Quarterly Report • Jun 30, 2012
Quarterly Report
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FINANCIAL REPORT for the six months ended 30 June 2012
According to Article 5 of the Law 3556/2007
I. Declaration (according to the article 5, par. 2 of the Law 3556/2007)
To the best of our knowledge, the financial statements of Eurobank Ergasias S.A. (the Bank) and the consolidated financial statements of the Bank and its subsidiaries (the Group) for the six months ended 30 June 2012 comply with applicable accounting standards, and present fairly the financial position and the results of the Bank and the Group.
Furthermore, to the best of our knowledge, the Report of the Directors for the same period presents fairly the information required by paragraph 6 of article 5 of Law 3556/2007.
Athens, 21 December 2012
Efthymios N. Christodoulou I.D. No ΑΒ - 049358 CHAIRMAN OF THE BOARD OF DIRECTORS
Nicholas C. Nanopoulos I.D. No ΑΕ - 586794 CHIEF EXECUTIVE OFFICER
Michael H. Colakides I.D. No 486588 DEPUTY CHIEF EXECUTIVE OFFICER ΙΙ. Interim Directors' Report
The directors present their report together with the accounts for the six months ended 30 June 2012.
The loss attributable to shareholders of the Eurobank Ergasias S.A Group (Eurobank Ergasias or the Group) for the first half of 2012 after taking into account the € 714m exceptional items (€ 443m after tax additional valuation losses on Greek sovereign exposure and other non recurring valuation losses of € 128m after tax) amounted to € 872m (first half 2011: € 588m loss) as set out in the consolidated income statement on page 3.
On 21 February 2012 the Euro-area finance ministers agreed on a bail out programme for Greece, including financial assistance from the Official Sector and a voluntary debt exchange agreed with the Private Sector forgiving 53.5% of the face value of Greek debt. The new programme aimed for debt sustainability and restoring competitiveness, and provided a comprehensive blueprint for putting the public finances and the economy of Greece back on a sustainable basis. Following the Bank's participation in the programme, the Group exchanged Greek Government Bonds and other eligible securities of face value €7,336m. Under this exchange, in March/ April 2012, the Group received a) new Greek government bonds (nGGBs) with face value equal to 31.5% of the face amount of the old bonds, b) EFSF notes having a face amount of 15% of the face value of the old bonds and c) GDP-linked securities. All exchanged bonds were derecognized and the new GGBs recognized at fair value, based on market quotes at the date of recognition, with a total valuation loss before tax of € 6.2bn as at 30 June 2012.
Following the Eurogroup's decisions on 27 November 2012 and as part of debt reduction measures, the Greek State announced on 3 December 2012 an invitation to eligible holders of nGGBs to submit offers to exchange such securities for six months zero coupon notes to be issued by the European Financial Stability Fund (EFSF). The Group submitted for exchange the 100% of its nGGBs portfolio of total face value € 2.3 bn and received EFSF notes of total face value € 0.8 bn on 18 December 2012. The transaction resulted to a pre tax gain of € 192 million to be recorded in the fourth quarter of 2012 (note 6 to the consolidated accounts).
Given the severity of the impact of the Greek Government Bond exchange programme (PSI+), on 21 February 2012 the Euro Area finance ministers allocated a total of € 50 bn of the second support programme for Greece specifically for the recapitalisation of the Greek banking system. These funds are directed to the Hellenic Financial Stability Fund (HFSF) whose mandate has been extended and enhanced accordingly. € 23 bn of these funds were
remitted to Greece in April 2012, € 16 bn in December 2012 and the final € 11 bn is expected in January 2013.
The Bank of Greece (BoG) has assessed the viability of each Greek bank and estimated its capital needs based on the more demanding of: (a) a minimum Core Tier I ratio of 9% under the baseline scenario and, (b) 7% under the adverse stress scenario, throughout the period to end of 2014. Capital needs of each bank were assessed based on, inter alia, the impact of its participation in the PSI+ programme, the results from the BlackRock loan diagnostic exercise, the viability of its business plan, and a detailed timetable of mitigating actions to restore solvency. BoG and the European Central Bank assessed that the € 50 bn is adequate to cover the capital needs, as above, of the viable Greek Banks and the resolution of the non viable ones.
In the meantime, the impact of Greek banks participation in the Greek Government Bonds exchange programme (PSI+) is such that they require a temporary financial support from the HFSF, subject to the requirements provided by law and the presubscription agreement signed by each bank, the HFSF and the EFSF (see below).
The HFSF was established in 2010, in order to maintain the stability of the Greek banking system through ensuring that adequate resources are available to support viable banks' recapitalisation needs and participating to the capital increases for any non-subscribed part.
Banks considered viable have been given the opportunity to apply for and receive EBA-Core Tier Ι-eligible capital from the HFSF under a certain process. Capital may take the form of ordinary shares, contingent convertible financial instruments or ordinary shares with restricted voting rights. Ordinary shares with restricted voting rights will only be available if private investors contribute 10% of the capital raising at the rights issue. The voting rights of the HFSF for the ordinary shares it holds, subject to the 10% threshold mentioned above, will be strictly limited to specific strategic decisions on the condition that the bank adheres to its restructuring plan and as long as contingent convertible financial instruments (CoCos) are not mandatorily converted to ordinary shares. HFSF is obliged to dispose, fully or partly, all the shares it acquired within five years from the initial rights issue covered by HFSF, if the required 10% private participation is met and within two years if not. In both cases the disposal period may be extended by Minister of Finance decision.
A Cabinet Act on 9 November 2012, agreed in consultation with the Troika (European Commission, ECB and IMF), provided the technical details of the banks' recapitalisation framework, which is a combination of issue of ordinary shares, contingent convertible financial instruments (CoCos) and warrants (note 7 of the consolidated accounts).
Non viable banks will be resolved by the HFSF, in an orderly manner and at the lowest cost to the State, in a way that ensures financial stability. To ensure that the system remains wellcapitalized, by the second quarter of 2013, the Bank of Greece will conduct a follow-up stress-test exercise, based on end of 2012 market values and using a methodology determined in consultation with the Troika (European Commission, ECB, IMF).
BoG, after assessing the business plan and the capital needs of Eurobank (the "Bank") has concluded on 19 April 2012 that Eurobank is a viable bank and, on 8 November 2012, notified the Bank that its Tier I capital should increase by € 5,839 million by April 2013. The Bank, the HFSF and the European Financial Stability Facility ("EFSF") signed on 28 May 2012 and on 21 December 2012 a trilateral presubscription agreement for the advance to the Bank of EFSF notes of face value of € 3.97 bn and € 1.34 bn respectively (total € 5.31 bn) as advance payment of its participation in the future share capital increase of the Bank. In addition, HFSF provided to the Bank a commitment letter for additional capital support of € 0.53 bn up to the total level of recapitalisation needs of € 5,839 million. Proforma with the full recapitalisation amount of € 5,839 million, on 30 September 2012, the Group's regulatory capital stands at € 4.7 bn, the EBA Core Tier I Capital at € 4.4 bn, its Capital Adequacy ratio at 11.8% and the EBA Core Tier I ratio at 10.9%. The disposal of the Turkish operations, which was agreed in April 2012 and is expected to complete in December 2012, will further increase Eurobank's capital ratios by approximately 50 bps.
The Group continues the implementation of its medium term internal capital generating plan, which includes initiatives which generate or release EBA equity capital and/or reduce Risk Weighted Assets. In addition the Group is preparing for a capital raising whose timing and structure will depend on the outcome of the National Bank of Greece S.A. voluntary tender offer (see below).
On 5 October 2012, the National Bank of Greece (NBG) announced its intention to launch a voluntary exchange offer to acquire all Eurobank's shares offering 58 new shares of NBG for every 100 shares of Eurobank tendered. NBG also stated that, Eurobank shareholders holding 43.6% of Eurobank's ordinary share capital have committed to tender their shares in the tender offer. The offer is subject to regulatory approvals. On 23 November 2012, the General Meeting of the shareholders of NBG, approved the increase of NBG's share capital, and the issue of new ordinary shares to be offered to Eurobank's ordinary shareholders who will accept NBG's voluntary tender offer at the said exchange ratio.
The Bank announced that the exchange offer falls within the context of the on-going consolidation of the Greek banking system. Eurobank's Board will further evaluate, in a
constructive spirit, the merits of the business combination in the interest of all stakeholders, including employees, customers, shareholders and the Greek economy.
After the offer is launched, following the approval of relevant offering documentation by the Greek Capital Market Committee, the Bank's Board of Directors, with the assistance of its financial advisers, will consider the merits, the terms and conditions of the exchange offer and express its opinion thereon as required by Law 3461/2006.
Eurobank EFG participates in the Greek Government's program to support liquidity in the Greek economy under Law 3723/2008, as amended (note 5 to the consolidated accounts).
Relevant legislation does not allow banks participating in the Greek Economy Liquidity Support Program to declare a cash dividend to the ordinary shareholder for the financial years 2008 to date. Based on the 2011 results and article 44a of Company Law 2190/1920, the Directors did not recommend to the Shareholders' Annual General Meeting the distribution of dividends to either ordinary or preference shareholders.
On 22 May 2012, the Second Repeat Extraordinary Shareholders' Meeting of Alpha Bank aborted the merger procedure with Eurobank EFG and recalled Alpha Bank's General Meeting decisions on 15 November 2011.
Eurobank is a financial services provider engaged in retail, corporate and private banking, asset management, insurance, and treasury and capital markets services in Greece and the region of Central, Eastern and South-eastern Europe. Its regional presence is concentrated primarily in Euro–zone members (Greece, Cyprus, Luxembourg), European Union members (Romania and Bulgaria) and candidate member nations (Serbia and Turkey). In Turkey, Eurobank has reached an agreement with Burgan Bank to sell its subsidiary bank Eurobank Tekfen.
Based on the terms of the Investment Agreement signed with Raiffeisen Bank International AG (RBI) in February 2011, on 30 April 2012, the Group transferred 70% of its Polish banking subsidiary (Polbank EFG) to RBI, after obtaining the relevant approvals from the Polish Financial Supervision Authority (KNF). As of 30 April 2012, Polbank EFG and RBI Poland (RBI's Polish banking subsidiary) were combined and Eurobank also exercised on 30 April 2012 its put option on its remaining 13% stake in Raiffeisen Polbank. In October 2012,
the relevant transfer of shares was completed (note 11 to the consolidated accounts).
On 9 April 2012 the Group entered into a sale agreement for the transfer of Eurobank Tekfen A.S and its subsidiaries to Burgan Bank of Kuwait. All regulatory approvals by the competent authorities were obtained in December and the completion of the sale is expected before the year end. The transaction will increase Eurobank's Core Tier I capital ratio by approximately 50 bps (or capital equivalent of almost € 200 million) and will improve its liquidity position by € 500 million (note 15 to the consolidated accounts).
The Greek sovereign debt crisis, which has severely impacted the Greek economy, and the negative consequences from the European debt crisis have adversely affected the Group's operations. The mounting uncertainty in markets, mainly in Greece but also in the Eurozone, and the negative sentiment among the Group's clients and counterparties, especially since the second half of 2011, have created a very difficult market environment. In this particularly challenging context and isolating the impact of additional valuation losses on Greek sovereign exposure, the Group's operations have shown resilience adjusting to the prevailing conditions. As at 30 June 2012 total assets amounted to €72bn (Dec. 2011: €76.8bn) mainly as a result of the continuing selective de-leveraging and the reduction of funding to the Polish operations.
During the 12 months to June 2012 the loan book continued moving towards lower risk categories, with loans excluding consumer lending decreasing by 4%1 to €42bn1 , whereas consumer lending was down by €0.9bn1 or 12%1 to €6.6bn1 . Gross loans reached €48.6bn1 , down 5.4%1 . In the same period, deposits receded significantly in Greece especially in the second quarter of 2012, as a result of the prolonged election period and the consequent political uncertainty, the persistent recessionary conditions and the Public Sector's cash needs. The increase of deposits by €0.7bn1 from International Operations contained the impact, with Group deposits at €28bn1 end of June. As a result, the loan–to–deposit (L/D) ratio for the Group at the end of June stood at 159%1 , up from 143%1 one year ago, whereas International Operations improved their L/D ratio from 103%1 to 96%1 . From July 2012 onwards, deposit outflows reversed and Group deposits reached €28.9bn1 end of September 2012, improving the L/D ratio by 8%.
Due to the Greek sovereign debt crisis, Greek banks obtain a significant part of their funding through the European Central Bank (ECB) and the Bank of Greece (together, the "Eurosystem"). As at 30 June 2012, Eurobank EFG's net Eurosystem funding totaled €34bn
1 Comparative figures have been adjusted to exclude Turkish operations
(2011: €31bn), while deposit inflows and some limited access to the markets have enabled the relevant balance to currently stand at €30bn.
Within a distressed macroeconomic environment, the six months' Pre-Provision Income (PPI) reached €477m1 from €523m1 in the 1st half of 2011. Net interest income stood at €800m1 down 19%1 year–on–year, mainly affected by the increased cost of funding, the ongoing balance sheet deleveraging and the delay in the recapitalization of the Bank. Net interest margin stood at a 2.21%1 (1st half 2011: 2.45%1 ). Fees and commissions, affected by weakened economic and credit activity in Greece, decreased to €129m1 , whereas non core revenues significantly increased by €159m1 to €91m1 mainly due to higher gains from liability management. To counter the pressure on revenues, intensive cost containment efforts continued for a fourth consecutive year. Operating expenses were 3.7%1 lower year–on– year, and 20% lower than 2008, with the cost to income ratio at 53.2%1 (1st half 2011:51.9%1 ).
The deteriorating market conditions, especially in Greece, resulted in higher loan provisions of €794m1 or 3.48%1 of average net loans (1st half 2011: €654m1 , 2.65%1 ). Non performing loans now stand at 15.4%1 of gross loans (end 2011: 12.4%1 ). In International operations, the worsening macroeconomic conditions and the prudent assessment of some individual wholesale cases in Romania and Bulgaria, resulted in higher bad debt provisions totaling €139m or 3.12% of average net loans.
The Group recognized in the 1st half of 2012 impairment/ valuation losses amounting to €571m after tax, of which €443m related to PSI and other Greek Sovereign risk exposure and €80m to subordinated debt securities issued by Agricultural Bank of Greece. Finally, the gain on disposal of Polish operations was adjusted by €59m after tax following the exchange of shares and the exercise of the put option in April 2012.
Overall, despite the deep economic recession and unprecedented business conditions, the Group continues to generate Pre–Provision Income, swiftly adjusting to the new requirements and supported by proven cost containment competencies. Net loss attributable to shareholders, after accounting for the €571m after tax impact of additional valuation losses mainly related with Greek sovereign exposure, amounted to €872m (1st half 2011 loss: €588m), while International operations losses amounted to €5m (1st half 2011 profits: €40m).
As at 30 June 2012 the ordinary share capital amounts to €1,227,545,508, divided into 552,948,427 ordinary voting shares of a nominal value of €2.22 each. All ordinary shares are registered, listed on the Athens Stocks Exchange and incorporate all the rights and obligations set by Greek company law (note 18 to the consolidated accounts).
As at 30 June 2012, the preference share capital amounts to €950,125,000 divided into 345,500,000 non-voting, non-listed, non-transferable, 10% preference shares, with nominal value €2.75 each, issued under Law 3723/2008 on 'Greek Economy Liquidity Support Program', and subscribed to by the Hellenic Republic. This entitles the Government to appoint its representative to the Board of Directors, veto strategic decisions and decisions which alter substantially the legal or financial position of the Bank and require the General Meeting's approval, veto dividend distributions and restrict management remuneration (note 19 to the accounts).
In May 2010 the Greek Government entered into an agreement with the European Commission (EC), the European Central Bank (ECB) and the International Monetary Fund (IMF) for a three-year €110bn refinancing and restructuring programme designed to cover Greece's funding needs until mid-2012.
Due to unfavourable developments and implementations issues, Greece entered into a new funding and restructuring programme with the European Commission, the ECB and the eurozone member-states in the Eurogroup meeting of February 21st 2012. The programme aimed at bringing the country's public debt-to-GDP ratio below 120% by 2020, and included:
In addition, the European Commission has taken measures to accelerate the release of EU funds to Greece (including reducing or eliminating state contribution to various projects) and support investments which will kick-start Greece's growth.
The new funding and reform programme improved the country's financial position and outlook, via the reduction of public debt and its servicing costs from 2012 onwards. The programme provided a credible opportunity for the Greek economy to remove the uncertainty surrounding it from mid-2010 onwards regarding the sustainability of its public debt and the stability of the country.
However, the implementation of the new programme stalled by April 2012. The prolonged election period, culminating in two consecutive elections in May and June increased political uncertainty and caused delays in the implementation of the reform agenda. Economic sentiment also deteriorated due to the worsening of the eurozone debt crisis. At the same time the IMF recognised the greater than previously expected effect of fiscal consolidation measures on growth. These developments combined led to the deepening of the Greek economy's contraction. The Greek Government according to the MTFS 2013-16 and the 2013 Budget, expects a growth rate of -6.5% of GDP for 2012 and -4.5% of GDP for 2013. Positive growth rates are expected from 2014 onwards with risks on the downside. The continued rationalization, restructuring and austerity measures together with the two year extension of the programme for 2015-16 (already approved by the November 19th 2012 Eurogroup) are expected to reduce the total budget deficit in 2012 to 6.6% of GDP, from 9.4% of GDP in 2011, and the primary deficit to 1.2%, from 2.3% in 2011, while a primary balance surplus of 0.4% of GDP is expected for 2013. However developments on the public debt are not encouraging. In the MTFS 2013-16 public debt is expected at 175.6% of GDP in 2012 and at 184.9% of GDP in 2016.
On the back of these developments, and after the implementation/legislation of a long list of structural reforms and fiscal austerity measures for 2013-16 by the Greek Government, the Eurogroup reached on November 26th, 2012 an agreement on a set of new measures for the reduction of Greek public debt to 124.0% of GDP by 2020 and 110.0% of GDP in 2022. This debt path is consistent with debt sustainability required by the IMF. The new measures include:
The approval of the above measures by the Parliaments of the eurozone member states and the successful debt-buyback operation paved the way for the disbursement of the next EFSF tranche. The disbursement of funds of ca €49.1 bn including €23.8 bn of the funds recapitalization scheme was approved by the Eurogroup on December 13th 2012. On 17 December 2012 €34.3 bn (including €16.0 bn for bank recapitalization) were disbursed, while the rest will be disbursed in sub-tranches during the first quarter of 2013, conditional on the implementation of a series of structural reforms (including implementation of the tax reform by end-of-January 2013) to be agreed by the troika.
Credit demand in 2012 is expected to be weaker than in 2011 when bank credit to domestic private sector contracted by 3.3% year-on-year. Following the loss of access to international capital markets from 2009 onwards, the Greek banking system relies on the ECB and the Bank of Greece for funding; this will continue in 2012. The projected mild recession in the eurozone may also affect tourism and related revenues.
New Europe economies continue to move below par impacted by the repercussions of the lingering Euro Area crisis and now face the additional downside risks of the global growth environment. GDP growth in the region is expected to weaken somewhat in H2-2012. Τhe three economies of continental Southeastern Europe (Bulgaria,Romania and Serbia) demonstrate the weakest growth performance. Tough fiscal austerity policies and strong buffers shield Bulgaria from markets turbulence. In the run up to parliamentary elections, full year growth prospects in Romania remained subdued. Output contraction deepens in the post-election landscape of Serbia. Headwinds from the Euro Area sovereign debt crisis, the urgent need for additional fiscal consolidation and volatile weather conditions in the first half put even more pressure on growth. Political instability tapered after October parliamentary elections in Ukraine since ruling coalition maintained its majority in parliament, although with a thin margin. Ukraine slowed in 2012 and risks remain elevated in an uncertain global environment given Ukraine's high external financing requirements and its heavy dependency on industrial exports to Western Europe. Finally, in Cyprus, economic activity is likely to remain in contraction through to 2014 due weakening domestic demand dynamics primarily as a result of the adoption of substantial fiscal austerity measures envisioned in the country's Memorandum of Understanding with the Troika. Cyprus announced its decision to request external financial assistance from the EU/ΙMF in June, primarily due to increased headwinds to the domestic banking sector mainly as a result of its exposure to Greece in its bond and
loan portfolios. Negotiations between the Cypriot government and the Troika over a potential financial aid package currently continue. An agreement is anticipated to be reached in early 2013 after the release of a final due-diligence report in mid-January on the domestic banking sector which will determine the costs associated with banks' recapitalization.
Regarding the outlook for the next 12 months, main risks in Greece stem from the macroeconomic environment, the developments on the eurozone sovereign debt crisis and the success, or otherwise, of the significant fiscal adjustment efforts and their impact on the economy. To date, satisfactory results have been registered, but progress could be compromised by significant delays in official financing, external shocks from the global economy as well as implementation risks, reform fatigue in Greece. The restoration of confidence, the attraction of new investments and the revival of economic growth remain key challenges.
Continuation of the recession could adversely affect the region and could lead to lower profitability and deterioration of asset quality. In addition, increased funding cost remains a significant risk, as it depends on both the level of sovereign spreads as well as on foreign exchange rate risk, due to the unstable nature of some currencies. Finally, the Group holds positions in the bond, stock and foreign exchange markets and consequently is exposed to the risk of losses if market valuations decrease.
In this very challenging environment, Eurobank's operations, adjust continuously to the new requirements so as to address effectively the emerging credit, liquidity and macroeconomic risks. The shift towards collateralised lending, self funded growth and the more promising markets have been in place for some time. In addition, the Group continues to reduce its cost base in order to increase the efficiency of operations. It also strengthens collection efforts to maximize loan recoveries by redeploying resources where necessary and implements conservative provisioning policies. Finally, the Group improves continuously the effectiveness of balance sheet management and reinforces its capital and liquidity, undertaking significant strategic initiatives in this direction.
The Group continues to support the recovery of the Greek economy and stands by its clients, deepening relationships with them, enhances the engagement of its staff and strengthens the value of its franchise.
Until July 23, 2012, the Bank was a member of the EFG Group, having as operating parent company the "European Financial Group EFG (Luxembourg) S.A." and ultimate parent company the "Private Financial Holdings Limited", the latter owned and controlled indirectly by members of the Latsis family. In particular, the EFG Group held 44.70% of the Bank's
ordinary shares and voting rights, through wholly owned subsidiaries of the ultimate parent company and the remaining ordinary shares and voting rights were held by institutional and retail investors, none of which, to the knowledge of the Bank, held 5% or more.
On July 23, 2012, 43.55% of the ordinary shares and voting rights held by EFG Group were transferred to ten legal entities, each of which acquired approximately 4.4%, while the EFG Group retained the remaining 1.15%. These entities have formally stated they are independent from each other. As a result, from July 23, 2012, onwards, Eurobank ceased to be under EFG Group's control. In addition, the Bank's corporate and trade name have already been amended in order to no longer include the "EFG" suffix.
In the context of the separation of the Eurobank Group from the EFG Group, the five EFG Group nominated Board members of Eurobank resigned from the Board. On 21 September 2012 the Board elected Mrs. Angeliki Frangou and Messrs. George David and Nicholas Stassinopoulos as new BoD members, with a term equal to the remaining term of the resigned members.
Henceforth, all of Eurobank's shares are held by the general public and the company is not controlled by any (one or more) individuals or legal entities.
The Hellenic Republic holds 100% of the non-voting preference shares of Eurobank, issued according to Law 3723/2008.
All transactions with related parties are entered into the normal course of business and are conducted on an arm's length basis. See also note 25 to the accounts.
Efthymios Christodoulou Nicholas Nanopoulos Chairman Chief Executive Officer
21 December 2012
III. Auditor's Report on Review of Interim Financial Information
We have reviewed the accompanying condensed company and consolidated balance sheet of EUROBANK ERGASIAS S.A. and its subsidiaries (the ''Group'') as of 30 June 2012 and the related condensed company and consolidated statements of income, comprehensive income, changes in equity and cash flows for the six-month period then ended and the selected explanatory notes, that comprise the interim condensed financial information and which form an integral part of the six-month financial report as required by article 5 of L.3556/2007. Management is responsible for the preparation and presentation of this condensed interim financial information 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 this interim condensed financial information 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 apply analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing 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 interim condensed financial information is not prepared, in all material respects, in accordance with IAS 34.
Without qualifying our opinion, we draw attention to the disclosures made in notes 2, 6 and 7 to the interim condensed financial information, which refer to the impact of the impairment losses resulting from the Greek sovereign debt restructuring on the Group's regulatory capital, the planned actions to restore the capital adequacy of the Group and the existing uncertainties that could adversely affect the going concern assumption until the completion of the recapitalisation process.
Our review has not revealed any inconsistency or discrepancy of the other information included in the six-month financial report, as required by article 5 of L.3556/2007, with the accompanying interim condensed financial information.
Athens, 21 December 2012
The Certified Auditor –Accountant Kyriakos Riris SOEL Reg. No. 12111
PricewaterhouseCoopers S.A. 268 Kifissias Avenue 152 32 Halandri SOEL Reg. No. 113
IV. Condensed Consolidated Interim Financial Statements for the six months ended 30 June 2012
30 JUNE 2012
Company Registration No: 000223001000 8 Othonos Street, Athens 105 57, Greece www.eurobank.gr, Tel.: (+30) 210 333 7000
Condensed Consolidated Interim Financial Statements for the six months ended 30 June 2012
| Page | ||
|---|---|---|
| Consolidated Interim Income Statement | 3 | |
| Consolidated Interim Balance Sheet | 4 | |
| Consolidated Interim Statement of Comprehensive Income | 5 | |
| Consolidated Interim Statement of Changes in Equity | 6 | |
| Consolidated Interim Cash Flow Statement | 7 | |
| Selected Explanatory Notes to the Condensed Consolidated Interim Financial Statements | ||
| 1 | General information | 8 |
| 2 | Basis of preparation of condensed consolidated interim financial statements | 8 |
| 3 | Principal accounting policies | 8 |
| 4 | Critical accounting estimates and judgements in applying accounting policies | 9 |
| 5 | Greek Economy Liquidity Support Program | 9 |
| 6 | Credit exposure to Greek sovereign debt | 9 |
| 7 | Greek Banks' recapitalisation | 10 |
| 8 | Segment information | 11 |
| 9 | Earnings per share | 12 |
| 10 | Income tax | 12 |
| 11 | Discontinued operations and disposal groups | 13 |
| 12 | Provision for impairment losses on loans and advances to customers | 13 |
| 13 | Other non recurring valuation losses | 14 |
| 14 | Investment securities | 14 |
| 15 | Shares in subsidiary undertakings | 14 |
| 16 | Other assets | 16 |
| 17 | Debt issued and other borrowed funds | 16 |
| 18 | Ordinary share capital, share premium and treasury shares | 16 |
| 19 | Preference shares | 17 |
| 20 | Preferred securities | 17 |
| 21 | Advance contribution of Hellenic Financial Stability Fund | 17 |
| 22 | Contingent liabilities and other commitments | 18 |
| 23 | National Bank of Greece S.A. voluntary tender offer | 18 |
| 24 | Other significant and post balance sheet events | 18 |
| 25 | Related party transactions | 18 |
| 26 | Dividends | 19 |
| Six months ended 30 June |
Three months ended 30 June |
||||||
|---|---|---|---|---|---|---|---|
| 2012 | 2011 | 2012 | 2011 | ||||
| Note | € million | € million | € million | € million | |||
| Net interest income | 800 | 986 | 374 | 497 | |||
| Net banking fee and commission income | 105 | 136 | 50 | 66 | |||
| Net insurance income | 8 | 18 | 3 | 7 | |||
| Income from non banking services | 16 | 15 | 8 | 8 | |||
| Dividend income | 2 | 3 | 2 | 3 | |||
| Net trading income | 107 | 0 | 42 | (6) | |||
| Gains less losses from investment securities | (19) | (71) | 4 | 20 | |||
| Other operating income | 1 | 0 | 1 | 0 | |||
| Operating income | 1,020 | 1,087 | 484 | 595 | |||
| Operating expenses | (543) | (564) | (270) | (276) | |||
| Profit from operations before impairment on loans | |||||||
| and advances and non recurring valuation losses | 477 | 523 | 214 | 319 | |||
| Impairment losses on loans and advances | 12 | (794) | (654) | (434) | (318) | ||
| Impairment and other losses on Greek sovereign | |||||||
| exposure | 6 | (554) | (830) | (115) | (830) | ||
| Other non recurring valuation losses | 13 | (160) | - | (160) | - | ||
| Share of results of associates and joint ventures | (0) | (1) | 1 | (1) | |||
| Profit/(loss) before tax | (1,031) | (962) | (494) | (830) | |||
| Income tax | 10 | 217 | 194 | 111 | 168 | ||
| Profit/(loss) for the period from continuing operations | (814) | (768) | (383) | (662) | |||
| Profit/(loss) for the period from discontinued operations | 11 | (51) | 187 | (57) | 3 | ||
| Net profit/(loss) for the period | (865) | (581) | (440) | (659) | |||
| Net profit for the period attributable to non controlling interest | 7 | 7 | 4 | 3 | |||
| Net profit/(loss) for the period attributable to shareholders | (872) | (588) | (444) | (662) | |||
| € | € | € | € | ||||
| Earnings/(losses) per share | |||||||
| -Basic and diluted earnings/(losses) per share | 9 | (1.22) | (1.17) | (0.77) | (1.26) | ||
| Earnings/(losses) per share from continuing operations | |||||||
| -Basic and diluted earnings/(losses) per share | 9 | (1.13) | (1.52) | (0.67) | (1.27) | ||
| 30 June | 31 December | ||
|---|---|---|---|
| 2012 | 2011 | ||
| Note | € million | € million | |
| ASSETS | |||
| Cash and balances with central banks | 2,421 | 3,286 | |
| Loans and advances to banks | 5,663 | 6,988 | |
| Financial instruments at fair value through profit or loss | 334 | 503 | |
| Derivative financial instruments | 1,737 | 1,818 | |
| Loans and advances to customers | 44,579 | 48,094 | |
| Investment securities | 14 | 9,777 | 11,383 |
| Property, plant and equipment | 1,301 | 1,304 | |
| Intangible assets | 450 | 465 | |
| Deferred tax asset | 1,998 | 1,726 | |
| Other assets | 16 | 1,629 | 1,255 |
| Assets of disposal group classified as held for sale | 11 | 2,128 | - |
| Total assets | 72,017 | 76,822 | |
| LIABILITIES | |||
| Secured borrowing from banks | 35,541 | 34,888 | |
| Other deposits from banks | 859 | 1,043 | |
| Derivative financial instruments | 2,932 | 3,013 | |
| Due to customers | 28,013 | 32,459 | |
| Debt issued and other borrowed funds | 17 | 1,500 | 2,671 |
| Other liabilities | 1,802 | 1,873 | |
| Liabilities of disposal group classified as held for sale | 11 | 1,587 | - |
| Total liabilities | 72,234 | 75,947 | |
| EQUITY | |||
| Ordinary share capital | 18 | 1,226 | 1,226 |
| Share premium | 18 | 1,438 | 1,439 |
| Other reserves | (4,475) | (3,763) | |
| Preference shares | 19 | 950 | 950 |
| Preferred securities | 20 | 371 | 745 |
| Non controlling interest | 273 | 278 | |
| Total | (217) | 875 | |
| Total equity and liabilities | 72,017 | 76,822 |
Consolidated Interim Statement of Comprehensive Income
| Six months ended 30 June |
Three months ended 30 June |
|||||||
|---|---|---|---|---|---|---|---|---|
| 2012 € million |
2011 € million |
2012 € million |
2011 € million |
|||||
| Profit/(loss) for the period | (865) | (581) | (440) | (659) | ||||
| Other comprehensive income: Cash flow hedges - net changes in fair value, net of tax - transfer to net profit, net of tax |
(88) 20 |
(68) | (8) (4) |
(12) | (72) 26 |
(46) | (3) (5) |
(8) |
| Available for sale securities - net changes in fair value, net of tax - impairment losses on Greek sovereign debt transfer to net profit, net of tax |
39 - |
(78) 209 |
(5) - |
(66) 209 |
||||
| - impairment losses on other investment securities transfer to net profit, net of tax - transfer to net profit, net of tax |
30 1 |
70 | - 23 |
154 | 30 0 |
25 | - (2) |
141 |
| Foreign currency translation - net changes in fair value, net of tax - transfer to net profit, net of tax |
(37) - |
(37) | (27) 4 |
(23) | (14) - |
(14) | (24) - |
(24) |
| Other comprehensive income for the period |
(35) | 119 | (35) | 109 | ||||
| Total comprehensive income for the period attributable to: Shareholders |
||||||||
| - from continuing operations - from discontinued operations |
(863) (43) |
(906) | (629) 160 |
(469) | (420) (58) |
(478) | (536) (17) |
(553) |
| Non controlling interest - from continuing operations - from discontinued operations |
6 0 |
6 | 7 (0) |
7 | 3 - |
3 | 3 (0) |
3 |
| (900) | (462) | (475) | (550) |
Consolidated Interim Statement of Changes in Equity for the six months ended 30 June 2012
| Ordinary share capital € million |
Share premium € million |
Special reserves € million |
Retained earnings € million |
Preference shares € million |
Preferred securities € million |
Non controlling interest € million |
Total € million |
|
|---|---|---|---|---|---|---|---|---|
| Balance at 1 January 2011 | 1,478 | 1,440 | 644 | 469 | 950 | 791 | 322 | 6,094 |
| Other comprehensive income for the period |
- | - | 119 | - | - | - | 0 | 119 |
| Profit/(loss) for the period | - | - | - | (588) | - | - | 7 | (581) |
| Total comprehensive income for the six months ended 30 June 2011 |
- | - | 119 | (588) | - | - | 7 | (462) |
| Acquisitions/changes in participating interests in subsidiary and associated |
||||||||
| undertakings | 73 | (6) | - | (23) | - | - | (48) | (4) |
| Purchase/sale of preferred securities | - | - | - | 15 | - | (33) | - | (18) |
| Preference shares' and preferred securities' dividend paid |
- | - | - | (97) | - | - | - | (97) |
| Dividends distributed by subsidiaries attributable to non controlling interest |
- | - | - | - | - | - | (10) | (10) |
| Share-based payment: | ||||||||
| - Value of employee services | - | - | (1) | - | - | - | - | (1) |
| Purchase of treasury shares | (2) | (1) | - | - | - | - | - | (3) |
| Sale of treasury shares, net of tax and related expenses |
2 | 1 | - | (7) | - | - | - | (4) |
| 73 | (6) | (1) | (112) | - | (33) | (58) | (137) | |
| Balance at 30 June 2011 | 1,551 | 1,434 | 762 | (231) | 950 | 758 | 271 | 5,495 |
| Balance at 1 January 2012 | 1,226 | 1,439 | 1,276 | (5,039) | 950 | 745 | 278 | 875 |
| Other comprehensive income for the period |
- | - | (34) | - | - | - | (1) | (35) |
| Profit/(loss) for the period | - | - | - | (872) | - | - | 7 | (865) |
| Total comprehensive income for the six months ended 30 June 2012 |
- | - | (34) | (872) | - | - | 6 | (900) |
| Acquisitions/changes in participating interests in subsidiary and associated undertakings |
- | - | - | 0 | - | - | (0) | (0) |
| Purchase/sale of preferred securities | - | - | - | 212 | - | (374) | - | (162) |
| Preferred securities' dividend paid | - | - | - | (18) | - | - | - | (18) |
| Dividends distributed by subsidiaries attributable to non controlling interest |
- | - | - | - | - | - | (11) | (11) |
| Share-based payment: | ||||||||
| - Value of employee services | - | - | (0) | - | - | - | - | (0) |
| Purchase of treasury shares | (0) | 0 | - | - | - | - | - | (0) |
| Sale of treasury shares, net of tax and related expenses |
0 | (1) | - | - | - | - | - | (1) |
| 0 | (1) | (0) | 194 | - | (374) | (11) | (192) | |
| Balance at 30 June 2012 | 1,226 | 1,438 | 1,242 | (5,717) | 950 | 371 | 273 | (217) |
| Note 18 | Note 18 | Note 19 | Note 20 |
Consolidated Interim Cash Flow Statement for the six months ended 30 June 2012
| Six months ended 30 June |
||
|---|---|---|
| 2012 | 2011 | |
| € million | € million | |
| Cash flows from operating activities | ||
| Interest received and net trading receipts | 1,674 | 1,587 |
| Interest paid Fees and commissions received |
(1,046) 408 |
(789) 265 |
| Fees and commissions paid | (284) | (67) |
| Cash payments to employees and suppliers | (466) | (451) |
| Income taxes paid | (18) | (24) |
| Cash flows from continuing operating profits before changes in operating assets and liabilities | 268 | 521 |
| Changes in operating assets and liabilities | ||
| Net (increase)/decrease in cash and balances with central banks | 1,117 | (1,520) |
| Net (increase)/decrease in financial instruments at fair value through profit or loss | 37 | (41) |
| Net (increase)/decrease in loans and advances to banks | 619 | 948 |
| Net (increase)/decrease in loans and advances to customers | 1,246 | 924 |
| Net (increase)/decrease in derivative financial instruments | (83) | (175) |
| Net (increase)/decrease in other assets | (382) | (72) |
| Net increase/(decrease) in due to banks | 1,201 | 6,432 |
| Net increase/(decrease) in due to customers | (3,735) | (6,424) |
| Net increase/(decrease) in other liabilities | (189) | (94) |
| Net cash from/(used in) continuing operating activities | 99 | 499 |
| Cash flows from investing activities | ||
| Purchases of property, plant and equipment and intangible assets | (64) | (105) |
| Proceeds from sale of property, plant and equipment and intangible assets | 2 | 4 |
| (Purchases)/sales and redemptions of investment securities | 1,213 | (396) |
| Disposal of foreign operations, net of cash and cash equivalents disposed | - | (143) |
| Dividends from investment securities and associated undertakings | 1 | 2 |
| Net cash from/(used in) continuing investing activities | 1,152 | (638) |
| Cash flows from financing activities | ||
| (Repayments)/proceeds from debt issued and other borrowed funds | (1,127) | (1,938) |
| Purchase of preferred securities | (159) | (29) |
| Proceeds from sale of preferred securities | - | 11 |
| Preference shares' and preferred securities' dividend paid | (22) | (23) |
| Purchase of treasury shares | (0) | (3) |
| Proceeds from sale of treasury shares | 0 | 3 |
| Net contributions by non controlling interest | (11) | (10) |
| Net cash from/(used in) continuing financing activities | (1,319) | (1,989) |
| Effect of exchange rate changes on cash and cash equivalents | (16) | (22) |
| Net increase/(decrease) in cash and cash equivalents from continuing operations | (84) | (2,150) |
| Net cash flows from discontinued operating activities | (216) | 54 |
| Net cash flows from discontinued investing activities | 176 | 47 |
| Net increase/(decrease) in cash and cash equivalents from discontinued operations | (40) | 101 |
| Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period |
3,124 3,000 |
4,044 1,995 |
Eurobank Ergasias S.A. (the "Bank") and its subsidiaries (the "Group") are active in retail, corporate and private banking, asset management, insurance, treasury, capital markets and other services. The Bank is incorporated in Greece and its shares are listed on the Athens Stock Exchange. The Group operates mainly in Greece and in Central, Eastern and Southeastern Europe. The Bank's corporate name was amended on 2 August 2012 from "EFG Eurobank Ergasias S.A." to Eurobank Ergasias S.A.", following the Annual General Meeting's resolution on 29 June 2012.
These condensed consolidated interim financial statements were approved by the Board of Directors on 21 December 2012.
These condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard (IAS) 34 "Interim Financial Reporting" and they should be read in conjunction with the Group's published consolidated annual financial statements for the year ended 31 December 2011. Where necessary, comparative figures have been adjusted to conform with changes in presentation in the current period. Except as indicated, financial information presented in euro has been rounded to the nearest million.
The financial statements have been prepared on a going concern basis. In making its assessment of the Group's ability to continue as a going concern, the Board of Directors has taken into consideration the impact of the following factors:
The Group has incurred substantial impairment losses as a result of the Hellenic Republic's debt restructuring (PSI+). Such losses had a respective impact on the accounting and regulatory capital of the Group as of 31 December 2011, which fell below the minimum capital requirements as determined by the Bank of Greece.
Capital needs of the Group were assessed by the Bank of Greece (BoG) at the level of € 5,839 million, in order to be able to achieve the level of EBA Core Tier I capital of 9% throughout the period to end of 2014. This assessment takes into account, inter alia, the PSI impairment losses, the results of Blackrock's diagnostic review and the Group's business plan which also includes certain capital strengthening actions.
HFSF (Hellenic Financial Stability Fund) has already advanced to the Bank EFSF notes of total € 3.97 bn (face value) and signed a presubscription agreement for the advance to the Bank of EFSF notes of € 1.34 bn (total € 5.31 bn) as advance payment of its participation in the future share capital increase of the Bank. The said advance qualifies as Tier I capital and brings the EBA Core Tier I capital above the current minimum level of 9%. In addition, HFSF provided to the Bank a commitment letter for additional capital support of € 0.53 bn up to the total level of recapitalisation needs of € 5,839 million.
The inability of the Greek banks to gain access to the international capital and money markets and the reduction of deposits due to heightened sovereign risk and deterioration of the Greek economy led to an increased reliance of the Group to Eurosystem financing facilities. These conditions pose a significant ongoing liquidity challenge for the Group and the Greek Banking system in general. The Group expects that the ECB and Bank of Greece facilities will continue to be available, until the normalization of market conditions.
The continued deterioration of the Greek economy has adversely affected the Group's operations and presents significant risks and challenges for the years ahead. Currently, there are a number of material economic and market risks and uncertainties that impact the Greek Banking system. The main risks stem from the adverse macroeconomic environment, the developments on the eurozone sovereign debt crisis and the success, or otherwise, of the significant fiscal adjustment efforts and their impact on the Greek economy. The significant progress made to date could be compromised by external shocks from the global economy as well as implementation risks and reform fatigue in Greece. The restoration of confidence, after the approval of the next EFSF disbursement amounting to € 43.7 bn by the Eurogroup on 13 December 2012, the attraction of new investments and the revival of economic growth remain key challenges of the Greek economy.
Continuation of the recession could adversely affect the region and could lead to lower profitability, deterioration of asset quality and a further reduction of deposits. In addition, increased funding cost remains a significant risk, as it is dependent on both the level of sovereign spreads as well as on foreign exchange rate risk, due to the unstable nature of some currencies.
Notwithstanding the conditions and uncertainties mentioned above, the Directors, having considered the mitigating factors set out below, have a reasonable expectation that the recapitalisation of the Group will be promptly and successfully completed and hence are satisfied that the financial statements of the Group can be prepared on a going concern basis:
The accounting policies and methods of computation in these condensed consolidated interim financial statements are consistent with those in the published consolidated annual financial statements for the year ended 31 December 2011.
The following amendments to standards and interpretations are effective from 1 January 2012, but currently, they do not have a significant effect to the Group's financial statements:
In preparing these condensed consolidated interim financial statements, the significant judgements made by Management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those applied to the published consolidated annual financial statements for the year ended 31 December 2011.
The Bank participates in the Greek Government's plan to support liquidity in the Greek economy under Law 3723/2008, as amended by Laws 3844/2010, 3845/2010, 3872/2010 and 3965/2011 and extended by Ministerial decision 32252/B.1132/17.07.2012, as follows:
Under Law 3723/2008, as amended by Law 3965/2011, for the period the Bank participates in the program through the preference shares or the guaranteed bonds (streams (a) and (b) above), the Government is entitled to appoint its representative to the Board of Directors, veto strategic decisions, decisions which alter substantially the legal or financial position of the Bank and require the General Assembly's approval and dividend distributions as well as restrict management remuneration.
In addition, under Law 3756/2009, as amended by Law 3844/2010 and supplemented by Laws 3965/2011 and 4063/2012, banks participating in the Greek Economy Liquidity Support Program are not allowed to declare a cash dividend to their ordinary shareholders for 2008 to date, and are not allowed to acquire treasury shares under article 16 of the Company Law.
On 21 February 2012, Euro Area finance ministers agreed on a bail out program for Greece, including financial assistance from the official sector and a voluntary debt exchange agreed with the Private Sector.
The key terms and conditions of the final voluntary debt exchange package (PSI+) were as follows:
The support program aimed at ensuring debt sustainability and restoring competitiveness, allowing Greece to achieve strict fiscal consolidation targets and the implementation of privatization plans and structural reforms.
The invitation for tender was launched on 24 February 2012 and the bonds invited to participate in PSI+ had an aggregate outstanding face amount of approximately € 206 bn. Greek and foreign law bonds of approximately € 199 bn were eventually exchanged.
Under Law 4046/2012, the tax losses arising from the bond exchange under the PSI+ program will be tax deductible in equal instalments over the life of the new bonds received, irrespective of the holding period of the bonds.
The exchange program of Greek Government bonds and other eligible securities (PSI+) provides evidence of a concession granted to the borrower (the Greek State) by the lender relating to the borrower's financial difficulty that the lender would not otherwise consider. Therefore, following the Bank's participation in the program, the Group recognised an impairment loss of € 5,779 million before tax, as of 31 December 2011, for GGBs and other securities of face value € 7,336 million exchanged in 2012 under PSI+.
Under this exchange, in March/April 2012, the Group received a) new Greek government bonds (nGGBs) with face value equal to 31.5% of the face amount of the old bonds, b) EFSF notes having a face amount of 15% of the face value of the old bonds and c) GDP-linked securities. All exchanged bonds were derecognised and the new GGBs, classified in the Held to Maturity portfolio, recognised at fair value. In 2012 and, following the international financial community's view that the market for nGGBs is active, the Group recognised an additional valuation loss of € 427 million based on market quotes at the date of recognition. The full amount has been recognised in the first quarter of 2012 (see below). GDP-linked securities were classified as derivatives. Furthermore, the Group incurred additional costs (extra funding cost, cost relating to old GGBs hedging instruments) amounting to € 12 million due to its participation in the PSI+ exchange program. As at 30 June 2012, and considering 2011 impact, total loss from PSI+ has amounted to € 6.2 bn. As at 30 June 2012, the carrying value of nGGBs amounted to € 587 million.
Following the position adopted by the international financial community that the price quotes for the nGGBs upon the execution of the PSI+ represented actual and regularly occurring market transactions on an arm's length basis, the fair value at which the nGGBs received by the Group were initially recognised, was retrospectively adjusted in order for the nGGBs to be reflected at such quoted prices as of the date of recognition. As a result, the interim financial information for the three month period ended 31 March 2012, is restated as follows: The carrying amount of the Held to Maturity investment portfolio decreased by € 240 million with a respective increase of the impairment losses on Greek sovereign risk and the deferred tax asset increased by € 48 million through a respective adjustment of the income tax expense. The above described amendment has no impact on the interim financial information for the six months ended 30 June 2012 as a whole.
Greek Government bonds exchanged under PSI+ in 2012 (continued)
Following the Eurogroup's decisions on 27 November 2012 as part of debt reduction measures, the Greek State announced on 3 December 2012 an invitation to eligible holders of nGGBs to submit offers to exchange such securities for six months zero coupon notes to be issued by the European Financial Stability Fund (EFSF). On 18 December 2012, pursuant to the above invitation, nGGBs of aggregate face amount of € 31.9 bn were eventually exchanged for EFSF notes of face amount of € 11.3 bn.
Under its participation to the Greek state's debt buyback program, the Group submitted for exchange the 100% of its nGGBs portfolio of total face value € 2.3 bn (carrying amount € 0.6 bn) and received EFSF notes of total face value € 0.8 bn. The transaction resulted in a pre tax gain of € 192 million to be recorded in the fourth quarter of 2012.
As at 30 June 2012, the total carrying value of other Greek sovereign exposure amounted to € 4,887 million. This includes Treasury Bills of € 2,239 million and GGBs of € 904 million maturing in 2014 and issued for the Greek State's subscription to the Preference Shares issued under Law 3723/2008 "Greek Economy Liquidity Support Program".
Other losses on Greek sovereign exposure further include € 115 million valuation losses for derivatives with the Greek State and for a Greek sovereign risk related financial guarantee.
Given the severity of the impact of the Greek Government Bond exchange program (PSI+), on 21 February 2012 the Euro Area finance ministers allocated a total of € 50 bn of the second support program for Greece specifically for the recapitalisation of the Greek banking system. These funds are directed to the Hellenic Financial Stability Fund (HFSF) whose mandate has been extended and enhanced accordingly. € 23 bn of these funds were remitted to Greece in April 2012, € 16 bn in December 2012 and the final € 11 bn is expected in January 2013.
The Bank of Greece (BoG) has assessed the viability of each Greek bank and estimated its capital needs based on the more demanding of (a) a minimum Core Tier I ratio of 9% under the baseline scenario and (b) 7% under the adverse stress scenario, throughout the period to end of 2014. Capital needs of each bank were assessed based on, inter alia, the impact of its participation in the PSI+ program, the results from the BlackRock loan diagnostic exercise, the viability of its business plan, and a detailed timetable of mitigating actions to restore solvency. BoG and the European Central Bank assessed that the € 50 bn is adequate to cover the capital needs, as above, of the viable Greek Banks and the resolution of the non viable ones.
In the meantime, the impact of Greek banks participation in the Greek Government Bonds exchange program (PSI+) is such that they require a temporary financial support from the Hellenic Financial Stability Fund (HFSF), subject to the requirements provided by law and the presubscription agreement signed by each bank, the HFSF and the EFSF (see below).
The HFSF was established in 2010, in order to maintain the stability of the Greek banking system through ensuring that adequate resources are available to support viable banks' recapitalisation needs and participating to the capital increases for any non-subscribed part.
Banks considered viable have been given the opportunity to apply for and receive EBA-Core Tier Ι-eligible capital from the HFSF under a certain process. Capital may take the form of ordinary shares, contingent convertible financial instruments or ordinary shares with restricted voting rights. Ordinary shares with restricted voting rights will only be available if private investors contribute 10% of the capital raising at the rights issue. The voting rights of the HFSF for the ordinary shares it holds, subject to the 10% threshold mentioned above, will be strictly limited to specific strategic decisions on the condition that the bank adheres to its restructuring plan and as long as contingent convertible financial instruments (CoCos) are not mandatorily converted to ordinary shares (see below under (b)). HFSF is obliged to dispose, fully or partly, all the shares it acquired within five years from the initial rights issue covered by HFSF, if the required 10% private participation is met and within two years if not. In both cases the disposal period may be extended by Minister of Finance decision.
A Cabinet Act on 9 November 2012, agreed in consultation with the Troika (European Commission, ECB and IMF), provided the technical details of the banks' recapitalisation framework, as follows:
The CoCos will convert immediately to ordinary shares if the required 10% private participation in rights issue is not met, at 50% of the average market price of the last 50 trading days prior to the issue of the CoCos, provided that their issue will take place prior to the issue of ordinary shares. On the assumption that 10% private participation is met, the CoCos will convert to ordinary shares under the following conditions: i) if the Bank decides not to pay coupon, at 65% of average market price of the last 50 trading days prior to the interest cut off date, ii) if Core Tier I or Basel III Common Equity Tier I falls below 7% or 5.125% respectively, at 50% of the price of the initial rights issue covered by HFSF and iii) after five years, at 50% of the price of the initial rights issue covered by HFSF. The issue of CoCos is expected in January 2013.
(c) Issue of warrants on all ordinary shares acquired by HFSF provided that the requirement for 10% private participation in rights issue is achieved. The warrants are issued to the private participants in the rights' issue and are listed and tradable instruments which provide the shareholders/ warrant holders i) the right to purchase the shares from HFSF within 4.5 years, twice a year at a strike price equal to the principal amount plus 4%, which steps up by 1% per annum (warrant strike price), ii) the pre-emption right to purchase from HFSF the shares at the lower of warrant strike price and market value of last 50 days from HFSF's notice, in case HFSF intends to sell them, following a 3 year minimum holding period.
Non viable Banks will be resolved by the HFSF, in an orderly manner and at the lowest cost to the State, in a way that ensures financial stability.
To ensure that the system remains well-capitalized, by the second quarter of 2013, the Bank of Greece will conduct a follow-up stress-test exercise, based on end of 2012 market values and using a methodology determined in consultation with the Troika (European Commission, ECB, IMF).
BoG, after assessing the business plan and the capital needs of Eurobank (the "Bank") has concluded on 19 April 2012 that Eurobank is a viable bank and, on 8 November 2012, notified the Bank that its Tier I capital should increase by € 5,839 million by April 2013. The Bank, the HFSF and the European Financial Stability Facility ("EFSF") signed on 28 May 2012 and on 21 December 2012 a trilateral presubscription agreement for the advance to the Bank of EFSF notes of face value of € 3.97 bn and € 1.34 bn respectively (total € 5.31 bn) as advance payment of its participation in the future share capital increase of the Bank. In addition, HFSF provided to the Bank a commitment letter for additional capital support of € 0.53 bn up to the total level of recapitalisation needs of € 5,839 million. Proforma with the full recapitalisation amount of € 5,839 million, on 30 September 2012 the Group's regulatory capital stands at € 4.7 bn, the EBA Core Tier I capital at € 4.4 bn, its Capital Adequacy ratio at 11.8% and the EBA Core Tier I ratio at 10.9%. The disposal of the Turkish operations, which was agreed in April 2012 and is expected to complete in December 2012, will further increase Eurobank's capital ratios by approximately 50 bps.
The Group continues the implementation of its medium term internal capital generating plan, which includes initiatives which generate or release EBA equity capital and/or reduce Risk Weighted Assets. In addition, the Group is preparing for a capital raising whose timing and structure will depend on the outcome of National Bank of Greece S.A. voluntary tender offer (note 23).
Management has determined the operating segments based on the internal reports reviewed by the Strategic Planning Group (SPG) that are used to allocate resources and to assess its performance in order to make strategic decisions. The SPG considers the business both from a business unit and geographic perspective. Geographically, management considers the performance of its business in Greece and other countries in Europe (International). Greece is further segregated into retail, wholesale, wealth management, and global and capital markets while International is monitored and reviewed on a country basis. The Group aggregates segments when they exhibit similar economic characteristics and profile and are expected to have similar long-term economic development.
With the exception of Greece no other individual country contributed more than 10% of consolidated net income. The Group is organized in the following reportable segments:
Other operations of the Group comprise mainly of investing activities, including property management and investment and the management of unallocated capital.
The Group's management reporting is based on International Financial Reporting Standards (IFRS). The accounting policies of the Group's operating segments are the same with those described in the principal accounting policies.
Revenues from transactions between business segments are allocated on a mutually agreed basis at rates that approximate market prices.
| For the six months ended 30 June 2012 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Retail € million |
Corporate € million |
Wealth Management € million |
Global & Capital Markets € million |
Other € million |
International € million |
Elimination center € million |
Total € million |
|
| External revenue | 368 | 222 | 58 | 149 | (50) | 273 | - | 1,020 |
| Inter-segment revenue | 32 | 12 | (20) | (20) | 15 | 1 | (20) | - |
| Total revenue | 400 | 234 | 38 | 129 | (35) | 274 | (20) | 1,020 |
| Profit before tax from continuing operations before one-offs (see note) One-offs Profit before tax from |
(397) - |
93 - |
8 (9) |
94 (596) |
(63) (109) |
(52) - |
- - |
(317) (714) |
| discontinued operations | - | - | - | - | (74) | 11 | - | (63) |
| Non controlling interest | - | - | 0 | - | (7) | (0) | - | (7) |
| Profit before tax attributable to shareholders, after one offs |
(397) | 93 | (1) | (502) | (253) | (41) | - | (1,101) |
| Profit before tax attributable to shareholders, before one offs |
(397) | 93 | 8 | 94 | (144) | (41) | - | (387) |
to the Condensed Consolidated Interim Financial Statements
| For the six months ended 30 June 2011 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Retail € million |
Corporate € million |
Wealth Management € million |
Global & Capital Markets € million |
Other € million |
International € million |
Elimination center € million |
Total € million |
||
| External revenue Inter-segment revenue Total revenue |
556 49 605 |
268 (2) 266 |
40 (14) 26 |
25 (24) 1 |
(126) 8 (118) |
324 4 328 |
- (21) (21) |
1,087 - 1,087 |
|
| Profit before tax from continuing operations excl. impairment on GGBs Impairment on GGBs |
(92) - |
141 - |
(2) (62) |
(32) (666) |
(163) (102) |
16 - |
- - |
(132) (830) |
|
| Profit before tax from discontinued operations Non controlling interest |
- - |
- - |
- 0 |
- - |
220 (7) |
6 (0) |
- - |
226 (7) |
|
| Profit before tax attributable to shareholders, after impairment on GGBs |
(92) | 141 | (64) | (698) | (52) | 22 | - | (743) | |
| Profit before tax attributable to shareholders, excl. impairment on GGBs |
(92) | 141 | (2) | (32) | 50 | 22 | - | 87 |
Note: One-off items include impairment losses on Greek sovereign debt and other non recurring valuation losses.
Basic earnings per share is calculated by dividing the net profit attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the period, excluding the average number of ordinary shares purchased by the Group and held as treasury shares.
The diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all potentially dilutive ordinary shares. The Group has two categories of potentially dilutive ordinary shares: share options and convertible, subject to certain conditions, preferred securities. In order to adjust the weighted average number of shares for the share options a calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average market price of the Bank's shares for the period) based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated as above is added to the weighted average number of ordinary shares in issue in order to determine the weighted average number of ordinary shares used for the calculation of the diluted earnings per share.
| Six months ended 30 June |
Three months ended 30 June |
||||
|---|---|---|---|---|---|
| 2012 | 2011 | 2012 | 2011 | ||
| Net profit/(loss) for the period attributable to ordinary shareholders (after deducting dividend attributable to preference shares and preferred securities holders and after including gains/(losses) on preferred securities) |
€ million | (675) | (633) | (428) | (685) |
| Net profit/(loss) for the period from continuing operations (after deducting dividend attributable to preference shares and preferred securities holders and after including gains/(losses) on preferred securities) |
€ million | (624) | (820) | (371) | (688) |
| Weighted average number of ordinary shares in issue Weighted average number of ordinary shares for diluted |
Number of shares | 552,273,793 | 539,802,984 | 552,289,829 | 542,617,172 |
| earnings per share | Number of shares | 552,273,793 | 539,802,984 | 552,289,829 | 542,617,172 |
| Earnings/(losses) per share | |||||
| - Basic and diluted earnings/(losses) per share | € | (1.22) | (1.17) | (0.77) | (1.26) |
| Earnings/(losses) per share from continuing operations | |||||
| - Basic and diluted earnings/(losses) per share | € | (1.13) | (1.52) | (0.67) | (1.27) |
Basic and diluted losses per share from discontinued operations for the period ended 30 June 2012 amount to € 0.09 (30 June 2011: earnings € 0.35).
No dividend attributable to preference shares was included in the EPS calculation for the period ended 30 June 2012 (30 June 2011: € 38 million) (note 19).
Share options did not have an effect on the diluted earnings per share, as their exercise price exceeded the average market price of the Bank's shares for the period. The Series D and Series E of preferred securities (note 20), were not included in the calculation of diluted earnings per share, as their effect would have been anti-dilutive.
On 14 February 2012, Law 4046/2012 was enacted and provided that the tax losses arising from the bond exchange under the PSI+ program (note 6) will be tax deductible in equal instalments over the life of the new bonds received, irrespective of the holding period of the bonds.
The nominal Greek corporate tax rate is 20%. In addition, dividends distributed as of 2012 are subject to a 25% withholding tax.
Based on the terms of the Investment Agreement signed with Raiffeisen Bank International AG (RBI) in February 2011, the Group recorded the disposal of its Polish operations as of 31 March 2011 for a total consideration of € 718 million.
On 30 April 2012, the Group transferred 70% of its Polish banking subsidiary (Polbank) to RBI after obtaining the relevant approvals from the Polish Financial Supervision Authority (KNF). As of 30 April 2012, Polbank and RBI Poland (RBI's Polish banking subsidiary) are combined. The Group received € 460 million in cash, while the remaining consideration receivable is subject to adjustments based on the Net Asset value of Polbank at the closing of the transaction.
Moreover, Eurobank exercised on 30 April 2012 its put option on its remaining 13% stake in Raiffeisen Polbank. In October 2012, the relevant transfer of shares was completed.
In 2011 the Group publicly announced that it was reviewing strategic options involving the sale of a controlling stake in Eurobank Tekfen A.S. As of 1 January 2012, the execution of a sale transaction was considered to be highly probable and Eurobank Tekfen was classified as held for sale. On 9 April 2012, a Share Purchase Agreement with Burgan Bank of Kuwait was agreed which is expected to be completed before the year end. Turkish operations are presented in the International segment.
The results of the Group's Turkish operations and Polish operations are set out below. The income statement distinguishes discontinued operations from continuing operations. Comparative figures have been restated.
| Six months ended 30 June |
||
|---|---|---|
| 2012 | 2011 | |
| € million | € million | |
| Net interest income | 46 | 71 |
| Net banking fee and commission income | 7 | 20 |
| Other income from discontinued operations | 5 | 3 |
| Operating expenses | (39) | (79) |
| Impairment losses on loans and advances | (8) | (19) |
| Profit/(loss) before tax from discontinued operations | 11 | (4) |
| Income tax | (2) | 1 |
| Profit/(loss) before gain on disposal | 9 | (3) |
| Gain/(loss) on disposal before tax | (74) | 230 |
| Income tax | 14 | (40) |
| Net profit/(loss) from discontinued operations | (51) | 187 |
| Net profit from discontinued operations attributable to non controlling interest | 0 | 0 |
| Profit/(loss) for the period from discontinued operations attributable to shareholders | (51) | 187 |
The major classes of assets and liabilities classified as held for sale, are as follows:
| 30 June | |
|---|---|
| 2012 | |
| € million | |
| Cash and balances with central banks | 99 |
| Loans and advances to banks | 109 |
| Trading and investment securities | 289 |
| Loans and advances to customers | 1,574 |
| Other assets | 57 |
| Total assets of disposal group classified as held for sale | 2,128 |
| Due to banks | 278 |
| Due to customers | 1,259 |
| Other liabilities | 50 |
| Total liabilities of disposal group classified as held for sale | 1,587 |
| Net Group funding associated with assets held for sale | 248 |
| Net assets of disposal group classified as held for sale | 293 |
Cumulative losses related to held for sale operations recognised in other comprehensive income as at 30 June 2012 amounted to € 34 million (30 June 2011: losses € 104 million).
The movement of the provision for impairment losses on loans and advances is as follows:
| € million | |
|---|---|
| Balance at 1 January 2012 | 3,397 |
| Impairment losses on loans and advances charged in the period | 794 |
| Amounts recovered during the period | 9 |
| Loans written off during the period as uncollectible | (32) |
| Foreign exchange differences and other movements | (112) |
| Accumulated impairment losses related to held for sale operations | (36) |
| Balance at 30 June 2012 | 4,020 |
Impairment losses on bonds 100 Impairment losses on mutual funds and equities 49 Credit valuation losses on derivative financial instruments 11
30 June 2012 € million 160
As at 30 June 2012, the Group has recognized an impairment loss amounting to € 100 million on subordinated debt issued by Agricultural Bank of Greece (ABG) whose license was revoked in July 2012 and has since been put in liquidation.
As at 30 June 2012, the Group has recognized impairment losses amounting to € 49 million on equity securities (including mutual funds), for which the decline in fair value below cost is considered to be significant and/or prolonged, as a result of the continuing deterioration in the equity markets.
| 30 June | 31 December | |
|---|---|---|
| 2012 | 2011 | |
| € million | € million | |
| Available-for-sale investment securities | 3,472 | 3,185 |
| Debt securities lending portfolio | 4,251 | 5,992 |
| Held-to-maturity investment securities | 2,054 | 2,206 |
| 9,777 | 11,383 |
In 2008 and 2010, in accordance with the amendments to IAS 39, the Group reclassified eligible debt securities from the "Available-for-sale" portfolio to "Debt securities lending" portfolio carried at amortised cost. Interest on the reclassified securities continued to be recognised in interest income using the effective interest rate method. As at 30 June 2012, the carrying amount of the reclassified securities was € 1,723 million. If the financial assets had not been reclassified, changes in the fair value for the period from the reclassification date until 30 June 2012 would have resulted in € 645 million losses net of tax, which would have been recognised in the available-for-sale revaluation reserve.
Reclassified Greek Government bonds of € 1.4 bn as at 31 December 2011, exchanged with new bonds under the PSI plan in 2012, were derecognised (note 6).
Under its participation to the Greek state's debt buyback program, the Group submitted for exchange the 100% of its nGGBs portfolio of total face value € 2.3 bn (carrying amount € 0.6 bn) and received EFSF notes of total face value € 0.8 bn (see note 6).
The following is a listing of the Bank's subsidiaries as at 30 June 2012:
| Percentage | Country of | |||
|---|---|---|---|---|
| Name | Note | Holding | incorporation | Line of business |
| Be-Business Exchanges S.A. | 98.01 | Greece | Business-to-business e-commerce | |
| Best Direct S.A. (1) | 100.00 | Greece | Sundry services | |
| ERB Insurance Services S.A. | 100.00 | Greece | Insurance brokerage | |
| Eurobank Asset Management Mutual Fund Mngt Company S.A. | 100.00 | Greece | Mutual fund and asset management | |
| Eurobank Business Services S.A. | 100.00 | Greece | Payroll and advisory services | |
| Eurobank Equities S.A. | 100.00 | Greece | Capital markets and advisory services | |
| Eurobank Ergasias Leasing S.A. | 100.00 | Greece | Leasing | |
| Eurobank Factors S.A. | 100.00 | Greece | Factoring | |
| Eurobank Financial Planning Services S.A. | d | 100.00 | Greece | Management of overdue loans |
| Eurobank Household Lending Services S.A. | d | 100.00 | Greece | Promotion/management of household products |
| Eurobank Properties R.E.I.C. | 55.94 | Greece | Real estate | |
| Eurobank Property Services S.A. | 100.00 | Greece | Real estate services | |
| Eurobank Remedial Services S.A. | d | 100.00 | Greece | Notification to overdue debtors |
| Eurolife ERB General Insurance S.A. | 100.00 | Greece | Insurance services | |
| Eurolife ERB Life Insurance S.A. | 100.00 | Greece | Insurance services | |
| Global Fund Management S.A. (1) | 99.50 | Greece | Investment advisors | |
| Eurobank EFG Bulgaria A.D. | 99.99 | Bulgaria | Banking | |
| Bulgarian Retail Services A.D. | 100.00 | Bulgaria | Credit card management | |
| EFG Auto Leasing E.O.O.D. | 100.00 | Bulgaria | Vehicle leasing and rental | |
| EFG Leasing E.A.D. | 100.00 | Bulgaria | Leasing | |
| EFG Property Services Sofia A.D. | 80.00 | Bulgaria | Real estate services | |
| IMO 03 E.A.D. | 100.00 | Bulgaria | Real estate services | |
| IMO Central Office E.A.D. | 100.00 | Bulgaria | Real estate services | |
| IMO Property Investments Sofia E.A.D. | 100.00 | Bulgaria | Real estate services | |
| IMO Rila E.A.D. | 100.00 | Bulgaria | Real estate services | |
| ERB Hellas (Cayman Islands) Ltd | 100.00 | Cayman Islands | Special purpose financing vehicle | |
| Berberis Investments Ltd | 100.00 | Channel Islands | Holding company | |
| ERB Hellas Funding Ltd | 100.00 | Channel Islands | Special purpose financing vehicle | |
| Eurobank Cyprus Ltd | 100.00 | Cyprus | Banking | |
| CEH Balkan Holdings Ltd | 100.00 | Cyprus | Holding company | |
| Chamia Enterprises Company Ltd | 100.00 | Cyprus | Special purpose investment vehicle | |
| EFG New Europe Funding III Ltd | 100.00 | Cyprus | Finance company | |
| NEU II Property Holdings Ltd | 100.00 | Cyprus | Holding company | |
| NEU III Property Holdings Ltd | 100.00 | Cyprus | Holding company | |
| NEU Property Holdings Ltd | 100.00 | Cyprus | Holding company | |
| Eurobank Private Bank Luxembourg S.A. | 100.00 | Luxembourg | Banking | |
| Eurobank Fund Management Company (Luxembourg) S.A. | 100.00 | Luxembourg | Fund management | |
| Eurobank EFG Holding (Luxembourg) S.A. | 100.00 | Luxembourg | Holding company |
to the Condensed Consolidated Interim Financial Statements
| Name | Note | Percentage Holding |
Country of incorporation |
Line of business |
|---|---|---|---|---|
| ERB New Europe Funding B.V. | 100.00 | Netherlands | Finance company | |
| ERB New Europe Funding II B.V. | 100.00 | Netherlands | Finance company | |
| ERB New Europe Holding B.V. | 100.00 | Netherlands | Holding company | |
| Bancpost S.A. | 99.11 | Romania | Banking | |
| Eurobank Property Services S.A. | 80.00 | Romania | Real estate services | |
| EFG IT Shared Services S.A. | 100.00 | Romania | Informatics data processing | |
| Eliade Tower S.A. | 55.94 | Romania | Real estate | |
| ERB Leasing IFN S.A. | 100.00 | Romania | Leasing | |
| ERB Retail Services IFN S.A. | 100.00 | Romania | Credit card management | |
| Eurobank Finance S.A. | 100.00 | Romania | Investment banking | |
| Eurobank Securities S.A. | 100.00 | Romania | Capital markets services | |
| IMO Property Investments Bucuresti S.A. | 100.00 | Romania | Real estate services | |
| IMO-II Property Investments S.A. | 100.00 | Romania | Real estate services | |
| Retail Development S.A. | 55.94 | Romania | Real estate | |
| Eurolife ERB Asigurari de Viata S.A. | 100.00 | Romania | Insurance services | |
| Eurolife ERB Asigurari Generale S.A. | 100.00 | Romania | Insurance services | |
| Seferco Development S.A. | 55.94 | Romania | Real estate | |
| Eurobank A.D. Beograd | 99.98 | Serbia | Banking | |
| EFG Business Services d.o.o. Beograd | 100.00 | Serbia | Payroll and advisory services | |
| EFG Leasing A.D. Beograd | 99.99 | Serbia | Leasing | |
| ERB Asset Fin d.o.o. Beograd | 100.00 | Serbia | Asset management | |
| ERB Property Services d.o.o. Beograd | 80.00 | Serbia | Real estate services | |
| IMO Property Investments A.D. Beograd | 100.00 | Serbia | Real estate services | |
| Reco Real Property A.D. | a | 55.94 | Serbia | Real estate |
| Eurobank Tekfen A.S. | 99.26 | Turkey | Banking | |
| EFG Finansal Kiralama A.S. | a | 99.26 | Turkey | Leasing |
| EFG Istanbul Equities Menkul Degerler A.S. | a | 99.26 | Turkey | Capital market services |
| EFG Istanbul Holding A.S. | 100.00 | Turkey | Holding company | |
| EFG Istanbul Portfoy Yonetimi A.S. | a | 99.26 | Turkey | Mutual fund management |
| Public J.S.C. Universal Bank | b | 99.97 | Ukraine | Banking |
| ERB Property Services Ukraine LLC | 100.00 | Ukraine | Real estate services | |
| Eurobank EFG Ukraine Distribution LLC | 100.00 | Ukraine | Sundry services | |
| Anaptyxi 2006-1 Plc | - | United Kingdom | Special purpose financing vehicle (SIC 12) | |
| Anaptyxi APC Ltd | - | United Kingdom | Special purpose financing vehicle (SIC 12) | |
| Anaptyxi Holdings Ltd (2) | - | United Kingdom | Special purpose financing vehicle (SIC 12) | |
| Anaptyxi II Holdings Ltd (2) | - | United Kingdom | Special purpose financing vehicle (SIC 12) | |
| Anaptyxi II Plc | - | United Kingdom | Special purpose financing vehicle (SIC 12) | |
| Anaptyxi Options Ltd (2) | - | United Kingdom | Special purpose financing vehicle (SIC 12) | |
| Anaptyxi SME I Holdings Ltd (2) | - | United Kingdom | Special purpose financing vehicle (SIC 12) | |
| Anaptyxi SME I Plc | - | United Kingdom | Special purpose financing vehicle (SIC 12) | |
| Anaptyxi SME II 2009-1 Plc | e | - | United Kingdom | Special purpose financing vehicle (SIC 12) |
| Anaptyxi SME II APC Ltd | e | - | United Kingdom | Special purpose financing vehicle (SIC 12) |
| Anaptyxi SME II Holdings Ltd (2) | e | - | United Kingdom | Special purpose financing vehicle (SIC 12) |
| Andromeda Leasing I Holdings Ltd (2) | - | United Kingdom | Special purpose financing vehicle (SIC 12) | |
| Andromeda Leasing I Plc | - | United Kingdom | Special purpose financing vehicle (SIC 12) | |
| Daneion 2007-1 Plc | - | United Kingdom | Special purpose financing vehicle (SIC 12) | |
| Daneion APC Ltd | - | United Kingdom | Special purpose financing vehicle (SIC 12) | |
| Daneion Holdings Ltd (2) | - | United Kingdom | Special purpose financing vehicle (SIC 12) | |
| ERB Hellas Plc | 100.00 | United Kingdom | Special purpose financing vehicle | |
| Karta 2005-1 Plc | e | - | United Kingdom | Special purpose financing vehicle (SIC 12) |
| Karta APC Ltd | e | - | United Kingdom | Special purpose financing vehicle (SIC 12) |
| Karta Holdings Ltd (2) | e | - | United Kingdom | Special purpose financing vehicle (SIC 12) |
| Karta II Holdings Ltd (2) | - | United Kingdom | Special purpose financing vehicle (SIC 12) | |
| Karta II Plc | - | United Kingdom | Special purpose financing vehicle (SIC 12) | |
| Karta LNI 1 Ltd | e | - | United Kingdom | Special purpose financing vehicle (SIC 12) |
| Karta Options Ltd (2) | e | - | United Kingdom | Special purpose financing vehicle (SIC 12) |
| Themeleion II Mortgage Finance Plc | - | United Kingdom | Special purpose financing vehicle (SIC 12) | |
| Themeleion III Holdings Ltd (2) | - | United Kingdom | Special purpose financing vehicle (SIC 12) | |
| Themeleion III Mortgage Finance Plc | - | United Kingdom | Special purpose financing vehicle (SIC 12) | |
| Themeleion IV Holdings Ltd (2) | - | United Kingdom | Special purpose financing vehicle (SIC 12) | |
| Themeleion IV Mortgage Finance Plc | - | United Kingdom | Special purpose financing vehicle (SIC 12) | |
| Themeleion Mortgage Finance Plc | - | United Kingdom | Special purpose financing vehicle (SIC 12) |
(1) dormant/under liquidation entities not consolidated as of 31 December 2011 due to immateriality
(2) not consolidated due to immateriality
On 9 April 2012, the Group entered into a sale agreement for the disposal of Eurobank Tekfen A.S. and its subsidiaries to Burgan Bank of Kuwait. The completion of the sale is expected before the year end. All regulatory approvals by the competent authorities were obtained in December 2012. Under the terms of the transaction, Burgan Bank will acquire 99.3% of Eurobank Tekfen, from Eurobank and the Tekfen Group, for an upfront cash consideration of TRY 641 million (1x Book Value). The consideration may be adjusted, depending on the Net Asset Value of Eurobank Tekfen as at the closing date. The transaction will increase Eurobank's Core Tier I capital ratio by approximately 50 bps (or capital equivalent of almost € 200 million) and will improve its liquidity position by € 500 million.
In May 2012, the Group increased its participation in Public J.S.C. Universal Bank from 99.96% to 99.97%.
In March 2012, the company was liquidated.
(d) Eurobank Financial Planning Services S.A. (previously Open 24 S.A.), Eurobank Household Lending Services S.A. (previously Eurobank Cards S.A.) and Eurobank Remedial Services S.A. (previously Eurobank Financial Planning Services S.A.), Greece
In November 2012, "Eurobank Cards S.A." changed its name into "Eurobank Household Lending Services S.A." and it operates in promotion and management of loan/ insurance products to households. "Eurobank Financial Planning Services S.A." was renamed to "Eurobank Remedial Services S.A." and operates in notification to overdue debtors.
In December 2012, the name and the activity of "Open 24 S.A." were changed. The new name of the entity is "Eurobank Financial Planning Services S.A." and it operates in the management of overdue consumer and mortgage loans.
(e) Anaptyxi SME II 2009-1 Plc, Anaptyxi SME II APC Ltd, Anaptyxi SME II Holdings Ltd, Karta 2005-1 Plc, Karta APC Ltd, Karta Holdings Ltd, Karta LNI 1 Ltd and Karta Options Ltd, United Kingdom
In October 2012, the companies were liquidated.
As at 30 June 2012, investments in associates and joint ventures amounted to € 7 million (31 December 2011: € 8 million, 30 June 2011: € 14 million) and are presented within "Other Assets".
The following is a listing of the Group's joint ventures as at 30 June 2012:
| Name | Percentage Holding |
Country of incorporation |
Line of business |
|---|---|---|---|
| Femion Ltd | 66.67 | Cyprus | Special purpose investment vehicle |
| Cardlink S.A. | 50.00 | Greece | POS administration |
| Tefin S.A. | 50.00 | Greece | Motor vehicle sales financing |
| Sinda Enterprises Company Ltd | 48.00 | Cyprus | Special purpose investment vehicle |
| Unitfinance S.A. | 40.00 | Greece | Financing company |
In August 2012, the Group acquired 33.33% of Rosequeens Properties Ltd, a special purpose investment vehicle incorporated in Cyprus, which controls 100% of Rosequeens Properties SRL, a real estate company incorporated in Romania.
| 30 June 2012 € million |
31 December 2011 € million |
|
|---|---|---|
| Medium-term notes (EMTN) Subordinated Securitised |
798 243 459 |
1,606 300 765 |
| 1,500 | 2,671 |
During the period, notes amounting to € 515 million, issued under the EMTN Program through the Group's special purpose entities, matured.
During the period, the Group proceeded with the repurchase of € 268 million of notes issued under the EMTN program and € 224 million of residential mortgage backed securities. All securities were issued through the Group's special purpose entities.
In February 2012, the Group invited the holders of Lower Tier II unsecured subordinated notes to tender existing bonds. The Group has repurchased notes amounting to € 106 million, generating a gain for the Group and increasing Core Tier I capital by € 53 million.
As at 30 June 2012, the covered bonds and government guaranteed bonds under the second stream of the Greek Economy Liquidity Support Program (note 5), totalling € 3,800 million and € 17,776 million respectively, were fully retained by the Bank and its subsidiaries. In May 2012, covered bonds amounting to € 650 million, matured. In November 2012, government guaranteed bonds amounting to € 1,500 million, matured.
Financial disclosures required by the Act 2620/28.08.2009 of the Bank of Greece in relation to the covered bonds issued, are available on the Bank's website.
The par value of the Bank's shares is € 2.22 per share (31 December 2011: € 2.22). All shares are fully paid. The movement of ordinary share capital, share premium and treasury shares is as follows:
| Ordinary share capital € million |
Treasury shares € million |
Net € million |
Share premium € million |
Treasury shares € million |
Net € million |
|
|---|---|---|---|---|---|---|
| Balance at 1 January 2012 | 1,228 | (2) | 1,226 | 1,448 | (9) | 1,439 |
| Purchase of treasury shares | - | (0) | (0) | - | 0 | 0 |
| Sale of treasury shares | - | 0 | 0 | - | (1) | (1) |
| Balance at 30 June 2012 | 1,228 | (2) | 1,226 | 1,448 | (10) | 1,438 |
to the Condensed Consolidated Interim Financial Statements
| Number of shares | |||
|---|---|---|---|
| Issued ordinary shares |
Treasury shares |
Net | |
| Balance at 1 January 2012 | 552,948,427 | (809,010) | 552,139,417 |
| Purchase of treasury shares | - | (110,562) | (110,562) |
| Sale of treasury shares | - | 377,966 | 377,966 |
| Balance at 30 June 2012 | 552,948,427 | (541,606) | 552,406,821 |
In June 2009, the Annual General Meeting approved the issue, within certain parameters, the terms and timing of which are at the Board of Directors discretion, either in total or gradually in tranches, of a callable bond of up to € 500 million, convertible to ordinary shares of the Bank (note 20, Series D and E). In July 2011, the repeat Annual General Meeting decided the amendment of the terms of the callable bonds approved by the Annual General Meeting in June 2009 for the amount of € 150 million not yet issued/allotted and the increase of the bonds total amount by up to € 100 million under certain conditions.
Under Law 3756/2009, banks participating in the Government's Greek Economy Liquidity Support Program are not allowed to acquire treasury shares under article 16 of the Company Law.
In the ordinary course of business, subsidiaries of the Group may acquire and dispose of treasury shares; the majority of which relates to life insurance activity.
| Preference Shares | |||||||
|---|---|---|---|---|---|---|---|
| 30 June | 31 December | ||||||
| Number of | 2012 | 2011 | |||||
| shares | € million | € million | |||||
| 345,500,000 | 950 | 950 |
On 12 January 2009 the Extraordinary General Meeting of the Bank approved the issue of 345,500,000 non-voting, non-listed, non-transferable, tax deductible, noncumulative 10% preference shares, with nominal value € 2.75 each, under Law 3723/2008 "Greek Economy Liquidity Support Program", to be fully subscribed to and paid by the Greek State with bonds of equivalent value. The proceeds of the issue total € 940 million, net of expenses, and the transaction was completed on 21 May 2009. In accordance with the current legal and regulatory framework, the issued shares have been classified as Tier I capital.
The preference shares pay a non-cumulative coupon of 10%, subject to meeting minimum capital adequacy requirements, set by Bank of Greece, availability of distributable reserves in accordance with article 44a of Company Law 2190/1920 and the approval of the Annual General Meeting. According to Law 3723/2008, as in force, five years after the issue of the preference shares or earlier subject to the approval of the Bank of Greece, the Bank may redeem the preference shares at their nominal value. In case of non redemption at the expiration of the five year period, the coupon is increased by 2% each year.
Based on the 2011 results and article 44a of Company Law 2190/1920, the Shareholders' Annual General Meeting approved the non distribution of a dividend to either ordinary or preference shareholders.
Under Law 3723/2008, as amended by Law 4093/2012, the Banks are required to pay the 10% coupon on preference shares notwithstanding the provisions of Law 2190/1920, with the exception of article 44a, and provided that the relevant payment does not jeopardise the minimum capital adequacy requirements.
The movement of preferred securities issued by the Group through its Special Purpose Entity, EFG Hellas Funding Limited, is as follows:
| Series A | Series B | Series C | Series D | Series E | Total | |
|---|---|---|---|---|---|---|
| € million | € million | € million | € million | € million | € million | |
| Balance at 1 January 2012 | 90 | 155 | 166 | 275 | 59 | 745 |
| Purchase of preferred securities | (71) | (148) | (106) | (49) | - | (374) |
| Sale of preferred securities | - | - | - | - | - | - |
| Balance at 30 June 2012 | 19 | 7 | 60 | 226 | 59 | 371 |
In February 2012, the Group invited the holders of preferred securities, series A, B and C to tender existing securities. The Group has repurchased an aggregate principal amount of € 325 million (Series A: € 71 million, Series B: € 147 million, Series C: € 107 million). The repurchase of preferred securities has generated a gain for the Group, net of related expenses, increasing its Core Tier I capital by € 188 million.
The rate of preferred dividends for the Tier I Issue series A has been determined at 2.50% for the period 18 March 2012 to 17 March 2013.
As at 30 June 2012, the dividend attributable to preferred securities' holders amounted to € 18 million (30 June 2011: € 25 million).
As at 30 June 2012, total gain from the redemption of preferred securities amounted to € 212 million (30 June 2011: € 15 million).
On 28 May 2012 the HFSF advanced to the Group EFSF notes of face value of € 3.97 bn on account for the impending recapitalisation of the Bank. Under the terms of the relevant presubscription agreement (PSA), the entire transaction was recorded as a securities lending agreement. On 21 December 2012, the Bank, the HFSF and the EFSF signed a similar PSA for the advance to the Bank of further EFSF notes of face value of € 1.34 bn (see note 7).
As at 30 June 2012, the Group's contingent liabilities in terms of guarantees, standby letters of credit and commitments to extend credit amounted to € 2,019 million (31 December 2011: € 2,239 million) and the Group's documentary credits amounted to € 110 million (31 December 2011: € 161 million).
Included above are contingent liabilities related to held for sale operations amounted to € 396 million as at 30 June 2012.
The Group's capital commitments in terms of property, plant and equipment amounted to € 11 million (31 December 2011: € 7 million). In February 2012, the guarantee issued by the Bank in favour of EFG Ora Funding Limited III, as well as the guarantee received by the ultimate parent company of the Group, were reduced to € 67 million.
On 5 October 2012, the National Bank of Greece (NBG) announced its intention to launch a voluntary exchange offer to acquire all Eurobank's shares offering 58 new shares of NBG for every 100 shares of Eurobank tendered. NBG also stated that, Eurobank shareholders holding 43.6% of Eurobank's ordinary share capital have committed to tender their shares in the tender offer. The offer is subject to regulatory approvals. On 23 November 2012, the General Meeting of the shareholders of NBG, approved the increase of NBG's share capital, and the issue of new ordinary shares to be offered to Eurobank's ordinary shareholders who will accept NBG's voluntary tender offer at the said exchange ratio.
The Bank announced that the exchange offer falls within the context of the on-going consolidation of the Greek banking system. Eurobank's board will further evaluate, in a constructive spirit, the merits of the business combination in the interest of all stakeholders, including employees, customers, shareholders and the Greek economy.
After the offer is launched, following the approval of relevant offering documentation by the Greek Capital Market Committee, the Bank's Board of Directors, with the assistance of its financial advisers, will consider the merits, the terms and conditions of the exchange offer and express its opinion thereon as required by Law 3461/2006.
On 22 May 2012, the Second Repeat Extraordinary Shareholders' Meeting of Alpha Bank aborted the merger procedure with Eurobank and recalled Alpha Bank's General Meeting decisions on 15 November 2011.
Under Law 3864/2012 as amended by Law 4093/2012, that was enacted in November 2012, the banks receiving financial support from HFSF are required to make a lump sum payment to HFSF totalling to € 556 million. According to the relevant presubscription agreement signed with HFSF on 21 December 2012, Eurobank's portion was determined at € 154 million.
Details of significant post balance sheet events are also provided in the following notes:
Until 23 July 2012, the Bank was a member of the EFG Group, having as operating parent company the "European Financial Group EFG (Luxembourg) S.A." and ultimate parent company the "Private Financial Holdings Limited", the latter owned and controlled indirectly by members of the Latsis family. In particular, the EFG Group held 44.70% of the Bank's ordinary shares and voting rights, through wholly owned subsidiaries of the ultimate parent company and the remaining ordinary shares and voting rights were held by institutional and retail investors, none of which, to the knowledge of the Bank, held 5% or more.
On 23 July 2012, 43.55% of the ordinary shares and voting rights held by EFG Group were transferred to ten legal entities, each of which acquired approximately 4.4%, while the EFG Group retained the remaining 1.15%. These entities have formally stated they are independent from each other. As a result, from 23 July 2012, onwards, Eurobank ceased to be under EFG Group's control and will no longer be consolidated in the financial statements of the EFG Group. In addition, the Bank's corporate and trade name have already been amended in order to no longer include the "EFG" suffix.
In the context of the separation of the Eurobank Group from the EFG Group, the five EFG Group nominated Board members of Eurobank resigned from the Board. On 21 September 2012 the Board elected Mrs. Angeliki Frangou and Messrs. George David and Nicholas Stassinopoulos as new BoD members, with a term equal to the remaining term of the resigned members.
A number of banking transactions are entered into with related parties in the normal course of business and are conducted on an arm's length basis. These include loans, deposits and guarantees. In addition, as part of its normal course of business in investment banking activities, the Group at times may hold positions in debt and equity instruments of related parties. The volume of related party transactions and outstanding balances at the period/year-end are as follows:
| 30 June 2012 | 31 December 2011 | |||||
|---|---|---|---|---|---|---|
| EFG Group € million |
Key management personnel (KMP)(2) € million |
Entities controlled by KMP and associates € million |
EFG Group € million |
Key management personnel (KMP)(2) € million |
Entities controlled by KMP and associates € million |
|
| Derivative financial instruments assets Investment securities Loans and advances to customers(1) Due to banks Due to customers(1) Other liabilities |
- 82 1 55 3 0 |
- - 15 - 19 1 |
- 5 178 - 213 - |
- 82 1 54 4 0 |
- - 15 - 42 1 |
1 7 335 - 345 0 |
| Guarantees issued (note 22) Guarantees received (note 22) Guarantees received (note 22) |
67 67 67 |
- 0 0 |
2 - - |
272 271 271 |
- 0 0 |
2 50 50 |
| Page 18 | 30 June 2012 Condensed Consolidated Interim Financial Statements |
to the Condensed Consolidated Interim Financial Statements
| six months ended 30 June 2012 | six months ended 30 June 2011 | |||||
|---|---|---|---|---|---|---|
| Net interest income | 1 | (0) | 1 | 2 | (1) | (2) |
| Net banking fee and commission income | (0) | 0 | 0 | 0 | 0 | 0 |
| Other operating income/(expense) | (0) | (1) | (0) | (0) | (0) | (0) |
(1)As at 30 June 2012, loans and advances to customers are covered by cash collateral amounting to € 111 million (31 December 2011: € 211 million).
(2)Key management personnel includes directors and key management personnel of the Group and its parent and their close family members.
In addition, as at 30 June 2012 the Group has granted loans amounting to € 619 million (31 December 2011: € 616 million) to Hellenic Petroleum S.A. group, in which the controlling party (until 23 July 2012) holds a significant shareholding. The respective interest income for the period to 30 June 2012 amounted to € 20 million (30 June 2011: € 16 million).
No provisions have been recognised in respect of loans given to related parties.
Key management personnel are entitled to compensation in the form of short-term employee benefits of € 3.4 million (30 June 2011: € 3.5 million), and long-term employee benefits of € 0.2 million out of which € nil are share-based payments (30 June 2011: € 0.9 million and € 0.7 million respectively).
Final dividends are not accounted for until they have been ratified by the Annual General Meeting.
Under Law 3756/2009, as amended by Law 3844/2010 and supplemented by Laws 3965/2011 and 4063/2012, banks participating in the Greek Economy Liquidity Support Program are not allowed to declare a cash dividend to their ordinary shareholders for 2008 to date. Based on the 2011 results and article 44a of Company Law 2190/1920, the Shareholders Annual General Meeting approved the non distribution of a dividend to either ordinary or preference shareholders (see also note 19).
Athens, 21 December 2012
Efthymios N. Christodoulou I.D. No AB - 049358 CHAIRMAN OF THE BOARD OF DIRECTORS
Nicholas C. Nanopoulos I.D. No ΑΕ - 586794 CHIEF EXECUTIVE OFFICER
Paula N. Hadjisotiriou I.D. No AK - 221300 CHIEF FINANCIAL OFFICER
Harris V. Kokologiannis I.D. No ΑK - 021124 HEAD OF GROUP FINANCE & CONTROL
V. Financial Data and Information for the period from 1 January to 30 June 2012
COMPANY'S DATA
(as stipulated by the Decision 4/507/28.04.2009 of the Capital Market Commission) The information listed below aims to provide a general overview about the financial position and the financial results of Eurobank Ergasias S.A. and its Group. Consequently, readers are strongly advised to visit the website of the Bank, where the interim financial statements prepared under International Financial Reporting Standards (IFRS) are available, before any investment decision or transaction with the Bank is entered into.
Company Registration No: 000223001000 - 8 Othonos Street, Athens 105 57
| COMPANY'S DATA | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Company's website: | Date of approval of the interim financial statements by BoD: | www.eurobank.gr 21 December 2012 |
Audit Firm: Auditors' report: |
PricewaterhouseCoopers S.A. Unqualified - emphasis of matter |
|||||||||
| Certified Public Accountant - Auditor: | Kyriakos Riris | Issue Date of Auditor's report: | 21 December 2012 | ||||||||||
| INCOME STATEMENT Amounts in Euro million |
BALANCE SHEET Amounts in Euro million |
||||||||||||
| Bank | Group | Bank | Group | ||||||||||
| 1 Jan- | 1 Jan- | 1 Apr- | 1 Apr- | 1 Jan- | 1 Jan- | 1 Apr- | 1 Apr | ||||||
| 30 Jun 2012 30 Jun 2011 30 Jun 2012 30 Jun 2011 | 30 Jun 2012 30 Jun 2011 30 Jun 2012 | 30 Jun 2011 | 30 Jun 2012 | 31 Dec 2011 ASSETS | 30 Jun 2012 | 31 Dec 2011 | |||||||
| 456 55 |
612 87 |
192 23 |
317 Net interest income 35 Net banking fee and commission income |
800 105 |
986 136 |
374 50 |
497 66 |
760 13,374 |
1,821 Cash and balances with central banks 23,965 Loans and advances to banks |
2,421 5,663 |
3,286 6,988 |
||
| - | - | - | Net insurance income - | 8 | 18 | 3 | 7 | Financial instruments at fair value | |||||
| 1 | 4 | 1 | 2 | Income from non banking services | 16 | 15 | 8 | 8 | 42 | 94 through profit or loss | 334 | 503 | |
| 14 | 15 | 0 | 15 Dividend income | 2 | 3 | 2 | 3 | 1,819 | 1,950 Derivative financial instruments | 1,737 | 1,818 | ||
| 98 | (15) | 52 | 3 Net trading income | 107 | 0 | 42 | (6) | 34,561 | 36,087 Loans and advances to customers | 44,579 | 48,094 | ||
| 68 | (97) | 60 | (4) Gains less losses from investment securities | (19) | (71) | 4 | 20 | 1,092 | 1,052 Available-for-sale investment securities | 3,472 | 3,185 | ||
| 1 | 16 | 0 | (1) Other operating income | 1 | 0 | 1 | 0 | 1,675 | 1,492 Held-to-maturity investment securities | 2,054 | 2,206 | ||
| 693 | 622 | 328 | 367 Operating income | 1,020 | 1,087 | 484 | 595 | 2,695 | 3,402 Debt securities lending portfolio | 4,251 | 5,992 | ||
| (327) | (343) | (161) | (165) Operating expenses | (543) | (564) | (270) | (276) | 2,941 | 2,946 Shares in subsidiary undertakings | - | |||
| Profit from operations before impairment on loans and advances and non |
6 220 |
6 Investments in joint ventures 232 Own used fixed assets |
7 683 |
736 | |||||||||
| 366 | 279 | 167 | 202 recurring valuation losses | 477 | 523 | 214 | 319 | 92 | 96 Investment property | 618 | 568 | ||
| (665) | (531) | (362) | (262) Impairment losses on loans and advances | (794) | (654) | (434) | (318) | 70 | 73 Intangible assets | 450 | 465 | ||
| Impairment and other losses on Greek | 1,942 | 1,718 Deferred tax asset | 1,998 | 1,726 | |||||||||
| (554) | (768) | (115) | (768) | sovereign exposure | (554) | (830) | (115) | (830) | 1,172 | 848 Other assets | 1,622 | 1,247 | |
| (160) | - | (160) | - | Other non recurring valuation l osses |
(160) | - (160) |
- | - | - | Assets of disposal group class ified as held for sale |
2,128 | ||
| - | - | - | - | Share of results of associates and joint ventures |
(0) | (1) | 1 | (1) | 62,461 | 75,782 Total assets | 72,017 | 76,822 | |
| (1,013) | (1,020) | (470) | (828) Profit/(loss) before tax | (1,031) | (962) | (494) | (830) | ||||||
| 199 | 202 | 90 | 174 Income tax Profit/(loss) for the period from |
217 | 194 | 111 | 168 | 35,498 | LIABILITIES 34,549 Secured borrowing from banks |
35,541 | 34,888 | ||
| (814) | (818) | (380) | (654) continuing operations | (814) | (768) | (383) | (662) | 1,779 | 3,372 Other deposits from banks | 859 | 1,043 | ||
| 2,963 | 3,044 Derivative financial instruments | 2,932 | 3,013 | ||||||||||
| Profit/(loss) for the period from | 20,657 | 26,864 Due to customers | 28,013 | 32,459 | |||||||||
| (56) | 190 | (56) | - | discontinued operations | (51) | 187 | (57) | 3 | 1,889 | 4,337 Debt issued and other borrowed funds | 1,500 | 2,671 | |
| (870) | (628) | (436) | (654) Net profit/(loss) for the period | (865) | (581) | (440) | (659) | 527 | 3,626 Other liabilities | 1,802 | 1,873 | ||
| - | - | Liabilities of disposal group classified as held for sale |
1,587 | ||||||||||
| Net profit for the period attributable to | 63,313 | 75,792 Total liabilities | 72,234 | 75,947 | |||||||||
| - | - | - | - | non controlling interest | 7 | 7 | 4 | 3 | |||||
| (870) | (628) | (436) | Net profit/(loss) for the period (654) attributable to shareholders |
(872) | (588) | (444) | (662) | ||||||
| EQUITY | |||||||||||||
| 1,228 | 1,228 Ordinary share capital | 1,228 | 1,228 | ||||||||||
| 950 | 950 Preference shares | 950 | 950 | ||||||||||
| (1.5556) | (1.2455) | (0.7573) | (1.2447) Basic earnings/(losses) per share | (1.2206) | (1.1728) | (0.7744) | (1.2615) | 1,448 | 1,448 Share premium | 1,448 | 1,448 | ||
| (5,168) | (4,380) Other reserves | (4,475) | (3,763) | ||||||||||
| - | Less: treasury shares - | (12) | (11) | ||||||||||
| 690 | 744 | Hybrid capital-preferred securities | 371 | 745 | |||||||||
| Basic earnings/(losses) per share share | - | - Non controlling interest | 273 | 278 | |||||||||
| (1.5556) | (1.5968) | (0.7573) | (1.2447) from continuing operations | (1.1288) | (1.5207) | (0.6724) | (1.2667) | (852) | (10) Total | (217) | 875 | ||
| 62,461 | 75,782 Total equity and liabilities | 72,017 | 76,822 | ||||||||||
| STATEMENT OF COMPREHENSIVE INCOME Amounts in Euro million |
Notes: | ||||||||||||
| 1. | Until 23 July 2012, the Bank was a member of the EFG Group, the operating parent company of which is the European Financial Group EFG (Luxembourg) S.A. As at 30 June 2012, European Financial Group EFG (Luxembourg) S.A. indirectly held 43.55% of |
||||||||||||
| 1 Jan- | Bank 1 Jan- |
1 Apr- | 1 Apr- | 1 Jan- | 1 Jan- | Group 1 Apr- |
1 Apr | the Bank's ordinary shares and voting rights, whilst the EFG Group held in total 44.7%. On 23 July 2012, 43.55% of the ordinary | |||||
| 30 Jun 2012 30 Jun 2011 30 Jun 2012 30 Jun 2011 | 30 Jun 2012 30 Jun 2011 30 Jun 2012 | 30 Jun 2011 | shares and voting rights held by EFG Group were transferred to ten legal entities, each of which acquired approximately 4.4%, | ||||||||||
| (870) | (628) | (436) | (654) Net profit/(loss) for the period | (865) | (581) | (440) | (659) | therefore Eurobank will no longer be consolidated in the financial statements of the European Financial Group EFG (Luxembourg) | |||||
| 77 | (46) | 39 | (59) | IAS 39 revaluation reserve | 2 | 142 | (21) | 133 | S.A., which does not prepare interim financial statements. | ||||
| - | (2) | - | - | Foreign currency translation | (37) | (23) | (14) | 2. (24) | The fixed assets of the Bank and the Group are free of material charges or encumbrances. | ||||
| (793) | (676) | (397) | (713) Total comprehensive income, net of tax | (900) | (462) | (475) | 3. (550) | The outcome of pending lawsuits is not expected to have a significant impact on the Bank's and the Group's financial statements. | |||||
| 4. | A list of the companies consolidated on 30 June 2012 is mentioned in notes 15 and 16 of the consolidated financial statements | ||||||||||||
| Attributable to: | where information on the percentage of Group's holding, the country of incorporation, as well as, the consolidation method | ||||||||||||
| Shareholders | applied is reported. (a) Fully consolidated on 30 June 2012 but not included in the 30 June 2011 consolidation were the | ||||||||||||
| (737) (56) |
(865) 189 |
(341) (56) |
(713) - |
- from continuing operations - from discontinued operations |
(863) (43) |
(629) 160 |
(420) (58) |
(536) (17) |
companies Chamia Enterprises Company Ltd, EFG Istanbul Portfoy Yonetimi A.S. and Anaptyxi II Plc which were established in the fourth quarter of 2011 as well as Karta II Plc which was established in the third quarter of 2011, (b) On 30 June 2012, the |
||||
| Non controlling interest from | following companies were not included in the consolidated financial statements: (i) EFG Hellas II (Cayman Islands) Ltd which | ||||||||||||
| - | - | - | - | continuing operations | 6 | 7 | 3 | 3 | was liquidated in the first quarter of 2012, (ii) Eurocredit Retail Services Ltd which merged with Eurobank Cyprus Ltd in the fourth | ||||
| quarter of 2011, (iii) Eurobank EFG Asset Management Investment Firm S.A. which merged with Eurobank EFG Mutual Fund | |||||||||||||
| Management Company S.A. in the fourth quarter of 2011, (iv) Themeleion V Mortgage Finance Plc and Themeleion VI Mortgage | |||||||||||||
| STATEMENT OF CHANGES IN EQUITY | Finance Plc which were liquidated in the third quarter of 2011 and (v) BD Financial Limited which was disposed in the fourth | ||||||||||||
| Amounts in Euro million | quarter of 2011, (c) The companies that are not included in the consolidated financial statements of 30 June 2012 due to | ||||||||||||
| immateriality are mentioned in note 15 of the Group's financial statements. | |||||||||||||
| Bank | Group | 5. | a) The Bank has been audited by tax authorities up to 2009. 2011's tax returns have been verified by the external auditors, b) Of | ||||||||||
| 1 Jan 30 Jun 2012 |
1 Jan - 30 Jun 2011 |
1 Jan 30 Jun 2012 |
1 Jan - 30 Jun 2011 |
the Group's bank subsidiaries: i) Bancpost S.A. (Romania) has been audited by tax authorities up to 2010, (ii) Eurobank Cyprus Ltd has been audited by tax authorities up to 2009, (iii) Eurobank EFG Bulgaria A.D. and Eurobank Private Bank Luxembourg |
|||||||||
| (10) | 5,115 | Balance at 1st January | 875 | 6,094 | S.A. have been audited by tax authorities up to 2007 and (iv) Eurobank A.D. Beograd (Serbia) has been audited by tax | ||||||||
| (870) | (628) | Profit/(loss) for the period | (865) | (581) | authorities up to 2006. The remaining of the Group's subsidiaries and joint ventures (notes 15 and 16 of the consolidated financial | ||||||||
| 77 | (48) | Other comprehensive income for the period |
(35) | 119 | statements), which operate in countries where a statutory tax audit is explicitly stipulated by law, have open tax years from | ||||||||
| Dividends distributed by subsidiaries | 1 to 8 years. | ||||||||||||
| - | - | attributable to non controlling interest |
(11) | (10) | 6. | The total number of employees as at 30 June 2012 was 7,113 (30 June 2011: 7,361) for the Bank and 18,541 (30 June 2011: | |||||||
| (49) | (115) | Preference shares/preferred securitie s |
(180) | (115) | 19,789) for the Group. | ||||||||
| Acquisitions/changes in participating interests | 7. | The number of treasury shares held by subsidiaries of the Bank as at 30 June 2012 was 541,606 at a cost of € 12 million. | |||||||||||
| - - |
67 (7) |
in subsidiary and associated under takings (Purchase)/sale of treasury share s, net of tax |
(0) (1) |
(4) (7) |
8. | The related party transactions of the Group are as follows: receivables € 885m., liabilities € 271m., guarantees issued € 69m., guarantees received € 67m., expenses € 5m. and revenues € 27m. The related party transactions of the Bank are as follows: |
|||||||
(0) (0) Other (0) (1)
receivables € 11,337m., liabilities € 7,179m., guarantees issued € 5,584m., guarantees received € 67m., expenses € 317m. and
(852) 4,384 Balance at 30th June (217) 5,495
1,152 4,581 Net cash from/(used in) continuing operating activities 99 499 348 666 Net cash from/(used in) continuing investing activities 1,152 (638) (2,495) (1,378) Net cash from/(used in) continuing financing activities (1,319) (1,989) Effect of exchange rate changes
| - | - | on cash and cash equivalents | (16) | (22) | |
|---|---|---|---|---|---|
| (995) | 3,869 | Net increase/(decrease) in cash and cash equivalents from continuing operations |
(84) | (2,150) | 11. |
| - | 36 | Net cash flows from discontinued operating activities | (216) | 54 | |
| - | (29) | Net cash flows from discontinued investing activities | 176 | 47 | |
| - | 7 | Net increase/(decrease) in cash and cash equivalents from discontinued operations |
(40) | 101 | |
| 2,172 | 3,235 | Cash and cash equivalents at beginning of period | 3,124 | 4,044 | |
| 1,177 | 7,111 | Cash and cash equivalents at end of period | 3,000 | 1,995 | 12. |
The Bank of Greece after assessing the business plan and the capital needs of the Bank has concluded that Eurobank is a viable bank and, on 8 November 2012, notified the Bank that its Tier I capital should increase by € 5,839 million by April 2013. Group's financial statements. The Bank, the Hellenic Financial Stability Fund (''HFSF'') and the European Financial Stability Facility (''EFSF'') signed on 28 May 2012 and on 21 December 2012 a trilateral presubscription agreement for the advance to the Bank of EFSF notes of face value of € 3.97 bn and € 1.34 bn respectively (total € 5.31 bn) as advance payment of HFSF's participation in the future share capital increase of the Bank. In addition, HFSF provided to the Bank a commitment letter for additional capital support of € 0.53 bn up to the total level of recapitalisation needs of € 5,839 million. Further information is provided in notes 2 and 7 of the Bank's and the
a. Under the exchange of Greek Government bonds in March/April 2012, all exchanged bonds were derecognized and the new GGBs recognised at fair value with a resulting additional valuation loss before tax of € 427 million in the first half of 2012. The full amount has been recognised in the first quarter of 2012. Following the position adopted by the international financial community that the market for nGGBs was active at the date of recognition, the interim financial information for the three month period ended 31 March 2012 is restated with an additional valuation loss on Greek sovereign exposure of € 192 million, after tax.
who will accept NBG's voluntary tender offer, at an exchange ratio of 58 new NBG ordinary shares for every 100 Eurobank On 23 November 2012 the General Meeting of the shareholders of National Bank of Greece (NBG), following the corporate announcement of 5 October 2012, approved the issue of new ordinary shares to be offered to Eurobank's ordinary shareholders shares. Further information is provided in notes 20 and 23 of the Bank's and the Group's financial statements.
financial statements. € 0.8 bn. Further information on credit exposure to Greek sovereign debt is provided in note 6 of the Bank's and the Group's
Athens, 21 December 2012
CASH FLOW STATEMENT Amounts in Euro million
completed by the end of 2012. Eurobank Tekfen A.S. and its subsidiaries were classified as held for sale as of 1 January 2012. Further information is provided in notes 11 and 15 of the Group's financial statements.
1 Jan-30 Jun 2012 1 Jan - 30 Jun 2011
b. On 18 December 2012, the Group exchanged 100% of its nGGBs portfolio (face value € 2.3 bn) for EFSF notes of face value
1 Jan-30 Jun 2012 1 Jan - 30 Jun 2011 Bank Group
Efthymios N. Christodoulou I.D. No AB - 049358 CHAIRMAN OF THE BOARD OF DIRECTORS
Nicholas C. Nanopoulos I.D. No AE - 586794 CHIEF EXECUTIVE OFFICER
Paula N. Hadjisotiriou I.D. No AK - 221300 CHIEF FINANCIAL OFFICER
Harris V. Kokologiannis I.D. No ΑK - 021124 HEAD OF GROUP FINANCE & CONTROL
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