National Bank of Greece SA (NBG)

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Call End:

National Bank of Greece SA (NBG)

Q2 2013 Earnings Conference Call

August 29, 2013 10:30 a.m. ET

Executives

Petros Nikolaos Christodoulou – Deputy Chief Executive Officer

Paula Chatzisotiriou – Group Chief Financial Officer

Paul Mylonas – General Manager of Strategy & International Activities

George Angelides – Head of Finance

Greg Papagrigoris – Head of Investor Relations

Analysts

Carriere Giovanni – Autonomous Research

Antonio Ramirez – KBW

Nitu Florent – Citigroup

Presentation

Operator

Good afternoon, ladies and gentlemen. This is the Chorus Call conference operator. Welcome and thank you for joining National Bank of Greece Second Quarter 2013 Financial Results Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions (Operator Instructions).

At this time, I’d like to turn the conference over to Mr. Petros Christodoulou, Deputy CEO; Mr. Paul Mylonas, CHT General Manager, Head of Strategy and International Operations of NBG; Mrs. Paula Chatzisotiriou, Group CFO; and Mr. Greg Papagrigoris, Head of Investor Relations. Please go ahead.

Petros Christodoulou

Good afternoon everyone. Good morning for those of you dialing in from the U.S. This is Petros Christodoulou speaking and with me today as you heard is Paul Mylonas, Head of our Strategy and International; Paula Chatzisotiriou, our new CFO; and we’re also joined by George Angelides, Head of Finance and Greg Papagrigoris, our Head of IR.

Welcome to the Q213 Results Conference Call. Let me begin with a few brief comments on our Q2 results before I pass the floor to Paula who will walk you through the numbers in more detail. After that we may open it up to Q&A. The key things I would like you to take away from the results are the following five.

First, we are witnessing clear signs of improvement in the domestic economic environment, allowing our gradual return to profitability. H1 ’13 group profit after tax stands at €344 million, relative to a loss of €1.9 billion a year ago. And even if we adjust for non-recurring profits and losses, still the bottom line remains positive, coming up at a solid €312 million for H1 ’13 and 126 million for Q2 ‘13. This performance is a function of two main drivers.

A, pre-provision profit, which is up by 45% year on year in H1 ’13 to €792 million, driven by the gradual bottoming out in Q1 ’13 and recovery of NII in Q2 ’13, the reversal of trading losses and sustained cost containment. It is worth mentioning, it is worth highlighting that in Q2 ’13, our free provision profit has exceeded the cost of risk for the first time in two and a half years, constituting an additional first in the domestic market.

B, the substantial reduction of the group cost of risk to 271 basis points for H1 ’13, versus 370 basis points a year ago has a consequence of lower formation in domestic past due loans for a third quarter in a row. During Q2 ’13, we witnessed further signs of a reduction in the formation of 90-day past due loans domestically. Indeed the generation of new 90-day past due loans in Q2 ’13 stood at €378 million or €835 million for H1 ’13, relative to around €2 billion number for H1 ’12, constituting a whopping 60% reduction in 90-day past due formation relative to H1 ’12, when Greece was as we know plagued by a conference of destabilizing forces.

As a result, our group 90-day past due ratio reached 19.8% in Q2 ’13, more than 10% points off that of our peers. In light of this policy development that clearly dissociates NBG from the rest of the market, we are steadily reducing loan provision and charges in Greece in tandem with the improvement in delinquency formation. As you can see from the results, the net provision in charges in H1 ’13 are down by 36% year on year, while at the same time coverage of 90-day past due loans has further risen to a best-in-class level of 56% in Q2 from 54% in Q1.

Second, on the liquidity front, we have managed to reduce further loan deposit ratios in all three geographies, Greece, Turkey and Se, pushing the group loan deposit down to 102%, just a whisper away from 100%. This has been a function of sustained growth deposit gathering in all three regions and measured deleveraging in Greece and SEE. As a result, as of June, we have managed to reduce Eurosystem system exposure by €5.4 billion year to date and by €9.2 billion on a year on year basis, while (inaudible) suggests a further reduction by about €3 billion, combined with a marginal exposure to the ELA of less than €1 billion.

Third, we continue to rationalize our cost base with a focus in Greece and SEE jurisdictions. In Greece, we have reduced OpEx by 8% year on year in H1 ’13, reaching a cumulative cost containment of 23% compared to the equivalent period of 2010. Upcoming quarters will be benefited additionally as the new collective wage agreement comes into effect and the large scale [VRS] is launched. The combined impact of agreed cost measures, including the above, is estimated at an additional 20% of our cost base. Similarly, in SEE we remain focused in further containing costs.

Fourth, our international franchise is supportive to group profitability. Finansbank’s H1 attributable profit after tax reached €332 million, posting a 32% increase in local Turkish Lira terms, despite 2012 being a record year in terms of profitability. Also, SEE has turned profitable, returning a profit of €6 million relative to a loss of €15 million in H1 ’12.

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