0.1 billion as at 30 June 2023.
On 31 January 2023, the European Banking Authority (EBA) launched the 2023 ST for a sample of 70 EU-wide participating banks. 2023 ST was designed to provide valuable input for assessing the resilience of the European banking sector in the current uncertain and changing macroeconomic environment. NBG participated in the 2023 ST as part of the EBA sample of euro-area's largest banks.
The 2023 ST was based on a static balance sheet approach, thus factoring in the Group's financial and capital position of 31.12.2022 as a starting point and conducting a 3-year horizon stress simulation (for the period 2023-2025), under a Baseline and an Adverse scenario.
On 28 July 2023, EBA announced the results of the 2023 ST. Under the commonly applied methodology in the Adverse scenario, the Bank's fully loaded ("FL") CET 1 ratio incurred a maximum depletion of 2.71pps, reaching its lowest level of 13.1% in the first year of the projections (2023). This outcome positions the Bank as a top performer among its domestic peers which report a maximum depletion of 3.50pps on average excluding the Bank.
By the same indicator, the Bank ranks 11th among the 70 EU-wide participating banks, and 5th considering the FL CET1 depletion by the end of 2025.
Considering the full 3-year horizon of the Stress Test:
The result of the 2023 ST demonstrates the Group's resilience to shocks and ability to maintain solid capital levels, even in conditions of severe economic stress. Comparing the performance to previous stress test exercises, the Bank has achieved notable progress over the past years in strengthening its balance sheet, despite globally challenging economic conditions. Specifically, the 2023 ST outcome reflects the successful NPE deleveraging Strategy, the build-up of adequate capital buffers as well as a favorable liquidity position.
Key Highlights
Transformation Program
Economic and Financial Review Risk Management
Corporate Governance
Following a clear mandate from NBG's Board of Directors, the Bank launched a rigorous Transformation Program in the second half of 2018, committing to the delivery of aspiring financial and operational targets. Since its inception, the Transformation Program has enabled the delivery of impressive results in terms of core profitability – fully in line with the Bank's financial and business targets – and tangible improvements to NBG's business and operating model. The Transformation Program has been designed and is being delivered across Workstreams, each led by a senior executive of the Bank and is closely monitored by the Strategy & Transformation Committee.
Since its launch, the Transformation Program has been structured into six-month Seasons. This setup helped gain the necessary pace in the early years and ensured that the Bank remained focused to the targets.
From 2022 onwards, recognizing the increased maturity and ownership of the involved employees, the Transformation Program transitioned to an annual planning horizon. The Bank maintains its agility as new Initiatives can be added to the Transformation Program, while existing ones are adjusted or removed throughout the year. Each annual cycle begins and ends with a Ceremony, aiming to review progress made, acknowledge achievements, and embed lessons learned from each Season in our future planning. In parallel, a strong Transformation Program Office ("TPO") has been established to:
The TPO is a fundamental factor in executing the Transformation Program in a coordinated, timely and disciplined manner.
| Transformation | Economic and | Corporate | ||
|---|---|---|---|---|
| Key Highlights | Program | Financial Review | Risk Management | Governance |
During 1H.23, more than 1,000 staff have been directly involved in the Transformation Program in at least one of c. 30 initiatives and c.75 sub-initiatives, achieving significant tangible results across all Workstreams:
| Workstreams | Key achievements in 1H.23 |
|---|---|
| Best Bank for | • Continued commercialization of Ethniki 2.0 program, aiming for a leading role in the Greek corporate loan market, leveraging on the National Recovery and Resilience Facility ("Greece 2.0"). |
| our Clients | • Increase in cross-selling and creation of new fee generation streams in Corporate, with a comprehensive and tailor-made offering of services through the Corporate Transaction Banking ("CTB") Division. |
| • Continued enrichment of tools and enablers to strengthen the Corporate Investment Banking ("CIB") Relationship Managers frontline. |
|
| • Roll out of new extroverted Small Business service model in branches and implementation of high impact productivity improvements in Small Business lending process. |
|
| • Enhancement of cross-selling in Retail through improved offering in terms of cards, investments and bancassurance products and analytics-driven campaigns. |
|
| • Acceleration of customers' migration to digital channels, through the offering of new solutions and customer experience enhancements: |
|
| – For individuals: New transactions and products available on internet and mobile banking including new prepaid and credit card balance transfer through internet banking. |
|
| – For businesses/ corporates: New business mobile app live, and enhancements in online legalisation services and Express Business Loan; continued digital migration to online platforms (Client Trade and i-FX) and development of innovative solutions via Application Programming Interfaces (APIs). |
|
| • Acceleration of branch network transformation, incl. customers' appointments booking functionality embedding in Internet and Mobile Banking, operations streamlining and customer-centricity/ sales training to all Branch staff. |
|
| Specialised Asset Solutions |
• Operationalization of the new business, Specialized Asset Solutions, to capture emerging revenue generation opportunities in the emerging ecosystem of servicers and investors (e.g., acquisition financing, Real Estate Operating companies ("REOCo") financing and alternative financing). |
| • Continuous containment of NPE flows and organic reduction through legal and strategic actions to maximize recoveries from legacy NPE portfolios. |
|
| Efficiency & Agility |
• Targeted efforts to optimise operating model and capacity efficiencies in selected Head Office functions. • Optimization of real estate footprint and spend, factoring in a more flexible working model. |
| Technology & | • Core Banking System ("CBS") replacement program in progress. |
| Processes | • Continued reengineering of core process centralizations (e.g., Small Business lending) and automations (e.g., Corporate workflow). |
| • Expansion of usage of new technologies, incl. Robotics Process Automation ("RPAs"), Artificial Intelligence ("AI"), and Optical Character Reader, and continued migration to cloud. |
|
| • Transition to a paperless operating model across Branches through gradual incorporation of paperless capabilities across all our products and services. |
|
| People, Organisation & |
• Conclusion of the new Performance Management System ("PMS") performance cycle for 2022 and variable payment compensation for 2022, in line with PMS results. |
| Culture | • Review of talent pool and succession planning across the organisation and implementation of relevant developmental activities. |
| • Delivery of learning programs with a focus on awareness on Climate and Environmental issues; continued implementation of training and development programs in the context of the NBG Academy. |
|
| • Initiation of a culture activation program with a focus on customer experience. |
|
| Climate & Environment |
• Ongoing alignment to UNEP FI Principles of Responsible Banking ("PRB") and progressed implementation of EU Taxonomy. |
| • Completion of 2022 Greenhouse Gas ("GHG") emissions measurement (including financed and non-financed emissions) and launch of Net Zero target-setting and strategy definition. |
|
| • Enhancement of Climate and Environment risk management practices (including Pillar III disclosures and climate stress testing capabilities). |
Economic and
Financial Review Risk Management Corporate Governance
Global growth has stabilized, albeit with diverging rates between economies
In the United States, economic growth was around its potential growth trend in the first half of 2023.
In the euro area, economic expansion has almost ground to a halt.
Central banks support an extended period of tight monetary policy to bring inflation back to medium-term targets.
Increased key policy interest rates by 150 basis points in the first half of 2023.
Decided to terminate Asset Purchase Programme ("APP") reinvestments, as of July 2023.
Increased the target range of the Federal Funds Rate by 75 basis points to a range of 5.0% to 5.25% in the first half of 2023.
Reduced US Treasury and agency Mortgage-Backed securities holdings by USD 210 billion to USD 8.3 trillion in the first half of 2023.
The global economic recovery slowed substantially in 2022, with real gross domestic product ("GDP") increasing by +3.3% from +6.1% in 2021 mainly due to less favourable financial conditions amid fasterthan-expected monetary policy tightening to stem elevated inflation. In addition, high energy costs due to the war in Ukraine and related sanctions on Russia took their toll on households' purchasing power and businesses' investment decisions. Economic conditions in the firstsix months of 2023 have sent mixed signals across countries. At the same time, global inflation has decelerated to +5.9% yearover-year in May 2023 from a multi-year peak of +9.5% in September 2022 due to the downturn in energy prices, albeit underlying inflation pressures remain robust.
Regarding majors, United States ("US") real GDP is expected to have increased by +1.8% six-month annualized rate in the first half of 2023, from +2.1% recorded in the second half of 2022. Private consumption found support from the use of accumulated savings during the pandemic, as well as from favourable labour market conditions, with the unemployment rate hovering at multi-year lows of 3.7%. On the other hand, residential investment has recorded eight consecutive quarters of contracting activity. Inflation, after surging by +7.7%, on average, over the second half of 2022, has fallen considerably, with the consumer price index ("CPI") increasing by +4% year-over-year in May.
The euro area economy operates in an environment of heightened geopolitical-related uncertainty, as the war in Ukraine, weigh on consumer and business confidence. Although the slowdown of activity was less-than-anticipated, as, inter alia, fiscal support was substantial, real GDP growth is expected to have remained stagnant in the first half of 2023 following growth of +1.5% annualized rate in the second half of 2022. Private consumption mirrors weak dynamics of real disposable income due to elevated, albeit lessening, price pressures. Indeed, euro area inflation CPI has decelerated to +5.5% year-over-year in June, after averaging +9.6% over the second half of 2022.
Finally, in China, economic activity improved due to the significant relaxation of COVID-19 restrictions, which paves the way for a complete re-opening of the economy. Indeed, real GDP growth is expected to have increased by +6.0% year-over-year on average in the first half of 2023, from +3.4% in the second half of 2022, albeit underlying growth dynamics have been muted more recently, with lukewarm business and real estate investment. Inflation CPI increased by +0.2% year-over-year in June 2023, from a mean value of +2.3% over the second half of 2022.
Monetary policy has tightened further in response to surging inflation. The Federal Reserve ("Fed") increased its main policy interest rate by 75 basis points in 1H.23, albeit pausing increases in June, bringing the target policy rate to a range of 5.0% to 5.25%. According to the Summary of Economic Projections ("SEP"), June 2023, participants in the Federal Open Market Committee expect an increase in the Federal Funds rate to 5.6% by end of 2023. In addition, the Fed continues to reduce US Treasury and agency Mortgage-Backed securities holdings by circa USD 95 billion per month, with the balance sheet standing at USD 8.3 trillion or 33% of 2022 GDP from USD 8.6 trillion in 2022.
In March 2023, the failure of Silicon Valley Bank ("SVB") and Signature Bank in the US, as well as the takeover of Credit Suisse by UBS with the sizable support of Swiss Authorities facilitated a swift response by US Authorities. Indeed, to stabilize the US banking system and safeguard deposits, the US Treasury, the Fed, and the Federal Deposit Insurance Corporation ("FDIC") intervened swiftly and announced two key policy measures. First, they used the systemic risk exception to cover all deposits in both banks, including those not being covered by deposit insurance (up to \$250k per depositor). Moreover, the Federal Reserve announced the Bank Term Funding Program ("BTFP"), to provide loans of up to one year to eligible depository institutions that pledge qualifying assets as a collateral (US Treasuries, agency securities and other assets), with the central bank valuing these assets at par, instead of the standard procedure that assets are broadly valued at fair value. As of June 2023, BTFP loans amounted to USD 103 billion.
In Europe, the ECB increased all three policy interest rates by 150 basis points in 1H.23 as inflation pressures have been amplified by the war in Ukraine, the recovery of the economy post COVID-19 and tight labor markets. The ECB stayed the course in June 2023 with another 25 basis points increase to 4.0% (Main Refinancing Operations), 4.25% (Marginal Lending Facility) and 3.5% (Deposit Facility Rate). According to the ECB, the likelihood for an additional interest rate hike of 25 basis points in July 2023 remains high, and then it will evaluate the subsequent path of monetary policy.
Regarding large-scale asset purchases, the ECB announced in June 2023 that APP repurchases will be terminated. The ECB will continue to reinvest in full the principal payments from maturing securities by applying flexibility across jurisdictions in the Pandemic Emergency Purchase Programme ("PEPP") portfolio until, at least, the end of 2024. Moreover, since the recalibration of targeted longer-term refinancing operations ("TLTRO III"), euro area banks have made sizable repayments of borrowed funds. As a result, the balance sheet of the Eurosystem has declined to €7.2 trillion or 54% of 2022 GDP from €8.0 trillion in 2022.
Financial market conditions improved in the first half of 2023 as the global economy was poised for a "soft-landing". Global equities recorded strong gains, with the Morgan Stanley Capital International All Country World Index ("MSCI ACWI") increasing by +12.8% in USD terms. In a similar vein, speculative grade corporate bond spreads narrowed both in the USD and the EUR spectrum by 74 basis points to 405 basis points and by 48 basis points to 446 basis points, respectively, amid lessening risks to the economic outlook. Nominal long-term Government bond yields were broadly stable in the United States (-4 basis points) to 3.8%, while the inversion of the yield curve deepened (-106 basis points) as short term interest rates were significantly above long-term bond interest rates. German tenyear nominal Government bond yields fell by 18 basis points to 2.4%, inter alia, due to the weaker-than-expected economic outlook, with euro area periphery Government bond spreads narrowing significantly across the board. The euro appreciated by +1.9% against the US Dollar to 1.09, and by +4.2% in nominal tradeweighted terms. Finally, the Standards & Poors ("S&P")/ Goldman Sachs ("GS") Commodities Index declined by -11% in the first half of 2023. In the details, the energy complex declined by -15%, as supply remained ample and concerns over demand hit oil prices (Brent: - 10.9% to \$75.7/barrel). A weaker-than-expected business investment recovery in China took its toll on industrial metals' prices, whereas precious metals increased slightly.
Looking forward, the cumulative tightening of financial conditions and the gradual unwinding of fiscal stimulus, is expected to slow down the growth rate of the global economy to a subpar +2.7% in 2023 from +3.3% in 2022, according to the Organization for Economic Co-operation and Development ("OECD"). Risks are tilted to the downside, including a faster-than-anticipated tightening of monetary policy due to persistently elevated inflation that fails to engineer a soft landing for the global economy. The prolonged war in Ukraine remains a source of concern, with any escalation jeopardizing to disrupt gas supplies to Europe, hurting, initially, the industrial sector of the economy and pushing up global energy prices, fueling inflation further. Moreover, the emergence of new COVID-19 variants could cause renewed economic and supply-chain disruptions. On the positive side, a potential unwinding of policyrelated and international trade-related uncertainties, could improve the pace of growth of the global economy, as balance sheets of households and corporates are lacking the large imbalances that have been built ahead of the global financial crisis. Moreover, the earlier-than-expected re-opening of the Chinese economy implies, inter alia, a faster recovery for the international trade, amid easing supply bottlenecks.
| Key Highlights | Transformation Program | Economic and Financial Review |
Risk Management | Corporate Governance |
|---|---|---|---|---|
| Greek Economy | GDP cumulative growth: Greece vs Euro area | |||
| slowing in 1Q.23 | Economic activity on a sustained upward path despite the | |||
| Greek GDP increased by 2.1% y-o-y in 1Q.23, exceeding by a significant margin the respective euro area average. |
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| Private consumption was up by 2.9% y-o-y, on the back of supportive labor market trends and declining energy costs. |
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| Non-wage income of households, as well as corporate profits, approximated by the economy-wide gross operating surplus and mixed income, increased by 9.3% y-o-y in 1Q.23. |
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| Reflecting strong confidence levels and attractive returns, gross fixed capital formation posted an 8.2% y-o-y rise in 1Q.23, to 14.5% of GDP, bolstered by construction. |
Moreover, a decrease in inventories weakened GDP growth, on an annual basis, following a period of abnormally rapid stock accumulation in the previous year, due to uncertainty-driven |
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| Bank lending to the private sector showed signs of slowing in 5M.23, following a buoyant 2022, under the pressure of continuing monetary policy tightening by the ECB. |
stockpiling in the energy sector and the replenishment of depleted business inventories. This effect should be considered a once-off adjustment and is unlikely to recur during the remainder of the year, |
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| point, during the 10-year crisis (3Q.17). | House prices surged by 14.5% y-o-y in 1Q.23, posting a cumulative appreciation of nearly 50%, from their lowest |
certainly not with the same intensity. GDP: level in billion euro & annual change |
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| investment projects. | Economic growth in Greece is expected to exceed the euro area average in 2023, despite increasing international headwinds, on the back of resilient tourism and domestic demand, combined with a strong pipeline of public and private |
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| Persistent underlying inflation, high geopolitical uncertainty, |
and the lagging impact of the ongoing monetary and fiscal tightening, limit the ability to address additional risk factors to the economic outlook.
Economic activity in Greece slowed but remained on an upward trend in 1Q.23, with GDP increasing by 2.1% y-o-y and exceeding by a significant margin – for an 8th consecutive quarter – the respective euro area average (+1.0% y-o-y in 1Q.23). Strong private consumption and fixed capital investment, in conjunction with a resilient export performance, were the key drivers of the 1Q.23 outturn1 .
However, the slowing in 1Q.23 GDP growth, compared with the solid growth outcome of 2022 (+6.0% y-o-y), mainly reflects the unwinding of very favorable base effects that bolstered activity in 2022, after the full lifting of COVID-related restrictions, especially on services activities1 .
bolstered by the positive impact on disposable income of declining
The largest component of domestic demand, private consumption, grew by a solid 2.9% y-o-y, on the back of supportive labor market conditions and declining energy prices which supported purchasing power1 . In fact, in constant price terms, the compensation of employees increased by 1.3% y-o-y in 1Q.23, following a drop of 1.8% y-o-y in FY.22, reflecting an estimated pick-up in nominal wages (c. 5% y-o-y), while Labor Force Survey ("LFS")-based employment growth was 1.4% y-o-y in 1Q.231 . Household spending was also
1 Source: ELSTAT, Gross domestic product, 1Q.2023
domestic energy prices (-6.2% y-o-y in 1Q.23 and -18.7% in April-May, from +40%y-o-y in FY.22) 1 .
Non-wage income of households, as well as corporate profits, were also buoyant, as the economy-wide gross operating surplus and mixed income ("GOSM") increased by 9.3% y-o-y in 1Q.23, albeit at a slower pace than in previous quarters (+14.7% y-o-y in FY.22).
Reflecting strong confidence levels and attractive returns, gross fixed capital formation ("GFCF") has been 8.2% higher y-o-y in 1Q.23, following a solid 11.6% expansion in FY.22. The further strengthening of construction activity (+19.6% y-o-y), led by residential investment (up by 48.4% y-o-y), accounted for the major part of the increase2 .
Net exports surprised positively with a contribution of +0.9 pps to annual GDP growth in 1Q.23 marking a sharp reversal from the 2.8 pp drag in FY.22 growth. Total export growth outpaced import growth in this quarter (+8.9% y-o-y versus +5.6% y-o-y, in constant prices), which is also reflected in the sharp improvement in the current account deficit of 34.8% y-o-y in 4M.233 .
Residential real estate prices, which account for more than 80% of household wealth, surged by an impressive 14.5% y-o-y in 1Q.23, following an upwardly revised +11.7% y-o-y in FY.22 (from a previous estimate of 11.1%), recording a cumulative appreciation of c. 50% between 3Q.17 and 1Q.23, and reducing the distance from their alltime high level in 2008 to -14%4 .
Commercial real estate prices, which exhibited a more subdued upward trend following the COVID-19 shock, also showed signs of acceleration in 2H.22, according to the Bank of Greece data on prices of office and retail spaces, released in June 2023. Specifically, the prices of prime office and retail spaces, for the whole country increased by 3.1% and 5.3% respectively, in the 2nd half of 2022, with the corresponding FY.22 increases at 2.6% and 5.0% y-o-y 4 .
Conjunctural and leading indicators provided mixed signs for economic activity in 2Q.23. Specifically:
The economic sentiment indicator ("ESI") significantly increased to a 15-month high (in quarterly terms) of 109 in 2Q.23, from 106.9 in 1Q.23, widening its positive gap against the Euro area average, for a 14th consecutive month5 .
The services and retail trade confidence components of the ESI remain close to all-time highs in 2Q.23 (average index levels of 35.3 and 20.6, respectively, compared with 16.4 and 21.0 in 1Q.23) 5 , pointing to strong momentum in key sectors, which account for ¾ of the domestic production.
Employment growth stood at 1.1% y-o-y in May 2023, from 1.6% in April, according to the latest LFS data6 , whereas ERGANI data showed that net hiring flows of wage earners surged to an all-time high of c. 180K positions in 4Μ.237 .
International arrivals in the Athens International Airport, in May 2023, exceeded by 9.1% the respective performance in the same period of the record year 2019, building on the already strong
2 Source: ELSTAT, Gross fixed capital formation, 1 st Quarter 2023 3 Sources: ELSTAT, Gross domestic product, 1Q.2023 & Bank of Greece, Balance of Payments Statistics (monthly data), April 2023 4 Source: Bank of Greece, Indices of residential & commercial property prices, 1st Quarter 2023
5 Source: EU Commission, Business, and consumer survey database, June 2023
6 Source: ELSTAT, Labour Force Survey (monthly estimates), May 2023
7 Source: Hellenic Ministry of Labor & Social Affairs, ERGANI Information System, April 2023
| Economic and | ||||
|---|---|---|---|---|
| Key Highlights | Transformation Program | Financial Review | Risk Management | Corporate Governance |
performance of 1Q.23 (+2.9% compared with 1Q.19) 8 , whereas preliminary data for June also exceed the respective June 2019 outturn.
Manufacturing Purchasing Managers' Index ("PMI") remained well above the expansion threshold (index value of 50) in 2Q.23, standing at c. 52.0 in May-June − following a 1Q.23 average of 51.2 − and exceeding the euro area average by a wide margin of 8.4 points in June, for a 6th consecutive month9 .
However, business turnover data for enterprises with a double entry bookkeeping system showed signs of weakening in nominal terms declining by 2.0% y-o-y in April 2023 compared to a 9.3% increase in 1Q.23. The weak trend could be partially attributed to the negative impact of falling energy and non-energy commodity prices and decelerating inflation on turnover value10 .
Indeed, inflation pressure subsided further, with CPI growth slowing to 2.9% y-o-y in April-May, from 5.9% in 1Q.23, on the back of a further drop in energy prices in the same period (-18.7% y-o-y), easing the pressure on real disposable income and production costs. The annual rate of change of the Harmonized Index of Consumer Prices ("HICP") was also slowed to 4.3% in April-May 2023, from 6.4% in 1Q.23, remaining significantly below the euro area average of 6.5% y-o-y in the same period. However, underlying price pressures, reflected in the CPI-based core inflation excluding food and energy costs, remained elevated (6.4% y-o-y in April-May) as well as in food & beverage inflation, which stood at, a still high, 11.5% y-o-y in April-May 2023, compared with +14.8% in 1Q.2311 .
CPI growth and key component contributions (year-over-year)
Strong cyclical tailwinds bolstered the fiscal performance, leading to a small primary surplus in Greece's General Government 2023 Budget of 0.1% in 2022 – a year earlier than planned – against a Budget estimate for a primary deficit of 1.6% of GDP12 .
Positive fiscal trends in 2022 have been reinforced by strong economic activity, which bolstered revenue and reduced the need for counter-cyclical primary spending (excluding measures related to the energy/inflation crisis). Greece also recorded the largest improvement among euro area countries, regarding the annual pace of decline of public debt, 23.3% of GDP in 2022 compared with 4% of GDP for the euro area. Greece's gross public debt decreased sharply to 171.3% in 2022, from 194.6% in 2021 and 206.3% in 2020, to the lowest point (as % of GDP) since 201213 .
This positive momentum is maintained in 5M.23 with a primary surplus in State Budget of 1.1% of GDP compared to Budget 2023 estimate for a deficit -0.7% in the same period with higher-thanexpected tax revenue accounting for more than half of the overperformance14 .
The Greek Stability Programme 2023 ("SP2023") projects that the debt-to-GDP ratio will decrease further to 162.6% of GDP in 2023 and to 135.2% by 2026; to below the forecasted ratio for Italy in this year15 .
This fiscal performance is expected to support Greece's effort to regain investment grade status during the remainder of 2023 or in 2024.
The tightening of monetary policy, reflected in the 400.0 bps hikes in policy rates by the ECB over the past 12 months, started to weigh on bank credit growth16. This slowing follows an upsurge in credit expansion, especially towards the corporate sector, in the past three years. Bank lending to the corporate sector, domestically, continues
13 Source: Eurostat, General Government deficit & debt, 2022 – 1 st notification
14 Source: Hellenic Ministry of Finance, State Budget Execution, Monthly bulletin, May 2023
15 Sources: Hellenic Ministry of Finance, Stability Programme 2023, May 2023 & European Commission, Italy – National Stability Programme 2023, May 2023
16 Source: European Central Bank, Key Interest Rates, June 2023
8 Source: Athens International Airport (ΑΙΑ), Facts & Figures, May 2023 9 Source: S&P Global, Greece Manufacturing Purchasing Managers' Index, June 2023
10 Source: ELSTAT, Evolution of Turnover of Enterprises, April 2023 and 1st Quarter 2023
11 Sources: ELSTAT Consumer Price Index database and European
Commission, Harmonized Indices of Consumer Prices database, May 2023 12 Sources: ELSTAT, Fiscal data – Annual, 2023, 1st notification (Provisional Data) & Hellenic Ministry of Finance, State Budget 2023
| Economic and | ||||
|---|---|---|---|---|
| Key Highlights | Transformation Program | Financial Review | Risk Management | Corporate Governance |
to exceed the euro area average. Total credit to private sector slowed to 3.1% y-o-y in May 2023, from 6.3% y-o-y in December 2022, mainly due to a deceleration in lending to the corporate sector to 7.0% y-o-y, from +12.3% y-o-y in December 2022. Private sector deposits remained close to a 12-year high, on the back of a notable rebound in time deposits, following a multi-year compression, buoyed by rising interest rates that increase the attractiveness of this deposit category17 .
The ruling party "New Democracy" secured a credible majority to form a government, for a second four-year term, in the 2nd election on 25 June 2023, following the 21 May 2023 election, when the leading party fell short of an outright majority under a purely proportional electoral system.
Financial markets and major rating agencies appear to have interpreted the election outcome as "credit positive" for the country's rating prospects, supporting visibility and policy continuity, and expect further progress in fiscal rebalancing and economic reforms in the coming quarters. In the first semester of 2023, Greece's sovereign rating has been upgraded to BB+ by Fitch in January, one notch below investment grade, whereas in March and April 2023, two rating agencies Moody's and S&P, respectively, revised the country's credit rating outlook to positive from stable. Currently, all major rating agencies rate Greece one notch below investment grade except for Moody's (two notches below investment grade).
The yield of 10-year Greek government bonds ("GGBs") decreased to 3.6% in late June 2023, averaging 4.0% in 2Q.23 compared with 4.3% in 1Q.23 and 4.1% in 2H.22 (2.9% in 1H.22), against a backdrop of tightened monetary policy and an ongoing adjustment of sovereign bond prices to the new inflation and interest rate environment. The spread of Greek government bond over the German bund fell to 130.0 bps in late June 2023 – the lowest since November 2021 – and to 160.0 bps on average in 2Q.23, from 190.0 bps in 1Q.23 and 240 bps in 2H.22. Moreover, the yield of 10-year GGBs remained lower than the respective Italian bonds, supported by Greece's faster fiscal adjustment, expectations of a rating upgrade to investment grade and the fact that Greek securities remain eligible, in the context of flexible reinvestments of capital of maturing bonds under PEPP (after its expiration in March 2022), at least until end-2024 according to the latest ECB monetary policy decisions18 .
Specifically, the spread of the 10yr GGB over the Italian bond became negative in May 2023, with the gap widening to an all-time high of about -40.0 bps in end-May and June, compared with a 4M.23 average of +6.0 bps19 .
The combined impact of the above-described supportive factors underpinned Greece's resilient growth performance in 2022, with the robust growth outcome of 1Q.23 boding well for an annual GDP growth of c.2.2% y-o-y in 2023 and 1.9% in 2024, according to the average of latest available official sector and private consensus estimates20 .
Greece's growth performance in the current year, but also in the medium term, is expected to be supported by the following factors, which bode well for maintaining a significant positive growth differential against the euro area average:
▪ Solid investment growth, on the back of a strong pipeline of private investment and increasing impact of the Recovery & Resilience Facility ("RRF"). Gross fixed capital formation is expected to rise at a double-digit pace, bolstered by positive demand prospects, high capacity-utilization rates and resilient profitability. Moreover, the positive impact from final capital spending related to the Recovery & Resilience Plan ("RRP") will
17 Source: Bank of Greece, Monetary and Banking Statistics, May 2023
18 Source: European Central Bank, Monetary Policy Decisions, 15 June 2023 19 Source: European Central Bank
20 Sources: European Commission, International Monetary Fund and Focus Economics-Consensus Forecasts Euro Area, July 2023
Financial Review Risk Management Corporate Governance
start to show from 2023 onwards, due to time lags between the funds' absorption (€11.1 billion of grants and loans, cumulatively, until 1H.23, corresponding to about 1/3 of total available funding for Greece) and the final capital spending 21 . Similarly, the €16.5 billion of inward Foreign Direct Investment ("FDI"), in the period 2020-4M.23, sets a strong base for a further strengthening of fixed capital formation22 .
Key Highlights Transformation Program
Nonetheless, the above estimates are subject to some considerable downside risks, such as:
A potential recurrence of the energy market tensions, resulting in a new spike in energy prices due to geopolitical frictions and/or nearterm challenges surrounding the implementation of the ambitious EU climate agenda and the acceleration of energy transition, could bring the Greek economy to a disadvantaged position, entailing additional downward pressures on economic growth, given the decreasing capacity for large scale fiscal interventions and the relatively high energy costs for the corporate sector.
The inflation drag on disposable income (including lagged effects from 2022) will remain sizeable especially for low income population groups – mainly due to sluggish core inflation and food prices increases – despite the moderation in headline inflation, weighing on private consumption.
Accordingly, a slower-than-expected easing of inflation pressures globally, would prompt an even more aggressive monetary policy tightening, giving rise to stronger recessionary and financial headwinds, weighing on fiscal capacity, weakening private investment spending and lowering credit demand.
Overall, the Greek economy seems well positioned to deal with the above challenges and continue outperforming its euro area peers, capitalizing on sustainable growth catalysts and the strong momentum built in 2021-22. Furthermore, there are upside risks from a better-than-expected energy price scenario, as Greece had been more negatively affected by the energy shock during 2022, due to its relatively high dependence on energy imports. An upgrade of Greece's sovereign rating to investment grade could be also growth enhancing, through positive effects on economic sentiment, risk appetite, liquidity conditions as well as in fixed capital formation and foreign direct investment.
Despite strong headwinds, the economy started the year on a
GDP growth accelerated to 2.1% y-o-y in the first quarter of 2023 from 0.6% in the previous quarter (with GDP expansion having come in at 2.7% in the first three quarters of 2022), converging to the regional average. Stronger net exports were the sole driver behind the pick-up in GDP growth in the first quarter of 2023, largely reflecting a favourable base effect from the recovery in domestic electricity production and, to a lesser extent, the continuing drawdown in inventories. At the same time, and despite rising interest rates and elevated inflation, reflecting lagged spillovers from the preceding global commodity price shock, private consumption continued to expand at a relatively solid pace, underpinned by rising remittances and the resilient labour market.
Importantly, the deterioration in external accounts halted, with the current account deficit narrowing to 2.0% of GDP, on a 4-quarter rolling basis, in the first quarter of 2023 from 6.0% in the previous quarter. Reduced energy imports, both in terms of quantity and price, and rising remittances were the key drivers behind this improvement. The lower current account deficit, together with still solid FDI inflows and the proceeds from a sovereign Eurobond placement, led FX reserves to increase by €296 million between March 2023 and December 2022 to a comfortable €4.2 billion (covering 4.0 months of imports of goods and non-factor services).
21 Source: European Commission, Recovery and Resilience scoreboard 22 Sources: Bank of Greece, Direct Investment Statistics & Bank of Greece, Balance of Payments (monthly data), April 2023
23 Source: ELSTAT, Index of wages cost, 1 st Quarter 2023 (Provisional Data)
24 Source: Published data from the Central Bank, the National Statistical Agency and the Ministry of Finance of the country and processed by the NBG.
Economic and
Financial Review Risk Management Corporate Governance
Released figures show that banking sector's profits surged to €246 million (annualised) in the first quarter of 2023 from €157 million in 2022, with the (annualised) return-on-average-equity ratio strengthening to 17.6% in the first quarter of 2023 from 12.2% in 2022, mainly driven by higher net interest income. Indeed, amid rising interest rates, the sector's net interest margin strengthened markedly in the first quarter of 2023 (to 348 basis points from 277 basis points in 2022), boosting net interest income, despite slowing lending growth (with credit to the private sector rising by 6.6% yearover-year in March 2023 against an increase of 9.3% in December 2022). At the same time, with the ratio of non-performing loans to total gross loans remaining subdued (at 2.8% in March 2023, a tad lower than in December 2022), banks curtailed further provisioning, despite the challenging economic outlook. Importantly, the sector remained well-capitalised, with the capital adequacy ratio firming to 18.0% in March 2023, still well above the minimum regulatory threshold of 8.0%.
Gross fixed capital formation should emerge as the key growth driver over the forecast horizon, with public investment holding the lead role. Note that Corridor 8/10d highway, the country's flagship infrastructure project, the construction of which was initiated in early-2023, is projected to add c. 0.3 pps to overall annual GDP growth over the next five years. Private investment (including FDI, which has proven resilient so far) should also contribute to overall growth, albeit modestly, due to tight financing conditions and elevated uncertainty. On the other hand, with inflation due to remain elevated for most part of the year (at 8.7% on average against 14.0% in 2022, well above the past decade's average of c. 1.0%), continuing to bite into households' disposable income, private consumption is unlikely to gain much steam in the short-term, despite a resilient labour market (with the steady decline in the unemployment rate masking, however, the shrinking labour force). Sluggish growth in the EU (especially in Germany, which absorbs c. 50% of the country's total exports), together with relatively solid gross capital formation (reflecting, inter alia, the need to replenish inventories, which have been depleted, amid disruptions in global supply chains), should lead to a negative contribution from net exports to overall growth in 2023, yet much smaller compared with the previous year, thanks to favourable base effects.
All said, GDP growth is projected at 2.2% in 2023, broadly unchanged compared with 2022. Stronger external demand and a recovery in private consumption, amid easing inflation, should boost GDP growth to 3.4% in 2024, with the output gap projected to remain slightly negative.
Should delays in the execution of the Government's ambitious investment programme arise, economic growth could come in lower than projected. Importantly, the country's 2-year precautionary financing agreement with the International Monetary Fund ("IMF") should curtail downside risks related to external financing.
Worryingly, political noise is set to remain elevated in the period ahead, mainly surrounding the controversial deal settling the country's long-standing dispute with Bulgaria, which eventually, however, enabled the launch of accession talks with the EU. Against this backdrop, and with the opposition pressing for early elections and stalling legislation in Parliament, further delays in the EU accession progress may be forthcoming.
| Key Highlights | Transformation Program | Economic and Financial Review |
Risk Management | Corporate Governance | |||
|---|---|---|---|---|---|---|---|
| Financial Results of 1H.23 | rates. | competitive edge in an environment of sharply rising interest | |||||
| 1H.23 Group Core PAT from continuing operations at €508 million | CET1 ratio at 17.3% | ||||||
| key Income Statement movements: | with Core Operating Profit at €710 million, reflecting the following | 1H.23 CET1 and total Capital ratio including the period PAT, post dividend accrual, at 17.3% and 18.4% respectively, exceeding the |
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| NII up by 75.2% y-o-y to €1,052 million, reflecting the ECB base | OCR ratio of 14.53%. | ||||||
| rate repricing and the higher return from excess cash placed with Bank of Greece, far offsetting higher deposit and MREL related |
Income Statement Group | ||||||
| funding costs. | € million | 1H.23 | 1H.22 | Y-o-Y |
Group deposits increased by €0.5 billion and stood at €55.7 billion as at 30 June 2023 compared to 31 December 2022, mainly due to increased time deposits by €3.0 billion largely offset by decreased current and sight account balances by €1.2 billion and savings account balances by €1.4 billion. Nevertheless, time deposits still comprise just 18.2% of total deposits (13.0% as at 31 December 2022), with strong and relatively stable core deposit base providing a strong
| € million | 1H.23 | 1H.22 | Y-o-Y |
|---|---|---|---|
| Net interest income | 1,052 | 600 | 75.2% |
| Net fee and commission income | 178 | 170 | 4.6% |
| Core Income | 1,230 | 770 | 59.6% |
| Net trading income / (loss), net other income / (loss) & Share of profit / |
|||
| (loss) of equity method investments | 56 | 301 | -81.3% |
| Total income | 1,286 | 1,072 | 20.0% |
| Operating Expenses | (399) | (386) | 3.4% |
| Core PPI | 830 | 384 | >100% |
| PPI | 887 | 686 | 29.3% |
| Loan and other impairments | (121) | (151) | -19.9% |
| Core Operating Profit | 710 | 234 | >100% |
| Taxes | (201) | (91) | >100% |
| Core PAT (continuing operations) PAT attributable to NBG equity |
508 | 142 | >100% |
| shareholders | 530 | 546 | -2.9% |
Note: The figures presented in the table are subject to roundings therefore, the amounts may not sum precisely to the totals provided.
| Profitability | 1Η.23 | 1Η.22 | Δ |
|---|---|---|---|
| NIM over average total assets (bps) | 278 | 146 | 132 |
| Cost of Risk (bps) | 68 | 68 | - |
| Cost-to-Income | 31.0% | 36.0% | -5.0% |
| Cost-to-Core Income | 32.5% | 50.1% | -17.7% |
| Liquidity | 30.6.23 | 31.12.22 | Δ |
| Loans-to-Deposits ratio | 57.4% | 58.6% | -1.2% |
| LCR | 253.8% | 259.2% | -5.4% |
| Capital | 30.6.23 (1) |
31.12.22 (1) |
|
| CET1 ratio | 17.3% | 16.6% | |
| RWAs (€ billion) | 36.7 | 36.4 |
(1) including the period PAT, post dividend accrual.
The Board of Directors concluded that the Group and the Bank is a going concern after considering:
Economic and
Financial Review Risk Management Corporate Governance
g) the Group and the Bank's insignificant exposure to Russia and Ukraine and Management's actions with respect to the crisis.
The profit for the period from continuing operations for the six month period ended 30 June 2023 amounted to €531 million and €494 million for the Group and the Bank, respectively.
In 1H.23, earnings per share from continuing operations amounted to €0.58 for the Group and €0.54 for the Bank.
As at 30 June 2023, funding from the ECB through TLTROs amounted to €1.9 billion (31 December 2022: €8.1 billion). Additionally, as at 30 June 2023, the Bank's liquidity buffer at cash values amounted to €25.5 billion, with the LCR and NSFR ratios well above 100%.
The Group's CET1 and Total Capital ratios at 30 June 2023 were 15.8% and 16.9%, respectively, exceeding the OCR ratio of 14.53% for 2023 (see Note 18 of the Interim Financial Statements).
Please refer above to the "Economic and Financial environment - Greek Economy".
Economic activity in Greece remained on a robust growth path in 1Q.23, with GDP increasing by 2.1% y-o-y and exceeding by a significant margin – for an 8th consecutive quarter – the respective euro area average (+1.0% y-o-y in 1Q.23). Strong private consumption and fixed capital investment, in conjunction with a resilient export performance were the key drivers of the 1Q.23 growth outturn.
The Group's 1H.23 financial results demonstrate a solid financial performance in the first half of 2023, underpinned by high-quality balance sheet, as well as superior levels of capital and liquidity. The Group's 1H.23 core PAT exceeded €508 million, translating into a core RoTE of nearly 16%, driven by the impressive growth in our core income by 59.7%, with operating expenses tightly managed and Cost-to-Core Income ratio settling at 32.5%, while credit risk charges remain well inside FY.23 guidance.
Moreover, our strong core profitability momentum allowed us to enhance our best-in-class capital position, with CET1 and total capital ratios (including profit for the period, post dividend accrual) standing at 17.3% and 18.4%, respectively. At the same time, our liquidity position remained robust, deriving from a strong and relatively stable core deposit base,still consisting nearly 80% of total deposits, while our net cash position nears c. €7 billion, on Group level, post full TLTRO repayment. Importantly, our residual net NPE exposure amounts to just €0.3 billion, while the small pick-up in early arrears in 2Q.23 is comfortably within our FY.23 guidance, bearing witness to the defensive nature of our loan book, enjoying a coverage ratio of 82.1%.
Overall, the Greek economy seems well positioned to continue outperforming its euro area peers, capitalizing on sustainable growth catalysts and the strong momentum built in 2021-2022. For further details, see above the "Key developments in the Macroeconomic and Financial environment - Greek Economy".
With high frequency economic indicators pointing to stronger growth in 2Q.23, GDP growth is now seen nearing 3% in 2023 and exceeding 2% in 2024. In this positive economic environment, we will continue ripping the benefits of our strong balance sheet emanating from our multi-year transformation effort that place us in a position of strength to deliver a sustainable core RoTE above 16% in 2025, providing long-term value to our shareholders. We remain committed to play a leading role in actively supporting our clients and the Greek economy as the Bank of First Choice.
Under the Directive 2014/59 (Bank Recovery and Resolution Directive or ("BRRD"), as amended by Directive 2019/879 (BRRD II), banks in the European Union are required to maintain a Minimum Requirement for own funds and Eligible Liabilities ("MREL"), which ensures sufficient loss-absorbing capacity in resolution. MREL includes a risk- and a leverage-based dimension. MREL is therefore expressed as two ratios that both have to be met: (i) as a percentage of Total Risk Exposure Amount ("TREA"), (the "MREL-TREA"); and (ii) as a percentage of the Leverage Ratio Exposure ("LRE"), (the "MREL-LRE").
Instruments qualifying for MREL are own funds (Common Equity Tier 1, Additional Tier 1 and Tier 2), as well as certain eligible liabilities (mainly senior unsecured bonds). Regulation (EU) No 806/2014 of the European Parliament and of the Council, as amended by Regulation (EU) No 877/2019 of the European Parliament and of the Council allows the Single Resolution Board ("SRB") to set in addition to the MREL requirement, a "subordination" requirement, within MREL, against which only subordinated liabilities and own funds count.
On 22 December 2022, the Bank as being identified by the SRB as the Single Point of Entry ("SPE") of the Group and the only entity required to maintain an MREL capacity, received from the Bank of Greece the SRB's decision that should meet by 31 December 2025 an MREL target of 23.53% of TREA and 5.88% of LRE on a consolidated basis. In addition, as per the MREL decision the Bank should always meet from 1 January 2022 onwards, the requirement of 14.79% of TREA and 5.85% of LRE on a consolidated basis. To the above requirements the capital buffer requirement ("CBR") must be added, which from 1 January 2022 stands at 3.25% and will stand at 3.53% from 1 January 2023 until 31 December 2025. The Bank maintains the MREL capacity required to meet both the LRE requirements and the 1 January 2022 interim binding target of 18.04 % of TREA (including CBR).
Finally, according to the abovementioned SRB's decision, for 2023 no subordination requirement is set for the Bank.
See section "Key highlights - Key achievements and significant developments of NBG Group in the first half of 2023 - Regulatory developments - 2023 EU-wide stress test".
Economic and
Financial Review Risk Management Corporate Governance
Based on the existing regulatory framework, the Group must disclose any transaction between the Bank, its subsidiaries and all its related parties as defined in IAS 24 "Related Parties", which took place during the six-month period ended 30 June 2023. Management's total compensation, receivables and payables must be also disclosed separately. Regarding the transactions with the Bank's main shareholder HFSF, other than the ordinary shares issued by the Bank and held by HFSF, no material transactions or balances exist with HFSF. The following table presents the transactions between the Bank and its subsidiaries, while there are no significant transactions with its associates.
For further details, see Note 17 of the Interim Financial Statements.
| (€ million) | Assets | Liabilities | Income | Expenses | Off Balance Sheet (net) |
|---|---|---|---|---|---|
| National Securities Single Member S.A. | 1 | 74 | 2 | - | 35 |
| NBG Asset Management Mutual Funds S.A. | 2 | 3 | 3 | - | - |
| Ethniki Leasing S.A. | 722 | 50 | 16 | 1 | 14 |
| NBG Property Services Single Member S.A. | - | 1 | - | - | - |
| Pronomiouhos Single Member S.A. Genikon Apothikon Hellados | - | 32 | - | 1 | - |
| NBG Greek Fund Ltd | - | - | - | - | - |
| National Bank of Greece (Cyprus) Ltd | 11 | 8 | - | 1 | 32 |
| National Securities Co (Cyprus) Ltd* | - | - | - | - | - |
| NBG Management Services Ltd | - | 1 | - | - | - |
| Stopanska Banka A.D.-Skopje | 36 | 11 | 2 | - | - |
| NBG International Ltd | - | 27 | - | - | - |
| NBGI Private Equity Ltd* | - | - | - | - | - |
| NBG Finance Plc | - | 50 | - | - | - |
| NBG Asset Management Luxembourg S.A. | - | - | - | - | - |
| KADMOS S.A. | - | - | - | - | - |
| DIONYSOS S.A. | - | - | - | - | - |
| EKTENEPOL Construction Company Single Member S.A. | - | 1 | - | - | - |
| Mortgage, Touristic PROTYPOS Single Member S.A. | - | 1 | - | - | - |
| Hellenic Touristic Constructions S.A. | - | - | - | - | - |
| Ethniki Ktimatikis Ekmetalefsis Single Member S.A. | - | - | - | - | - |
| NBG International Holdings B.V. | - | 46 | - | - | - |
| NBG Leasing SRL. | - | - | - | - | - |
| NBG Finance (Dollar) Plc* | - | 1 | - | - | - |
| NBG Finance (Sterling) Plc* | - | 1 | - | - | - |
| NBG Malta Ltd* | - | 195 | - | - | - |
| Ethniki Factors S.A. | 570 | 44 | 13 | - | 417 |
| ARC Management One SRL (Special Purpose Entity) | - | - | - | - | - |
| ARC Management Two EAD (Special Purpose Entity) | - | - | - | - | - |
| I-BANK DIRECT S.A.** | - | - | - | - | - |
| Probank Leasing S.A.*** | 33 | 7 | 1 | - | - |
| Probank Insurance Brokers S.A. | - | 2 | - | - | - |
| Bankteco EOOD | - | - | - | - | - |
| Stopanska Leasing DOOEL Skopje | - | - | - | - | - |
| Total | 1,375 | 555 | 37 | 3 | 498 |
*Companies under liquidation. ** I Bank Direct S.A. liquidated on 10 March 2023.
***Probank Leasing S.A., has been reclassified as Non-current assets held for sale (See Note 11 ''Assets and liabilities held for sale and discontinued operations'').
| Key Highlights | ||
|---|---|---|
Transformation Program
The Group, as an international organization operating in a rapidly growing and changing environment, acknowledges its exposure to risks and the need for these risks to be managed effectively. Risk management and control forms an integral part of the Group's commitment to pursue sound returns to its shareholders.
Credit risk is the risk of financial loss relating to the failure of a borrower to honour its contractual obligations. It arises in lending activities as well as in various other activities where the Group is exposed to the risk of counterparty default, such as its trading, capital markets and settlement activities. Credit risk is the largest single risk the Group faces. The credit risk processes are conducted separately by the Bank and each of its subsidiaries. The credit risk procedures established by the subsidiaries are coordinated by the Group Credit Divisions and the Group Credit Risk Control Division ("GCRCD") for issues falling under their respective responsibilities.
The Group's credit granting processes include:
The Group maintains on-going credit administration, measurement and monitoring processes, including in particular:
The Group's controls implemented for the above processes include:
| Economic and Financial Review |
Risk Management | Corporate Governance |
|---|---|---|
| proper management of the credit-granting functions; | ||
Additionally, the GCRCD measures and monitors credit risk on an on-going basis through documented credit risk policies, internal rating systems, as well as information systems and analytical techniques that enable measurement of credit risk inherent in all relevant activities. Thus, the Group achieves active credit risk management through:
The Credit Policies for the Corporate and the Retail Banking portfolios of the Bank and its subsidiaries set the minimum credit criteria, present the fundamental policies, procedures and guidelines for the identification, measurement, approval, monitoring and managing of credit risk undertaken in Corporate and Retail Banking Portfolios respectively, both at the Bank and Group level.
The Credit Policy of the Bank is approved by the Board of Directors upon recommendation of the Board Risk Committee ("BRC") following proposal by the Chief Risk Officer ("CRO") to the Senior Executive Committee and the BRC, and is reviewed on an annual basis and revised whenever deemed necessary and in any case every two years.
Credit Policies of each subsidiary are approved by the competent local boards or committees, following a recommendation by the responsible officers or subsidiaries' bodies, according to the decisions of the Bank and the provisions of the Credit Policies. Each proposal must bear the prior consent of the Group Chief Credit Officer ("CCO"), or the Head of NBG's Group Retail Credit Division depending on the portfolio, in collaboration with the Head of NBG's GCRCD for issues falling under their responsibility. The subsidiaries' Credit Policies are reviewed on an annual basis and revised whenever deemed necessary and in any case every two years.
Through the application of the Retail Banking Credit Policy, the evaluation and estimation of credit risk, for new as well as for existing products, are effectively facilitated. NBG's Senior Management is regularly informed on all aspects regarding the Credit Policy. Remedial action plans are set to resolve the issues, whenever necessary, within the risk appetite and strategic
| Transformation | Economic and | |||
|---|---|---|---|---|
| Key Highlights | Program | Financial Review | Risk Management | Corporate Governance |
orientation of the Bank. The Bank's Retail Banking Credit Policy is approved and can be amended or revised by the Board of Directors following recommendation from the BRC and is subject to periodic revision. Retail Banking Credit Policy is reviewed on an annual basis and revised whenever deemed necessary and in any case every two years. All approved policy changes are incorporated in the Policy Manual.
The Bank manages the extension of credit, controls its exposure to credit risk and ensures its regulatory compliance based on an internal limits system. The GCRCD is responsible for limits setting, limits monitoring and regulatory compliance.
The fundamental instruments for controlling Corporate Portfolio concentration are obligor limits, reflecting the maximum permitted level of exposure for a specific obligor, given its Risk Rating and sector limits, that set the maximum allowed level of exposure for any specific industry of the economy; industries are classified in groups on the basis of NACE (General Industrial Classification of Economic Activities within the European Communities) codes. Sector limits constitute part of the Bank's RAF and are revised annually. Excesses of the Industry Concentration Limits should be approved by the BRC following a proposal of the CRO. Any risk exposure in excess of the authorized internal obligor limits must be approved by a higher level authority, based on the Corporate Credit Policy.
Credit risk concentration arising from a large exposure to a counterparty or group of connected clients whose probability of default depends on common risk factors is monitored, through the Large Exposures reporting framework.
Finally, within the Internal Capital Adequacy Assessment Process ("ICAAP"), the Bank has adopted a methodology to measure the risk arising from concentration to economic sectors (sectoral concentration) and to individual companies (name concentration). Additional capital requirements are calculated, if necessary, and Pillar 1 capital adequacy is adjusted to ultimately take into account such concentration risks.
Market Risk is the current or prospective risk to earnings and capital arising from adverse movements in interest rates, equity and commodity prices and exchange rates, as well as their levels of volatility. The main contributor to market risk in the Group is the Bank. NBG seeks to identify, estimate, monitor and effectively manage market risk through a robust framework of principles, measurement processes and a valid set of limits that apply to all the Treasury's transactions. The most significant types of market risk to which the Bank is exposed are the following: interest rate risk, equity risk, foreign exchange risk and commodity risk.
Interest Rate Risk is the risk arising from fluctuations of interest rates and/or their implied volatility. A principal source of interest rate risk stems from the Bank's interest rate, over-the-counter ("OTC") and exchange traded derivative transactions, as well as from the Trading and the Held to Collect and Sell ("HTCS") bond portfolios.
More specifically, the Bank maintains a material derivatives portfolio of mainly vanilla interest rate products, which are mostly cleared in Central Counterparties ("CCPs") or managed through bilateral International Swaps and Derivatives Association ("ISDA") and Credit Support Annexes ("CSAs") agreements. Their main function is to hedge the IR risk of the bonds classified in the HTCS and Held to Collect ("HTC") portfolios or the exposure of other derivative products in the Trading Book. Additionally, the Bank retains a significant securities portfolio, mainly comprising of Greek and other periphery sovereign bonds, which is primarily held in the Banking Book and predominantly in the HTC portfolio. Furthermore, NBG holds a moderate portfolio of bonds issued by Greek and international banks and limited positions in corporate bonds. Overall, NBG has moderate exposure to interest rate risk in the Trading Book, while it enters into vanilla IRS transactions in order to mitigate the interest rate risk of the bonds listed in the Banking Book.
Equity Risk is the risk arising from fluctuations of equity prices or equity indices and/or their implied volatility. The Bank holds moderate positions in cash stocks traded in the Athens Stock Exchange and a limited position in equity-index linked exchange traded derivatives. The cash portfolio comprises of trading (i.e. short-term) and held to collect and sell (i.e. long-term) positions. The portfolio of equity derivatives is mainly used for the hedging of equity risk arising from the Group's cash position and equitylinked products offered to customers and to a lesser extent for proprietary trading. Additionally, the Bank retains positions in mutual funds, through the embedded options in structured deposits sold to clients, along with their cash hedge.
Foreign Exchange Risk is the risk arising from fluctuations of currency exchange rates and/or their implied volatility. The Open Currency Position ("OCP") of the Bank primarily arises from foreign exchange spot and forward transactions, as well as from the markto-market of NBG's OTC derivatives' trades denominated in foreign currency. The OCP is distinguished between trading and structural. The structural OCP contains all of the Bank's assets and liabilities in foreign currency (for example loans, deposits, etc.), along with the foreign exchange transactions performed by the Treasury Division. Apart from the Bank, the foreign exchange risk undertaken by the rest of the Group's subsidiaries is insignificant. The Group trades in all major currencies, holding mainly shortterm positions for trading purposes and for servicing its institutional /corporate, domestic and international customers.
Commodity Risk is the risk arising from fluctuations of commodity prices or commodity indices and/or their implied volatility. The Bank's exposure to commodity risk is limited, since the clients' positions in commodity derivatives are mostly hedged with exchange traded commodity futures.
Value at Risk ("VaR"). The Bank uses market risk models and dedicated processes to assess and quantify its portfolios' market risk, based on best practice and industry-wide accepted risk metrics. More specifically, the Bank estimates the market risk of its Trading and HTCS portfolios, using the Variance-Covariance ("VCV") VaR methodology. The VaR estimates are used both for internal management as well as for regulatory purposes. In order to verify the predictive power of the VaR model, the Bank conducts back-testing on a daily basis. Moreover, since the daily VaR estimations refer to "normal" market conditions, a supplementary analysis is necessary for capturing the potential loss that might arise under extreme and unusual circumstances in the financial markets. Thus, the Bank conducts stress testing on a weekly basis, on both the Trading and HTCS portfolios, based on specific scenarios per risk factor category (interest rates, stock index prices, exchange rates). For more details on the VaR model and the
| Transformation | Economic and | |||
|---|---|---|---|---|
| Key Highlights | Program | Financial Review | Risk Management | Corporate Governance |
respective results, as well as on the back-testing and stress-testing procedures, please see Note 4.3 of the Annual Financial Statements.
The Bank has also established a framework of VaR limits, in order to control and manage the risks to which it is exposed, in an efficient way. These limits are based on the Bank's Risk Appetite, as outlined in the RAF, the anticipated profitability of the Treasury Division, as well as on the level of the Bank's own funds (capital budgeting), in the context of the Group strategy. The VaR limits refer not only to specific types of market risk,such as interest rate, foreign exchange, equity and commodities but also to the overall market risk of the Bank's Trading and HTCS portfolios, taking into account the respective diversification between portfolios. Moreover, the same set of limits are used to monitor and manage risk levels on the Trading Book, on an overall basis and per risk type, since this is the aggregation level relevant for the calculation of the own funds requirements for Market Risk, under the Internal Model Approach ("IMA").
The principles and practices for sound market risk management at NBG are set forth in the Market Risk Management Policy ("Policy") which is subject to ongoing revision, as changes in business conditions, amendments to existing regulations and other events may affect market risk practices and controls. The Policy is established to evidence the Bank's commitment to develop and adhere to the highest standards for assessing, measuring, monitoring and controlling market risk arising from trading and non-trading activities. Additionally, the VaR model as well as the processes followed by the Group Financial & Liquidity Risk Management Division ("GFLRMD") for the measurement and monitoring of Market Risk are described in the VaR/sVaR Model Methodology document, which is subordinate to the Market Risk Management Policy and is subject to changes, in accordance with amendments to the Policy.
The adequacy of the Market Risk Management Framework as a whole, as well as the appropriateness of the VaR model, were successfully reassessed by the SSM, in the context of the Targeted Review of Internal Models ("TRIM"). ECB concluded in its final Decision that NBG may continue calculating the own funds requirements for general market risk with the internal model approach, which verifies the robustness of the Bank's Market Risk management model. Furthermore, the Bank's independent MVU assesses the validity of the VaR model, on an annual basis, while the Internal Audit Division evaluates the effectiveness of the relevant controls, on a periodic basis. Finally, the GFLRMD implemented the new standardized approach for the calculation of the Market Risk capital requirements under Basel III (SA-FRTB), in the current risk engine. The revised framework came into force for reporting purposes in 3Q.21.
Interest Rate Risk in the Banking Book ("IRRBB") refers to the current or prospective risk to the Bank's capital and earnings arising from adverse movements in interest rates that affect the Bank's Banking Book positions. The main sources of IRRBB are the following:
Gap risk: the risk related to the timing mismatch in the maturity and re-pricing of assets and liabilities and off-balance sheet short- and long-term positions;
Interest rate fluctuations affect the economic value of the Group's assets, liabilities and off-balance sheet items, through corresponding changes in the cash flows' amounts and discount rates and – therefore – their present value. Changes in interest rates also affect the Group's earnings by increasing or decreasing its Net Interest Income ("NII") and the level of other interest ratesensitive income and operating expenses. It is therefore important to examine Interest Rate Risk in Banking Book ("IRRBB") from these two complementary views; and quantify the effect of interest rate changes using both value and earnings measures.
The Group's Banking Book consists mainly of loans and advances to customers, reserves with the Central Bank, due from banks, securities measured at amortised cost and Fair Value through Other Comprehensive Income ("FVTOCI") (mainly Greek government and other EU sovereign fixed rate bonds), due to customers, due to banks, debt securities in issue, Eurosystem Funding and other borrowed funds that are measured at amortised cost. The Group maintains adequate measurement, monitoring, and control functions for IRRBB, including:
IRRBB is measured, monitored, and controlled by GFLRMD, based on the Group's established RAF. Specifically, GFLRMD calculates a number of risk metrics for the purpose of monitoring and controlling IRRBB:
NII sensitivity, a measure of the effect of interest rate changes to the Group's expected interest earnings. NII sensitivity measures changes to interest income
| Key Highlights | Transformation Program |
Economic and Financial Review |
Risk Management | Corporate Governance |
|---|---|---|---|---|
| under varying interest rate scenarios over a one-year |
horizon and assuming a constant balance sheet over this period. Its main purpose is to measure the vulnerability of the Group's profitability to changing interest rates conditions.
Economic Value of Equity ("EVE") Sensitivity, a measure of the Bank's Balance sheet value vulnerability to interest rate changes. EVE Sensitivity represents the change in the net present value of all cash flows in the Bank's balance sheet under a set of interest rate stress scenarios and is calculated on the entire balance sheet under a run-off assumption, i.e., no replenishment of matured transactions.
Both metrics are used in establishing the Group's IRRBB capital requirements. The evaluation and review of IRRBB measurement systems and processes is undertaken annually by the Group's Internal Audit Division in relation to capital requirements calculations performed for the ICAAP exercise. Furthermore, the Bank's independent MVU granted full approval to the IRRBB model and has included IRRBB to its models' inventory and corresponding annual model recertification process.
A set of IRRBB limits are defined in the Group's RAF in relation to the EVE sensitivity measure and in alignment with the limits prescribed in the Supervisory Outlier Test of the latest IRRBB Regulatory Guidelines. In addition, the Bank has established internal IRRBB limits of the Bank's NII sensitivity to interest rate fluctuations. Both EVE and NII sensitivity limits are monitored and reported to the BRC as well as the Asset & Liability Committee ("ALCO") on a monthly basis. The Group is exposed to increasing levels of IRRBB, amidst the current, increasing interest rates environment, which however remain within the limit structure prescribed in the Regulatory Guidelines.
Counterparty Credit Risk (CCR) arises from the potential failure of the obligor to meet its contractual obligations and stems from derivative and other interbank secured and unsecured funding transactions, as well as commercial transactions.
Complementary to the risk of the counterparty defaulting, CCR also includes the risk of loss due to the deterioration in the creditworthiness of the counterparty to a derivative transaction.
NBG's CCR predominantly stems from Over the Counter (OTC) and Exchange Traded (Listed) derivative products and, to a lesser extent, from interbank secured and unsecured funding transactions, as well as commercial transactions to which the Bank has limited CCR exposure.
The Group has established and maintains adequate measurement, monitoring, and control functions for counterparty credit risk, including:
CCR measurement systems and methodologies that aim to capture and quantify all material sources of CCR, in ways that are consistent with the scope of the Group's activities.
The calculation of the key CCR metrics, namely the Exposure at Default ("EAD"), the Potential Future Exposure ("PFE") and the Credit Valuation Adjustment ("CVA") relevant to the aforementioned transactions. These metrics are used for limits monitoring purposes, for the calculation of the CCR capital requirements, as well as for accounting valuation adjustment and collateral management purposes.
NBG seeks to further mitigate CCR by standardizing the terms of the agreements with counterparties through International Swaps and Derivatives Association, Inc. ("ISDA") and Global Master Repurchase Agreement ("GMRA") contracts that encompass all necessary netting and margining clauses. CSAs have also been signed with almost all active FIs, so that net current exposures are managed through margin accounts, on a daily basis, by exchanging mainly cash or debt securities as collateral. Moreover, NBG performs OTC transactions with CCPs, either directly or through qualified clearing brokers.
Also, NBG avoids taking positions on derivative contracts where the values of the underlying assets are highly correlated with the credit quality of the counterparty (wrong way risk).
All the methodologies and processes followed by NBG for the estimation, monitoring and management of the counterparty credit risk, both for internal purposes, as well as for regulatory compliance are detailed in the Counterparty Credit Risk Framework document.
Country risk is the current or prospective risk to earnings and capital caused by events in a particular country, which are at least to some extent, under the control of the government but not under the control of a private enterprise or individual. The main categories of country risk consist of sovereign, convertibility and transfer risk. Sovereign risk stems from a foreign government's lack of capacity and/or unwillingness to repay its debt or other obligations. Convertibility and transfer risk arise when a borrower is unable to convert funds from local to foreign currency, in order to repay external obligations. Therefore, country risk stems from all cross border transactions, either with a central government, or with a financial institution, a corporate or a retail client.
The on and off-balance sheet items, which potentially entail country risk are the following:
| Transformation | Economic and | |||
|---|---|---|---|---|
| Key Highlights | Program | Financial Review | Risk Management | Corporate Governance |
In this context, NBG's exposure to country risk predominantly arises from the participation in the Group's subsidiaries operating abroad, the Bank's holdings in foreign sovereign bonds, as well as from cross border activities in the form of interbank/commercial transactions and corporate lending.
GFLRMD monitors country risk exposure, as defined above, on a daily basis, mainly focusing on the countries where the Group has presence. Currently, the Group has limited exposure to country risk, since the main operations abroad are in Cyprus and Northern Macedonia.
Liquidity Risk is defined as the risk arising from the institution's inability to meet its liabilities when they come due without incurring unacceptable losses.
It reflects the risk stemming from limited or less stable sources of funding over the longer term (i.e., funding risk), or from insufficient available collateral for Eurosystem, secured or wholesale funding (i.e., asset encumbrance risk) or from a concentration in unencumbered assets disrupting the Bank's ability to generate cash in times of reduced market liquidity for certain asset classes (i.e., concentration risk). Therefore, Liquidity Risk captures both the risk of the Bank being unable to liquidate assets in a timely manner with reasonable terms, and the risk of unexpected increases in the Bank's cost of funding.
The Bank's executive and senior management has the responsibility to implement the Liquidity Risk appetite approved by the BRC and to develop the policies, methodologies and procedures for identifying, measuring, monitoring and controlling Liquidity Risk, consistent with the nature and complexity of the Bank's activities. The Bank's executive and senior management is informed daily of the Bank's Liquidity Risk position, ensuring that the Group's Liquidity Risk stays within approved levels.
On a daily basis, senior management receives the Bank's liquidity report, which presents a detailed analysis of the Bank's funding sources, liquidity buffer, cost of funding and other liquidity metrics and indicators in line with the Bank's RAF, Recovery Plan and Contingency Funding Plan. Risk Management is also able to produce and report the LCR to executive management daily, leveraging the capabilities of the in-house developed liquidity platform. Additionally, Risk Management reports monthly to ALCO, all approved liquidity metrics and indicators, as well as liquidity stress testing outcomes, maturity gaps between assets and liabilities, and cost of funding evolution.
Liquidity Risk management aims to ensure that the Bank's liquidity risk is measured appropriately and reported frequently to confirm that liquidity metrics are within set risk appetite, and management is promptly informed of any developing liquidity risks. In addition, the Group's subsidiaries measure, report and manage their own individual Liquidity Risk, ensuring they are self-sufficient in a liquidity stress (i.e., not reliant to the Parent entity).
NBG's liquidity position remains solid, despite the sharp tightening in monetary policy by the ECB and stems from the stability of its funding sources, and from the high level of its liquidity buffer, making the Bank very resilient to a potential liquidity stress event.
On 30 June 2023, the Bank's strong liquidity profile is representative of a healthy liability side of the balance sheet. The funding structure has further improved by the inflow of customer deposits and the decrease of its public funding dependance, whilst the Bank maintains full access to the secured interbank markets. Moreover, LCR and NSFR, as well as the Bank's Liquidity Buffer currently stand significantly above the regulatory and internal limits.
The Bank's principal sources of liquidity are its customer deposits, Eurosystem funding, which is gradually decreasing, repurchase agreements (repos) with FIs and wholesale funding through the issuance of (MREL-eligible) securities. ECB funding and repos with FIs are collateralized mainly by high quality liquid assets, such as, EU sovereign bonds, Greek government bonds and T-Bills, as well as by other assets, such as highly rated corporate loans and own issued covered bonds.
At the end of the first half of 2023, the Bank strengthened its liquidity profile, as customer deposit balance continued its upward trend and stood at €55.7 billion on 30 June 2023, driven by an increase of retail time deposits, as interest rates increased.
Additionally, the Bank's participation to the ECB TLTRO III refinancing operations, decreased to €1.9 billion on 30 June 2023, compared to €8.1 billion as of 31 December 2022, through a combination of scheduled and early terminations. The Bank's secured interbank funding transactions decreased to almost zero as of 30 June 2023 as well.
As a result, the Bank's LCR stood at the very high level of 244.8% (Group: 253.8%), on 30 June 2023, notwithstanding TLTRO III repayments and NSFR reached the highest historical level on 31 March 2023 and stood at 146.9% (Group: 146.5%). Finally, Loanto-Deposit ratio stood at 56.4% and 57.4% as of 30 June 2023, on a domestic (Greece) and on a Group level, respectively.
During the first half of 2023 the Bank's cost of funding increased by 28bps and on 30 June 2023 stood at 58bps, driven by the increasing customer deposits' cost, while ECB raised interest rates by a total of 150bps.
Finally, the Bank's ample Liquidity Buffer stood at €25.5 billion as at 30 June 2023. More specifically, it comprises of €7 billion in the form of cash deposited with the Bank of Greece and other cash deposited in Nostro accounts, €13.7 billion of collateral eligible for ECB funding and €4.8 billion of unencumbered collateral that could be used for secured interbank funding with FIs.
Key Highlights
Transformation Program
Economic and
Financial Review Risk Management Corporate Governance
Operational Risk is the risk of loss resulting from inadequate or failure in internal processes, people and systems or from external events. This definition includes legal risk, excludes strategic and business risk, but takes into consideration the reputational impact of Operational Risk.
The Group Operational Risk Management Division ("GORMD") is responsible for overseeing and monitoring the risks' assessment, providing appropriate tools and methodologies, coordination and assistance to the Business Units and proposing appropriate risk mitigation measures.
NBG has established a Group-wide Operational Risk Management Framework ("ORMF") that provides the foundations, principles and governance arrangements for designing, implementing, monitoring, reviewing and continually strengthening operational risk management throughout the Group. GORMD regularly reviews the Group's ORMF to ensure that all relevant regulatory requirements are met.
In particular, under the ORMF, NBG aims to:
The GORMD reports to the Operational Risk Management Committee ("ORCO"), a sub-committee of the Senior Executive Committee. ORCO, that has the overview of the ORMF implementation, meets on a quarterly basis, providing a semiannual report to the Senior Executive Committee. In January 2022, an Outsourcing Committee was established, which operates in accordance with the applicable legal and regulatory framework and is responsible for overseeing the outsourcing arrangements' risk of the Group.
The overall responsibility for the management of Operational Risk relies within the First Line of Defence Business Units (please refer to section "Corporate Governance Statement - E. Internal Control System and Risk Management" of the Board of Directors Report for the year ended 31 December 2022 for the Lines of Defence) of the Annual Financial Report for the year ended 31 December 2022, that are responsible and accountable for directly identifying, assessing, controlling and mitigating operational risk within their business activities in compliance with the Bank's policies and procedures.
Operational Risk Management is integrated into the day-to-day business, adding value to the organization by applying a proactive approach. A series of techniques and tools have been defined by the Group to identify, measure and assess Operational Risk. The most important operational risk mechanisms used by the Group are the following:
Model Risk is the potential loss the Group may incur, as a consequence of decisions that could be principally based on the output of the models deployed, due to errors in the development, implementation or use of these models.
• a model may produce inaccurate outputs due to errors in its design, methodology, data inputs or implementation;
| Transformation | Economic and | |||
|---|---|---|---|---|
| Key Highlights | Program | Financial Review | Risk Management | Corporate Governance |
• a model may be used incorrectly or inappropriately, without following the proper considerations regarding its limitations and assumptions.
Model Risk is measured, monitored, and managed by the MVU. Specifically, the MVU has elaborated a set of policies, guidelines, methodologies and controls that comprise the Model Risk Management ("MRM") Framework. The suitable application of the MRM Framework with the aim to also fulfill the models' lifecycle needs, empowers the MVU to perform and to be engaged in various control activities as part of the model validation process. In case that certain deficiencies are identified following the completion of a model validation assessment, the MVU formulates its concerns and crucial conclusions in the form of Required Action Items ("RAIs"), which are acted upon after their competent approval and may effect material changes to the models.
Since 2018, the MVU has organized its tasks towards the following directions, aiming to thoroughly implement the MRM Framework:
MVU has undertaken further initiatives towards the above two directions. Αn update of the Model Validation Policy and its Annexes is currently in progress, mainly focusing on their alignment with the Bank's internal control mechanisms, their enhanced integration with the MRM Framework's recent developments and their compliance with the latest regulatory requirements.
Moreover, the MRM module's use is scoped to be further expanded by completing the registration process of the entirety of the Bank's models being in use, turning it into the Bank's comprehensive model repository. Additionally, MVU plans to formulate processes to accomplish the existing communication needs through the issuance of specific directives concerning the adoption of MRM module's use and the broadened introduction of the workflows comprising models' lifecycle environment, and the training of the delegated users. Finally, the Unit will be working towards embedding the reporting streams produced by various Risk and Control Units into the GRC Platform, by integrating all reports being pertinent to the Model Risk management process as encoded in the controls developed by the MVU, the related Policy documents and their Annexes.
Key Highlights
Transformation Program
Economic and
• Issues and Action Plans: The MVU has formalized a specific issue tracking process, implemented the GRC platform which constitutes the Bank's new workflow management system for the purpose of communicating model issues to the model owners, monitoring their statuses, approving plans regarding the necessary remedial actions, keeping track of their accomplishment and finally reporting the completion of the respective issues' resolution to the Bank's Senior Executive Committee and the BRC. This multitude of processes ensures that the validation exercises are contributing effectively to maintaining the models sound and functional, keeping them fit for purpose and assisting at the same time an active Model Risk management operation while ensuring that the business essence of the models' validation assessment is not solely constrained to the fulfilment of reporting needs and purposes.
• Model Inventory and Model Risk Management Module: The Group's Risk Units have worked extensively towards the adoption of the new workflow management system which aims among other purposes, to automate most of the procedures being pertinent to the models' lifecycle requirements. This effort will be further enhanced by the participation of the Model Risk management module being part of the software system's hosting platform, which also incorporates a self-contained model inventory comprising the Bank's thorough and concise model registry in terms of models' attributes. The latter can provide the required supportive evidence for Model Risk management purposes, that remains available within the platform's infrastructure. Additionally, they are utilized – in their entirety or partly – as a pool of necessary inputs for Model Risk estimation purposes. The inventory is intended to play an essential role in the centralized and holistic approach of Model Risk assessment.
The structure of the Model Risk Management process followed by the MVU, is built around a set of distinct phases.
Initially, when the development of a new model has been decided and approved, the model must be registered in the Bank's Model Inventory by its owner. An effective Model Risk Management requires the maintenance of a complete and regularly updated inventory, comprising the entirety of the models employed by the Bank, so that the prioritization of the validation process adhering to the determined model's validation cycle and in turn the tiering and the monitoring of the emanating Model Risk, can be adequately accomplished. During the models' development phase, the MVU is kept informed of the completed tasks and the process's general progress status. Upon model development completion, the Bank's Model Inventory is updated by the model owner with the essential material that is needed to conclude the model materiality tiering, the Model Risk assessment, the model review sequential list of checks and finally, the completion of the validation process in its entirety.
After a new model has been registered, the model's Initial Validation follows as required. This process is a key component of the Model Risk management course of actions, as it allows for the accurate mentioned risk's estimation. As part of its Initial
Financial Review Risk Management Corporate Governance
Validation, the model is examined through a series of controls that cover a multitude of qualitative and quantitative aspects, being mainly designed to mitigate specific areas recognized as potential Model Risk sources, such as input data quality issues, model design deficiencies, non-adherence to internal or/and external requirements, improper model use, erroneous model implementation and inadequate model performance. These checks are performed utilizing a set of deliverables made available by the model owner, which are uploaded to the GRC Platform comprising the data quality reports, the model development report, the model use reports etc. The outcome of the model validation effort is a combined assessment regarding the classification of the model's risk rating, the confirmation regarding the type of model's approval and an ensuing list of RAIs if crucial deficiencies are found concerning the model assessment areas and need to be remediated.
Following the finalization of model's approval by the competent management level or Bank's committee, the model is implemented in the appropriate Bank's system. The implementation phase potentially constitutes an additional source of Model Risk. The MVU conducts a review to assess if the implementation process and all available reports covering the IT actions and UAT tests were suitably performed and signed-off, with the aim to determine if the deployed model is fit for the intended purpose and functions as expected. Deployed models and their proper use are regularly monitored by their owners, while they are also re-visited by the MVU through the execution of ongoing validation exercises (conducted yearly in case of models that present material Model Risk, or every three years for the rest of the models), focusing mainly on the models' quantitative performance comprising the estimation of their discriminatory power, accuracy and stability. Any validation exercise could lead to the issuance of RAIs and could possibly trigger the necessity of developing a new model version, if material model changes are required. The latter could consequently trigger the commencement of a new maintenance set of actions contained in the model's lifecycle, as previously described.
Strategic/ Business Model Risks are defined as the current or prospective risks on the viability and sustainability of the Group's Business model, i.e. the Business model becoming obsolete or irrelevant and/or losing the ability to generate results aligned with the Group's strategic objectives and stakeholders' expectations. These risks are associated with vulnerabilities in Strategic Positioning or Strategy Execution (delivery), as a result of external or endogenous risk factors and possible inability to effectively react thereon. The impact of Strategic/Business Model Risks is demonstrated through:
| Transformation | Economic and | |||
|---|---|---|---|---|
| Key Highlights | Program | Financial Review | Risk Management | Corporate Governance |
Acknowledging the increasing importance of the Business model viability and sustainability risks, the Bank introduced strategic focus within the Risk Management organization (dedicated function of Group Strategic Risk Management has been established) and active participation in Business and Capital planning cycles (including a CRO opinion). The objective is to strengthen the interlink between risk management and strategy, establishing a regular and active involvement of the former in the strategy formulation and execution processes and providing the risk perspective during the definition of overarching business and strategic objectives. The development of Strategic Risk Management Framework is part of the Bank's Enterprise Risk Management ("ERM").
NBG's strategic objectives and priorities are identified through the Business and Capital Plan and the description of Business strategies set therein, in order to enable the realization of the Group Strategy. The risk identification and materiality assessment process is conducted by associating NBG's current Business model with Business Strategy and the external economic environment outlook (forward-looking perspective).
The business model aspects which are considered for risk identification and materiality assessment are set out and mapped to specific Key Performance Indicators ("KPIs") which the Bank considers as most relevant and indicative to formulate its business profile (current status and forward-looking perspective). The identification of material business risk sources forms the basis for impact quantification, through Scenario Analysis and Stress Testing complemented with single-factor risk impact analysis. This process aims to assess the core profitability resilience and thus, the capital generation capacity and provide insights regarding potential vulnerabilities and key threats to NBG's business model going forward.
Acknowledging the importance of ESG related risks, the Bank has updated its Risk Taxonomy Framework, by defining such risks as transversal, i.e. considers them as drivers of existing types of financial and non-financial risk (rather than stand-alone risk types). In line with the sequential approach, C&E risks have been prioritized. More specifically, the Bank:
Proceeded with the identification and materiality assessment of such risks and their incorporation in the overall Risk Management Framework, committing to a concrete action plan for monitoring, assessing and managing the particular risks going forward.
Incorporated ESG risks/drivers in the Risk Management Framework of the existing risk types and implemented the necessary enhancements into their area of expertise, as follows:
The Bank had participated in the 2022 ECB Climate Stress Test and leveraged the relevant feedback, internal processes, data and infrastructure alongside with external sources and proxy models for further enhancement of C&E Risk Management capabilities.
| Transformation | Economic and | |||
|---|---|---|---|---|
| Key Highlights | Program | Financial Review | Risk Management | Corporate Governance |
the transitional period until June 2024 (full implementation).
Going forward, the Bank is planning to further enhance the incorporation of ESG factors in its Risk Management Framework, as methodological approaches mature, quantification/analytical capabilities develop and additional climate and environmental data become available.
Moreover, key initiatives relevant to the implementation of the ESG strategy are being included in the Transformation Program (see section "Transformation Program") to ensure high level of focus and execution discipline in the aforementioned critical areas and alignment between business strategy and risk management priorities. Planned actions for 2023 include enhancements in the following areas:
The Bank is increasingly dependent on information and communication technologies to achieve its mission and carry out its day-to-day operation. Timely and valid information is necessary to support the Bank's business decisions. The Bank considers its information, as well as that of its Group of Companies, a strategic asset, and fully recognizes the importance of protecting and safeguarding it, as it is critical to its operation.
Information and communication technologies are subject to everincreasing and complex threats, which exploit known and unknown system vulnerabilities with potentially serious impact on business operation, individuals, and critical infrastructure due to the breach of confidentiality, integrity, and availability of information that these systems process, store or transmit.
In a continuously evolving and changing digital global landscape, there is an increase of information security risks in the banking sector:
In fact, after all, the more the society and the economy rely on the digitization of processes and services, the more the attack surface, or else, the perpetrators' opportunities for malicious actions increase, compelling all relevant bodies involved, in timely planning and an effective response.
Therefore, information security is a key success factor in the Bank's business activities. The need for information security is particularly important in this modern, sophisticated, and interconnected business environment.
The Group continuously analyzes its threat environment in order to identify the most important threats that may undermine the achievement of its business objectives.
The Group and the Bank have implemented appropriate security controls, aiming to mitigate the risks arising from cyber-attacks (Cyber Risk) and to facilitate the increase of its resilience to the challenges related to cybersecurity.
The most essential, among others, controls are outlined below:
| Transformation | Economic and | |||
|---|---|---|---|---|
| Key Highlights | Program | Financial Review | Risk Management | Corporate Governance |
NBG Group's cyber security systems continue to improve with the strengthening of detection, response, and protection mechanisms, in order to ensure high quality of customer service, protection of personal data, increase of service efficiency and secure business activity.
Risk related to the recognition of the main part of deferred tax assets as regulatory capital or as an asset
The Group includes deferred tax assets ("DTAs") in calculating the Group's capital and capital adequacy ratios. As at 30 June 2023, the Group's DTAs, amounted to €4.5 billion (31 December 2022: €4.7 billion).
The Bank reviews the carrying amount of its DTAs at each reporting date, and such review may lead to a reduction in the value of the DTAs on the Group and the Bank's Statement of Financial position, and therefore reduce the value of the DTAs as included in the Group's regulatory capital.
EU Regulation 575/2013 provides that DTAs recognized for IFRS purposes that rely on future profitability and arise from temporary differences of a credit institution and exceed certain thresholds must be deducted from its CET1 capital.
The deduction would have a significant impact on Greek credit institutions, including the Bank. However, as a measure to mitigate the effects of the deduction, article 27A of Greek Law 4172/2013, ("DTC Law"), as currently in force, allows credit institutions, under certain conditions, and from 2017 onwards to convert DTAs arising from (a) Private Sector Initiative ("PSI") losses, (b) accumulated provisions for credit losses recognized as at 30 June 2015, (c) losses from final write off or the disposal of loans and (d) accounting write offs, which will ultimately lead to final write offs and losses from disposals, to a receivable ("Tax Credit") from the Greek State. Items (c) and (d) above were added with Greek Law 4465/2017 enacted on 29 March 2017. The same Greek Law 4465/2017 provided that the total tax relating to cases (b) to (d) above cannot exceed the tax corresponding to accumulated provisions recorded up to 30 June 2015 less (a) any definitive and cleared Tax Credit, which arose in the case of accounting loss for a year according to the provisions of par.2 of article 27A, which relate to the above accumulated provisions, (b) the amount of tax corresponding to any subsequent specific tax provisions, which relate to the above accumulated provisions and (c) the amount of the tax corresponding to the annual amortization of the debit difference that corresponds to the above provisions and other losses in general arising due to credit risk.
Furthermore, Greek Law 4465/2017 amended article 27 "Carry forward losses" by introducing an amortization period of 20 years for losses due to loan write offs as part of a settlement or restructuring and losses that crystallize as a result of a disposal of loans. In addition, in 2021 Greek Law 4831 further amended article 27 of Greek Law 4172/2013. According to this amendment the annual amortization / deduction of the debit difference arising from PSI losses is deducted at a priority over the debit difference arising from realized NPL losses. The amount of annual deduction of the debit difference arising from realized NPL losses is limited to the amount of the profits determined according to the provisions of the tax law as in force before the deduction of such debit differences and after the deduction of the debit difference arising from PSI losses. The remaining amount of annual deduction that has not been offset, is transferred to be utilized in the 20 subsequent tax years, in which there will be sufficient profit after the deduction of the above debit differences (PSI & NPL losses) that correspond to those years. As to the order of deduction of the transferred (unutilized) amounts, older balances of debit difference have priority over newer balances. If at the end of the 20-year amortization period, there are balances that have not been offset, these qualify as tax losses which are subject to the 5 year statutes limitation.
As at 30 June 2023, the Group's eligible DTAs amounted to €3.8 billion (31 December 2022: €3.9 billion). The main condition for the conversion of DTAs to a Tax Credit is the existence of an accounting loss at Bank level of a respective year, starting from accounting year 2016 and onwards. The Tax Credits will be calculated as a ratio of IFRS accounting losses to net equity (excluding the year's losses) on a solo basis and such ratio will be applied to the remaining Eligible DTAs in a given year to calculate the Tax Credit that will be converted in that year, in respect of the prior tax year. The Tax Credit may be offset against income taxes payable. The non-offset part of the Tax Credit is immediately recognized as a receivable from the Greek State. The Bank is obliged to issue conversion rights to the Greek State for an amount of 100% of the Tax Credit in favour of the Greek State and will create a specific reserve for an equal amount. Common shareholders have pre-emption rights on these conversion rights. The reserve will be capitalized with the issuance of common shares in favour of the Greek State. This legislation allows credit institutions to treat such DTAs as not "relying on future profitability" according to Capital Requirement Directive ("CRD") IV, and as a result such DTAs are not deducted from CET1, hence improving a credit institution's capital position.
On 7 November 2014, the Bank convened an extraordinary General Shareholders Meeting which resolved to include the Bank in the DTC Law. An exit by the Bank from the provisions of the DTC Law requires regulatory approval and a General Shareholders meeting resolution.
If the regulations governing the use of Deferred Tax Credit ("DTCs") as part of the Group's regulatory capital change, this may affect the Group's capital base and consequently its capital ratios. As at 30 June 2023, 60.1% of the Group's CET1 capital (including the profit for the period, post dividend accrual) was comprised of DTA eligible for DTC. Additionally, there can be no assurance that any final interpretation of the amendments described above will not change or that the European Commission will not rule the treatment of the DTCs under Greek law illegal and as a result Greek credit institutions will ultimately not be allowed to maintain certain DTCs as regulatory capital. If any of these risks materialize, this could have a material adverse effect on the Group's ability to maintain sufficient regulatory capital, which may in turn require the Group to issue additional instruments qualifying as regulatory capital, to liquidate assets, to curtail business or to take any other actions, any of which may have a material adverse effect on the Group's operating results and financial condition and prospects.
Economic and
Financial Review Risk Management Corporate Governance
The Board of Directors consists of the following thirteen (13) members:
| Executive Members: |
Mr. Pavlos Mylonas, Chief Executive Officer |
|||
|---|---|---|---|---|
| Ms. Christina Theofilidi, Executive Member | ||||
| Non - Executive Members: |
Mr. Gikas Hardouvelis, Chair of the Board of Directors |
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| Mr. Periklis Drougkas, Member, Representative of the Hellenic Financial Stability Fund under Greek Law 3864/2010 |
||||
| Independent Non-Executive Members: |
Mr. Avraam Gounaris, Senior Independent Director |
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| Mr. Matthieu Kiss, Member | ||||
| Mr. Claude Piret, Member | ||||
| Ms. Aikaterini Beritsi, Member | ||||
| Mr. Wietze Reehoorn, Member | ||||
| Ms. Elena Ana Cernat, Member | ||||
| Mr. Athanasios Zarkalis, Member | ||||
| Ms. Anne Marion Bouchacourt, Member | ||||
| Mr. Jayaprakasa (JP) C.S. Rangaswami, Member |
Secretary of the Board of Directors and its Committees is Mr. Panos Dasmanoglou, General Manager of Group Compliance and Corporate Governance.
The Board of Directors Μembers are elected by the Bank's General Meeting of Shareholders for a maximum term of three years and may be re-elected. The term of the above Members expires at the Annual General Meeting of the Bank's Shareholders in 2024.
It is noted that the election of the members of the Board of Directors of credit institutions is subject to approval and constant review by the SSM of the ECB.
Our Annual General Meeting of Shareholders took place remotely, in real-time via teleconference, on 28 July 2023. For further information please refer to our site https://www.nbg.gr/en/group/investor-relations/general-
meetings-all-data.
Athens, 31 July 2023
THE CHAIRMAN OF THE BOARD OF DIRECTORS THE CHIEF EXECUTIVE OFFICER
GIKAS A. HARDOUVELIS PAVLOS K. MYLONAS
The Board of Directors' report contains financial information and measures as derived from the Group and the Bank's financial statements for the six months period ended 30 June 2023 and for the year ended 31 December 2022, which have been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" and International Financial Reporting Standards ("IFRS"), as endorsed by the EU. Additionally, it contains financial data which is compiled as a normal part of our financial reporting and management information systems. For instance, financial items are categorized as foreign or domestic on the basis of the jurisdiction of organization of the individual Group entity whose separate financial statements record such items.
Moreover, it contains references to certain measures which are not defined under IFRS, including "pre-provision income" ("PPI"), "net interest margin" and others, as defined below. These measures are non-IFRS financial measures. A non-IFRS financial measure is a measure that measures historical or future financial performance, financial position or cash flows but which excludes or includes amounts that would not be so adjusted in the most comparable IFRS measure. The Group believes that the non-IFRS financial measures it presents allow a more meaningful analysis of the Group's financial condition and results of operations. However, the non-IFRS financial measures presented are not a substitute for IFRS measures.
| Name | Abbreviation | Definition |
|---|---|---|
| Balance Sheet | Statement of Financial Position | |
| CET1 ratio fully loaded | CET1FL | CET1 capital as defined by Regulation No 575/2013, without the application of the |
| regulatory transitional arrangements for IFRS 9 impact over RWAs. | ||
| Common Equity Tier 1 ratio | CET1 | CET1 capital as defined by Regulation No 575/2013, with the application of the |
| regulatory transitional arrangements for IFRS 9 impact over RWAs. | ||
| Core profit for the period (PAT) | Core PAT | Core operating profit less taxes. |
| from continuing operations | ||
| Core Income | Net Interest Income ("NII") + Net fee and commission income. | |
| Core Operating Profit | Core income less operating expenses and loan and other impairments. | |
| Core Pre-Provision Income | Core PPI | Core Income less operating expenses. |
| Core return on Tangible Equity | Core RoTe | Core Operating Profit/(Loss) for the period/year + Taxes, over average tangible equity. |
| Cost of Risk | CoR | Loan impairments of the period/year over average loans and advances to customers, excluding the short term reverse repo facility of €3.0 billion as at 30 June 2023 and €3.2 billion as at 31 December 2022. |
| Cost-to-Core Income ratio | C:CI | Operating expenses over core income. |
| Cost-to-Income ratio | Operating expenses over total income. | |
| Deposits | Due to customers. | |
| Depreciation | Depreciation and amortisation on investment property, property & equipment and software & other intangible assets |
|
| Disbursements of loans | Loan disbursements for the period/year, not considering rollover of working capital repaid and increase of unused credit limits. |
|
| Domestic banking activities | Refers to banking business in Greece and includes retail, corporate and investment banking. Group's domestic operations includes operations of the Bank in Greece, Ethniki Leasing S.A (Ethniki Leasing) and Ethniki Factors S.A. (Ethniki Factors). |
|
| Funding cost | The weighted average cost of deposits, ECB refinancing, repo transactions, covered bonds and securitization transactions. |
|
| Gross loans | Loans and advances to customers at amortised cost before Expected Credit Loss ("ECL") allowance and loans and advances to customers mandatorily measured at FVTPL. |
|
| Interest earning assets | Interest earning assets include all assets with interest earning potentials and includes cash and balances with central banks, due from banks, financial assets at fair value through profit or loss (excluding Equity securities and mutual funds units), loans and advances to customers and investment securities (excluding equity securities and mutual funds units). |
|
| International operations | International operations refers to the Group's banking business in North Macedonia (Stopanska Banka, Stopanska Leasing) and Cyprus (NBG Cyprus). |
|
| Liquidity Coverage Ratio | LCR | The LCR refers to the liquidity buffer of High Quality Liquid Assets ("HQLAs") that a Financial Institution holds, in order to withstand net liquidity outflows over a 30 calendar-day stressed period as per Regulation (EU) 2015/61. |
| Loan Impairments | Impairment charge for ECL. | |
| Name | Abbreviation | Definition |
|---|---|---|
| Loans-to-Deposits Ratio | Loans and advances to customers over due to customers, at period/year end, | |
| excluding the short term reverse repo facility of €3.0 billion as at 30 June 2023 and €3.2 billion as at 31 December 2022. |
||
| Net cash position | Cash and balances with central banks + Due from banks and excluding Due to Banks. | |
| Net Fees & Commissions / Fees | Net fee and commission income. | |
| / Net Fees | ||
| Net Interest Margin over average total assets |
NIM | Net interest income over average total assets. Net Interest Margin equals net interest income divided by the average of total assets on a monthly basis. |
| Net Stable Funding Ratio | NSFR | The NSFR refers to the portion of liabilities and capital expected to be sustainable over |
| the time horizon considered by the NSFR over the amount of stable funding that must be allocated to the various assets, based on their liquidity characteristics and residual maturities. |
||
| Net trading income / (loss), net other income/(loss) & Share of profit / (loss) of equity method investments |
Refers to: Net trading income / (loss) and results from investment securities, Gains / (losses) arising from the derecognition of financial assets measured at amortised cost, Net other income/(loss) and Share of profit / (loss) of equity method investments, excluding other one-off costs of €12 million. |
|
| Non-Performing Exposures | NPEs | Non-performing exposures are defined according to EBA ITS technical standards on Forbearance and Non-Performing Exposures as exposures that satisfy either or both of the following criteria: |
| a. Material exposures which are more than 90 days past due. b. The debtor is assessed as unlikely to pay its credit obligations in full without realization of collateral, regardless of the existence of any past due amount or of the number of days past due. |
||
| Non-Performing Loans NPLs | NPLs | Loans and advances to customers at amortised cost that are in arrears for 90 days or more. |
| NPE Coverage Ratio | ECL allowance for loans and advances to customers at amortised cost divided by NPEs, excluding loans and advances to customers mandatorily measured at FVTPL, at period/year end. |
|
| NPE formation | Net increase / (decrease) of NPEs, before write-offs. | |
| NPE Organic Formation | NPE balance change, excluding sales and write-offs. | |
| NPE ratio | NPEs divided by loans and advances to customers at amortised cost before ECL | |
| allowance and loans and advances to customers mandatorily measured at FVTPL at the end of the period, excluding the short term reverse repo facility of €3.0 billion as at 30 June 2023 and €3.2 billion as at 31 December 2022. |
||
| Operating Expenses | Personnel expenses + General, administrative and other operating expenses ("G&As") + Depreciation and amortisation on investment property, property & equipment and |
|
| software and other intangible assets, excluding the additional social security contribution for LEPETE to e-EFKA and other one-off costs. More specifically, for the |
||
| six months period ended 30 June 2023, operating expenses exclude personnel expenses of €18 million related to defined contributions to LEPETE to e-EFKA and other |
||
| one-off costs of €2 million. For the six months period ended 30 June 2022, operating expenses exclude personnel expenses of €18 million related to defined contributions |
||
| for LEPETE to e-EFKA and other one off-costs of €5 million. | ||
| Operating Profit / (Loss) | Total income less operating expenses and loan and other impairments. | |
| Other impairments | Impairment charge for securities and Other provisions and impairment charges. | |
| PAT attributable to NBG equity | Core PAT (continuing operations) + Net trading income / (loss), net other income/(loss) | |
| shareholders | and Share of profit / (loss) of equity method investments + Discontinued Operations, | |
| Restructuring costs, other & Non controlling interest. | ||
| Pre-Provision Income | PPI | Total income less operating expenses, before loan and other impairments. |
| Risk Weighted Assets | RWAs | Assets and off-balance-sheet exposures, weighted according to risk factors based on Regulation (EU) No 575/2013. |
| Risk Adjusted NIM | NIM minus CoR. | |
| Staff Costs/ Personnel expenses | Personnel expenses excluding the additional social security contribution for LEPETE to | |
| e-EFKA and one-off costs. More specifically, for the six months period ended 30 June 2023, personnel expenses exclude defined contributions to LEPETE to e-EFKA of €18 |
||
| million. For the six months period ended 30 June 2022, personnel expenses exclude defined contributions for LEPETE to e-EFKA of €18 million and other one off-costs of €3 million. |
||
| Tangible Equity / Book Value | Common equity less goodwill, software and other intangible assets. | |
| Taxes | Refers to tax benefit/ (expense), excluding one-off taxes of amount €46 million for the | |
| six months period ended 30 June 2022. | ||
| Total Capital Ratio | Total capital as defined by Regulation No 575/2013, with the application of the regulatory transitional arrangements for IFRS 9 impact over RWAs. |
| Name Abbreviation |
Definition |
|---|---|
| Total Income | Refers to Net interest income, Net fee and commission income, Net trading income / (loss) and results from investment securities, Gains / (losses) arising from the derecognition of financial assets measured at amortised cost, Net other income / (expense) and Share of profit / (loss) of equity method investments. |
The information, statements and opinions set out in the Board of Director's Report (the "Board of Director's Report") have been provided by National Bank of Greece S.A. (the "Bank") (together with its consolidated subsidiaries (the "Group"). They serve inf ormational only purposes and should not be considered as advice or a recommendation to investors or potential investors in relation to holding, purchasing or selling securities or other financial products or instruments and do not take into account particular investment objectives, financial situation or needs. It is not a research report, a trade confirmation or an offer or solicitation of an offer to buy/sell any financial instruments.
Whilst reasonable care has been taken to ensure that its contents are true and accurate, no representations or warranties, express or implied are given in, or in respect of the accuracy or completeness of any information included in the Board of Director's Report. To the fullest extent permitted by law in no circumstances will the Bank, or any of its respective subsidiaries, shareholders, affiliates, representatives, directors, officers, employees, advisers or agents be responsible or liable for any direct, indirect or consequential loss or loss of profit arising from the use of the Board of Director's Report, its contents (including the internal economic models), its omissions, reliance on the information contained within it, or on opinions communicated in relation thereto or otherwise arising in connection therewith.
Recipients of the Board of Director's Report are not to construe its contents, or any prior or subsequent communications from or with the Bank or its representatives as financial, investment, legal, tax, business or other professional advice. In addition, the Board of Director's Report does not purport to be all-inclusive or to contain all of the information that may be required to make a full analysis of the Bank. Recipients of the Board of Director's Report should consult with their own advisers and should each make their own evaluation of the Bank and of the relevance and adequac y of the information.
The Board of Director's Report includes certain non-IFRS financial measures. These measures are presented in this section under "ESMA Alternative Performance Measures (APMs), definition of financial data and ratios used". Section herein may not be comparable to those of other credit institutions. Reference to these non-IFRS financial measures should be considered in addition to IFRS financial measures but should not be considered a substitute for results that are presented in accordance with IFRS. Due to rounding, numbers presented throughout the Board of Director's Report may not add up precisely to the totals provided and percentages may not precisely reflect the absolute figures.
The Board of Director's Report contains forward-looking statements relating to management's intent, belief or current expectations with respect to, inter alia, the Bank's businesses and operations, market conditions, results of operation and financial condition, capital adequacy, risk management practices, liquidity, prospects, growth and strategies ("Forward Looking Statements"). Forward Looking Statements concern future circumstances and results and other statements that are not historical facts, sometimes identified by the words "may", "will", "believes", "expects", "predicts", "intends", "projects", "plans", "estimates", "aims", "foresees", "anticipates", "targets", "would", "could" or similar expressions or the negative thereof.
Forward Looking Statements reflect knowledge and information available at the date of the Board of Director's Report and are subject to inherent uncertainties and qualifications and are based on numerous assumptions, in each case whether or not identified in the Board of Director's Report. Although Forward Looking statements contained in the Board of Director's Report are based upon what management of the Bank be lieves are reasonable assumptions, because these assumptions are inherently subject to significant uncertainties and contingencies, including p ersisting inflationary pressures and risks related to increased geopolitical tensions, that are difficult or impossible to predict and are beyond the Bank's control, no assurance can be provided that the Bank will achieve or accomplish these expectations, beliefs or projections. Energy -related risks and a new upsurge of inflation pressures, in the event of a new escalation of Ukraine crisis or a stronger-than-expected increase in global demand and/or supply cuts by major energy producers, represent the key risk factors in view of the limited margins for new fiscal interventions. T he delayed drag on activity and financial conditions from the ongoing monetary policy tightening and new incidences of banking system stress following a turbulent March 2023 (SVB, Credit Swiss) could also affect business and banking activity. Moreover, uncertainty over the scope of actions that may be required by us, governments and others to achieve goals relating to climate, environmental and social matters, as well as the evolving nature of underlying science and industry and governmental standards and regulations. Therefore, these events constitute additional factors that could cause actual results to differ materially from the ones included in the Forward-Looking Statements. Forward-Looking Statements are provided for illustrative purposes only and are not intended to serve as, and must not be relied on as, a guarantee, an assurance, a prediction or a definitive statement of fact or probability. The Bank's actual results may differ materially from those discussed in the Forward-Looking Statements. Some important factors that could cause actual results to differ materially from those in any Forward Looking Statements could include, inter alia, changes in domestic and foreign business, market, financial, political and legal conditions including changing industry regulation, adverse decisions by domestic or international regulatory and supervisory authorities, the impact of market size reduction, the ability to maintain credit ratings, capital resources and capital expenditures, adverse litigation and dispute outcomes, impact of COVID-19 and the effect of such outcomes on the Group's financial condition. There can be no assurance that any particular Forward-Looking Statement will be realized, and the Bank expressly disclaims any obligation or undertaking to release any updates or revisions to any Forward-Looking Statement to reflect any change in the Bank's expectations with regard thereto or any changes in events, conditions or circumstances on which any Forward-Looking Statement is based. Accordingly, the reader is cautioned not to place undue reliance on Forward-Looking Statements.
Unless otherwise specified all information in the Board of Director's Report is as of the date of the Board of Director's Report. Neither the delivery of the Board of Director's Report nor any other communication with its recipients shall, under any circumstances, create any implication that there has been no change in the Bank's affairs since such date. Except as otherwise noted herein, the Bank does not intend to, nor will it assume any obligation to, update the Board of Director's Report or any of the information included herein. The Board of Director's Report is subject to Greek law, and any dispute arising in respect of the Board of Director's Report is subject to the exclusive jurisdiction of the Courts of Athens.
To the Board of Directors of National Bank of Greece S.A.
We have reviewed the accompanying company and consolidated statement of financial position of the Bank and the Group of National Bank of Greece S.A., as of 30 June 2023 and the related company and consolidated statements of income, comprehensive income, changes in equity and cash flow statements for the six-month period then ended, and the selected explanatory notes that comprise the interim condensed financial statements and which form an integral part of the six-month financial report as required by L.3556/2007.
Management is responsible for the preparation and presentation of these condensed interim financial statements in accordance with International Financial Reporting Standards as they have been adopted by the European Union and applied to interim financial reporting (International Accounting Standard "IAS 34"). Our responsibility is to express a conclusion on these interim separate and consolidated condensed financial statements based on our review.
We conducted our review in accordance with International Standard on Review Engagements 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity". A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing, as they have been transposed into Greek Law and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed interim financial statements are not prepared, in all material respects, in accordance with IAS 34.
Our review has not revealed any material inconsistency or misstatement in the statements of the members of the Board of Directors and the information of the six-month Board of Directors Report, as defined in articles 5 and 5a of Law 3556/2007, in relation to the accompanying interim separate and consolidated condensed financial statements.
Athens, 2 August 2023
PricewaterhouseCoopers S.A. Certified Auditors 260 Kifissias Avenue 152 32 Halandri Soel Reg. No. 113
The Certified Auditor
Andreas Riris SOEL Reg. No. 65601
| Group | Bank | |||
|---|---|---|---|---|
| € million Note |
30.06.2023 | 31.12.2022 | 30.06.2023 | 31.12.2022 |
| ASSETS | ||||
| Cash and balances with central banks | 7,551 | 14,226 | 7,265 | 13,957 |
| Due from banks | 2,735 | 2,900 | 2,684 | 2,854 |
| Financial assets at fair value through profit or loss | 718 | 395 | 689 | 375 |
| Derivative financial instruments | 1,905 | 1,962 | 1,905 | 1,962 |
| Loans and advances to customers 9 |
34,976 | 35,561 | 33,198 | 33,782 |
| Investment securities | 15,114 | 13,190 | 14,763 | 12,905 |
| Investment property | 68 | 71 | 1 | 2 |
| Current tax asset | 225 | 208 | 224 | 205 |
| Deferred tax assets | 4,508 | 4,705 | 4,496 | 4,692 |
| Equity method investments | 176 | 175 | 172 | 172 |
| Investments in subsidiaries | - | - | 768 | 759 |
| Property and equipment 10 |
1,561 | 1,565 | 1,204 | 1,164 |
| Software | 481 | 431 | 474 | 424 |
| Other assets | 2,388 | 2,229 | 2,245 | 2,122 |
| Non-current assets held for sale 11 |
443 | 495 | 388 | 441 |
| Total assets | 72,849 | 78,113 | 70,476 | 75,816 |
| LIABILITIES | ||||
| Due to banks 12 |
3,374 | 9,811 | 3,584 | 10,027 |
| Derivative financial instruments | 1,883 | 1,923 | 1,883 | 1,923 |
| Due to customers 13 |
55,671 | 55,192 | 54,121 | 53,704 |
| Debt securities in issue | 1,793 | 1,731 | 1,793 | 1,731 |
| Other borrowed funds | 69 | 63 | - | - |
| Current income tax liabilities | 4 | 2 | - | - |
| Deferred tax liabilities | 15 | 16 | - | - |
| Retirement benefit obligations | 225 | 248 | 223 | 246 |
| Other liabilities 10 |
2,731 | 2,627 | 2,442 | 2,302 |
| Liabilities associated with non-current assets held for sale 11 |
25 | 25 | - | - |
| Total liabilities | 65,790 | 71,638 | 64,046 | 69,933 |
| SHAREHOLDERS' EQUITY | ||||
| Share capital 15 |
915 | 915 | 915 | 915 |
| Share premium 15 |
3,542 | 3,542 | 3,539 | 3,539 |
| Reserves and retained earnings | 2,578 | 1,995 | 1,976 | 1,429 |
| Equity attributable to NBG shareholders | 7,035 | 6,452 | 6,430 | 5,883 |
| Non-controlling interests | 24 | 23 | - | - |
| Total equity | 7,059 | 6,475 | 6,430 | 5,883 |
| Total equity and liabilities | 72,849 | 78,113 | 70,476 | 75,816 |
Athens, 31 July 2023
THE CHAIRMAN OF THE BOARD OF DIRECTORS
THE CHIEF EXECUTIVE OFFICER THE CHIEF FINANCIAL OFFICER
| Group | Bank | ||||
|---|---|---|---|---|---|
| 6-month period ended | 6-month period ended | ||||
| € million | Note | 30.06.2023 | 30.06.2022 | 30.06.2023 | 30.06.2022 |
| Continuing Operations | |||||
| Interest and similar income | 1,215 | 674 | 1,149 | 624 | |
| Interest expense and similar charges | (163) | (74) | (167) | (79) | |
| Net interest income | 1,052 | 600 | 982 | 545 | |
| Fee and commission income | 216 | 221 | 189 | 196 | |
| Fee and commission expense | (38) | (51) | (30) | (46) | |
| Net fee and commission income | 178 | 170 | 159 | 150 | |
| Net trading income / (loss) and results from investment securities | 4 | 26 | 288 | 25 | 285 |
| Gains / (losses) arising from the derecognition of financial assets measured at | |||||
| amortised cost | 4 | 49 | 54 | 49 | 54 |
| Net other income / (expense) | (32) | (42) | (36) | (54) | |
| Total income | 1,273 | 1,070 | 1,179 | 980 | |
| Personnel expenses | (227) | (228) | (209) | (211) | |
| Administrative and other operating expenses | (99) | (97) | (84) | (82) | |
| Depreciation and amortisation on investment property, property & equipment | |||||
| and software | (93) | (83) | (85) | (75) | |
| Credit provisions | 5 | (109) | (104) | (99) | (83) |
| Other impairment charges Restructuring costs |
5 6 |
(12) (2) |
(47) (62) |
(11) (2) |
(33) (62) |
| Share of profit / (loss) of equity method investments | 1 | 1 | - | ||
| Profit before tax | 732 | 450 | 689 | 434 | |
| Tax benefit / (expense) | 7 | (201) | (137) | (195) | (132) |
| Profit for the period from continuing operations | 531 | 313 | 494 | 302 | |
| Discontinued Operations | |||||
| Profit / (loss) for the period from discontinued operations | 11 | - | 234 | - | (8) |
| Profit for the period | 531 | 547 | 494 | 294 | |
| Attributable to: | |||||
| Non-controlling interests | 1 | 1 | - | - | |
| NBG equity shareholders | 530 | 546 | 494 | 294 | |
| Earnings per share (Euro) - Basic and diluted from continuing operations | 8 | €0.58 | €0.34 | €0.54 | €0.33 |
| Earnings per share (Euro) - Basic and diluted from continuing and discontinued operations |
8 | €0.58 | €0.60 | €0.54 | €0.32 |
| Income Statement – 6-month period | |||||
| Athens, 31 July 2023 |
THE CHAIRMAN OF THE BOARD OF DIRECTORS
THE CHIEF EXECUTIVE OFFICER THE CHIEF FINANCIAL OFFICER
| Group | Bank | |||||
|---|---|---|---|---|---|---|
| 6-month period ended | 6-month period ended | |||||
| € million | Note | 30.06.2023 | 30.06.2022 | 30.06.2023 | 30.06.2022 | |
| Profit for the period | 531 | 547 | 494 | 294 | ||
| Other comprehensive income / (expense): | ||||||
| Items that will be reclassified to the Income Statement: | ||||||
| Available-for-sale securities, net of tax | - | (246) | - | - | ||
| Investments in debt instruments measured at fair value through other comprehensive income ("FVTOCI"), net of tax |
49 | (152) | 49 | (151) | ||
| Currency translation differences, net of tax | (20) | (2) | (9) | (2) | ||
| Cash flow hedge, net of tax | 1 | 18 | 1 | 18 | ||
| Total of items that will be reclassified to the Income Statement | 30 | (382) | 41 | (135) | ||
| Items that will not be reclassified to the Income Statement: | ||||||
| Investments in equity instruments measured at FVTOCI, net of tax | 5 | (12) | 5 | (12) | ||
| Total of items that will not be reclassified to the Income Statement | 5 | (12) | 5 | (12) | ||
| Other comprehensive income / (expense) for the period, net of tax | 16 | 35 | (394) | 46 | (147) | |
| Total comprehensive income / (expense) for the period | 566 | 153 | 540 | 147 | ||
| Attributable to: | ||||||
| Non-controlling interests | 1 | 1 | - | - | ||
| NBG equity shareholders Statement of Compr ehe nsive I ncome – 6-month peri od |
565 | 152 | 540 | 147 |
Athens, 31 July 2023
| THE CHAIRMAN OF THE BOARD OF | |
|---|---|
| DIRECTORS | |
THE CHIEF EXECUTIVE OFFICER THE CHIEF FINANCIAL OFFICER
| Group | ||
|---|---|---|
| 3-month period ended | ||
| € million | 30.06.2023 | 30.06.2022 |
| Continuing Operations | ||
| Interest and similar income | 646 | 348 |
| Interest expense and similar charges | (91) | (36) |
| Net interest income | 555 | 312 |
| Fee and commission income | 110 | 113 |
| Fee and commission expense | (19) | (28) |
| Net fee and commission income | 91 | 85 |
| Net trading income / (loss) and results from investment securities | 6 | 203 |
| Net other income / (expense) | (12) | (23) |
| Total income | 640 | 577 |
| Personnel expenses | (112) | (116) |
| General, administrative and other operating expenses | (50) | (49) |
| Depreciation and amortisation on investment property, property & equipment and software & other intangible assets |
(47) | (42) |
| Credit provisions | (53) | (48) |
| Οther impairment charges | (3) | (29) |
| Restructuring costs | (2) | (2) |
| Share of profit / (loss) of equity method investments | - | 1 |
| Profit before tax | 373 | 292 |
| Tax benefit / (expense) | (103) | (100) |
| Profit for the period from continuing operations | 270 | 192 |
| Discontinued operations | ||
| Profit / (loss) for the period from discontinued operations | - | (6) |
| Profit for the period | 270 | 186 |
| Attributable to: | ||
| Non-controlling interests | - | - |
| NBG equity shareholders | 270 | 186 |
| Earnings per share (Euro) - Basic and diluted from continuing operations | €0.30 | €0.21 |
| Earnings per share (Euro) - Basic and diluted from continuing and discontinued operations | €0.30 | €0.20 |
| Income Statement – 3-month period Athens, 31 July 2023 |
||
THE CHAIRMAN OF THE BOARD OF DIRECTORS
THE CHIEF EXECUTIVE OFFICER THE CHIEF FINANCIAL OFFICER
| THE CHAIRMAN OF THE BOARD OF DIRECTORS |
THE CHIEF EXECUTIVE OFFICER | THE CHIEF FINANCIAL OFFICER |
|---|---|---|
GIKAS A. HARDOUVELIS PAVLOS K. MYLONAS CHRISTOS D. CHRISTODOULOU
The notes on pages 53 to 90 form an integral part of these Interim Financial Statements
| Attributable to equity holders of the parent company | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| € million | Share capital | Share premium Treasury shares | Securities at FVTOCI reserve |
Currency translation reserve |
Net investment hedge reserve |
Cash flow hedge reserve |
Defined benefit plans |
Other reserves & Retained earnings |
Total | Non-controlling Interests |
Total | |
| Ordinary shares Ordinary shares | ||||||||||||
| Balance at 31 December 2021 and at 1 January 2022 |
915 | 13,866 | - | 195 | 69 | (111) | (18) | (199) | (8,967) | 5,750 | 22 | 5,772 |
| Other Comprehensive Income/ (expense) for the period Gains/(losses) from equity instruments at FVTOCI reclassified to retained earnings |
- - |
- - |
- - |
(406) (4) |
(2) - |
- - |
18 - |
- - |
1 4 |
(389) - |
- - |
(389) - |
| Profit for the period | - | - | - | - | - | - | - | - | 546 | 546 | 1 | 547 |
| Total Comprehensive Income / (expense) for the period (see Note 16) Acquisitions, disposals & share capital |
- | - | - | (410) | (2) | - | 18 | - | 551 | 157 | 1 | 158 |
| increases of subsidiaries/associates | - | - | - | - | - | - | - | - | (1) | (1) | (1) | (2) |
| Balance at 30 June 2022 | 915 | 13,866 | - | (215) | 67 | (111) | - | (199) | (8,417) | 5,906 | 22 | 5,928 |
| Movements to 31 December 2022 | - | (10,324) | - | (58) | (123) | 110 | - | 44 | 10,897 | 546 | 1 | 547 |
| Balance at 31 December 2022 and at 1 January 2023 |
915 | 3,542 | - | (273) | (56) | (1) | - | (155) | 2,480 | 6,452 | 23 | 6,475 |
| Other Comprehensive Income/ (expense) for the period |
- | - | - | 61 | (20) | - | 1 | - | 11 | 53 | - | 53 |
| Gains/(losses) from equity instruments at FVTOCI reclassified to retained earnings |
- | - | - | (7) | - | - | - | - | 7 | - | - | - |
| Profit for the period | - | - | - | - | - | - | - | - | 530 | 530 | 1 | 531 |
| Total Comprehensive Income / (expense) for the period (see Note 16) |
- | - | - | 54 | (20) | - | 1 | - | 548 | 583 | 1 | 584 |
| Balance at 30 June 2023 | 915 | 3,542 | - | (219) | (76) | (1) | 1 | (155) | 3,028 | 7,035 | 24 | 7,059 |
The notes on pages 53 to 90 form an integral part of these Interim Financial Statements
| € million | Share capital | Share premium | Securities at FVTOCI reserve |
Currency translation reserve |
Cash flow hedge reserve |
Defined benefit plans |
Other reserves & retained earnings |
Total |
|---|---|---|---|---|---|---|---|---|
| Ordinary shares Ordinary shares | ||||||||
| Balance at 31 December 2021 and 1 January 2022 | 915 | 13,863 | (59) | (51) | (18) | (189) | (9,220) | 5,241 |
| Other Comprehensive Income/ (expense) for the period | - | - | (159) | (2) | 18 | - | - | (143) |
| Gains/(losses) from equity instruments at FVTOCI reclassified to retained earnings | - | - | (4) | - | - | - | 4 | - |
| Profit for the period | - | - | - | - | - | - | 294 | 294 |
| Total Comprehensive Income / (expense) for the period (see Note 16 ) | - | - | (163) | (2) | 18 | - | 298 | 151 |
| Balance at 30 June 2022 | 915 | 13,863 | (222) | (53) | - | (189) | (8,922) | 5,392 |
| Movement to 31 December 2022 | - | (10,324) | (59) | (11) | - | 35 | 10,850 | 491 |
| Balance at 31 December 2022 and 1 January 2023 | 915 | 3,539 | (281) | (64) | - | (154) | 1,928 | 5,883 |
| Other Comprehensive Income/ (expense) for the period | - | - | 61 | (9) | 1 | - | - | 53 |
| Gains/(losses) from equity instruments at FVTOCI reclassified to retained earnings | - | - | (7) | - | - | - | 7 | - |
| Profit for the period | - | - | - | - | - | - | 494 | 494 |
| Total Comprehensive Income / (expense) for the period (see Note 16 ) | - | - | 54 | (9) | 1 | - | 501 | 547 |
| Balance at 30 June 2023 Statement of Changes in Equity - Bank |
915 | 3,539 | (227) | (73) | 1 | (154) | 2,429 | 6,430 |
Cash Fl ow Statement
| Group | Bank | ||||
|---|---|---|---|---|---|
| 6-month period ended | 6-month period ended | ||||
| € million | 30.06.2023 | 30.06.2022 | 30.06.2023 | 30.06.2022 | |
| Cash flows from operating activities | |||||
| Profit before tax | 732 | 691 | 689 | 426 | |
| Adjustments for: | |||||
| Non-cash items included in income statement and other adjustments: | 244 | 256 | 184 | 465 | |
| Depreciation and amortisation on investment property, property & equipment and software | 93 | 83 | 85 | 75 | |
| Amortisation of premiums /discounts of investment securities, debt securities in issue and other | |||||
| borrowed funds | 17 | 42 | 13 | 40 | |
| Credit provisions and other impairment charges Provision for employee benefits |
126 | 42 | 85 | 175 | |
| Share of (profit) / loss of equity method investments | 5 (1) |
10 (1) |
5 - |
4 - |
|
| Result from fair value and cash flow hedges | (6) | 15 | (6) | 15 | |
| Dividend income from investment securities | (2) | (2) | (2) | (2) | |
| Net (gain) / loss on disposal of property & equipment and investment property | (4) | (8) | - | - | |
| Net (gain) / loss on disposal of subsidiaries | - | (34) | - | - | |
| Net (gain) / loss on disposal of investment securities | (68) | 36 | (68) | 33 | |
| Accrued interest from financing activities and results from repurchase of debt securities in issue | 41 | 23 | 43 | 24 | |
| Accrued interest of investment securities | 36 | 45 | 36 | 44 | |
| Valuation adjustment on instruments designated at fair value through profit or loss | - | 3 | - | 3 | |
| Other non-cash operating items | 7 | 2 | (7) | 54 | |
| Net (increase) / decrease in operating assets: | (22) | 3,560 | 6 | 4,071 | |
| Mandatory reserve deposits with Central Bank Due from banks |
(6) 57 |
(4) 2,453 |
- 19 |
2 2,896 |
|
| Financial assets at fair value through profit or loss | (271) | 4 | (261) | (2) | |
| Derivative financial instruments | 60 | 2,004 | 60 | 2,004 | |
| Loans and advances to customers | 319 | (872) | 335 | (882) | |
| Other assets | (181) | (25) | (147) | 53 | |
| Net increase / (decrease) in operating liabilities: | (5,798) | (647) | (5,830) | (1,004) | |
| Due to banks | (6,437) | (1,181) | (6,442) | (1,108) | |
| Due to customers | 479 | 796 | 416 | 753 | |
| Derivative financial instruments Retirement benefit obligations |
(38) (28) |
(580) (23) |
(38) (28) |
(580) (11) |
|
| Insurance related reserves and liabilities | - | 329 | - | - | |
| Income taxes (paid) / received | (18) | (7) | 1 | - | |
| Other liabilities | 244 | 19 | 261 | (58) | |
| Net cash from / (for) operating activities | (4,844) | 3,860 | (4,951) | 3,958 | |
| Cash flows from investing activities | |||||
| Participation in share capital (increase)/decrease of subsidiaries | - | - | (10) | 268 | |
| Disposals of subsidiaries, net of cash disposed | - | 142 | 2 | 233 | |
| Dividends received from investment securities & equity method investments | 2 | 2 | 1 | 2 | |
| Purchase of investment property, property & equipment, software | (247) | (84) | (243) | (81) | |
| Proceeds from disposal of property & equipment and investment property | 7 | 7 | - | - | |
| Purchase of investment securities Proceeds from redemption and sale of investment securities |
(4,707) 2,904 |
(5,204) 3,876 |
(4,486) 2,767 |
(4,647) 3,021 |
|
| Net cash (used in) / provided by investing activities | (2,041) | (1,261) | (1,969) | (1,204) | |
| Cash flows from financing activities | |||||
| Proceeds from debt securities in issue and other borrowed funds | 6 | 24 | 25 | - | |
| Repayments of debt securities in issue, other borrowed funds and preferred securities | 22 | (40) | (3) | - | |
| Principal elements of lease payments | (33) | (30) | (28) | (25) | |
| Proceeds from disposal of treasury shares | 6 | 9 | - | - | |
| Repurchase of treasury shares | (6) | (9) | - | - | |
| Net cash from/ (for) financing activities | (5) | (46) | (6) | (25) | |
| Effect of foreign exchange rate changes on cash and cash equivalents | (9) | (1) | (10) | ||
| Net increase / (decrease) in cash and cash equivalents | (6,899) | 2,552 | (6,936) | 2,729 | |
| Cash and cash equivalents at beginning of period | 17,725 | 16,105 | 17,510 | 15,810 | |
| Cash and cash equivalents at end of period | 10,826 | 18,657 | 10,574 | 18,539 |
National Bank of Greece S.A. (hereinafter "NBG" or the "Bank") was founded in 1841 and its shares have been listed on the Ath ens Exchange since 1880. The Bank's headquarters are located at 86 Eolou Street, 10559 Athens, Greece (Register number G.E.MH. 237901000), tel. (+30) 210 334 1000, www.nbg.gr. By resolution of the Board of Directors, the Bank can establish branches, agencies and correspondence offices in Greece and abroad. In its 182 years of operation, the Bank has expanded on its commercial banking business by entering into related business areas. The Bank and its subsidiaries (hereinafter the "Group") provide a wide range of financial services including mainly retail, corporate and investment banking, non-performing exposures management, transactional banking, leasing, factoring, brokerage, asset management, real estate management and insurance services. The Group operates mainly in Greece but also through its branch in Cyprus and its subsidiaries in North Macedonia, Romania, Bulgaria, Cyprus, Luxembourg, Netherlands and U.K. Following the respective Bank's decision in 2021, the Group ceased its operation in Egypt, Malta and NBG London Branch; therefore, the NBG Egypt Branch, the NBG London Branch and the subsidiaries NBG Malta Ltd (formerly known as NBG Bank Malta Ltd) and NBG Malta Holdings Ltd are currently under liquidation.
The Board of Directors ("BoD") consists of the following members:
The Non-Executive Chairman of the Board of Directors Gikas A. Hardouvelis
Executive members Pavlos K. Mylonas Christina T. Theofilidi
Avraam C. Gounaris - Senior Independent Director Anne Clementine L. Marion-Bouchacourt Claude Edgar L.G. Piret Wietze J.P. Reehoorn Matthieu A. Kiss Elena Ana E.V. Cernat Aikaterini K. Beritsi Jayaprakasa (JP) C.S. Rangaswami Athanasios S. Zarkalis
The Board of Directors Μembers are elected by the Bank's General Meeting of Shareholders for a maximum term of three years and may be reelected. The term of the above Members expires at the Annual General Meeting of the Bank's Shareholders in 2024.
These Interim Financial Statements have been approved for issue by the Bank's Board of Directors on 31 July 2023.
The condensed consolidated and separate Interim Financial Statements as at and for the six-month period ended 30 June 2023 (the "Interim Financial Statements") have been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting". These Interim Financial Statements include selected explanatory notes and do not include all the information required for full set of annual financial statements. Therefore, the Interim Financial Statements should be read in conjunction with the consolidated and separate Annual Financial Statements for the Group and the Bank as at and for the year ended 31 December 2022, which have been prepared in accordance with International Financial Reporting Standards ("IFRSs") as endorsed by the European Union (the "EU").
The Interim Financial Statements have been prepared under the historical cost basis except for the financial assets measured at fair value through other comprehensive income, financial assets and financial liabilities (including derivative instruments) measured at fair-value-throughprofit-or-loss. The carrying values of recognised assets and liabilities that are hedged items in fair value hedges, and otherwise carried at amortised cost, are adjusted to record changes in fair value attributable to the risk being hedged.
The accounting policies for the preparation of the Interim Financial Statements have been consistently applied with those in the consolidated and separate Annual Financial Statements for the year-ended 31 December 2022, after considering amendments in IFRSs as described in Section 2.3 "New and Amended Standards and Interpretations". Where necessary, comparative figures have been adjusted to conform to changes in the current period's presentation.
The Interim Financial Statements have been prepared on the basis that the Group and the Bank will continue to operate as a going concern (see Note 2.2 "Going Concern").
The Group's presentation currency is the Euro (€) being the functional currency of the parent company. Except as indicated, financial information presented in Euro has been rounded to the nearest million.
After considering (a) the significant recurring profitability of the Group and the Bank (b) the significant collateral buffer and Liquidity Coverage Ratio ("LCR") and Net Stable Funding Ratio ("NSFR") which is well above 100% (c) the current level of European Central Bank ( "ECB") funding solely from Targeted Long-term Refinancing Operations ("TLTROs") (d) the Group and the Bank's Common Equity Tier 1 ("CET1") ratio as at 30 June 2023 which exceeded the Overall Capital Requirements ("OCR"), (e) the increasing support from the Recovery and Resilience Facility ("RRF"), (f) the fiscal measures in force in response to pressures from increased inflation and (g) the Group and the Bank's insignificant exposure to Russia and Ukraine and the Management's actions with respect to the crisis, the Board of Directors concluded that the Group and the Bank are a going concern and thus the application of the going concern principle for the preparation of these Interim Financial Statements is appropriate.
For the period ended 30 June 2023, the profit from continuing operations amounted to €531 million and €494 million for the Group and the Bank, respectively, whereas earnings per share from continuing operations amounted to €0.58 and €0.54 for the Group and the Bank, respectively.
As at 30 June 2023, funding from the ECB through TLTROs amounted to €1.9 billion (31 December 2022: €8.1 billion). Additionally, as at 30 June 2023, the Bank's liquidity buffer at cash values amounted to €25.5 billion, with the LCR and NSFR ratios well above 100%.
The Group's Common Equity Tier 1 ("CET1") and Total Capital ratios as at 30 June 2023 were 15.8% and 16.9% respectively, exceeding the OCR ratio of 14.53% for 2023, (see Note 18 "Capital Adequacy").
Economic activity in Greece slowed but remained on an upward trend in 1Q.23, with Gross Domestic Product ("GDP") increasing b y 2.1% yearover-year ("y-o-y") and exceeding by a significant margin – for an 8th consecutive quarter – the respective euro area average (+1.0% y-o-y in 1Q.23). Strong private consumption and fixed capital investment, in conjunction with a resilient export performance were the key drivers of the 1Q.23 growth outturn.
The slowing in 1Q.23 GDP growth, compared with the solid growth outcome of 2022 (+6.0% y-o-y), mainly reflects the unwinding of very favourable base effects that bolstered activity in 2022, after the full lifting of COVID-19 related restrictions, especially on services activities, in conjunction with a sharp decrease in inventories, following a period of abnormally rapid stock accumulation.
The largest component of domestic demand, private consumption, grew by a solid 2.9% y-o-y, on the back of supportive labor market conditions and declining energy prices which supported purchasing power. Non-wage income of households, as well as corporate profits, were also buoyant, as the economy-wide gross operating surplus and mixed income ("GOSM") increased by 9.3% y-o-y in 1Q.23, albeit at a slower pace than in previous quarters.
Reflecting strong confidence levels and attractive returns, gross fixed capital formation ("GFCF") has been 8.2% higher y-o-y in 1Q.23, following a solid 11.6% expansion in FY.22. The further strengthening of construction activity (+19.6% y-o-y), led by residential investment (up by 48.4% y-o-y), accounted for the major part of the increase.
Net exports surprised positively with a contribution of +0.9 pps to annual GDP growth in 1Q.23, marking a sharp reversal from the -2.8 pps drag in FY.22. Total export growth outpaced import growth in 1Q.23 but this trend is expected to weaken during the remainder of the year as demand in the euro area remains subdued. Nonetheless, a significant decline in the current account deficit is expected in FY.23 (-€5.6 billion or 2.5% of GDP in 4M.23).
Residential real estate prices, surged by an impressive 14.5% y-o-y in 1Q.23, following an upwardly revised +11.7% y-o-y in FY.22, from a previous estimate of 11.1%, recording a cumulative appreciation of c. 50% between 3Q.17 and 1Q.23. Commercial real estate prices, which exhibited a more subdued upward trend, following the COVID-19 shock, also showed signs of acceleration in 2H.22, according to the Bank of Greece data on prices of office and retail spaces released in June 2023. Specifically, the prices of prime office and retail spaces, for the whole country increased by 3.1% and 5.3% respectively, in the 2nd half of 2022, with the corresponding FY.22 increases at 2.6% and 5.0% y-o-y.
Inflation decelerated significantly, with CPI growth at 2.9% y-o-y in April-May, from 5.9% in 1Q.23, on the back of a further drop in energy prices in the same period (-18.7% y-o-y), easing the pressure on real disposable income.
Positive fiscal trends in 2022 have been reinforced by strong economic activity, which bolstered revenue and reduced the need for countercyclical primary spending. This positive momentum was maintained in 5M.23, with a State Budget primary surplus of 1.1% of GDP, compared with a Budget 2023 estimate of a -0.7% deficit in the same period, with higher-than-expected tax revenue accounting for more than half of the overperformance. Greece has also achieved the largest decline in public debt as per cent of GDP – 23.3% of GDP in 2022, compared with 4% of GDP for the euro area. Greece's gross public debt was deceased to 171.3% in 2022, from 194.6% in 2021 and 206.3% in 2020.
Leading indicators of economic activity based on survey data point to a significant acceleration of GDP growth in 2Q.23, wher eas available data from conjunctural indicators (such as business turnover, retail trade volume) provide a positive albeit less buoyant picture. The resilient growth outcome of 1Q.23 and the current assessment of other relevant factors bode well for an annual GDP growth of c.2.2% y-o-y in 2023 and 1.9% in 2024, according to the average of latest available official and private sector consensus estimates (EU Commission, IMF and Focus consensus estimates).
Overall, the Greek economy seems well positioned to continue outperforming its euro area peers, capitalizing on sustainable growth catalysts and the strong momentum built in 2021-2022. Solid investment growth prospects, on the back of a strong pipeline of private investment and increasing impact of the Recovery & Resilience Plan ("RRP"), the positive momentum of services activities and especially tourism, and lower pressure from energy and commodity costs on households and enterprises are expected to support private spending. Increases in private sector wages, against a backdrop of strengthened labor market conditions and slowing inflation support real disposable income.
An upgrade of Greece's sovereign rating to investment grade could bolster the economic performance through positive effects on economic sentiment, risk appetite, liquidity conditions as well as on fixed capital formation and foreign direct investment. Greek Government bond valuations responded positively to favorable macroeconomic trends and the increased probability of policy continuity, following the 25 June 2023 election outcome, with the spread of the 10-year Greek government bond (10-year GGB) over the German bund declining to a 15-month low of 120 bps, whereas the 10-year GGB yield was nearly 50 bps lower than the respective Italian bond in end-June 2023.
Nonetheless, the above estimates are subject to some considerable downside risks, such as:
- IFRS 17 Insurance Contracts and Amendments to IFRS 17 (effective for annual periods beginning on or after 1 January 2023). IFRS 17 was issued in May 2017, including amendments issued in June 2020 and supersedes IFRS 4. IFRS 17 establishes principles for the recognition, measurement, presentation and disclosure of insurance contracts within the scope of this standard and its objective is to ensure that an entity provides relevant information that faithfully represents those contracts. The new standard solves the comparison problems created by IFRS 4 by requiring all insurance contracts to be accounted for in a consistent manner. Insurance obligations will be accounted for using current values instead of historical cost. The standard has been endorsed by the EU.
Due to the sale of the Bank's insurance subsidiary Ethniki Hellenic General Insurance S.A. ("Ethniki Insurance" or "NIC") on 31 March 2022, there was no impact from the adoption of IFRS 17.
- Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts (Amendment to IFRS 4). The amendment, which has been endorsed by the EU, introduces two approaches. The amended standard will: a) give all companies that issue insurance contracts the option to recognise in the Statement of Other Comprehensive Income, rather than in the Income Statement, the volatility that could arise when IFRS 9 is applied before the new insurance contracts standard is issued (i.e. the difference between the amounts that would be recognized in profit or loss in accordance with IFRS 9 and the amounts recognized in profit or loss in accordance with IAS 39) – "overlay approach" and b) give companies whose activities are predominantly connected with insurance an optional temporary exemption from applying IFRS 9 until 2021 – "deferral approach". The entities that defer the application of IFRS 9 will continue to apply IAS 39.
The Amendment 'Extension of the Temporary Exemption from Applying IFRS 9 (effective for annual periods beginning on or after 1 January 2021) extended the expiry date of the extension described above from 1 January 2021 to 1 January 2023.
On 31 March 2022, the Group sold its insurance subsidiary NIC. NIC applied this amendment using the deferral approach up to the date of sale.
- IAS 1 and IFRS Practice Statement 2 (Amendments): Disclosure of Accounting Policies (effective for annual reporting periods beginning on or after 1 January 2023). The amendments require that an entity discloses its material accounting policies, instead of its significant accounting policies. Further amendments explain how an entity can identify a material accounting policy. Examples of when an accounting policy is likely to be material are added. To support the amendment, the Board has also developed guidance and examples to explain and demonstrate the application of the 'Four-Step Materiality Process'. The Group and the Bank are currently assessing the impact of this amendment but considering the fact that the significant accounting policies disclosed in Note 2 "Summary of significant accounting policies" in the Annual Financial Report as at and for the year ended 31 December 2022 include all material accounting policies, the Group and the Bank expect to disclose fewer accounting policies in the future.
- IAS 8 (Amendment): Definition of Accounting Estimates (effective for annual reporting periods beginning on or after 1 January 2023). The amendment replaces the definition of a change in accounting estimates with a definition of accounting estimates. Under the new definition, accounting estimates are "monetary amounts in financial statements that are subject to measurement uncertainty". Entities develop accounting estimates if accounting policies require items in the financial statements to be measured in a way that involves measurement uncertainty. The amendments clarify that a change in accounting estimate that results from new information or new developments is not the correction of an error. There was no impact on the consolidated and separate Interim Financial Statements from the adoption of this amendment.
- IAS 12 (Amendments): Deferred Tax related to Assets and Liabilities arising from a Single Transaction (effective for annual reporting periods beginning on or after 1 January 2023). These amendments clarify and narrow the scope of the exemption provided by the IAS 12 "Income Taxes" standard allowing institutions to not recognise any deferred tax during the initial recognition of an asset and a liability. All leases and decommissioning obligations are excluded from the exemption scope for which companies recognise both an asset and a liability and will now have to recognise deferred taxes. From the date of first application of IFRS 16 "Leases", the Group and the Bank have considered the right of use assets and the lease-related liabilities as a single transaction. Consequently, on the initial recognition date, the amount of deferred tax asset offsets the amount of deferred tax liability. The net temporary differences resulting from later variations in the right of use assets and lease liabilities subsequently result in a deferred tax asset as of 1 January 2023 which is subject to the recoverability criteria of IAS 12 "Income Taxes". There was no impact on the consolidated and separate Interim Financial Statements from the adoption of these amendments.
- IFRS 17 (Amendment): Initial Application of IFRS 17 and IFRS 9 – Comparative Information (effective for annual periods beginning on or after 1 January 2023). The amendment is a transition option relating to comparative information about financial assets presented on initial application of IFRS 17. The amendment is aimed at helping entities to avoid temporary accounting mismatches between financial assets and insurance contract liabilities, and therefore improve the usefulness of comparative information for the users of financial statements. Due to the sale of the Bank's insurance subsidiary NIC in March 2022 there was no impact on the consolidated and separate Interim Financial Statements from the adoption of this amendment.
- IAS 12 (Amendments): International Tax Reform – Pillar Two Model Rules (effective for annual periods beginning on or after 1 January 2023). The amendments introduce a mandatory temporary exception from accounting for deferred taxes arising from the Organisation for Economic Co-operation and Development's (OECD) international tax reform. The amendments also introduce targeted disclosure requirements. The temporary exception applies immediately and retrospectively in accordance with IAS 8, whereas the targeted disclosure requirements will be applicable for annual reporting periods beginning on or after 1 January 2023.
The amendments to existing standards effective from 1 January 2023 have been endorsed by the EU, except for the amendments to IAS 12 Income Taxes (International Tax Reform – Pillar Two Model Rules), which have not yet been endorsed by the EU.
- IAS 1 (Amendments): Classification of liabilities as current or non-current (effective for annual periods beginning on or after 1 January 2024). The amendments clarify that the classification of liabilities as current or non-current should be based on rights that are in existence at the end of the reporting period. The amendments also clarify that the classification is unaffected by expectations about whether an entity will exercise its right to defer settlement of a liability and make clear that settlement refers to the transfer to the counterparty of cash, equity instruments, other assets or services. The amendments are expected to be effective for annual periods beginning on or after 1 January 2024 with early adoption permitted.
- IFRS 16 (Amendment): Lease Liability in a Sale and Leaseback (effective for annual periods beginning on or after 1 January 2024). The amendment clarifies how an entity accounts for a sale and leaseback after the date of the transaction. Sale and leaseback transactions where some or all the lease payments are variable lease payments that do not depend on an index or rate are most likely to be impacted. The requirements are applied retrospectively back to sale and leaseback transactions that were entered into after the date of initial application of IFRS 16.
- IAS 1 (Amendments): Non-current Liabilities with Covenants (effective for annual periods beginning on or after 1 January 2024). The new amendments clarify that if the right to defer settlement is subject to the entity complying with specified conditions (covenants), this amendment will only apply to conditions that exist when compliance is measured on or before the reporting date. Additionally, the amendments aim to improve the information an entity provides when its right to defer settlement of a liability is subject to compliance with covenants within twelve months after the reporting period.
- IAS 7 and IFRS 7 (Amendments) - Disclosures: Supplier Finance Arrangements (effective for annual periods beginning on or after 1 January 2024). The amendments require companies to disclose information about their Supplier Finance Arrangements such as terms and conditions, carrying amount of financial liabilities that are part of such arrangements, ranges of payment due dates and liquidity risk information.
The amendments to these existing standards have not yet been endorsed by the EU. The Group is examining the impact from the above amendments.
In preparing these Interim Financial Statements for the six-month period ended on 30 June 2023, the critical judgments and estimates made by Management in applying the Group's accounting policies and the key sources of estimation uncertainty were similar to those applied to the consolidated and separate Annual Financial Statements as at and for the year ended on 31 December 2022, except for:
Economic activity in Greece slowed but remained on an upward trend in 1Q.2023, with the Gross Domestic Product ("GDP") increasing by 2.1% in year-over-year ("y-o-y") terms and exceeding by a significant margin – for an 8th consecutive quarter – the respective Euro area average (+1.0% y-o-y in 1Q.2023).
The deceleration in GDP growth, compared with the strong economic growth during 2022 (+6.0% y-o-y), mainly reflects the unwinding of very favorable base effects that bolstered activity in 2022, after the full lifting of COVID-19 related restrictions, especially on services activities. Moreover, a decrease in inventories weakened GDP growth, on an annual basis, following a spike in 2H.2022, due to the uncertainty-driven stockpiling in the energy sector and the replenishment of depleted business inventories.
The largest component of domestic demand, private consumption, grew by a solid 2.9% y-o-y in 1Q.2023, on the back of supportive labor market conditions – rising employment and real wages – and declining energy prices, which supported purchasing power.
Headline inflation pressures declined at a faster pace than previously expected, with Consumer Price Index ("CPI") growth slowing to 2.5% y-oy in 2Q.2023 from 5.9% in 1Q.2023, on the back of a further drop in energy prices in the same period (-19.6% y-o-y), easing the pressure on real disposable income and production costs. However, core and food price inflation exhibited higher inertia both domestically and in the euro area, leading to additional hikes in monetary policy interest rates by the ECB.
Non-wage income of households as well as corporate profits were also buoyant, as the economy-wide gross operating surplus and mixed income ("GOSM") increased by 9.3% y-o-y in 1Q.2023, albeit at a slower pace than in previous quarters (+14.7% y-o-y in FY.2022).
Reflecting strong confidence levels and attractive returns, gross fixed capital formation ("GFCF") increased by 8.2% y-o-y in 1Q.2023, following a solid expansion of 11.6% y-o-y in FY.2022. The further strengthening of construction activity (+19.6% y-o-y), led by residential investment (up by 48.4% y-o-y), accounted for the major part of the increase.
Net exports surprised positively with a contribution of +0.9 pps to annual GDP growth in 1Q.2023, marking a sharp reversal from the 2.8 pps drag in FY.2022 growth. Total export growth outpaced import growth in this quarter (+8.9% y-o-y versus +5.6% y-o-y, in constant prices), leading to a significant decline of the current account deficit by 34.8% y-o-y in 4M.2023.
Residential real estate prices surged by an impressive 14.5% y-o-y in 1Q.2023, following an upwardly revised +11.7% y-o-y in FY.2022, recording a cumulative appreciation of c. 50% between 3Q.2017 and 1Q.2023 and reducing the distance from their all-time high level in 2008 to -14%.
Positive fiscal trends in 2022 have been reinforced by strong economic activity, which bolstered revenue and reduced the need for countercyclical primary spending (excluding measures related to the energy/inflation crisis). This positive momentum was maintained in 6M.2023, with a primary surplus in State Budget of 1.0% of GDP compared to the Budget 2023 estimate for a deficit of 0.2% of GDP in the same period. The Greek Stability Programme 2023 projects that the debt-to-GDP ratio will decrease further to 162.6% of GDP in 2023 and to 135.2% by 2026. This fiscal trajectory is expected to support Greece's effort to regain investment grade status during the remainder of 2023 or in 2024.
Latest releases of high frequency indicators provided mixed signs for economic activity in 2Q.2023, with survey data portending a significant acceleration in GDP growth whereas a limited number of conjunctural indicators points to a more subdued growth. Specifically:
Against this backdrop, Greece's GDP is estimated by the Bank to increase by 2.2% y-o-y, on average, in 2023-2027 in the baseline scenario, whereas the optimistic and the adverse scenarios envisage average annual GDP changes of 3.5% and -0.6%, respectively, in the same period. All three scenarios represent an informed assessment of the macroeconomic outlook, on the basis of the latest available information on economic conditions and relevant risk factors. The corresponding weighted forecasts derived from the above paths are in line with the latest available official sector forecasts. The probability weighting of the three forward-looking macroeconomic scenarios, i.e., baseline, optimistic and adverse, remained identical to those of 31 December 2022. Specifically, a probability weighting of 55%, 20% and 25% was assigned, respectively.
The macroeconomic variables utilized by the Bank relate to Greek economic factors, while the ECL allowance is mainly driven by the changes in GDP and House Price Index ("HPI"). GDP growth, directly or indirectly, affects the whole spectrum of the projected macro variables which are conditioned on the GDP path, including the HPI. The annual GDP growth in the baseline scenario is projected at 2.5%, on average, in FY.2023 and 2.3% in FY.2024 from 6.0% in FY.2022. For the HPI, the values corresponding to the optimistic scenario are exogenously assumed to be equal to those of the baseline over the projection period, in view of the uncertainty and the idiosyncratic non-modelled drivers of this market under the current juncture. The annual HPI growth in the baseline and the optimistic scenarios over the 2023-2027 period is projected at 4.9%, on average, compared with 1.6% in the same period under the adverse scenario.
A multiplicity of factors continues to affect the ECL allowance, with the main risks related to: i) a more aggressive monetary policy tightening by the ECB in response to the persistent underlying price increases and high food inflation as well as weakened euro area growth prospects against a more challenging global economic and financial environment, ii) the risk of resurgence of energy price pressures, in the event of a new escalation of Ukraine crisis or a stronger-than-expected increase in global demand and/or supply cuts by major energy producers, which is combined with limited margins for new fiscal interventions as the period of enhanced fiscal flexibility in the EU effectively ends in December 2023, and iii) new, more significant incidences of financial system stress, following the pressures in some peripheral US banks in 1H.2023 which were effectively contained until now. The Group will continue to evaluate the ECL allowance and the related economic conditions each quarter, in order to timely capture any changes arising from uncertainty on macroeconomic trends.
The Group manages its business through the following business segments:
Retail banking includes all individual customers, professionals, small-medium and small-sized companies (companies with annual turnover of up to €2.5 million). The Bank, through its extended network of branches and digital business, offers to its retail customers various types of loans (mortgage, consumer and small business lending), cards (debit, credit and prepaid cards), deposit, investment and bancassurance products, as well as a wide range of other traditional services and products.
Corporate & investment banking includes lending to all large and medium-sized companies and shipping finance except for exposures transferred to the Special Assets Unit ("SAU") and investment banking activities. The Group offers its corporate customers a wide range of products and services, including financial and investment advisory services, deposit accounts, loans (denominated in both euro and foreign currency), foreign exchange and trade service activities.
In order to (a) manage more effectively delinquent, non-performing and denounced loans and (b) ensure compliance with the provisions of the Bank of Greece Executive Committee Act 42/30.5.2014 and Act 47/9.2.2015 and the Code of Conduct (referred to in Article 1(2) of Greek Law 4224/2013), the Bank established two dedicated and independent internal units, one responsible for the management of the Bank's retail loans (the Retail Collection Unit ("RCU")) and the other for the Bank's corporate delinquent exposures the SAU, which have the overall responsibility for the management of such loans (end-to-end responsibility). In 2022, a new business, SAS was setup in order to expand business in the emerging ecosystem of NPE's portfolio servicers and investors (e.g. acquisition financing, Real Estate Operating companies ("REOCo") financing).
Global markets and asset management includes all treasury activities, asset management (mutual funds and closed end funds), custody services, private equity and brokerage.
Until 31 March 2022, the Group offered a wide range of insurance products through its subsidiary company NIC and other subsidiaries in SEE. NIC was classified as Held for Sale and Discontinued Operations. On 31 March 2022, the disposal of NIC to CVC Capital Partners was completed (see Note 20 "Acquisitions, disposals and other capital transactions").
The Group's international banking activities include a wide range of traditional commercial banking services, such as commercial and retail credit, trade financing, foreign exchange and taking of deposits. In addition, the Group offers shipping finance, investment banking and brokerage services through certain of its foreign branches and subsidiaries. The profit or losses from discontinued operations for the period ended 30 June 2022 include CAC Coral Ltd. The disposal of CAC Coral Ltd was completed on 15 July 2022 (see Note 20 "Acquisitions, disposals and other capital transactions").
Includes proprietary real estate management, warehousing business as well as unallocated income and expense of the Group.
6-month period ended
| Global | ||||||||
|---|---|---|---|---|---|---|---|---|
| Corporate & | markets & | International | ||||||
| Retail | Investment | Asset | Banking | |||||
| 30.06.2023 | Banking | Banking | TAU & SAS | Management | Insurance | Operations | Other | Group |
| Net interest income | 719 | 326 | 52 | (96) | - | 48 | 3 | 1,052 |
| Net fee and commission income | 88 | 57 | 5 | 13 | - | 8 | 7 | 178 |
| Other | (10) | (12) | (3) | 118 | - | 12 | (62) | 43 |
| Total income | 797 | 371 | 54 | 35 | - | 68 | (52) | 1,273 |
| Direct costs | (164) | (20) | (3) | (11) | - | (26) | (38) | (262) |
| Allocated costs and provisions(1) | (103) | 29 | (165) | 9 | - | (11) | (39) | (280) |
| Share of profit of equity method investments |
- | - | - | - | - | - | 1 | 1 |
| Profit / (loss) before tax | 530 | 380 | (114) | 33 | - | 31 | (128) | 732 |
| Tax benefit / (expense) | (201) | |||||||
| Profit for the period from | ||||||||
| continuing operations | 531 | |||||||
| Non-controlling interests | (1) | |||||||
| Profit attributable to NBG equity shareholders |
530 | |||||||
| Depreciation and amortisation(1) | 23 | 2 | 1 | - | - | 2 | 65 | 93 |
| Credit provisions and other | ||||||||
| impairment charges | 3 | (56) | 151 | (18) | - | 11 | 30 | 121 |
(1) Includes depreciation and amortisation on investment property, property & equipment and software.
| Corporate & | Global markets & | International | ||||||
|---|---|---|---|---|---|---|---|---|
| 30.06.2022 | Retail Banking | Investment Banking |
ΤAU & SAS | Asset Management |
Insurance | Banking Operations |
Other | Group |
| Net interest income | 121 | 251 | 67 | 136 | - | 36 | (11) | 600 |
| Net fee and commission income | 85 | 55 | 5 | 12 | - | 10 | 3 | 170 |
| Other | (9) | 18 | (6) | 323 | - | 13 | (39) | 300 |
| Total income | 197 | 324 | 66 | 471 | - | 59 | (47) | 1,070 |
| Direct costs | (161) | (20) | (3) | (12) | - | (26) | (43) | (265) |
| Allocated costs and provisions(2) | (68) | (60) | (120) | (16) | - | (8) | (84) | (356) |
| Share of profit of equity method | ||||||||
| investments | - | - | - | - | - | - | 1 | 1 |
| Profit / (loss) before tax | (32) | 244 | (57) | 443 | - | 25 | (173) | 450 |
| Tax benefit / (expense) | (137) | |||||||
| Profit for the period from continuing | ||||||||
| operations | 313 | |||||||
| Non controlling interests | (1) | |||||||
| Profit / (loss) for the period from | ||||||||
| discontinued operations | - | - | - | - | 240 | (6) | - | 234 |
| Profit attributable to NBG equity | ||||||||
| shareholders | 546 | |||||||
| Depreciation, amortisation(2) | 20 | 1 | 1 | 1 | - | 3 | 57 | 83 |
| Credit provision and other | ||||||||
| impairment charges | (25) | 38 | 104 | 8 | - | 8 | 18 | 151 |
(2) Includes depreciation and amortisation on investment property, property & equipment and software.
| Retail Banking | Corporate & Investment Banking |
ΤAU & SAS | Global Μarkets & Asset Management |
International Banking Operations |
Other | Group | |
|---|---|---|---|---|---|---|---|
| Segment assets as at 30 June 2023 | |||||||
| Segment assets | 7,364 | 23,322 | 2,836 | 27,236 | 2,700 | 4,215 | 67,673 |
| Current income tax advance and deferred tax assets | - | - | - | - | - | - | 4,733 |
| Non-current assets held for sale | - | - | 389 | - | - | 54 | 443 |
| Total assets | 72,849 | ||||||
| Segment liabilities as at 30 June 2023 Segment liabilities |
46,214 | 5,743 | 176 | 8,551 | 1,752 | 3,310 | 65,746 |
| Current income and deferred tax liabilities | - | - | - | - | - | - | 19 |
| Liabilities associated with non-current assets held for sale |
- | - | - | - | - | 25 | 25 |
| Total liabilities | 65,790 | ||||||
| Retail Banking |
Corporate & Investment Banking |
ΤAU & SAS | Global Μarkets & Asset Management |
International Banking Operations |
Other | Group | |
| Segment assets as at 31 December 2022 | |||||||
| Segment assets | 7,352 | 23,693 | 3,054 | 31,694 | 2,608 | 4,304 | 72,705 |
| Current income tax advance and deferred tax assets | - | - | - | - | - | - | 4,913 |
| Non-current assets held for sale | - | - | 438 | - | - | 57 | 495 |
| Total assets | 78,113 | ||||||
| Segment liabilities as at 31 December 2022 | |||||||
| Segment liabilities | 45,411 | 6,364 | 180 | 14,552 | 1,794 | 3,294 | 71,595 |
| Current income and deferred tax liabilities | - | - | - | - | - | - | 18 |
| Liabilities associated with non-current assets held for sale |
- | - | - | - | - | 25 | 25 |
| Total liabilities | 71,638 |
6-month period ended
| Global | ||||||||
|---|---|---|---|---|---|---|---|---|
| Corporate & | markets & | International | ||||||
| Retail | Investment | Asset | Banking | |||||
| 30.06.2023 | Banking | Banking | TAU & SAS | Management | Insurance | Operations | Other | Group |
| Custody, brokerage & investment | ||||||||
| banking | 1 | - | - | 8 | - | - | - | 9 |
| Retail lending fees | 48 | - | 2 | - | - | 6 | 1 | 57 |
| Corporate lending fees | 8 | 45 | 1 | - | - | 1 | 3 | 58 |
| Banking fees & similar charges | 51 | 15 | 3 | 1 | - | 7 | 7 | 84 |
| Fund management fees | - | - | - | 8 | - | - | - | 8 |
| Total Commisions Income | 108 | 60 | 6 | 17 | - | 14 | 11 | 216 |
| Global | ||||||||
|---|---|---|---|---|---|---|---|---|
| Corporate & | markets & | International | ||||||
| 30.06.2022 | Retail Banking |
Investment Banking |
TAU & SAS | Asset Management |
Insurance | Banking Operations |
Other | Group |
| Custody, brokerage & investment | ||||||||
| banking | 1 | - | - | 9 | - | - | - | 10 |
| Retail lending fees | 68 | - | 2 | - | - | 6 | - | 76 |
| Corporate lending fees | 8 | 45 | 1 | 2 | - | 2 | - | 58 |
| Banking fees & similar charges | 45 | 13 | 3 | - | - | 7 | 3 | 71 |
| Fund management fees | - | - | - | 6 | - | - | - | 6 |
| Total Commisions Income | 122 | 58 | 6 | 17 | - | 15 | 3 | 221 |
| Group | Bank | ||||
|---|---|---|---|---|---|
| Continuing Operations | 30.06.2023 | 30.06.2022 | 30.06.2023 | 30.06.2022 | |
| Net trading result and other net unrealized gains / (losses) from financial assets or liabilities at fair value through profit or loss |
41 | 366 | 40 | 363 | |
| Net gain / (loss) from disposal of financial assets measured at fair value through other comprehensive income |
20 | (88) | 20 | (88) | |
| Net trading result and other net unrealized gains / (losses) from financial assets or liabilities mandatorily measured at fair value through profit or loss |
(35) | 10 | (35) | 10 | |
| Total net trading income / (loss) and results from investment securities | 26 | 288 | 25 | 285 |
| Group | Bank | ||||
|---|---|---|---|---|---|
| Continuing Operations | 30.06.2023 | 30.06.2022 | 30.06.2023 | 30.06.2022 | |
| Gains / (losses) arising from the derecognition of financial assets measured at amortised | |||||
| cost | 49 | 54 | 49 | 54 | |
| Total | 49 | 54 | 49 | 54 |
| Group | Bank | |||||
|---|---|---|---|---|---|---|
| 6-month period ended | 6-month period ended | |||||
| Continuing Operations a. Impairment charge for ECL Loans and advances to customers at amortised cost Net modification (gain)/loss b. Impairment charge for securities Investment in debt instruments c. Other provisions and impairment charges Impairment of investment property, property and equipment, software & other intangible assets and other assets Impairment of investment in subsidiaries and equity method investments Legal and other provisions |
Note | 30.06.2023 | 30.06.2022 | 30.06.2023 | 30.06.2022 | |
| 9 | 105 | 101 | 95 | 80 | ||
| 9 | 4 | 3 | 4 | 3 | ||
| 109 | 104 | 99 | 83 | |||
| (19) | 8 | (19) | 8 | |||
| (19) | 8 | (19) | 8 | |||
| 1 | - | - | - | |||
| - | 21 | 1 | 13 | |||
| 30 | 18 | 29 | 12 | |||
| 31 | 39 | 30 | 25 | |||
| Total | 121 | 151 | 110 | 116 |
For the period ended 30 June 2023, restructuring costs include NIL for the Group and the Bank relating to the Exit Schemes (30 June 2022: €59 million) and €2 million direct expenditure relating to the Transformation Program for the Group and the Bank (30 June 2022: €3 million).
| Group 6-month period ended |
Bank 6-month period ended |
|||
|---|---|---|---|---|
| Continuing Operations | 30.06.2023 | 30.06.2022 | 30.06.2023 | 30.06.2022 |
| Current tax | (4) | (49) | 1 | (45) |
| Deferred tax | (197) | (88) | (196) | (87) |
| Tax benefit / (expense) | (201) | (137) | (195) | (132) |
The nominal corporation tax rate for the Bank is 29%. The withholding tax on dividends distributed is 5%.
The unaudited tax years of the Group's investments accounted for by applying the equity method of accounting and subsidiaries are presented in Note 21 "Group companies".
The corporate income tax rate for legal entities, other than credit institutions, is 22%.
| Group | Bank | ||||
|---|---|---|---|---|---|
| 6-month period ended | 6-month period ended | ||||
| 30.06.2023 | 30.06.2022 | 30.06.2023 | 30.06.2022 | ||
| Profit for the period attributable to NBG equity shareholders from continuing operations |
530 | 312 | 494 | 302 | |
| Profit / (loss) for the period from discontinued operations (see Note 11) | - | 234 | - | (8) | |
| Profit for the period attributable to NBG ordinary shareholders from continuing and discontinued operations |
530 | 546 | 494 | 294 | |
| Weighted average number of ordinary shares outstanding for basic and diluted EPS |
914,657,642 | 914,688,783 | 914,715,153 | 914,715,153 | |
| Earnings per share (Euro) - Basic and diluted from continuing operations | 0.58 | 0.34 | 0.54 | 0.33 | |
| Earnings per share (Euro) - Basic and diluted from continuing and discontinued operations |
0.58 | 0.60 | 0.54 | 0.32 |
| Group | Bank | |||
|---|---|---|---|---|
| 30.06.2023 | 31.12.2022 | 30.06.2023 | 31.12.2022 | |
| Loans and advances to customers at amortised cost | ||||
| Mortgage loans | 7,742 | 7,906 | 7,424 | 7,608 |
| Consumer loans | 1,626 | 1,633 | 983 | 1,012 |
| Credit cards | 467 | 459 | 416 | 407 |
| Small business lending | 1,494 | 1,508 | 1,344 | 1,344 |
| Retail lending | 11,329 | 11,506 | 10,167 | 10,371 |
| Corporate and public sector lending | 24,629 | 25,049 | 23,904 | 24,305 |
| Gross carrying amount of loans and advances to customers at amortised cost | 35,958 | 36,555 | 34,071 | 34,676 |
| ECL allowance on loans and advances to customers at amortised cost | (1,428) | (1,493) | (1,319) | (1,393) |
| Net carrying amount of loans and advances to customers at amortised cost | 34,530 | 35,062 | 32,752 | 33,283 |
| Loans and advances to customers mandatorily measured at FVTPL | 446 | 499 | 446 | 499 |
| Total Loans and advances to customers | 34,976 | 35,561 | 33,198 | 33,782 |
As at 30 June 2023, the gross carrying amount of loans and advances to customers at amortised cost in corporate and public sector lending includes the Frontier senior notes of €2,623 million (31 December 2022: €2,795 million) and a short-term reverse repo of €3,000 million (31 December 2022: €3,200 million), for the Group and the Bank.
Loans and advances to customers at amortised cost and mandatorily measured at FVTPL | Group
| As at 30 June 2023 | Stage 1 12-month ECL |
Stage 2 Lifetime ECL |
Credit impaired Lifetime ECL |
Total |
|---|---|---|---|---|
| Loans and advances to customers at amortised cost | ||||
| Mortgage loans | ||||
| Gross carrying amount | 4,967 | 2,239 | 536 | 7,742 |
| ECL allowance | (21) | (104) | (163) | (288) |
| Net carrying amount | 4,946 | 2,135 | 373 | 7,454 |
| Consumer loans | ||||
| Gross carrying amount | 1,292 | 175 | 159 | 1,626 |
| ECL allowance | (26) | (25) | (111) | (162) |
| Net carrying amount | 1,266 | 150 | 48 | 1,464 |
| Credit cards | ||||
| Gross carrying amount | 421 | 16 | 30 | 467 |
| ECL allowance | (8) | (2) | (27) | (37) |
| Net carrying amount | 413 | 14 | 3 | 430 |
| Small business lending | ||||
| Gross carrying amount | 679 | 604 | 211 | 1,494 |
| ECL allowance | (13) | (65) | (118) | (196) |
| Net carrying amount | 666 | 539 | 93 | 1,298 |
| Corporate lending (1) | ||||
| Gross carrying amount | 22,114 | 996 | 850 | 23,960 |
| ECL allowance | (132) | (72) | (511) | (715) |
| Net carrying amount | 21,982 | 924 | 339 | 23,245 |
| Public sector lending | ||||
| Gross carrying amount | 625 | 30 | 14 | 669 |
| ECL allowance | (7) | (10) | (13) | (30) |
| Net carrying amount | 618 | 20 | 1 | 639 |
| Total loans and advances to customers at amortised cost | ||||
| Gross carrying amount | 30,098 | 4,060 | 1,800 | 35,958 |
| ECL allowance | (207) | (278) | (943) | (1,428) |
| Net carrying amount of loans and advances to customers at amortised cost | 29,891 | 3,782 | 857 | 34,530 |
| Loans and advances to customers mandatorily measured at FVTPL | 446 | |||
| Total loans and advances to customers | 34,976 |
(1) The senior notes relating to the Frontier securitization and the short-term reverse repo are included in Stage 1 of Corporate lending.
| Stage 1 | Stage 2 | Credit impaired | ||
|---|---|---|---|---|
| As at 31 December 2022 Loans and advances to customers at amortised cost |
12-month ECL | Lifetime ECL | Lifetime ECL | Total |
| Mortgage loans | ||||
| Gross carrying amount | 5,010 | 2,467 | 429 | 7,906 |
| ECL allowance | (26) | (98) | (148) | (272) |
| Net carrying amount | 4,984 | 2,369 | 281 | 7,634 |
| Consumer loans | ||||
| Gross carrying amount | 1,203 | 281 | 149 | 1,633 |
| ECL allowance | (23) | (30) | (101) | (154) |
| Net carrying amount | 1,180 | 251 | 48 | 1,479 |
| Credit cards | ||||
| Gross carrying amount | 409 | 17 | 33 | 459 |
| ECL allowance | (8) | (2) | (31) | (41) |
| Net carrying amount | 401 | 15 | 2 | 418 |
| Small business lending | ||||
| Gross carrying amount | 679 | 629 | 200 | 1,508 |
| ECL allowance | (14) | (70) | (118) | (202) |
| Net carrying amount | 665 | 559 | 82 | 1,306 |
| Corporate lending (1) | ||||
| Gross carrying amount | 22,307 | 1,153 | 945 | 24,405 |
| ECL allowance | (134) | (91) | (577) | (802) |
| Net carrying amount | 22,173 | 1,062 | 368 | 23,603 |
| Public sector lending | ||||
| Gross carrying amount | 581 | 49 | 14 | 644 |
| ECL allowance | (7) | (3) | (12) | (22) |
| Net carrying amount | 574 | 46 | 2 | 622 |
| Total loans and advances to customers at amortised cost | ||||
| Gross carrying amount | 30,189 | 4,596 | 1,770 | 36,555 |
| ECL allowance | (212) | (294) | (987) | (1,493) |
| Net carrying amount of loans and advances to customers at amortised cost | 29,977 | 4,302 | 783 | 35,062 |
| Loans and advances to customers mandatorily measured at FVTPL | 499 | |||
| Total loans and advances to customers | 35,561 |
(1) The senior notes relating to the Frontier securitization and the short-term reverse repo are included in Stage 1 of Corporate lending.
Loans and advances to customers at amortised cost and mandatorily measured at FVTPL | Bank
| As at 30 June 2023 | Stage 1 12-month ECL |
Stage 2 Lifetime ECL |
Credit impaired Lifetime ECL |
Total |
|---|---|---|---|---|
| Loans and advances to customers at amortised cost | ||||
| Mortgage loans | ||||
| Gross carrying amount | 4,796 | 2,103 | 525 | 7,424 |
| ECL allowance | (21) | (103) | (158) | (282) |
| Net carrying amount | 4,775 | 2,000 | 367 | 7,142 |
| Consumer loans | ||||
| Gross carrying amount | 745 | 121 | 117 | 983 |
| ECL allowance | (20) | (19) | (86) | (125) |
| Net carrying amount | 725 | 102 | 31 | 858 |
| Credit cards | ||||
| Gross carrying amount | 373 | 15 | 28 | 416 |
| ECL allowance | (8) | (2) | (26) | (36) |
| Net carrying amount | 365 | 13 | 2 | 380 |
| Small business lending | ||||
| Gross carrying amount | 569 | 571 | 204 | 1,344 |
| ECL allowance | (12) | (64) | (116) | (192) |
| Net carrying amount | 557 | 507 | 88 | 1,152 |
| Corporate lending (1) | ||||
| Gross carrying amount | 21,813 | 707 | 744 | 23,264 |
| ECL allowance | (138) | (62) | (454) | (654) |
| Net carrying amount | 21,675 | 645 | 290 | 22,610 |
| Public sector lending | ||||
| Gross carrying amount | 598 | 28 | 14 | 640 |
| ECL allowance | (7) | (10) | (13) | (30) |
| Net carrying amount | 591 | 18 | 1 | 610 |
| Total loans and advances to customers at amortised cost | ||||
| Gross carrying amount | 28,894 | 3,545 | 1,632 | 34,071 |
| ECL allowance | (206) | (260) | (853) | (1,319) |
| Net carrying amount of loans and advances to customers at amortised cost | 28,688 | 3,285 | 779 | 32,752 |
| Loans and advances to customers mandatorily measured at FVTPL | 446 | |||
| Total loans and advances to customers | 33,198 |
(1) The senior notes relating to the Frontier securitization and the short-term reverse repo are included in Stage 1 of Corporate lending.
| Stage 1 | Stage 2 | Credit impaired | ||
|---|---|---|---|---|
| As at 31 December 2022 | 12-month ECL | Lifetime ECL | Lifetime ECL | Total |
| Loans and advances to customers at amortised cost | ||||
| Mortgage loans | ||||
| Gross carrying amount | 4,848 | 2,341 | 419 | 7,608 |
| ECL allowance | (26) | (98) | (143) | (267) |
| Net carrying amount | 4,822 | 2,243 | 276 | 7,341 |
| Consumer loans | ||||
| Gross carrying amount | 761 | 140 | 111 | 1,012 |
| ECL allowance | (20) | (22) | (82) | (124) |
| Net carrying amount | 741 | 118 | 29 | 888 |
| Credit cards | ||||
| Gross carrying amount | 367 | 10 | 30 | 407 |
| ECL allowance | (8) | (1) | (30) | (39) |
| Net carrying amount | 359 | 9 | - | 368 |
| Small business lending | ||||
| Gross carrying amount | 556 | 599 | 189 | 1,344 |
| ECL allowance | (14) | (69) | (114) | (197) |
| Net carrying amount | 542 | 530 | 75 | 1,147 |
| Corporate lending (1) | ||||
| Gross carrying amount | 22,029 | 829 | 829 | 23,687 |
| ECL allowance | (140) | (83) | (521) | (744) |
| Net carrying amount | 21,889 | 746 | 308 | 22,943 |
| Public sector lending | ||||
| Gross carrying amount | 580 | 24 | 14 | 618 |
| ECL allowance | (7) | (3) | (12) | (22) |
| Net carrying amount | 573 | 21 | 2 | 596 |
| Total loans and advances to customers at amortised cost | ||||
| Gross carrying amount | 29,141 | 3,943 | 1,592 | 34,676 |
| ECL allowance | (215) | (276) | (902) | (1,393) |
| Net carrying amount of loans and advances to customers at amortised cost | 28,926 | 3,667 | 690 | 33,283 |
| Loans and advances to customers mandatorily measured at FVTPL | 499 | |||
| Total loans and advances to customers | 33,782 | |||
(1) The senior notes relating to the Frontier securitization and the short-term reverse repo are included in Stage 1 of Corporate lending.
| Stage 1 | Stage 2 | Credit impaired | Total ECL | |
|---|---|---|---|---|
| Group | 12-month ECL | Lifetime ECL | Lifetime ECL | allowance |
| ECL allowance at 1 January 2023 | 212 | 294 | 987 | 1,493 |
| Transfers between Stages | 33 | (24) | (9) | - |
| Impairment charge for ECL (Note 5) | (38) | 8 | 135 | 105 |
| Modification impact on ECL | - | - | 3 | 3 |
| Write-offs | - | - | (122) | (122) |
| Change in the present value of the ECL allowance | - | - | (5) | (5) |
| Foreign exchange differences and other movements | - | - | (14) | (14) |
| Reclassified as Held for Sale | - | - | (32) | (32) |
| ECL allowance at 30 June 2023 | 207 | 278 | 943 | 1,428 |
| Group | Stage 1 12-month ECL |
Stage 2 Lifetime ECL |
Credit impaired Lifetime ECL |
Total ECL allowance |
|---|---|---|---|---|
| ECL allowance at 1 January 2022 | 204 | 272 | 1,179 | 1,655 |
| Transfers between Stages | 53 | 66 | (119) | - |
| Impairment charge for ECL | (37) | (46) | 301 | 218 |
| Modification impact on ECL | - | - | (2) | (2) |
| Write-offs | - | - | (218) | (218) |
| Change in the present value of the ECL allowance | - | - | (12) | (12) |
| Foreign exchange differences and other movements | (8) | 2 | (86) | (92) |
| Reclassified as Held for Sale | - | - | (56) | (56) |
| ECL allowance at 31 December 2022 | 212 | 294 | 987 | 1,493 |
Total impairment charge for ECL on loans and advances to customers measured at amortised cost for the six-month period ended on 30 June 2023 for the Group of €109 million, also includes the net modification loss of €4 million related to the loans and advances to customers with lifetime ECL whose cash flows were modified during the period, as disclosed in Note 5 "Credit provisions and other impairment charges". The respective figures for the year ended on 31 December 2022 are an impairment charge of €217 million and a net modification gain of €1 million. The impact of modification on the ECL allowance associated with these assets was a charge of €3 million (31 December 2022: release of €2 million) for the Group, as disclosed in the Movement of the ECL allowance on loans and advances to customers at amortised cost presented above.
| Bank | Stage 1 12-month ECL |
Stage 2 Lifetime ECL |
Credit impaired Lifetime ECL |
Total ECL allowance |
|---|---|---|---|---|
| ECL allowance at 1 January 2023 | 215 | 276 | 902 | 1,393 |
| Transfers between Stages | 26 | (19) | (7) | - |
| Impairment charge for ECL (Note 5) | (35) | 3 | 127 | 95 |
| Modification impact on ECL | - | - | 3 | 3 |
| Write-offs | - | - | (115) | (115) |
| Change in the present value of the ECL allowance | - | - | (5) | (5) |
| Foreign exchange differences and other movements | - | - | (17) | (17) |
| Reclassified as Held for Sale | - | - | (35) | (35) |
| ECL allowance at 30 June 2023 | 206 | 260 | 853 | 1,319 |
| Stage 1 | Stage 2 | Credit impaired | Total ECL | |
|---|---|---|---|---|
| Bank | 12-month ECL | Lifetime ECL | Lifetime ECL | allowance |
| ECL allowance at 1 January 2022 | 205 | 261 | 1,077 | 1,543 |
| Transfers between Stages | 51 | 67 | (118) | - |
| Impairment charge for ECL | (35) | (51) | 272 | 186 |
| Modification impact on ECL | - | - | (2) | (2) |
| Write-offs | - | - | (165) | (165) |
| Change in the present value of the ECL allowance | - | - | (12) | (12) |
| Foreign exchange differences and other movements | (6) | (1) | (94) | (101) |
| Reclassified as Held for Sale | - | - | (56) | (56) |
| ECL allowance at 31 December 2022 | 215 | 276 | 902 | 1,393 |
Total impairment charge for ECL on loans and advances to customers measured at amortised cost for the six-month period ended on 30 June 2023 for the Bank of €99 million, also includes the net modification loss of €4 million related to the loans and advances to customers with lifetime ECL whose cash flows were modified during the period, as disclosed in Note 5 "Credit provisions and other impairment charges". The respective figures for the year ended on 31 December 2022 are an impairment charge of €185 million and a net modification gain of €1 million. The impact of modification on the ECL allowance associated with these assets was a charge of €3 million (31 December 2022: release of €2 million) for the Bank, as disclosed in the Movement of the ECL allowance on loans and advances to customers at amortised cost presented above.
Management adjustments may be performed to factor in certain conditions and circumstances prevailing at the reporting date which are not fully captured into the ECL models, based on management judgment, resulting in either an increase or a decrease in the total ECL allowance.
Management adjustments relate to post-model adjustments ("PMAs") to the ECL model output which are calculated and allocated at a granular level following relevant risk assessment and analysis as well as to in-model adjustments to model inputs.
More specifically, the Group, in the context of its provisional framework, may occasionally make use of PMAs based on expert credit judgment, to capture additional risks and incorporate the impact from new economic conditions and related macroeconomic uncertainties as a result of unexpected events, which may not be timely reflected in the ECL model outputs. PMAs may also relate to accounting requirements not incorporated in the ECL model output due to model limitations. Management critically assesses the prevailing economic conditions at each quarter and determines whether PMAs are warranted to address emerging risks or whether prior period PMAs are no longer required, incorporating the related uncertainties in the estimation of expected credit losses in a valid, consistent and efficient manner, in accordance with the Group's internal respective frameworks. The determination and estimation of PMAs is performed in accordance with established dedicated processes and is subject to strict governance arrangements, ensuring the adequacy and soundness of the ECL measurement under IFRS 9.
As at 30 June 2023, PMAs include adjustments relating to the economic uncertainty resulting from the increasing interest rates, persistence of inflationary and energy-related pressures and geopolitical tensions as well as financial market volatility, which may have an adverse impact on the credit condition of corporates and households, depending on their sensitivity to the macro-financial environment. In this context, PMAs have been applied on exposures of retail and corporate obligors that relate to risk sensitive segments considering their respective risk profiles, which are considered most vulnerable to further deterioration of the economic conditions and related financial pressures caus ed by increasing cost of living and higher operating costs. The adjustment is performed on performing exposures and involves the application of increased provision coverage rates, following relevant risk assessment. Furthermore, other management adjustments have also been applied, mainly focusing on recovery strategies to be pursued for NPEs.
As at 31 December 2022, PMAs included similar adjustments relating to the economic uncertainty resulting from the aforementio ned factors, and had been applied on exposures of retail and corporate obligors that had been either under post support measures during 2022 or related to other risk sensitive segments considering their respective risk profiles. Furthermore, other management adjustments had also been applied, mainly focusing on recovery strategies to be pursued for NPEs.
During the second quarter of 2023 the Bank purchased certain real estate assets that it had formerly been leasing. The assets recognized under Property and Equipment associated with the purchase of these real estate, amounted to €151 million for the Group and the Bank .
This resulted in the termination of the associated leases and thus, a reduction of €173 million and €179 million reduction in the RoU asset and the lease liability respectively for the Group and €145 million and €153 million reduction in the RoU asset and the lease liability respectively for the Bank. As a result of this transaction, the Group and the Bank recognized a gain in other income of €6 million and €8 million, respectively.
Furthermore, the Bank has entered into a memorandum of understanding to buy additional real estate assets for an amount of approximately €154 million. These real estate assets are currently being leased.
Non-current assets held for sale as at 30 June 2023 and as at 31 December 2022 comprise of Probank Leasing S.A. (part of Project "Pronto", see below), as well as loan portfolio disposals mainly relating to Projects "Frontier II", Project "Solar" and Project "Pronto". Profit / (loss) from discontinued operations for the period ended 30 June 2022, comprises of NIC and CAC Coral Ltd.
On 24 March 2021, NBG's Board of Directors approved the sale of the 90.01% out of 100% stake in NIC and authorized the Bank's Management to proceed with the signing of the Share Sale and Purchase Agreement ("SPA") with CVC Capital Partners ("CVC") on 26 March 2021. The transaction was approved by the Extraordinary General Meeting of NBG's Shareholders held on 21 April 2021.
The closing of the transaction took place on 31 March 2022, following the reception of the required supervisory approvals by national and EU authorities (see Note 20 "Acquisitions, disposals and other capital transactions").
On 16 October 2020, a sale and purchase agreement was signed with Bain Capital for the sale of a 100% stake in CAC Coral Ltd.
The transaction was concluded on 15 July 2022, after the approval of the competent regulatory authorities, (see Note 20 "Acquisitions, disposals and other capital transactions").
In the context of deleveraging its NPEs through inorganic actions and according to its NPE Divestment Policy, the Bank decided the disposal of a portfolio of Greek Non-Performing Exposures in the form of a rated securitization that will utilize the provisions of Hellenic Asset Protection Scheme ("HAPS"), known as Hercules II. The portfolio includes secured Large Corporate, Small and Medium Enterprises, Small Business Lending, Residential Mortgage loans and Consumer loans with a total gross book value of c. €1 billion (as of the cut-off date 31 December 2021).
On 29 July 2022, the Bank announced that it has entered into a definitive agreement with funds managed by Bracebridge Capital LLC for the sale of 95% of the Mezzanine and Junior notes. NBG will retain the 100% of the Senior notes and 5% of the Mezzanine and Junior notes.
The transaction is estimated to be completed within the 2Η.2023, subject to required approvals.
The Bank decided the disposal of the Non-Performing leasing exposures through: i) the sale of the shares of the Probank Leasing S.A. and ii) the sale of the Bank's leasing portfolio (ex-FBB) and NBG Leasing S.A. ("NBGL") leasing portfolio, with a total gross book value of €51 million as of the 31 December 2022.
The transaction is estimated to be completed within the 2H.2023, subject to required approvals.
In December 2021, the Bank decided to launch the divestment of the secured portfolio of SMEs (Project "Solar") with a gross book value c. €170 million (as of the cut-off date 30 September 2021), through a joint securitization process with the other Greek financial institutions under HAPS. In August 2022, the Bank together with the other Greek financial institutions submitted to the Greek Ministry of Finance a joint application for inclusion of the senior notes to be issued in the context of the Solar Securitization in the HAPS scheme.
The transaction is expected to be completed within the 2Η.2023, subject to required approvals.
| Condensed Income Statement of discontinued operations | Group | Bank | ||
|---|---|---|---|---|
| 6-month period ended | 6-month period ended | |||
| € million | 30.06.2023 | 30.06.2022(1) | 30.06.2023 | 30.06.2022 |
| Net interest income | - | 8 | - | - |
| Net fee and commission income | - | (3) | - | - |
| Earned premia net of claims and commissions | - | 49 | - | - |
| Net trading income / (loss) and results from investments securities | - | (4) | - | - |
| Other income | - | 1 | - | - |
| Total income | - | 51 | - | - |
| Operating expenses | - | (18) | ||
| Credit Provisions and other impairment charges (2) | - | 174 | - | (10) |
| Profit before tax | - | 207 | - | (10) |
| Tax benefit/(expense) | - | (7) | - | 2 |
| Profit for the period from discontinued operations | - | 200 | - | (8) |
| Profit on disposal (see Note 20) | - | 34 | - | - |
| Total profit for the period from discontinued operations (attributable to NBG equity | ||||
| shareholders) | - | 234 | - | (8) |
(1) Includes NIC and CAC Coral Ltd.
(2) Credit provisions and other impairment charges refer mainly to remeasurement impairments of NIC.
| Cash Flows from discontinued operations | Group | Bank | |||
|---|---|---|---|---|---|
| 6-month period ended | 6-month period ended | ||||
| € million | 30.06.2023 | 30.06.2022 | 30.06.2023 | 30.06.2022 | |
| Net cash inflows/(outflows) from operating activities | - | (1) | - | - | |
| Net cash inflows/(outflows) from investing activities | - | - | - | - | |
| Net cash inflows/(outflows) from financing activities | - | - | - | - | |
| Net Cash inflows /(outflows) | - | (1) | - | - |
| Group | Bank | |||
|---|---|---|---|---|
| ASSETS | 30.06.2023(1) | 31.12.2022(1) | 30.06.2023(1) | 31.12.2022 |
| Loans and advances to customers | 442 | 494 | 386 | 438 |
| Investments in subsidiaries | - | - | 2 | 3 |
| Other assets | 1 | 1 | - | - |
| Total assets | 443 | 495 | 388 | 441 |
| LIABILITIES | ||||
| Other liabilities | 25 | 25 | - | - |
| Total liabilities | 25 | 25 | - | - |
(1) Includes Probank Leasing S.A.
Due to Banks mainly comprise of the Bank's participation in the TLTRO III operations which as at 30 June 2023 amounted to €1.9 billion (31 December 2022: €8.1 billion). During the six-month period ended 30 June 2023, the Bank repaid €6.2 billion TLTROs. For more information regarding TLTRO III transactions please refer to Note 30 of the Annual Financial Statements as at and for the year ended 31 December 2022.
Αs at 30 June 2023, at a Group level, "Due to Banks" also include securities sold under agreements to repurchase with financial institutions of Nil and other deposits with financial institutions of €1.5 billion (31 December 2022: €0.1 billion and €1.6 billion, respectively). The corresponding figures for the Bank is Nil and €1.7 billion (31 December 2022: €0.1 billion and €1.8 billion, respectively).
| Group | Bank | ||||
|---|---|---|---|---|---|
| € million | 30.06.2023 | 31.12.2022 | 31.12.2022 | ||
| Deposits: | |||||
| Individuals | 43,128 | 42,122 | 41,653 | 40,692 | |
| Corporate | 10,673 | 11,348 | 10,602 | 11,294 | |
| Government and agencies | 1,870 | 1,722 | 1,866 | 1,718 | |
| Total | 55,671 | 55,192 | 54,121 | 53,704 |
| Group | Bank | ||||
|---|---|---|---|---|---|
| 30.06.2023 | 31.12.2022 | 30.06.2023 | 31.12.2022 | ||
| Deposits: | |||||
| Savings accounts | 29,974 | 31,333 | 29,697 | 31,050 | |
| Current & Sight accounts | 13,583 | 14,770 | 12,914 | 14,130 | |
| Time deposits | 10,146 | 7,177 | 9,553 | 6,625 | |
| Other deposits | 1,968 | 1,912 | 1,957 | 1,899 | |
| Total | 55,671 | 55,192 | 54,121 | 53,704 |
Included in time deposits are deposits which contain one or more embedded derivatives. The Group and the Bank have designated such deposits as financial liabilities at fair value through profit or loss. As at 30 June 2023, these deposits amounted to €772 million (31 December 2022: €608 million).
In accordance with Greek Law 4151/2013, all dormant deposit accounts are subject to statute of limitations of 20 years in fav our of the Greek State. All banks operating in Greece are required by April of every year to remit the cash balances of such dormant accounts to the Greek State. The Bank until 30 June 2023 had remitted to the Greek State €1.8 million in respect of dormant account balances (2022: NIL).
The Bank and certain of its subsidiaries are defendants in certain claims and legal actions and proceedings arising in the ordinary course of business. These actions and proceedings are generally based on alleged violations of consumer protection, banking, employment and other laws. None of these actions and proceedings is individually material. The Group establishes provisions for all litigations, for which it believes it is probable that a loss will be incurred and the amount of the loss can be reasonably estimated. These provisions may change from time to time, as appropriate, in light of additional information. For the cases for which a provision has not been recognized, management is not able to reasonably estimate possible losses, since the proceedings may last for many years, many of the proceedings are in early stages, there is uncertainty as to the likelihood of the final result, there is uncertainty as to the outcome of pending appeals and there are significant issues to be resolved. However, in the opinion of management, after consultation with legal counsel, the final outcome of these matters is not expected to have a material adverse effect on the Group and Bank's Statement of Financial Position, Income Statement and Cash Flow Statement, taking into account that as at 30 June 2023 the Group and the Bank have provided for cases under litigation the amount of €23 million and €12 million, respectively (31 December 2022: €30 million and €19 million, respectively).
Tax authorities have not yet audited all subsidiaries for certain financial years and accordingly their tax obligations for those years may not be considered final. Additional taxes and penalties may be imposed as a result of such tax audits; although the amount cannot be determined, it is not expected to have a material effect on the Group's and the Bank's Statement of Financial Position.
The years 2011-2016 have been tax audited by Deloitte Certified Public Accountants S.A., in accordance with article 82 of Greek Law 2238/1994 and subsequently with article 65A of Greek Law 4174/2013 and the tax audit certificates which were unqualified, were issued o n 27 July 2012, 27 September 2013, 10 July 2014, 30 October 2015, 30 September 2016 and 23 October 2017 respectively. The years 2017, 2018, 2019, 2020 and 2021 have been tax audited by PwC S.A. and the tax certificates, which were unqualified, were issued on 26 October 2018, 31 October 2019, 27 October 2020, 27 October 2021 and 27 October 2022, respectively. The year 2022 is currently tax audited by PwC S.A., however it is not expected to have a material effect on the Group's and the Bank's Statement of Financial Position.
On 31 March 2023, the right of the tax authorities to issue a deed for re-calculation of income tax for the years up to and including year 2016 expired. For the years 2017 onwards, in accordance with the Ministerial Decision 1006/2016 there is no exception from tax audit by the tax authorities for those entities that have been tax audited by an independent auditor who has issued an unqualified tax audit certificate.
Therefore, the tax authorities may re-audit the tax books of the Bank for those years. However, the Bank does not expect any material effect on the Group and the Bank's Statement of Financial Position.
For the subsidiaries and associates regarding unaudited tax years refer to Note 21 "Group companies".
In the normal course of business, the Group enters into contractual commitments on behalf of its customers and is a party to financial instruments with off-balance sheet risk to meet the financing needs of its customers. These contractual commitments consist of commitments to extend credit, commercial letters of credit and standby letters of credit and guarantees. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of the conditions established in the contract. Commercial letters of credit ensure payment by the Bank to a third party for a customer's foreign or domestic trade transactions, generally to finance a commercial contract for the shipment of goods. Standby letters of credit and financial guarantees are conditional commitments issued by the Group to guarantee the performance of a customer to a third party. All of these arrangements are related to the normal lending activities of the Group. The Group and the Bank's exposure to credit loss in the event of non-performance by the other party to the financial instrument for commitments to extend credit, commercial and standby letters of credit is represented by the contractual nominal amount of those instruments. The Group uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.
| Group | Bank | |||
|---|---|---|---|---|
| 30.06.2023 31.12.2022 |
30.06.2023 | 31.12.2022 | ||
| Standby letters of credit and financial guarantees written | 4,965 | 4,657 | 5,194 | 4,907 |
| Commercial letters of credit | 763 | 1,049 | 763 | 1,048 |
| Total credit related commitments | 5,728 | 5,706 | 5,957 | 5,955 |
In addition to the above, credit commitments also include commitments to extend credit which as at 30 June 2023 amounted to €12,786 million for the Group (31 December 2022: €13,504 million) and to €11,447 million for the Bank (31 December 2022: €12,414 million). Commitments to extend credit at 30 June 2023 do not include any amounts, which cannot be cancelled without certain conditions being met at any time and without notice, or for which automatic cancellation due to credit deterioration of the borrower is not allowed.
| Group | Bank | |||
|---|---|---|---|---|
| 30.06.2023 | 31.12.2022 | 30.06.2023 | 31.12.2022 | |
| Assets pledged as collateral | 2,925 | 10,956 | 2,925 | 10,956 |
As at 30 June 2023, the Group and the Bank have pledged mainly for funding purposes with the ECB and financial institutions, the following instruments:
Furthermore, as at 31 December 2022, the Group and the Bank had pledged covered bonds of a nominal value of €1,700 million backed with mortgage loans of total value of €3,217 million.
In addition to the pledged items presented above, as at 30 June 2023, the Group and the Bank have pledged an amount of €313 million (31 December 2022: €312 million) included in "Due from banks" with respect to a guarantee for the non-payment risk of the Hellenic Republic, as well as Greek Government bond of €436 million (31 December 2022: €443 million) for trade finance transactions.
The total number of ordinary shares as at 30 June 2023 and 31 December 2022 was 914,715,153, with a nominal value of 1.00 Euro per share.
On 28 July 2022, the Annual General Meeting of the Bank's shareholders decided, the offsetting of (a) the special reserve of article 31, par. 2, Greek Law 4548/2018 (former special reserve of article 4, par. 4a, Greek Law 2190/1920) of €5,014 million and (b) part of the share premium account of €10,324 million with accumulated accounting losses €15,338 million, according to articles 31 par. 2 and 35 par. 3 of Greek Law 4548/2018, as in force. The offsetting of the special reserve and the share premium with the accumulated accounting losses serves the purpose of rationalizing the accounting and regulatory equity of the Bank and the Group and facilitating potential future dividends distribution. On 8 September 2022, the offsetting was approved by the regulatory authorities.
Treasury shares transactions are conducted by the Group subsidiary, NBG Securities S.A. and are summarized as follows:
| Group | ||
|---|---|---|
| No of shares | € million | |
| 37,513 | - | |
| 4,402,533 | 14 | |
| (4,440,046) | (14) | |
| - | - | |
| 1,309,681 | 7 | |
| (1,282,962) | (7) | |
| 26,719 | - | |
| Group | 6-month period ended | 6-month period ended | ||||
|---|---|---|---|---|---|---|
| 30.06.2023 | 30.06.2022 | |||||
| Gross | Tax | Net | Gross | Tax | Net | |
| Items that may be reclassified subsequently to profit or loss: |
||||||
| Unrealised gains / (losses) on investments in available for-sale for the period |
- | - | - | (217) | 35 | (182) |
| Reclassification adjustments on investments in available-for-sale included in the income statement |
- | - | - | (35) | 8 | (27) |
| Impairment loss recognized on investments in available for-sale |
- | - | - | 1 | - | 1 |
| Unrealised gains / (losses) on investments in debt instruments measured at FVTOCI |
71 | - | 71 | (241) | - | (241) |
| Losses / (Gains) on investments in debt instruments measured at FVTOCI reclassified to profit or loss on disposal |
(19) | - | (19) | 88 | - | 88 |
| ECL impairment recognised to profit or loss | (3) | - | (3) | 1 | - | 1 |
| Gain reclassified to income statement on disposal of NIC | - | - | - | (38) | - | (38) |
| Investments in debt instruments | 49 | - | 49 | (441) | 43 | (398) |
| Currency translation differences | (20) | - | (20) | (6) | - | (6) |
| Loss reclassified to income statement on disposal of NIC | - | - | - | 4 | - | 4 |
| Currency translation differences | (20) | - | (20) | (2) | - | (2) |
| Cash flow hedge | 1 | - | 1 | 18 | - | 18 |
| Total of items that may be reclassified subsequently to profit or loss |
30 | - | 30 | (425) | 43 | (382) |
| Items that will not be reclassified subsequently to profit or loss: |
||||||
| Gains / (losses) on investments in equity instruments measured at FVTOCI |
12 | - | 12 | (8) | - | (8) |
| (Gains)/losses on investments in equity instruments designated as at FVTOCI transferred to retained earnings upon disposal |
(7) | - | (7) | (4) | - | (4) |
| Total of items that will not be reclassified subsequently to profit or loss |
5 | - | 5 | (12) | - | (12) |
| Other comprehensive income / (expense) for the period |
35 | - | 35 | (437) | 43 | (394) |
| Bank | 6month period ended 30.06.2023 |
6month period ended 30.06.2022 |
|||||
|---|---|---|---|---|---|---|---|
| Gross | Tax | Net | Gross | Tax | Net | ||
| Items that may be reclassified subsequently to profit or loss: |
|||||||
| Unrealised gains / (losses) on investments in debt instruments measured at FVTOCI |
71 | - | 71 | (240) | - | (240) | |
| (Gains) / losses on investments in debt instruments measured at FVTOCI reclassified to profit or loss on disposal |
(19) | - | (19) | 88 | - | 88 | |
| ECL impairment recognised to profit or loss | (3) | - | (3) | 1 | - | 1 | |
| Investments in debt instruments | 49 | - | 49 | (151) | - | (151) | |
| Currency translation differences | (9) | - | (9) | (2) | - | (2) | |
| Cash flow hedge | 1 | - | 1 | 18 | - | 18 | |
| Total of items that may be reclassified subsequently to profit or loss |
41 | - | 41 | (135) | - | (135) | |
| Items that will not be reclassified subsequently to profit or loss: |
|||||||
| Gains / (losses) on investments in equity instruments measured at FVTOCI |
12 | - | 12 | (8) | - | (8) | |
| (Gains)/losses on investments in equity instruments designated as at FVTOCI transferred to retained earnings upon disposal |
(7) | - | (7) | (4) | - | (4) | |
| Total of items that will not be reclassified subsequently to profit or loss |
5 | - | 5 | (12) | - | (12) | |
| Other comprehensive income / (expense) for the period |
46 | - | 46 | (147) | - | (147) |
The nature of the significant transactions entered into by the Group with related parties during the 6-month period ended 30 June 2023 and 30 June 2022 and the significant balances outstanding as at 30 June 2023 and 31 December 2022 are presented below.
The Group and the Bank entered into transactions with the members of the Board of Directors, the General Managers and the members of the Senior Executive Committees of the Bank, the key management of other Group companies, as well as with the close members of family and entities controlled or jointly controlled by those persons.
All loans granted to related parties (i) were made in the ordinary course of business, (ii) were made on substantially the same terms, including interest rates and collaterals, as those prevailing at the time for comparable transactions with other persons, and (iii) did not involve more than the normal risk of collectability or present other unfavourable features.
The members of the Board of Directors of the Bank are disclosed in Note 1 "General Information".
As at 30 June 2023, loans and advances to customers, deposits/liabilities and letters of guarantee, at Group level, amounted to €4 million, €6 million and NIL respectively (31 December 2022: €4 million, €7 million and NIL respectively), whereas the corresponding figures for the Bank amounted to €3 million, €5 million and NIL respectively (31 December 2022: €4 million, €6 million and NIL respectively)
Total compensation to related parties for the period ended 30 June 2023, amounted to €5 million for the Group (30 June 2022: €4 million) and to €4 million for the Bank (30 June 2022: €4 million), mainly relating to short-term benefits, in particular salaries and social security contributions.
Transactions and balances between the Bank, its subsidiaries, associates and joint ventures are presented at the table below. At a Group level, only transactions and balances with associates and joint ventures are included, as transactions and balances with subsidiaries are eliminated on consolidation.
| Group | |||
|---|---|---|---|
| 30.6.2023 | 31.12.2022 | ||
| Assets | 32 | 15 | |
| Liabilities | 53 | 23 | |
| Letters of guarantee, contingent liabilities and other off balance sheet accounts | 4 | 3 | |
| 6 month period ended | |||
| 30.6.2023 | 30.6.2022 | ||
| Interest, commission and other income | 7 | - | |
| Interest, commission and other expense | 3 | 1 | |
| Bank |
| 30.6.2023 | 31.12.2022 | |||||
|---|---|---|---|---|---|---|
| Subsidiaries | Associates & Joint Ventures |
Total | Subsidiaries | Associates & Joint Ventures |
Total | |
| Assets | 1,375 | 21 | 1,396 | 1,318 | 6 | 1,324 |
| Liabilities | 555 | 53 | 608 | 560 | 23 | 583 |
| Letters of guarantee, contingent liabilities and other | ||||||
| off balance sheet accounts | 498 | 4 | 502 | 569 | 3 | 572 |
| 6 month period ended 30.6.2023 | 6 month period ended 30.6.2022 | |||||
| Interest, commission and other income | 37 | 6 | 43 | 24 | - | 24 |
| Interest, commission and other expense | 3 | 3 | 6 | 5 | 1 | 6 |
The total receivables of both, the Group and the Bank, from the employee benefits related funds as at 30 June 2023, amounted to €746 million (31 December 2022: €746 million). For these receivables the Group and the Bank recognized a provision of €739 million (31 December 2022: €739 million).
The total payables of both the Group and the Bank, to the employee benefits related funds as at 30 June 2023, amounted to €46 million (31 December 2022: €41 million).
Taking into consideration the Hellenic Financial Stability Fund ("HFSF") Law, the Relationship Framework Agreement ("RFA") between the Bank and the HFSF that was signed in December 2015, the fact that the HFSF holds 40.39% of the Bank's ordinary shares and that the HFSF has representation in the Bank's Board of Directors and other Board Committees of the Bank, the HFSF is considered a related part y of the Group. Other than the ordinary shares issued by the Bank and held by the HFSF, no material transactions or balances exist with the HFSF.
In June 2013, the European Parliament and the Council of Europe issued Directive 2013/36/EU and Regulation (EU) No 575/2013 ( known as Capital Requirements Directive IV ("CRD IV") and Capital Requirements Regulation ("CRR") respectively), which incorporate the key amendments that have been proposed by the Basel Committee for Banking Supervision (known as Basel III). Directive 2013/36/EU has been transported into Greek Law by virtue of Greek Law 4261/2014 and Regulation (EU) No 575/2013 has been directly applicable to all EU Member States since 1 January 2014 and certain changes under CRD IV were implemented gradually.
Regulation (EU) No 575/2013 as amended by Regulation (EU) No 876/2019 (CRR2) defines the minimum capital requirements (Pillar 1 requirements) and Directive 2013/36/EU as amended by Directive 2019/878/EU (CRD V) defines the combined buffer requirements for EU institutions. In addition, Directive 2013/36/EU provides (Art. 97 et seq.) that Competent Authorities regularly carry out the Supervisory Review and Evaluation process ("SREP"), to assess and measure risks not covered, or not fully covered, under Pillar 1 and determine additional capital and liquidity requirements (Pillar 2 requirements). SREP is conducted under the lead of the ECB. The SREP decision is tailored to each bank's individual profile. The Pillar 1 (minimum regulatory requirement) and Pillar 2 requirements form the Total SREP Capital Requirement (TSCR).
NBG Group is required to meet its Overall Capital Requirements (OCR) that consists of the Total SREP Capital Requirement (TSCR) and the Combined Buffer Requirement (CBR) as defined in point (6) of Article 128 of Directive 2013/36/EU.
The table below presents the breakdown of the Group's CET1 and Total Capital regulatory requirements:
| CET1 Capital Requirements | Overall Capital Requirements | ||||||
|---|---|---|---|---|---|---|---|
| 2023 | 2022 post capital relief measures |
2022 | 2023 | 2022 post capital relief measures |
2022 | ||
| Pillar 1 (minimum regulatory requirement) | 4.50% | 4.50% | 4.50% | 8.00% | 8.00% | 8.00% | |
| Pillar 2 (P2R) | 1.69% | 1.69% | 1.69% | 3.00% | 3.00% | 3.00% | |
| Total SREP Capital Requirement (TSCR) | 6.19% | 6.19% | 6.19% | 11.00% | 11.00% | 11.00% | |
| Capital conservation buffer (CCoB) | 2.50% | - | 2.50% | 2.50% | - | 2.50% | |
| Countercyclical capital buffer (CCyB) | 0.03% | - | 0.03% | 0.03% | - | 0.03% | |
| O-SII Buffer | 1.00% | 0.75% | 0.75% | 1.00% | 0.75% | 0.75% | |
| Combined Buffer Requirement (CBR) | 3.53% | 0.75% | 3.28% | 3.53% | 0.75% | 3.28% | |
| Overall Capital Requirement (OCR) | 9.72% | 6.94% | 9.47% | 14.53% | 11.75% | 14.28% |
The aim of the Group is to maintain a strong capital basis, well above regulatory requirements ensuring the execution of Group's business plan and the achievement of its strategic goals.
The capital adequacy ratios for the Group and the Bank are presented in the table below:
| Group | Bank | |||||
|---|---|---|---|---|---|---|
| 30.06.2023 | 30.06.2023 31.12.2022 | 30.06.2023 | 30.06.2023 31.12.2022 | |||
| Common Equity Tier 1 | 15.8% | 17.3% | 16.6% | 15.3% | 16.8% | 16.3% |
| Tier 1 | 15.8% | 17.3% | 16.6% | 15.3% | 16.8% | 16.3% |
| Total capital adequacy ratio | 16.9% | 18.4% | 17.7% | 16.5% | 18.0% | 17.5% |
* including profit for the period, post dividend accrual.
On 30 June 2023, Group's CET1 and Total Capital ratios stood at 15.8% and 16.9% respectively, well above the required capital requirement of 9.72% for CET1 and of 14.53% for Total Capital.
Article 27A of Greek Law 4172/2013 ("DTC Law"), as currently in force, allows credit institutions, under certain conditions, and from 2017 onwards to convert deferred tax assets ("DTAs") arising from (a) private sector initiative ("PSI") losses, (b) accumulated provisions for credit losses recognized as at 30 June 2015, (c) losses from final write off or the disposal of loans and (d) accounting write offs, which will ultimately lead to final write offs and losses from disposals, to a receivable ("Tax Credit") from the Greek State. Items (c) and (d) above were added with Greek Law 4465/2017 enacted on 29 March 2017. The same Greek Law 4465/2017 provided that the total tax relating to cases (b) to (d) above cannot exceed the tax corresponding to accumulated provisions recorded up to 30 June 2015 less (a) any definitive and cleared Tax Credit,
which arose in the case of accounting loss for a year according to the provisions of par.2 of article 27A of Greek Law 4172/2013, which relate to the above accumulated provisions, (b) the amount of tax corresponding to any subsequent specific tax provisions, which relate to the above accumulated provisions and (c) the amount of the tax corresponding to the annual amortization of the debit difference that corresponds to the above provisions and other losses in general arising due to credit risk.
The main condition for the conversion of DTAs to a Tax Credit is the existence of an accounting loss at Bank level of a respective year, starting from accounting year 2016 and onwards. The Tax Credits will be calculated as a ratio of IFRS accounting losses to net equity (excluding the year's losses) on a solo basis and such ratio will be applied to the remaining Eligible DTAs in a given year to calculate the Tax Credit that will be converted in that year, in respect of the prior tax year. The Tax Credit may be offset against income taxes payable. The non-offset part of the Tax Credit is immediately recognized as a receivable from the Greek State. The Bank is obliged to issue conversion rights to the Greek State for an amount of 100% of the Tax Credit in favour of the Greek State and will create a specific reserve for an equal amount. Common shareholders have pre-emption rights on these conversion rights. The reserve will be capitalized with the issuance of common shares in favour of the Greek State. This legislation allows credit institutions to treat such DTAs as not "relying on future profitability" according to CRD IV, and as a result such DTAs are not deducted from CET1, hence improving a credit institution's capital position.
Furthermore, Greek Law 4465/2017 amended article 27 "Carry forward losses" by introducing an amortization period of 20 years for losses due to loan write offs as part of a settlement or restructuring and losses that crystallize as a result of a disposal of loans. In addition, in 2021 Greek Law 4831 further amended article 27 of Greek Law 4172/2013 (see Note 27 "Deferred tax assets and liabilities" of the Annual Financial Report for the year ended 31 December 2022).
On 7 November 2014, the Bank convened an extraordinary General Shareholders Meeting which resolved to include the Bank in the DTC Law. An exit by the Bank from the provisions of the DTC Law requires regulatory approval and a General Shareholders meeting resolution.
As of 30 June 2023, the amount of DTAs that were eligible for conversion to a receivable from the Greek State subject to the DTC Law was €3.8 billion (31 December 2022: €3.9 billion). The conditions for conversion rights were not met in the year ended 31 December 2022 and no conversion rights are deliverable in 2023.
On 31 January 2023, the European Banking Authority (EBA) launched the 2023 ST for a sample of 70 EU-wide participating banks. 2023 ST was designed to provide valuable input for assessing the resilience of the European banking sector in the current uncertain and changing macroeconomic environment. NBG participated in the 2023 ST as part of the EBA sample of euro-area's largest banks.
The 2023 ST was based on a static balance sheet approach, thus factoring in the Group's financial and capital position of 31.12.2022 as a starting point and conducting a 3-year horizon stress simulation (for the period 2023-2025), under a Baseline and an Adverse scenario.
On 28 July 2023, EBA announced the results of the 2023 ST. Under the commonly applied methodology in the Adverse scenario, the Bank's fully loaded ("FL") CET 1 ratio incurred a maximum depletion of 2.71pps, reaching its lowest level of 13.1% in the first year of the projections (2023). This outcome positions the Bank as a top performer among its domestic peers which report a maximum depletion of 3.50pps on average excluding the Bank.
By the same indicator, the Bank ranks 11th among the 70 EU-wide participating banks, and 5th considering the FL CET1 depletion by the end of 2025.
Considering the full 3-year horizon of the Stress Test:
The result of the 2023 ST demonstrates the Group's resilience to shocks and ability to maintain solid capital levels, even in conditions of severe economic stress. Comparing the performance to previous stress test exercises, the Bank has achieved notable progress over the past years in strengthening its balance sheet, despite globally challenging economic conditions. Specifically, the 2023 ST outcome reflects the successful NPE deleveraging Strategy, the build-up of adequate capital buffers as well as a favorable liquidity position of the Group.
Under the Directive 2014/59 (Bank Recovery and Resolution Directive or ("BRRD"), as amended by Directive 2019/879 (BRRD II), banks in the European Union are required to maintain a Minimum Requirement for own funds and Eligible Liabilities ("MREL"), which ensures sufficient lossabsorbing capacity in resolution. MREL includes a risk- and a leverage-based dimension. MREL is therefore expressed as two ratios that both have to be met: (i) as a percentage of Total Risk Exposure Amount ("TREA"), (the "MREL-TREA"); and (ii) as a percentage of the Leverage Ratio Exposure ("LRE"), (the "MREL-LRE").
Instruments qualifying for MREL are own funds (Common Equity Tier 1, Additional Tier 1 and Tier 2), as well as certain eligible liabilities (mainly senior unsecured bonds). Regulation (EU) No 806/2014 of the European Parliament and of the Council, as amended by Regulation (EU) No
877/2019 of the European Parliament and of the Council allows the Single Resolution Board ("SRB") to set in addition to the MREL requirement, a "subordination" requirement, within MREL, against which only subordinated liabilities and own funds count.
On 22 December 2022, the Bank as being identified by the SRB as the Single Point of Entry ("SPE") of the Group and the only entity required to maintain an MREL capacity, received from the Bank of Greece the SRB's decision (dated 14 December 2022) that it should meet by 31 December 2025 an MREL target of 23.53% of TREA and 5.88% of LRE on a consolidated basis. In addition, as per the MREL decision the Bank should always meet from 1 January 2022 onwards, the requirement of 14.79% of TREA and 5.85% of LRE on a consolidated basis. To the above requirements the capital buffer requirement ("CBR") must be added, which from 1 January 2022 stands at 3.25% and at 3.53% from 1 January 2023 until 31 December 2025. The Bank maintains the MREL capacity required to meet both the LRE requirements and the 1 January 2022 interim binding target of 18.04 % of TREA (including CBR).
Finally, according to the abovementioned SRB's decision, for 2023 no subordination requirement is set for the Bank.
The table below summarises the carrying amounts and the fair values of those financial assets and liabilities that are not pr esented on the Group's and the Bank's Statement of Financial Position at fair value and the fair value is materially different from the carrying amount.
| Carrying amount |
Fair value | |
|---|---|---|
| Group | 30.06.2023 | 30.06.2023 |
| Financial Assets | ||
| Loans and advances to customers at amortised cost | 34,530 | 35,695 |
| Investment securities at amortised cost | 11,940 | 11,341 |
| Financial Liabilities | ||
| Due to customers | 54,899 | 54,969 |
| Debt securities in issue | 1,793 | 1,843 |
| Carrying amount |
Fair value | |
| Group | 31.12.2022 | 31.12.2022 |
| Financial Assets | ||
| Loans and advances to customers at amortised cost | 35,062 | 35,817 |
| Investment securities at amortised cost | 10,357 | 9,128 |
| Financial Liabilities | ||
| Due to customers | 54,584 | 54,640 |
| Debt securities in issue | 1,731 | 1,728 |
| Carrying amount |
Fair value | |
|---|---|---|
| Bank | 30.06.2023 | 30.06.2023 |
| Financial Assets | ||
| Loans and advances to customers at amortised cost | 32,752 | 33,917 |
| Investment securities at amortised cost | 11,686 | 11,088 |
| Financial Liabilities | ||
| Due to customers | 53,349 | 53,419 |
| Debt securities in issue | 1,793 | 1,843 |
| Carrying amount |
Fair value | |
|---|---|---|
| Bank | 31.12.2022 | 31.12.2022 |
| Financial Assets | ||
| Loans and advances to customers at amortised cost | 33,283 | 34,038 |
| Investment securities at amortised cost | 10,121 | 8,891 |
| Financial Liabilities | ||
| Due to customers | 53,096 | 53,151 |
| Debt securities in issue | 1,731 | 1,728 |
The following methods and assumptions were used to estimate the fair values of the above financial instruments on 30 June 2023 and 31 December 2022:
The carrying amount of cash and balances with central banks, due from and due to banks, other borrowed funds as well as accru ed interest, approximates their fair value.
Loans and advances to customers at amortised cost: The fair value of loans and advances to customers at amortised cost is estimated using discounted cash flow models. The discount rates are based on current market interest rates offered for instruments with similar terms to borrowers of similar credit quality.
Investment securities at amortised cost: The fair value of investment securities at amortised cost is estimated using market prices, or using discounted cash flow models based on current market interest rates offered for instruments with similar credit quality.
Due to customers: The fair value for demand deposits and deposits with no defined maturity is determined to be the amount payable on demand at the reporting date. The fair value for fixed-maturity deposits is estimated using discounted cash flow models based on rates currently offered for the relevant product types with similar remaining maturities.
Debt securities in issue: The fair value of debt securities in issue is estimated using market prices, or if such are not available, using a discounted cash flow analysis, based on current market rates of similar maturity and credit quality debt securities.
Group
The tables below present the fair values of those financial assets and liabilities presented on the Group's and Bank's Statement of Financial Position at fair value by fair value measurement level on 30 June 2023 and on 31 December 2022. Other Assets include an investment in spot position for emission rights which is carried at fair value through profit or loss.
| As at 30 June 2023 | Fair value measurement using | |||
|---|---|---|---|---|
| Financial Assets | Level 1 | Level 2 | Level 3 | Total at fair value |
| Financial assets at fair value through profit or loss | 365 | 75 | - | 440 |
| Financial assets mandatorily at fair value through profit or loss | 248 | 10 | 466 | 724 |
| Derivative financial instruments | - | 1,893 | 12 | 1,905 |
| Investment securities at fair value through other comprehensive income | 1,278 | 1,844 | 52 | 3,174 |
| Other Assets | 388 | - | - | 388 |
| Total | 2,279 | 3,822 | 530 | 6,631 |
| Financial Liabilities | ||||
| Due to customers designated as at fair value through profit or loss | - | 772 | - | 772 |
| Derivative financial instruments | 2 | 1,877 | 4 | 1,883 |
| Total | 2 | 2,649 | 4 | 2,655 |
| Total at fair value Level 1 Level 2 Level 3 Financial Assets Financial assets at fair value through profit or loss 139 81 - 220 Financial assets mandatorily at fair value through profit or loss 152 10 512 674 Derivative financial instruments 2 1,947 13 1,962 Investment securities at fair value through other comprehensive income 833 1,949 51 2,833 Other assets 298 - - 298 Total 1,424 3,987 576 5,987 Financial Liabilities Due to customers designated as at fair value through profit or loss - 608 - 608 Derivative financial instruments 1 1,872 50 1,923 Other Liabilities 1 - - 1 Total 2 2,480 50 2,532 Bank As at 30 June 2023 Fair value measurement using Total at fair value Level 1 Level 2 Level 3 Financial Assets Financial assets at fair value through profit or loss 342 75 - 417 Financial assets mandatorily at fair value through profit or loss 245 10 463 718 Derivative financial instruments - 1,893 12 1,905 Investment securities at fair value through other comprehensive income 1,270 1,757 50 3,077 Other Assets 388 - - 388 Total 2,245 3,735 525 6,505 Financial Liabilities Due to customers designated as at fair value through profit or loss - 772 - 772 Derivative financial instruments 2 1,877 4 1,883 Total 2 2,649 4 2,655 As at 31 December 2022 Fair value measurement using Total at fair value Level 1 Level 2 Level 3 Financial Assets Financial assets at fair value through profit or loss 126 81 - 207 Financial assets mandatorily at fair value through profit or loss 149 10 508 667 Derivative financial instruments 2 1,947 13 1,962 Investment securities at fair value through other comprehensive income 826 1,909 49 2,784 Other assets 298 - - 298 Total 1,401 3,947 570 5,918 Financial Liabilities Due to customers designated as at fair value through profit or loss - 608 - 608 Derivative financial instruments 1 1,872 50 1,923 Total 1 2,480 50 2,531 |
As at 31 December 2022 | Fair value measurement using | |
|---|---|---|---|
There were no financial assets or liabilities classified as held-for-sale in the Group's Statement of Financial Position measured at fair value as at 30 June 2023 and 31 December 2022.
As at 30 June 2023, one security issued by the European Stability Mechanism ("ESM") measured at fair value through profit or loss and one security issued by the Italian Republic measured at fair value through other comprehensive income, for which the Group determined that sufficient liquidity and trading existed as of that date, have been transferred from Level 2 to Level 1 according to the Group's fair value hierarchy policy. The total carrying amount of the securities transferred on 30 June 2023 was €156.4 million
As at 31 December 2022, a fair value through other comprehensive income security issued by the Italian Republic and a fair value through profit or loss security issued by the European Stability Mechanism ("ESM"), for which the Group determined that sufficient liquidity and trading did not exist as of that date, have been transferred from Level 1 to Level 2 according to the Group's fair value hierarchy policy. The total carrying amount of the securities transferred on 31 December 2022 was €142.3 million.
All transfers between levels are assumed to happen at the end of the reporting period.
Level 3 financial instruments on 30 June 2023 and 31 December 2022 include:
The table below presents the movement of all Level 3 fair value measurements for the period ended 30 June 2023 and the year ended 31 December 2022, including realized and unrealized gains/(losses) included in the "Income Statement" and "Statement of Other Comprehensive Income".
The Group conducts a review of the fair value hierarchy classifications on a quarterly basis.
For the period ended 30 June 2023 and the year ended 31 December 2022, transfers from Level 2 into Level 3 include derivative financial instruments for which the BCVA is significant to the base fair value of the respective instruments. Transfers from Level 3 into Level 2 include derivative financial instruments for which the BCVA is no longer significant to the base fair value of the respective instruments.
| 2023 | ||||
|---|---|---|---|---|
| Group | Net derivative financial instruments |
Investment securities at FVTOCI |
Mandatorily at FVTPL |
|
| Balance at 1 January | (37) | 51 | 512 | |
| Gain/(loss) included in Income Statement | 10 | - | (51) | |
| Gain/(loss) included in OCI | - | 1 | - | |
| Purchases/Additions | - | - | 8 | |
| Settlements | - | - | (3) | |
| Transfer into/(out of) level 3 | 35 | - | - | |
| Balance at 30 June | 8 | 52 | 466 |
| 2022 | ||||
|---|---|---|---|---|
| Group | Net derivative financial instruments |
Investment securities at FVTOCI |
Mandatorily at FVTPL |
|
| Balance at 1 January | 28 | 26 | 354 | |
| Gain/(loss) included in Income Statement | (77) | - | 16 | |
| Gain/(loss) included in OCI | - | 1 | - | |
| Purchases/Additions | - | 27 | 198 | |
| Sales | - | (3) | - | |
| Settlements | - | - | (56) | |
| Transfer into/(out of) level 3 | 12 | - | - | |
| Balance at 31 December | (37) | 51 | 512 |
| 2023 | ||||
|---|---|---|---|---|
| Bank | Net derivative financial instruments |
Investment securities at FVTOCI |
Mandatorily at FVTPL |
|
| Balance at 1 January | (37) | 49 | 508 | |
| Gain/(loss) included in Income Statement | 10 | - | (50) | |
| Gain/(loss) included in OCI | - | 1 | - | |
| Purchases/Additions | - | - | 8 | |
| Settlements | - | - | (3) | |
| Transfer into/(out of) level 3 | 35 | - | - | |
| Balance at 30 June | 8 | 50 | 463 |
| 2022 | |||
|---|---|---|---|
| Bank | Net derivative financial instruments |
Investment securities at FVTOCI |
Mandatorily at FVTPL |
| Balance at 1 January | 28 | 26 | 341 |
| Gain/(loss) included in Income Statement | (77) | - | 17 |
| Gain/(loss) included in OCI | - | 1 | - |
| Purchases/Additions | - | 25 | 204 |
| Sales | - | (3) | - |
| Settlements | - | - | (54) |
| Transfer into/(out of) level 3 | 12 | - | - |
| Balance at 31 December | (37) | 49 | 508 |
For the period ended 30 June 2023, changes in unrealised gains/(losses) included in the income statement of financial instruments measured at fair value using significant unobservable inputs (Level 3), relate to financial assets mandatorily measured at fair value through profit or loss, amounting to €(51) million for the Group and €(50) million for the Bank (31 December 2022: €3 million for the Group and €4 million for the Bank), as well as to net derivative financial instruments amounting to €(1) million for the Group and the Bank (31 December 2022: €(25) million for the Group and the Bank).
The Group has various processes in place to ensure that the fair values of its assets and liabilities are reasonably estimated and has established a control framework which is designed to ensure that fair values are validated by functions independent of the risk-taker. To that end, the Group utilizes various sources for determining the fair values of its financial instruments and uses its own independent functions to validate these results, where possible.
Fair values of debt securities are determined either by reference to prices for traded instruments in active markets, to external quotations or widely accepted financial models, which are based on market observable or unobservable information where the former is not available, as well as relevant market based parameters such as interest rates, option volatilities, currency rates, etc.
The Group may, sometimes, also utilize third-party pricing information, and perform validating procedures on this information to the extent possible or base its fair value on the latest transaction prices available, given the absence of an active market or similar transactions or other market observable inputs. All such instruments are categorized within the lowest level of fair value hierarchy (i.e. Level 3).
Generally, fair values of debt securities, including significant inputs on the valuation models are independently checked and validated by the Middle Office and Risk Management Function on a systematic basis.
Fair values of derivatives are determined by Management using valuation models which include discounted cash-flow models, option pricing models or other appropriate models. Adequate control procedures are in place for the validation of these models, including the valuation inputs, on a systematic basis. Middle Office and Risk Management functions provide the control valuation framework necessary to ensur e that the fair values are reasonably determined, reflecting current market circumstances and economic conditions. Furthermore, over-the-counter derivatives are also compared on a daily basis with counterparties' valuations, under the daily collateral management process.
Counterparty credit risk-adjustments are applied to all over-the-counter derivatives. Own credit-risk adjustments are applied to reflect the Group's own credit risk when valuing derivatives. Bilateral credit-risk adjustments consider the expected cash flows between the Group and its counterparties under the relevant terms of the derivative instruments and the effect of the credit-risk profile of the counterparties on the valuation of these cash flows. Where appropriate, the Group takes into consideration the credit-risk mitigating arrangements, including collateral agreements and master netting arrangements, for the purpose of estimating own and counterparty credit risk valuation adjustments.
| Financial Instrument | Fair Value | Valuation Technique | Significant Unobservable Input | Range of Inputs | |
|---|---|---|---|---|---|
| Low | High | ||||
| Investment securities mandatorily at fair value through profit or loss |
20 | Income and market approach | Price | n/a1 | n/a1 |
| 11 | Discounted Cash Flows, Internal Model (for CVA/DVA) |
Credit Spread | 190 bps | 360 bps | |
| Interest Rate Derivatives | (3) | Discounted Cash Flows | Constant Maturity Swap correlation between different tenors |
72.80% | 100.00% |
| Other Derivatives | (1) | Discounted Cash Flows, Internal Model (for CVA/DVA) |
Credit Spread | 360 bps | 614 bps |
| Investment Securities at fair value through other comprehensive income |
52 | Income and market approach | n/a1 | n/a1 | n/a1 |
| Loans and advances to customers mandatorily | 19 | Discounted Cash Flows | Credit Spread | 260 bps | 260 bps |
| at fair value through profit or loss | 427 | Discounted Cash Flows | Credit Spread | n/a2 | n/a2 |
1Equity securities at FVTPL and at FVTOCI include equity securities which are not traded in active markets. In the absence of an active market the fair value of these securities is estimated using a market or an income valuation approach. Given the bespoke nature of the valuation metho d in respect of each holding, it is not practicable to quote a range of unobservable inputs.
2The valuation of the contingent part of the receivables from the loan portfolio sales and other transactions, has been performed using a discounted cash flow methodology under the income approach and includes a wide range of unobservable inputs, for which is not practicable to quote a relevant range of unobservable inputs, for disclosure purposes.
| Financial Instrument | Fair Value | Valuation Technique | Significant Unobservable Input | Range of Inputs | |
|---|---|---|---|---|---|
| Low | High | ||||
| Investment securities mandatorily at fair value through profit or loss |
13 | Income and market approach | Price | n/a1 | n/a1 |
| (34) | Discounted Cash Flows, Internal Model (for CVA/DVA) |
Credit Spread | 237 bps | 624 bps | |
| Interest Rate Derivatives | (3) | Discounted Cash Flows | Constant Maturity Swap correlation between different tenors |
72.80% | 100.00% |
| Investment Securities at fair value through other comprehensive income |
51 | Income and market approach | n/a1 | n/a1 | n/a1 |
| Loans and advances to customers mandatorily | 21 | Discounted Cash Flows | Credit Spread | 300 bps | 300 bps |
| at fair value through profit or loss | 478 | Discounted Cash Flows | Credit Spread | n/a2 | n/a2 |
1Equity securities at FVTPL and at FVTOCI include equity securities which are not traded in active markets. In the absence of an active market the fair value of these securities is estimated using a market or an income valuation approach. Given the bespoke nature of the valuation method in respect of each holding, it is not practicable to quote a range of unobservable inputs.
2The valuation of the contingent part of the receivables from the loan portfolio sales and other transactions, has been performed using a discounted cash flow methodology under the income approach and includes a wide range of unobservable inputs, for which is not practicable to quote a relevant range of unobservable inputs, for disclosure purposes.
For structured interest rate derivatives, a significant change in the correlation inputs (e.g. the degree of correlation between two different interest rates, or between interest rates and foreign exchange rates) would have a significant impact on the fair value of the individual instrument; however, the magnitude and the direction of the impact depends on whether the Group is long or short the exposure, among other factors. Due to the limited exposure that the Group has to these instruments, a reasonable change in the above unobservable inputs would not be significant to the Group. Additionally, interest rate derivatives include interest rate swaps for which the bilateral credit valuation adjustment is significant in comparison to their fair value. The counterparty credit-risk adjustment in these cases is mainly driven by the internal ratings of the counterparty. A reasonable change in the credit spread of these entities would result in an insignificant change in the fair value of the Group's and the Bank's financial instruments.
Other derivatives include derivatives for which the bilateral credit valuation adjustment is significant in comparison to their fair value. In these cases, the counterparty credit risk adjustment is mainly driven by the internal ratings of the counterparty. A reasonable change in the credit spread of these entities would result in an insignificant change in the fair value of the Group's and the Bank's financial instruments.
For "Loans and advances to customers mandatorily measured at fair value through profit or loss", the valuation includes a parameter which is not observable in the market, i.e., the credit spread of the customer. A reasonable change in the respective credit spreads used would not have a significant effect on their fair value for the Group and the Bank.
The valuation of the contingent part of the receivables from sales of loan portfolios, mandatorily measured at fair value through profit or loss, includes a range of unobservable inputs. A reasonable change in the unobservable inputs used would not result in a significant change in the fair value of these receivables.
On 24 March 2021, the Bank's Board of Directors approved the sale of the 90.01% out of 100.00% stake in NIC and authorized the Bank's Management to proceed with the signing of the SPA with CVC on 26 March 2021.
On 31 March 2022, the Bank lost control of NIC and proceeded with the derecognition of its assets and liabilities due to the fact that at that date all the conditions agreed between NBG and CVC were fulfilled. The consideration, less costs to sell plus the fair value of investment retained in NIC, amounted to €314 million.
| As at | |
|---|---|
| 31 March 2022 | |
| Assets | |
| Due from banks | 93 |
| Financial assets at FVTPL | 25 |
| Loans and advances to customers | 16 |
| Investment securities | 3,031 |
| Deferred tax assets | 53 |
| Insurance related assets and receivables | 702 |
| Other assets | 114 |
| Total assets | 4,034 |
| Liabilities | |
| Debt securities in issue | 175 |
| Retirement benefit obligations | 66 |
| Insurance related liabilities | 2,905 |
| Other liabilities | 573 |
| Total liabilities | 3,719 |
| Net Assets derecognized | 315 |
| As at | |
|---|---|
| 31 March 2022 | |
| Consideration less costs to sell | 288 |
| Fair value of 9.99% investment retained in NIC | 26 |
| Net assets derecognized | (315) |
| Non-controlling interests | 1 |
| Cumulative exchange loss in respect of the net assets of NIC reclassified from equity to profit or loss | (4) |
| Cumulative gain on financial assets measured at FVTOCI in NIC reclassified from equity to profit or loss | 38 |
| Gain on disposal | 34 |
The gain on disposal of €34 million at Group level is included in the profit/(loss) for the period from discontinued operations (see Note 11 "Assets and liabilities held for sale and discontinued operations").
Net cash inflow on disposal of NIC amounted to €142 million.
On 16 October 2020, a sale and purchase agreement was signed with Bain Capital for the sale of a 100% stake in CAC Coral Ltd, which contains a portfolio of non-performing corporate, SME and consumer and mortgage loans.
On 15 July 2022, the transaction was concluded, after approval of the competent regulatory authorities. The consideration less costs to sell amounted to €73 million.
| As at | |
|---|---|
| 15 July 2022 | |
| Assets | |
| Due from banks | 1 |
| Loans and advances to customers | 77 |
| Total assets | 78 |
| Liabilities | |
| Other borrowed funds | 70 |
| Other liabilities | 1 |
| Total liabilities | 71 |
| Net Assets derecognized | 7 |
| As at | |
|---|---|
| 15 July 2022 | |
| Consideration less costs to sell | 73 |
| Net assets derecognized | (7) |
| Transfer of loan to Bain Capital | (70) |
| Loss on disposal | (4) |
The loss on disposal of €4 million at Group level is included in the profit/(loss) for the period from discontinued operations (see Note 11 "Assets and liabilities held for sale and discontinued operations").
Net cash inflow on disposal of CAC Coral Ltd amounted to €72 million.
On 17 December 2021, NBG announced that it has entered into a long-term strategic marketing alliance with the EVO Payments, Inc. ("EVO"), a leading global provider of payment technology integrations and acquiring solutions, to provide merchant acquiring and payment processing services.
Under the terms of the agreement, NBG and EVO will form a merchant acquiring joint venture. NBG will spin off its merchant acquiring business into a new entity called NBG Pay S.A., and EVO will acquire a 51% interest in this entity. This transaction includes a marketing alliance whereby NBG will exclusively refer customers to the joint venture, and EVO will manage the joint venture and provide its market leading card acceptance solutions through its proprietary products and processing platforms. EVO has agreed to pay €158 million for its ownership int erest in the joint venture. Under the joint venture agreement, the parties will have joint control and rights to the net assets of the joint venture.
On 23 May 2022, a wholly owned subsidiary of the Bank, under the name of NBG Pay S.A. was established. The initial paid-in share capital amounted to €125 thousand. On 7 December 2022, according to the agreement, NBG spun off its card payments acceptance business line and transferred it to NBG Pay S.A., and on 8 December 2022, following the receipt of all required regulatory approvals, NBG completed the sale of 51% of NBG Pay S.A.'s share capital to EVO for a consideration of €158 million. The fair value of the sector spun off was estimated to €308 million. This was accounted for as a loss of control of NBG Pay S.A. where NBG:
At Group and Bank level the gain from the transaction amounted to €294 million and was determined as follows:
| Period ended | |
|---|---|
| 31 December | |
| 2022 | |
| Consideration received | 158 |
| Fair value of 49% investment retained in NBG Pay S.A. | 155 |
| Costs to sell | (8) |
| Net assets derecognised | (11) |
| Gain on disposal | 294 |
| Period ended 31 December 2022 |
|
|---|---|
| Fair value of sector spun off | 308 |
| Initial cost of investment including establishment costs | 8 |
| Total cost of investment before the transfer of 51% | 316 |
| Gain from the spin off and the transfer of acquiring business sector to NBG Pay S.A. | |
| Fair value of sector spun off | 308 |
| Less: Net assets spun off | (11) |
| Gain from the spin off (A) | 297 |
| Consideration received from the disposal of 51% | 158 |
| Carrying amount of the investment disposed of | (161) |
| Loss from the sale of 51% of the investment to EVO (Β) | (3) |
| Total gain from the spin off and the Sale of 51% of the investment to EVO (Α+Β) | 294 |
The total gain from the spin off and the Sale of 51% of the investment to EVO of €294 million at Group and Bank level was included in Net other income / (expense) (see Note 9 "Net other income / (expense) of the 2022 Annual Financial Report).
NBG accounts for its investment in the joint venture in the Consolidated and Separate Financial Statements using the equity method and the cost method, respectively.
Included in the Joint Venture investment is goodwill of €145 million.
On 24 February 2022, a wholly owned subsidiary of Stopanska Banka A.D. – Skopje, under the name of Stopanska Leasing DOOEL - Skopje was established. The total paid-in share capital amounted to MKD 15 million.
| Group | Bank | |||||
|---|---|---|---|---|---|---|
| Subsidiaries | Country | Tax years unaudited | 30.06.2023 | 31.12.2022 | 30.06.2023 | 31.12.2022 |
| National Securities Single Member S.A. | Greece | 2017-2022 | 100.00% | 100.00% | 100.00% | 100.00% |
| NBG Asset Management Mutual Funds S.A. | Greece | 2017-2022 | 100.00% | 100.00% | 100.00% | 100.00% |
| Ethniki Leasing S.A. | Greece | 2012-2022 | 100.00% | 100.00% | 100.00% | 100.00% |
| NBG Property Services Single Member S.A. | Greece | 2017-2022 | 100.00% | 100.00% | 100.00% | 100.00% |
| Pronomiouhos Single Member S.A. Genikon Apothikon Ellados | Greece | 2012-2022 | 100.00% | 100.00% | 100.00% | 100.00% |
| ΚΑDΜΟS S.A. | Greece | 2012-2022 | 100.00% | 100.00% | 100.00% | 100.00% |
| DIONYSOS S.A. | Greece | 2012-2022 | 99.91% | 99.91% | 99.91% | 99.91% |
| EKTENEPOL Construction Company Single Member S.A. | Greece | 2012-2022 | 100.00% | 100.00% | 100.00% | 100.00% |
| Mortgage, Touristic PROTYPOS Single Member S.A. | Greece | 2012-2022 | 100.00% | 100.00% | 100.00% | 100.00% |
| Hellenic Touristic Constructions S.A. | Greece | 2012-2022 | 78.34% | 78.34% | 78.34% | 78.34% |
| Ethniki Ktimatikis Ekmetalefsis Single Member S.A. | Greece | 2012-2022 | 100.00% | 100.00% | 100.00% | 100.00% |
| Ethniki Factors S.A. | Greece | 2017-2022 | 100.00% | 100.00% | 100.00% | 100.00% |
| I-Bank Direct S.A.(1) | Greece | - | - | 100.00% | - | 99.90% |
| Probank Leasing S.A. (2) | Greece | 2012-2022 | 100.00% | 100.00% | 100.00% | 100.00% |
| NBG Insurance Brokers S.A. | Greece | 2017-2022 | 100.00% | 100.00% | 100.00% | 100.00% |
| NBG Malta Holdings Ltd(3) | Malta | 2013-2022 | 100.00% | 100.00% | - | - |
| NBG Malta Ltd(3) | Malta | 2013-2022 | 100.00% | 100.00% | - | - |
| ARC Management Two EAD (Special Purpose Entity) | Bulgaria | 2017-2022 | 100.00% | 100.00% | 99.55% | 99.55% |
| Bankteco E.O.O.D. | Bulgaria | 2017-2022 | 100.00% | 100.00% | 100.00% | 100.00% |
| NBG Leasing S.R.L. | Romania | 2018-2022 | 100.00% | 100.00% | 100.00% | 100.00% |
| ARC Management One SRL (Special Purpose Entity) | Romania | 2013-2022 | 100.00% | 100.00% | 99.63% | 99.51% |
| Stopanska Banka A.D.-Skopje | North Macedonia | 2014-2022 | 94.64% | 94.64% | 94.64% | 94.64% |
| Stopanska Leasing DOOEL Skopje | North Macedonia | 2022 | 94.64% | 94.64% | - | - |
| NBG Greek Fund Ltd | Cyprus | 2021-2022 | 100.00% | 100.00% | 100.00% | 100.00% |
| National Bank of Greece (Cyprus) Ltd | Cyprus | 2012-2022 | 100.00% | 100.00% | 100.00% | 100.00% |
| National Securities Co (Cyprus) Ltd (3) | Cyprus | - | 100.00% | 100.00% | - | - |
| NBG Management Services Ltd | Cyprus | 2021-2022 | 100.00% | 100.00% | 100.00% | 100.00% |
| Merbolium Limited (Special Purpose Entity) | Cyprus | 2022 | 100.00% | 100.00% | - | - |
| Cortelians Limited (Special Purpose Entity) | Cyprus | 2022 | 100.00% | 100.00% | - | - |
| Ovelicium Ltd (Special Purpose Entity) | Cyprus | 2022 | 100.00% | 100.00% | - | - |
| Pacolia Holdings Ltd (Special Purpose Entity) | Cyprus | 2022 | 100.00% | 100.00% | - | - |
| NBG Asset Management Luxemburg S.A. | Luxembourg | 2017-2022 | 100.00% | 100.00% | 94.67% | 94.67% |
| NBG International Ltd | U.K. | 2003-2022 | 100.00% | 100.00% | 100.00% | 100.00% |
| NBGI Private Equity Ltd(3) | U.K. | 2003-2022 | 100.00% | 100.00% | - | - |
| NBG Finance Plc | U.K. | 2003-2022 | 100.00% | 100.00% | 100.00% | 100.00% |
| NBG Finance (Dollar) Plc(3) | U.K. | 2008-2022 | 100.00% | 100.00% | 100.00% | 100.00% |
| NBG Finance (Sterling) Plc(3) | U.K. | 2008-2022 | 100.00% | 100.00% | 100.00% | 100.00% |
| NBG International Holdings B.V. | The Netherlands | 2022 | 100.00% | 100.00% | 100.00% | 100.00% |
(1) I-Bank Direct S.A. was liquidated on 10 March 2023.
(2) Probank Leasing S.A. has been reclassified as non-current assets held for sale (See Note 11 "Assets and liabilities held for sale and discontinued operations"). (3) Companies under liquidation.
| Group | Bank | |||||
|---|---|---|---|---|---|---|
| Name of associate | Country | Tax years unaudited | 30.06.2023 | 31.12.2022 | 30.06.2023 | 31.12.2022 |
| Social Security Funds Management S.A. | Greece | 2017-2022 | 20.00% | 20.00% | 20.00% | 20.00% |
| Larco S.A. | Greece | 2012-2022 | 33.36% | 33.36% | 33.36% | 33.36% |
| Eviop Tempo S.A. | Greece | 2017-2022 | 21.21% | 21.21% | 21.21% | 21.21% |
| Teiresias S.A. | Greece | 2012-2022 | 39.93% | 39.93% | 39.93% | 39.93% |
| Planet S.A. | Greece | 2017-2022 | 36.99% | 36.99% | 36.99% | 36.99% |
| Pyrrichos Real Estate S.A. | Greece | 2012-2022 | 21.83% | 21.83% | 21.83% | 21.83% |
| SATO S.A. | Greece | 2017-2022 | 23.74% | 23.74% | 23.74% | 23.74% |
| Olganos S.A. | Greece | 2012-2022 | 33.60% | 33.60% | 33.60% | 33.60% |
| Perigenis Business Properties S.A. | Greece | 2020-2022 | 28.50% | 28.50% | 28.50% | 28.50% |
| NBG Pay S.A. | Greece | 2022 | 49.00% | 49.00% | 49.00% | 49.00% |
Events after the reporting period are the following:
On 28 July 2023, EBA published the results of the EU-wide Stress Test. For detailed information regarding the NBG related information please see Note 18 "Capital adequacy".
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