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National Bank of Greece SA (NBG)

Q1 2012 Earnings Conference Call

May 30, 2012 11:00 ET


Paul Mylonas – Chief Economist

Anthimos Thomopoulos – Deputy Chief Executive Officer

Babis Mazarakis – Group Chief Financial Officer


Alex Atienza – Citigroup



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Welcome to the NBG's Quarter One 2012 Results Conference Call. My name is (Sara) and I will be your coordinator for today’s conference. For the duration of the call, you will be on listen-only. However, at the end of the call, you will have the opportunity to ask questions. (Operator Instructions)

I am now handing you over to Mr. Paul Mylonas to begin today's conference. Thank you.

Paul Mylonas

Hello, everyone. Thank you for joining us for the Q1 results call. As usual, we’ll start off with Anthimos Thomopoulos going through the company remarks and then we'll have Q&A. I am joined here also by Babis Mazarakis, Group CFO who will be also available for financial questions afterwards. Anthimos?

Anthimos Thomopoulos

Thank you, Paul. Good afternoon everyone. Let's proceed with the key highlights of the first quarter. I'd like to start with a quick reference to the recapitalization. As you know, we have received yesterday the first installment of €7.4 billion from the Hellenic Financial Stability Fund. And as a result, our capital base has been replenished with post-PSI with a capital adequacy ratio now standing at just over 8% on a pro forma basis of course, taking into account the disbursement that took place last night.

The result for the quarter came in at a loss of €537 million, primarily because of the negative trading results of €270 odd million in Greece. The trading results was to a large extent the impact of credit valuation adjustments, the counterparty risk we have with the Hellenic Republic on derivative transactions that carry with the Republic, including Titlos. And as the credit standing of the – credit rating of Republic was deteriorating, we booked a significant markdown on those positions as well. Turkey turned a good quarter contributed €125 million to the group's bottom line, on the back of a very strong showing in net interest income, while businesses in Southeastern Europe were marginally in the red as the leverage in the region impacts the top line.

Stripping away the negative trading result, the group continues to generate significant pre-provision earnings at the tune of €500 million a quarter. We continue to focus on streamlining the cost base and we are pleased with the results. OpEx are down 7% year-on-year and 10% on the quarter. On the asset quality front though, deterioration is accelerating. The 90 days ratio climbed to 15% for the group. Clearly, Greece has been driving this very difficult situation. Consistent provisioning kept the cost coverage of 56%; cost of risk at a high of 344 basis. The – on the liquidity front, key concern these days, deposit drain has somewhat slowed, slowed down post-PSI. However, the political stalemate after the May 6 elections has one again stoked anxiety. In such an environment, beset by uncertainty, NBG has defended its deposit franchise with loans and deposit in Greece and 105% despite Q1 outflows.

We continue to experience a drain in the second quarter. We have seen as NBG at – just over €1100 million of outflows, which is again as I said stoked by the renewed uncertainty, but important to note that this is way before any panicky type of background. Yes, there is a lot of uncertainty. There is a lot of anxiety. The good news of the PSI have evaporated in terms of consumer and customer psyche and behavior, but the press reports for a slow or a fast background in Greece are exaggerating the deplete that we are experiencing in the high strength. The situation in the liquidity position boils down to our Eurosystem funding which as we speak remains at the first quarter levels, €32 billion. Post recap, as expected we have regained access to ECB funding and thus will be substitute – will be able to substitute ELA with ECB, which is obviously a positive development.

Finally, as you know as of the end of the quarter, we exchanged the majority of our PSI eligible sovereign exposure into new GGBs and EFSF one and two-year notes after taking the well-known haircuts. These new bonds have been categorized as available-for-sale. The exact accounted reason that we undertook was to obviously fair value the loans – those positions as of the date of the exchange that resulted in an additional €214 million worth of markdowns beyond those that we had recognized in the first quarter. Effectively, we brought the – we markdown the average mark from €0.34 to €0.29 as of the date of the inception increasing the discount yield by two percentage points in recognition of the market conditions prevailing at the relevant date. Furthermore, having classified these bonds as available-for-sale, we mark those positions to market, i.e., from €0.29 down to €0.19 as of the end of the quarter. So, our account in equity carries the full burden of a markdown of positions to €0.19 as opposed to €0.34 at the end of last year.

Turning to page three, group income for the quarter was – came close to €800 million. Core banking is down, is down because of down 8% year-on-year and 3% for the quarter, as massive deleverage of, i.e., of interest-earned assets predominantly, because of the PSI, but also bona fide loan deleverage and obviously the impact of non-accruing non-performing loans has its bearing on our top line. Margin, strong at 400 basis plus mainly due to the resilient top line in Turkey, where NIM topped 586 basis. And Greece NII, as I said in terms of millions was down €58 million, as the deposit spreads absorbed most of the Euribor decrease, but as I just mentioned, interest-earned assets was last, i.e., the combined effect of PSI and loan deleverage.

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