0003/00013943/en 3rd Quarter Financial Report HELLENIC BANK PUBLIC COMPANY LTD Results of the Group of Hellenic Bank for the nine months ended 30th September Announcement dated 25th November is attached. HB Attachments: 1. Results of the Group of Hellenic Bank for the nine months ended 30th September 2. Condensed Consolidated Financial Statements as at 30.09.15 3. Commentary 4. Press Release 5. Καταχώρηση στον Τύπο Regulated Publication Date: 25/11/
HELLENIC BANK GROUP Condensed Consolidated Financial Statements for the nine-month period ended 30 September
HELLENIC BANK GROUP Condensed Consolidated Financial Statements for the nine-month period ended 30 September Contents Page Condensed Consolidated Income Statement for the nine-month period ended 30 September 3 Condensed Consolidated Income Statement for the three-month period from 1 July to 30 September 4 Condensed Consolidated Statement of Comprehensive Income for the nine-month period ended 30 September 5 Condensed Consolidated Statement of Comprehensive Income for the three-month period from 1 July to 30 September 6 Condensed Consolidated Statement of Financial Position 7 Condensed Consolidated Statement of Changes in Equity 8-9 Condensed Consolidated Statement of Cash Flows 10 Notes to the Condensed Consolidated Financial Statements 11-47 2
HELLENIC BANK GROUP Condensed Consolidated Income Statement for the nine-month period ended 30 September Nine-month period ended 30 September Note Continuing Operations Turnover 229.749 291.355 Net interest income 108.228 156.776 Net income from fees, commissions, net gains on disposal and revaluation of foreign currencies and financial instruments and other income 67.967 68.922 Total net income 176.195 225.698 Total expenses 5 (114.198) (104.345) Profit from ordinary operations before impairment losses and provisions to cover credit risk 61.997 121.353 Impairment losses and provisions to cover credit risk 9 (59.130) (259.056) Profit/(loss) before taxation 2.867 (137.703) Taxation 6 (981) 12.909 Profit/(loss) for the period from continuing operations 1.886 (124.794) Discontinued Operations Profit from discontinued operations after taxation 7 4.826 688 Profit/(loss) for the period 6.712 (124.106) Profit/(loss) attributable to: Shareholders of the parent company from continuing operations 1.266 (125.510) Shareholders of the parent company from discontinued operations 4.826 688 6.092 (124.822) Non-controlling interest 620 716 Profit/(loss) for the period 6.712 (124.106) Basic earnings/(loss) per share (cent) 8 3,3 (184,5) Basic earnings/(loss) per share (cent) from continuing operations 8 0,7 (185,5) 3
HELLENIC BANK GROUP Condensed Consolidated Income Statement for the three-month period from 1 July to 30 September Continuing Operations Three-month period from 1 July to 30 September Turnover 71.299 95.866 Net interest income 34.949 50.842 Net income from fees, commissions, net gains on disposal and revaluation of foreign currencies and financial instruments and other income 22.396 22.759 Total net income 57.345 73.601 Total expenses (37.320) (41.547) Profit from ordinary operations before impairment losses and provisions to cover credit risk 20.025 32.054 Impairment losses and provisions to cover credit risk (12.120) (65.031) Profit/(loss) before taxation 7.905 (32.977) Taxation (1.736) 3.783 Profit/(loss) for the period from continuing operations 6.169 (29.194) Discontinued Operations Profit from discontinued operations after taxation -- -- Profit/(loss) for the period 6.169 (29.194) Profit/(loss) attributable to: Shareholders of the parent company from continuing operations 6.017 (29.332) Shareholders of the parent company from discontinued operations -- -- 6.017 (29.332) Non-controlling interest 152 138 Profit/(loss) for the period 6.169 (29.194) 4
HELLENIC BANK GROUP Condensed Consolidated Statement of Comprehensive Income for the nine-month period ended 30 September Note Nine-month period ended 30 September Profit/(loss) for the period 6.712 (124.106) Other comprehensive expenses Other comprehensive expenses not to be reclassified in the income statement Taxation relating to components of other comprehensive income (50) 1.579 Revaluation of land and buildings -- (8.183) Other comprehensive (expenses)/income that are or may be reclassified in the income statement (50) (6.604) Surplus on revaluation of investments in equity and debt securities available for sale 962 1.939 Transfer to the income statement on disposal of investments in equity (315) -- Amortisation of revaluation of reclassified debt securities available for sale 11 (901) (1.041) (254) 898 Other comprehensive expenses for the period net of taxation (304) (5.706) Total comprehensive income/(expenses) for the period net of taxation 6.408 (129.812) Total comprehensive income/(expenses) for the period net of taxation attributable to: Shareholders of the parent company from continuing operations 982 (131.305) Shareholders of the parent company from discontinued operations 4.826 688 5.808 (130.617) Non-controlling interest 600 805 6.408 (129.812) 5
HELLENIC BANK GROUP Condensed Consolidated Statement of Comprehensive Income for the three-month period from 1 July to 30 September Three-month period from 1 July to 30 September Profit/(loss) for the period 6.169 (29.194) Other comprehensive income/(expenses) Other comprehensive expenses not to be reclassified in the income statement Taxation relating to components of other comprehensive income (39) 1.557 Revaluation of land and buildings -- (8.183) Other comprehensive income/(expenses) that are or may be reclassified in the income statement (39) (6.626) Surplus on revaluation of investments in equity and debt securities available for sale 986 312 Transfer to the income statement on disposal of investments in equity (1) -- Amortisation of revaluation of reclassified debt securities available for sale (278) (434) 707 (122) Other comprehensive income/(expenses) for the period net of taxation 668 (6.748) Total comprehensive income/(expenses) for the period net of taxation 6.837 (35.942) Total comprehensive income/(expenses) for the period net of taxation attributable to: Shareholders of the parent company from continuing operations 6.645 (36.087) Shareholders of the parent company from discontinued operations -- -- 6.645 (36.087) Non-controlling interest 192 145 6.837 (35.942) 6
HELLENIC BANK GROUP Condensed Consolidated Statement of Financial Position at 30 September Assets 30 September 31 December Note Cash and balances with Central Banks 2.083.845 2.175.599 Placements with other banks 940.327 1.122.058 Loans and advances to customers 9 3.144.794 3.221.055 Debt securities 10 1.131.043 779.726 Equity securities & Collective Investment Units 11.397 9.319 Property, plant and equipment 12 98.638 97.715 Intangible assets 12 21.715 19.683 Tax receivable 52 40 Deferred tax 52.044 52.471 Assets of subsidiary company held for sale -- 4.546 Other assets 60.023 69.351 Total assets 7.543.878 7.551.563 Liabilities Deposits by banks 100.830 70.760 Amounts due to Central Banks 13 236.282 236.014 Customer deposits and other customer accounts 6.295.833 6.345.948 Tax payable 7.797 5.260 Deferred tax liability 1.394 1.345 Liabilities of subsidiary company held for sale -- 1.044 Other liabilities 117.800 115.399 6.759.936 6.775.770 Loan capital 14 181.468 181.448 Equity Share capital 15 Reserves Equity attributable to shareholders of the parent company 93.884 93.010 505.695 496.977 599.579 589.987 Non-controlling interest 2.895 4.358 Total equity 602.474 594.345 Total liabilities and equity 7.543.878 7.551.563 Contingent liabilities and commitments 655.845 730.941 I. A. Georgiadou Chairwoman of Board of Directors B. Pijls Chief Executive Officer L. G. Papadopoulos Member of Board of Directors A. Rouvas Group Chief Financial Officer 7
HELLENIC BANK GROUP Condensed Consolidated Statement of Changes in Equity for the nine-month period ended 30 September Attributable to shareholders of the parent company Share Reduction of share capital Share premium Revenue Translation Revaluation reserve Own shares Noncontrolling Capital Reserve reserve reserve reserve reserve Total interest Total Balance 1 January 93.010 260.269 499.057 (297.345) 39 36.561 (1.604) 589.987 4.358 594.345 Total comprehensive income/(expenses) for the period net of taxation Profit for the period -- -- -- 6.092 -- -- -- 6.092 620 6.712 Other comprehensive expenses -- -- -- -- -- (284) -- (284) (20) (304) Transfer of excess depreciation on revaluation surplus -- -- -- 219 -- (219) -- -- -- -- Disposal of own shares -- -- -- (1.062) -- -- 1.604 542 -- 542 Transactions with shareholders recognised in equity Dividends paid -- -- -- -- -- -- -- -- (2.063) (2.063) Issue of shares from the exercise of rights (see Note 15) 874 -- 2.404 -- -- -- -- 3.278 -- 3.278 Expenses from issue of shares -- -- (36) -- -- -- -- (36) -- (36) 30 September 93.884 260.269 501.425 (292.096) 39 36.058 -- 599.579 2.895 602.474 8
HELLENIC BANK GROUP Condensed Consolidated Statement of Changes in Equity for the nine-month period ended 30 September Share capital Reduction of share capital reserve Attributable to shareholders of the parent company Share premium reserve Revenue reserve Translation reserve Revaluation reserves Own shares reserve Total Noncontrolling interest Balance 1 January 26.888 260.269 245.073 (179.719) 39 41.938 -- 394.488 4.333 398.821 Total comprehensive (expenses)/income for the period net of taxation (Loss)/profit for the period -- -- -- (124.822) -- -- -- (124.822) 716 (124.106) Other comprehensive (expenses)/income -- Transfer from property revaluation reserve on disposal of property -- -- -- -- -- -- (5.795) -- (5.795) 89 (5.706) -- 201 -- (201) -- -- -- Transfer of excess depreciation on revaluation surplus -- -- -- 260 -- (260) -- -- -- -- Transactions with the shareholders recognised in equity Shares held by Subsidiary company of the Group -- -- -- -- -- -- (1.298) (1.298) -- (1.298) Issue of shares from conversion of CCS 1 10.098 -- 90.882 -- -- -- -- 100.980 -- 100.980 30 September 36.986 260.269 335.955 (304.080) 39 35.682 (1.298) 363.553 5.138 368.691 Total -- 9
HELLENIC BANK GROUP Condensed Consolidated Statement of Cash Flows for the nine-month period ended 30 September Cash flow from operating activities Note Nine-month period ended 30 September Profit/(loss) for the period 6.712 (124.106) Adjustments to profit/(loss) for the period 43.526 244.464 Operating profit before working capital changes 50.238 120.358 Working capital changes 24.867 580.818 Cash flow from operations 75.105 701.176 Tax paid (416) (253) Net cash flow from operating activities 74.689 700.923 Cash flow from investing activities Disposal of discontinued operations, net of cash disposed of 7 4.021 5.247 Income from investments in debt and equity securities 15.071 13.816 Net (additions)/disposals/maturity of investment in debt and equity securities (351.767) (133.733) Additions less proceeds from disposal of property, plant and equipment and intangible assets (6.536) (3.103) Proceeds from disposal of assets held for sale 14.120 -- Net cash flow used in investing activities (325.091) (117.773) Cash flow from financing activities Subsidiary dividends paid to non-controlling interest (2.063) -- Proceeds from the issue of share capital 3.278 -- Proceeds from disposal of own shares 562 -- Expenses from issue of shares (36) -- Interest paid on loan capital (685) (766) Net cash flow from/(used in) financing activities 1.056 (766) Net (decrease)/increase in cash and cash equivalents (249.346) 582.384 Effect of exchange rate fluctuations on cash and cash equivalents -- 893 Cash and cash equivalents at the beginning of the period 3.127.423 1.815.741 Cash and cash equivalents at the end of the period 2.878.077 2.399.018 10
The condensed consolidated financial statements for the nine-month period ended 30 September have not been audited by the external auditors of the Group. 1. General information The condensed consolidated nine-month financial statements comprise of the financial statements of Hellenic Bank Public Company Limited and its subsidiary companies, which together are referred to as the Group. Hellenic Bank Public Company Limited (the Bank ) was incorporated in Cyprus and is a public company in accordance with the provisions of the Companies Law Cap. 113, the Cyprus Stock Exchange Laws and Regulations and the Income Tax Laws. The Company s registered office is located at 200, Corner of Limassol and Athalassa Avenues, 2025 Strovolos, P.O. Box 24747, 1394 Nicosia. The principal activity of the Group during the period, continued to be the provision of a wide range of banking and financial services, which include financial, investment and insurance services, as well as custodian and factoring services. 2. Significant accounting policies 2.1 Basis of preparation The condensed consolidated nine-month financial statements have been prepared in accordance with International Accounting Standard (IAS) 34 Interim Financial Reporting as adopted by the European Union and should be read in conjunction with the audited consolidated financial statements for the year ended 31 December. The condensed consolidated financial statements for the period ended 30 September are presented in euro ( ), which is the main functional currency of the Bank that most faithfully represents the economic effects of the underlying transactions and activities of the Group entities. 2.2 Comparatives The comparative figures included in the condensed consolidated nine-month financial statements are restated, where considered necessary, to conform with changes in the presentation of the current period. 2.3 Adoption of new and revised International Financial Reporting Standards (IFRSs) and interpretations The accounting policies adopted in respect of items considered material in relation to the financial statements are consistent with the accounting policies adopted in the annual report and financial statements for the year ended 31 December, except for the adoption of new and revised standards, interpretations and amendments to existing standards with effect from the 1 st of January. The adoption of new and revised IFRSs, interpretations and amendments to existing standards did not have a material effect on the condensed consolidated nine-month financial statements of the Group. 11
2. Significant accounting policies (continued) 2.4 Standards and interpretations not yet effective On 24 th of July, the International Accounting Standards Board (IASB) published the final version of IFRS 9 Financial Instruments which will replace the requirements of IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 abolishes the four categories of classification of financial instruments and financial assets are classified under one of the three measurement categories: amortised cost, fair value through other comprehensive income and fair value through profit or loss. The new standard is effective for periods beginning on or after 1 st January 2018 with early adoption permitted, if the Group decides so, subject to its adoption by the competent EU bodies. IFRS 9 changes significantly the way provisions for impairment are calculated, since it involves losses in relation to events that have occurred, as well as part of losses that are expected to occur in the future ( expected credit loss ). Particular criteria are established to determine for which loans expected credit losses that may occur in the next 12 months will be recognised and for which loans expected credit losses that may occur by the final payment of these loans will be recognised. The Group is currently evaluating the impact of the standard on its financial statements. 3. Use of estimates and judgements The preparation of financial statements requires Management to make use of judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. The estimates and underlying assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances and the results of which form the basis of making judgments about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and in future periods if the revision affects both current and future periods. The accounting policies that are deemed critical to the Group s results and financial position and which involve significant estimates and judgements are set out below: 3.1 Provision for impairment of loans and advances to customers The Group reviews the loans and advances to customers to assess whether impairment losses should be recognised in the income statement and accumulated in an impairment loss reserve. The Group assesses whether there is objective evidence of impairment of the loan portfolio on an individual and collective basis. Indicatively, the following events may be considered by the Group as an evidence of impairment. However, one event alone may not constitute evidence of impairment while the absence of a specific event does not preclude the existence of impairment: 1) Credit facilities classified as non-performing 2) Restructured credit facilities included in performing loans and advances 3) Significant and sustained reduction of total income/future cash flows of the borrower 4) Apparent deterioration of the debt servicing capacity of the borrower 5) The possibility of the debtor's insolvency 6) Significant reduction in the value of collateral 7) Credit facilities which are partly provided 12
3. Use of estimates and judgements (continued) 8) Credit facilities with internal credit rating that represents high credit risk 9) Credit facilities which are pending renewal, violating the relevant credit policy of the Bank 10) Macroeconomic indications that may affect the expected future cash flows of the borrowers such as increase in unemployment rates and decline in real estate prices. The loan portfolio which is assessed on an individual basis includes loans that are above specific significance limits as well as loans to groups of connected persons under paragraph 11 of the Central Bank of Cyprus Directive on Loan Impairment and Provisioning Procedures (February ). The amount of impairment loss on the value of loans and advances to customers which are examined on an individual basis, is measured as the difference between the carrying amount of the loan and the present value of estimated future cash flows discounted at the original effective interest rate of the loan, whereas in cases where the interest rate of the loan is variable, the original effective interest rate is measured with reference to the initial margin and the current basic variable interest rate. The estimated future cash flows are based on assumptions about a number of factors and therefore the actual losses may be different. To determine the amount of impairment loss on the value of loans and advances to customers, judgment is involved regarding the amount and timing of estimated future cash flows. In particular, the time frame and the net recoverable amount of the recovered collateral, which mainly includes land and buildings, are considered, among others, important factors in calculating the amount of impairment loss. Assumptions are made about future changes in property prices, as well as the time horizon of collateral liquidation, the tax and recovery costs and subsequent selling costs of the collateral. Loans and advances assessed on an individual basis and for which no impairment loss is recognised are assessed on a collective basis for losses that have been incurred but not yet identified. Loans and advances that were below the materiality threshold were assessed on a collective basis for probable losses. For the calculation of impairment loss on a collective basis, loans and advances are grouped based on similar credit risk characteristics and appropriate models are applied that take into account the recent historical loss experience of each group with similar credit risk characteristics adjusted for current conditions using appropriate probabilities of default and loss given default. Restructured facilities are classified in separate group with higher risk parameters. These calculations include estimates and the use of judgment to supplement, assess and adjust accordingly the historical information and past experience events which determine the parameters and calculation of impairment losses as at the reporting date. Accumulated impairment losses of the Group's loans and advances are inherently uncertain due to their sensitivity to economic and credit conditions of the environment in which the Group operates. Conditions are affected by many factors with a high degree of interdependency and there is not one single factor to which these conditions are particularly sensitive. It is possible for the actual conditions in the next financial year to differ significantly from the assumptions made during the current year, so that the carrying amount of loans and advances to be adjusted significantly. 3.2 Provisions for litigation or arbitration The Group examines whether reliable estimates can be made for amounts which an outflow of resources embodying economic benefits to settle present obligations (legal or constructive) of the Group is probable as a result of a past event, in order to assess whether a provision must be recognised in the Group s income statement and reflected in the Group s administrative and other expenses. The amounts recognised as provisions are the best estimates of the expenditure required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties 13
3. Use of estimates and judgements (continued) surrounding the facts and circumstances of any litigation or arbitration proceedings. Any provision recognised does not constitute an admission of wrongdoing or legal liability. The Group obtains legal advice on the value of the provision of specific claims and arbitration. Where the effect of the time value of money is material, the amount of the provision is the present value of the estimated future expenditures expected to be required to settle the obligation. When a separate liability is measured, the most likely outcome may be considered the best estimate of the liability. 3.3 Impairment of goodwill and investments in subsidiaries The process of identifying and evaluating impairment of goodwill and investments in subsidiaries is inherently uncertain because it requires significant Management judgement in making a series of estimates, the results of which are highly sensitive to the assumptions used. The review of impairment represents Management s best estimate of the factors below. Firstly, significant Management judgement is required in estimating the future cash flows of the acquired entities. The values are sensitive to the cash flows projected for the periods for which detailed forecasts are available, and to assumptions regarding the long-term pattern of sustainable cash flows thereafter. The cash flow forecasts are compared with actual performance and verifiable economic data in future years. However, the cash flow forecasts necessarily and appropriately reflect Management s view of future business prospects. Additionally, the cost of capital used to discount its future cash flows, can have a significant effect on the entity s valuation. Any impairment of goodwill of the acquired entities affects the Group's results while any impairment of investments in subsidiaries affects the Bank's results. 3.4 Fair value of investments The best evidence of fair value of investments is a quoted price in an actively traded market. If the market for a financial instrument is not active, a valuation technique is used. The majority of valuation techniques employed by the Group use only observable market data and thus the reliability of the fair value measurement is relatively high. The Group uses only models with unobservable inputs for the valuation of non-listed investments. In these cases, the Group takes into account, amongst others, the net positions of the entities in which the investment has been made, as well as estimates of the Group s Management to reflect uncertainties in fair values resulting from the lack of data and significant adverse changes in technology, market, economic or legal environment in which the entity operates. 3.5 Impairment of available for sale investments Available for sale investments in equity securities are impaired when there has been a significant or prolonged decline in their fair value below cost. In such a case, the total loss previously recognised in equity is recognised in the consolidated income statement. The determination of what is significant or prolonged requires judgement by Management. The factors which are taken into account in these estimates include the percentage reduction in the cost or impaired cost, as well as the net positions of the entities. Available for sale investments in debt securities are impaired when there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the investment and the loss event (or events) has an impact on the estimated future cash flows of the investment. The identification of impairment requires judgment by Management. An individual assessment of impairment is carried out on debt securities whose fair value as at the date of the financial position has significantly decreased as well as the issuer has been downgraded. 14
3. Use of estimates and judgements (continued) 3.6 Fair value of properties and impairment of properties held for sale Volatility in the global markets is reflected in the real estate markets with a significant reduction in the volume of property transactions. Under these circumstances, the degree of uncertainty is greater than that which exists in a more active market for determining the market value of properties. The properties held by the Group for own use, are measured at fair value less accumulated depreciation and impairment losses. The fair value is determined from valuations carried out by professionally qualified valuers based on market conditions for their existing use and is carried out at regular intervals so that the carrying amount is not materially different from the fair value. Properties held for sale by the Group are measured at cost which includes any transaction costs, less any impairment losses. The calculation of the impairment losses is determined based on estimates made by professional valuers based on market conditions. 3.7 Taxation The Group is subject to corporation tax in the countries in which it operates. Estimates are required in determining the provision for corporation taxes as at the date of the financial position. The Group recognises corporation tax liabilities for transactions and assessments whose tax treatment is uncertain. Where the final tax is different from the amounts initially recognised in the income statement, such differences will impact the tax expense, the tax liabilities and deferred tax assets or liabilities of the period in which the final tax is agreed with the relevant tax authorities. Deferred tax assets are recognised by the Group in respect of tax losses to the extent that it is probable that future taxable profits will be available against which the losses can be utilised. Judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits, together with future strategies. These variables have been established on the basis of significant Management judgement and are subject to uncertainty. It is possible that the actual future events could be different from the assumptions made, resulting in a material adjustment to the carrying amount of deferred tax assets. The recognition of deferred tax asset arising from taxable losses is based on estimates of the Bank s Management in respect to its profitability. These estimates are based on available information including historical data, improved macroeconomic estimates, the reduction in deposit rates, the stabilization of the non-performing exposures and the work development. Deferred tax assets are reduced when the Bank makes profits which are subject to corporation tax. 4. Segmental Analysis For Management purposes, the Group was organised into two operating segments based on the provision of services, as follows: Banking and financial services segment - principally provided banking and financial services, including financing and investment services, as well as custodian and factoring services. It also includes the results of the Group s subsidiary company in Greece, Hellenic Insurance Agency Ltd. Insurance services segment - principally provided life and general insurance services in Cyprus. The table below presents income, expenses, impairment losses and provisions to cover credit risk, profit/(loss) before taxation and information on assets regarding the Group's operating segments. 15
4. Segmental analysis (continued) Banking & Financial services Nine-month period ended 30 September Insurance Services Nine-month period ended 30 September Inter-segment transactions/balances Nine-month period ended 30 September Total Nine-month period ended 30 September 000 000 000 000 000 000 000 000 Turnover 225.738 281.053 13.350 14.770 (9.339) (4.468) 229.749 291.355 Net interest income 107.884 156.197 379 579 (35) -- 108.228 156.776 Net income from fees, commissions, net gains on disposal and revaluation of foreign currencies and financial instruments and other income 65.689 59.588 9.822 10.854 (7.544) (1.520) 67.967 68.922 Total net income 173.573 215.785 10.201 11.433 (7.579) (1.520) 176.195 225.698 Total expenses (108.417) (99.128) (5.840) (5.279) 59 62 (114.198) (104.345) Profit /(loss) from ordinary operations before impairment losses and provisions to cover credit risk 65.156 116.657 4.361 6.154 (7.520) (1.458) 61.997 121.353 Impairment losses and provisions to cover credit risk (59.130) (258.156) -- (900) -- -- (59.130) (259.056) Profit/(loss) before taxation 6.026 (141.499) 4.361 5.254 (7.520) (1.458) 2.867 (137.703) Banking & Financial services 30 September 31 December 30 September Insurance Services 31 December Inter-segment transactions/balances Total 30 September 31 December 30 September 31 December 000 000 000 000 000 000 000 000 Total assets 7.491.366 7.504.254 83.433 86.832 (30.921) (44.069) 7.543.878 7.547.017 Subsidiary assets held for sale (see Note 7) -- 4.546 Total Assets 7.543.878 7.551.563 16
5. Total expenses Total expenses for the period ended 30 September, includes an amount of 10,1 million (30 September : 3,4 million) for advisory services. During the third quarter of the Board of Directors of the Bank proceeded with the appointment of international advisory firms to provide advisory services on matters in accordance with its competency. Additionally, total expenses include an amount of 4,1 million, relating to provisions for pending litigations or cases subject to arbitration proceedings (30 September : 29 thousands). Total expenses for the period ended 30 September included a provision for impairment of land and buildings and assets available for sale amounting to 10,5 million. According to the Special Levy on Credit Institutions Law of 2011" as amended, a special levy was imposed on deposits at 31 December of the previous year at the rate of 0,15% and is included in administrative expenses in the Income Statement of the Group. For the nine-month period ended 30 September, the full amount for the year, which amounts to 9,6 million was charged to administrative expenses. This amount represents the actual payment for the nine months of amounting to 7,2 million as well as the remaining amount for the fourth quarter of amounting to 2,4 million. The Bank proceeded in charging the amount of 2,4 million to the Income Statement of the third quarter of following the relevant opinion of the European Securities and Markets Authority (ESMA) dated 25 th of September. 6. Taxation 30 September 30 September Corporation tax (540) (250) Taxes withheld at source (14) (18) Deferred tax (427) 13.117 (981) 12.909 According to the Income Tax Law 118(I)/2002 (amended), the Bank s profit and that of its subsidiaries in Cyprus, is subject to corporation tax at the rate of 12,5%. Taxable profits are not subject to defence fund contribution. In accordance with Article 13 of the Income Tax Law 118(I)/02, any tax losses of the Group companies in Cyprus which are not offset against taxable profits of other Group companies in Cyprus, are carried forward and offset against future taxable profits of the next five years. Profits earned from subsidiaries and permanent establishment abroad are subject to taxation at the rates applicable in the country in which the operations are carried out. For the calculation of the tax for the period, the tax benefits expected to result in the Group are taken into account, pursuant to the provisions of Articles 9, 10 and 13 of the Income Tax Law 118(I)/2002. Companies that do not distribute 70% of their profits after tax, as these profits are defined by the Special Contribution for the Defence of the Republic Law, during the two years following the end of the assessment to which the profits refer, will be deemed to have contributed this amount as dividend. Special contribution for defence at 17% will be payable on such deemed dividends to the extent that the shareholders (individuals and companies), at the end of the period of two years from the end of the fiscal year to which the profits refer, are Cyprus residents (domicile). The amount of this deemed dividend distribution is reduced by any actual dividend already distributed for the year to which the profits refer. The special contribution for defence is paid by the Company on behalf of the shareholders. 17
6. Taxation (continued) The recognition of deferred tax asset arising from taxable losses is based on estimates of the Bank s Management in respect to its future profitability. These estimates are based on available information including historical data, improved macroeconomic estimates, the reduction in deposit rates, the stabilization of the non-performing exposures and the work development as calculated in the strategic plan of the Group and measured at the tax rate of 12.5%. Deferred tax assets are reduced when the Bank makes profits which are subject to corporation tax. Deferred tax assets have not been recognised in relation to the following data, as it is not probable that future taxable profit will be available against which the Group may utilize the benefits in relation to the fact that they can be transferred and set off to the taxable profits of the following five years. 30 September Tax losses ending 2016 21.721 7. Profit/(loss) from discontinued operations after taxation According to the provisions of the International Financial Reporting Standard 5, Non-Current assets held for sale and discontinued operations, the comparable Group s results for the period ended 30 September have been adjusted to reflect the reclassification from continuing operations to discontinued operations of the Bank s subsidiaries, Limited Liability Company Commercial Bank Hellenic Bank and Borenham Holdings Limited that were disposed. On the 6 th of February, the Bank proceeded with the disposal of its subsidiary Borenham Holdings Limited. The Bank s subsidiary, Borenham Holdings Limited owned 100% of the share capital of the Russian company Limited Liability Company Format Invest, owner of the building facilities of the former Bank s subsidiary in Russia Limited Liability Company Commercial Bank Hellenic Bank. On 5 th of June, the Bank disposed 100% of the share capital of the Group s wholly owned subsidiary bank in Russia, Limited Liability Company Commercial Bank Hellenic Bank. The sale was at arm s length basis with counterparties Russian investors, after obtaining the necessary approvals from the Central Bank of Cyprus. 18
7. Profit/(loss) from discontinued operations after taxation (continued) The effect of the discontinued operations on the Group s results is presented below and is analysed by company at the points (i) and (ii) (Russia segment) as follows: Nine-month period ended 30 September Note 000 000 Discontinued operations Turnover -- 1.433 Net interest income -- 554 Net income from fees, commissions, net gains on disposal and revaluation of foreign currencies and financial instruments and other income -- 264 Total net income -- 818 Total expenses (60) (3.161) Loss before taxation (60) (2.343) Taxation -- 76 Loss after taxation (60) (2.267) Profit on disposal of subsidiary company 4.886 2.955 Profit for the period 4.826 688 Basic earnings per share (cent) 8 2,6 1,0 (i) Russia Segment -Limited Liability Company Commercial Bank Hellenic Bank Nine-month period ended 30 September 000 000 Turnover -- 1.286 Net interest income -- 992 Net income from fees, commissions, net gains on disposal and revaluation of foreign currencies and financial instruments and other income -- 117 -- 1.109 Total net income Total expenses -- (1.119) Loss before taxation -- (10) Taxation -- 76 Profit after taxation -- 66 Profit on disposal of subsidiary company -- 2.955 Profit for the period -- 3.021 19
7. Profit/(loss) from discontinued operations after taxation (continued) (i) Russia Segment -Limited Liability Company Commercial Bank Hellenic Bank (continued) The profit arose from the sale of the subsidiary s assets and liabilities, under the signed agreement on 5 th of June, which constitutes the difference between the net payable amount and the carrying value of net assets and is analysed as follows: Assets Cash and balances with Central Banks 853 Placements with other banks 18.061 Loans and advances to customers 12.435 Property, plant and equipment 170 Intangible assets 553 Deferred tax asset 769 Other assets 115 Total Assets 32.956 Liabilities Deposits and other customer accounts 1.464 Deferred tax liability 107 Other liabilities 663 Loan capital 9.236 Total Liabilities 11.470 Net Assets 21.486 Disposal consideration 24.441 Profit on disposal of subsidiary company 2.955 20
7. Profit/(loss) from discontinued operations after taxation (continued) (ii) Russia Segment - Borenham Holdings Limited Nine-month period ended 30 September 000 000 Discontinued operations Turnover -- 147 Net interest income -- (438) Net income from fees, commissions, net gains on disposal and revaluation of foreign currencies and financial instruments and other income -- 147 Total net income -- (291) Total expenses (60) (2.042) (60) (2.333) Profit on disposal of subsidiary company 4.886 -- Profit/(loss) for the period 4.826 (2.333) The profit arose from the sale of the subsidiary s assets and liabilities, under the signed agreement on the 6 th of February, which constitutes the difference between the net payable amount and the carrying amount of Net assets and is analysed as follows: Assets Cash and balances with Central Banks 30 Property, plant and equipment 3.828 Other assets 53 Total assets 3.911 Liabilities Intercompany loan undertaken by new company shareholders 3.514 Other liabilities 1.231 Total liabilities 4.745 Net liabilities 834 Disposal consideration 4.052 Profit on disposal of subsidiary company 4.886 21
7. Profit/(loss) from discontinued operations after taxation (continued) The effect of the discontinued operations on the Statement of Cash Flows was as follows: Nine-month period ended 30 September Cash flow from discontinued operations Net cash flow from investing activities 4.021 5.247 Net cash flow (used in)/from operating activities (864) 10.424 Net cash flow for the period 3.157 15.671 8. Basic earnings/(loss) per share Nine-month period ended 30 September Basic earnings/(loss) per share Profit/(loss) attributable to shareholders of the parent company ( thousand) 6.092 (124.822) Average number of shares in issue during the period (thousand) 187.566 67.668 Basic earnings/(loss) per share (cent) 3,3 (184,5) Nine-month period ended 30 September Basic earnings/(loss) per share from continuing operations Profit/(loss) attributable to shareholders of the parent company from continuing operations ( thousand) 1.266 (125.510) Average number of shares in issue during the period (thousand) 187.566 67.668 Basic earnings/(loss) per share from continuing operations (cent) 0,7 (185,5) Nine-month period ended 30 September Basic earnings per share from discontinued operations Profit attributable to shareholders of the parent company from discontinued operations ( thousand) 4.826 688 Average number of shares in issue during the period (thousand) 187.566 67.668 Basic earnings per share from discontinued operations (cent) 2,6 1,0 For the calculation of basic loss for the period ended 30 September, the average number of shares in issue has been adjusted in accordance with IAS to take into account the issue of shares from the exercise of rights (see Note 21), during as well as the reverse split of the share capital (see Note 15). 22
9. Loans and advances to customers 30 September 31 December Loans and advances to customers 4.383.406 4.405.082 Accumulated impairment losses (1.238.612) (1.184.027) 3.144.794 3.221.055 Accumulated impairment losses on the value of loans and advances: Individual impairment losses 30 September 31 December 1 January Provision reserve 889.573 598.996 Temporary income suspension account 244.001 164.833 1.133.574 763.829 Net write-offs of loan impairment losses (64.345) (5.242) Net write-offs of suspended income losses (48.539) (1.059) Suspended income for the period/year 97.534 80.227 Charge for the period/year 66.646 296.970 Transfer to other assets/other liabilities -- (4.621) Exchange difference 12.439 3.470 63.735 369.745 30 September/31 December Provision reserve 904.313 889.573 Temporary suspension income account 292.996 244.001 Collective impairment losses 1.197.309 1.133.574 1 January 50.453 66.388 Net write-offs of loan impairment losses (1.799) -- Transfer to other assets/other liabilities -- (899) Charge for the period/year (8.135) (15.036) Exchange difference 784 -- 30 September/31 December 41.303 50.453 Accumulated impairment losses 1.238.612 1.184.027 23
9. Loans and advances to customers (continued) Impairment losses and provisions to cover credit risk in the income statement: 30 September 30 September Impairment losses on the value of loans and advances 58.511 259.056 Provisions to cover credit risk for contractual commitments and guarantees 619 -- 59.130 259.056 Impaired loans and advances Represent the loans and advances for which the Group determines that there is objective evidence for impairment as a result of one or more loss events occurring after initial recognition and which have an impact on the estimated future cash flows. These loans and advances are classified Grade 3 (high risk) based on the Group s credit risk assessment system. Loans with renegotiated terms due to the deterioration of the financial position of the customer are usually considered impaired, if the Group determines that, according to the loan contractual terms, nonrepayments of the total principal and contractual interest due is possible. Non-impaired loans and advances The loans and advances which were not found to be impaired, are presented in risk categories based on the credit risk assessment system of the Group. The risk categories are as follows: Grade 1 (Low Risk): An immediate ability to repay the credit facility is assumed. Grade 2 (Medium Risk): The probability of indirect recovery of the credit facility is assumed. Grade 3 (High Risk): The debtor presents a higher risk compared to Grade 1 and 2 on the existence of direct and indirect recovery of the credit facility. Past due but not impaired loans and advances Represent non-impaired loans and advances for which the contractual interest or principal repayments are past due and the Group determines that there is no objective evidence of impairment by taking into account, among others, the value of available collateral. Loans with renegotiated terms Loans with renegotiated terms represent customers facilities that have been restructured. Forbearance measures are any actions taken by the Bank, which involve the modification of the terms and/or conditions of a credit facility and aim to address existing or foreseeable difficulties of the borrower to meet the current repayment schedule. Such actions usually include the extension of the contractual maturity of the loan and changing the repayment schedule of interest payments. Loans with forbearance measures have arisen as a result of adverse changes in the financial condition of a number of customers, resulting in the inability to repay the facilities according to the original terms of the agreement. As a result, the Bank considers amending the terms of the agreement to offer customers more favourable terms in order to facilitate the repayment of their debts and therefore minimise the Bank s final loss. 24
9. Loans and advances to customers (continued) A loan with forbearance measures is considered restructured when one or more of the following signs of weakness in repaying the debt appear: (a) Substantial delay over 60 days, which existed at the time of the restructuring. (b) Material deterioration of the financial results of the customer (reduction of income/profit/turnover/increase of expenses etc). (c) Existence of events that adversely affect the financial condition of the customer such as bankruptcy of a debtor of the customer, destruction of plant or goods of the customer by fire or other cause, dismissal from work etc. (d) Repetitive material delays of 30 days and over in the servicing of the loan, that negatively impact on the customer s conduct of account. (e) Substantial deterioration of the credit rating of the customer. (f) Existence of other overdue debts to the Bank. Prerequisite for taking forbearance measures is the existence of customer repayment ability in other words, the customer is deemed viable. The Bank s Forbearance Policy includes the terms and conditions on which the Bank determines whether or not a renegotiated repayment schedule shall be granted. The forbearance measures to be taken and their duration thereof are determined on the basis of specific customer information, based on the prevailing economic conditions and in accordance with relevant legislation or regulatory Directives. The monitoring of forborne loans is performed by both, Business Units and the Credit Risk Management Department. Every effort is taken for the proper assessment of the new repayment schedule on the basis of the forbearance measures, in order to avoid a new default. Collateral On the basis of the Group s policy, the amount of credit facilities granted should be based on the repayment capacity of the relevant counterparties. Furthermore, policies are applied for the hedging and mitigation of credit risk through the holding of collateral. These policies define the types of collaterals held and the methods for estimating their fair value. The main collaterals held by the Group include mortgage interests over property, pledging of cash, government and bank guarantees, charges over business assets as well as personal and corporate guarantees. The financial effects of collaterals are calculated in accordance with the Group s Loan Policy, taking into account, among others, the forced sale value of collaterals and are limited to the amount of loans covered. The financial effects of collaterals for loans and advances classified as individually impaired at 30 September amounted to 1.433.732 thousand (31 December : 1.340.768 thousand), while for loans and advances past due but not impaired amounted to 153.331 thousand at 30 September (31 December : 282.657 thousand). 25
9. Loans and advances to customers (continued) Based on the above categories, loans and advances to customers of the Group, are presented as follows: Loans and advances to customers 30 September 000 31 December 000 Carrying amount 3.144.794 3.221.055 Impaired: Grade 3 (high risk) 2.592.899 2.368.793 Individual impairment losses (1.197.309) (1.133.574) Carrying amount 1.395.590 1.235.219 Of which loans with renegotiated terms 651.466 543.352 Past due but not impaired: Grade 1 (low risk) 67.194 134.951 Grade 2 (medium risk) 108.510 189.182 Grade 3 (high risk) 13.540 30.734 Carrying amount 189.244 354.867 Past due comprises: 0+ up to 30 days 75.429 103.286 30+ up to 60 days 26.848 84.875 60+ up to 90 days 57.726 66.712 90 days+ 29.241 99.994 Carrying amount 189.244 354.867 Of which loans with renegotiated terms 51.894 77.917 Neither past due nor impaired: Grade 1 (low risk) 1.191.393 1.210.810 Grade 2 (medium risk) 384.464 442.972 Grade 3 (high risk) 25.406 27.640 Carrying amount 1.601.263 1.681.422 Of which loans with renegotiated terms 338.020 479.576 Balances after individual impairment losses 3.186.097 3.271.508 Collective impairment losses (41.303) (50.453) Total carrying amount 3.144.794 3.221.055 26
9. Loans and advances to customers (continued) The movement of the net carrying amount of the Group s impaired loans and advances to customers is as follow: 30 September 31 December 000 000 1 January 1.235.219 827.342 Transfer to non- impaired loans and advances during the period/year (102.949) (76.206) Net movement of impaired loans and advances (4.025) (97.877) 1.128.245 653.259 Loans and advances classified as impaired during the period/year 267.345 581.960 30 September/31 December 1.395.590 1.235.219 The Group s loans and advances with renegotiated terms after individual impairment losses are analysed below: 30 September 31 December 000 000 Trade 57.363 83.361 Construction and Real Estate 479.818 482.698 Manufacturing 35.623 35.828 Tourism 64.089 48.351 Other sectors 272.084 306.271 Retail 132.403 144.336 Non-Performing Exposures 1.041.380 1.100.845 According to the CBC Directive on Loan Impairment and Provisioning Practices (February, amendment February ), is required by the credit institutions to publish Table A - Analysis of loan portfolio according to the counterparty sector, as presented below. It is mentioned that on 17 th of February, the CBC, by circular amended the relevant table and the presentation for the year ended 31 December was based on the amended table. On 30 th of September non-performing exposures amounted to 2.683 million according to the technical standards of the European Banking Authority (EBA) () (December : 2.557 million) (December : 2.494 million according to the Directive of the CBC to credit institutions on the Definitions of Non-performing and Restructured Credit facilities, July 2013). 27