Eurobank Ergasias Services and Holdings S.A.

Stavros Ioannou – Deputy Chief Executive Officer Harris Kokologiannis – Chief Financial Officer

Floriani Jonas – Axia Ventures Bairaktari Angeliki – Autonomous Research Boulougouris Alexandros – Wood & Co

Good afternoon, ladies and gentlemen, and welcome to the Eurobank first quarter 2018 results presentation. Let me first introduce the team here with me.

Mr. Harris Kokologiannis, our Chief Financial Officer; and the Investor Relations team.

Together, we will present our results, and then we will answer your questions during the Q&A session. On the macroeconomic background, Greece reached the staff level agreement on the fourth quarter review while negotiations on the debt relief and the post-program architecture are ongoing.

Sentiment and market confidence should further improve once these milestones are cleared. In such a scenario, we see expectations for GDP growth of 2% as attainable.

This is based on double-digit increase investments from a low base low, another strong tooling season, improving employment and stable private consumption. While on the negative side, net exports are going to be affected by higher oil price.

Last but not least, the stress test conducted according to the EBA methodology confirmed the Greek banks’ resilience. The highlights of our financial results for the first quarter of 2018 are shown on Slide 4 of the presentation.

We had net profit of €57 million in the first quarter. The core pre-provision income was stable at €200 million year-on-year but lower 7.6% from the previous quarter.

It was affected by the cost of new lease of Tier 2 bonds, the day’s effect of the quarter and lower fees and commissions. Operating expenses were down 1.3% year-on-year, with Greece actually 3.3% lower.

On asset quality metrics, our NPE formation was a negative €210 million, while the NPE stock was reduced by €0.5 billion last quarter. The NPE ratio decreased by 70 basis points in the first quarter and reached 41.8%, while the ratio provision over NPEs reached 56.1%, improved by 60 basis points in the last quarter.

Given our performance so far, our planned initiatives for the rest of the year as well as the improved legal framework, including the accelerated pace of the auctions, we are confident we will meet the NPE reduction target for the full year. On liquidity, the gradual return of deposits continued, and deposits increased last quarter by €1.4 billion.

ELA funding decreased by €4 billion from December 2017. The trend of positive growth in business lending we saw in 2017 was reaffirmed in the first quarter of 2018.

On capital, we ended the quarter on common equity Tier 1 ratio of 15.1% and the fully loaded Basel III ratio at 12%, while the total capital adequacy ratio stood at 17.8%, among the highest in the sector. Most importantly, our capital position was confirmed by the successful completion of the EBA stress test.

Turning now on our international operations. Our international operations are considerably profitable and self-funded while profits increased by 22% year-on-year, reaching €33 million in the first quarter.

The disposal of our Romanian operations agreed last year was completed in April, effectively meeting the restructuring plan commitments. In conclusion, based on our performance in the first quarter, we are confident that we will meet all our operational targets for the year.

That is to be profitable in 2018, to meet our NPE reduction plan and to accelerate new loan disbursements. At this point, I would like to ask our CFO, Harris Kokologiannis, to present our results in detail before opening the Q&A session.

Thank you, Stavros. Moving on Slide 7 and on funding liquidity.

As shown on the top left of the page, related trading of ELA funding stands at €3.9 billion. That is €4 billion lower than last December’s figure.

The decrease is mainly driven by public and private deposit inflows, market repos and the proceeds from the sale of Bancpost. As regard to capital position on Page 8, our CET1 ratio as of quarter end, and including the full year effect of regulatory transitions, amounted to 15.1%.

On a fully loaded basis, CET1 amounted to 12%. While total capital ratio, including the new lease of Tier 2 bonds, amounted to 17.8%.

Moving on Page 11 and to loans and deposits evolution. In the first quarter of the year, gross loans, excluding writeoffs and FX effect, had a growth of €104 million coming from the biggest portfolio increase, Bulgaria and Cyprus.

The growth in the above 3 segments amounted to €270 million and more than offset the amortization of the mortgage portfolio in Greece. Group deposits increased by €1.4 billion, mostly coming from Greece, while loans to deposit ratio improved fairly this quarter to 102%.

On Page 13, lending and deposit spreads as well as net interest market evolution are presented. On lending spreads, it is now shown separately the spreads of performing and non-performing loans on a gross basis, which provides a clear picture of the market evolution for the various business segments.

Moving on Page 14, net interest income for the group remained stable on a yearly basis and decreased quarter-on-quarter by 4.8% to €355 million. The main drivers of this movement are shown on the right part of the page, were the Tier 2 cost and the days effect.

The lower margin on Greek loans and to international business have been fully offset by lower ELA cost and higher bonds income. On Page 15, net commission income is stable year-on-year and decreased quarter-on-quarter by 8.4%.

The decrease mainly relates with the seasonality on platform fees and the lower commission from capital market and investment banking activities. On Page 16, operating expenses decreased on a yearly basis by 1.3% for the group and by 3.3% in Greece.

After the bottom right of the page, the number of staff in Greece decreased in the last two quarters by more than 500 people, while branches were reduced in the last 12 months by 20% to 350. Thereby, apart from driving costs lower, they also signal the gradual transformation to more digitized channels and infrastructure.

Further on pre-provision income and on Page 5. On the top left of the page, our core PPI is stable compared to the first quarter of 2017 and decreased by 7.6% quarter-on-quarter for the reasons already mentioned.

Pre-provision income amounted to €233 million at first quarter 2017’s level and to lower on the previous period also due to lower other income. On Page 9 and on international business, net profit from the current operations for the first quarter amounted to €33 million, higher year-on-year by 22% and at par with the previous quarter.

Other lower core PPI was offset by lower provisions costs. Moving on asset quality and on Page 6.

As shown on the top left of the page, negative NPE formation amounted this quarter to €210 million, driving the NPEs ratio was down by 70 basis points to 41.8%. Provisions in the first quarter amounted to €167 million, €40 million lower than the previous period.

Cost of risk over net loans decreased to 1.86%. Finally, as the results of the above, NPEs coverage increased by 60 basis points to 56.1%.

On Page 18 and to the left part, it is shown that at the end of the first quarter, NPEs as per SSM parameter amounted to €17.8 billion, €300 million better than the target. On the right part of the page, it is presented the contribution of the different drivers to the decrease of NPE stock.

Furthermore, the breakdown of NPE net flows into inflows, outflows and cash collections is also shown. Moving on Page 21 and in the context of IFRS 9, we introduced information related to the quarterly movements for the Stages 1, 2 and 3 as well the respective provisions coverage as at quarter-end.

On Page 25, it is presenting the progress of auctions as follows. On the left part of the page, it is shown that as of the end of February when the electronic auctions were introduced, the number of auctions hit substantially increased.

More specifically, in this context since the beginning of the year, the bank auctioned successfully almost 630 properties, acquiring the majority of them. This completes my presentation, and we may now open the floor for your questions.

Good afternoon guys. Thanks for the presentation.

A quick question on the – on your 90+ formation on Page 6. Can you please elaborate on that – on the positive effect on plus rate?

Second point on deposits, just interested to understand if there’s any movement coming from public sector, from cash buffers into your deposits and how that compares to your private sector flows. And also, finally, I think if you could just update us on NII trends now for 2018.

I mean, I understand the movement that you have now, especially considering the Tier 2 costs, and we know how challenging it is as well on the asset side. So if you can elaborate a bit on the moving parts of the rest of the year now considering that we already know and how you see things moving forward with price.

Okay. Let me answer the first question about our 90+ formation.

That has been turned positive. And actually to explain the trend, please go to Page 23.

In Page 23, we are actually presenting the 90+ formation per segment. As you will see, in all segments with the only exception of corporate, our 90+ formation is actually negative, and it follows a similar trend in the last two quarters.

It goes, as you will see, only adversely for the corporate portfolio. And actually what this is, is actually one single corporate name with the formation of €116 million, and this is what causes the distortion, yes?

And the second one about the deposits. We have – I have to tell you that the private sector deposits in the Greek market based actually on the statistics that were recently announced by the Bank of Greece was up by €600 million in the first four months of the year.

The total market deposits, including also the general government, increased by €3.6 billion over the same period in question. Now the Eurobank deposits increased by €1.3 billion in first quarter 2018 and this is between €1 billion from the public entities and €300 million from the private sector.

That is the explanation on how the things are moving in terms of deposits.

Regarding your question about net interest income. As you may see on Page 14 and as we explain in the first quarter, our net interest income Q-on-Q was 4.8% down in that previous year’s level.

The quarterly movement is basically explained from the Tier 2 costs and the days effect. As in the first quarter, we have 90 days versus 92 in the previous one, while the downside from loans international were fully offset from lower ELA costs and higher bonds income.

Now going forward, we should expect for the full year from mid-single digit reduction mainly driven by – first, by the Tier 2 cost; second, by the lower interest on NPE loans; and third, by some lower margins in the corporate performing portfolio that will offset the lower funding cost coming from lower ELA and lower deposit cost. This is the outline of how we expect to move on NII.

Okay, okay. And then just finally, a quick follow-up.

When you say that you’re confident in meeting your targets for 2018, meaning positive profitability, NPE targets and also new disbursements, what is the level of new disbursements you’re targeting on for 2018?

Actually, in Greece, we should expect approximately €400 million increase in the balances of gross loans. However, this is more interesting than it looks because we have to cover the amortization of mortgages, but it is close to €400 million.

So on the corporate and business – and then on the business portfolio, we should expect an increase by close to €700 million to €800 million.

Thank you. Operator The next question comes from the line of Bairaktari Angeliki with Autonomous Research.

Please go ahead.

Hello, thank you for the presentation. Three questions on my side, please.

Firstly, could you please tell us what would be the impact on your CET1 ratio from the mark-to-market of Greek government bonds in Q2 until today given that the spreads have moved upwards again? The second question is, you are guiding for NII to be down by mid-single-digit, and that includes the improvement overall in the cost of funding, I presume mainly on the back of the ELA decline.

Do you see any risk that as Greece exits from the bailout in August, your funding cost in terms of market repos or sort of like Central Bank funding could increase? And thirdly, we have seen some Irish banks disclosing their MREL requirements.

How do you engage in any discussion with the Single Resolution Board on MREL? And do you have any plans to issue sub or senior debt this or next year?

Thank you very much.

Thank you, Angeliki, for your questions. So starting from the Greek sovereign.

Actually, we have close to €2.4 billion holdings that are classified as fair value through OCI. The movement quarter today is close to, as we speak because we are talking about an unprecedented volatility in the market, is close to €60 million, but it is – the impact is around 15, 1-5, basis points.

Regarding your second question on net interest on, let’s say, the potential impact in case of – once Greece exits the program, probably you are talking about a possible lift of waiver and what would be the effect. Currently, we get close to €400 million funding from placing Greek government bonds and treasury bills to the ACB.

If there is a list of waiver, this funding should be replaced by ELA or through market repo transactions. But as you understand, due to the low amount, the impact is immaterial.

Regarding MREL, of course, we had discussions with SRB, presenting on a yearly basis our resolution plan. However, we have been exempting from so far, and it is not clear at all what is going to happen in 2018, which have been accepting for being provided a binding MREL target.

Now regarding the possibility, chances going forward, first of all, I have to say that, as you know well, Eurobank is the only Greek bank that has already issued €950 million Tier 2 bonds. These bonds are held by the Greek state and count by 250 basis points towards our total capital adequacy ratio, which is one of the highest in the Greek banking sector.

And furthermore, as per the stress test results, no capital shortfall emerge in either the baseline or the other scenario in the bank, was not called to submit a capital plan as a result of the exercise. Therefore, we do not need or – and do not intend as well to issue new Tier 2 or new Tier 1 or Tier 2 securities.

Now depending on the market conditions, of course, we may explore the possibility of gradually placing into the market part of the Tier 2 bonds held by the Greek state, but for which the cost, as we have informed the market, is 6.4%, which is not that good as well. However, despite the progress made as far as the fundamentals of the sovereign, the Greek bank sector and Eurobank, market conditions can become challenging due to the external factors and the latest developments in the region.

And given that we are not in a rush, we will consider all available options before taking our final decisions and subject to market conditions at the time.

Thank you. If I may just follow up on my second question on your funding cost, I understand that the impact of the waiver is lifting – potentially lifting the waiver may not be that material.

But I guess what I had in mind was you do use Greek government bonds and other instruments as collateral for your market repos. Do you see any risk that the cost of doing market repos may increase as we are moving into a risk-off environment?

For the moment, we have not such an indication.

Thank you.

Yes, hello. Could you just clarify the 50 bps impact from AFS that you point from core equity Tier 1, which is €98 million?

What that refers to? Not sure if you went through in the first part of the call.

I’m not sure the €36 million restructuring cost, if we could have a bit more details on that.

Sure. As you may see on Page 8 of the presentation, the 50 basis points negative impact comes both from RWAs increase by €477 million and capital decrease of €98 million.

In first quarter, RWAs increased by €477 million due to increase of RWAs from loans by €200 million, another €220 million from market risk and €16 million due to other factors. The €98 million capital impact is exclusively due to the mark-to-market of our sovereign exposure in the first quarter of the year.

Regarding your second question, the €36 million is exclusively associated with the voluntary exit scheme but encompassed 300 people that left in the first quarter from the bank in the context of voluntary exit scheme.

So the savings from that will be from Q2 onwards?

A major part, yes. They have left towards the end of the first quarter.

A small part has been incorporated already, but the majority will come to the next quarters.

Okay. And just as a follow-up.

In your previous call, you had provided a guidance for cost of risk, I think, slightly below 200 bps from that launch. Is that still the case?

Or...

Yes, it is still the case. So we should expect cost of risk to move at levels below 2% of net loans.

Okay, thank you.

Hi, thanks for taking my follow-up question. As we have now moved past stress test’s exercise, could you give us a bit more color with regards to your NPE reduction target discussion that you are planning to have this September?

Given that you currently have targets until 2019, have you been given any indication or what are your expectations with regards to the targets after 2019 and all the way to 2020, 2021?

Yes, sure. Let’s go first to Page 18, where we have the NPE stock evolution versus the SSM targets.

As you will see in the first quarter of 2018, we’re able to record NPE in the flow of €238 million, while the collateral liquidation was €52 million; the write-off, €57 million; and the sales, €26 million. But you will see there and what you will notice is that the collateral liquidation is €52 million.

The reason for that is that the e-auctions, which is vital for the collateral liquidation, have only started in the last month of the quarter. So we are expecting this figure to increase much more in the quarters to come.

Now the – in 2017, the mix of the NPE reduction stock was coming from the net flow, write-offs and sales that accounted approximately 30% each, while the collateral liquidation was 10%. To give you an indication in the guidance, we expect this to double as a final contribution to the total reduction.

Now we feel confident that we’ll be meeting then NPE reduction target for 2018. Just to mention that in 2017, we reduced the stock of NPEs by €2.4 billion, as we see on the left-hand side of the page.

And if you take also into consideration that we have outperformed our 2017 target by €300 million, as the 2000 target for €2.5 billion reduction, which is similar to the 2017 performance, we feel that is feasible. So we are committed and confident that we’ll meet this target.

And if we talk about the period between 2016-2019 actually, which is the dates that we have started the NPE reduction plan, you will see that if we achieve the target as we have indicated, then the cumulative reduction of NPEs will be close to 40%, which, of course, is by far the largest ever recorded. However, even after that, after this achievement, the NPE ratio will still remain high, so the NPE reduction has to be extended beyond this period.

And we are already working on a big NPE plan, which is still rather early to be more specific, but we will update you in due course.

Thank you.

Hi, guys. Just back on your previous point now – just now on your updated NPE reduction target, I mean, what is the latest on your engagement with third-party services, project solar, those kind of stuff?

And also if you can make any comments on how likely you think you guys are in terms of engaging into more sales than currently budgeted. That’s it from my side.

Starting from your second question, I mean, it is obvious that Eurobank was the first bank that sell – sold an unsecured loan portfolio in 2017. We have contributed, I believe, to the creation of secondary NPL market, which, okay, we have to accept that it remains while impact is improving.

Now in 2018, we have plans to sell another portfolio of unsecured loans of an amount up to €1 billion. Now over the next few months, we also will be able to update you about the transaction that is related to secured NPEs.

But when the time comes, I mean, we will inform you about that. Now on your first question, which was about the selling of portfolios, I think that I have answered that.

Is that an answer that...

No. Yes, it was more related to the third parties, right, to the services and solar and not necessarily selling but on the collaboration with – even on the NPL for or the other banks but also with the other guys that might take a look at your retail portfolios or SMEs or something like that.

Actually, in order to achieve our ambitions targets, we have to work and exploit a number of alternatives and options. And some of them, it is, of course, the solar that it is the cooperation among four banks for a population of approximately €2.5 billion SME loans, where we’ll be serviced under the supervision and the possibility of the bank.

Regarding the retail portfolio, we have the privilege to have our own services, which has a very strong size, actually. We are the only bank that has a fully-owned subsidiary that deals – is a licensed servicer and deals with a retail portfolio exceeding €15 billion of loans.

So far, there’s no any, let’s say, issue to – of course, we’ll explore any option but as basic in that a unique advantage that we see.

Thank you.

Thank you all for your participation. We are looking forward to seeing you in our next roadshows or in Athens.

Goodbye.