REG - Alpha Bank A.E. - Annual Financial Report <Origin Href="QuoteRef">ACBr.AT</Origin> - Part 1
RNS Number : 0956BAlpha Bank A.E.31 March 2017ANNUAL REPORT
For the period from 1 January to 31 December 2016
(In accordance with Law 3556/2007)
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http://www.rns-pdf.londonstockexchange.com/rns/0956B_1-2017-3-30.pdfAthens,
30 March 2017
table of contents
Statement by the Members of the Board of Directors.............................................. 7
Board of Directors' Annual Management Report as at 31.12.2016............................ 9
Explanatory Report of the Board of Directors for the year 2016............................. 24
Corporate Governance Report for the year 2016.................................................... 26
Independent Auditors' Report
(on Group Financial Statements)............................................................................. 39Group Financial Statements as at 31.12.2016
Consolidated Income Statement ............................................................................. 41
Consolidated Balance Sheet................................................................................... 42
Consolidated Statement of Comprehensive Income .................................................. 43
Consolidated Statement of Changes in Equity ......................................................... 44
Consolidated Statement of Cash Flows.................................................................... 46
Notes to the Financial Statements
General Information ............................................................................................. 47
Accounting policies applied
1.1 Basis of presentation .............................................................................. 49
1.2 Basis of consolidation ............................................................................. 55
1.3 Operating segments................................................................................. 57
1.4 Transactions in foreign currency and translation of foreign operations............... 57
1.5 Cash and cash equivalents ....................................................................... 57
1.6 Classification and measurement of financial instruments ................................ 58
1.7 Derivative financial instruments and hedge accounting ................................... 60
1.8 Fair value measurement............................................................................ 61
1.9 Property, plant and equipment................................................................... 63
1.10 Investment property ................................................................................. 63
1.11 Goodwill and other intangible assets........................................................... 64
1.12 Leases.................................................................................................. 64
1.13 Insurance activities ................................................................................. 65
1.14 Impairment losses on loans and advances ................................................... 65
1.15 Impairment losses on non-financial assets .................................................. 66
1.16 Income tax ............................................................................................ 66
1.17 Non-current assets held for sale ................................................................ 67
1.18 Employee benefits................................................................................... 67
1.19 Share options granted to employees........................................................... 68
1.20 Provisions and contingent liabilities............................................................ 68
1.21 Sale and repurchase agreements and securities lending ................................ 69
1.22 Securitization......................................................................................... 69
1.23 Equity................................................................................................... 69
1.24 Interest income and expense..................................................................... 69
1.25 Fee and commission income...................................................................... 70
1.26 Dividend income...................................................................................... 70
1.27 Gains less losses on financial transactions.................................................. 70
1.28 Discontinued operations............................................................................ 70
1.29 Related parties definition.......................................................................... 70
1.30 Comparatives.......................................................................................... 70
1.31 Estimates, decision making criteria and significant sources of uncertainty......... 71
Income Statement
2 Net interest income ................................................................................. 74
3 Net fee and commission income ................................................................ 74
4 Dividend income ..................................................................................... 75
5 Gains less losses on financial transactions.................................................. 75
6 Other income ......................................................................................... 76
7 Staff costs............................................................................................. 76
8 General administrative expenses ............................................................... 78
9 Other expenses....................................................................................... 79
10 Impairment losses and provisions to cover credit risk .................................... 79
11 Income tax ............................................................................................ 79
12 Earnings /(losses) per share ..................................................................... 83
Assets
13 Cash and balances with Central Banks ....................................................... 84
14 Due from banks ...................................................................................... 84
15 Trading securities ................................................................................... 85
16 Derivative financial instruments (assets and liabilities) .................................. 85
17 Loans and advances to customers ............................................................. 87
18 Investment securities .............................................................................. 89
19 Investments in associates and joint ventures ............................................... 90
20 Investment property ................................................................................. 93
21 Property, plant and equipment .................................................................. 94
22 Goodwill and other intangible assets........................................................... 95
23 Deferred tax assets and liabilities .............................................................. 96
24 Other assets .......................................................................................... 98
Liabilities
25 Due to banks ......................................................................................... 99
26 Due to customers (including debt securities in issue)..................................... 99
27 Debt securities in issue and other borrowed funds ........................................ 99
28 Liabilities for current income tax and other taxes ........................................ 101
29 Employee defined benefit obligations......................................................... 101
30 Other liabilities ..................................................................................... 107
31 Provisions ............................................................................................ 108
Equity
32 Share capital ........................................................................................ 109
33 Share premium ..................................................................................... 109
34 Reserves ............................................................................................. 110
35 Retained earnings ................................................................................. 111
36 Hybrid securities ................................................................................... 111
Additional information
37 Contingent liabilities and commitments ..................................................... 112
38 Group consolidated Companies ................................................................ 116
39 Disclosures of Law 4261/5.5.2014 ............................................................ 123
40 Operating segments .............................................................................. 127
41 Risk management ................................................................................. 130
41.1 Credit Risk Management......................................................................... 130
41.2 Market risk .......................................................................................... 158
Foreign currency risk ............................................................................. 158
Interest rate risk ................................................................................... 161
41.3 Liquidity risk......................................................................................... 164
41.4 Fair value of financial assets and liabilities ................................................ 169
41.5 Transfers of financial assets.................................................................... 173
41.6 Offsetting financial assets-liabilities.......................................................... 175
42 Recapitalization framework - Restructuring Plan.......................................... 176
43 Capital adequacy .................................................................................. 178
44 Related party transactions ...................................................................... 179
45 Auditors' fees ....................................................................................... 180
46 Disclosures of Law 4151/2013 .................. 180
47 Assets held for sale and discontinued operations ................. 181
48 Corporate events ................................................................................... 185
49 Restatement of financial statements.......................................................... 187
50 Events after the balance sheet date........................................................... 190
Independent Auditors' Report
(on Bank Financial Statements)................................................................................. 191Bank Financial Statements as at 31.12.2016
Income Statement................................................................................................ 193
Balance Sheet..................................................................................................... 194
Statement of Comprehensive Income..................................................................... 195
Statement of Changes in Equity............................................................................. 196
Statement of Cash Flows....................................................................................... 197
Notes to the Financial Statements
General Information ............................................................................................ 198
Accounting policies applied
1.1 Basis of presentation.............................................................................. 200
1.2 Operating segments............................................................................... 206
1.3 Transactions in foreign currency and translation of foreign operations ............. 206
1.4 Cash and cash equivalents...................................................................... 207
1.5 Classification and measurement of financial instruments............................... 207
1.6 Derivative financial instruments and hedge accounting.................................. 209
1.7 Fair value measurement ......................................................................... 211
1.8 Investments in subsidiaries, associates and joint ventures............................ 212
1.9 Property, plant and equipment.................................................................. 212
1.10 Investment property ............................................................................... 213
1.11 Goodwill and other intangible assets......................................................... 213
1.12 Leases ................................................................................................ 213
1.13 Impairment losses on loans and advances ................................................. 214
1.14 Impairment losses on non-financial assets ................................................. 215
1.15 Income tax ........................................................................................... 215
1.16 Non-current assets held for sale .............................................................. 215
1.17 Employee benefits.................................................................................. 216
1.18 Share options granted to employees ......................................................... 217
1.19 Provisions and contingent liabilities........................................................... 217
1.20 Sale and repurchase agreements and securities lending................................ 217
1.21 Securitization ....................................................................................... 218
1.22 Equity.................................................................................................. 218
1.23 Interest income and expense.................................................................... 218
1.24 Fee and commission income.................................................................... 218
1.25 Gains less losses on financial transactions ............................................... 218
1.26 Discontinued operations.......................................................................... 218
1.27 Related parties definition......................................................................... 219
1.28 Comparatives........................................................................................ 219
1.29 Estimates, decision making criteria and significant sources of uncertainty....... 219
Income Statement
2 Net interest income ............................................................................... 223
3 Net fee and commission income .............................................................. 223
4 Dividend income .................................................................................... 224
5 Gains less losses on financial transactions................................................ 224
6 Other income ....................................................................................... 225
7 Staff costs ........................................................................................... 225
8 General administrative expenses .............................................................. 227
9 Other expenses..................................................................................... 228
10 Impairment losses and provisions to cover credit risk................................... 228
11 Income tax ........................................................................................... 228
12 Earnings /(losses) per share ................................................................... 231
Assets
13 Cash and balances with Central Banks ..................................................... 232
14 Due from banks .................................................................................... 232
15 Trading securities ................................................................................. 233
16 Derivative financial instruments (assets and liabilities) ................................. 233
17 Loans and advances to customers ............................................................ 235
18 Investment securities ............................................................................. 236
19 Investments in subsidiaries, associates and joint ventures ........................... 237
20 Investment property ............................................................................... 239
21 Property, plant and equipment ................................................................. 240
22 Goodwill and other intangible assets ........................................................ 241
23 Deferred tax assets................................................................................ 242
24 Other assets ........................................................................................ 243
Liabilities
25 Due to banks ........................................................................................ 244
26 Due to customers .................................................................................. 244
27 Debt securities in issue and other borrowed funds ....................................... 244
28 Liabilities for current income tax and other taxes ........................................ 246
29 Employee defined benefit obligations ........................................................ 246
30 Other liabilities ..................................................................................... 252
31 Provisions ............................................................................................ 252
Equity
32 Share capital ........................................................................................ 253
33 Share premium ..................................................................................... 253
34 Reserves ............................................................................................. 254
35 Retained earnings ................................................................................. 254
Additional information
36 Contingent liabilities and commitments ..................................................... 255
37 Operating segments .............................................................................. 257
38 Risk management ................................................................................. 260
38.1 Credit risk management.......................................................................... 260
38.2 Market risk .......................................................................................... 286
Foreign currency risk ............................................................................. 286
Interest rate risk ................................................................................... 289
38.3 Liquidity risk ........................................................................................ 292
38.4 Fair value of financial assets and liabilities ................................................ 297
38.5 Transfers of financial assets ................................................................... 301
38.6 Offsetting financial assets-liabilities.......................................................... 302
39 The Bank's recapitalization framework - Restructuring Plan........................... 304
40 Capital adequacy .................................................................................. 306
41 Related-party transactions ...................................................................... 306
42 Auditors' fees ....................................................................................... 309
43 Merger of Company Diners Club Greece A.E.P.P......................................... 309
44 Assets held for sale and discontinued operations......................................... 309
45 Disclosures of Law 4151/2013.................................................................. 312
46 Corporate events.................................................................................... 312
47 Restatement of financial statements ......................................................... 313
48 Events after the balance sheet date .......................................................... 314
Appendix................................................................................................................ 315
Disclosures of Law 4374/2016................................................................................ 317
Information in accordance with article 10 of Law 3401/2005 ................................. 331
Availability of Annual Financial Report ................................................................. 333
Statement by the Members of the Board of Directors
(in accordance with article 4 paragraph 2 of Law 3556/2007)
To the best of our knowledge, the annual financial statements that have been prepared in accordance with the applicable accounting standards, give a true view of the assets, liabilities, equity and financial performance of Alpha Bank A.E. and of the group of companies included in the consolidated financial statements taken as a whole, as provided in article 4 paragraphs 3 and 4 of Law
3556/2007, and the Board of Directors' annual report presents fairly the evolution, performance and financial position of Bank, and group of companies included in the consolidated financial statements taken as a whole, including the analysis of the main risks and uncertainties that they face.
Athens, 30March2017
THE CHAIRMAN
OF THE BOARD OF DIRECTORSTHE MANAGING DIRECTOR
THE DEPUTY CEO
OF NON-PERFORMING LOANS AND TREASURY MANAGEMENTVASILEIOS T. RAPANOS
ID. No 666242
DEMETRIOS P. MANTZOUNIS
ID. No 166670
ARTEMIOS CH. THEODORIDIS
ID. No 281969
Board of Directors' Annual Management Report
as at 31.12.2016
THE GREEK ECONOMY
The Greek economy stalled in 2016 for a second consecutive year (2015: -0.2%, 2016: 0,0%), yet showing signs of resilience despite the imposition of capital controls in July 2015. The economic adjustment programmes implemented in Greece managed taddress, to a great extent, the fiscal imbalances and the lack of competitiveness. In particular, Greece recorded a primary surplus for a fourth consecutive year in 2016, which is estimated to exceed the target set of 0.5% to GDP, due to revenue over-performance as a result of the contractionary fiscal policy. The conclusion of the first review of the economic programme and subsequently the disbursement of the second tranche allowed the state to meet its financing needs and to partially clear the government arrears to the private sector which helped easing liquidity conditions.
The above developments are positive signs for the business climate and the strengthening of the prospects of the economy. However, delays regarding the conclusion of the second review prolong the vicious cycle of uncertainty and investment weakness.
The main developments in Greek economy can be summarized as follows:
Real GDPstagnated in 2016. Private consumption had a positive contribution to GDP change, investment had stalled, while net exports and public consumption had a negative contribution.
Regarding inflation, national CPI declined by 0.8% on average in 2016, against a fall by 1.7% in 2015, while the Harmonized Index of Consumer Prices stagnated in 2016 (0.0%) for the first time since 2013. The end of deflation in 2016 (period average) is the combined outcome of the mild recession in the first semester and the gradual recovery of the economy in the second semester. Deflationary pressures have eased mainly due to the significant increase of tax rates on consumption and the upward trend in energy prices in November-December 2016, not reflecting a pick-up of domestic demand. In 2017, HICP is expected to turn positive along with the recovery of the economy.
Labour market conditions continued to moderately improve in 2016 as they did in 2015, as a result of gains in employment and the falling number of unemployed. More specifically, in 2016 the unemployment rate declined to 23.5%, from 24.9% and 26.5% in 2015 and 2014 respectively, on account of a 5.5% decline in the number of unemployed persons and a 1.7% rise in the number of employed persons. Further de-escalation of unemployment rate and the increase in the employment rate depend to a large extent on the stabilisation of economic sentiment, the growth prospects, as well as the implementation of structural changes.
The general index of Industrial Production increased by 2.3% in 2016, against a smaller increase by 1.0% in 2015. This positive development in the Greek industry is due to the significant increase of manufacturing production (2016: 4.0%, 2015: 1.8%). It is worth noting that the main sectors of industry continue to increase their production, as they managed to direct most of the production abroad.
According to the Balance of Payments (Bank of Greece data) current account (CA) recorded a deficit of Euro 1.1 bn in 2016, against a small surplus of Euro 0.2 bn in 2015. The deficit in 2016 was mainly due to the decrease of services surplus which was not outweighed by the narrowing of trade deficit.
In particular, the service and trade balance that represent the largest part of the CA, recorded a deficit of Euro 1.3 bn in 2016, against a deficit of Euro 0.3 bn in 2015. The surplus in the services balance shrunk by 9.5% on a yearly basis, as tourism receipts declined by 6.4% (despite the increase of tourists arrivals by 5.1%), and transport receipts decline by 21.6%.
Regarding fiscal consolidation progress, is estimated that in 2016 a general government primary surplus higher than the target (0.5% of GDP) was achieved. The primary surplus is attributed to the over-performance of state revenues, as a result of the tax rate hikes on consumption, the increased use of electronic transactions that broaden the tax base, and finally, the further squeeze of Public Investment Programme. Moreover, it is noted the partial clearance of government arrears that amounted to Euro 4.5 bn in the end of 2016, from Euro 7.4 bn in the end of June 2016.
In 2016, Greek Banks showed signs of stabilization, achieved marginal profitability before taxes, met gradually their commitments according to their business plans and strengthened their capital base. The banking system's capital adequacy (CET1 Sept 2016, on consolidated basis: 18.1%) and coverage ratio (Q3 2016: ca 50%1) are at high level, creating an important capital buffer which is able to absorb further turbulences and to support the significant effort of managing and drastically reducing the non-performing exposures (NPEs).
However, the structural weaknesses of the banking system remain, mainly due to the high stock of NPEs (Sept. 2016: 45.2%1) and the low level of deposits. The reduction of the NPEs is crucial to further stabilize the banking system, to ensure the sustainability of the banks' business model and to resume credit expansion.
The contraction of credit to the private sector, which started at the second quarter of 2012, as a result of the economic crisis, continued at a slower pace in 2016 (December 2016:-1.4%, December 2015:-2.0%). At the end of December 2016, the private sector loan outstanding amounted to Euro 195.2 bn from Euro 204.3 bn at the end of December 2015. The private sector deposit outstanding2 stood at Euro 121.4 bn. in December 2016. Household deposits amounted to Euro 100.8 bn and accounted for the 83% of the total private sector deposits, while corporation deposits amounted to Euro 20.6 bn. Finally, total deposits in the banking system that include, apart from deposits of the private sector, those of General Government and foreign residents amounted to Euro 157.5 bn in December 2016, registering a marginal decrease of 0.2% yoy.
In 2016, the use of electronic means of payment, by corporations and households has increased, as a result of capital controls. Specifically, the number of payment cards increased in the first half of 2016 by 440 thousands. The use of electronic payments is expected to expand further mainly due to the fact that corporations and households are getting more familiar.
The stabilization of the Greek economy from the second half of 2016, and the establishment of a framework for the management of non-performing exposures are estimated to set the conditions for a favourable environment for the banking system.
INTERNATIONAL ECONOMY
igh volatility in stock markets during the first weeks of 2016, showed signs of stabilising in the first quarter. However, the outcome of the referendum in the UK on 23 June 2016, in favour of leaving the European Union took the stock markets by surprise and reinforced uncertainty.
The lack of a specific withdrawal procedure, as well as the uncertainty surrounding the future relationship between the United Kingdom and the European Union maintained investors' concerns throughout H2 2016, causing the British pound to slide against the euro by 14% and by 16% against the dollar, throughout 2016.
According to the latest forecasts by the International Monetary Fund (IMF, January 2017), world GDP is expected to increase by 3.1% in 2016 and 3.4% in 2017 from 3.2% in 2015. However, the international economic activity continues to suffer from geopolitical tensions and increased terrorist incidents. These could possibly reverse the course of global economic activity. In addition, economic uncertainty has increased due to the economic policy to be followed by the newly elected President of the US, since no details have been released about it.
As regards the rate of economic growth in developed economies, the IMF expects this to stand at 1.6% in 2016 and rise to 1.9% in 2017 from 2.1% in 2015.
The major Central Banks aim to increase in the medium term inflation close to 2%, with a combination of conventional and unconventional measures of expansionary monetary policy (such as very low or even negative interest rates) and through forward guidance.
The international trade in goods and services is estimated to have grown by 1.9% in 2016 and substantially increase by 3.8% in 2017 and 4.1% in 2018 (IMF, January 2017).
The Organization of Petroleum Exporting Countries (OPEC) maintained the petroleum production in high levels during the first eleven months of 2016 keeping the oil prices lower than USD 50. However, in late November 2016, an agreement between O.P.E.C. and other oil-producing countries, such as Russia, to reduce production in the first half of 2017 and with a view to extend the agreement, led to a significant rise in oil prices in December.
Oil price staying at a very low level for more than two years, led to the prevalence of low inflationary pressures, especially in developed economies. Deflationary pressures further strengthened by the decline in commodity prices by 2.7% in 2016 (IMF, January 2017).
In the USA, GDP growth rate is expected to increase by 2.3% in 2017 from 1.6% in 2016, due to the expansionary fiscal policy the new President has announced. Despite the reduction of the unemployment rate around the full employment level and the upward trend of inflation in 2016, the Federal Reserve in U.S.. increased only once its key interest rates, in December 2016.
In China, GDP growth rate has decelerated to 6.7% in 2016 from 6.9% in 2015 and is forecasted to further decelerate to 6.5% in 2017 and to 6.3% in 2018 (IMF, January 2017), due to weak external demand and reduced private investment. However, in 2016, the economic rebalancing continued and growth was mainly relied on services, while investment expansion in the private sector was moderate.
In Japan, GDP increased by 1.0% in 2016 from 1.2% in 2015, as a result of increased consumption, investment and exports. he Bank of Japan, in order to achieve the medium-term target for inflation (2%), decided to introduce quantitative and qualitative monetary easing by means of yield curve control. Growth of GDP is forecasted to stand at 0.9% in 2017 and 0.8% in 2018 (IMF, January 2017), driven by a fiscal stimulus package and the postponement of a planned consumption tax hike to October 2019 instead of April 2017.
In Eurozone, GDP growth stood at 1.7% in 2016, compared with 2.0% in 2015, but is forecasted to fall again to 1.6% in 2017, according to the IMF. The recovery is driven mainly by domestic demand, as the European Central Bank (ECB) has adopted accommodative monetary policy from June 2014, extended until December 2017.Indicatively, the deposit rate is negative from June 2014 (-0.10%) and has been further reduced, to -0.40%, since March 2016. However, as the ECB points out, the expansionary monetary policy is imperative to be complemented by the necessary reforms in the labour and product markets in order to improve the Eurozone competitiveness create new jobs and render recovery sustainable. Economic recovery has led to job creation taking the Eurozone unemployment rate down to 10.0% in 2016. According to the European Commission forecasts (Winter 2017 Economic Forecast), the unemployment rate is expected to further decline to 9.6% in 2017 and 9.1% in 2018.
The banking system of the Eurozone demonstrates resilience, according to the EU-wide stress test results in July 2016. The exercise stress test conducted by the European Banking Authority (EBA), in cooperation with the ECB on a sample of 51 banks showed that the weighted average common equity ratio (CET1) increased compared with 2014, both under the normal (July 2016: 13.0%, 2014: 11.2%), and under the unfavourable scenario (July 2016: 9.1%, 2014: 8.6%). However, Monte dei Paschi di Siena which bears a significant volume of non-performing loans was shown to have a weak financial position and has resorted to state resources for its rescue, since it failed to attract private funds.
In Southeastern Europe, Cyprus exited in 2016 the Economic Adjustment Programme and successfully returned to international capital markets. Private consumption was boosted by the decline in consumer prices and the fall in the unemployment rate, that resulted from economic recovery during the last years. Economic growth stood at 2.8% in 2016 (European Commission, Winter 2017 Economic Forecast) from 1.7% in 2015 due to the increase in private consumption and tourism. In 2017 and 2018, growth is forecast to fall to 2.5% and 2.3% respectively.
In Romania, economic growth rate in 2016 was one of the highest among the European Union countries, based mainly on domestic demand that was boosted by tax cuts, wage increases and low interest rates. GDP growth increased to 4.9% in 2016 from 3.9% in 2015 and decelerate to 4.4% in 2017 and to 3.7% in 2018 (European Commission, Winter 2017 Economic Forecast).
Analysis of Group financial information
On 31.12.2016 the total assets amounted to 64.9 billion. This amount decreased by 4.4 billion or 6.3% compared to 31.12.2015. At the end of December 2016, the total Group loans, before impairment, amounted to 57 billion, decreased by 1.2 billion compared to 31.12.2015 (58.2 billion), mainly due to the loans accounting write-offs and to the classification of Alpha Bank Srbija A.D. as "Asset Held for Sale". The loans' balance after accumulated impairment amounts to 44.4 billion compared to 46.2 billion on 31.12.2015.
The total deposits of the Group amounted to 32.9 billion, showing an increase compared to 31.12.2015 by 4.8%, resulting to a loans (before impairment) to deposits ratio of 173%. This ratio was improved compared to 31.12.2015, when it was 185%, as a result of the gradual deposit inflow during the year. The increase of the deposits and the sale of the bonds issued by the European Financial Stability Facility, through the Public Sector Purchase Programme (PSPP), led to the decrease of the Group's funding from credit institutions (mainly the Eurosystem), which amounted to 19.1 billion, decreased by 23.9% compared to 31.12.2015.
Assets held for Sale and Liabilities related to Assets held for Sale, include the figures of the subsidiaries Alpha Bank Srbija A.D. and APE Fixed Assets A.E., as well as the figures of the joint ventures APE Commercial Property A.E. and APE Investment Property A.E. after the decision making for starting the sales process. In addition, during the year, the Bank proceeded with the sale of the operations of the Branch in Bulgaria, of Alpha Bank A.D. Skopje and of Ionian Hotel Enterprises A.E, that had been classified as "Assets Held for Sale".
On 31.12.2016 the Group's equity amounted to 9.1 billion, remaining unchanged compared to 31.12.2015, while the Common Equity Tier 1 ratio amounted to 17.1%.
Analyzing the financial performance of the year, the net interest income amounted to 1,924.1 million, compared to 1,897.5 million of the year 2015, positively affected by the voluntary exchange of bonds with shares in the context of the Liability Management Exercise (LME) that took place in November 2015, the decrease in the nominal value of the guarantees issued by the Greek State (Law 3723/2008) and the decrease of the exposure to the Emergency Liquidity Assistance (ELA).
Net fee and commission income amounted to 317.9 million increasing by 3% compared to the previous year, when amounted to 308.6 million. This increase was a result of the cancellation of the bonds issued by the Greek Government (Pillar III), which burdened the commission expenses until October 2015, and the credit card commission income increase due to the increase in the volume of transactions.
Gains less losses on financial transactions recorded a profit of 84.9 million, reflecting the gains from the sale of the bonds issued by the European Financial Stability Facility and the acquisition of the shares of Visa Europe from Visa Inc., which were partially offset from the impairment/sale losses of the Group's companies.
The Group's total revenue amounted to 2,387.1 million, increased by 7.5% compared to 2015 when amounted to 2,220.9 million.
The Group's total expenses amounted to 1,225.5 million, reduced by 3.3% compared to 2015 when amounted to 1,266.9 million. More specifically, during the first quarter of 2016 Alpha Bank Cyprus Ltd launched a staff voluntary redundancy scheme, which cost amounted to 31.7 m. As a result, staff expense reduced in 2016, incorporating the respective benefit. The rest captions of expenses do not show significant variation in aggregate during 2016 in comparison with prior year. The expenses to revenue ratio, excluding the gains less losses on financial transactions and other nonrecurring expenses, reduced by 2% compared to the comparative year (31.12.2016: 48.2%, 31.12.2015: 50.2%).
The impairment losses and the provisions to cover credit risk amounted to 1,168 million compared to 2,988 million in the previous year, resulting to a cost of risk of 191 base points compared to 215 base points in 2015, excluding the effect of the Asset Quality Review (AQR) that conducted in the context of the Bank's overall evaluation from the Single Supervisory Mechanism (SSM).
Group's after tax result was a loss of 9.7 million while income tax for the Group is credit and amounts to 29.2 million. During the previous year, the income tax amounted to 806.8 million, significantly affected by the deferred tax effect due to the change of the tax rate from 26% to 29%.
Due to the above, after tax result from continuing operations amounted to profits of 19.5 million and the after tax result from discontinued operations amounted to profits of 22.8 million, resulting to profit after income tax for the Group of 42.3 million.
Other information
The Bank's Ordinary General Meeting of the Shareholders on 30.6.2016 decided the non distribution of dividend to the common shareholders.
Bank's branches as at 31.12.2016 were 518, out of which 517 established in Greece and 1 established in United Kingdom (London).
Risk Management
The Group has established a framework of thorough and discreet management of all kinds of risks facing on the best supervisory practices and which is based on the common European legislation and the current system of common banking rules, principles and standards is improving continuously over the time in order to be applied in a coherent and effective way in a daily conduct of the Bank's activities within and across the borders making effective the corporate governance of the Bank.
The main objective of the Group during 2016 was to maintain the high quality internal corporate governance and compliance within the regulatory and supervisory provisions risk management in order to ensure the confidence in the conduct of its business activities through sound provision of suitable financial services.
Since November 2014, the Group falls within the Single Supervisory Mechanism (SSM) - the new financial supervision system which involves the European Central Bank (ECB) and the Bank of Greece - and as a major banking institution is directly supervised by the European Central Bank (ECB). The Single Supervisory Mechanism is working with the European Banking Authority (EBA), the European Parliament, the Eurogroup, the European Commission and the European Systemic Risk Board (ESRB) within their respective competences.
Moreover, since January 1st, 2014, EU Directive 2013/36/EU of the European Parliament and of the Council dated June 26, 2013 along with the EU Regulation 575/2013/EU dated June 26, 2013 ("CRD IV") are effective. The Directive and the Regulation gradually introduce the new capital adequacy framework (Basel III) of credit institutions.
In this new regulatory and supervisory risk management framework, Alpha Bank Group strengths its internal governance and its risk management strategy and redefining its business model in order to achieve full compliance within the increased regulatory requirements and the extensive guidelines. The latest ones are related to the governance of data risks, the collection of such data and their integration in the required reports of the management and supervisory authorities.
The Group's new approach constitutes of a solid foundation for the continuous redefinition of Risk Management strategy through (a) the determination of the extent to which the Bank is willing to undertake risks (risk appetite), (b) the assessment of potential impacts of activities in the development strategy by defining the risk management limits, so that the relevant decisions to combine the anticipated profitability with the potential losses and (c) the development of appropriate monitoring procedures for the implementation of this strategy through a mechanism which allocates the risk management responsibilities between the Bank units.
More specifically, the Group taking into account the nature, the scale and the complexity of its activities and risk profile, develops a risk management strategy based on the following three lines of defense, which are the key factors for its efficient operation:
Development Units of banking and trading arrangements (host functions and handling customer requests, promotion and marketing of banking products to the public (credits, deposit products and investment facilities), and generally conduct transactions (front line)), which are functionally separated from the requests approval units, confirmation, accounting and settlement.
They constitute the first line of defense and 'ownership' of risk, which recognizes and manages risks that will arise in the course of banking business.
Management and control risk and regulatory compliance Units, which are separated between themselves and also from the first line of defense.
They constitute the second line of defense and their function is complementary in conducting banking business of the first line of defense in order to ensure the objectivity in decision-making process, to measure the effectiveness of these decisions in terms of risk conditions and to comply with the existing legislative and institutional framework, by involving the internal regulations and ethical standards as well as the total view and evaluation of the total exposure of the Bank and the Group to risk.
Internal audit Units, which are separated from the first and second line of defense.
They constitute the third line of defense, which through the audit mechanisms and procedures cover an ongoing basis of all operation of the Bank and the Group. They ensure the consistent implementation of the business strategy, by involving the risk management strategy through the true and fair implementation of the internal policies and procedures and they contribute to the efficient and secure operation.
Credit Risk
Credit risk arises from the potential weakness of borrowers' or counterparties' to repay their debts as they arise from their loan obligations to the Group.
The primary objective of the Group's strategy for the credit risk management in order to achieve the maximization of the adjusted relative to the performance risk is the continuous, timely and systematic monitoring of the loan portfolio and the maintenance of the credit risks within the framework of acceptable overall risk limits. At the same time, the conduct of daily business within a clearly defined framework of granting credit is ensured.
The framework of the Group's credit risk management is developed based on a series of credit policy procedures, systems and measurement models by monitoring and auditing models of credit risk which are subject to an ongoing review process. This happens in order to ensure full compliance with the new institutional and regulatory framework as well as the international best practices and their adaptation to the requirements of respective economic conditions and to the nature and extent of the Group's business.
The indicative actions below represent the development and improvement that occurred in 2016 with respect to the aforementioned framework:
Ongoing upgrade of Wholesale and Retail Banking Credit Policies in Greece and on abroad in order to be adapted in the given macroeconomic and financial conditions of the Group's risk profile as well as in the acceptable maximum risk appetite limits totally for each kind of risk.
Ongoing update of the credit rating models for corporate and retail banking in Greece and on abroad in order to ensure their proper and effective operation.
Update of the impairment policy for Wholesale and Retail Banking.
Update of Wholesale and Retail Banking Forbearance Policies, taking into consideration the Alpha Bank Group's NPE Business Plan for the reduction of the NPL/NPE stock.
Establishment of Environmental and Social Risk Policy. During the credit approval process, supplementary to the credit risk assessment, the strict compliance of the principles of an environmentally and socially responsible credit facility is also examined. The main purpose is the management of potentially arising risk from the operations of obligors that may be connected with damage to the environment or the society or with any direct threat of such a damage having as a result a negative impact on the business operations and financial results of the Bank.
Centralized and automated approval process for retail banking applications in Greece and abroad.
Complete centralization of the collections policy mechanisms for retail banking (mortgage loans, consumer loans, credit cards, retail banking corporate loans) in Greece and abroad.
Systematic estimation and assessment of credit risk per counterparty and per sector of economic activity.
Periodic stress tests as a tool of assessment of consequences of various macroeconomic scenarios to establish the business strategy, the business decisions and the capital position of the Group. The stress tests are performed according to the requirements of the regulatory framework and they are fundamental parameters of the Group's credit risk management Policy.
Additionally, the following actions are in progress in order to enhance and develop the internal system of credit risk management:
Continuation of the preparation for the transition process for the Bank and the Group companies in Greece to the Advanced Method for the Calculation of Capital Requirements against Credit Risk. For the purpose of this transition, the Advanced Internal Ratings-Based Approach method will be used with regards to the corporate loan portfolios, retail banking, leasing and factoring.
Initiation of the preparation for the compliance to the International Financial Reporting Standards (IFRS 9) for the Bank and the Group companies, through the development of the necessary infrastructure and Credit Risk Models.
Continuous upgrade of databases for performing statistical tests in the Group's credit risk rating models.
Upgrade and automation of the aforementioned process in relation to the Wholesale and Retail banking by using specialized statistical software.
Gradual implementation of an automatic interface of the credit risk rating systems with the central systems (core banking systems I-flex) for all Group companies abroad.
Reinforcing the completeness and quality control mechanism of crucial fields of Wholesale and Retail Credit for monitoring, measuring and controlling of the credit risk.
Determining a specific framework for the management of overdue and non-performing loans, in addition to the existing obligations, which arise from the Commission Implementing Regulation 2015/227 of January 9, 2015 of the European Committee for amending Executive Committee Act (EU) No. 680/2014 of the Committee for establishing executive technical standards regarding the submission of supervisory reports by institutions in accordance with the regulation (EU) No. 575/2013 of the European Parliament and the Council and Executive Committee Act of Bank of Greece, P.E.E. 42/30.5.2014 and the amendment of this with the Executive Committee Act of Bank of Greece, P.E.E. 47/9.2.2015 and P.E.E. 102/30.08.2016, which define the framework of supervisory commitments for the management of overdue and non-performing loans from credit institutions.
This framework develops based on the following pillars:
a. the establishment of an independent operation management for the "Troubled assets" (Troubled Asset Committee). This is achieved by the representation of the Administrative Bodies in the Evaluation and Monitoring of Denounced Customers Committee as well as in the Arrears Councils,
b. the establishment of a separate management strategy for these loans, and
c. the improvement of IT systems and processes in order to comply with the required periodic reporting to management and supervisory mechanisms.
Liquidity and interest rate risk of banking portfolio
During 2016 capital controls in the Greek banking system, which were imposed for the first time in June 29th, 2015, remains (even though slightly relaxed) resulting to the reduction of capital sources from the banking system. The deposit gathering campaigns during the year by offering new improved products has led to an increase of customer deposits both at a Bank and Group level by the end of the year. Thus, on 31.12.2016 the deposits of the Bank increased by 4.6% compared to 31.12.2015 and the deposits of the Group increased by 4.8%.
On June 29, 2016 the ECB re-issued a waiver for Greek Government Debt to be used as collateral for ECB funding, providing cheaper funding. Alpha Bank pledged 2.4 billion face value of Greek Government Bonds and 1.1 billion of Greek Government Tbills to the ECB, with a subsequent reduction of the ELA collateral. The corresponding cash value of the collaterals was 1.8 billion and it was used to repay ELA funding.
In 2016 the Bank paid off and did not renew bonds issued with the guarantee of the Greek Government of an amount 8.2 billion. This specific source of funding (Pillar II) on 31.12.2016 amounted to 1 billion.
In December, Bank successfully completed an SME securitisation transaction, achieving medium term funding of Euro 320 million, by placing Senior Notes to the European Investment Bank, the European Bank for Reconstruction and Development (EBRD) and an International Investment Bank. In addition, Alpha Bank was one of the Greek systemic banks to sign an agreement with the European Investment Bank for the support of SMEs and MidCaps. Both developments confirm market's trust to the Bank and its business portfolio.
As a result from the above developments on 31.12.2016 Bank's financing from the Eurosystem decreased by 25% reaching the level of 18.3 billions, of which 13.1 billion came from the emergency funding mechanism of Bank of Greece (ELA). Need to be mentioned that during 2016, the ECB Governing Council decreased significantly the amount of Emergency Liquidity Assistance (ELA) to the greek banking sector by 25.1 billion, from 70.8 billion to 50.7 billion.
Under the new requirements of the Regulatory Environment (Basel III) for liquidity, the stability, cost and the diversification of liquidity sources are systematically monitored. During 2016, Liquidity Coverage Ratio has been submitted on a monthly basis. Relatively, the Net Stable Funding Ratio was calculated for internal purposes on a monthly basis and it will be in force for regulatory purposes in 2018 The detailed conditions for both liquidity and the analysis of financing sources and the effects of regulatory interest rate crisis scenarios on Group's profitability are given on a quarterly basis in the Single Supervisory Mechanism (SSM). Additionally, starting from April 2016 the Bank submits to the Single Supervisory Mechanism (SSM) monthly reports for the additional liquidity monitoring metrics.
During 2016, Bank has renewed the policies and procedures of the Recovery Plan along with the scenarios for the liquidity stress tests. At the same time the Bank Subsidiaries have reviewed both Contingency Funding Plans and Recovery Plans.
The continuous update of the Assets and Liabilities Management (ALM) system, in which all Bank's reports are based, is essential for the evolution and the development of the product mix of the Bank, by taking into account the current structure of competition and the economic conditions. In particular, the audit and the finalization of the conventions of repricing and of movement of non-maturing assets-liabilities are parts of the efficient and the effective management of asset liability risk. It has to be noted that at the end of 2016, in accordance with the new directions of the European Banking Authority, a review of all applicable assumptions has been completed as a part of the annual update of the applied assumptions.
The interbank financing (short, medium to long-term) and the Early Warning Indicators of the Bank and of Group's subsidiaries and foreign branches are monitored on a daily basis with reports and checks in order to capture daily variations.
Due to the criticality of the Greek economy, stress tests are incurred frequently for liquidity purposes in order to assess potential outflows (contractual or contingent). The purpose of this process is to determine the level of the immediate liquidity which is available in order to cover the Bank's needs. These exercises are carried out in accordance with the approved Liquidity Buffer and Liquidity Stress Scenario of Group's policy.
Moreover, the stress tests are implemented for interest rate risk purposes of the Banking Portfolio in order to estimate the volatility of the net interest income of the banking portfolio and the value of the customer loans and deposits.
Market, Counterparty and Foreign Currency Risk
The Group has developed a strong control envirnonment applyingpolicies and procedures in accordance with the regulatory framework and the international best practices in order to meet business needs incurring market and counterparty risk while limiting adverse impact on results and equity. The framework of methodologies and systems for the effective management of those risks is evolving on a continuous basis in accordance with the changing circumstances in the markets and in order to meet customer requirements.
The valuation of bonds and derivative positions are monitored on an ongoing basis. Each new position is examined for its characteristics and an appropriate valuation methodology is developed, in case it is required. On a regular basis stress tests are conducted in order to assess the impact on the results and the equity, in the markets where the Group operates.
A detailed structure for trading limits, investment limits and counterparty limits have been adopted and implemented. This structure involves regular monitoring of trigger events in order to perform extra revisions. The limit usage is monitored on an ongoing basis and any limit breaches identified are reported officially.
For the mitigation of the market risk of the banking portfolio, hedging relationships are applied using derivatives and hedge effectiveness is tested on a regular basis.
During 2016, interbank credit lines were largely restored and foreign currency financing operations were resumed. In capital markets high volatility was experienced in Greek Government Bonds that registered an increase in fair value on an annual basis.
With respect to the market risk internal model the Bank participated in the Targeted Review of Internal Models (TRIM), a project launched by the European Central Bank with a view to fostering greater consistency and accuracy in the use of internal models within the Single Supervisory Mechanism. Furthermore, the Bank participated in the Benchmarking Exercise with respect to the market risk internal model, providing valuation and risk analysis to the Bank of Greece and the European Central Bank for specific benchmarking portfolios as specified by the European Banking Authority, in order for the competent authorities to assess the internal approaches that they have permitted institutions to use for the purpose of calculating risk weighted exposure amounts and own fund requirements. Moreover, the Bank implemented the calculation methodology in order to quantify the overall capital requirements according to the revised market risk framework (Minimum Capital Requirements for Market Risk - Fundamental Review of the Trading Book) and reported such calculations to the Bank of Greece and the European Central Bank, in the scope of participating in the Basel III monitoring exercise of the Basel Committee on Banking Supervision
Operational Risk
In the context of the continuous improvement in the implementation of the operational risk management framework, the Bank proceeded rigorously to the expansion of preventive measures in order to identify and evaluate risk as well as, the enhancement of the process of collecting and analyzing operational risk events.
Specifically, the RCSA method of operational risk self-assessment has been implemented during the year in accordance with the general plan for the Bank and Group Companies. It is noted that this method provides the recognition and assessment of potential operational risks through the implementation of audits (residual risks). Further to the above the respective divisions proceed with the appropriate actions in order to mitigate the potential negative impacts. In addition, a process for the monthly production, assessment and monitoring of Key Risk Indicators (KRIs) regarding the Bank's Branches and selected Divisions of the Bank, has been initiated.
Moreover, several projects are in progress for the improvement of the Operational Risk Management Framework, the implementation of Advanced Techniques in Operational Risk Measurement as well as for the creation of a framework regarding the management of specific Operational Risk sub-categories as highlighted by recent guidelines issued by the European Banking Authority.
The operational risk events, the risk and control self-assessment results as well as, other operational risk issues are systematically monitored by the Bank and the Group Companies by the competent Operational Risk Management Committees which review the relevant information and ensure the implementation of Operational Risk mitigation measures.
Management Non Performing Loans (NPLs)
As a result of the sustained downturn of the Greek economy, where GDP has declined by more than 30% since 2009, the quality of the Bank's loan book has deteriorated, and the Bank experienced increased NPLs across all business segments. However, in a very challenging economic environment, the Bank is constantly reviewing and adjusting its strategy for the management of NPLs.
During the past two years, the Bank has undertaken a major overhaul of its NPE Management infrastructure and Strategy, leveraging, among others, recommendations of the Bank of Greece Troubled Asset Review as well as provisions in the Bank of Greece Executive Committee Act 42/47.
On September 30, 2016 the Bank submitted to the SSM the NPE/NPL targets along with the NPE Strategy Explanatory Note and the relevant Action Plan, depicting the Bank's full commitment towards the active Management and reduction of NPEs over the Business Plan period 2016-2019.
The development and launch of targeted long-term arrangements represents a significant shift from the past, where the focus was more on short-term arrangements. In addition, efforts for the increased collectability and improved collateral levels remain a key aspect of the Bank's strategy.
At the same time key operating indicators were adjusted and updated accordingly:
Organizational restructuring: Major reengineering aiming at creating and developing appropriate and independent management structures, which in tandem with improvements in the overall governance structure, provide increased control over governance, as well as the implementation of evidence-based practices and policies regarding the management of past due portfolio.
Segmentation and Portfolio Analysis: clearly defined and detailed strategies are in progress, including a strict and well defined segmentation framework.
Flexible and upgraded modification products and final settlement solutions (for example out of court settlements).
Focused human resources management with specialised teams and targeted training.
Significant IT investment and automated decision-making tools (for example NPV calculators).
These operational changes have been combined with major, recent strategic components, in particular:
Joint Venture with Retail NPL Servicer (which is a specialized provider of loan services). This action will allow the Bank to manage more effectively the portfolio of the non-performing loans.
Cooperation with KKR Credit and Pillarstone on the management of selected large corporate NPL exposures (jointly with Eurobank) in order to optimize their value and improve their recoverability.
Loss Budget allocation framework: the Bank, in collaboration with an international consultant, has formulated a granular loss budget allocation framework to facilitate the implementation of its strategy for the restructuring of the portfolio of non-performing loans. This framework provides for:
- Loss allocation into sub-portfolios in order to achieve better non-performing loans management objectives.
- Control and monitoring of key performance indicators of the Bank's NPLs management strategy.
- Identification of the most suitable resolution strategies per segment.
Property Repossession Strategy (REO): Evaluation of the existing Property Repossession strategy in order to determine the best way to maximize their value for the Bank in the current economic environment.
Some of the above initiatives are already in place, while others have been already developed and implemented over the past months.
Furthermore, these strategic initiatives and the execution of the resolution strategy will benefit from a number of changes in the Greek legislative landscape and economic environment, including:
Structural reforms: The structural reforms as part of the third bailout package will benefit the Bank's ability to execute their resolution strategy, in particular the state-wide Juridical System Reform, the new Civil Procedure Code, an expansion of the loan servicing industry, removal or alleviation of the residential real estate moratorium.
Improved macroeconomic environment forecast: The estimated improvement of the Greek economy, in conjunction with the eventual lifting of capital controls, is expected to improve the ability of borrowers to respect their repayment schedules. It is also expected that they will enhance the reliability of the planned business projects, by enhancing the value of the existing collaterals.
Administrative Structure Division - Arrears Management
Having realized the strategic need to focus on NPL management, the Bank has embarked on an effort to streamline the monitoring functions and the management of past due exposures. Dedicated teams have been established within the Bank to monitor the evolution of a wide range of NPL-related strategies and metrics within the Bank's pre-defined NPL Strategy.
Organizational Structure and Corporate Governance
Since 2009 discrete units for the management of Retail and Wholesale NPLs have been established and they are key pillars for the Bank. These independent Units report directly to the Bank CEO through the Heads of each division. Moreover, they are responsible for all the areas which are related to the loan management - such as monitoring the portfolio and the front line services. Through those Units, the Bank has achieved the segregation of arrears management, from the Relationship Management and the Approval Authorities, by combining automated and mass procedures for portfolio's low-risk segments and a case by case management of the portfolio's more complex and higher-risk segments.
Furthermore, the establishment of the Troubled Assets Committee (TAC) has also contributed to the strategic alignment of the Retail & Wholesale NPL strategy
Exposure management of arrears strategy
The reduction of the Wholesale/Retail NPE & NPL stock, taking into consideration the new flows for the period 2016-2019, is driven by targeted resolution actions to specific segments of the Wholesale/Retail portfolio. These actions are envisaged to deliver comprehensive NPE resolution to a broad range of portfolio segments.
Targeted loss mitigation approaches and a broad range of loan modification offerings, primarily skewed towards long-term solutions, are designed to accommodate a wide variety of financial difficulties faced by borrowers and to deliver sustainable and affordable solutions.
In order to successfully implement the aforementioned strategy, the Bank aims to transform its NPL operating model by addressing the following operational areas: (i) execution strategy, (ii) organizational structure, (iii) systems, tools and processes, and (iv) Joint Ventures (e.g. Retail NPL Servicing Platform & KKR/Pillarstone) and (v) distressed asset sales, as also referred to in the Bank's Action Plan submitted to SSM in conjunction with the NPE Strategy.
Prospects
The future performance of the Bank will also be a function, among other parameters, of the developments in the Greek economy, as these will largely define the potential for positive developments in terms of the management of non-performing exposures and the restoration of a healthy liquidity profile for the Bank.
2017 is considered a turning point for the Greek economy, which is expected to return in positive growth rate. The drivers of the economy are expected to be the fixed capital formation, the exports of goods and services and to a lesser extent private consumption.
However, the international environment seems particularly unstable and is expected to be determined by the following parameters:
First, the successive critical elections in some European countries along with the rise of Euroscepticism. Second, the weakening of the economy in the urozone from 1.7% growth rate in 2016 to 1.6% in 2017, with significant deviations among countries. Third, the evolution of the refugee flows that may test the resilience of the respective agreements between the EU and Turkey. Fourth, the deterioration of security conditions and the spike of terrorism which increase uncertainty. Fifth, the geopolitical instability in the wider region (eg. the escalation of war in Syria and the attempt of a military coup in Turkey). Finally, the process of setting the new European landscape, as the EU-U negotiations evolve in the post-Brexit era.
Concerning Greece, the completion of the second review of the programme, the commitment regarding the medium-term debt relief measures and subsequently the inclusion of Greek State bonds in the ECB's quantitative easing programme, are the catalysts for investment pick-up in 2017 and job creation that will have a multiple effect on consumer spending in the following years.
Delays in the realization of the above developments may endanger not only the strengthening of the economic recovery but also the possibility to reach the fiscal targets. On the contrary, the above sequence of events paves the way for an essential improvement of the indicators that reflect restoration of confidence, such as the improvement of the investment climate, the fall of the Greek and German bonds spread, the lift of capital controls and ultimately the access of the economy to the international markets.
Related parties
According to the corresponding regulatory framework, this report must include the main transactions with related parties. All the transactions between related parties, the Bank and the Group companies, are performed in the ordinary course of business, conducted according to market conditions and are authorized by corresponding management personnel. There are no other material transactions between related parties beyond those described in the following paragraph.
a. The outstanding balances of the Group transactions
with key management personnel which is composed by members of the Board of Directors and the Executive Committee of the Bank, as well as their close family members and the companies relating to them, as well as the corresponding results from those transactions are as follows:Amounts in thousand of Euro
Loans and advances to customers
916
Due to customers
12,302
Employee defined benefit obligations
260
Letters of guarantee and approved limits
1,500
Interest and similar income
79
Fee and commission income
76
Interest expense and similar charges
47
Fees paid to key management and close family members
3,647
b. The outstanding balances and the corresponding results of the most significant transactions of the Bank with Group companies are as follows:
. subsidiaries
Amounts in thousand of Euro
Name
Assets
Liabilities
Income
Expenses
Letters of guarantee and other guarantees
Banks
1. Alpha Bank London Ltd
15,256
1,062
5,410
822
2. Alpha Bank Cyprus Ltd
119,462
233,656
1,313
101
58,292
3. Alpha Bank Romania S.A.
1,139,860
80,739
2,494
2,715
326,788
4. Alpha Bank AD Skopje
36
5. Alpha Bank Srbija A.D.
94,370
16,516
1,842
226
8,083
6. Alpha Bank Albania SH.A.
20,299
27,995
281
351
Leasing
1. Alpha Leasing A.E.
182,777
384
4,684
143
2. ABC Factors A.E.
402,516
71
51,470
1
39,463
Investment Banking
1. Alpha Finance A.E.P...
122
11,884
862
606
56
2. SSIF Alpha Finance Romania S.A.
13
3. Alpha .. Investment Holdings
35,738
7
266
4. Alpha A.E. Ventures Capital Management - S
2,193
27
15
5. Emporiki Ventures Capital Developed Markets Ltd
6. Emporiki Ventures Capital Emerging Markets Ltd
394
Asset Management
1. Alpha Asset Management ..D...
2,667
33,460
18,909
336
Insurance
1. Alpha Insurance Agents ..
2,186
4,990
32
2. Alphalife A.A.E.Z.
151
6,801
13,218
1,789
Real estate and hotel
1. Alpha Astika Akinita ..
341
59,254
974
9,326
2. Ionian Hotel Enterprises ..
1,677
200
3. Oceanos .....
5,129
24
4. Emporiki Development and Real Estate ..
29,031
18,137
402
5. Alpha Real Estate Bulgaria E.O.O.D.
6. Chardash Trading E.O.O.D.
290
7. Alpha Investment Property Chalandriou ..
17,451
737
354
8
8. Alpha Investment Property Attikis ..
6,214
7
169
9. Alpha Investment Property Attikis II ..
38,647
247
189
1
10. Alpha Investment Property Amaroussion ..
1,530
18,994
25
8
11. Alpha Investment Property Amaroussion ..
478
63
8
5
12. Stockfort Ltd
23,629
3
450
13. AGI-RRE Zeus S.R.L.
32,988
659
14. AGI-RRE Poseidon S.R.L.
13,137
262
15. AGI-BRE Participations 1 E.O.O.D.
4,715
92
16. AGI-BRE Participations 2 E.O.O.D.
8,956
182
17. AGI-BRE Participations 2BG E.O.O.D.
7,611
91
a. Subsidiaries
Amounts in thousand of Euro
Name
Assets
Liabilities
Income
Expenses
Letters of guarantee and other guarantees
Real estate and hotel
18. AGI-BRE Participations 3 E.O.O.D.
19,702
337
19. AGI-BRE Participations 4 E.O.O.D.
16,182
15,937
20. APE Fixed Assets ..
9
21. HT-1 E.O.O.D.
434
9
22. SC Carmel Residential SRL
14,463
244
23. AGI-RRE Cleopatra S.R.L.
12,558
222
24. AGI-RRE Hera S.R.L.
10,710
250
25. Alpha Investment Property Neas Kifisias ..
3,361
388
55
26. Alpha Investment Property Kallirois ..
588
757
10
27. Alpha Investment Property Livadias ..
4,483
366
160
28. Asmita Gardens S.R.L.
29. Alpha Investment Property Kefalariou ..
11
30. Ashtrom Residents S.R.L.
17,466
295
31. AGI-BRE Participations 5 E.O.O.D.
32. Cubic Center Development S.A.
33,640
637
33. Alpha Investment Property Neas Erythreas ..
10,133
1,400
169
1
34. Anaplasis Plagias ..
24,078
10,118
1,480
35. Alpha Real Estate Services S.R.L.
9
Special purpose and holding entities
1. Alpha Credit Group Plc
8,880
2. Alpha Group Jersey Ltd
21
15,277
15,542
3. Alpha Group Investments Ltd
88,420
4. Ionian Holdings ..
340,003
56,034
2,420
5. Ionian Equity Participations Ltd
5,152
6. Emporiki Group Finance Plc
1,256
7. AGI-RRE Participations 1 Ltd
935
8. Alpha Group Ltd
15,589
325,002
36
9. Katanalotika Plc
1,196
10. Epihiro Plc
1,248
11. Irida Plc
361,600
118,061
251
12. Pisti 2010-1 Plc
142
13. Alpha Shipping Finance Ltd
5
229,622
4,859
12,989
14. Umera Ltd
419,884
21,763
1,535
78
4,258
15. AGI-RRE Poseidon Ltd
35,032
594
16. AGI-BRE Participations 4 Ltd
3,334
102
17. AGI-RRE Artemis Ltd
1,747
34
18. Zerelda Ltd
998
19. AGI-Cypre Ermis Ltd
1,757,868
111,551
27,808
184
308,786
20. AGI-SRE Ariadni DOO
21,724
18,780
21. AGI-CYPRE ALAMINOS LTD
8,445
89
22. AGI-CYPRE TOCHINI LTD
1,300
13
23. AGI-CYPRE MAZOTOS LTD
7,486
76
24. Alpha Proodos DAC
289,262
153
Other
1.Kafe Alpha A.E.
227
17
283
2. Alpha Supporting Service ..
270
31,641
561
6,894
3. Real Car Rental A.E.
31
4. Evisak ..
735
1
5
5. Emporiki Management ..
15
1,956
50
14
6. Alpha Bank Notification Services ..
11
717
20
621
. JOINT VENTURES
1. APE Commercial Property ..
13,684
1
108
2. APE Investment Property ..
151,738
6,642
4,960
34
3. Alpha ...S.
390
4. Rosequeens Properties SRL
23,397
990
5. Aktua Hellas Holdings S.A.
6
835
5
C. ASSOCIATES
Amounts in thousand of Euro
Name
Assets
Liabilities
Income
Expenses
Letters of guarantee and other guarantees
1. DP Thessalias and Stereas Ellados
299
2. Banking Information Systems ..
299
3. Olganos ..
3,044
9
4. Alpha Investment Property Eleona ..
51,196
326
420
Total
5,150,294
1,901,484
556,111
40,674
780,870
c. Other related party transactions
The outstanding balances and the corresponding results are analyzed as follows:
(Amounts in thousand of Euro)
Assets
Liabilities
Income
Expenses
Employees Supplementary Funds - TAP
296
18
Hellenic Financial Stability Fund - HFSF
10
CORPORATE RESPONSIBILITY - NON-FINANCIAL REPORT
Alpha Bank Corporate Responsibility Policy
With a view to ensuring its sustainable development, Alpha Bank is committed to operating responsibly, taking into account of the economic, social and environmental parameters of its operation, both in Greece and in the other countries where it is present. To this end, it promotes communication and cooperation with all its Stakeholders.
In order to enhance social responsibility and integrate it into the Group's principles and values in the best possible way, Alpha Bank applies the law and aligns its activity with internationally recognised guidelines, principles and initiatives on sustainable development, such as the OECD Guidelines on Responsible Business Conduct, the Principal Conventions of the International Labour Organisation (ILO), and the United Nations' Universal Declaration of Human Rights (UDHR).
Alpha Bank's organisation and operation follow the best banking and business practices. They are governed by principles such as integrity and honesty, impartiality and independence, confidentiality and discretion, in line with the Bank's Code of Ethics and the principles of Corporate Governance. Particular significance is attached to the identification, measurement and management of the undertaken risk, to the compliance with the applicable legal and regulatory frameworks, to transparency and to the provision of full, accurate and truthful information to the Bank's Stakeholders.
The Bank's primary goals are credibility, reliability and efficiency in banking services. Its key concerns are to continuously improve the products and services it offers and to ensure that its Customers' banking needs are addressed in a modern and responsible manner. It examines and incorporates non-financial criteria (on issues related to the environment, society and corporate governance) in its financing procedures, as well as in developing and placing new products and services on the market.
Alpha Bank is responding with increased awareness to matters concerning the protection of the environment and the conservation of natural resources and is committed to addressing the direct and indirect impacts of its activities on the environment.
Alpha Bank implements responsible policies with regard to its Human Resources. In particular, the Bank:
Respects and defends the diversity of its Employees (age, gender, ethnic origin, religion, disability/special capabilities, sexual orientation etc.).
Ensures top-quality working conditions and opportunities for advancement based on merit and equitable treatment, free of discrimination.
Offers fair remuneration, based on contracts which are in agreement with the corresponding national labour market and ensure compliance with the respective national regulations on minimum pay, working hours and the granting of leave.
Defends human rights, recognises the right to union membership and to collective bargaining, and opposes all forms of child, forced or compulsory labour.
Treats all Employees with respect.
Provides Employees with continuous education and training.
Ensures the health and safety of Employees at the workplace, and helps them balance their professional and personal life.
The Bank's activities are directly linked to the society and the citizens. Therefore, Alpha Bank seeks to contribute to the efforts to support the society and the citizens, giving priority to culture, education, health and the protection of the environment.
The Bank applies the Corporate Social Responsibility principles across the entire range of its activities and seeks to ensure that its suppliers and partners also comply with the values and business principles that govern its operation.
Business Model
The business model of Alpha Bank aims to create value for its Stakeholders. Alpha Bank invests in its employees, in its network and infrastructures in order to develop and place on the market high quality services and products. It also works together with its Stakeholders in order to identify their requirements in a timely manner, to ensure its responsible operation and to support the society. Alpha Bank provides a healthy work environment, in which its employees broaden their knowledge and skills and contribute to the development of new products and services. Alpha Bank supports the Greek economy, enhances its electronic services, offers products and services with specific social and environmental, and also actively contributes to the society.
Codes and procedures
The Corporate Governance Code of Alpha Bank sets out the framework and the guidelines for the governance of the Bank and is revised by the Board of Directors. The Code also defines the duties and the allocation of responsibilities between the Board of Directors, the Board Committees, the Executive Committee and the other Committees of the Bank, and is published on the Bank's website.
Matters of Corporate Governance, as well as the management of matters concerning sustainability in general, are determined by the Board of Directors based on the recommendations submitted by the competent Divisions. The Code of Ethics describes the Bank's commitments and practices regarding its activities, its management, and the rules of conduct that apply to its Executives and Employees not only in their interactions with each other but also with business parties and with the Shareholders. The application of the Code of Ethics and of the principles of Corporate Governance, together with the operation of the Audit Committee, the Risk Management Committee, the Remuneration Committee and the Corporate Governance and Nominations Committee, have allowed Alpha Bank to enhance effectively the principles of integrity and transparency in its operations and to ensure optimal management of risk.
In line with Alpha Bank's firm and unwavering position against corruption, during 2016 the Market and Operational Risk Division and the Compliance Division examined, for yet another year, all cases which could represent a risk in connection with the Bank's efforts to combat corruption and bribery. Alpha Bank conducted audits of transactions and Customers for compliance with the regulatory framework, aiming at combating money laundering, financial crime and fraud, using the specialised control and reporting systems it has put in place and working closely with the competent Regulatory Authorities.
Alpha Bank has in place policies, procedures and management systems to ensure its compliance with the regulatory framework in force, its responsible operation and the continuous improvement of its performance. When required, relevant instructions are issued to the Bank's Branches, as well as to the Group Companies in Greece and abroad. In addition, employees attend corresponding training programmes.
Identification of Material Issues
Alpha Bank has identified and mapped the most important issues for its responsible operation (Materiality Analysis), taking into account the views of its Stakeholders.
Performance in 2016
The table below presents sample indicators on Alpha Bank's performance in 2016. Detailed information and additional performance indicators for the Bank, together with information on the corporate responsibility activities of the Group's subsidiaries, are presented in the Alpha Bank Corporate Responsibility Report 2016.
Indicators
Alpha Bank
Employees (total number)
8,543
Women employees (%)
54
Donations for social purposes
1.6 million
Increase in the use of e-statements* (%)
209
Convictions for corruption and bribery
-
----------------------------------------
* Calculated on the basis of the number of deposit and mortgage loan accounts, as well as of debit, credit and prepaid cards registered with the Alpha e-statements service.
Athens, 30March 2017
THE CHAIRMAN
OF THE BOARD OF DIRECTORS
VASILEIOS T. RAPANOS
ID. No 666242
Explanatory Report of the Board of Directors of
Alpha Bank for the year 2016
The present Explanatory Report of the Board of Directors of Alpha Bank (hereinafter the "Bank") to the Ordinary General Meeting of Shareholders of the Bank for the year 2016 contains detailed information, pursuant to the provision of article 4 par. 7 of Law 3556/2007, the reference date being 31.12.2016, in accordance with the order in which they are written in the provision in question.
In particular:
a. 1. On 1.1.2016 the share capital of the Bank stood at the total amount of Euro 461,064,360.00 divided into 1,536,881,200 common, nominal, voting, paperless shares, of a nominal value of Euro 0.30 each. Out of the said common, nominal, voting, paperless shares, 1,367,706,054 have been subscribed by Private Investors and 169,175,146 have been issued by the Bank and have been subscribed by the Hellenic Financial Stability Fund, pursuant to Law 3864/2010, governed by virtue of the terms thereof
2. On the dates of the sixth and seventh exercise processes for Titles Representing Share Ownership Rights (hereinafter Warrants), i.e. on 10.6.2016 and 12.12.2016 respectively, no Warrants were exercised.
Following the above-mentioned under 1 and 2, on 31.12.2016 the share capital of the Bank stood at the total amount of Euro 461,064,360.00 divided into 1,536,881,200 common, nominal, voting, paperless shares, of a nominal value of Euro 0.30 each. Out of the said common, nominal, voting, paperless shares, 1,367,706,054 have been subscribed by Private Investors and 169,175,146 have been issued by the Bank and have been subscribed by the Hellenic Financial Stability Fund, pursuant to Law 3864/2010, governed by virtue of the terms thereof.
All shares are listed for trading on the Securities Market of the Athens Exchange.
The 1,367,706,054 shares that have been subscribed by Private Investors represent 89% of the total paid-in share capital of the Bank and embody all the rights and obligations provided for in the law and the Bank's Articles of Incorporation.
The 169,175,146 shares that have been subscribed by the Hellenic Financial Stability Fund represent 11% of the total paid-in share capital of the Bank, they have the rights stipulated by law and are subject to the restrictions of the law. With regard to these shares, it is noted that the Hellenic Financial Stability Fund:
became a shareholder of the Bank, within 2013, in the context of the Recapitalisation of the Greek Credit Institutions, on the basis of Law 3864/2010, having, however, restricted voting rights at the General Meeting.
has issued, in accordance with Law 3864/2010 and Cabinet Act 38/2012, Warrants in order to offer the shares of the Bank it undertook to private investors. These Warrants may be exercised within the time periods referred to in the relevant legislation.
may vote at the General Meeting only on resolutions pertaining to the amendment of the Articles of Incorporation, including the increase or reduction of the share capital or the grant of a relevant authorisation to the Board of Directors, the merger, split-up, conversion, revival, extension of the term of operation or winding-up of the Bank, the transfer of assets, including the sale of Group Companies or on any other item for which an enhanced majority is required in accordance with the stipulations of Codified Law 2190/1920.
also possesses all the other rights stipulated by Law 3864/2010, as it is each time in force.
b. The Articles of Incorporation contain no restrictions on the transfer of Bank shares, save as otherwise provided for in the law.
c. From the Bank's records, on 31.12.2016 there are no qualified, direct or indirect, holdings within the meaning of Law 3556/2007, in its share capital, with the exception of the Hellenic Financial Stability Fund, which holds common shares representing 11% of the total paid-in share capital of the Bank.
d. There are no shares issued by the Bank possessing special rights of control, with the exception of the common shares held by the Hellenic Financial Stability Fund in reference to the rights that the Hellenic Financial Stability Fund enjoys by virtue of Law 3864/2010.
e. The Articles of Incorporation contain no restrictions on voting rights and the deadlines for exercising the same on shares issued by the Bank, save the restrictions foreseen in Law 3864/2010 with regard to the shares owned by the Hellenic Financial Stability Fund.
f. To the knowledge of the Bank, there are no shareholder agreements providing for restrictions on share transfers or restrictions on the exercise of voting rights on shares issued by the Bank save as otherwise provided for in the provisions of the laws stipulating the rights of the Hellenic Financial Stability Fund.
g. There are no rules in the Articles of Incorporation for the appointment and replacement of Members of the Board of Directors, as well as for the amendment of the Articles of Incorporation of the Bank, which are at variance with the stipulations of the law as in force.
h. The Bank may increase its share capital by virtue of a resolution of the General Meeting of Shareholders or of the Board of Directors, in accordance with the law and the Articles of Incorporation.
The General Meeting of Shareholders of 27.6.2014 renewed the validity of the authority (articles 13 par. 1 case (b) and 3a par. 3 item first of Codified Law 2190/1920) granted by the General Meeting to the Board of Directors of the Bank: (i) to increase the share capital of the Bank, through the issuance and distribution of new shares, the amount whereof shall be paid in cash and/or by contribution in kind, and (ii) to issue a bond loan convertible into shares issued by the Bank.
For as long as the Bank participates in the programmes for the enhancement of the economy's liquidity as per Law 3723/2008, the Bank may not purchase its own shares (article 28 par. 2 of Law 3756/2009).
Additionally, for as long as the Hellenic Financial Stability Fund participates in the share capital of the Bank, the latter may not purchase its own shares without the former's approval.
The Bank does not hold any of its own shares.
i. The Bank has entered into no major agreement, which comes into effect, is amended or expires upon a change of control of the Bank following a public tender offer.
j. The Bank has entered into no agreement with Members of the Board of Directors or the staff, providing for compensation upon their resignation or dismissal without just cause, or upon termination of tenure/employment, owing to a public tender offer, except in accordance with the provisions of the law.
Corporate Governance Report for the year 2016
Pursuant to the provision of article 43bb of Codified Law 2190/1920, the Annual Management Report of the Board of Directors of Alpha Bank (hereinafter the "Bank") includes the Corporate Governance Report for the year 2016. The reference date of the Corporate Governance Report is 31.12.2016.
Specifically, the required information is listed below:
a. The Bank operates within the framework of the Alpha Bank Corporate Governance Code, which is posted on the Bank's website (http://www.alpha.gr/page/default.asp?id=120&la=2).
b. Effective Corporate Governance is not determined by a fixed programme, but rather by a continuous effort to integrate parameters proposed each time, in conjunction with the ever increasing requirements of the institutional framework and expectations of society. The proper corporate structure, the appropriate institutional framework and its implementation are prerequisites for successful Corporate Governance, which promotes the recognition and reputation of the company.
The Corporate Governance practices, which are implemented by the Bank, are in accordance with the requirements of the relevant legal, supervisory and regulatory frameworks as well as with the international best practices in Corporate Governance and aim at the increase of the long-term value of the Bank, taking into consideration the interests of the Shareholders, those transacting with the Bank, Employees and other Stakeholders.
The said practices are quoted in the Alpha Bank Corporate Governance Code, which sets the framework and guidelines for the governance of the Bank and is reviewed by the Board of Directors.
The Corporate Governance Code of Alpha Bank defines the duties and allocates responsibilities among the Board of Directors, its Committees, the Executive Committee and the other Committees of the Bank.
Alpha Bank implemented, as early as 1994, the principles of Corporate Governance, enhancing transparency in communication with the Bank's Shareholders and keeping investors promptly and continuously informed. In this context, the Bank has adopted the following modifications, before their establishment as regulatory and legal requirements: the separation of the Chairman's duties from those of the Managing Director, a number of Independent Members of the Board of Directors exceeding the minimum stipulated by law, the establishment of an Audit Committee of the Board of Directors, the monthly convocation of the Risk Management Committee of the Board of Directors, the provision of comprehensive and detailed introductory informational programmes for the new Members of the Board of Directors and of information seminars in the context of constant training, when deemed necessary.
Additionally, since 2006 the Vice Chairman of the Board of Directors is a Non-Executive Independent Member, even today when the Chairman of the Board of Directors is Non-Executive.
The Corporate Governance Code stipulates expressly the distinguished responsibilities of the Chairman of the Board of Directors, the Vice Chairman and the Managing Director.
The Board of Directors convenes every month or more often if necessary. The Articles of Incorporation of the Bank provide the Board of Directors with the option to meet by teleconference. The programme of the Meetings of the Board of Directors and its Committees for every year is set and notified at the end of the previous year. The Minutes of the Meetings of the Board of Directors and its Committees are ratified at the next regular Meeting of the Board of Directors or of the relevant Committee. The tenure of the Members of the Board of Directors is four years while Codified Law 2190/1920 stipulates up to six years.
Article 3 of Law 3016/2002 stipulates, inter alia, that the number of Non-Executive Members of the Board of Directors cannot be less that 1/3 of the total number of Members. Out of a total of thirteen (13) Members of the Board of Directors of the Bank, the number of Non-Executive Members amounts to nine (9), i.e. 69% of the total, thus exceeding by far the minimum number for such Members set by Law 3016/2002.
In accordance with the above-mentioned article of Law 3016/2002, at least two (2) Non-Executive Members should also be Independent. In the Board of Directors of the Bank, the respective number exceeds, as in the case mentioned above, the minimum requirement set by law and amounts to five (5), i.e. 38% of the total.
Additionally, the Bank has adopted a Code of Ethics for the performance of duties with the purpose to implement the standards required by modern corporate governance and effective Internal Audit. The Code of Ethics is posted on the Bank's website (http://www.alpha.gr/page/default.asp?la=2&id=5393).
The Corporate Governance and Nominations Committee ascertained that the current composition of all the Committees of the Board of Directors, namely the Audit Committee, the Risk Management Committee, the Remuneration Committee and the Corporate Governance and Nominations Committee, meets the requirements of the compliance framework, is consistent with the principles of Corporate Governance of the Bank and contributes to the effective and smooth operation of the Committees.
It also ascertained that the Members of the Board of Directors represent different business sectors and geographical areas and are acknowledged for their character, integrity, ability of leadership, management, thought and constructive collective operation in a team environment as well as for their financial knowledge and other professional and business experience. The level of experience and knowledge as well as the work of all the Members of the Board of Directors and its Committees was evaluated as very high.
Lastly, it was ascertained that the Members comply with the stipulations of article 83 of Law 4261/2014 on the combination of directorships that Board Members may hold at the same time, that they do not have any personal or private interest, as defined in article 2 of Law 3016/2002 and that the Non-Executive Independent Members of the Board of Directors fulfil all the criteria for being Independent, in accordance with Law 3016/2002 and the Corporate Governance Code of the Bank.
Additionally, at the annual Meeting of the Non-Executive Members of the Board of Directors, the Non-Executive Members recognised that the Board operations are conducted in an effective manner and that the Members of the Board of Directors contribute to very effective and productive Board meetings. During the meetings, the Members deliberate openly in an environment of trust and they feel free to express their views and the relevant arguments. The Meeting evaluated the performance of the Executive Members and highlighted the contribution of each and every Member to the accomplishment of absolutely satisfactory results during these highly volatile economic circumstances which the country is experiencing as well as the excellent cooperation with the Non-Executive Members of the Board.
The main objective is that the Members attend more than 85% of the Board meetings. The Corporate Governance and Nominations Committee reviewed the attendance of Members at Board Meetings and deemed that there are no Member absences without a valid reason. The Members of the Board of Directors who were absent had informed the Bank on time of the relevant reasons and had authorised in writing another Member of the Board of Directors to represent them at the Meeting where they were not present due to impediment.
During the year the Bank, in response to the changing landscape in Greek banking and anticipating the recent regulatory and legal trends in the Corporate Governance framework, proceeded to modify the composition of its Board of Directors. The modifications pertained to the replacement of Non-Executive Members with persons who possess international experience in banking, audit, risk management and non-performing loans.
In the context of implementing the above, in 2016 Mr. Minas G. Tanes, Ms Ioanna E. Papadopoulou, Mr. Ioannis K. Lyras and Mr. Pavlos A. Apostolides departed from the Board of Directors of the Bank. Within the same year Messrs Jan A. Vanhevel and Richard R. Gildea were elected as Members.
Messrs Jan A. Vanhevel and Richard R. Gildea were provided by the Bank with a comprehensive and detailed introductory informational programme on Corporate Governance, Risk Management, Internal Audit, Compliance, Capital Adequacy, Financial Services and Human Resources.
In order to enhance the active participation of the Shareholders in the General Meetings and the genuine interest in issues relating to its operation, the Bank develops procedures of active communication with the Shareholders and establishes the appropriate conditions so that the policies and strategies adopted are based on the constructive exchange of views with the Shareholders.
In order to ensure the reliable, secure and broad dissemination of institutional information to Shareholders, the Bank declares the "Officially Appointed Mechanism for the Central Storage of Regulated Information" of the Hellenic Exchanges S.A. (HELEX), which is currently managed by the Athens Exchange and operates through the "HERMES" communication system, in accordance with the Athens Exchange Rulebook (www.helex.gr), as the means of disclosure of regulated information and information provided by law to its Shareholders before the General Meeting. Through this disclosure, the prompt and non-discriminatory access to the relevant information is made available to the general public and particularly to the Shareholders, given that the above System, as recognised by law, is considered reasonably reliable for the effective dissemination of information to the investing public and meets the national and European range requirements of the law.
c. Internal Control System
The Internal Control System, on which the Bank places great emphasis, comprises auditing mechanisms and procedures, relating to all the activities of the Bank, aiming at its effective and secure operation.
The Internal Control System ensures:
the consistent implementation of the business strategy with an effective utilisation of the available resources,
the identification and management of all risks undertaken,
the completeness and the credibility of the data and information required for the accurate and timely determination of the financial situation of the Bank and the generation of reliable financial statements,
the compliance with the current regulatory framework, the internal regulations, the rules of ethics,
the prevention and avoidance of erroneous actions that could jeopardise the reputation and interests of the Bank, the Shareholders and those transacting with it,
the effective operation of the IT systems in order to support the business strategy and the secure circulation, processing and storage of critical business information.
The evaluation of the adequacy and effectiveness of the Internal Control System of the Bank is conducted:
a) On a continuous basis through audits effected by the Internal Audit Division of the Bank, as well as by the Compliance Division with respect to the observance of the regulatory framework.
The audit plan of the Internal Audit Division is based on the prioritisation of the audited areas by identifying and assessing the risks and the special factors associated with them. In addition, any instructions or decisions of the Management of the Bank, along with regulatory framework requirements and extraordinary developments in the overall economic environment are taken into account.
The Audit Committee of the Board of Directors approves the audit plan and is updated every quarter on its implementation, the main conclusions of the audits and the implementation of the audit recommendations, as well as on the compliance with the regulatory framework.
b) On an annual basis by the Audit Committee of the Board of Directors, on the basis of the relevant data and information from the Internal Audit Division, the findings and observations from the External Auditors as well as from the Regulating Authorities.
In 2016, the Audit Committee evaluated the Internal Control System of the Bank for 2015.
c) Every three years by External Auditors, other than the regular ones.
These are highly experienced individuals in the field of internal audit (external auditors or special advisors), who are independent of the Group and for whom there is no question of a conflict of interests.
The Audit Committee determines the criteria and the selection procedures for external auditors and approves the scope and the content of audit operations.
The Bank has in place Policies and Procedures for the recognition of financial events and the preparation of the financial statements.
Transactions are carried out through specialised computerised applications, per business activity of the Bank and the Group, which support Officer authorisation limits and procedures for double-checking transactions.
The accounting system of the Bank and the Group is supported by specialised IT systems which have been adapted to the business requirements of the Bank.
Audit and accounting reconciliation procedures have been established in order to ensure the correctness and the legitimacy of the entries in the accounting books as well as the completeness and validity of the financial statements.
Furthermore, in order to ensure the independence of the regular audit of the financial statements of the Group, the Board of Directors applies specific policies and procedures in order to formulate a recommendation for the General Meeting with regard to the election of a regular auditor.
The Audit Committee of the Board of Directors supervises and assesses the drafting procedures, in accordance with the current audit standards, for the interim and annual financial statements of the Bank and studies the reports of the External Auditors as regards deviations from the current accounting practices.
Risk Management
The Bank places great emphasis on the identification, measurement and management of the risks undertaken and, to this end, has assigned these tasks to the Risk Management Business Unit. The Risk Management Business Unit reports to the General Manager and Chief Risk Officer of the Group, to the Risk Management Committee and (through the latter) to the Board of Directors of the Bank.
The effective management of all types of risk focuses on accurate and efficient measurement using specialised methods and calculation models, and on the adoption of policies and limits through which the Bank's exposure to various risks is monitored.
The Operational Risk Committee convenes regularly or whenever deemed necessary by the circumstances and ensures that the appropriate processes, methodologies and infrastructure to manage the operational risk of the Group exist and approves recommendations to limit operational risk.
The Credit Risk Committee convenes regularly and assesses the adequacy and the efficiency of the credit risk management policy and procedures of the Bank and the Group and resolves on the planning of the required corrective actions.
The Troubled Assets Committee (TAC) convenes regularly and examines issues related to the portfolios managed by the Divisions under the supervision of the Non-Performing Loans - Wholesale Banking Executive General Manager and the Non-Performing Loans - Retail Banking Executive General Manager, in order to achieve the operational goals of the Bank and the Group, pertaining to which it may propose further decision-making to the Credit Risk Committee and subsequently to the Board of Directors for the final approval, through the Risk Management Committee of the Board.
The Assets-Liabilities Management Committee (ALCo) convenes regularly every quarter, examines and resolves on issues related to Treasury and Balance Sheet Management and the overall financial volumes of the Bank and the Group approving the respective actions and policies.
The Bank has fully complied with the provisions of the institutional framework with respect to its troubled assets.
The Audit Committee and the Risk Management Committee review in a joint session every quarter the financial statements of the Bank and the Group compiled in accordance with the International Financial Reporting Standards (IFRS) and propose to the Board of Directors the approval thereof.
d. The items c), d), f), h), i) of article 10 of Directive 2004/25/EC of the European Parliament and of the Council, as they are incorporated in the items c), d), e), g), h) of article 4 par. 7 of Law 3556/2007, are analysed in the Explanatory Report of the Board of Directors already submitted to the General Meeting of Shareholders.
e. General Meeting
The General Meeting of Shareholders is the supreme governing body of the Bank and resolves on all corporate matters, apart from those that fall within the exclusive jurisdiction of the Board of Directors, unless the latter resolves, on a particular item of its agenda, to relegate it to the General Meeting. Its resolutions shall be binding upon all the Shareholders including those absent or dissenting.
The General Meeting, unless otherwise foreseen by law and the Articles of Incorporation, is vested with exclusive authority to resolve on the following matters:
(a) Amend the Articles of Incorporation, including the resolutions to increase or to reduce the share capital;
(b) elect Members to the Board of Directors and award the status of Independent Member of the Board of Directors;
(c) appoint regular auditors and determine their remuneration;
(d) approve and reform the Annual Financial Statements and determine the distribution of the annual profits of the Bank;
(e) issue bond loans pursuant to articles 8 (without prejudice to article 3a par. 1 section b of Codified Law 2190/1920) and 9 of Law 3156/2003;
(f) merge, split-up, convert, revive, extend the term of operation or wind-up the Bank;
(g) change the nationality of the Bank;
(h) appoint liquidators; and
(i) resolve on any other issues stipulated by law.
Board of Directors
The Board of Directors is responsible for the general administration and management of corporate affairs, as well as for the representation of the Bank in all its relations and resolves on all issues concerning the Bank. It performs any action for which the relevant authority is bestowed upon it, apart from those actions for which the General Meeting of Shareholders is the sole competent authority.
The primary concern of the Board of Directors, while exercising its powers, is to meet the interests of the Bank, the Shareholders, and of its Employees and of other interested parties (as the case may be). The Board of Directors monitors the compliance and adherence to the provisions of the law, within the framework of the corporate interest, as well as the compliance to procedures of reliable and timely information and communication.
Pursuant to the Presubscription Agreement of 28 May 2012, the Hellenic Financial Stability Fund is represented in the Board of Directors of the Bank. The representative of the Hellenic Financial Stability Fund is also a Member of the Audit Committee, the Risk Management Committee, the Remuneration Committee and the Corporate Governance and Nominations Committee of the Board of Directors.
As long as the Bank is subject to the provisions of article 2 of Law 3723/2008, the participation of the representative of the Greek State in the Board of Directors of the Bank, pursuant to article 1 par. 3 of Law 3723/2008 will be maintained and, in fact, produce the same lawful effects, until the expiration of the guarantee granted.
The Board of Directors convenes at least on a monthly basis. In 2016, it convened 16 times.
Committeees of the Board of Directors
. The Audit Committee of the Board of Directors, having as a whole specialised knowledge in finance and audit, under the chairmanship of Mr. E.J. Kaloussis, assists the Board of Directors in the adaptation and implementation of an adequate and effective Internal Control System for the Bank and the Group, which it evaluates on an annual basis, it supervises and evaluates the procedures followed in drawing-up the published annual and interim Financial Statements of the Bank and of the Group, it approves the Financial Statements of the Bank and of the Group before they are submitted to the Board of Directors, ensures the independent and unprejudiced conducting of internal and external audits in the Bank and assesses the performance and effectiveness of the Internal Audit and Compliance Divisions of the Bank and the Group.
The Audit Committee convenes at least once every quarter. In 2016, it convened 6 times.
The specific duties and responsibilities of the Audit Committee are determined in its Charter, which is posted on the Bank's website (http://www.alpha.gr/page/default.asp?id=3295&la=2 ).
. The Risk Management Committee of the Board of Directors, under the chairmanship of Mr. J.A. Vanhevel, recommends to the Board of Directors the risk undertaking and capital management strategy, checks its implementation, evaluates its effectiveness and defines the principles governing risk management with regard to identifying, forecasting, measuring, monitoring, controlling and handling it in line with the adequacy of the available resources, as well as the limits of the Risk Appetite of the Bank and of the Group. It evaluates and monitors the implementation of the Troubled Assets Management Strategy and the performance of actions on Non-Performing Exposures. The Member of the Committee Mr. R.R. Gildea possesses expertise and experience in risk management and NPLs management.
The Risk Management Committee convenes at least every month. In 2016, it convened 12 times.
The specific duties and responsibilities of the Risk Management Committee are determined in its Charter, which is posted on the Bank's website (http://www.alpha.gr/page/default.asp?id=3295&la=2).
C. The Remuneration Committee of the Board of Directors proposes the policy for remuneration, of the Bank and Group Personnel as well as of the Members of the Board of Directors and submits recommendations accordingly to the Board of Directors.
The Remuneration Committee convenes at least twice a year. In 2016, it convened 5 times.
The specific duties and responsibilities of the Remuneration Committee are determined in its Charter, which is posted on the Bank's website (http://www.alpha.gr/page/default.asp?id=3295&la=2 ).
D. The Corporate Governance and Nominations Committee of the Board of Directors attends to the implementation of the legal, regulatory and supervisory frameworks with regards to the composition, structure and operation of the Board of Directors, and of international corporate governance best practices. Additionally, it formulates the Policy for the Nomination of Candidates to the Alpha Bank Board of Directors.
The Corporate Governance and Nominations Committee convenes at least twice a year. In 2016, it convened 8 times.
In particular, as far as the Policy for the Nomination of Candidates to the Alpha Bank Board of Directors is concerned, the Committee evaluates the qualifications with regards to the different business sectors and the interaction of the candidate with the geographical areas served by the Bank and the Group. It takes into consideration their professional and management experience, their skills, integrity of character, and their ability to fulfil the independence criteria. During the nomination procedure it assesses the balance of knowledge, qualifications, experience, skills, views, as well as gender within the Board of Directors, so as to rule with perspicuity on the role and skills that the candidate Members must have.
The specific duties and responsibilities of the Corporate Governance and Nominations Committee are determined in its Charter, which is posted on the Bank's website (http://www.alpha.gr/page/default.asp?id=3295&la=2).
Composition of the Board of Directors and the Board of Directors' Committees for the year 2016
Board of Directors
Audit Committee
Risk Management Committee
Remuneration Committee
Corporate Governance and Nominations Committee
Chairman (Non-Executive Member)
Vasileios T.Rapanos
Professor Emeritus, University of Athens
Vice Chairman (Non-Executive Independent Member)
Minas G. Tanes (until 21.4.2016)Chairman, FOOD PLUS S.A.
Pavlos A. Apostolides (Vice-Chairman from 21.4.2016 until 15.12.2016 )
Honorary Ambassador
Evangelos I. Kaloussis (Vice-Chairman as of 15.12.2016)
Chairman, Federation of Hellenic Food Industries (SEVT)
EXECUTIVE MEMBERS
Managing Director - CEO
Demetrios P.Mantzounis
Executive Directors and General Managers
Spyros N.Filaretos
Artemios Ch.Theodoridis
George C.Aronis
NON-EXECUTIVE MEMBERS
Ioanna E. Papadopoulou (until 28.7.2016)
President and Managing Director,
E.J. PAPADOPOULOS S.A. BISCUIT AND FOODWARE INDUSTRY
Efthimios O. Vidalis
Executive Member of the Board of Directors, TITAN S.A.
(as of 15.12.2016)
(as of 15.12.2016)
NON-EXECUTIVE INDEPENDENT MEMBERS
Ioannis K. Lyras (until 30.11.2016)
President, PARALOS MARITIME CORPORATION S.A.
Ibrahim S. Dabdoub
Vice Chairman, INTERNATIONAL BANK OF QATAR
(as of 15.12.2016)
(as of 28.7.2016)
Shahzad A. Shahbaz
Investment Advisor
Jan A. Vanhevel (as of 21.4.2016)
Banking Executive
Richard R. Gildea (as of 28.7.2016)
Banking Executive
NON-EXECUTIVE MEMBER in accordance with Law 3723/2008
THE GREEK STATE, via its appointed representative:
- Ms Marica S. Ioannou - Frangakis, Economist
NON-EXECUTIVE MEMBER in accordance with Law 3864/2010
Panagiota S. Iplixian
As representative, and upon instruction of the Hellenic Financial Stability Fund.
Committee Chairman Committee Member
CVs of the Memers of the Board of Directors
Chairman
(Non-Executive Member)
Vasileios T.Rapanos
He was born in Kos in 1947. He is Professor Emeritus at the Faculty of Economics of the University of Athens. He studied Business Administration at the Athens School of Economics and Business (1975) and holds a Master's in Economics from Lakehead University, Canada (1977) and a PhD from Queen's University, Canada. He was Deputy Governor and Governor of the Mortgage Bank (1995-1998), Chairman of the Board of Directors of the Hellenic Telecommunications Organization (1998-2000), Chairman of the Council of Economic Advisors at the Ministry of Economy and Finance (2000-2004), and Chairman of the Board of Directors of the National Bank of Greece and the Hellenic Bank Association (2009-2012). He has been the Chairman of the Board of Directors of the Bank since May 2014.
Vice-Chairman
(Non-Executive Independent Member)
Minas G.Tanes (until 21.4.2016)
He was born in 1940 and is the Chairman of FOOD PLUS S.A. He was at the helm of Athenian Brewery S.A. from 1976 to 2008 and was a member of the Board of Directors of the Bank from 2003.
Pavlos A.Apostolides (from 21.4.2016 to 15.12.2016)
He was born in 1942 and graduated from the Law School of Athens. He was a member of the Bank's Board of Directors from 2004. He joined the Diplomatic Service in 1965 and has been, among others, Ambassador of Greece to Cyprus and Permanent Representative of Greece to the European Union in Brussels. In 1998 he became General Secretary of the Ministry of Foreign Affairs and in 1999 he was appointed Director of the National Intelligence Agency. He retired in November 2004.
Evangelos J.Kaloussis (as of 15.12.2016)
He was born in 1943 and is the Chairman of the Federation of Hellenic Food Industries (SEVT) as of 2006, whereas he has been a member of the Federation's Board of Directors since 2002. He was Chairman of NESTLE HELLAS S.A. from 2001 until 2015. He has been a member of the Board of Directors of the Bank since 2007.
EXECUTIVE MEMBERS
MANAGING DIRECTOR - CEO
Demetrios P.Mantzounis
He was born in Athens in 1947. He studied Political Sciences at the University of Aix-Marseille. He joined the Bank in 1973 and he has been a member of the Board of Directors of the Bank since 1995. In 2002 he was appointed General Manager and he has been the Managing Director since 2005.
Executive Directors and General Managers
Spyros N.Filaretos
He was born in Athens in 1958. He studied Economics at the University of Manchester and at the University of Sussex. He joined the Bank in 1985. He was appointed Executive General Manager in 1997. He has been a member of the Board of Directors of the Bank and a General Manager since 2005. In October 2009 he was appointed Chief Operating Officer (COO).
Artemios Ch.Theodoridis
He was born in Athens in 1959. He studied Economics and holds an MBA from the University of Chicago. He joined the Bank as Executive General Manager in 2002. He has been a member of the Board of Directors of the Bank and a General Manager since 2005.
George C. Aronis
He was born in Athens in 1957. He studied Economics and holds an MBA, major in Finance, from the Athens Laboratory of Business Administration (ALBA). He has worked for multinational banks for 15 years, mostly at ABN AMRO BANK in Greece and abroad. He joined Alpha Bank in 2004 as Retail Banking Manager. In 2006 he was appointed Executive General Manager and in 2008 General Manager. He joined the Board of Directors of the Bank in 2011.
NON-EXECUTIVE MEMBERS
Ioanna E. Papadopoulou (until 28.7.2016)
She was born in 1952 and is the President and Managing Director of the E.J. PAPADOPOULOS S.A. BISCUIT AND FOODWARE INDUSTRY. She was a member of the Board of Directors of the Bank from 2008.
Efthimios O.Vidalis
He was born in 1954. He holds a BA in Government from Harvard University and an MBA from the Harvard Graduate School of Business Administration. He worked at Owens Corning (1981-1998), where he served as President of the Global Composites and Insulation Business Units. Furthermore, he was Chief Operating Officer (1998-2001) and Chief Executive Officer (2001-2011) of the S&B Industrial Minerals Group, where he served on the Board of Directors for 15 years. He is an executive member of the Board of Directors of the TITAN Group. He was a member of the Board of Directors of the Hellenic Federation of Enterprises (SEV) from 2006 to 2016 as well as founder and Chairman of the SEV Business Council for Sustainable Development from 2008 to 2016. He has been a member of the Board of Directors of the Bank since May 2014.
NON-EXECUTIVE INDEPENDENT MEMBERS
Ioannis K.Lyras (until 30.11.2016)
He was born in 1951 and is the President of PARALOS MARITIME CORPORATION S.A. He was a member of the Board of Directors of the Bank from 2005. He was Chairman of the Union of Greek Shipowners from 1997 to 2003. He represents the Union of Greek Shipowners to the Board of Directors of the European Community Shipowners' Associations.
Ibrahim S.Dabdoub
He was born in 1939. He studied at the Collge des Frres in Bethlehem, at the Middle East Technical University in Ankara, Turkey and at Stanford University, California, U.S.A. He was the Group Chief Executive Officer of the National Bank of Kuwait from 1983 until March 2014. He is Vice Chairman of the International Bank of Qatar (IBQ), Doha and a member of the Board of Directors of the International Institute of Finance (IIF) as well as Co-Chair of the Emerging Markets Advisory Council (EMAC), Washington D.C. He is also a member of the Bretton Woods Committee, Washington D.C. and of the International Monetary Conference (IMC). Furthermore, he is a member of the Board of Directors of the Central Bank of Jordan, Amman, of the Board of Directors of the Consolidated Contractors Company, Athens, and of the Board of Advisors of Perella Weinberg, New York. In 1995, he was awarded the title of "Banker of the Year" by the Arab Bankers Association of North America (ABANA) and in 1997 the Union of Arab Banks named him "Arab Banker of the Year". In 2008 and 2010 he was given a "Lifetime Achievement Award" by "The Banker" and "MEED" respectively. He has been a member of the Board of Directors of the Bank since May 2014.
Shahzad A.Shahbaz
He was born in 1960. He holds a BA in Economics from Oberlin College, Ohio, U.S.A. He has worked at various banks and investments firms, since 1981, including the Bank of America (1981-2006), from which he left as Regional Head (Corporate and Investment Banking, Continental Europe, Emerging Europe, Middle East and Africa). He served as Chief Executive Officer (CEO) of NDB Investment Bank/Emirates NBD Investment Bank (2006-2008) and of QInvest (2008-2012). He is currently the Investment Advisor at Al Mirqab Holding Co. He has been a member of the Board of Directors of the Bank since May 2014.
Jan A. Vanhevel (as of 21.4.2016)
He was born in 1948. He studied Law at the University of Leuven (1971), Financial Management at Vlekho (Flemish School of Higher Education in Economics), Brussels (1978) and Advanced Management at INSEAD (The Business School for the World), Fontainebleau. He joined Kredietbank in 1971, which became KBC Bank and Insurance Holding Company in 1998. He acquired a Senior Management position in 1991 and joined the Executive Committee in 1996. In 2003 he was in charge of the non-Central European branches and subsidiaries while in 2005 he became responsible for the KBC subsidiaries in Central Europe and Russia. In 2009 he was appointed CEO and implemented the Restructuring Plan of the group until 2012 when he retired. From 2008 until 2011 he was President of the Fdration belge du secteur financier (Belgian Financial Sector Federation) and a member of the Verbond van Belgische Ondernemingen (Federation of Enterprises in Belgium), while he has been the Secretary General of the Institut International d'tudes Bancaires (International Institute of Banking Studies) since May 2013. He was also a member of the Liikanen Group on reforming the structure of the EU banking sector. He has been a member of the Board of Directors of the Bank since April 2016.
Richard R. Gildea (as of 28.7.2016)
He was born in 1952. He holds a BA in History from the University of Massachusetts (1974) and an MA in International Economics, European Affairs from The Johns Hopkins University School of Advanced International Studies (1984). He served in JP Morgan Chase from 1986 until 2015 wherein he held various senior management positions throughout his career. He was Emerging Markets Regional Manager for the Central and Eastern Europe Corporate Finance Group, London (1993-1997) and Head of Europe, Middle East and Africa (EMEA) Restructuring, London (1997-2003), as well as Senior Credit Officer in EMEA Emerging Markets, London (2003-2007). From 2007 until 2015 he was Senior Credit Officer for JP Morgan's Investment Bank Corporate Credit in EMEA Developed Markets, London and was appointed Senior Risk Representative to senior committees within the Investment Bank. He is currently a member of the Board of Trustees at The Johns Hopkins University School of Advanced International Studies, Washington D.C., of the Chatham House (the Royal Institute of International Affairs), London and of the International Institute of Strategic Studies, London. He has been a member of the Board of Directors of the Bank since July 2016.
NON-EXECUTIVE MEMBER, pursuant to the provisions of Law 3723/2008
THE GREEK STATE, via its appointed representative:
Marica S. Ioannou - Frangakis
She was born in Asyut, Egypt in 1950. She holds a BSc in Economics from the London School of Economics (LSE), University of London, U.K. and an MA in Development Economics from the University of Sussex, U.K. From 1978 to 1993 she worked at the Agricultural Bank of Greece, initially as Head of the Economic Forecasting Department (1978-1990) and then at the Privatisations Unit of the Governor's Office (1990-1993). From 1993 to 2010 she served as Head of the Liquidations Department of Ethniki Kefaleou S.A., a company of the National Bank of Greece group. She is currently an independent researcher focusing on Macroeconomics and Finance. She is a member of the Board of Directors of the Nicos Poulantzas Institute as well as of the Steering Committee of the EuroMemo Group. Following a decision by the Minister of Finance, she has been a member of the Board of Directors of the Bank as a representative of the Greek State since March 2015.
NON-EXECUTIVE MEMBER, pursuant to the provisions of Law 3864/2010
Panagiota S. Iplixian
She was born in 1949. She holds a BA in Business Administration and a Postgraduate Diploma in Management Studies from the University of Northumbria, Newcastle upon Tyne, England, and specialised in "Organisation and Methods" at the British Institute of Administrative Management. From 1972 to 1987, she worked for consulting firms. From 1987 until 2000 she worked for commercial banks in the United States and from 2000 until 2009 for EFG Eurobank Ergasias. From 2010 until 2012 she was a Non-Executive Independent Member of the Board of Directors of the Hellenic Financial Stability Fund. From October 2011 until December 2013 she was Non-Executive Vice President of the Board of Directors of New Proton Bank, representing the Hellenic Financial Stability Fund. She has been a member of the Board of Directors of the Bank, representing the Hellenic Financial Stability Fund, since January 2014.
Management Committees
The Committees composed by Members of the Management of the Bank are the Executive Committee, the Operations Committee, the Assets - Liabilities Management Committee (ALCo), the Treasury and Balance Sheet Management Committee, the Operational Risk Committee, the Credit Risk Committee and the Troubled Assets Committee.
A. The Executive Committee is the senior executive body of the Bank. It convenes at least once a week under the chairmanship of the Managing Director and with the participation of the General Managers and the Secretary of the Committee. Depending on the subjects under discussion, other Executives or Members of the Management of Group Companies participate in the proceedings. The Executive Committee carries out a review of the domestic and international economy and market developments, and examines issues of business planning and policy. Furthermore, the Committee deliberates on issues relating to the development of the Group and submits recommendations on the Rules and Regulations of the Bank, as well as on the budget of each Business Unit. Finally, it submits recommendations on the Human Resources policy and the participation of the Bank or the Group Companies in other companies.
B. The Operations Committee convenes at least once a week under the chairmanship of the Managing Director and with the participation of the General Managers, the Executive General Managers, and the Secretary of the Committee. Depending on the subjects under discussion, other Executives or Members of the Management of Group Companies participate in the proceedings. The Operations Committee undertakes a review of the market and the sectors of the economy, examines the course of business and new products. It resolves on the policy on Network and Group development and determines the credit policy. Finally, it decides on treasury management, the level of interest rates and the Terms and Conditions for deposits, loans and transactions of the Bank.
C. The Assets - Liabilities Management Committee (ALCo) convenes regularly every quarter under the chairmanship of the Managing Director. The General Managers, the Executive General Managers and the Managers of the Asset Liability Management Division, the Market and Operational Risk Division, the Analysis and Performance Management Division, the Asset Gathering Management Division, the Accounting and Tax Division, the Economic Research Division, the Wholesale Banking Credit Risk Division, the Retail Banking Credit Risk Division, the Trading Division and the Capital Management and Banking Supervision Division participate as Members. The Committee examines and decides on issues related to Treasury and Balance Sheet Management and monitors the course of the results, the budget, the funding plan, the capital adequacy and the overall financial volumes of the Bank and the Group approving the respective actions and policies. In addition, the Committee approves the interest rate policy, the structure of the investment portfolios and the total market, interest rate and liquidity risk limits.
D. The Treasury and Balance Sheet Management Committee convenes regularly every month under the chairmanship of the Wholesale Banking and International Network General Manager. The Retail Banking General Manager, the Chief Risk Officer, the Chief Financial Officer, the Executive General Manager of Treasury Management and the Managers of the Asset Liability Management Division and the Market and Operational Risk Division participate as Members. The Committee examines and submits recommendations to ALCo or to the Executive Committee of the Bank on issues generally related to the Treasury and Balance Sheet Management, such as capital structure, interest rate policy, total market, interest rate and liquidity risk limits, the funding policy of the Bank and the Group, liquidity management, stress test assumptions, hedging strategies, funds transfer pricing, the structure of the investment portfolios and capital and liquidity allocation to the business units.
E. The Operational Risk Committee convenes regularly under the chairmanship of the Managing Director and with the participation of the General Managers, the Information Technology and Operations Executive General Manager and the Manager of the Market and Operational Risk Division. The Operational Risk Committee ensures that the appropriate organisational structure, processes, methodologies and infrastructure to manage operational risk are in place. In addition, it is regularly updated on the operational risk profile of the Group and the results of the operational risk assessment process; reviews recommendations for minimising operational risk; assesses forecasts regarding Third Party Lawsuits against the Bank; approves the authorisation limits of the Committees responsible for the management of operational risk events of the Bank and the Group Companies and reviews the operational risk events whose financial impact exceeds the limits of the other Committees.
F. The Credit Risk Committee convenes regularly at least every quarter under the chairmanship of the Managing Director and with the participation of the General Managers and the Managers of the Credit Control Division, the Credit Risk Data and Analysis Division and the Capital Management and Banking Supervision Division. The Credit Risk Committee assesses the adequacy and the efficiency of the credit risk management policy and procedures of the Bank and the Group with regard to the undertaking, monitoring and management of credit risk per Business Unit (Wholesale Banking, Retail Banking, Wealth Management/Private Banking), geographical area, product, activity, industry et al. and resolves on the planning of the required corrective actions.
G. The Troubled Assets Committee (TAC) reports to the General Manager - Chief Operating Officer and convenes on a monthly basis or ad hoc under the chairmanship of either the Non-Performing Loans - Wholesale Banking Executive General Manager or the Non-Performing Loans - Retail Banking Executive General Manager while the Managers of the Strategic Planning Division, the Credit Control Division, the Credit Risk Data and Analysis Division, the Capital Management and Banking Supervision Division, the Budgeting and Controlling Division, the Non-Performing Loans Monitoring Division - Retail and the Non-Performing Loans Monitoring Division - Wholesale participate in the meetings. The Committee examines issues related to the portfolios managed by the Divisions under the supervision of the Non-Performing Loans - Wholesale Banking Executive General Manager and the Non-Performing Loans - Retail Banking Executive General Manager, in order to achieve the operational goals of the Bank and the Group, pertaining to which it may propose further decision-making to the Credit Risk Committee and subsequently to the Board of Directors for the final approval, through the Risk Management Committee of the Board.
Finally, the Bank states that it complies immediately with any additional disclosure requirements which are set by the institutional framework for Credit Institutions.
f. Description of the diversity policy applied to management, administration and supervision bodies.
To Alpha Bank, the provision of equal opportunities for employment and advancement to all its Employees, is not merely a legal obligation, but a cornerstone of its Human Resources policy. This policy is incorporated in the Human Resources management procedures and practices and ensures the implementation thereof in every country where Alpha Bank is present. Seeking to implement gender equality in action and to address the issue of the low percentage of women in positions of responsibility, two issues which are typical of the Greek labour market, Alpha Bank has taken a number of measures which help its Employees balance their professional and family life, while also promoting equitable treatment and merit-based Personnel advancement, with equal advancement opportunities for female Employees. The Bank also applies a uniform, gender-neutral salary policy to all categories of Personnel. The Bank respects and defends the diversity of its Employees irrespective of gender, age, nationality, political and religious convinctions or any other discrimination. Further to the above principles, the Bank recognises the need for diversity pertaining to skills, background, knowledge and experience in order to facilitate constructive discussion and independent thinking. It ensures top-quality work conditions and opportunities for advancement that are based on merit and equitable treatment. It offers fair remuneration, based on contracts which are in agreement with the conditions of the corresponding national labour market and ensures compliance with the respective national regulations, inter alia, on minimum pay, working hours and the granting of leave.
Moreover, the Bank defends human rights and opposes all forms of child, forced or compulsory labour. Alpha Bank respects Employee rights and is committed to safeguarding them fully, in accordance with the national and European law and the Conventions of the International Labour Organization.
The Board of Directors of Alpha Bank applies a Diversity Policy pertaining to gender in accordance with which Alpha Bank strives to achieve and maintain over time a balanced gender profile at Board level. The Bank targets a Board gender profile where the under-represented gender constitutes at least 30% of Board Members. This might not always be achievable in the short term. However, whenever the above target is not reached, the Corporate Governance and Nominations Committee informs the Board and makes its achievement a priority in nominating candidates.
Employees in positions of responsibility (Positions of Responsibility are defined as the positions from Branch Manager and above) as of 31.12.2016:
Gender
Age Breakdown as of 31.12.2016
Percentage (%)
18-25
26-40
41-50
51+
Total
Male
45
260
195
500
63.21
Female
32
210
49
291
36.79
Total:
77
470
244
791
100
Percentage %
9.73
59.42
30.85
100
Educational level
Breakdowns 31.12.2016
Percentage
Postgraduate Studies (Master's, PhD)
270
34,13
Tertiary Education (graduates of Universities or Technological Education Institutes)
279
35,27
High School (Lyceum) graduates
242
30,59
Total:
791
100
The percentage and number of Employees in managerial positions per educational level points out the following:
Employees in managerial positions holding tertiary education degrees (graduates of Universities or Technological Education Institutes) represent in 2016 the highest percentage, i.e. 35.27%.
Employees in managerial positions holding postgraduate degrees represent in 2016 34.14%.
The percentage of High School (Lyceum) graduates represents the lowest percentage of the population in question, i.e. 30.59%.
Remuneration Policy
The Remuneration Policy is consistent with the values, business strategy, objectives and, in general, the long-term interests of the Bank and the Group Companies and complies, inter alia, with the dictates of Law 3723/2008, Law 4261/2014 and the Bank of Greece Governor's Act 2650/2012.
In particular, in the context of effective risk management, it discourages excessive risk undertaking and prevents or minimises the emergence of conflicts of interest which are to the detriment of the proper, wise and moral management of risks. It also correlates the remuneration received by the Human Resources of the Bank and Group Companies with the risks they undertake and manage.
For the determination of the fixed remuneration, further to the provisions of the labour legislation and the collective labour agreements, the market practices and the significance of each position are also taken into account. In order to establish an objective and fair Remuneration Policy, the assessment of job positions is required. Furthermore, the performance management system motivates the achievement of outstanding long-term results without encouraging excessive risk undertaking. More specifically, the evaluation of the performance of an Executive takes into account the achievement of his/her predefined goals, which include, operational results, adherence to internal procedures, client relations and subordinates management, but also includes qualitative criteria relating to his/her personality demonstrated in the performance of his/her duties. The proper and selective implementation of the variable remuneration policy is considered a necessary tool of Human Resources Management and is required for attracting and/or keeping Executives at Bank and Group level, thus contributing significantly to the achievement of the long-term business objectives of the Bank and the Group Companies.
Athens, 30 March 2017
THE CHAIRMAN
OF THE BOARD OF DIRECTORS
VASILEIOS T. RAPANOS
ID. No 666242
Group Financial Statements as at 31.12.2016
Consolidated Income Statement
(Amounts in thousands of Euro)
From 1 January to
Note
31.12.2016
31.12.2015*
Interest and similar income
2
2,668,781
2,972,740
Interest expense and similar charges
2
(744,696)
(1,075,279)
Net interest income
2
1,924,085
1,897,461
Fee and commission income
373,667
373,791
Commission expense
(55,742)
(65,150)
Net fee and commission income
3
317,925
308,641
Dividend income
4
3,178
3,308
Gains less losses on financial transactions
5
84,896
(46,869)
Other income
6
56,988
58,329
145,062
14,768
Total income
2,387,072
2,220,870
Staff costs
7
(507,853)
(519,626)
Cost/Provision for separation schemes
7
(31,655)
(64,300)
General administrative expenses
8
(510,770)
(539,563)
Depreciation and amortization
20, 21, 22
(97,425)
(102,587)
Other expenses
9
(77,752)
(40,793)
Total expenses
(1,225,455)
(1,266,869)
Impairment losses and provisions to cover credit risk
10
(1,167,953)
(2,987,646)
Share of profit/(loss) of associates and joint ventures
19
(3,342)
(9,821)
Profit/(loss) before income tax
(9,678)
(2,043,466)
Income tax
11
29,214
806,814
Profit/(loss) after income tax, from continuing operations
19,536
(1,236,652)
Profit /(loss) after income tax, from discontinued operations
47
22,766
(134,802)
Profit/(loss) after income tax
42,302
(1,371,454)
Profit/(loss) attributable to:
Equity owners of the Bank
- from continuing operations
19,374
(1,236,912)
- from discontinued operations
22,766
(134,802)
42,140
(1,371,714)
Non-controlling interests
- from continuing operations
38
162
260
Earnings/(losses) per share:
Basic and diluted (per share)
12
0.03
(3.56)
Basic and diluted from continuing operations (per share)
12
0.01
(3.21)
Basic and diluted from discontinued operations (per share)
12
0.01
(0.35)
-----------------------------------
* The figures for the comparative year for the Consolidated Income Statement have been restated due to modification of the presentation of figures related to the loyalty bonus card program and the presentation of Alpha Bank Srbija A.D. as discontinued operations (note 49).
The attached notes (pages 47-190) form an integral part of these consolidated financial statements
Consolidated Balance Sheet
(Amounts in thousands of Euro)
Note
31.12.2016
31.12.2015*
ASSETS
Cash and balances with central banks
13
1,514,607
1,730,327
Due from banks
14
1,969,281
1,976,273
Trading securities
15
4,701
2,779
Derivative financial assets
16
634,323
793,015
Loans and advances to customers
17
44,408,760
46,186,116
Investment securities
- Available for sale
18a
5,217,053
5,794,484
- Held to maturity
18b
44,999
79,709
- Loans and receivables
18c
2,682,655
4,289,482
Investments in associates and joint ventures
19
21,792
45,771
Investment property
20
614,092
623,662
Property, plant and equipment
21
793,968
860,901
Goodwill and other intangible assets
22
371,314
345,151
Deferred tax assets
23
4,519,046
4,398,176
Other assets
24
1,450,459
1,508,633
64,247,050
68,634,479
Assets held for sale
47
625,216
663,063
Total Assets
64,872,266
69,297,542
LIABILITIES
Due to banks
25
19,105,577
25,115,363
Derivative financial liabilities
16
1,336,227
1,550,529
Due to customers (including debt securities in issue)
26
32,946,116
31,434,266
Debt securities in issue held by institutional investors and other borrowed funds
27
616,865
400,729
Liabilities for current income tax and other taxes
28
33,778
38,192
Deferred tax liabilities
23
21,219
20,852
Employee defined benefit obligations
29
91,828
108,550
Other liabilities
30
879,185
910,623
Provisions
31
321,704
298,458
55,352,499
59,877,562
Liabilities related to assets held for sale
47
406,354
366,781
Total Liabilities
55,758,853
60,244,343
EQUITY
Equity attributable to equity owners of the Bank
Share capital
32
461,064
461,064
Share premium
33
10,790,870
10,790,870
Reserves
34
400,640
308,880
Amounts recognized directly in equity related to assets held for sale
34, 47
(68,579)
40
Retained earnings
35
(2,506,711)
(2,546,885)
9,077,284
9,013,969
Non-controlling interests
38
20,997
23,998
Hybrid securities
36
15,132
15,232
Total Equity
9,113,413
9,053,199
Total Liabilities and Equity
64,872,266
69,297,542
-----------------------------------
* The figures of the Consolidated Balance Sheet of the comparative year have been restated due to the completion of the valuation of net assets of acquired subsidiary company and the correct presentation of amounts of Alpha Bank A.D. Skopje recognized directly in equity (note 49).
The attached notes (pages 47-190) form an integral part of these consolidated financial statements
Consolidated Statement of Comprehensive Income
(Amounts in thousands of Euro)
From 1 January to
Note
31.12.2016
31.12.2015*
Profit/(loss), after income tax, recognized in the Income Statement
42,302
(1,371,454)
Other comprehensive income recognized directly in equity:
Amounts that may be reclassified to the Income Statement
Net change in available for sale securities reserve
93,352
214,288
Net change in cash flow hedge reserve
(55,212)
52,313
Exchange differences on translating and hedging the net investment in foreign operations
(849)
773
Net change in the share of other comprehensive income of associates and joint ventures
-
(547)
Income tax
(6,635)
(68,055)
Amounts that may be reclassified in the income statement from continuing operations
30,656
198,772
Amounts that may be reclassified in the income statement from discontinued operations
47
(1,458)
1,959
Amounts that may not be reclassified in the income statement from continuing operations
Net change in actuarial gains/(losses) of defined benefit obligations
(10,694)
916
Income tax
3,100
2,130
(7,594)
3,046
Amounts that may not be reclassified in the income statement from discontinued operations
4
(4)
Total of other comprehensive income recognized directly in equity, after income tax
11
21,608
203,773
Total comprehensive income for the year, after income tax
63,910
(1,167,681)
Total comprehensive income for the year attributable to:
Equity owners of the Bank
- from continuing operations
42,448
(1,035,109)
- from discontinued operations
21,312
(132,847)
63,760
(1,167,956)
Non controlling interests
- from continuing operations
150
275
-----------------------------------
* The figures for the comparative year for the Consolidated Comprehensive Income have been restated due to the presentation of lpha Bank Srbija A.D. as discontinued operations and due to the completion of the valuation of net assets of acquired subsidiary company (note 49).
The attached notes (pages 47-190) form an integral part of these consolidated financial statements
Consolidated Statements of Changes in Equity
(Amounts in thousands of Euro)
Note
Share capital
Share premium
Reserves
Retained earnings
Total
Non-controlling interests
Hybrid securities
Total
Balance 1.1.2015
3,830,718
4,858,216
105,687
(1,142,801)
7,651,820
23,266
31,464
7,706,550
Changes for the period 1.1- 31.12.2015
Profit for the year, after income tax
(1,371,714)
(1,371,714)
260
(1,371,454)
Other comprehensive income recognized directly in equity, after income tax
200,713
3,045
203,758
15
203,773
Total comprehensive income for the year, after income tax
200,713
(1,368,669)
(1,167,956)
275
-
(1,167,681)
Decrease of common shares nominal value
32
(3,754,104)
3,754,104
-
-
Share capital increase paid in cash
32
232,825
1,319,344
1,552,169
1,552,169
Share capital increase through capitalization of monetary claims
32
151,625
859,206
1,010,831
1,010,831
Share capital increase expenses, after income tax
(43,506)
(43,506)
(43,506)
Effect due to change in income tax rate for the share capital increase expenses
6,261
6,261
6,261
Purchases/sales and change of ownership interests in subsidiaries
(457)
(457)
457
-
(Purchases), (redemptions)/sales of hybrid securities, after income tax
4,807
4,807
(16,232)
(11,425)
Appropriation of reserves
2,520
(2,520)
-
-
Balance 31.12.2015
461,064
10,790,870
308,920
(2,546,885)
9,013,969
23,998
15,232
9,053,199
The attached notes (pages 47-190) form an integral part of these consolidated financial statements
(Amounts in thousands of Euro)
Note
Share capital
Share premium
Reserves
Retained earnings
Total
Non-controlling interests
Hybrid securities
Total
Balance 1.1.2016
461,064
10,790,870
308,920
(2,546,885)
9,013,969
23,998
15,232
9,053,199
Changes for the period 1.1-31.12.2016
Profit for the year, after income tax
42,140
42,140
162
42,302
Other comprehensive income recognized directly in equity, after income tax
29,208
(7,588)
21,620
(12)
21,608
Total comprehensive income for the year, after income tax
-
-
29,208
34,552
63,760
150
-
63,910
Share capital increase expenses, after income tax
(689)
(689)
(689)
Purchases/sales and change of ownership interests in subsidiaries
(8,826)
8,826
-
(3,151)
(3,151)
(Purchases), (redemptions)/sales of hybrid securities, after income tax
61
61
(100)
(39)
Appropriation of reserves
2,759
(2,759)
-
-
Other
183
183
183
Balance 31.12.2016
461,064
10,790,870
332,061
(2,506,711)
9,077,284
20,997
15,132
9,113,413
The attached notes (pages 47-190) form an integral part of these consolidated financial statements
Consolidated Statement of Cash Flows
(Amounts in thousands of Euro)
From 1 January to
Note
31.12.2016
31.12.2015*
Cash flows from continuing operating activities
Profit / (loss) before income tax
(9,678)
(2,043,466)
Adjustments for gain/(losses) before income tax for:
Depreciation/impairment/write-offs of fixed assets
101,855
92,139
Amortization/impairment/write-offs of intangible assets
51,578
45,714
Impairment losses from loans, provisions and staff leaving indemnity
1,237,992
3,117,055
(Gains)/losses from investing activities
(109,792)
75,696
(Gains)/losses from financing activities
50,015
31,714
Share of (profit)/loss of associates and joint ventures
3,342
9,821
Other adjustments
9,529
1,325,312
1,338,202
Net (increase)/decrease in assets relating to continuing operating activities:
Due from banks
(135,041)
1,059,452
Trading securities and derivative financial assets
156,769
356,871
Loans and advances to customers
480,508
(223,026)
Other assets
82,573
(54,510)
Net increase/(decrease) in liabilities relating to continuing operating activities:
Due to banks
(6,004,782)
7,842,354
Derivative financial liabilities
(269,485)
(345,729)
Due to customers
1,901,458
(11,008,914)
Other liabilities
(28,180)
(230,316)
Net cash flows from continuing operating activities before taxes
(2,490,868)
(1,265,616)
Income taxes and other taxes paid
(17,391)
(40,794)
Net cash flows from continuing operating activities
(2,508,259)
(1,306,410)
Net cash flows from discontinued operating activities
2,697
(869)
Cash flows from continuing investing activities
Investments in associates and joint ventures
(18,655)
(12,310)
Acquisitions during the year
9,151
Amounts received from disposal of subsidiaries
76,016
15,392
Dividends received
3,178
3,308
Acquisitions of fixed and intangible assets
20, 21, 22
(186,048)
(105,553)
Disposals of fixed and intangible assets
36,537
14,270
Net (increase)/decrease in investement securities
2,093,587
7,469
Net cash flows from continuing investing activities
2,004,615
(68,273)
Net cash flows from discontinued investing activities
(24,477)
33,252
Cash flows from continuing financing activities
Receipts of debt securities in issue and other borrowed funds
204,640
Repayments of debt securities in issue and other borrowed funds
(9,640)
(Purchases)/sales of hybrid securities
(15)
(1,730)
Share capital increase
32
1,552,169
Share capital increase expenses
(970)
(61,276)
Net cash flows from continuing financing activities
203,655
1,479,523
Effect of exchange rate differences on cash and cash equivalents
(31,476)
(3,334)
Net increase/(decrease) in cash flows from continuing activities
(331,465)
101,506
Net increase/(decrease) in cash flows from discontinued activities
(21,780)
32,383
Cash and cash equivalents at the beginning of the year
13
1,328,133
1,194,244
Cash and cash equivalents at the end of the year
13
974,888
1,328,133
-----------------------------------
* The figures for the comparative year for the Consolidated Statement of Cash Flows have been restated due to the presentation of lpha Bank Srbija A.D. as discontinued operations (note 49).
The attached notes (pages 47-190) form an integral part of these consolidated financial statements
Notes to the Financial Statements
GENERAL INFORMATION
The Alpha Bank Group, which includes companies in Greece and abroad, offers the following services: corporate and retail banking, financial services, investment banking and brokerage services, real estate management, hotel services.
The Bank operates under the brand name of Alpha Bank A.E. using the sign of Alpha Bank. The Bank's registered office is 40 Stadiou Street, Athens and is listed in the General Commercial Register with registration number 223701000 (ex societe anonyme registration number 6066/06/B/86/05).The Bank's duration is until 2100 but may be extended by the General Meeting of Shareholders.
In accordance with article 4 of the Articles of Incorporation, the Bank's objective is to engage, on its own account or on behalf of third parties, in Greece and abroad, independently or collectively, including joint ventures with third parties, in any and all (main and secondary) operations, activities, transactions and services allowed to credit institutions, in conformity with whatever rules and regulations (domestic, community, foreign) may be in force each time. In order to serve this objective, the Bank may perform any kind of action, operation or transaction which, directly or indirectly, is pertinent, complementary or auxiliary to the purposes mentioned above.
The tenure of the Board of Directors which was elected by the Ordinary General Meeting of Shareholders on 27.6.2014 expires in 2018.
The Board of Directors as at December 31, 2016, consists of:
CHAIRMAN (Non Executive Member)
Vasileios Th.Rapanos
VICE CHAIRMAN
(Non Executive Independent Member)Evangelos J.Kaloussis */***
EXECUTIVE MEMBERS
MANAGING DIRECTOR
Demetrios P.Mantzounis
EXECUTIVE DIRECTORS AND GENERAL MANAGERS
Spyros N.Filaretos (COO)
Artemis Ch.Theodoridis
George C.Aronis
NON-EXECUTIVE MEMBERS
Efthimios O.Vidalis **/****
NON-EXECUTIVE INDEPENDENT MEMBERS
Ibrahim S.Dabdoub **/****
Richard R.Gildea **/***
Shahzad A.Shahbaz ***/****
Jan Oscar A.Vanhevel */***
NON-EXECUTIVE MEMBER
(in accordance with the requirements of Law 3723/2008)Marica S.Ioannou - Frangakis
NON-EXECUTIVE MEMBER
(in accordance with the requirements of Law 3864/2010)Panagiota S.Iplixian */**/***/****
SECRETARY
Georgios P. Triantafyllidis
At the meeting held on 26.1.2017, the Board of Directors of Alpha Bank elected Mrs. Carolyn Adele G.Dittmeier, as non-Executive Independent Member in replacement of Mr. Pavlos A.Apostolidis who resigned on 15.12.2016. On 23.2.2017 the Board of Directors of Alpha Bank elected, according to Law 3864/2010, as suggested by the Financial Stability Fund (HFSF), Mr. Spyridon - Stavros A.Mavrogalos - Fotis, as Non-Executive Member in replacement of Mrs. Panagiota S.Iplixian who resigned.
-------------------------------
* Member of the Audit Committee
** Member of the Remuneration Committee
*** Member of the Risk Management Committee
**** Member of Corporate Governance and Nominations Committee
The Ordinary General Meeting of Shareholders of 30.6.2016 appointed for the fiscal year of 2016, KPMG Certified Auditors AE as certified auditors of the Bank by the following persons:
a. Principal Auditors: Nikolaos E. Vouniseas
John . chilas
b. Substitute Auditors: Michael A. Kokkinos
Anastasios E. Panayides
The Bank's shares are listed in the Athens Stock Exchange since 1925 and are ranked among the companies with the higher market capitalization. Additionally, the Bank's share is included in a series of international indices, such as MSCI Emerging Markets Index, the FTSE All World, FTSE Med100 and the FTSE4Good Emerging Index (from December 2016).
Apart from Greek Stock Exchange, the shares of the Bank are listed on the London Stock Exchange in the form of international certificates (GDRs) and they are traded over the counter in New York (ADRs).
The total number of ordinary shares amounted to 1,536,881,200 as at 31 December 2016. 1,367,706,054 ordinary shares of the Bank are traded in the Athens Stock Exchange while the Hellenic Financial Stability Fund ("HFSF") possesses the remaining 169,175,146 ordinary, registered, voting, paperless shares or percentage equal to 11.01% on the total of ordinary shares issued by the Bank. The exercise of the voting rights for the shares of HFSF is subject to restrictions according to the article 7a of Law 3864/2010.
In addition, on the Athens Stock Exchange there are 1,141,734,167 warrants that are traded each one incorporating the right of the holder to purchase 0.148173663047785 new shares owned by the HFSF.
During the year 2016, the average daily volume per session for shares was 14,802,962 and for warrants 4,325.
The credit rating of the Bank assessment by three international credit rating agencies is as follows:
Moody's: Caa3
Fitch Ratings: RD
Standard & Poor's: CCC+
According to Law 4374/1.4.2016, the obligation to publish quarterly financial statements for the first and third quarter of the financial year, pursuant to the provision of Article 6 of Law 3556/30.4.2007 before its amendment, was abolished. However, article 25 of Law 4416/6.9.2016 incorporated article 5b in the Law 3556/30.4.2007, based on which the obligation to prepare and publish consolidated Financial Statements for the first and third quarter of the financial year remains. This obligation relates to credit institutions whose securities are traded on a regulated market and are required to publish Consolidated Financial Statements.
Furthermore, according to No.8/754/14.4.2016 decision of the Hellenic Capital Market Commission relating to "Special Topics Periodic Reporting according to Law 3556/30.4.2007", the obligation to publish financial Information arising from the quarterly and half-yearly financial statements, as previously stated by the No.4/507/28.4.2009 decision of the Hellenic Capital Market Commission Board of Directors, was abolished.
In addition, according to Law 4403/7.7.2016, which amended article 135 of Codified Law 2190/1920 the obligation to publish the financial information arising from the annual financial statements, was abolished.
The financial statements have been approved by the Board of Directors on 30 March 2017.
ACCOUNTING POLICIES APPLIED
1.1 Basis of presentation
These consolidated financial statements relate to the fiscal year 1.1-31.12.2016 and they have been prepared:
a) in accordance with International Financial Reporting Standards (IFRS), as adopted by the European Union, in accordance with Regulation 1606/2002 of the European Parliament and the Council of the European Union on 19 July 2002 and
b) on the historical cost basis. As an exception, some assets and liabilities are measured at fair value. Those assets are mainly the following:
Trading securities
Derivative financial instruments
Available-for-sale securities
The convertible bond issued by the Bank which is included in "Debt securities in issue held by institutional investors and other borrowed funds".
The financial statements are presented in Euro, rounded to the nearest thousand, unless otherwise indicated.
The accounting policies for the preparation of the financial statements have been consistently applied by the Group to the years 2015 and 2016, after taking into account the following amendments to standards which were issued by the International Accounting Standards Board (IASB), adopted by the European Union and applied on 1.1.2016:
Amendment to International Financial Reporting Standard 10 "Consolidated Financial Statements", toInternational Financial Reporting Standard 12 "Disclosure of Interests in Other Entities" and toInternationalccounting Standard 28 "Investments in Associates and Joint Ventures": Investment Entities: Applying the Consolidation Exception (Regulation 2016/1703/22.9.2016)
On 18.12.2014, the International Accounting Standards Board issued an amendment to the above standards with which it clarified that the exception provided in IFRS 10 and IAS 28, for the preparation of consolidated financial statements and the application of the equity method respectively, applies also to a parent entity that it is a subsidiary of an investment entity which measures all of its subsidiaries at fair value according to IFRS 10. In addition, with the aforementioned amendment it was clarified that the disclosure requirements of IFRS 12 apply to the investment entities which measure all of their subsidiaries at fair value through profit or loss.
The adoption of the above amendment by the Group had no impact on its financial statements.
Amendment to International Financial Reporting Standard 11 "Joint Arrangements": Accounting for acquisition of interests in joint operations (Regulation 2015/2173/24.11.2015)
On 6.5.2014 the International Accounting Standards Board issued an amendment to IFRS 11 with which it is clarified that when an entity acquires an interest in a joint operation in which the activity of the joint operation constitutes a business (as defined in IFRS 3), it shall apply all of the principles on business combinations accounting in IFRS 3, and other IFRSs, that do not conflict with the guidance in IFRS 11. In addition, it shall disclose the information required by IFRS 3 and other related standards. This applies both when acquiring the initial interest in the joint operation that constitutes a business and when acquiring an additional interest.
The adoption of the above amendment by the Group had no impact on its financial statements.
Amendment to International Accounting Standard 1 "Presentation of Financial Statements": Disclosure Initiative (Regulation 2015/2406/18.12.2015)
On 18.12.2014 the International Accounting Standards Board issued an amendment to IAS 1 in the context of the project it has undertaken to analyze the possibilities for improving the disclosures in IFRS financial reporting. The main amendments are summarized below:
the restriction to disclose only a summary of significant accounting policies is removed;
it is clarified that even when other standards require specific disclosures as minimum requirements, an entity may not provide them if this is considered immaterial. In addition, in case the disclosures required by the IFRS are insufficient to enable users to understand the impact of particular transactions, the entity shall consider whether to provide additional disclosures;
it is clarified that the line items that IFRS require to be presented in the balance sheet and the statements of profit or loss and other comprehensive income are not restrictive and that the entity may present additional line items, headings and subtotals;
it is clarified that in the Statement of Comprehensive Income the share of other comprehensive income of associates and joint ventures accounted for using the equity method shall be separated into:
- amounts that will not be reclassified subsequently to profit or loss and
- amounts that will be reclassified subsequently to profit or loss;
it is clarified that the standard does not specify the presentation order of the notes and that each entity shall determine a systematic manner of presentation taking into account the understandability and comparability of its financial statements.
The adoption of the above amendment by the Group had no impact on its financial statements.
Amendment to International Accounting Standard 16 "Property, Plant and Equipment" and toInternational Accounting Standard 38 "Intangible Assets": Clarification of Acceptable Methods of Depreciation and Amortization (Regulation 2015/2231/2.12.2015)
On 12.5.2014 the International Accounting Standards Board issued an amendment to IAS 16 and IAS 38 with which it expressly prohibits the use of revenue as a basis for the depreciation and amortization method of property, plant and equipment and intangible assets respectively. An exception is provided only for intangible assets and only when the following conditions are met:
when the intangible asset is expressed as a measure of revenue, i.e. when the right over the use of the intangible asset is expressed as a function of revenue to be generated in such a way that the generation of a specific amount of revenue determines the end of the right of use, or
when it can be demonstrated that the revenue and the consumption of the economic benefits are highly correlated.
The adoption of the above amendment by the Group had no impact on its financial statements.
Amendment to International Accounting Standard 16 "Property, Plant and Equipment" and toInternational Accounting Standard 41 "Agriculture": Bearer Plants (Regulation 2015/2113/23.11.2015)
On 30.6.2014 the International Accounting Standards Board issued an amendment to IAS 16 and IAS 41 with which it clarified that bearer plants, which are living plants that:
a) are used in the production or supply of agricultural produce;
b) are expected to bear produce for more than one period; and
c) have remote likelihood of being sold as agricultural produce, except for incidental scrap sales,
shall be accounted for based on IAS 16 instead of IAS 41.
The above amendment does not apply to the activities of the Group.
Amendment to International Accounting Standard 27 "Separate Financial Statements": Equity Method in Separate Financial Statements (Regulation 2015/2441/18.12.2015)
On 12.8.2014 the International Accounting Standards Board issued an amendment to IAS 27 with which it provides the option to use the equity method to account for investments in subsidiaries, joint ventures and associates in an entity's separate financial statements. In addition, with the above amendment it is clarified that the financial statements of an investor that does not have investments in subsidiaries but has investments in associates or joint ventures, which under IAS 28 are accounted for with the equity method, do not constitute separate financial statements.
The above amendment does not apply to the financial statements of the Group.
Improvements to International Accounting Standards - cycle 2012-2014 (Regulation 2015/2343/15.12.2015)
As part of the annual improvements project, the International Accounting Standards Board issued, on 25.9.2014, non- urgent but necessary amendments to various standards.
The adoption of the above amendments had no impact on the financial statements of the Group.
Except for the standards mentioned above, the European Union has adopted the following new standards which are effective for annual periods beginning after 1.1.2016 and have not been early adopted by the Group.
International Financial Reporting Standard 9 "Financial Instruments" (Regulation 2016/2067/22.11.2016)
Effective for annual periods beginning on or after 1.1.2018
On 24.7.2014, the International Accounting Standards Board completed the issuance of the final text of IFRS 9: Financial Instruments, which replaces the existing IAS 39. The new standard provides for significant differentiations in the classification and measurement of financial instruments as well as in hedge accounting. An indication of the new requirements is presented below:
Classification and measurement
Financial instruments shall be classified, at initial recognition, at either amortized cost or at fair value. The criteria that should be considered for the initial classification of the financial assets are the following:
i. The entity's business model for managing the financial assets and
ii. The contractual cash flow characteristics of the financial assets.
A financial asset shall be measured at amortized cost if both of the following conditions are met:
the instrument is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows and
the contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
If an instrument meets the above criteria but is held with the objective of both selling and collecting contractual cash flows it shall be classified as measured at fair value through other comprehensive income.
Financial assets that are not included in any of the above two categories are mandatorily measured at fair value though profit or loss.
In addition, IFRS 9 permits, at initial recognition, equity instruments to be classified at fair value through other comprehensive income. The option precludes equity instruments held for trading. Moreover, with regards to embedded derivatives, if the hybrid contact contains a host that is within the scope of IFRS 9, the embedded derivative shall not be separated and the accounting treatment of the hybrid contact should be based on the above requirements for the classification of the financial instruments.
With regards to the financial liabilities, the main difference is that the change in the fair value of a financial liability initially designated at fair value through profit or loss shall be recognised in profit or loss with the exception of the effect of change in the liability's credit risk which shall be recognised directly in other comprehensive income.
Impairment
Contrary to the existing IAS 39, under which an entity recognizes only incurred credit losses, the new standard requires the recognition of expected credit losses. In particular, on initial recognition of an asset, 12-month expected credit losses are recognized. However, in case the credit risk of the issuers has increased significantly since initial recognition as well as in cases of purchased or originated credit impaired assets lifetime expected credit losses are recognized.
Hedging
The new requirements for hedge accounting are more aligned with the entity's risk management. The main changes in relation to the current requirements of IAS 39 are summarized below:
more items become eligible for participating in a hedging relationship either as hedging instruments or as hedged items,
the requirement for hedge effectiveness tests to be within the range of 80%-125% is removed. Hedge effectiveness test is performed progressively only and under certain circumstances a qualitative assessment is considered adequate,
in case that a hedging relationship ceases to be effective but the objective of risk management regarding the hedging relationship remains the same, the entity shall rebalance the hedging relationship in order to satisfy the hedge effectiveness criteria.
It is noted that the new requirements for hedge accounting do not include those that relate to macro hedging, since they have not been finalized yet.
Except for the aforementioned modifications, the issuance of IFRS 9 has resulted in the amendment to other standards and mainly to IFRS 7 where new disclosures were added.
IFRS 9 Implementation Program
The Bank, in order to ensure proper application of the new standard, has embarked on the IFRS 9 Implementation Program. For the management of the Program two Committees have been established:
a. An Implementation Steering Committee consisting of member of the General Management
b. An Operational Steering Committee consisting of senior management from Finance, Credit Risk and IT.
The Implementation Steering Committee meets on a regular basis to confirm key assumptions, approve decisions and policies as well as to monitor the progress of the implementation work across the Group. The program is organized around two main work streams, the impairment workstream and the classification and measurement work stream. Delivery of implementation of the required changes has been undertaken by the approximately 42 projects that the Bank has identified to ensure compliance with IFRS 9.
In addition, the Board of Directors, the Audit Committee and the Risk Management Committee have assumed an active role, which includes the involvement in the decision making process for key assumptions and decisions of the IFRS 9 Program.
The project organization is relevant for significant Group subsidiaries which have also set up committees for the management of the application at the local level, within the framework of principles and policies set by the Group.
To date, the Program has been directed towards determining the classification of its financial instruments based on the new criteria, developing key methodologies regarding IFRS 9 concepts, designing the operating model and the systems operating model will be maintained and developing risk modeling methodologies for the calculation of impairment.
Classification and measurement work stream
The Group is in the process of assessing the existing and define the new business models, where necessary, that will be compatible with the Group's business strategy. The result of the assessment will be the mapping of Group's financial assets to the new business models.
Additionally, the Group is in the process of assessing its financial assets in order to determine whether the SPPI criterion (i.e. cash flows represent Solely Payments of Principal and Interest) is met. For standardised retail loans, the assessment is based on product characteristics while for non standardised (mainly corporate) loans and debt securities the assessment is based on the characteristics of the individual asset.
Finally, the Group is in the process of updating policies and designing new classification processes that shall be applied for the classification of financial assets from 1.1.2018.
Impairment work stream
The Group will be required to record an allowance for expected losses for all loans and other debt financial assets not held at fair value through profit or loss, together with loan commitments and financial guarantee contracts.
The allowance is based on the expected credit losses associated with the probability of default in the next twelve months unless there has been a significant increase in credit risk since origination, in which case, the allowance is based on the probability of default over the life of the asset.
When determining whether the risk of default has significantly increased since initial recognition, the Group intends to consider reasonable and supportable information, both quantitative and qualitative, that could vary between portfolios.
The Group is currently developing its detailed methodologies for assessing when there is an increase in credit risk.
The key inputs to the measurement of the expected credit loss are the following variables:
- Probability of default
- Loss Given default
- Exposure at default
The Group expects to derive these parameters from internally developed statistical models and other historical data that will be adjusted to reflect forward looking information. The Group intends to develop at least two scenarios to estimate future economic environment.
Finally, the Group is designing the processes and the governance framework for impairment calculations, including the new elements introduced by IFRS 9, with the aim to establish detailed process flow to be implemented in the system for impairment calculations and to update accordingly policy and process manuals.
Hedge accounting
The Group is still examining whether it will exercise the accounting policy choice to continue applying IAS 39 hedge accounting. The current intention is to continue to apply IAS 39.
Transition approach
The classification and measurement and impairment requirements are applied retrospectively by adjusting the opening balance sheet at the date of initial application, with no requirement to restate comparative periods. The current intention of the Group is not to restate comparatives.
Quantitative Impact
It is estimated that until IFRS 9 Implementation Program has progressed to such a degree that important decisions affecting implementation have been taken and incorporated in the models for the calculation of impairment losses there would be no reliable estimate of the impact of IFRS 9, especially with regards to the interaction with regulatory capital requirements. Therefore, no reliable information can be disclosed regarding expected impact on the Group's financial position and regulatory capital.
The Group, however, intends to quantify the potential impact of IFRS 9 once allowed by the degree of Program Implementation and no later than the audited annual financial statements of 31.12.2017.
International Financial Reporting Standard 15 "Revenue from Contracts with Customers" (Regulation 2016/1905/22.9.2016)
Effective for annual periods beginning on or after 1.1.2018
IFRS 15 "Revenue from Contracts with Customers" was issued on 28.5.2014 by the International Accounting Standards Board. The new standard is the outcome of a joint project by the IASB and the Financial Accounting Standards Board (FASB) to develop common requirements as far as the revenue recognition principles are concerned.
The new standard shall be applied to all contracts with customers, except those that are in scope of other standards, such as financial leases, insurance contracts and financial instruments.
According to the new standard, an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. A new revenue recognition model is introduced, by applying the following five steps:
- Step 1: Identify the contract(s) with a customer
- Step 2: Identify the performance obligations in the contract
- Step 3: Determine the transaction price
- Step 4: Allocate the transaction price to the performance obligations in the contract
- Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation.
The performance obligation notion is new and in effect represents a promise in a contract with a customer to transfer to the customer either: (a) a good or service (or a bundle of goods or services) that is distinct; or (b) a series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.
The new IFRS 15 supersedes:
(a) IAS 11 "Construction Contracts";
(b) IAS 18 "Revenue";
(c) IFRIC 13 "Customer Loyalty Programmes";
(d) IFRIC 15 "Agreements for the Construction of Real Estate";
(e) IFRIC 18 "Transfers of Assets from Customers";and
(f) SIC-31 "Revenue-Barter Transactions Involving Advertising Services".
The Group is examining the impact from the adoption of IFRS 15 on its financial statements.
In addition, the International Accounting Standards Board has issued the following standards and amendments to standards as well as IFRIC 22 which have not yet been adopted by the European Union and they have not been early applied by the Group.
Amendment to International Financial Reporting Standard 2 "Share-based Payment": Classification and Measurement of Share-based Payment Transactions
Effective for annual periods beginning on or after 1.1.2018
On 20.6.2016 the International Accounting Standards Board issued an amendment to IFRS 2 with which the following were clarified:
- in estimating the fair value of a cash-settled share-based payment, the accounting for the effects of vesting and non-vesting conditions shall follow the same approach as for equity-settled share-based payments,
- where tax law requires an entity to withhold a specified amount of tax (that constitutes a tax obligation of the employee) that relates to share-based payments and shall be remitted to the tax authority, such an arrangement shall be classified as equity-settled in its entirety, provided that the share-based payment would have been classified as equity-settled had it not included the net settlement feature,
- if the terms and conditions of a cash-settled share-based payment transaction are modified with the result that it becomes an equity-settled share-based payment transaction, the transaction is accounted for as such from the date of the modification.
The Group is examining the impact from the adoption of the above amendment on its financial statements.
Amendment to International Financial Reporting Standard 4 "Insurance Contracts": applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts
Effective for annual periods beginning on or after 1.1.2018
On 12.9.2016 the International Accounting Standards Board issued an amendment to IFRS 4 with which:
- It provides insurers, whose activities are predominantly connected with insurance, with a temporary exemption from application of IFRS 9 and
- following full adoption of IFRS 9, it gives all entities with insurance contracts the option to present changes in fair value on qualifying designated financial assets in other comprehensive income instead of profit or loss.
The Group is examining the impact from the adoption of the above amendment on its financial statements.
Amendment to International Financial Reporting Standard 10 "Consolidated Financial Statements" and toInternational Accounting Standard 28 "Investments in Associates and Joint Ventures": Sale or contribution of assets between an investor and its associate or joint venture
Effective date: To be determined
On 11.9.2014 the International Accounting Standards Board issued an amendment to IFRS 10 and IAS 28 in order to clarify the accounting treatment of a transaction of sale or contribution of assets between an investor and its associate or joint venture. In particular, IFRS 10 was amended in order to be clarified that in case that as a result of a transaction with an associate or joint venture, a parent loses control of a subsidiary, which does not contain a business, as defined in IFRS 3, it shall recognise to profit or loss only the part of the gain or loss which is related to the unrelated investor's interests in that associate or joint venture. The remaining part of the gain from the transaction shall be eliminated against the carrying amount of the investment in that associate or joint venture. In addition, in case the investor retains an investment in the former subsidiary and the former subsidiary is now an associate or joint venture, it recognises the part of the gain or loss resulting from the remeasurement at fair value of the investment retained in that former subsidiary in its profit or loss only to the extent of the unrelated investor's interests in the new associate or joint venture. The remaining part of the gain is eliminated against the carrying amount of the investment retained in the former subsidiary.
In IAS 28, respectively, it was clarified that the partial recognition of the gains or losses shall be applied only when the involved assets do not constitute a business. Otherwise, the total of the gain or loss shall be recognised.
On 17.12.2015, the International Accounting Standards Board deferred the effective date for the application of the amendment that had been initially determined. The new effective date will be determined by the International Accounting Standards Board at a future date after taking into account the results of its project relating to the equity method.
The Group is examining the impact from the adoption of the above amendment on its financial statements.
International Financial Reporting Standard 14 "Regulatory deferral accounts"
Effective for annual periods beginning on or after 1.1.2016
On 30.1.2014 the International Accounting Standards Board issued IFRS 14. The new standard addresses the accounting treatment and the disclosures required for regulatory deferral accounts that are maintained in accordance with local legislation when an entity provides rate-regulated goods or services. The scope of this standard is limited to first-time adopters that recognized regulatory deferral accounts in their financial statements in accordance with their previous GAAP. IFRS 14 permits these entities to capitalize expenditure that non-rate-regulated entities would recognize as expense.
The above standard does not apply to the financial statements of the Group.
Amendment to International Financial Reporting Standard 15 "Revenue from Contracts with Customers": Clarifications to IFRS 15 Revenue from Contracts with Customers
Effective for annual periods beginning on or after 1.1.2018
On 12.4.2016 the International Accounting Standards Board issued an amendment to IFRS 15 with which it clarified mainly the following:
- when a promised good or service is separately identifiable from other promises in a contract, which is part of an entity's assessment of whether a promised good or service is a performance obligation,
- how to apply the principal versus agent application guidance to determine whether the nature of an entity's promise is to provide a promised good or service itself (i.e., the entity is a principal) or to arrange for goods or services to be provided by another party (i.e., the entity is an agent),
- for a licence of intellectual property, which is a factor in determining whether the entity recognises revenue over time or at a point in time.
Finally, two practical expedients to the transition requirements of IFRS 15 were added for completed contracts under full retrospective transition approach as well as for contract modifications at transition.
The Group is examining the impact from the adoption of the above amendment on its financial statements.
International Financial Reporting Standard 16 "Leases"
Effective for annual periods beginning on or after 1.1.2019
On 13.1.2016 the International Accounting Standards Board issued IFRS 16 "Leases" which supersedes:
IAS 17 " Leases"
IFRIC 4 "Determining whether an arrangement contains a lease"
SIC 15 "Operating Leases - Incentives" and
SIC 27 "Evaluating the substance of transactions involving the legal form of a lease".
The new standard significantly differentiates the accounting of leases for lessees while essentially maintaining the existing requirements of IAS 17 for the lessors. In particular, under the new requirements, the classification of leases as either operating or finance is eliminated. A lessee is required to recognize, for all leases with term of more than 12 months, the right-of-use asset as well as the corresponding obligation to pay the lease payments. The above treatment is not required when the asset is of low value.
The Group is examining the impact from the adoption of IFRS 16 on its financial statements.
Amendment to International Accounting Standard 7 "Statement of Cash Flows": Disclosure Initiative
Effective for annual periods beginning on or after 1.1.2017
On 29.1.2016 the International Accounting Standards Board issued an amendment to IAS 7 according to which an entity shall provide disclosures that enable users of financial statements to evaluate changes in liabilities for which cash flows are classified in the statement of cash flows as cash flows from financing activities. The changes that shall be disclosed, which may arise both from cash flows and non-cash changes, include:
- changes from financing cash flows,
- changes arising from obtaining or losing control of subsidiaries or other businesses,
- the effect of changes in foreign exchange rates,
- changes in fair values and
- other changes.
The Group is examining the impact from the adoption of the above amendment on its financial statements.
Amendment to International Accounting Standard 12 "Income Taxes": Recognition of Deferred Tax Assets for Unrealised Losses
Effective for annual periods beginning on or after 1.1.2017
On 19.1.2016 the International Accounting Standards Board issued an amendment to IAS 12 with which the following were clarified:
Unrealised losses on debt instruments measured at fair value for accounting purposes and at cost for tax purposes may give rise to a deductible temporary difference regardless of whether the debt instrument's holder expects to recover the carrying amount of the asset by sale or by use.
The recoverability of a deferred tax asset is assessed in combination with other deferred tax assets. However, if tax law offsets specific types of losses only against a particular type of income, the relative deferred tax asset shall be assessed in combination with other deferred tax assets of the same type.
During the deferred tax asset recoverability assessment, an entity compares the deductible temporary differences with future taxable profit that excludes tax deductions resulting from the reversal of those deductible temporary differences.
The estimate of probable future taxable profit may include the recovery of some of an entity's assets for more than their carrying amount if there is sufficient evidence that it is probable that the entity will achieve this.
The Group is examining the impact from the adoption of the above amendment on its financial statements.
Amendment to International Accounting Standard 40 "Investment Property": Transfers of Investment Property
Effective for annual periods beginning on or after 1.1.2018
On 8.12.2016 the International Accounting Standards Board issued an amendment to IAS 40 with which it clarified that an entity shall transfer a property to, or from, investment property when, and only when, there is a change in use. A change in use occurs when the property meets, or ceases to meet, the definition of investment property and there is evidence of the change in use. In isolation, a change in management's intentions for the use of a property does not provide evidence of a change in use. In addition, the examples of evidence of a change in use were expanded to include assets under construction and not only transfers of completed properties.
The Group is examining the impact from the adoption of the above amendment on its financial statements.
Improvements to International Accounting Standards - cycle 2014-2016
Effective for annual periods beginning on or after 1.1.2017 and 1.1.2018
As part of the annual improvements project, the International Accounting Standards Board issued, on 8.12.2016, non- urgent but necessary amendments to various standards.
The Group is examining the impact from the adoption of the above amendments on its financial statements.
IFRIC Interpretation 22 "Foreign Currency Transactions and Advance Consideration"
Effective for annual periods beginning on or after 1.1.2018
On 8.12.2016 the International Accounting Standards Board issued IFRIC 22. The Interpretation covers foreign currency transactions when an entity recognizes a non monetary asset or liability arising from the payment or receipt of advance consideration before the entity recognizes the related asset, expense or income. The Interpretation clarified that the date of the transaction, for the purpose of determination of exchange rate to use on initial recognition of the asset, the income or expense, is the date of initial recognition of the non monetary asset or liability (i.e. advance consideration). Additionally, if there are multiple payments or receipts in advance, the entity shall determine a date of the transaction for each payment or receipt of advance consideration.
The Group is examining the impact from the adoption of the above Interpretation on its financial statements.
1.2 Basis of consolidation
The consolidated financial statements include the parent company Alpha Bank, its subsidiaries, associates and joint ventures. The financial statements used to prepare the consolidated financial statements have been prepared as at 31.12.2016 and the accounting policies applied in their preparation, when necessary, were adjusted to ensure consistency with the Group accounting policies.
a. Subsidiaries
Subsidiaries are entities controlled by the Group.
The Group takes into account the following factors, in assessing control:
- power over the investee,
- exposure, or rights, to variable returns from its involvement with the investee, and
- the ability to use its power over the investee to affect the amount of the investor's return.
Power arises from currently exercisable rights that provide the Group with the current ability to direct the relevant activities of the investee. In a straightforward case, rights that provide power are derived from voting rights granted by equity instruments such as shares. In other cases, power results from contractual arrangements.
The Group's returns are considered variable, when these returns have the potential to vary as a result of the investee's performance. Variability of returns is judged based on the substance of the arrangement, regardless of their legal form.
The Group, in order to evaluate the link between power and returns, assesses whether it exercises its power for its own benefit or on behalf of other parties, thus acting as either a principal or an agent, respectively. If the Group determines that it acts as a principal, then it controls the investee and consolidation is required. Otherwise, control does not exist and there is no requirement to consolidate.
In cases where the power over an investee arises from voting rights, the Group primarily assesses whether it controls the investee through holding more than 50% of the voting rights. However, the Group can have power even if it holds less than 50% of the voting rights of the investee, through:
- a contractual arrangement between the investors and other vote holders,
- rights arising from other contractual arrangements,
- the size of the investor's holding of voting rights relative to the size and dispersion of holdings of the other vote holders,
- potential voting rights.
In cases of structured entities where the voting rights relate to administrative tasks only and the relevant activities are directed by means of contractual arrangements (i.e. securitization vehicles or mutual funds), the Group assesses the existence of control based on the following:
the purpose of the entity and the contractual rights of the parties involved,
the risks to which the investee was designed to be exposed, the risks it was designed to pass on to the parties involved with the investee and the degree of exposure of the Group to those risks,
indications of a special relationship with the entity, which suggests that the Group has more than a passive interest in the investee.
Furthermore, regarding the structured entities that are managed by the Group, the Group assesses if it acts as principal or an agent based on the extent of its decision - making authority over the entity's activities, the rights of third parties and the degree of its exposure to variability of returns due to its involvement with the entity.
The Group, based on the above criteria, controls structured entities established for the securitization of loan portfolios.
The Group reassess whether it controls an investee if facts and circumstances indicate that there are changes to one or more of the elements of control.
The financial statements of subsidiaries are fully consolidated from the date that control commences until the date that control ceases.
The acquisition method is applied when the Group obtains control of other companies or units that meet the definition of a business. Application of the acquisition method requires identifying the acquirer, determining the acquisition date and measuring the consideration transferred, the identifiable assets acquired, the liabilities assumed and any non controlling interest in the acquiree, in order to determine the amount of goodwill or gain arising from the business combination.
The consideration transferred is measured at fair value on acquisition date. Consideration includes also the fair value of any contingent consideration. The obligation to pay contingent consideration is recognized as a liability or as an equity component, in accordance with IAS 32 or other applicable IFRSs. The right to the return of a previously transferred consideration is classified as an asset, if specified conditions are met. Subsequently, and to the extent that changes in the value of the contingent consideration do not constitute measurement period adjustments, contingent consideration is measured as follows:
- In case it has been classified in equity, it is not re-measured.
- In all other cases it is measured at fair value through profit or loss.
The identifiable assets acquired and liabilities assumed are initially recognised on acquisition date at their fair value, except from specific assets or liabilities for which a different measurement basis is required. Any non controlling interests are recognised at either fair value or at their proportionate share in the acquiree's identifiable net assets, as long as they are present ownership interests and entitle their holders to a proportionate share of the entity's net assets in the event of liquidation. Otherwise, they are measured at their acquisition date fair values.
Any difference between:
a. the sum of the consideration transferred, the fair value of any previously held equity interest of the Group in the acquiree and the amount of any non - controlling interests, and
b. the net of the acquisition date amounts of the identifiable assets acquired and the liabilities assumed,
is recognised as goodwill if the above difference is positive or as a gain in profit or loss if the difference is negative.
During the measurement period, the provisional amounts recognized at the acquisition date are adjusted in order to reflect new information obtained about facts and circumstances that existed as of the acquisition date and, if known, would have affected the measurement of the amounts recognized as of that date. These adjustments affect accordingly the amount of goodwill. The measurement period ends as soon as the information about facts and circumstances existed as of the acquisition date has been obtained. However, the measurement period shall not exceed one year from the acquisition date.
When the Group's interest in a subsidiary increases as a result of an acquisition, the difference between the consideration paid and the share of net assets acquired is recognized directly in retained earnings.
Sales of ownership interests in subsidiaries that do not result in a loss of control for the Group are accounted for as equity transactions and the gain or loss arising from the sale is recognized directly in retained earnings.
Intercompany transactions are eliminated, unless the transaction provides evidence of impairment of the asset transferred, in which case, it is recognized in the consolidated balance sheet.
b. Associates
Associates are entities over which the Group has significant influence but not control. Significant influence is generally presumed to exist when the Group holds, directly or indirectly, more than 20% of the share capital of the company concerned without having control or joint control, unless the ownership of more than 20% does not ensure significant influence, e.g. due to lack of representation of the Group in the company's Board of Directors or due to the Group's non-participation in the policy making process.
Investments in associates are accounted for using the equity method of accounting. The investment is initially recognised at cost and adjusted thereafter for the post acquisition change in the Group's share of net assets of the associate. In case the losses according to the equity method exceed the investment in ordinary shares, they are recognized as a reduction of other elements that are essentially an extension of the investment in the associate.
The Group's share of the associate's profit or loss and other comprehensive income is separately recognized in the income statement and in the statement of comprehensive income, accordingly.
c. Joint ventures
The Group applies IFRS 11 which deals with the accounting treatment of interests in joint arrangements. All joint arrangements in which the Group participates and has joint control are joint ventures, which are accounted for by using the equity method.
A detailed list of all Group subsidiaries, associates and joint ventures, as well as the Group's ownership interest in them, is provided in note 38.
1.3 Operating Segments
Operating segments are determined and measured based on the information provided to the Executive Committee of the Bank, which is the body responsible for the allocation of resourses between the Group's operating segments and the assessment of their performance.
Based on the above, as well as the Group's administrative structure and activities, the following operating segments have been determined:
Retail Banking
Corporate Banking
Asset Management and Insurance
Investment Banking and Treasury
South Eastern Europe
Other
Since the Group operates in various geographical areas, apart from the operating segments identified above, the financial statements contain information based on the below distinction:
Greece
Other Countries
It is noted that the methods used to measure operating segments for the purpose of reporting to the Executive Committee are not different from those required by the International Financial Reporting Standards.
Detailed information relating to operating segments is provided in note 40.
1.4 Transactions in foreign currency and translation of foreign operations
a. Transactions in foreign currency
The consolidated financial statements are presented in Euro, which is the functional currency and the currency of the country of incorporation of the parent company Alpha Bank.
Items included in the financial statements of the subsidiaries are measured in the functional currency of each subsidiary which is the currency of the company's country of incorporation or the currency used in the majority of the transactions held.
Transactions in foreign currencies are translated into the functional currency of each subsidiary at the closing exchange rate at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated into the functional currency at the closing exchange rate at that date. Foreign exchange differences arising on translation are recognized in the income statement.
Non-monetary assets and liabilities are recognized at the exchange rate ruling at initial recognition, except for non-monetary items denominated in foreign currencies that are measured at fair value. The exchange differences relating to these items are part of the change in fair value and they are recognized in the income statement or recorded directly in equity depending on the classification of the non-monetary item.
b. Translation of foreign operations
The financial statements of all group entities that have a functional currency that is different from the presentation currency of the Group financial statements are translated as follows:
i. Assets and liabilities are translated to Euro at the closing rate applicable on the balance sheet date. The comparative figures presented are translated to Euro at the closing rates at the respective date of the comparative balance sheet.
ii. Income and expense items are translated to Euro at average exchange rates applicable for each period presented.
The resulting exchange difference from the retranslation and those arising from other monetary items designated as a part of the net investment in the entity are recorded in equity. When a foreign entity is sold, the exchange differences are reclassified to the income statement as part of the gain or loss on sale.
1.5 Cash and cash equivalents
For the purposes of the consolidated cash flow statement, cash and cash equivalents consists of:
a. Cash on hand
b. Non-restricted placements with Central Banks and
c. Short-term balances due from banks and Reverse Repo agreements
Short-term balances due from banks are amounts that mature within three months of the balance sheet date.
1.6 Classification and measurement of financial instruments
Initial recognition
The Group recognises financial assets or financial liabilities in its statement of financial position when it becomes a party to the contractual provisions of the instrument.
Upon initial recognition the Group measures financial assets and liabilities at fair values. Financial instruments not measured at fair value through profit or loss are initially recognised at fair value plus transaction costs and minus income or fees that are directly attributable to the acquisition or issue of the financial instrument.
Subsequent measurement of financial assets
The Group classifies its financial assets as:
Loans and receivables
Held-to-maturity investments
Financial assets at fair value through profit or loss
Available-for-sale financial assets
For each of the above categories the following apply:
a) Loans and receivables
Non derivative financial assets, with fixed or determinable payments, that are not quoted in an active market and for which the Group does not expect not to recover substantially its investment other than because of credit deterioration of the issuer, can be classified as loans and receivables. The Group has classified the following as loans and receivables:
i. loans to customers,
ii. amounts paid to acquire a portion or the total of series of bonds that are not quoted in an active market,
iii. all receivables from customers, banks etc.,
iv. bonds with fixed or determinable payments that are not quoted in an active market.
This category is measured at amortized cost using the effective interest rate method and is periodically tested for impairment based on the procedures described in note 1.14.
The effective interest rate method is a method of calculating the amortised cost of a financial instrument and of allocating the interest income or expense during the relative period. The effective interest rate is the rate that exactly discounts the estimated future cash payments or receipts through the contractual life of a financial instrument or the next repricing date.
b) Held-to-maturity investments
Non derivative financial assets with fixed or determinable payments and fixed maturity that the Group has the positive intention and ability to hold until maturity can be classified as Held-to-maturity investments.
The Group has classified bonds, treasury bills and other debt securities in this category.
Held-to-maturity investments are measured at amortized cost using the effective interest rate method and are tested for impairment at each reporting date. In cases when objective evidence exists that an impairment loss has occurred, the carrying amount of the financial asset is reduced to the recoverable amount, and the difference is recognised in profit or loss.
c) Financial assets at fair value through profit or loss
Financial assets included in this category are:
i. Financial assets which are acquired principally for the purpose of selling in the near term to obtain short term profit (held for trading).
The Group has included in this category bonds, treasury bills and a limited number of shares.
ii. Financial assets the Group designated, at initial recognition, as at fair value through profit or loss. This classification is used in the following circumstances:
When management monitors and manages the financial instruments on a fair value basis in accordance with a documented risk management or investment strategy.
When the designation eliminates an accounting mismatch which would otherwise arise from measuring financial assets and liabilities on a different basis (i.e. amortized cost) in relation to another financial asset or liability (i.e. derivatives which are measured at fair value through profit or loss).
When a financial instrument contains an embedded derivative that significantly modifies the cash flows, or the separation of these derivatives from the main financial instruments is not prohibited.
As at the reporting date, the Group had not designated, at initial recognition, any financial assets as at fair value through profit or loss.
d) Available-for-sale
Available-for-sale financial assets are financial assets that have not been classified in any of the previous categories.
The Group has included in this category bonds, treasury bills, debt securities, shares and mutual fund units.
This category is measured at fair value. Changes in fair value are recognized directly in equity until the financial asset is sold, where upon, the cumulative gains and losses previously recognized in equity are recognized in profit or loss.
The financial assets included in this category are reviewed at each balance sheet date to determine whether there is any indication of impairment. For investments in shares, in particular, a significant or prolonged decline in their fair value below their acquisition cost is considered as an objective evidence of impairment. The Group considers as "significant" a decrease of over 20% compared to the cost of the investment. Respectively, "prolonged" is a decrease in the fair value below amortised cost for a continuous period exceeding one year. The above criteria are assessed in conjunction with the general market conditions.
In case of impairment, the cumulative loss already recognised in equity is reclassified in profit or loss. When a subsequent event causes the amount of impairment loss recognised on an available-for-sale bond or debt security to decrease, the impairment loss is reversed through profit or loss, if it can objectively be related to an event occurring after the impairment loss was recognized. However, impairment losses recognised for investments in shares and mutual funds are not reversed through profit or loss.
The measurement principles noted above are not applicable when a specific financial asset is the hedged item in a hedging relationship, in which case the principles set out in note 1.7 apply.
Reclassification of financial assets
Reclassification of non-derivative financial assets is permitted as follows:
i. Reclassification out of the "held-for-trading" category to the "loans and receivables" category, "investments held-to-maturity" category or "available-for-sale" category is permitted only when there are rare circumstances and the financial assets are no longer held for sale in the foreseeable future.
ii. Reclassification out of the "held-for-trading" category to either "loans and receivables" or "available-for-sale" is permitted, even when there are no rare circumstances, only if the financial assets meet the definition of loans and receivables and there is the intention to hold them for the foreseeable future or until maturity.
iii. Reclassification out of the "available-for-sale" category to the "loans and receivables" category is permitted for financial assets that would have met the definition of loans and receivables and the entity has the intent to hold the financial asset for the foreseeable future or until maturity.
iv. Reclassification out of the "available-for-sale" category to the "held-to-maturity" category is permitted for financial assets that meet the relevant characteristics and the entity has the intent and ability to hold them until maturity.
v. Reclassification out of the "held-to-maturity" category to the "available-for-sale" category occurs when the entity has no longer the intention or the ability to hold these instruments until maturity.
It is noted that in case of sale or reclassification of a significant amount of held-to-maturity investments, the remaining investments in this category are mandatorily transferred to the available-for-sale category. This would prohibit the classification of any securities as held for maturity for the current and the following two financial years. Exceptions apply in cases of sales and reclassifications of investments that:
- are so close to maturity or the financial asset's call date that changes in the market rate of interest would not have a significant effect on the financial asset's fair value;
- occur after the Group has collected substantially all of the financial asset's original principal through scheduled payments or prepayments; or
- are attributable to an isolated, nonrecurring event that is beyond the Group's control.
Derecognition of financial assets
The Group derecognizes financial assets when:
the cash flows from the financial assets expire,
the contractual right to receive the cash flows of the financial assets is transferred and at the same time both risks and rewards of ownership are transferred,
loans or investments in securities are no longer recoverable and consequently are written off.
In the case of transactions where despite the transfer of the contractual right to recover the cash flows from financial assets both the risk and rewards remain with the Group, no derecognition of these financial assets occurs. The amount received by the transfer is recognized as a financial liability. The accounting practices followed by the Group in such transactions are discussed further in notes 1.21 and 1.22
In the case of transactions, whereby the Group neither retains nor transfers risks and rewards of the financial assets, but retains control over them, the financial assets are recognized to the extent of the Group's continuing involvement. If the Group does not retain control of the assets then they are derecognised, and in their position the Group recognizes, distinctively, the assets and liabilities which are created or retained during the transfer. No such transactions occurred upon balance sheet date.
Subsequent measurement of financial liabilities
The Group classifies financial liabilities in the following categories for measurement purposes:
a) Financial liabilities measured at fair value through profit or loss
i. This category includes financial liabilities held for trading, that is:
financial liabilities acquired or incurred principally with the intention of selling or repurchasing in the near term for short term profit, or
derivatives not used for hedging purposes. Liabilities arising from either derivatives held for trading or derivatives used for hedging purposes are presented as "derivative financial liabilities" and are measured according to the principles set out in note 1.7.
ii. this category also includes financial liabilities which are designated by the Group as at fair value through profit or loss upon initial recognition, according to the principles set out above for financial assets (point cii).
In the context of the acquisition of Emporiki Bank, the Group issued a bond which was classified in the above mentioned category.
b) Financial liabilities carried at amortized cost
The liabilities classified in this category are measured at amortized cost using the effective interest method.
Liabilities to credit institutions and customers, debt securities issued by the Group and other loan liabilities are classified in this category.
In cases when financial liabilities included in this category are designated as the hedged item in a hedge relationship, the accounting principles applied are those set out in note 1.7.
c) Liabilities arising from financial guarantees and commitments to provide loans at a below market interest rate
A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment.
The financial guarantee contracts and the commitments to provide loans at a below market interest rate are initially recognized at fair value, and measured subsequently at the higher of:
the amount of the provision (determined in accordance with IAS 37) when an outflow of resources is considered probable and a reliable estimate of this outflow is possible,
the amount initially recognised less cumulative amortization.
Derecognition of financial liabilities
The Group derecognizes a financial liability (or part thereof) when its contractual obligations are discharged or cancelled or expire.
In cases that a financial liability is exchanged with another one with substantially different terms, the exchange is accounted for as an extinguishment of the original financial liability and the recognition of a new one. The same applies in cases of a substantial modification of the terms of an existing financial liability or a part of it (whether or not attributable to the financial difficulty of the debtor). The terms are considered substantially different if the discounted present value of the cash flows under the new terms (including any fees paid net of any fees received), discounted using the original effective interest rate, is at least 10% different from the present value of the remaining cash flows of the original financial liability.
In cases of derecognition, the difference between the carrying amount of the financial liability (or part of the financial liability) extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss.
Offsetting financial assets and financial liabilities
Financial assets and liabilities are offset and the net amount is presented in the balance sheet, only in cases when the Group has both the legal right and the intention to settle them on a net basis, or to realize the asset and settle the liability simultaneously.
1.7 Derivative financial instruments and hedge accounting
Derivative financial instruments
Derivatives are financial instruments that upon inception have a minimal or zero value that subsequently changes in accordance with a particular underlying instrument (foreign exchange, interest rate, index or other variable).
All derivatives are recognized as assets when their fair value is positive and as liabilities when their fair value is negative.
Derivatives are entered into for either hedging or trading purposes and they are measured at fair value irrespective of the purpose for which they have been transacted.
In the cases when derivatives are embedded in other financial instruments, such as bonds, loans, deposits, borrowed funds etc and the host contract is not itself carried at fair value through profit or loss, then they are accounted for as separate derivatives when the economic characteristics and risks of the embedded derivative are not closely related to those of the host contract. These embedded derivatives are measured at fair value and are recognized as derivative assets or liabilities.
In the cases where derivatives are embedded in financial instruments that are measured at fair value through profit or loss, the changes in the fair value of the derivative are included in the fair value change of the combined instrument and recognized in gains less losses on financial transactions.
The Group uses derivatives as a means of exercising Asset-Liability management within the guidelines established by the Asset-Liability Committee (ALCO).
In addition the Group uses derivatives for trading purposes to exploit short-term market fluctuations, within the Group risk level set by the Asset-Liability Committee (ALCO).
Valuation differences arising from these derivatives are recognized in gains less losses on financial transactions.
When the Group uses derivatives for hedging purposes it ensures that appropriate documentation exists on inception of the transaction, and that the effectiveness of the hedge is monitored on an ongoing basis at each balance sheet date.
We emphasize the following:
a. Synthetic Swaps
The parent company (Alpha Bank), in order to increase the return on deposits to selected customers, uses synthetic swaps.
This involves the conversion of a Euro deposit to JPY or other currency with a simultaneous forward purchase of the related currency to cover the foreign exchange exposure.
The result arising from the forward transaction is recognized as interest expense, which is included in deposits' interest expense, foreign exchange differences and other gains less losses on financial transactions.
b. FX Swaps
These types of swaps are entered into primarily to hedge the exposures arising from customer loans and deposits.
As there is no documentation to support hedge accounting they are accounted for as trading instruments.
The result arising from these derivatives is recognized as interest and foreign exchange differences, in order to match with the interest element and foreign exchange differences resulting from the deposits and loans, and as other gains less losses on financial transactions.
Hedge accounting
Hedge accounting establishes the valuation rules to offset the gain or loss of the fair value of a hedging instrument and a hedged item which would not have been possible if the normal measurement principles were applied.
Documentation of the hedging relationship upon inception and of the effectiveness of the hedge on an on-going basis are the basic requirements for the adoption of hedge accounting.
The hedge relationship is documented upon inception and the hedge effectiveness test is carried out upon inception and is repeated at each reporting date.
a. Fair value hedges
A fair value hedge of a financial instrument offsets the change in the fair value of the hedged item in respect of the risks being hedged.
Changes in the fair value of both the hedging instrument and the hedged item, in respect of the specific risk being hedged, are recognized in the income statement.
When the hedging relationship no longer exists, the hedged items continue to be measured based on the classification and valuation principles set out in note 1.6. Specifically any adjustment, due to the fair value change of a hedged item for which the effective interest method is used, up to the point that the hedging relationship ceases to be effective, is amortized to interest income or expense based on a recalculated effective interest rate, over its remaining life.
The Group uses interest rate swaps (IRS's, caps) to hedge risks relating to borrowings, bonds, and loans.
b. Cash flow hedge
A cash flow hedge changes the cash flows of a financial instrument from a variable rate to a fixed rate.
The effective portion of the gain or loss on the hedging instrument is recognized directly in equity, whereas the ineffective portion is recognized in profit or loss. The accounting treatment of the hedged item does not change.
When the hedging relationship is discontinued, the amount recognized in equity remains there separately until the cash flows or the future transaction occur. When the cash flows or the future transaction occur the following apply:
- If the result is the recognition of a financial asset or a financial liability, the amount is reclassified to profit or loss in the same periods during which the hedged forecast cash flows affect profit or loss.
- If the result is the recognition of a non-financial asset or a non-financial liability or a firm commitment for which fair value hedge accounting is applied, the amount recognized in equity either is reclassified to profit or loss in the same periods during which the asset or the liability affect profit or loss or adjusts the carrying amount of the asset or the liability.
If the expected cash flows or the transaction are no longer expected to occur, the amount is reclassified to profit or loss.
The Group applies cash flow hedge accounting for specific groups of term deposits as well as for the currency risk of specific assets. The amount that has been recognized in equity, as a result of revoked cash flow hedging relationships for term deposits, is linearly amortized in the periods during which the hedged cash flows from the aforementioned term deposits affect profit or loss.
c. Hedges of net investment in a foreign operation
The Group uses foreign exchange derivatives or borrowings to hedge foreign exchange risks arising from investment in foreign operations.
Hedge accounting of net investment in a foreign operation is similar to cash flow hedge accounting. The cumulative gain or loss recognized in equity is reversed and recognized in profit or loss, at the time that the disposal of the foreign operation takes place.
1.8 Fair Value Measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, in the principal market for the asset or liability or, in the absence of a principal market, in the most advantageous market for the asset or liability.
The Group measures the fair value of assets and liabilities traded in active markets based on available quoted market prices. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, pricing service or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm's length basis. Especially, for the measurement of securities, the Group uses a particular range of prices, within the bid-ask spread, in order to characterize the prices as prices of an active market.
The fair value of financial instruments that are not traded in an active market is determined by the use of valuation techniques, appropriate in the circumstances, and for which sufficient data to measure fair value are available, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs. If observable inputs are not available, other model inputs are used which are based on estimations and assumptions such as the determination of expected future cashflows, discount rates, probability of counterparty default and prepayments. In all cases, the Group uses the assumptions that 'market participants' would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
Assets and liabilities which are measured at fair value or for which fair value is disclosed are categorized according to the inputs used to measure their fair value as follows:
Level 1 inputs: quoted market prices (unadjusted) in active markets
Level 2 inputs: directly or indirectly observable inputs
Level 3 inputs: unobservable inputs used by the Group, to the extent that relevant observable inputs are not available
In particular, the Group applies the following:
Financial instruments
For financial instruments the best evidence of fair value at initial recognition is the transaction price, unless the fair value can be derived by other observable market transactions relating to the same instrument, or by a valuation technique using mainly observable inputs. In these cases, if the fair value differs from the transaction price, the difference is recognized in the statement of comprehensive income. In all other cases, fair value is adjusted to defer the difference with the transaction price. After initial recognition, the deferred difference is recognized as a gain or loss only to the extent that it arises from a change in a factor that market participants would take into account when pricing the instrument.
When measuring fair value, the Group takes into consideration the effect of credit risk. Specifically, for derivative contracts, the Group estimates the credit risk of both counterparties (bilateral credit valuation adjustments).
The Group measures fair value for all assets and liabilities separately. Regarding derivative exposures, however, that the Group manages as a group on a counterparty basis and for which it provides information to the key management personnel, the fair value measurement for credit risk is performed based on the net risk exposure per counterparty. Credit valuation adjustments arising from the aforementioned process are allocated to either assets or liabilities, depending on whether the net exposure to the counterparty is long or short respectively.
Furthermore, the fair value of deposit accounts with a demand feature (such as saving deposits) is no less than the amount payable on demand, discounted from the first date that the amount could be required to be paid.
The principal inputs to the valuation techniques used by the Group are:
Bond prices - quoted prices available for government bonds and certain corporate securities.
Credit spreads - these are derived from active market prices, prices of credit default swaps or other credit based instruments, such as debt. Values between and beyond available data points are obtained by interpolation and extrapolation.
Interest rates - these are principally benchmark interest rates such as the LIBOR, OIS and other quoted interest rates in the swap, bond and futures markets. Values between and beyond available data points are obtained by interpolation and extrapolation.
Foreign currency exchange rates - observable markets both for spot and forward contracts and futures.
Equity and equity index prices - quoted prices are generally readily available for equity shares listed on stock exchanges and for major indices on such shares.
Price volatilities and correlations - Volatility and correlation values are obtained from pricing services or derived from option prices.
Unlisted equities - financial information specific to the company or industry sector comparables.
Mutual Funds- for open-ended investments funds listed on a stock exchange the published daily quotations of their net asset values (NAVs).
Non financial assets and liabilities
The most important category of non financial assets for which fair value is estimated is real estate property.
The process, mainly, followed for the determination of the fair value is summarized below:
Assignment to the engineer - valuer
Case study- Setting of additional data
Autopsy - Inspection
Data processing - Calculations
Preparation of the valuation report
To derive the fair value of the real estate property, the valuer chooses among the three following valuation techniques:
Market approach (or sales comparison approach), which measures the fair value by comparing the property to other identical ones for which information on transactions is available.
Income approach, which capitalizes future cash flows arising from the property using an appropriate discount rate.
Cost approach, which reflects the amount that would be required currently to replace the asset with another asset with similar specifications, after taking into account the required adjustment for impairment.
Examples of inputs used to determine the fair value of properties and which are analysed to the individual valuations, are the following:
Commercial property: price per square meter, rent growth per annum, long-term vacancy rate, discount rate, expense rate of return, lease term, rate of non leased properties/units for rent.
Residential property: Net return, reversionary yield, net rental per square meter, rate of continually non leased properties/units, expected rent value per square meter, discount rate, expense rate of return, lease term etc.
General assumptions such as the age of the building, residual useful life, square meter per building etc are also included in the analysis of the individual valuation assessments.
It is noted that the fair value measurement of a property takes into account a market's participant ability to generate economic benefits by using the asset in it's highest and best use or by selling it to another market participant that would use the asset in it's highest and best use.
1.9 Property, Plant and Equipment
This caption includes: land, buildings used by branches or for administrative purposes, additions and improvements of leased property and equipment.
Property, plant and equipment are initially recognised at cost which includes any expenditure directly attributable to the acquisition of the asset.
Subsequently, property, plant and equipment are measured at cost less accumulated depreciation and impairment losses.
Subsequent expenditure is recognized on the carrying amount of the item when it increases future economic benefit.
Expenditure on repairs and maintenance is recognized in profit or loss as an expense as incurred.
Depreciation is charged on a straight line basis over the estimated useful lives of property, plant and equipment and it is calculated on the asset's cost minus residual value.
The estimated useful lives are as follows:
Buildings: up to 50 years
Additions to leased fixed assets and improvements: duration of the lease
Equipment and vehicles: up to 40 years
Land is not depreciated but it tested for impairment.
The right to use of land for indefinite period that is held by Alpha Real Estate D.O.O. Belgrade, a subsidiary of the Group, is recorded as land and is not depreciated.
The residual value of property and equipment and their useful lives are periodically reviewed and adjusted if necessary at each reporting date.
Property, plant and equipment are reviewed at each reporting date to determine whether there is an indication of impairment and if they are impaired the carrying amount is adjusted to its recoverable amount with the difference recorded in profit or loss.
Gains and losses from the sale of property and equipment are recognized in profit or loss.
1.10 Investment property
The Group includes in this category buildings or portions of buildings together with their respective portion of land that are held to earn rental income.
Investment property is initially recognised at cost which includes any expenditure directly attributable to the acquisition of the asset.
Subsequently investment property is measured at cost less accumulated depreciation and impairment losses.
Subsequent expenditure is recognized on the carrying amount of the item when it increases future economic benefit. All costs for repairs and maintenance are recognized in profit or loss as incurred.
The estimated useful lives over which depreciation is calculated using the straight line method are the same as those applied to property, plant and equipment.
In case of a change in the Group's intention regarding the use of property, reclassifications to or from the "Investment Property" category occur. In particular, property is reclassified to "Property, plant and equipment" if the Group's intention is to use the asset in its own business operations, whereas in case the Group decides to sell the property, it is reclassified to the "Assets held-for-sale" category, provided that all conditions mentioned in paragraph 1.17 are met. Conversely, property not classified as "Investment Property" is transferred to this category in case a decision for its lease is made.
1.11 Goodwill and other intangible assets
Goodwill
Goodwill represents the difference between the cost of an acquisition as well as the value of non-controlling interests and the fair value of the assets and liabilities of the entity acquired, as at the acquisition date.
Positive goodwill arising from acquisitions after 1/1/2004 is recorded to "Goodwill and other intangible assets", if it relates to the acquisition of a subsidiary, and it is tested for impairment at each balance sheet date. Goodwill on acquisitions of associates or joint ventures is included in "Investment in associates and joint ventures".
Negative goodwill is recognized in profit or loss.
Other intangible assets
The Group has included in this caption:
a) Intangible assets which are recognized from business combinations in accordance with IFRS 3 or which were individually acquired. The intangible assets are carried at cost less accumulated amortization and impairment losses.
Intangible assets include the value attributed to the acquired customer relationships, deposit bases and mutual funds management rights. Their useful life has been determined from 2 to 9 years.
b) Software, which is measured at cost less accumulated amortization and impairment losses. The cost of separately acquired software comprises of its purchase price and any directly attributable cost of preparing the software for its intended use, including employee benefits or professional fees. The cost of internally generated software comprises of expenditure incurred during the development phase, including employee benefits arising from the generation of the software. Amortization is charged over the estimated useful life of the software which the Group has estimated between 1 to 15 years. Expenditure incurred to maintain software programs is recognized in the income statement as incurred. Software that is considered to be an integral part of hardware (hardware cannot operate without the use of the specific software) is classified in property, plant and equipment.
c) Brand names and other rights are measured at cost less accumulated amortization and impairment losses. The amortization is charged over the estimated useful life which the Group has estimated up to 7 years.
Intangible assets are amortized using the straight line method, excluding those with indefinite useful life, which are not amortized. All intangible assets are tested for impairment.
No residual value is estimated for intangible assets.
1.12 Leases
The Group enters into leases either as a lessee or as a lessor.
When the risks and rewards incident to ownership of an asset are transferred to the lessee they are classified as finance leases.
All other lease agreements are classified as operating leases.
The accounting treatment followed depends on the classification of the lease, which is as follows:
a) When the Group is the lessor
i. Finance leases:
For finance leases where the Group is the lessor the aggregate amount of lease payments is recognized as loans and advances.
The difference between the present value (net investment) of lease payments and the aggregate amount of lease payments is recognized as unearned finance income and is deducted from loans and advances.
The lease rentals received decrease the aggregate amount of lease payments and finance income is recognized on an accrual basis.
The finance lease receivables are subject to the same impairment testing as applied to customer loans and advances as described in note 1.14.
ii. Operating leases:
When the Group is a lessor of assets under operating leases, the leased asset is recognized and depreciation is charged over its estimated useful life. Income arising from the leased asset is recognized as other income on an accrual basis.
b) When the Group is the lessee
i. Finance leases:
For finance leases, where the Group is the lessee, the leased asset is recognized as property, plant and equipment and a respective liability is recognized in other liabilities.
At the commencement of the lease the leased asset and liability are recognized at amounts equal to the fair value of leased property or, if lower, the present value of the minimum lease payments. The discount rate used in calculating the present value of the minimum lease payments is the interest rate implicit in the lease or if, this is not available, the Group's borrowing rate for similar financing.
Subsequent to initial recognition, the leased assets are depreciated over their useful lives unless the duration of the lease is less than the useful life of the leased asset and the Group is not expected to obtain ownership at the end of the lease, in which case the asset is depreciated over the term of the lease.
The lease payments are apportioned between the finance charge and the reduction of the outstanding liability.
ii. Operating leases:
For operating leases the Group, as a lessee, does not recognize the leased asset but charges in general administrative expenses the lease payments on an accrual basis.
1.13 Insurance activities
a) Insurance contracts
An insurance contract is a contract with which significant insurance risk is transferred from the policyholder to the insurance company and the insurance company agrees to compensate the policyholder if a specified uncertain future event affects him adversely. Insurance risk is significant if, and only if an event could force the company to pay significant additional benefits. For the Group, insurance risk is significant when the amount paid in the event of insurance risk exceeds 10% of the total benefit arising from the contract.
b) Distinction of insurance products
In accordance with IFRS 4 contracts that do not transfer significant insurance risk are characterized as investment and/or service contracts, and their accounting treatment is covered by IAS 32 and IAS 39 for financial instruments and IAS 18 for revenue.
All types of contracts offered by the Group are classified as insurance life contracts, as they represent individual, traditional insurance contracts that provide earnings participation based on surplus revenue from investment (in relation to the technical interest rate) on the mathematical reserves.
c) Insurance reserves
The insurance reserves are the current estimates of future cash flows arising from insurance life contracts. The reserves consist of:
i. Mathematical reserves
The insurance reserves for the term life contracts (e.g. term, comprehension, investment) are calculated on actuarial principles using the present value of future liabilities less the present value of premiums to be received.
The calculations are based on technical assumptions (mortality tables, interest rates) in accordance with the respective supervisory authorities on the date the contract was signed.
If the carrying amount of the insurance reserves is inadequate, the entire deficiency is provided for.
ii. Outstanding claims reserves
They concern liabilities on claims occurred and reported but not yet paid at the balance sheet date. These claims are determined on a case-by-case basis based on existing information (loss adjustors' reports, court decisions etc) at the balance sheet date.
They include also provisions for claims incurred but not reported at the balance sheet date (IBNR). The calculation of these provisions is based on statistical experience and the estimated average cost of claim.
d) Revenue recognition
Revenue from life insurance contracts is recognized when it becomes payable.
e) Reinsurance
The Group currently does not use reinsurance contracts.
f) Liability adequacy test
In accordance with IFRS 4 an insurer shall assess at each reporting date whether its recognized insurance reserves less deferred acquisition costs are adequate to cover the risk arising from the insurance contracts.
The methodology applied for life insurance products was based on current estimates of all future cash flows from insurance contracts and of related handling costs. These estimates were based on assumptions representing current market conditions and regarding parameters such as mortality, cancellations, future changes and allocation of administrative expenses as well as the discount rate. The guaranteed return included in certain insurance contracts has also been taken into account in estimating cash flows.
If that assessment shows that the carrying amount of its insurance reserves is inadequate, the entire deficiency is recognized against profit or loss.
1.14 Impairment losses on loans and advances
The Group assess at each balance sheet date whether there is evidence of impairment in accordance with the general principles and methodology set out in IAS 39 and the relevant implementation guidance.
Specifically, the steps performed are the following:
a. The criteria of assessment on an individual or collective basis
The Group assesses for impairment on an individual basis the loans that it considers individually significant. Significant are the loans of the wholesale sector as well as specific loans of the retail sector. For the remaining loans impairment test is performed on a collective basis.
The Group has determined the criteria that consist trigger events for the assessment of impairment.
Loans which are individually assessed for impairment and found not impaired are included in groups, based on similar credit risk characteristics, and assessed for impairment collectively.
The Group groups the portfolio into homogenous populations, based on common risk characteristics, and has a strong historical statistical basis, in which it performs an analysis with which it captures and defines impairment testing, by segment population.
In addition, as part of the collective assessment, the Group recognizes impairment for loss events that have been incurred but not reported (IBNR). The calculation of the impairment loss in these cases takes into account the period between the occurance of a specific event and the date it becomes known (Loss Identification Period).
A detailed analysis of the loans that belong to the wholesale and the retail sectors, of the trigger events for impairment as well as of the characteristics used for the determination of the groups for the collective assessment is included in note 41.1.
b. Methodology in determining future cash flows from impaired loans
The Group has accumulated a significant amount of historical data, which includes the loss given default for loans after the completion of forced recovery, or other measures taken to secure collection of loans, including the realization of collaterals.
Based on the above, the amount of the recoverable amount of each loan is determined after taking into account the time value of money. The cash flows are discounted at the loans' original effective interest rate.
An impairment loss is recognized to the extent that the recoverable amount of the loan is less than its carrying amount.
c. Interest income recognition
Interest income on impaired loans is recognized based on the carrying value of the loan net of impairment at the original effective interest rate.
d. Impairment recognition - Write - offs
Amounts of impaired loans are recognized on allowance accounts until the Group decides to write them down/write them off.
The policy of the Group regarding write downs/write offs is presented in detail in note 41.1.
e. Recoveries
If in a subsequent period, after the recognition of the impairment loss, events occur which require the impairment loss to be reduced, or there has been a collection of amounts from loans and advances previously written-off, the recoveries are recognized in impairment losses and provisions to cover credit risk.
1.15 Impairment losses on non-financial assets
The Group assess as at each balance sheet date non-financial assets for impairment, particularly property, plant and equipment, investment property, goodwill and other intangible assets as well as its investment in associates and joint ventures.
In assessing whether there is an indication that an asset may be impaired both external and internal sources of information are considered, of which the following are indicatively mentioned:
- The asset's market value has declined significantly, more than would be expected as a result of the passage of time or normal use.
- Significant changes with an adverse effect have taken place during the period or will take place in the near future, in the technological, economic or legal environment in which the entity operates or in the market to which the asset is dedicated.
- Significant unfavorable changes in foreign exchange rates.
- Market interest rates or other rates of return of investments have increased during the period, and those increases are likely to affect the discount rate used in calculating an asset's value in use.
- The carrying amount of the net assets of the entity is greater than its market capitalization.
- Evidence is available of obsolescence or physical damage of an asset.
An impairment loss is recognized in profit or loss when the recoverable amount of an asset is less than its carrying amount. The recoverable amount of an asset is the higher of its fair value less costs to sell and its value in use.
Fair value less costs to sell is the amount received from the sale of an asset (less the cost of disposal) in an orderly transaction between market participants.
Value in use is the present value of the future cash flows expected to be derived from an asset or cash -generating unit through their use and not from their disposal. For the valuation of property, plant and equipment, value in use incorporates the value of the asset as well as all the improvements which render the asset perfectly suitable for its use by the Group.
1.16 Income tax
Income tax consists of current and deferred tax.
Current tax for a period includes the expected amount of income tax payable in respect of the taxable profit for the current reporting period, based on the tax rates enacted at the balance sheet date.
Deferred tax is the tax that will be paid or for which relief will be obtained in future periods due to the different period that certain items are recognized for financial reporting purposes and for taxation purposes. It is calculated based on the temporary differences between the tax base of assets and liabilities and their respective carrying amounts in the financial statements.
Deferred tax assets and liabilities are calculated using the tax rates that are expected to apply when the temporary difference reverses, based on the tax rates (and laws) enacted at the balance sheet date.
A deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available against which the asset can be utilized.
Income tax, both current and deferred, is recognized in profit or loss except when it relates to items recognized directly in equity. In such cases, the respective income tax is also recognized in equity.
1.17 Non-current assets held for sale
Non-current assets or disposal groups that are expected to be recovered principally through a sale transaction, along with the related liabilities, are classified as held-for-sale.
The above classification is used if the asset is available for immediate sale in its present condition and its sale is highly probable. The sale is considered highly probable when it has been decided by Management, an active programme to locate a buyer has been initiated, the asset is actively marketed for sale at a price which is reasonable in relation to its current fair value and the sale is expected to be completed within one year. Non-current assets that are acquired exclusively with a view to their subsequent disposal are classified as held for sale at the acquisition date when the one-year requirement is met and it is highly probable that the remaining criteria will be met within a short period following the acquisition (usually within three months).
Non-current assets held for sale mainly consist of assets acquired through the enforcement of security over customer loans and advances. Before their classification as held for sale, the assets are remeasured in accordance with the respective accounting standard.
Assets held for sale are initially recognised and subsequently remeasured at each balance sheet date at the lower of their carrying amount and fair value less cost to sell. Any loss arising from the above measurement is recorded in profit or loss and can be reversed in the future. When the loss relates to a disposal group it is allocated to assets within the disposal group with the exception of specific assets that are not within the scope of IFRS 5. The impairment loss on a disposal group is first allocated to goodwill and then to the remaining assets and liabilities on a pro-rata basis.
Assets in this category are not depreciated.
Gains or losses from the sale of these assets are recognized in the income statement.
Non - current assets that are acquired through enforcement procedures but are not available for immediate sale or are not expected to be sold within a year are included in Other Assets and are measured at the lower of cost (or carrying amount) and fair value. Non-current assets held for sale, that the Group subsequently decides either to use or to lease, are reclassified to the categories of property, plant and equipment or investment property respectively. During their reclassification, they are measured at the lower of their recoverable amount and their carrying amount before they were classified as held for sale, adjusted for any depreciation, amortization or revaluation that would have been recognized had the assets not been classified as held for sale.
1.18 Employee benefits
The Group has both defined benefit and defined contribution plans.
A defined contribution plan is where the Group pays fixed contributions into a separate entity and the Group has no legal or constructive obligation to pay further contributions if the fund does not have sufficient assets to pay all employees the benefits relating to employee service in current or prior years. The contributions are recognized as employee benefit expense on an accrual basis. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in the future payments is available.
A defined benefit plan is a pension plan that defines an amount of pension benefit that an employee will receive on retirement which is dependent, among others, on years of service and salary on date of retirement and it is guaranteed by the entity of the Group.
The defined benefit obligation is calculated, separately for each plan, based on an actuarial valuation performed by independent actuaries using the projected unit credit method.
The net liability recognized in the consolidated financial statements is the present value of the defined benefit obligation (which is the expected future payments required to settle the obligation resulting from employee service in the current and prior periods) less the fair value of plan assets. The amount determined by the above comparison may be negative, an asset. The amount of the asset recognised in the financial statements cannot exceed the total of the present value of any economic benefits available to the Group in the form of refunds from the plan or reductions in future contributions to the plan.
The present value of the defined benefit obligation is calculated based on the return of high quality corporate bonds with a corresponding maturity to that of the obligation, or based on the return of government bonds in cases when there in no deep market in corporate bonds.
Interest on the net defined benefit liability (asset), which is recognised in profit or loss, is determined by multiplying the net defined benefit liability (asset) by the discount rate used to discount post-employment benefit obligation, as determined at the start of the annual reporting period, taking into account any changes in the net defined benefit liability (asset).
Service cost, which is also recognised in profit or loss, consists of:
Current service cost, which is the increase in the present value of the defined benefit obligation resulting from employee service in the current period;
Past service cost, which is the change in the present value of the defined benefit obligation for employee service in prior periods, resulting from the introduction or withdrawal of, or changes to, a defined benefit plan or a curtailment (a significant reduction by the entity in the number of employees covered by a plan) and
Any gain or loss on settlement.
Before determining past service cost or a gain or loss on settlement, the Group remeasures the net defined benefit liability (asset) using the current fair value of plan assets and current actuarial assumptions, reflecting the benefits offered under the plan before its amendment, curtailment or settlement.
Past service cost, in particular, is directly recognized to profit or loss at the earliest of the following dates:
When the plan amendment or curtailment occurs; and
When the Group recognizes related restructuring costs (according to IAS 37) or termination benefits.
Likewise, the Group recognizes a gain or loss on the settlement when the settlement occurs.
Remeasurements of the net defined benefit liability (asset) which comprise:
actuarial gains and losses;
return on plan assets, excluding amounts included in net interest on the net defined benefit liability (asset); and
any change in the effect of the limitation in the asset recognition, excluding amounts included in net interest on the net defined benefit liability (asset),
are recognized directly in other comprehensive income and are not reclassified in profit or loss in a subsequent period.
Finally, when the Group decides to terminate the employment before retirement or the employee accepts the Group's offer of benefits in exchange for termination of employment, the liability and the relative expense for termination benefits are recognized at the earlier of the following dates:
a. when the Group can no longer withdraw the offer of those benefits; and
b. when the Group recognizes restructuring costs which involve the payment of termination benefits.
1.19 Share options granted to employees
The granting of share options to the employees, their exact number, the price and the exercise date are decided by the Board of Directors in accordance with the Shareholders' Meeting approvals and after taking into account the current legal framework.
The fair value calculated at grant date is recognized over the period from the grant date to the exercise date and recorded as an expense in payroll and related costs with an increase of a reserve in equity respectively. The amount paid by the beneficiaries of share options on the exercise date increases the share capital of the Group and the reserve in equity from the previously recognized fair value of the exercised options is transferred to share premium.
1.20 Provisions and contingent liabilities
A provision is recognized if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation.
Provisions are, also, recognized in cases of restructuring plans with which management attempts either to change the subject of a corporate activity or the manner in which it is conducted (e.g. close down business locations). The recognition of provision is accompanied with the relevant, authorized by the Management, program and with the suitable actions of disclosure.
The amount recognized as a provision shall be the best estimate of the expenditure required to settle the present obligation at the end of the reporting period. Where the effect of the time value of money is material, the amount of the provision is equal to the present value of the expenditures expected to settle the obligation.
Amounts paid for the settlement of an obligation are set against the original provisions for these obligations. Provisions are reviewed at the end of each reporting period.
If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision is reversed. Additionally, provisions are not recognized for future operating losses.
Future events that may affect the amount required to settle the obligation, for which a provision has been recognized, are taken into account when sufficient objective evidence exists that they will occur.
Reimbursements from third parties relating to a portion of or all of the estimated cash outflow are recognized as assets, only when it is virtually certain that they will be received. The amount recognized for the reimbursement does exceed the amount of the provision. The expense recognized in profit or loss relating to the provision is presented net of the amount of the reimbursement.
The Group does not recognize in the statement of financial position contingent liabilities which relate to:
possible obligations resulting from past events whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group, or
present obligations resulting from past events for which:
- it is not probable that an outflow of resources will be required, or
- the amount of liability cannot be measured reliably.
The Group provides disclosures for contingent liabilities taking into consideration their materiality.
1.21 Sale and repurchase agreements and securities lending
The Group enters into purchases of securities under agreements to resell at a certain date in the future at a fixed price. Securities purchased subject to commitments to resell them at future dates are not recognized as investments.
The amounts paid are recognized in loans and advances to either banks or customers. The difference between the purchase price and the resale price is recognized as interest on an accrual basis.
Securities that are sold under agreements to repurchase continue to be recognized in the consolidated balance sheet and are measured in accordance with the accounting policy of the category that they have been classified in and are presented as investments.
The proceeds from the sale of the securities are reported as liabilities to either banks or customers. The difference between the sales price and the repurchase price is recognized on an accrual basis as interest.
Securities borrowed by the Group under securities lending agreements are not recognized in the consolidated balance sheet except when they have been sold to third parties whereby the liability to deliver the security is recognized and measured at fair value.
1.22 Securitization
The Group securitises financial assets by transferring these assets to special purpose entities, which in turn issue bonds.
In each securitization of financial assets the assessment of control of the special purpose entity is considered, based on the circumstances mentioned in note 1.2, so as to examine whether it should be consolidated. In addition, the contractual terms and the economic substance of transactions are considered, in order to decide whether the Group should proceed with the derecognition of the securitised financial assets, as referred in note 1.6.
1.23 Equity
Distinction between debt and equity
Financial instruments issued by Group companies to obtain funding are classified as equity when, based on the substance of the transaction, the Group does not undertake a contractual obligation to deliver cash or another financial asset or to exchange financial instruments under conditions that are potentially unfavorable to the issuer.
In cases when Group companies are required to issue equity instruments in exchange for the funding obtained, the number of equity instruments must be fixed and determined on the initial contract, in order for the obligation to be classified as equity.
Incremental costs of share capital increase
Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from retained earnings.
Share premium
Share premium includes the difference between the nominal value of the shares and the consideration received in the case of a share capital increase.
It also includes the difference between the nominal value of the shares issued and their market value, in cases of exchanges of shares as consideration for the acquisition of a business by the Group.
Treasury shares
The cost of acquiring treasury shares is recognized as a reduction of equity. Subsequent gains or losses from the sale of treasury shares, after deducting all direct costs and taxes, are recognized directly in retained earnings.
Retained earnings
Dividends are deducted from retained earnings and recorded as a liability in the period that the dividend is approved by the Shareholders in General Meeting.
1.24 Interest income and expense
Interest income and expense is recognized in the income statement for all interest bearing financial assets and liabilities.
Interest income and expense is recognised on an accrual basis and measured using the effective interest rate method. Interest on impaired financial assets is determined on their balance after impairment using the effective interest rate.
Borrowing costs that are directly attributable to assets that require a substantial period of time to get ready for their intended use or sale are capitalized as part of the cost of the asset. Capitalisation ceases when substantially all the activities necessary to prepare the asset for its intended use are complete.
1.25 Fee and commission income
Fee and commission income is recognized in the income statement on an accrual basis when the relevant service has been provided.
Transaction revenues relating to the recognition of a financial instrument not measured at fair value through profit or loss are capitalized and amortised in the income statement using the effective interest rate method over the life of the financial instrument.
1.26 Dividend Income
Dividend income from investments in shares is recognised in the income statement when the dividend distribution is approved by the appropriate body of the company that the Group has invested in.
1.27 Gains less losses on financial transactions
Gains less losses on financial transactions include the fair value changes of financial assets and liabilities, gains or losses on their disposal and the exchange differences arising from the translation of financial instruments denominated in foreign currencies. Impairment losses on bonds, shares and other securities of variable return are also included in gains less losses on financial transactions.
Differences that may arise between the carrying amount of financial liabilities settled or transferred and the consideration paid are also recognised in gains less losses on financial transactions.
1.28 Discontinued operations
A discontinued operation is a component of the Group that either has been disposed of, or has been classified as held for sale and represents:
a major line of Group's business; or
a geographical area of operations; or
a subsidiary acquired exclusively with a view to resale.
The assets and liabilities of discontinued operations are presented separately from other assets and liabilities in the balance sheet and are not offset.
Any cumulative income or expense recognized directly in equity relating to a discontinued operation is presented separately (as a separate line in equity).
The profit or loss after tax from discontinued operations and any losses recognized on the measurement to fair value less costs to sell of the disposal group are presented in a separate line in the face of the income statement after net profit from continuing operations.
The comparative financial statements are restated only for the income statement and the cash flow statement.
1.29 Related parties definition
According to IAS 24, a related party is a person or entity that is related to the entity that is preparing its financial statements. For the Group, in particular, related parties are considered:
a) An entity that constitutes for the Group:
i) a joint venture,
ii) an associate and
iii) a Post-Employment Benefit Plan, in this case the Supplementary Fund of former Alpha Credit Bank's employees,
b) A person or an entity that have control, or joint control, or significant influence over the Group.
This category includes Hellenic Financial Stability Fund and its subsidiaries because, in the context of the L.3864/2010, the HFSF participates in the Board of Directors and in significant committees of the Bank and as a result is considered to have significant influence over the Group.
c) A person and his close family members, if that person is a member of the key management personnel.
The Group considers as key management personnel all the members of the Bank's Board of Directors and of the Bank's Executive Committee while as their close family members it considers their children and spouses or domestic partners and their dependants and the dependants of their spouses or domestic partners.
Moreover, the Group discloses all transactions and outstanding balances with entities which are controlled or jointly controlled by the above mentioned persons. This disclosure concerns participations of the above persons in entities that exceed 20%.
1.30 Comparatives
To the extent considered necessary the comparatives have been adjusted to facilitate changes in presentation of the current year amounts.
1.31 Estimates, decision making criteria and significant sources of uncertainty
The Group, in the context of applying accounting policies and preparing financial statements in accordance with the International Financial Reporting Standards, makes estimates and assumptions that affect the amounts that are recognized as income, expenses, assets or liabilities. The use of estimates and assumptions is an integral part of recognizing amounts in the financial statements that mostly relate to the following:
Fair value of assets and liabilities
For assets and liabilities traded in active markets, the determination of their fair value is based on quoted, market prices. In all other cases the determination of fair value is based on valuation techniques that use observable market data to the greatest extent possible. In cases where there is no observable market data, the fair value is determined using data that are based on internal estimates and assumptions eg. determination of expected cash flows, discount rates, prepayment probabilities or potential counterparty default.
Impairment losses of financial assets
The Group, when performing impairment tests on loans and advances to customers, makes estimates regarding the amount and timing of future cash flows. Given that these estimates are affected by a number of factors such as the financial position of the borrower, the net realizable value of any collateral or the historical loss ratios per portfolio, actual results may differ from those estimated. Similar estimates are used in the assessment of impairment losses of securities classified as available for sale or held to maturity.
Impairment losses of non - financial assets
The Group, at each year end balance sheet date, assesses for impairment non - financial assets, and in particular property, plant and equipment, investment property, goodwill and other intangible assets, as well as its investments in associates and joint ventures. Internal estimates are used to a significant degree to determine the recoverable amount of the assets, i.e. the higher between the fair value less costs to sell and the value in use.
Income Tax
The Group recognizes assets and liabilities for current and deferred tax, as well as the related expenses, based on estimates concerning the amounts expected to be paid to or recovered from tax authorities in the current and future periods. Estimates are affected by factors such as the practical implementation of the relevant legislation, the expectations regarding the existence of future taxable profit and the settlement of disputes that might exist with tax authorities etc. Future tax audits, changes in tax legislation and the amount of taxable profit actually realised may result in the adjustment of the amount of assets and liabilities for current and deferred tax and in tax payments other than those recognized in the financial statements of the Group. Any adjustments are recognized within the year that they become final.
Employee defined benefit obligations
Defined benefit obligations are estimated based on actuarial valuations that incorporate assumptions regarding discount rates, future changes in salaries and pensions, as well as the return on any plan assets. Any change in these assumptions will affect the amount of obligations recognized.
Provisions and contingent liabilities
The Group recognises provisions when it estimates that it has a present legal or constructive obligation that can be estimated reliably, and it is almost certain that an outflow of economic benefits will be required to settle the obligation. In contrast, when it is probable that an outflow of resources will be required, or when the amount of liability cannot be measured reliably, the Group does not recognise a provision but it provides disclosures for contingent liabilities, taking into consideration their materiality. The estimation for the probability of the outflow as well as for the amount of the liability are affected by factors which are not controlled by the Group, such as court decisions, the practical implementation of the relevant legislation and the probability of default of the counterparty, for those cases which are related to the exposure to off-balance sheet items.
The estimates and judgments applied by the Group in making decisions and in preparing the financial statements are based on historical information and assumptions which at present are considered appropriate. The estimates and judgments are reviewed on an ongoing basis in order to take into account current conditions, and the effect of any changes is recognized in the period in which the estimates are revised.
1.31.1 Going concern principle
The Group applied the going concern principle for the preparation of the financial statements as at 31.12.2016. For the application of this principle, the Group takes into consideration current economic developments in order to make projections for future economic conditions of the environment in which it operates. The main factors that cause uncertainties regarding the application of this principle relate to the unstable economic environment in Greece and abroad and to the liquidity levels of the Hellenic Republic and the banking system.
Specifically, the high degree of uncertainty that characterizes the internal economic environment in recent years, as a result of the prolonged recession of the Greek economy, led to a significant deterioration in the creditworthiness of corporate and individuals, to an increase of non performing loans and therefore to the recognition of significant impairment losses by the Bank and by the Greek banking system in general. Additionally, during the first semester of 2015, the internal economic environment was adversely affected by the uncertainties that were created during the negotiations of the Hellenic Republic with the European Commission, the European Central Bank and the International Monetary Fund for the financing of the Hellenic Republic, a fact that led to significant outflows of deposits, to the imposition of capital controls and of a bank holiday which was announced on 28.6.2015 and lasted until 19.7.2015. Capital controls remain in place until the date of approval of the financial statements, while the detailed provisions for their application are amended where appropriate by the adoption of a legislative act.
At the same time the liquidity needs of Greek banks continue to be mostly satisfied by the emergency liquidity mechanisms of the Bank of Greece.
The completion, in the third quarter of 2015, of the negotiations of the Hellenic Republic for the coverage of the financing needs of the Greek economy, led to an agreement for new financial support by the European Stability Mechanism. The agreement provided for the coverage of the financing needs of the Hellenic Republic for the medium-term period, under the condition that economic reforms are made, while additionally it provided for the allocation of resources to cover the recapitalization needs of the banks as a result of their assessment by the Single Supervisory Mechanism. With respect to the Bank specifically, a recapitalization of a total amount of 2,563 million took place in the fourth quarter of 2015, exclusively from private funds, as further analyzed in note 42.
In June 2016 the first evaluation of the Hellenic Republic financial support program was completed and the partial disbursement of the second installment of the program, amounting to 10.3 billion, was approved. The first disbursement of 7.5 billion took place in June and covered the short-term public debt servicing needs as well as the clearance of part of amounts overdue by the Hellenic Republic to individuals. The remaining amount of 2.8 billion was disbursed in October 2016 after the completion of the prerequisite actions that had been set. The completion of the first evaluation and the disbursement of installments contributed to the enhancement of the real economy and the improvement of the economic environment. Meanwhile, in the fourth quarter of 2016 the second evaluation of the financial support program begun and is expected to be completed in the near time. The above, combined with the continuation of reforms and the measures described in the Eurogroup statement for the enhancement of the sustainability of the Greek debt (note 1.31.2), are expected to contribute to the gradual improvement of the economic environment in Greece and to the return of the economy to positive growth rates, noting, however, the negative consequences that would have in these sectors any further delay in the completion of the second evaluation of the program.
In parallel to the above, the Bank, in the context of its strategy to address the issue of non performing loans, is taking a series of actions and initiatives, as specifically mentioned in the relevant section of the Board of Director's Annual Management Report of 2016, which, combined with the changes in the legislative framework, are expected to contribute to the effective management of the non performing loans portfolio.
With regards to the liquidity levels and funding costs of the Bank and the banking system in general, they have been positively affected by the reinstatement of Greek government securities in the perimeter of collaterals accepted by the European Central Bank, by the reduction of the haircut applied on eligible collaterals and by the ability to transfer part of the securities issued by the European Financial Stability Fund that the Bank holds to the European Central Bank, as mentioned in note 18 of the financial statements.
Based on the above and taking into account the Group's high capital adequacy and the ability of the Bank to access the liquidity mechanisms of the eurosystem, the Group estimates that the conditions for the application of the going concern principle for the preparation of its financial statements are met.
1.31.2 Estimation of the Group's exposure to the Hellenic Republic
The Group's total exposure to Greek Government securities and loans related to the Hellenic Republic are presented in note 41.1. The main uncertainties regarding the estimations for the recoverability of the Group's total exposure relate to the debt service capacity of the Hellenic Republic, which, in turn, is affected by the development of the macroeconomic environment in Greece and the Eurozone as well as by the levels of liquidity of the Hellenic Republic.
The financing agreement with the European Stability Mechanism, signed on 19.8.2015, is expected to cover the financing needs of the Hellenic Republic and in parallel to contribute to the growth of the Greek economy provided that specific commitments that relate to the achievement of specific financial targets and the implementation of reforms in the Greek economy will be respected. In addition, the completion of the second assessment of the program is expected to be accompanied by measures for Greek debt relief in order to enhance its sustainability.
Pursuant to the above, in the Eurogroup of 9.5.2016 the framework based on which the sustainability of the Greek debt will be assessed was set. In the Eurogroup of 24.5.2016 the measures for the enhancement of the sustainability of the Greek debt were broadly described, separately for the short, the medium and the long term. Based on this framework, under the baseline scenario, gross financing needs of the Hellenic Republic should remain below 15% of GDP during the post programme period for the medium term and below 20% of GDP thereafter. Out of the above measures for debt relief, only the short-term ones have been specified and come into force. By taking the above measures (short, medium and long term), it is estimated that the service capacity of the Greek debt will be improved.
Based on the above, the Group has not recognized impairment losses on the Greek Government securities that it holds as at 31.12.2016, however, it assesses the developments relating to the Greek Government debt in conjunction with the market conditions and it reviews its estimations for the recoverability of its total exposure at each reporting date.
1.31.3 Recoverability of deferred tax assets
The Group recognizes deferred tax assets to the extent that it is probable that it will have sufficient future taxable profit available, against which, deductible temporary differences and tax losses carried forward can be utilized.
The main categories of deferred tax assets which have been recognized by the Group relate to tax losses carried forward, to losses from the Greek government bonds exchange program (PSI) and the December 2012 Greek government bond buyback program and to deductible temporary differences arising from loans' impairment.
Deferred tax assets on tax losses carried forward arise, to their greater extent, from the Bank and they relate to the years 2012-2014. Tax losses can be offset against taxable profits within five years from their formation. The Group recognized the aforementioned assets since, according to the estimated future taxable profits of the Bank, for the coming years until the expiry of the right to set-off tax losses, these are recoverable even after the deduction of the temporary differences that are expected to occur within these years. The estimation of future taxable profits was based on forecasts for the development of the accounting results, as these are reflected in the updated business plan of the Bank, which also includes the strategy plan for non performing loans submitted to the Single Supervisory Mechanism (SSM, as well as the provisions of the law voted on 29.3.2017 (note 50i).The existence of significant tax profits in the last decade, with the exception of the years from 2012 to 2014, because of the unexpected major recession of the Greek economy and the loss from the PSI, was also taken into account.
Deferred tax assets associated with tax losses incurred by the PSI and the participation of the Bank in the December 2012 Greek government bond buyback program were recognized as a "debit difference" according to Law 4046/14.2.2012, Law 4110/23.1.2013 and a respective legal opinion. According to Law 4110/23.1.2013 the "debit difference" is deductible for tax purposes, gradually in equal installments, within 30 years, a fact which, according to the Group's estimation, provides a sufficient time period for its gradual utilization against taxable profits.
Regarding the temporary differences arising from loans' impairment, there are no time constraints concerning their recovery, as it also applies to the other deferred tax assets categories. The Group assessed their recoverability based on estimates for future taxable profits, as these are estimated to be formed on the basis of the aforementioned business plan, after extending the period of estimation for a limited number of years compared to the business plan.
The Group, based on the above, estimates that the total deferred tax assets it has recognized and that has been derived both from temporary differences and from tax losses carried forward is recoverable.
In addition, and regardless of the assessment of the recoverability of deferred tax assets that it is carried out based on what is mentioned above, Law 4303/2014 provides that in case that the after tax accounting result for the period is a loss, deferred tax assets arising from the PSI debit difference and from the accumulated provisions and other general losses due to credit risk are eligible to be converted into a final and settled claim against the Greek State, as described in detail in note 11.
The main uncertainties concerning the estimations for the recoverability of the deferred tax assets relate to the achievement of the goals set in the Bank's business plan, which is affected by the general macroeconomic environment in Greece and internationally. At each balance sheet date, the Group reassesses its estimation regarding the recoverability of deferred tax assets in conjunction with the development of the factors that affect it.
INCOME STATEMENT
2. Net interest income
From 1 Janury to
31.12.2016
31.12.2015
Interest and similar income
Due from banks
7,525
2,442
Loans and advances to customers
2,015,394
2,205,389
Securitized loans
273,391
302,908
Trading securities
206
269
Available for sale securities
231,876
243,735
Held to maturity securities
2,833
12,791
Loans and receivables securities
6,758
15,964
Derivative financial instruments
117,769
177,334
Other
13,029
11,908
Total
2,668,781
2,972,740
Interest expense and similar charges
Due to banks
(274,225)
(299,744)
Due to customers
(195,683)
(340,510)
Debt securities in issue and other borrowed funds
(67,910)
(172,041)
Derivative financial instruments
(123,295)
(174,591)
Other
(83,583)
(88,393)
Total
(744,696)
(1,075,279)
Net interest income
1,924,085
1,897,461
During 2016 there was a decrease in interest expense mainly due to the exchange of senior, subordinated and hybrid securities with shares in the context of the Liability Management Exercise (LME) that took place on November of 2015, due to the decrease in the yield of securities guaranteed by Greek Government (Law 3723/2008) following the reduction in the total nominal value of an amount of 8.2 billion and the decrease in borrowing cost. In addition, interest income was decreased mainly due to the decrease in interest income from loans and advances to customers as a result from the significant impairment losses recognized in the previous year (note 10).
3. Net fee and commission income
From 1 January to
31.12.2016
31.12.2015
Loans
39,302
38,618
Letters of guarantee
64,460
71,429
Imports-exports
10,958
11,028
Credit cards
64,235
57,223
Fund Transfers
46,847
47,064
Mutual funds
31,800
37,745
Advisory fees and securities transaction fees
3,144
375
Foreign exchange trades
4,670
6,129
Issuance of securities of Law 3723/2008
(11,509)
Other
52,509
50,539
Total
317,925
308,641
Net fee and commission income during fiscal year 2016 increased, mainly due to the cancellation in October 2015 of the bonds issued by the Greek Government under the Pillar III of Law 3723/2008 framework and the increase in income from credit cards commission due to the increase in the volume of transactions. Previous year credit cards commissions were restated due to the change in the presentation of the figures related to the bonus cards loyalty program, as mentioned in note 49.
4. Dividend income
From 1 January to
31.12.2016
31.12.2015
Available for sale securities
3,178
3,308
Total
3,178
3,308
5. Gains less losses on financial transactions
From 1 January to
31.12.2016
31.12.2015
Foreign exchange differences
17,622
(20,788)
Trading securities:
- Bonds
1,122
1,953
- Shares
(96)
(66)
Investment securities:
- Bonds
54,187
(33,811)
- Shares
72,641
(12,437)
- Other securities
(1,251)
(3,996)
From impairments/sale of holdings
(60,173)
6,902
Derivative financial instruments
(8,249)
87,720
Other financial instruments
9,093
(72,346)
Total
84,896
(46,869)
Gains less losses on financial transactions were affected from:
Losses of 19.3 million which are included in the account "From impairments/sales of investments" and concern the valuation of the subsidiary company of the Group APE Fixed Assets and their joint ventures APE Commercial A.E and APE Investment Property A.E, due to their classification as "Held for sale" (note 47).
Losses of 38.3 million which are also included in the account "From impairments/sales of investments" as a result of the sale of Ionian Hotel Enterprises S.A. (note 47).
profit of 36.1 million, included in "Bonds" of investment securities, which relates to the sale of bonds issued by the European Financial Stability Facility (note 18c).
Profit of 5 million from the proceeds of sale of investments in Alpha Bank Romania S.A to Victoria Bank S.A (based in Moldavia) which is included in the account of investment security shares.
Visa's Europe share's acquisition transaction from Visa Inc, for the shares held by the Bank and Group companies.
On 21.6.2016, Visa Inc. completed the acquisition of Visa Europe. According to the agreement (as amended on 10.5.2016), on the date of completion of the transaction, Visa Inc. purchased from Visa Europe's members the shares they held. The price for this acquisition consists of:
i. The payment of a total amount of 12.25 billion upon completion of the transaction.
ii. The distribution of preferred shares.
iii. The payment of an amount of 1 billion on the third anniversary of the closing of the transaction plus interest.
The transaction price was calculated based on Visa Europe's net revenue contributed by each member for a specific period of time.
Therefore, during the current year, the Group recognized in financial results from shares an amount of 55.6 million which consists of cash received on the closing date of the transaction and from the recognition of the present value of the amount due from collecting the surplus amount on the third anniversary.
In addition, the Group recognized during the year the preference shares of Visa Inc. acquired in connection with the transaction. These shares, which were classified as available for sale portfolio, were recognized at fair value of 16.3 million by crediting gains less losses on financial transactions.
6. Other income
From 1 January to
31.12.2016
31.12.2015
Insurance activities
(4,814)
(3,772)
Hotel activities
27,951
29,658
Operating lease income
17,242
13,928
Sale of fixed assets
1,852
902
Other
14,757
17,613
Total
56,988
58,329
"Hotel activities", includes the figures of Ionian Hotel Enterprises S.A. The amount for 2016 refers to the period until 16.12.2016 when the sale took place, as described in note 47.
The decrease in "Other" compared to the previous year is mainly due to the fact that, the 2015 figure includes a fee from professional employee training programs (LAEK) amounting to 2.8 million that is partly offset by Insurance indemnities for buildings in the current period.
Income from insurance activities is analyzed as follows:
From 1 January to
31.12.2016
31.12.2015
Life insurance
Premiums and other related income
52,279
39,721
Less:
- Commissions
(3,935)
(3,476)
- Claims from policyholders
(53,158)
(40,017)
Total
(4,814)
(3,772)
7. Staff costs
From 1 January to
31.12.2016
31.12.2015
Wages and salaries
358,889
373,218
Social security contributions
99,988
100,828
Common insurance fund of bank employees
2,490
5,195
Employee defined benefit obligation of Group (note 29)
12,139
8,883
Other charges
34,347
31,502
Total
507,853
519,626
The total number of employees in the Group as at 31.12.2016 was 12,699 (31.12.2015: 14,779) out of which 8,881 (31.12.2015: 9,678) were employed in Greece and 3,818 (31.12.2015: 5,101) were employed abroad. As at 31.12.2016 the number of employees of Alpha Bank Srbija A.D. was 836. The subsidiary has been characterized as discontinued operations (note 47).
Defined contribution plans
All the employees of the Bank are insured for their main pension plans by the Social Insurance Fund (IKA-ETAM). The Social Insurance Fund (IKA-ETAM) as of 1.1.2017 consists part of the Single Social Security Body (E.F.K.A.), a legal person governed by public law established under the provisions of Law 4387/2016. In addition for the Bank's employees, the following also apply:
a. The supplementary pension plan for employees of the former Ionian and Popular Bank of Greece is T.A.P.I.L.T.A.T., a multi-employer plan. The Bank has obtained legal opinions that indicate that it has no obligation if this fund does not have sufficient assets to pay employee benefits. Therefore the Bank considers that the fund is a defined contribution plan and has accounted for it as such.
b. Employees of former Ioniki and Popular Bank of Greece and former Emporiki Bank are insured for the lump sum benefit in the "Bank Employee and Companies Common Benefit Plan" (T.A.Y.T.E.K.O.) which is a defined contribution plan with contributions paid only by employees. In accordance with article 74 of Law 4387/2016, the Care Sectors of the "Bank Employee and Companies Common Benefit Plan" (T.A.Y.T.E.K.O.) consist part of the "Joint Supplementary Insurance Fund" (E.T.E.A.) which is renamed to "Joint Supplementary Insurance Fund and Lump Sum Benefits" (E.T.E.A.E.P.).
c. All employees of the Bank receive medical benefits from the National Organization of Health Care (EOPYY). On 1.1.2017 EOPYY consists part of E.F.K.A.
d. Employees of former Alpha Credit Bank, which were insured, for supplementary pension in T.A.P. (the Insurance Fund of employees of Alpha Credit Bank), from 1.1.2008, onwards are insured for supplementary pension in E.T.A.T according to article 10, Law 3620/2007. The Bank pays to E.T.A.T. an annual installment of the ten interest bearing installments, that relates to the total cost of joining E.T.A.T. which amounts to 543 million, this was calculated with the reference date being 31.12.2006, in accordance with a special economic study as stipulated by Law 3371/2005. The outstanding balance including accrued interest amounts to 67.3 million as at 31.12.2016, which represent the last installment that will be paid during the first quarter of 2017.
The implementation of Law 3371/2005 for Emporiki Bank was done in accordance with Law 3455/2006. According to this law, the pensioners and members insured by Emporiki Bank, who were also insured for supplementary pension in T.E.A.P.E.T.E. were absorbed by I.K.A- E.T.E.A.M. and E.T.A.T on 31.12.2004. As of 1.1.2017, EOPYY consists part of E.F.K.A. Emporiki Bank S.A. paid a total amount of specific contribution of 786.6 million for the pensioners to the insurance funds I.K.A-E.T.E.A.M and E.T.A.T. in ten annual interest bearing installments. The repayment of the total amount was completed with the payment of the last installment on January 2014. In addition, in accordance with the amendments of Law 3455/2006 for the active insured members, who were hired before 31.12.2004 in Emporiki Bank, additional social contributions are paid for the supplementary pension compared to the respective contributions which are stipulated by the Law of E.T.E.A.M.
When E.T.A.T. was absorbed by E.T.E.A. (Joint Supplementary Insurance Fund):
a) the members of T.E.A.P.E.T.E. and T.A.P. who were insured until 31.12.1992 receive a pre-pension amount from E.T.A.T. (main and supplementary pension until the date of retirement from the Main Pension Fund and E.T.E.A.) and
b) the members of T.E.A.P.E.T.E. who were insured until 31.12.1992 receive the difference between the amount of pensions which arose from the calculation of supplementary pension in accordance with the provisions of Article of Association of E.T.E.A. (former E.T.E.A.M) and T.E.A.P.E.T.E.
Law 4387/2016 provides for the incorporation of both E.T.A.T. and the pre-retirement scheme pensioners of E.T.E.A. to E.F.K.A., as of 1.1.2017. Particularly, EFKA grants pre-pensions and other benefits to the pensioners who were insured by E.T.A.T. until 31.12.1992 and who are entitled to receive respective benefits until 12.5.2016, as well as to the pre-retirement scheme pensioners of E.T.E.A. who, as pensioners of T.E.A.P.E.T.E., joined former I.K.A. - E.T.E.A.M. and currently E.T.E.A. pursuant to Law 3455/2006. The members of E.T.A.T. insured until 31.12.1992 and who are entities to receive a pre-pension amount until 12.5.2016 and have paid higher contributions than the ones provided by E.T.E.A. will obtain an increased supplementary pension from E.T.E.A. in accordance to Law 4387/2016.
e. The Bank, in cooperation with AXA Insurance, has created a savings plan for its employees that were hired and insured for the first time on 1.1.1993 and onwards. The plan's effective date is January 1, 2011 and its aim is to provide a lump sum monetary benefit to retiring employees. The plan assets consist of investment from the fixed monthly contributions of the Bank and its employees in low risk mutual funds. After signing the Collective Labor Agreement for the 3-year period of 2016-2019, the personnel of the Group may be included in the savings plan. For the personnel, except for a certain group that was hired by the Group and were members of under the main pension scheme for the period from 1.1.1993 until 31.12.2004 (Law 2084/1992), are considered as a defined contributions plan as the beneft is paid from a savings fund that was accumulated up to the date they left the plan.
Employee defined benefit obligations
n analysis of liabilities arising from defined benefit plans is included in note 29.
Separation Scheme
The Bank conducted in 2014 a voluntary separation scheme for their employees in Greece, in order to achieve substantial benefits to operating costs as provided in the Restructuring Plan of the Bank approved by the European Competition Committee based on which a total number of 2,193 employees left in 2014 and 15 employees also retired during the first half 2015 with an amount of 200.8 million recognized as cost in income statement.
Moreover, the Bank committed to further reduce its Greek Personnel (including non-financial subsidiaries) in 2015 , in accordance to the framework for implementation of the updated restructuring plan resulting in 9.504 maximum number of employees until 2017.
The reduction of personnel will contribute to the achievement of significant gains in the operational costs, achieving the commitment to reduce the overall cost in Greece in specific level.
Following the above commitments and relevant decisions for their implementation, on 31.12.2015 the Bank recorded provision amounting to 64.3 million. In 2016 35.3 million from the recorded provision was used resulting to a balance amounting to 29 million for future use.
Finally, during 2016 the program of Redundancy Scheme was devised and completed from Alpha Bank Cyprus as noted in note 31. The total cost of the program amounted to 31.7 million.
8. General administrative expenses
From 1 January to
31.12.2016
31.12.2015
Operating leases for buildings
41,055
44,373
Rent and maintenance of EDP equipment
17,420
17,457
EDP expenses
26,130
41,096
Marketing and advertisement expenses
26,495
24,395
Telecommunications and postage
22,835
25,092
Third party fees
55,641
49,863
Consultants fees
7,806
6,815
Contribution to the Deposit Guarantee Fund - Investment fund and Solvency Fund
56,358
73,703
Insurance
10,678
9,979
Consumables
6,474
7,398
Electricity
11,630
14,996
Thrid party fees for customer attraction
30
38
Taxes (VAT, real estate etc)
84,559
83,651
Services from collection agencies
30,150
18,599
Building and equipment maintenance
9,364
9,423
Security
12,349
12,823
Cleaning fees
5,701
5,709
Other
86,095
94,153
Total
510,770
539,563
The expenses occurred from the services provided by the collection agencies increased compared to last year, however, the overall amount of General Administrative Expenses have decreased, mainly because 2015 included a payment of the extraordinary contribution for the resolution of a Greek credit institution as well as the merger costs mainly relating to the maintenance of computer applications.
Regarding the regulatory framework governing the resolution of credit institutions, the following are noted:
On 23.7.2015 under Law 4335/2015, European Directive 2014/59 was incorporated in to Greek Law to establish a framework for the recovery and resolution of credit institutions and investment entities. In particular, the Resolution Scheme of Hellenic Deposit and Investment Guarantee Fund (HDIGF) is defined as the National Resolution Fund which within ten years (until 31 December 2024) should gradually, create a reserve equal to at least 1% of the deposits guaranteed by the HDIGF. From 1.1.2016, the Single Resolution Mechanism (SRM) is responsible for the resolution of credit institutions established in country-member states of the Eurozone. It operates in cooperation with the Single Resolution Fund (SRF), which will cover the resolution costs of non-sustainable credit institutions.
According to Law no. 4335/2015 (Article 98), credit institutions authorized to operate in Greece, including branches operating in third countries, should make at least an annual contribution to the Resolution Fund. According to Law 4370/2016 (Article 36), in case a new credit institution is included in the Resolution Fund or it one ceases its participation during the fiscal year, the credit institution is still obliged for its annual contribution in proportion to the time of its operation. In addition with Law 4370/2016, Directive 2014/49 / EU of the European Parliament and the Decision of the Council of 16 April 2014 were incorporated into Greek law which enacts the same rules for all Deposit Guarantee Schemes intended to provide a uniform level of protection to all EU depositors and to ensure the same level of stability as regards the DGS.
The Single Resolution Board, determined that the 2016 contribution for credit institutions may provide irrevocable payment commitments amounting up to 15% of their total obligation which for the Bank amounts to 21 million. These irrevocable payment commitments have to be fully covered by cash collateral. On 20.05.2016, the Bank signed a contract with the Single Resolution Board to provide irrevocable payment commitment and establish the necessary cash collateral for the 2016 contribution.
"Contribution to the Deposit Guarantee Fund - Investment Fund and Solvency Fund" of the comparative fiscal year includes the Bank's proportional contribution to the resolution of a Greek Credit Institution.
9. Other expenses
From 1 January to
31.12.2016
31.12.2015
Losses from write-off/impairments on fixed assets
56,010
38,872
Other provisions (note 31)
16,000
1,921
Other
5,742
Total
77,752
40,793
Losses from write - off / impairements on fixed assets as at 31.12.2016 include an amount of 49.5 million (31.12.2015: 36.4 million) which arose from the recognition of an impairment loss on the value of investment property, property, plant and equipment and property obtained through auctions by the Group (notes 20, 21, 22 and 24).
Other provisions include provisions of 14.4 million (31.12.2015: 1.6 million) concerning legal cases against the Group (note 31), while the caption "other" includes impairment losses on stock and other assets amounting to 3.2 million.
10. Impairment losses and provisions to cover credit risk
From 1 January to
31.12.2016
31.12.2015
Impairment losses on loans and advances to customers (note 17)
1,193,748
3,015,027
Impairment losses with credit institutions (note 14)
2,552
Impairment losses of other receivables
4,191
Provisions to cover credit risk relating to off balance sheet items (note 31)
(1,357)
(10,806)
Recoveries
(28,629)
(19,127)
Total
1,167,953
2,987,646
For the preparation of 2015 financial statements, the Group took into consideration the specific conditions that existed in the Greek economy, affecting the macroeconomic environment especially after the end of the second quarter and the imposition of capital controls. As a result, significant impairment losses were recognized due to the adjustments when required of the parameters applied by the Bank when calculating impairments.
The results of fiscal year 2016, were significantly burden by the recognition of impairment losses, which mainly related to:
- corporate groups, for which impairment assessment took into account the conditions existing at the reporting date, the ongoing process and the various scenario prevailing for theit restructuring up to the publication date of the 31.12.2016 Financial Statements and
- the increase in provisions of selected retail portfolios, which contributes to the optimal management of non-performing loans.
11. Income tax
In accordance with Article 1 par 4 of Law 4334/2015 "Urgent prerequisites for the negotiation and conclusion of an agreement with the European Stability Mechanism (ESM)" the corporate income tax rate for legal entities increased from 26% to 29%. The increased rate will apply for profits arising in fiscal years commencing on or after 1 January 2015 on the absence of an explicit definition in the law regarding the retrospective application of income tax rate for profits of fiscal year 2014.
For the Bank' subsidiaries and branches operating in other countries, the applicable nominal tax rates for accounting periods 2015 and 2016 are as follows:
Cyprus 12.5
Bulgaria 10
Serbia 15
Romania 16
FYROM 10
Albania 15
Jersey 10
United Kingdom 20* (from 1.4.2015)
Ireland 12.5
In accordance with article 65A of Law 4174/2013, from 2011, the statutory auditors and audit firms conducting statutory audits to a Societe Anonyme (AE), are obliged to issue an Annual Tax Certificate on the compliance on tax
issues. This tax certificate is submitted to the entity being audited within the first ten days of the seventh month after the end of the audited financial year, as well as, electronically to the Ministry of Finance, no later than the end of the seventh month after the end of the audited financial year. For fiscal years 2011 up to 2015 the Bank and its local subsidiaries have obtained the relevant tax certificate without any qualifications on the tax issues covered. In accordance with article 56 of Law 4410/03.08.2016 for the fiscal years from 1.1.2016 and onwards, the issuance of tax certificate is optional. However, the Group and its companies intended to continue to obtain the tax certificate.
The income tax in the income statement from continuing operations is analysed in the table below, while the income tax from discontinued operations is analysed in note 23 and 47:
From 1 January to
31.12.2016
31.12.2015
Current
14,239
(36,924)
Deferred
(43,453)
(769,890)
Total
(29,214)
(806,814)
Deferred tax recognized in the income statement is attributable to temporary differences, the effect of which is analyzed in the table below:
From 1 January to
31.12.2016
31.12.2015
Debit difference of Law 4046/2012
44,554
(79,891)
Write-offs and depreciation of fixed assets
(5,806)
22,946
Valuation/impairment of loans
(144,477)
(697,915)
Valuation of loans
(840)
(943)
Defined benefit obligation and insurance funds
26,353
8,224
Valuation of derivatives
(6,032)
26,491
Effective interest rate
191
(9,970)
Valuation of liabilities to credit institutions and other borrowed funds due to fair value hedge
3,776
(3,202)
Valuation/impairment of bonds and other securities
(210)
(21,009)
Tax losses carried forward
38,136
(12,020)
Other temporary differences
902
(2,601)
Total
(43,453)
(769,890)
The table above includes the effect caused by the change in the tax rate for 2015.
The Group has not recognized deferred tax asset as at 31.12.2016 of 124.6 million (31.12.2015: 123.9 million) deriving mainly from tax losses carried forward from subsidiaries, which are reassessed at every reporting date, in the process of the recoverability of deferred tax assets.
A reconciliation between the effective and nominal tax rate is provided below:
--------------------------------------
* Until 31.3.2015 the tax rate was 21%.
From 1 January to
31.12.2016
31.12.2015
%
%
Profit/(loss) before income tax
(9,678)
(2,043,466)
Income tax (nominal tax rate)
(174.73)
16,910
26.29
(537,241)
Increase/(decrease) due to:
Additional tax on income from property
(0.01)
273
Non taxable income
46.00
(4,451)
1.47
(30,050)
Non deductible expenses
(84.71)
8,199
(1.86)
37,914
Deferred tax recognition for temporary differences of previous years
821.95
(79,548)
Non-recognition of deferred tax for temporary differences of the current period
(172.64)
16,708
(2.27)
46,360
Tax losses carried forward
57.61
(5,575)
Credit balances of reserves
(5.22)
106,659
Other temporary differences
(191.60)
18,543
1.62
(33,021)
Total
301.86
(29,214)
20.02
(409,106)
Adjustment tax rates on temporary differences 31.12.2014
19.46
(397,708)
Income tax
301.86
(29,214)
39.48
(806,814)
According to article 5 of Law 4303/17.10.2014 "Ratification of the Legislative Act "Emergency legislation to replenish the General Secretary of Revenue upon early termination of office" (A 136) and other provisions", deferred tax assets of legal entities supervised by the Bank of Greece, under article 26 paragraphs 5, 6 and 7 of Law 4172/2013 that have been or will be recognized and are due to the debit difference arising from the PSI and the accumulated provisions and other general losses due to credit risk, with respect to existing amounts up to 31 December 2014, are converted into final and settled claims against the State, if, the accounting result for the period, after taxes, is a loss, according to the audited and approved financial statements by the Ordinary Shareholders' General Meeting.
The inclusion in the Law is implemented by the General Meeting of Shareholders, related to tax assets from 2016 and onwards, and refer to tax year 2015 and onwards, whereas it is envisaged the end of inclusion in the Law with the same procedure and after obtaining relevant approval from the Regulatory Authority.
According to article 4 of Law 4340/1.11.2015 "Recapitalization of financial institutions and other provisions of the Ministry of Finance" the above were amended regarding the time of the application which is postponed for a year. In addition the amount of deferred tax asset for credit risk, which is included in the same legislation, is limited to the amount related to provisions for credit risk which were accounted until 30 June 2015.
On 31.12.2016 the amount of deferred tax assets within the scope of the aforementioned Law amounts to 3,341,802 (31.12.2015: 3,417,055).
During 2015, as a result of recent decision by the State Council, the Bank recognized in current tax the recovery of tax that was related to prior year untaxed reserves. These reserves of 367.8 million were netted with tax losses carried forward according to article 72 par 12 and 13 of Law 4172/2013, resulting to the reduction of the related deferred tax assets by 106.7 million.
During 2016, the loss from the sale of the Group's subsidiary Alpha Bank A.D. Skopje was recognized in the current year's taxable finacial results. Moreover, the Bank recognized deferred tax assets of 84.4 million relating to the impairment of the Bank's investment in the Group's subsidiary, Alpha Bank Srbija A.D. and it is included in the caption "Profit/(loss) after income tax, from discontinued operations" of the Consolidated Income Statement. The loss from the sale of the investment in a foreign subsidiary is recognized as deductible from the gross expenses during the year when the transfer is completed, in accordance with article 124 of Law 4446/22.12.2016 "Bankruptcy Code, Administration Justice, Duties-Fees, Voluntary Disclosure of Previous Years' Taxable Income, Online Transactions, Amendments of Law 4270/2014 and other provisions".
Income tax of comprehensive income recognized directly in equity
From 1 January to
31.12.2016
31.12.2015
Before income tax
Income tax
After income tax
Before income tax
Income tax
After income tax
Amounts that may be reclassified to the Income Statement
Net change in available for sale securities' reserve
93,239
(19,843)
73,396
217,034
(65,037)
151,997
Net change in cash flow hedge reserve
(55,212)
16,069
(39,143)
52,313
(15,171)
37,142
Foreign exchange differences on translating and hedging the net investment in foreign operations
(2,196)
(2,859)
(5,055)
(18)
(256)
(274)
Change in the share of other comprehensive income of associates and joint ventures
(547)
(547)
Tax rate adjustment (Law 4334/2015)
12,413
12,413
Total
35,831
(6,633)
29,198
268,782
(68,051)
200,731
Amounts that may not be reclassified to the Income Statement
Change in actuarial gains/(losses) of defined benefit obligations
(10,689)
3,099
(7,590)
941
(74)
867
Tax rate adjustment (Law 4334/2015)
2,175
2,175
Total
25,142
(3,534)
21,608
269,723
(65,950)
203,773
The above analysis includes a credit tax amount of 2 from discontinued operations (31.12.2015: deferred tax asset 25).
During 2016 "Retained earnings" includes deferred tax amounting to 25 which derives from Purchases)/Redemptions/Sales of hybrid securities (2015: 2,122).
During 2016 "Retained earnings" includes a credit tax amounting to 281 resulting from the share capital increase expenses which were recognized in the same account when the share capital increase took place in 2015. The respective amount for 2015 was 17,770.
Furthermore in 2015 "Retained earnings" includes a deferred tax liability of 6,261, referring to the income tax rate adjustment on the share capital increase costs which were recorded in the same account in previous years.
12. Earnings/(losses) per share
a. Basic
Basic earnings/(losses) per share are calculated by dividing the profit/(losses) after income tax attributable to ordinary equity owners of the Bank, by the weighted average number of outstanding ordinary shares, after deducting the weighted average number of treasury shares held by the Bank, during the period.
b. Diluted
Diluted earnings/(losses) per share are calculated by adjusting the weighted average number of ordinary shares outstanding to the presumed conversion amount of all dilutive potential ordinary shares. The Bank does not have any dilutive potential ordinary shares and in addition, based on the issuance terms of the convertible bond loan covered by Credit Agricole S.A., basic and dilutive earnings/(losses) per share should not differ as the issue price of the ordinary shares will not be less than their average market price.
It is noted that on 23.2.2017 the Bank increased its share capital due to the conversion of the total amount of the convertible bond loan, by issuing 6,818,181 new ordinary shares (note 50).
From 1 January to
31.12.2016
31.12.2015
Profit/(losses) attributable to equity owners of the Bank
42,140
(1,371,714)
Weighted average number of outstanding ordinary shares
1,536,881,200
385,286,677
Basic and diluted earnings/(losses) per share (in )
0.0274
(3.5602)
From 1 January to
31.12.2016
31.12.2015
Profit/(losses) from continuing operations attributable to equity owners of the Bank
19,374
(1,236,912)
Weighted average number of outstanding ordinary shares
1,536,881,200
385,286,677
Basic and diluted earnings/(losses) from continuing operations per share (in )
0.0126
(3.2104)
From 1 January to
31.12.2016
31.12.2015
Profit/(losses) from discontinued operations attributable to equity owners of the Bank
22,766
(134,802)
Weighted average number of outstanding ordinary shares
1,536,881,200
385,286,677
Basic and diluted earnings/(losses) from discontinued operations per share (in )
0.0148
(0.3499)
The weighted average number of ordinary shares as at 31.12.2015, has been retrospectively restated from the beginning of the year, after the decrease of the total number of shares due to the merger in proportion of 50 voting common shares of old nominal value to 1 voting common share of new nominal value which took place on November 2015.
ASSETS
13. Cash and balances with Central Banks
31.12.2016
31.12.2015
Cash
346,322
402,402
Cheques receivable
4,853
6,801
Placements with European Central Bank
10,500
Balances with Central Banks
1,152,932
1,321,124
Total
1,514,607
1,730,327
Less: Deposits pledged to Central Banks
(1,016,213)
(1,130,662)
Balance
498,394
599,665
The Bank is required to maintain a current account with the Bank of Greece (Central Bank) in order to facilitate interbank transactions with the Central Bank and other financial institutions through the Trans European - Automated Real Time Gross Settlement Express Transfer System (TARGET).
The Bank of Greece also requires, that all financial institutions established in Greece to maintain reserve deposits with the Central Bank equal to 1% of customer deposits.
These deposits are interest bearing based on the refinancing rate set by the European Central Bank which as at 31.12.2016 was 0% (31.12.2015: 0.05%).
The subsidiaries that operate abroad and offer banking services, maintain pledged deposits in accordance with the rules set by the respective Central Banks in their countries.
Cash and cash equivalents (as presented in the Statement of cash flows)
31.12.2016
31.12.2015
Cash and balances with Central Banks
498,394
599,665
Short-term placements with other banks
430,820
682,808
Cash and cash equivalents from discontinued operations
45,674
45,660
Total
974,888
1,328,133
14. Due from banks
31.12.2016
31.12.2015
Placements with other banks
812,337
912,933
Guarantees for coverage of derivative securities and sale and repurchase agreement (note 37e)
1,148,368
1,067,405
Sale and repurchase agreements (Reverse Repos)
50,475
Loans to credit institutions
62
4,900
Less:
Allowance for impairment losses
(41,961)
(8,965)
Total
1,969,281
1,976,273
In 2016, the Group transferred from Investment portfolio securities to Due from banks an amount of 32,996 concerning a bond issued by a foreign Credit Institution that matured. The bond has been fully impaired in prior years.
In 2015, the Group proceeded in the impairment and write off of 2,552 for a loan to a foreign credit institution (note 10).
15. Trading securities
31.12.2016
31.12.2015
Bonds
Greek Government
2,256
1,888
Shares
Listed
2,445
891
Total
4,701
2,779
16. Derivative financial instruments (assets and liabilities)
31.12.2016
Contractual Nominal amount
Fair value
Assets
Liabilities
Derivatives held for trading purposes
a. Foreign exchange derivatives
Foreign exchange forwards
272,162
2,409
7,074
Foreign exchange swaps
1,158,359
6,362
2,723
Cross currency swaps
1,646,562
74,107
141,036
Currency options
68,547
227
491
Currency options embedded in customer products
8,991
69
108
Total non-listed
3,154,621
83,174
151,432
Futures
Total listed
-
-
-
b. Interest rate derivatives
Interest rate swaps
7,285,341
465,554
528,852
Interest rate options (caps and floors)
240,395
15,204
4,275
Total non-listed
7,525,736
480,758
533,127
Futures
Total listed
-
-
-
c. Commodity derivatives
Commodity swaps
126,458
8,341
7,841
Commodity options
1,413
422
419
Total non-listed
127,871
8,763
8,260
d. Index derivatives
OTC options
49,312
75
75
Total non-listed
49,312
75
75
Futures
48
Total listed
48
-
-
e. Other derivatives
GDP linked security
1,663,143
4,224
Total listed
1,663,143
4,224
-
Derivatives for hedging purposes
a. Foreign exchange derivatives
FX swaps
24,826
304
Cross currency swaps
360,603
12,786
Total non-listed
385,429
304
12,786
b. Interest rate derivatives
Interest rate swaps
1,046,541
57,025
630,547
Total non-listed
1,046,541
57,025
630,547
Grand total
13,952,701
634,323
1,336,227
As part of the daily settlement and providing guarantee for derivatives with credit institutions as counterparties, the Bank has pledged as collateral an amount of 1.1 billion on 31.12.2016 (31.12.2015: 1 billion). The respective net fair value of derivatives with credit institutions amounted to 1.1 billion on 31.12.2016 (31.12.2015: 0.9 billion).
31.12.2015
Contractual Nominal amount
Fair value
Assets
Liabilities
Derivatives held for trading purposes
a. Foreign exchange derivatives
Foreign exchange forwards
177,192
719
4,162
Foreign exchange swaps
499,899
5,681
2,334
Cross currency swaps
3,723,496
248,200
394,746
Currency options
113,833
1,078
1,174
Currency options embedded in customer products
1,534
4
51
Total non-listed
4,515,954
255,682
402,467
Futures
Total listed
-
-
-
b. Interest rate derivatives
Interest rate swaps
7,925,948
451,484
506,190
Interest rate options (caps and floors)
462,883
19,538
4,655
Total non-listed
8,388,831
471,022
510,845
Futures
Total listed
-
-
-
c. Commodity derivatives
Commodity swaps
142,415
17,106
16,605
Total non-listed
142,415
17,106
16,605
d. Index derivatives
OTC options
49,000
176
176
Total non-listed
49,000
176
176
Futures
105
5
22
Total listed
105
5
22
e. Other derivatives
GDP linked security
1,665,055
6,660
Total listed
1,665,055
6,660
-
Derivatives for hedging purposes
a. Foreign exchange derivatives
Cross currency swaps
357,872
46,052
Total non-listed
357,872
-
46,052
b. Interest rate derivatives
Interest rate swaps
1,153,639
42,364
574,362
Interest rate options (caps and floors)
Total non-listed
1,153,639
42,364
574,362
Grand Total
16,272,871
793,015
1,550,529
17. Loans and advances to customers
31.12.2016
31.12.2015
Individuals
Mortgages:
19,670,133
20,171,969
Consumer:
- Non-securitized
4,041,109
4,063,792
- Securitized
1,272,572
1,299,934
Credit cards:
- Non-securitized
718,425
720,016
- Securitized
540,376
565,583
Other
705
2,601
Total
26,243,320
26,823,895
Companies:
Corporate loans
- Non-securitized
26,595,645
27,547,074
- Securitized
2,514,014
2,126,179
Leasing
- Non-securitized
347,810
245,981
- Securitized
324,773
447,618
Factoring
528,618
599,387
Total
30,310,860
30,966,239
Other receivables
412,833
417,737
56,967,013
58,207,871
Less:
Allowance for impairment losses *(12,558,253)
(12,021,755)
Total
44,408,760
46,186,116
The Bank and Alpha Leasing A.E. have proceeded in securitization of consumer, corporate loans, credit cards and leasing through special purpose entities controlled by them.
In addition, in 2016, the Bank proceeded in securitizing corporate (SME) loans by transferring the loans to the special purpose entity, Alpha Proodos Designated Activity Company.
Based on the contractual terms and structure of the above transactions (e.g. allowance of guarantees or/and credit enhancement or due to the Bank owing the bonds issued by the special purpose entities) the Bank and Alpha Leasing A.E. retained in all cases the risks and rewards deriving from securitized portfolios.
The Bank has proceeded on 8.7.2015 in the cancellation of amount 3.75 billion of covered that were issued, secured by mortgage loans. On 31.12.2016, the balance of the covered bonds amounted to 5 million (note 27). The value of mortgage loans provided as coverage for these bonds amounted to 15.5 million.
---------------------------------------------------
* In addition to the allowance of impairment losses regarding loans and advances to customers, a provision of 3,195 (31.12.2015: 4,713) has been recorded to cover credit risk relating to off-balance sheet items. The total provision recorded to cover credit risk amounts to 12,561,448 (31.12.2015: 12,026,468).
Allowance for impairment losses
Balance 1.1.2015
8,830,277
Changes for the period 1.1 - 31.12.2015
Impairment losses for the year from continuing operations (note 10)
3,015,027
Impairment losses for the year from discontinued operations
32,814
Transfer of accumulated provisions to assets held for sale
(111,912)
Change in present value of the impairment losses from continuing operations
547,996
Change in present value of the impairment losses from discontinued operations
1,435
Foreign exchange differences
54,781
Loans written-off during the year
(348,663)
Balance 31.12.2015
12,021,755
Changes for the period 1.1 - 31.12.2016
Impairment losses for the year from continuing operations (note 10)
1,193,748
Transfer of accumulated provisions to assets held for sale
(171,580)
Utilization of accumulated provisions for other movements
(16,425)
Sales of impaired loans
(17,795)
Change in present value of the impairment losses from continuing operations
413,835
Foreign exchange differences
7,893
Loans written-off during the year
(873,178)
Balance 31.12.2016
12,558,253
The finance lease receivables by duration are as follows:
31.12.2016
31.12.2015
Up to 1 year
324,206
396,490
From 1 year to 5 years
202,472
136,893
Over 5 years
237,799
265,009
764,477
798,392
Non accrued finance lease income
(91,894)
(104,793)
Total
672,583
693,599
The net amount of finance lease receivables by duration is analyzed as follows:
31.12.2016
31.12.2015
Up to 1 year
309,997
380,421
From 1 year to 5 years
165,083
91,614
Over 5 years
197,503
221,564
Total
672,583
693,599
18. Investment securities
a. Available for sale
31.12.2016
31.12.2015
Greek Government:
- Bonds
2,078,924
1,787,958
- Treasury bills
1,510,796
2,142,123
Other Government:
- Bonds
273,171
319,117
- Treasury bills
254,654
239,621
Other issuers:
- Listed
921,473
1,074,750
- Non-listed
9,863
8,947
Shares
- Listed
78,748
149,482
- Non-listed
54,571
37,670
Other variable yield securities
34,853
34,816
Total
5,217,053
5,794,484
During 2016 the Group has recognized impairment losses amounting to 3,279 which is analyzed to 1,784 that relates to shares, 1,495 that relates to other variable yield securities.
During 2015 the Group has recognized impairment losses amounting to 16,374 which is analyzed as 9,197 that relates to shares, 4,227 that relates to other variable yield securities and an amount of 2,950 which relates to bonds of other issuers.
hese impairment amounts are included in "Gains less losses on financial transactions".
b. Held to maturity
31.12.2016
31.12.2015
Other countries:
- Bonds
15,430
18,983
Other issuers:
- Listed
29,569
60,726
Total
44,999
79,709
The variation between the comparative years is mainly attributed to the maturity of bonds with a carrying amount of 6.1 million and the sale of a bond close to its maturity with a book value amounting to 28.6 million.
c. Loans and receivables
Loans and receivables include bonds issued by the European Financial Stability Facility (E.F.S.F.) with a nominal value of 3,960,544 received by the Bank as a result of the share capital increase which was completed on 6.6.2013 and a nominal value of 284,628 which were transferred to the Bank from the Hellenic Financial Stability Fund for the undertaking of customer deposits from the former Cooperative Banks of West Macedonia, Evia and Dodecanese in December 2013.
These bonds under the original agreement could only be used as collateral to obtain liquidity from the Eurosystem or from interbank counterparties in the form of repos.
In April 2016 the subscription agreement between the European Financial Stability Facility (EFSF), the Hellenic Financial Stability Fund (HFSF) and the Bank was revised. The revision refers to the terms of use of the above bonds. The revision states that the Bank may participate with the EFSF bonds in the purchase programme for the bonds issued by central governments, special bodies-securities issuers and European supranational institutions of the Eurozone (Public Sector Purchase Programme - PSPP) conducted by ECB. According to the ECB's decision, a total up to 50% of each EFSF issue can be purchased until the completion of the program in March 2017. During 2016, the Bank conducted sale transactions of EFSF securities at a nominal value of 1,583 million, and within 2017 (until 23.1.2017) at a nominal value of 140 million. The total book value of these bonds on 31.12.2016 was 2,682,655 (31.12.2015: 4,289,482).
In the context of the implementation of short-term measures for public debt relief, the European Stability Mechanism (ESM), the European Financial Stability Facility (EFSF), the Hellenic Financial Stability Fund (HFSF), the Greek State and the four Greek systemic banks signed a bond exchange agreement in March 2017. Under this contract, floating rate bonds issued by EFSF and held by the Banks are gradually exchanged with long-term fixed rate bonds issued by EFSF with equal nominal value, which will be repurchased within one month from EFSF against cash. For the use of long-term fixed rate bonds the same restrictions apply to these of floating-rate bonds, i.e. they consist eligible instruments for providing financing from the Eurosystem and the participation of the ECB's bond purchase program (PSPP) and can be pledged as collateral under repurchase transactions with interbank counterparties.
19. Investments in associates and joint ventures
31.12.2016
31.12.2015
Opening balance
45,771
46,383
New associates/joint ventures
18,439
Debt capitalization and share capital increase
168
9,756
Transfer to assets held for sale
(39,244)
Share of profit/(loss) and other comprehensive income
(3,342)
(10,368)
Total
21,792
45,771
During 2016, the new investments in associates and joint ventures are "Aktua Hellas Holdings S.A." and "AEP Elaionas A.E.".
The "Transfer due to reclassification to assets held for sale" relates to the joint ventures APE Commercial Property A.E. and APE Investment Property A.E., which were classified as Assets Held for Sale on 30.6.2016, as described in detail in note 47.
During 2015, the debt capitalization and share capital increase relates to the joint ventures "Alpha TANEO A.K.E.S." and "APE Investment Property A.E.".
The associates and joint ventures of the Group are the following:
Name
Country
Group's ownership interest %
31.12.2016
31.12.2015
a. Associates
AEDEP Thessalias and Stereas Ellados
Greece
50
50
A.L.C Novelle Investments Ltd
Cyprus
33.33
33.33
Olganos ..
Greece
30.44
30.44
Bank Information Systems
Greece
23.77
23.77
Propindex ..D.
Greece
35.58
35.58
Alpha Investment Property Elaionas ..
Greece
50
Selonda A.E.G.E.
Greece
21.97
23.01
Nireus S.A.
Greece
20.65
20.72
b. Joint Ventures
APE Commercial Property .
Greece
72.2
72.2
APE Investment Property A.E.*
Greece
72.8
72.8
Alpha ...S.
Greece
51
51
Rosequeens Properties Ltd*
Cyprus
33.33
33.33
Aktua Hellas Holdings ..*
Greece
45
The Bank participates in companies "Selonda A.E.G.E." and "Nireus S.A." as a consequence of their restructuring agreements of loan liabilities. The Bank intends to transfer these companies in the near future. As a result these companies were classified in assets held for sale at their fair value, which was determined in the amount of 1.
-------------------------------------
* Companies are parent group entities as mentioned in note 38.
The Group's share in equity and profit/(loss) of each associate and joint venture is set out below:
Group's
share on equityShare
of profit/(loss)Share of other comprehensive income in equity
From 1 January to
From 1 January to
From 1 January to
Name
31.12.2016
31.12.2015
31.12.2016
31.12.2015
31.12.2016
31.12.2015
a. Associates
AEDEP Thessalias and Stereas Ellados
74
74
A.L.C. Novelle Investments Ltd
1,012
1,020
(8)
510
(470)
Olganos ..
(25)
Bank Information Systems ..
267
480
(213)
179
Propindex ..D.
86
86
(2)
Alpha Investment Property Elaionas ..
11,344
(555)
Total (a)
12,783
1,660
(776)
662
(470)
b. Joint ventures
APE Commercial Property ..
40,844
(1,600)
(1,071)
(77)
Alpha ...S.
3,213
3,267
(195)
(173)
APE Investment Property A.E.
(9,239)
Rosequeens Properties Ltd
12
(15)
Aktua Hellas Holdings ..
5,784
(756)
Total (b)
9,009
44,111
(2,566)
(10,483)
(77)
Total (a) + (b)
21,792
45,771
(3,342)
(9,821)
(547)
Investments in material associates and joint ventures
The Group considers as material the associate companies and joint ventures that it participates in, by taking into consideration the activities of strategic importance carried out, but also the book value of the Group's investments as well as the loans and receivables that consist part of the Group's net investment in the companies, if any.
On the basis of the above, the associate company AEP Elaionas A.E. and the joint ventures APE Commercial Property A.E. and APE Investment Property A.E. are considered material.
AEP Elaionas mainly carries out activities relating to building construction and real estate exploitation in general. APE Commercial Property A.E. carries out activities mainly relating to the management and exploitation of real estate activities, as well as the acquisition and management of shareholding, while APE Investment Property A.E. activities relating to the acquisition of securities and any kind of assets in general. The last two are classified as joint ventures, since, under a contractual agreement, the exercise of control requires a consensus decision of the shareholders.
All the above mentioned companies are established in Greece, are not listed on a regulated market and therefore there is no official reference regarding their fair value.
Condensed financial information about AEP Elaionas A.E., which is accounted for under the equity method, as presented below. For APE Commercial Property A.E. and APE Investment Property A.E. that have been classified as Held for Sale on 30.6.2016, the applicable disclosures of IFRS 5 are provided in note 47.
Condensed Total Comprehensive Income
31.12.2016
Other expenses
(1,110)
Profit/(losses) before income tax, from continuing operations
(1,110)
Income tax
-
Profit/(losses) after income tax, from continuing operations
(1,110)
Other comprehensive income recognized directly in Equity:
Total comprehensive income for the year, after income tax
(1,110)
Amount attributed to the participation of the Group to profits/(losses) of the joint venture
(555)
Amount attributed to the participation of the Group to other comprehensive income recorded directly in the equity
-
No dividends have been received from the joint venture in 2016.
31.12.2016
ASSETS
Cash and cash equivalents
326
Other current assets
489
Total current assets
815
Non current assets
104,940
Short-term liabilities
262
Total Short-term liabilities
262
Long-term liabilities
101,687
Total Long-term liabilities
101,687
Total Equity
3,806
Group participation (%)
50
Equity share
1,903
Goodwill from the acquisition
9,441
Carrying amount of participation
11,344
Loan that is part of the net investment
51,196
Net investment
62,540
The Group does not participate in joint operations.
Other information for associates and joint ventures and significant restrictions
Apart from the associated companies and the joint ventures that have been classified as Assets Held for Sale and are accounded for in accordance with the provisions of IFRS 5, the rest of the associates and the joint ventures are accounted for using the equity method.
No cases exist where the Group has stopped recognizing its share in the losses of associates and joint ventures because its participation has been fully impaired.
The Group has no contingent liabilities regarding its participation in associates or joint ventures. The Bank has undertaken the obligation to participate in additional investments in the joint venture Alpha TANEO AKES amounting up to 0.3 million. Further to this, there are no other unrecognized commitments of the Group relating with its participation in joint ventures which could result in future cash or other outflows.
No significant restrictions exist on associates or joint ventures to transfer capital in the entity either as dividends or to repay loans that have been financed by the Group apart from the restrictions imposed by Codified Law 2190/1920 on Greek companies according to the minimum share capital required, equity and distribution of dividend. Moreover, restrictions imposed by the adoption of Legislative Act within 2015 exist which refer to cash withdrawals and free capital flows as well as any ministerial or other decision issued, which apply to all companies operating in Greece.
20. Investment property
Land - Buildings
Balance 1.1.2015
Cost
693,486
Accumulated depreciation and impairment losses
(126,274)
1.1.2015 - 31.12.2015
Net book value 1.1.2015
567,212
Additions
21,543
Additions from companies consolidated for the first time in 2015
90,941
Reclassifications to "Other assets"
(108)
Reclassifications from "Property, plant and equipment"
4,145
Reclassification to "Assets held for sale"
(939)
Reclassification of discontinued operations assets to "Assets held for sale"
(1,277)
Foreign exchange differences
(771)
Disposals/Write-offs
(13,836)
Depreciation charge for the year from continuing operations
(10,802)
Depreciation charge for the year from discontinued operations
(162)
Impairment losses
(32,284)
Net book value 31.12.2015
623,662
Balance 31.12.2015
Cost
800,910
Accumulated depreciation and impairment losses
(177,248)
1.1.2016 - 31.12.2016
Net book value 1.1.2016
623,662
Additions
76,069
Additions from companies consolidated for the first time in 2016
11,907
Reclassification to "Assets held for sale"
(40,233)
Reclassification from/to Property, plant and equipment
25,312
Reclassification of discontinued operations assets to "Assets held for sale"
(6,374)
Foreign exchange differences
(539)
Disposals/Write-offs
(30,584)
Depreciation charge for the year from continuing operations
(12,937)
Impairment losses
(32,191)
Net book value 31.12.2016
614,092
Balance 31.12.2016
Cost
800,527
Accumulated depreciation and impairment losses
(186,435)
In 2016, an impairment loss amounting to 32.2 million, in order for the carrying amount of investment property not to exceed their recoverable amount as at 31.12.2016, as estimated by certified appraisers. In 2015, an impairment loss amounted to 32.3 million. The recoverable amount of investment property which was impaired during the current year amounted to 110.2 million (31.12.2015: 100.1 million) and was calculated as the fair value less costs of disposal. The fair value of investment property as at 31.12.2016 amounts to 616.1 million (31.12.2015: 667 million). The fair value of investment property is calculated in accordance with the methods mentioned in note 1.8 and are classified, in terms of fair value hierarchy, in Level 3, since they have made use of research inputs, assumptions and inputs relating to properties of relevant characteristics and encompass a wide range of non-observable market inputs. The capitalization rate used ranges between 7.0% and 8.5%.
The additions from companies consolidated for the first time in 2016 and 2015 relate to investment property which were obtained as collateral for loans and acquired by the Group in the context of its credit risk management.
21. Property, plant and equipment
Land and buildings
Leasehold improvements
Equipment
Total
Balance 1.1.2015
Cost
1,417,632
4,302
518,133
1,940,067
Accumulated depreciation and impairment losses
(411,831)
(3,152)
(441,736)
(856,719)
1.1.2015 - 31.12.2015
Net book value 1.1.2015
1,005,801
1,150
76,397
1,083,348
Foreign exchange differences
(19)
(1)
138
118
Additions
7,659
102
17,460
25,221
Additions from companies consolidated for the first time in 2015
949
949
Disposals/Write-offs
(3,711)
(7)
(127)
(3,845)
Reclassification to "Investment property"
(4,145)
(4,145)
Reclassification of discontinued operations assets to "Assets held for sale"
(5,345)
(3,131)
(8,476)
Reclassification to "Assets held for sale"
(164,166)
(3,088)
(167,254)
Reclassification internally to Property, plant and equipment
49
615
(664)
-
Reclassification to "Other assets"
(14,102)
(18)
(540)
(14,660)
Depreciation charge from continuing operations
(26,011)
(400)
(19,660)
(46,071)
Depreciation charge from discontinued operations
(1,454)
(577)
(2,031)
Impairment losses
(1,929)
(324)
(2,253)
Net book value 31.12.2015
792,627
1,441
66,833
860,901
Balance 31.12.2015
Cost
1,169,294
4,090
472,059
1,645,443
Accumulated depreciation and impairment losses
(376,667)
(2,649)
(405,226)
(784,542)
1.1.2016 - 31.12.2016
Net book value 1.1.2016
792,627
1,441
66,833
860,901
Foreign exchange differences
(286)
(1)
(37)
(324)
Additions
10,074
71
20,414
30,559
Additions from companies consolidated for the first time in 2016
278
278
Disposals/Write-offs
(3,040)
(3)
(86)
(3,129)
Reclassification from/to "Investment property"
(25,312)
(25,312)
Reclassification of discontinued operations assets to "Assets held for sale"
(400)
(400)
Reclassification to "Assets held for sale"
(19,579)
(1,387)
(20,966)
Reclassification internally to Property, plant and equipment
(77)
(471)
548
-
Reclassification to "Other assets"
(4,035)
(4,035)
Depreciation charge from continuing operations
(20,604)
(316)
(18,745)
(39,665)
Impairment losses
(3,818)
(121)
(3,939)
Net book value 31.12.2016
725,550
721
67,697
793,968
Balance 31.12.2016
Cost
1,097,399
3,389
462,904
1,563,692
Accumulated depreciation and impairment losses
(371,849)
(2,668)
(395,207)
(769,724)
In 2016, an impairment loss of 3.9 million (2015: 2.3 million) was recognized in "Other Expenses". The recoverable amount of the owned fixed assets that were impaired during the year amounted to 23,023 (2015: 9,828). During the impairment test of property, plant and equipment, the estimation is based on the value in use incorporating the carrying amount of an asset and all the improvements which render it absolutely suitable for use from the Group.
The carrying amount of owned land and buildings included in the above balances amounts to 675,797 as at 31.12.2016 (31.12.2015: 718,699).
22. Goodwill and other intangible assets
Goodwill
Software
Other intangible
Total
Balance 1.1.2015
Cost
488,347
155,103
643,450
Accumulated amortization and impairment loss
(278,559)
(33,467)
(312,026)
1.1.2015 - 31.12.2015
Net book value 1.1.2015
209,788
121,636
331,424
Additions
60,855
72
60,927
Additions from companies consolidated for the first time in 2015
2,900
2,900
Reclassification of discontinued operations assets to "Assets held for sale"
(4,384)
(1)
(4,385)
Reclassification to "Assets held for sale"
22
22
Foreign exchange differences
198
198
Depreciation charge from continuing operations
(22,804)
(22,910)
(45,714)
Depreciation charge from discontinued opearations
(221)
(221)
Net book value 31.12.2015
2,900
243,454
98,797
345,151
Balance 31.12.2015
Cost
2,900
544,009
152,363
699,272
Accumulated amortization and impairment loss
(300,555)
(53,566)
(354,121)
1.1.2016 - 31.12.2016
Net book value 1.1.2016
2,900
243,454
98,797
345,151
Additions
79,420
79,420
Reclassification of discontinued operations assets to "Assets held for sale"
(2)
(2)
Reclassification to "Assets held for sale"
(1,461)
(1,461)
Foreign exchange differences
(46)
(46)
Disposals/Write-offs
(170)
(170)
Depreciation charge from continuing operations
(26,531)
(18,292)
(44,823)
Impairment losses
(2,900)
(3,855)
(6,755)
Net book value 31.12.2016
-
290,809
80,505
371,314
Balance 31.12.2016
Cost
617,620
140,128
757,748
Accumulated amortization and impairment loss
(326,811)
(59,623)
(386,434)
The additions of year 2016 mainly concern acquisitions of user rights for computer applications. In 2015 the goodwill amounting to 2.9 million relates to the acquired company Asmita Gardens S.R.L., following the completion of valuation of its assets (note 49). In 2016 the above goodwill was fully impaired.
23. Deferred tax assets and liabilities
31.12.2016
31.12.2015
Assets
4,519,046
4,398,176
Liabilities
(21,219)
(20,852)
Total
4,497,827
4,377,324
Deferred tax assets and liabilities are analyzed as follows:
1.1 - 31.12.2016
Balance 1.1.2016
Recognized in
Transferred to Held for Sale
Foreign exchange differences
Balance 31.12.2016
Income Statement from continuing operations
Income Statement from discontinued operations
Equity
Debit difference of Law 4046/2012
1,158,424
(44,554)
1,113,870
Write-offs, depreciation, and impairment of fixed assets
32,883
5,806
38,689
Valuation/Impairment of loans
2,334,547
144,477
2,479,024
Valuation of loans due to hedging
(1,154)
840
(314)
Employee defined benefit and insurance funds
69,580
(26,353)
3,099
46,326
Valuation of derivatives
150,183
6,032
16,069
172,284
Effective interest rate
11,909
(191)
11,718
Valuation of liabilities to credit institutions and other borrowed funds due to fair value hedge
(50,491)
(3,776)
(54,267)
Valuation/impairment of bonds and other securities
78,185
210
84,438
(19,843)
142,991
Tax losses carried forward
488,502
(38,136)
281
450,647
Other temporary differences
101,398
(902)
(25)
(4,432)
322
96,363
Exchange differences from translating and hedging of foreign operations
3,358
(2,859)
499
Total
4,377,324
43,453
84,438
(3,278)
(4,432)
322
4,497,827
1.1 - 31.12.2015
Balance 1.1.2015
Recognized in
Transferred to Held for Sale
Foreign exchange differences
Balance 31.12.2015
Income Statement from continuing operations
Income Statement from discontinued operations
Equity
Debit difference of
Law 4046/20121,078,533
79,891
1,158,424
Write-offs, depreciation, and impairment of fixed assets
60,041
(22,946)
6,261
(10,473)
32,883
Valuation/Impairment of loans
1,636,632
697,915
2,334,547
Valuation of loans due to hedging
(2,097)
943
(1,154)
Employee defined benefit and insurance funds
76,352
(8,224)
2,101
(649)
69,580
Valuation of derivatives
184,269
(26,491)
(7,595)
150,183
Effective interest rate
1,939
9,970
11,909
Valuation of liabilities to credit institutions and other borrowed funds due to fair value hedge
(53,693)
3,202
(50,491)
Valuation/impairment of bonds and other securities
119,498
21,009
(62,322)
78,185
Tax losses carried forward
461,046
12,020
17,770
(2,334)
488,502
Other temporary differences
97,810
2,601
533
402
52
101,398
Exchange differences from translating and hedging of foreign operations
3,614
(256)
3,358
Total
3,663,944
769,890
533
(44,041)
(13,054)
52
4,377,324
The amount of 17,770 which is recognized in Equity in the category "Tax losses carried forward" relates to Bank's share capital increase expenses which according to Law 4308/14 (Greek Accounting Standards) are recognized in the tax results of the year.
24. Other assets
31.12.2016
31.12.2015
Tax advances and withholding taxes
431,164
468,016
Deposit and Investment Guarantee Fund
625,417
613,377
Assets obtained from auctions
191,227
197,904
Prepaid expenses
20,550
42,693
Accrued income
3,831
4,129
Other
178,270
182,514
Total
1,450,459
1,508,633
Hellenic Deposit and Investment Guarantee Fund included in other assets relates to the Bank's participation in assets of investment and deposit cover scheme. The above figure consists of:
1. the amount contributed relating to investment cover scheme and
2. the difference between the regular annual contribution of credit institutions resulting from the application of article 6 of Law 3714/2008 "Borrowers protection and other regulations", which raised the amount of deposits covered from Deposit Guarantee scheme from 20 thousands to 100 thousands per each depositor.
The above difference is included according to Law4370/7.3.2016 Deposit Gurantee Scheme (incorporating Directive 2014/49/EE), Deposit and Investment Guarantee Fund and other regulations in a special group of assets, whose elements are owned in common by the participant credit institutions, according to the participation percentage of each one.
On 31.12.2016 the Group measured its fixed assets classified in other assets at the lowest value between the carrying amount and its fair value. In cases where the fair value was less than the carrying amount, an impairment loss was recognized which amounted to 6.6 million in total and is included in "Other expenses" of the Income Statement. On 31.12.2015 the relevant impairment loss amounted to 1.8 million. The fair value of fixed assets is calculated in accordance with the methods mentioned in note 1.8 and are classified in terms of fair value hierarchy in Level 3, since they have made use of research inputs, assumptions and inputs relating to properties of relevant characteristics and therefore encompass a wide range of non-observable market inputs. The capitalization rate used was between 7.0% and 8.5%.
The account balance "Other" of the comparative period has been restated due to the completion of the valuation of the acquired subsidiary company (note 49).
Liabilities
25. Due to banks
31.12.2016
31.12.2015
Deposits:
- Current accounts
35,304
112,482
- Term deposits
Central Banks
18,331,086
24,404,828
Other credit institutions
21,053
17,408
Cash collateral for derivative margin account and repurchase agreements
25,465
56,960
Sale and repurchase agreements (Repos)
411,914
269,292
Borrowing funds
277,404
252,123
Deposits on demand:
- Other credit institutions
3,351
2,270
Total
19,105,577
25,115,363
Eurosystem funding decreased by 6.1 billion mainly due to the sale of EFSF bonds through the PSPP programme (note 18), new repurchase agreements (Repos) and the increase in customer deposits.
In June 2016, the European Central Bank carried out a new program of targeted long term refinancing operations (TLTRO-II) with a four year duration. The Bank participates in this program with an amount of 1.5 billion.
26. Due to customers (including debt securities in issue)
31.12.2016
31.12.2015
Deposits:
- Current accounts
9,046,299
8,336,028
- Saving accounts
9,447,093
9,911,144
- Term deposits
14,217,085
12,952,678
Debt securities in issue
78,675
94,155
Sale and repurchase agreements (Repos)
46,112
46,140
Deposits on demand
32,687
28,773
32,867,951
31,368,918
Cheques payable
78,165
65,348
Total
32,946,116
31,434,266
27. Debt securities in issue and other borrowed funds
i. Issues guaranteed by the Greek State (Law 3723/2008)
Under the programme for the enhancement of the Greek's economy liquidity, according to Law 3723/2008, during 2016, the Bank proceeded to the issuance of senior debt securities guaranteed by the Greek Government amounting to 6.15 billion while the maturities/redemptions for the same period amounted to 14.37 billion.
The total balance of senior debt securities guaranteed by the Greek Government on 31.12.2016 amounts to 1 billion (31.12.2015: 9.22 billion).
These securities are not included in the "Debt securities in issue and other borrowed funds", as they are held by the Group.
ii. Covered bonds *
Covered bonds are not included in caption "Debt securities in issue and other borrowed funds" as these securities are held by the Group.
The total balance of covered bonds on 31.12.2016 amounts to 5 million.
iii. Senior debt securities
Balance 1.1.2016
29,742
Changes for the period 1.1 - 31.12.2016
Maturities/Repayments
(4,128)
Fair value change
38
Accrued interest
1,262
Foreign exchange differences
(80)
Balance 31.12.2016
26,834
This variation is mainly due to an early redemption of senior debt security of a nominal value of USD 3 million that took place on 23.5.2016.
iv. Liabilities from the securitization of shipping loans
Balance 1.1.2016
340,272
Changes for the period 1.1 - 31.12.2016
Maturities/Repayments
(95,195)
Accrued interest
8,507
Foreign exchange differences
(1,264)
Balance 31.12.2016
252,320
The Bank proceeded in a shipping loan securitization transaction, transferring them to the fully consolidated Special Purpose Entity, Alpha Shipping Finance Ltd which in turn raised funding from third parties. The liability of the Group to third parties on 31.12.2016, amounts to 252.3 million.
v. Liabilities from the securitization of corporate loans (SMEs)
Balance 1.1.2016
-
Changes for the period 1.1 - 31.12.2016
New issues
319,899
Accrued interest
154
Balance 31.12.2016
320,053
During the year, the Bank proceeded with the securitization of SME's loans, transferring the aforementioned loans to the fully consolidated special purpose entity, Alpha Proodos Designated Activity Company (D.A.C), which in turn raised funding from third parties. The liability of the Group to third parties on 31.12.2016 amounts to 320 million.
vi. Liabilities from the securitization of other loans
Liabilities arising from the securitization of consumer loans, corporate loans and credit cards are not included in "Debt securities in issue and other borrowed funds" since these securities of nominal value 4.2 billion have been issued by special purpose entities and held by the Bank.
------------------------------------------
* Financial disclosures regarding covered bonds issues, as determined by the 2620/28.8.2009 directive of Bank of Greece are published at the Bank's website.
vii. Subordinated debt
1. Subordinated loans (Lower Tier II, Upper Tier II)
Balance 1.1.2016
100,270
Changes for the period 1.1 - 31.12.2016
(Repurchases)/sales
(17,552)
Maturities/repayments
(367)
Accrued interest
(13)
Balance 31.12.2016
82,338
2. Convertible bond loan
Balance 1.1.2016
24,600
Changes for the period 1.1 - 31.12.2016
Fair value change
(10,605)
Balance 31.12.2016
13,995
The convertible bond concerns bond issuance with nominal value 150 million issued by the Bank on 1.2.2013 under an agreement with Credit Agricole SA for the acquisition of former Emporiki Bank. The decrease in the liability from the convertible bond at the amount of 10.6 million was recognized in Gains less losses on financial transactions.
The convertible bond matured on 1.2.2017 (note 50).
Total of debt securities in issue and other borrowed funds
695,540
Of the above debt securities in issue amounting to 695,540 an amount of 78,675 (31.12.2015: 94,155) held by Group customers has been reclassified to "Due to customer". Therefore, the balance of "Debt securities in issue held by institutional investors and other borrowed funds" on 31.12.2016, amounts to 616,865 (31.12.2015: 400,729).
28. Liabilities for current income tax and other taxes
31.12.2016
31.12.2015
Current income tax
9,328
10,492
Other taxes
24,450
27,700
Total
33,778
38,192
29. Employee defined benefit obligations
The total amounts recognized in the financial statements for defined benefit obligations are presented in the table below:
Balance Sheet - Liabilities
31.12.2016
31.12.2015
Bank employee's indemnity provision due to retirement in accordance with Law 2112/1920
78,597
70,643
TAP - Lump sum benefit
0
27,445
Savings program guarantee
4,225
2,556
Plans for Diners (pension and health care)
6,305
5,172
Group employees in Greece indemnity provision due to retirement in accordance with Law 2112/1920
2,701
2,519
Alpha Bank Srbija employee's indemnity provision due to retirement
0
215
Total Liabilities
91,828
108,550
Income statement
Expenses/(Income)
From 1 January to
31.12.2016
31.12.2015
Bank employee's indemnity provision due to retirement in accordance with Law 2112/1920
7,118
4,068
TAP - Lump sum benefit
3,972
3,987
Savings program guarantee
206
41
Plans for Diners (pension and health care)
141
118
Group employees in Greece indemnity provision due to retirement in accordance with Law 2112/1920
702
669
Total
12,139
8,883
Balance Sheet item and Income Statement amounts are analyzed per fund and type of benefit as follows:
i. Bank
a. Employee indemnity due to retirement in accordance with Law 2112/1920
The employment contracts of the employees are considered open term employee contracts and when cancelled, the provisions of Law 2112/1920 and Law 3198/1955 apply, as amended by Law 4093/2012, which provide a lump sum benefit payment.
The amounts recognized in the balance sheet are as follows:
31.12.2016
31.12.2015
Present value of defined obligations
78,597
70,643
Liability/(Asset)
78,597
70,643
The amounts recognized in the income statement are as follows:
From 1 January to
31.12.2016
31.12.2015
Current service cost
2,082
1,965
Net interest cost resulted from net asset/liability
1,760
1,295
Past service cost
2,343
Settlement/Curtailment/Termination (gain)/loss
933
808
Total (included in staff costs)
7,118
4,068
The movement in the present value of the defined benefit obligation is as follows:
2016
2015
Opening balance
70,643
65,023
Current service cost
2,082
1,965
Interest cost
1,760
1,295
Benefits paid
(7,225)
(1,600)
Settlement/Curtailment/Termination (gain)/loss
933
808
Past service cost
2,343
Actuarial (gain)/loss - financial assumptions
8,690
3,576
Actuarial (gain)/loss - experience assumptions
(629)
(424)
Closing balance
78,597
70,643
The amounts recognized directly in equity during the year are analyzed as follows:
31.12.2016
31.12.2015
Change in liability gain/(loss) due to changes in financial and demographic assumptions
(8,690)
(3,576)
Change in liability gain/(loss) due to experience adjustments
629
424
Total actuarial gain/(loss) recognized in Equity
(8,061)
(3,152)
The movement in the obligation in the balance sheet is as follows:
2016
2015
Opening balance
70,643
65,023
Benefits paid
(7,225)
(1,600)
Loss /(Gain) recognized in Income Statement
7,118
4,068
Loss/(Gain) recognized in equity
8,061
3,152
Closing balance
78,597
70,643
b. Supplementary Pension Fund (TAP) of former Alpha Credit Bank Employees
The obligation to the Supplementary Pension Fund (TAP) of former Alpha Credit Bank employees, after it was absorbed by the Common Insurance Fund of Bank Employees for the supplementary pension (Article 10, Law 3620/2007) is restricted to paying a lump sum benefit to retiring employees, which is guaranteed by the Bank. On 18.11.2013 the Bank signed a new operational agreement with the Association of Personnel, whereby the amount paid by the Supplementary Pension Fund, will not exceed the difference between the amount corresponding to the overall lump sum provision, according to the statute of the Supplementary Pension Fund (TAP), and the amount of compensation that the Bank must pay, according to the current labor legislation, on the termination of employment contracts. This adjustment is not affected by a potential reduction of the compensation amount in the future.
On 20.05.2016 the General Meeting of the representatives of TAP members decided the liquidation of TAP under the terms of the agreement signed on 21.04.2016 between the Bank, the staff association and TAP. Based on the decision, contribution from TAP were returned to its members along with their returns according to the articles of association. This resulted in the settlement of the respective obligation.
The amounts included in the balance sheet are as follows:
31.12.2016
31.12.2015
Present value of defined obligation
62,947
Fair value of plan assets
(35,502)
Liability/(asset)
-
27,445
The amounts included in the income statement are as follows:
From 1 January to
31.12.2016
31.12.2015
Current service cost
1,155
2,651
Net interest cost resulted from net asset/liability
284
354
General expenses
2
5
Total of current service cost
1,441
3,010
Settlement/Curtailment/Termination (gain)/loss
2,531
977
Total (included in staff costs)
3,972
3,987
The movement in the present value of the defined benefit obligation is as follows:
2016
2015
Opening balance
62,947
82,475
Current service cost
1,155
2,651
Interest cost
654
1,179
Employee contributions
124
366
Benefits paid
(72,125)
(26,357)
Contributions paid directly by the Fund
-
(230)
Settlement/curtailment/termination loss/(gain)
2,531
977
Actuarial (gain)/loss - financial assumptions
-
1,983
Actuarial (gain)/loss - experience adjustments
4,714
(97)
Closing balance
-
62,947
The movement in the fair value of plan assets is as follows:
2016
2015
Opening balance
35,502
53,245
Expected return
370
825
Employee contributions
124
366
Bank's contributions
31,417
Benefits paid
(72,125)
(26,357)
Expenses
(2)
(5)
Actuarial (losses) / gains
4,714
7,428
Closing balance
-
35,502
The amounts recognized directly in equity during the year are analyzed as follows:
2016
2015
Change in liability gain/(loss) due to changes in financial and demographic assumptions
(1,983)
Change in liability gain/(loss) due to experience adjustments
(4,714)
97
Return on plan assets excluding amounts included in income statement
4,714
7,428
Total actuarial gain/(loss) recognized in equity
-
5,542
The movement of the liability/(asset) in the balance sheet is as follows:
2016
2015
Opening balance
27,445
29,230
Benefits paid directly by the Bank
(230)
Bank's contributions
(31,417)
Loss/(Gain) recognized in Income Statement
3,972
3,987
Loss/(Gain) recognized in Equity
(5,542)
Closing balance
-
27,445
c. Guarantee of the minimum benefit for newly insured employees (after 1993) that were hired up to 31.12.2004 and joined the new Bank's savings plan
For employees hired by the Bank and insured from 1.1.1993 until 31.12.2004 the final amount to be received upon retirement has, according to the provisions of the insurance plan, as minimum limit the benefit as defined in Law 2084/1992 and the Cabinet Act 2/39350/0022/2.3.99.
The amounts included in the balance sheet are analyzed as follows:
31.12.2016
31.12.2015
Present value of defined obligation
4,225
2,556
Liability/(asset)
4,225
2,556
The amounts included in the income statement are analyzed as follows:
From 1 January to
31.12.2016
31.12.2015
Current service cost
142
30
Net interest cost resulted from the net asset/liability
64
11
Total (included in staff costs)
206
41
The movement in the present value of liability is as follows:
2015
2015
Opening balance
2,556
547
Current service cost
142
30
Interest cost
64
11
Actuarial (gain)/loss - financial assumptions
1,631
1,947
Actuarial (gain)/loss - experience adjustments
(168)
21
Closing balance
4,225
2,556
The amounts recognized directly in equity during the year are analyzed as follows:
2016
2015
Change in liability gain/(loss) due to changes in assumptions
(1,631)
(1,947)
Change in liability gain/(loss) due to experience adjustments
168
(21)
Total actuarial gain/(loss) recognized in Equity
(1,463)
(1,968)
The movement in the obligation is as follows:
2016
2015
Opening balance
2,556
547
Loss/(Gain) recognized in income statement
206
41
Loss/(Gain) recognized in equity
1,463
1,968
Closing balance
4,225
2,556
d. Supplementary Pension Fund and Health Care of Diners
The Bank guarantees from 30.9.2014, date of acquisition of Diners Club Hellas S.A. the Supplementary Pension Fund and Health Care Plan of the company, which is managed by an independent insurance company. On 2.6.2015, the merger via absorption of the company was completed. These plans cover the pensioners and those who have retired and have the right to receive suplementary penion in the future.
The amounts included in the balance sheet are analyzed as follows:
31.12.2016
31.12.2015
Present value of defined obligation
9,727
8,941
Fair value of plan assets
(3,422)
(3,769)
Liability/(asset)
6,305
5,172
The amounts included in the income statement are analyzed as follows:
From 1 January to
31.12.2016
31.12.2015
Net interest cost resulted from the net asset/liability
130
113
General expenses
11
5
Total (included in staff costs)
141
118
The movement in the present value of benefits is as follows:
2016
2015
Opening balance
8,941
9,766
Interest cost
220
192
Benefits paid directly by the Bank
(13)
(11)
Benefits paid
(336)
(329)
Actuarial (gain)/loss - financial assumptions
1,000
(825)
Actuarial (gain)/loss - experience adjustments
(85)
148
Closing balance
9,727
8,941
The movement in the fair value of plan assets is as follows:
2016
2015
Opening balance
3,769
4,099
Expected return
90
79
Benefits paid
(336)
(329)
Expenses
(11)
(5)
Actuarial losses
(90)
(75)
Closing balance
3,422
3,769
The amounts recognized directly in equity during the year are analyzed as follows:
2016
2015
Change in liability gain/(loss) due to financial and demographic assumptions
(1,000)
825
Change in liability gain/(loss) due to experience adjustments
85
(148)
Return on plan assets excluding amounts included in income statement - gain / (loss)
(90)
(75)
Total actuarial gain/(loss) recognized in equity
(1,005)
602
The movement of the liability/(asset) in the balance sheet is as follows:
2016
2015
Opening balance
5,172
5,667
Benefits paid directly by the Bank
(13)
(11)
(Gain)/loss recognized in Income Statement
141
118
(Gain)/loss recognized in Equity
1,005
(602)
Closing balance
6,305
5,172
The results of the abovementioned valuations are based on the assumptions of the actuarial studies.
The principal actuarial assumptions used for the above mentioned defined benefit plans are as follows:
31.12.2016
31.12.2015
Discount rate
1.8%
2.5%
Inflation rate
1.5%
1.8%
Return on plan assets
2.0%
2.5%
Future salary growth
1.8%
1.8%
Future pension growth
0%
0%
The discount rate was based on the iBoxx Euro Corporate AA+ adopted to the characteristics of the programs.
The average duration per program is depicted in the table below:
31.12.2016
31.12.2015
Bank employee's indemnity provision due to retirement in accordance with Law 2112/1920
17.7
17.9
TAP - Lump sum benefit
-
13.0
Saving program guarantee
19.5
20.0
Plans for Diners (pension and health care)
16.3
17.1
The table below presents the sensitivity of the obligations of the above programs on the financial assumptions:
Percentage variation
in liability (%)Increase in discount rate by 0.5%
(8.2)
Decrease in discount rate by 0.5%
9.1
Increase in future salary growth rate by 0.5%
9.0
Decrease in future salary growth rate by 0.5%
(8.3)
ii. Group companies
The employees of the Greek subsidiaries with open ended employment contracts receive a lump sum payment on retirement, which is defined by Law 2112/1920 as modified by Law 4093/2012. For subsidiary Alpha Bank Srbija A.D., the employees receive a lump sum payment on retirement, which equals two salaries of the Serbian Government from 2014 compared to three salaries applied in prior year as a result of the change of the respective law.
The total amounts recognized in the financial statements regarding the defined benefit obligations are analyzed as follows:
Balance Sheet - Liabilities
31.12.2016
31.12.2015
Bank's employees indemnity of greek subsidiaries due to retirement in accordance with
Law 2112/19202,701
2,519
Alpha Bank Srbija employees indemnity provision due to retirement
215
Total Liabilities
2,701
2,734
Income Statement
Expenses/(Income)
From 1 January to
31.12.2016
31.12.2015
Bank's employees indemnity of greek subsidiaries due to retirement in accordance with
Law 2112/1920702
669
Total
702
669
The liability on 31.12.2016 which concerns Alpha Bank Srbija employee's indemnity has been transferred to the liabilities related to assets held for sale, while the respective results of 2016 and 2015 have been incorporated in profit/(loss) from discontinued operations (note 47).
The amount of actuarial gain/losses that was recognized in equity for the defined benefit programs of the Group companies' amounts to 160 loss for 2016 against 83 loss for 2015.
30. Other liabilities
31.12.2016
31.12.2015
Liabilities to third parties
80,732
70,209
Liabilities to Insurance Funds
67,281
131,911
Brokerage services
9,387
28,140
Deferred income
5,410
8,594
Accrued expenses
60,172
61,215
Liabilities to merchants from credit cards
271,339
285,042
Other
384,864
325,512
Total
879,185
910,623
The account balance "Other" of the comparative year have been restated due to the completion of the valuation of the acquired subsidiary company (note 49).
31. Provisions
31.12.2016
31.12.2015
Insurance
219,530
168,818
Provisions to cover credit risk and other provisions
102,174
129,640
Total
321,704
298,458
a. Insurance
31.12.2016
31.12.2015
Life insurance
Unearned premiums
218,996
168,629
Outstanding claim reserves
534
189
Total
219,530
168,818
b. Provisions to cover credit risk and other provisions
Balance 1.1.2015
80,501
Changes for the period 1.1 - 31.12.2015
Reclassification of provision from Bulgaria branch and Ionian Hotel Enterpises to "Liabilities related assets held for sale"
(834)
Provisions to cover credit risk relating to off-balance sheet items from continuing operations (note 10)
(10,806)
Provisions to cover credit risk relating to off-balance sheet items from discontinued operations
98
Provisions from pending legal cases and other contingent liabilities of continuing operations (Note 9)
1,921
Provisions from pending legal cases and other discontinued operations
179
Other provisions for companies consolidated for the first time
2,444
Other provisions used during the year
(8,063)
Provision for voluntary separation scheme of Alpha Bank AE
64,300
Foreign exchange differences
(100)
Balance 31.12.2015
129,640
Changes for the period 1.1 - 31.12.2016
Reclassification of provision from Alpha Bank Srbija A.D. to "Liabilities related assets held for sale"
(1,139)
Provisions to cover credit risk relating to off-balance sheet items (note 10)
(1,357)
Used provision for Alpha Bank A.E. separation scheme
(35,262)
Provisions from legal cases and other contingent liabilities (note 9)
16,000
Other provisions
785
Other provisions used for companies consolidated for the first time in 2015
(2,444)
Other provisions used during the year
(4,092)
Foreign exchange differences
43
Balance 31.12.2016
102,174
The amounts of the provisions from pending legal cases and other contingent liabilities are included in "Other Expenses" of the income statement.
On 31.12.2016 the balance of provisions to cover credit risk relating to off-balance sheet items amounts to 3.2 million (31.12.2015: 4.7 million) and other provisions to 99 million (31.12.2015:124.9 million) out of which:
an amount of 38.6 million relates to pending legal cases (31.12.2015: 29 million).
an amount of 29 million relates to the balance of provision for voluntary separation scheme of Alpha Bank A.E., that had been accounted on 31.12.2015 at the amount of 64.3 million. Alpha Bank A.E. recorded that provision within the context of the implementation of the updated restructuring plan and its relevant commitments. During 2016, it was decided to utilize a part of the relevant provision in the context of a consensual separation scheme.
During the year, Alpah Bank Cyprus performed a voluntary separation scheme, aiming to achieve substantial benefit in operational costs. The Group recognized during the first quarter a provision of amount 31 million for the expected cost, which has been used during the second quarter for the compensations. The final cost amounted to 31.7 million.
Finally, the prior year balance was restated, due to the recognition of the relevant provision related to the valuation of the acquired subsidiary's net assets as mentioned in note 49.
This provision has been fully considered during the current year.
Equity
32. Share capital
The Bank's share capital on 31.12.2015 and 31.12.2016 is analysed as follows:
Changes for the period from 1.1.2015 to 31.12.2015 (units)
Opening balance of shares as at 1.1.2015
Reverse split
Capitalization of special reserve
Share capital increase in cash
Share capital increase through capitalization of money claims
Balance of shares as at 31.12.2015/ 31.12.2016
Paid-in capital as at 31.12.2015/ 31.12.2016
a. Ordinary shares
Number of ordinary shares
12,769,059,858.00
(12,513,678,660.84)
2.84
255,381,200.00
76,614
Share capital increase
776,084,586.00
505,415,414.00
1,281,500,000.00
384,450
Total
12,769,059,858.00
(12,513,678,660.84)
2.84
776,084,586.00
505,415,414.00
1,536,881,200.00
461,064
On 24.11.2015 the following took place:
a) increase the nominal value of each ordinary, registered, with voting rights, non-paper share issued by the Bank from 0.30 to 15.00,by reverse split, with a respective decrease of the total number of shares at a ratio of 50 old shares to 1 new ordinary, with voting rights share,
b) increase of share capital of the Bank, with capitalization of part of special reserve of the Bank with an amount of 42.6 by the virtue of the paragraph 4a of the article 4 of the Codified Law 2190/1920, in order to create an integer number of shares,
c) decrease, by the virtue of the paragraph 4a of the article 4 of the Codified Law 2190/1920, of the share capital of the Bank by an amount of 3,754,103,640 as a result of the decrease of the nominal value of each ordinary, non-paper , registered, with voting rights share issued by the Bank from 15.00 to 0.30 with a respective increase of special reserve of the Bank, by virtue of the paragraph 4a of the article 4 of the Codified Law 2190/1920, and
d) increase of the share capital of the Bank for an amount 1,010,830,828.00 through capitalization of the monetary claims in the context of the voluntary exchange of securities that participated in the liability management exercise and payment in cash of an amount of 1,552,169,172.00 via a private placement.
The increase of the share capital aimed to the coverage in full of its total recapitalization requirement under the adverse scenario of the Single Supervisory Mechanism comprehensive assessment
Following the above, the Bank's share capital as at 31.12.2015 amounts to 461,064,360.00 divided to 1,536,881,200 ordinary, registered, with voting rights shares with nominal value of 0.30 and a share premium of 10,790,869,872.46. The number of the ordinary shares that the Hellenic Financial Stability Fund (HFSF) held at 31.12.2015 was 169,175,146.
There was no change in the Bank's share capital during 2016.
Finally, with the decision of the Board of Directors on 23.2.2017, the Bank proceeded with a share capital increase due to a bond's conversion as mentioned in note 50.
Regarding the process of warrant's exercise on the shares of Hellenic Financial Stability Fund, held on 15.6.2015, 13,800 warrants were exercised by the common shareholders which corresponded to 102,239 ordinary shares. The exercise of warrants did not affect the Bank's share capital but the number of shares owned by the Hellenic Financial Stability Fund. During 2016 no warrants on the shares of Hellenic Financial Stability Fund were exercised.
33. Share premium
Opening balance 1.1.2015
4,858,216
Decrease of nominal value of common shares from 15 to 0.30
3,754,104
Share capital increase - share premium on issuance of ordinary shares
2,178,550
Balance 31.12.2015 / 31.12.2016
10,790,870
On 24.11.2015 following the share capital increase and the issuance of 1,281,500,000 new ordinary shares with a nominal amount of 0.30 and an offer price of 2, the total difference of 2,178.5 million between the nominal value and the shares' offer price increased the caption "Share Premium".
34. Reserves
Reserves are analyzed as follows:
a. Statutory reserve
31.12.2016
31.12.2015
Statutory reserve
529,700
535,767
According to the Bank's article of association (article 26), the Bank is required to transfer 5% of its annual profit after tax to a statutory reserve, until this reserve amounts to one third of its share capital. This reserve can only be used to offset losses according to article 44 of Codified Law 2190/1920.
For the remaining companies of the Group the statutory reserve is established according to local regulations.
b. Available for sale securities reserve
2016
2015
Opening balance 1.1
30,705
(126,104)
Changes for the period 1.1 - 31.12
Net change in fair value of available for sale securities, after income tax
109,691
17,875
Fair value of available for sale securities transferred to profit and loss
(36,199)
138,934
Reclassification to reserves relating to assets held for sale
(1,559)
Total
71,933
156,809
Balance 31.12
102,638
30,705
c. Other reserves
2016
2015
Balance 1.1
(142,179)
(186,897)
Change in cash flow hedge reserve after income tax
(39,198)
44,718
Balance 31.12
(181,377)
(142,179)
d. Exchange differences on translating and hedging the net investment in foreign operations
2016
2015
Balance 1.1
(115,179)
(114,871)
Change in exchange differences on translating and hedging the net investment in foreign operations
(5,046)
(268)
Reclassification to reserves relating to assets held for sale
70,016
(40)
Balance 31.12
(50,209)
(115,179)
e. Share of other comprehensive income of associates and joint ventures
2016
2015
Balance 1.1
(234)
313
Change in the share of other comprehensive income of associates and joint ventures
(547)
Reclassification to reserves relating to assets held for sale
122
Balance 31.12
(112)
(234)
Total reserves (a+b+c+d+e)
400,640
308,880
Reserves relating to assets held for sale
2016
2015
Opening balance 1.1
40
-
Changes for the period 1.1 - 31.12
Exchange differences on translating and hedging the net investment in foreing operations
(70,016)
40
Available for sale securities reserve
1,559
Share of other comprehensive income of associates and joint ventures
(122)
Transfer in comprehensive income available for sale securities reserve
(40)
Total
(68,619)
40
Balance 31.12
(68,579)
40
35. Retained earnings
a. Due to the accumulated losses for the year 2015 and after taking into account article 44a of Codified Law 2190/1920, the Ordinary General Meeting of Shareholders on 30.6.2016 decided the non distribution of dividend to ordinary shareholders of the Bank.
b. Since the above are valid for 2016 the Bank's Board of Directors will suggest the non distribution of dividend to the Ordinary General Meeting of the shareholders of the Bank.
c. "Retained Earnings" as of 31.12.2016 includes expenses concerning the share capital increase, amounting to 0.7 million net of income tax (31.12.2015: 43.5 million.).
36. Hybrid securities
31.12.2016
31.12.2015
Perpetual with 1st call option on 18.2.2015 and per year
15,232
15,232
Securities held by Group companies
(100)
Total
15,132
15,232
Additional Information
37. Contingent liabilities and commitments
a) Legal issues
The Group, in the ordinary course of business, is a defendant in claims from customers and other legal proceedings. In the context of managing the operational risk events and on the basis of the accounting principles followed, the Group records all the filed lawsuits or similar actions performed by third parties against the Group and considers any possibility of their success, as well as the possible outcome.
For cases where there is a significant probability of a negative outcome, and the result may be sufficiently estimated, the Group creates a provision that is included in the Balance Sheet under the caption "Provisions". On 31.12.2016 the amount of the provision stood at 38.6 million.
For cases where according to their progress and the evaluation of the Legal department on December 31, 2016, a negative outcome is not probable or the potential outflow cannot be estimated reliably due to the complexity of the cases, the time period they will last and the uncertainty of their outcome, the Group has not recognized a provision. As of 31.12.2016 the legal claims against the Bank for the above cases amounts to 270.3 million.
According to the estimations of the legal department, the ultimate settlement of these matters is not expected to have a material effect on the financial position or the operations of the Group.
b. Tax issues
Alpha Bank has been audited by the tax authorities for the years up to and including 2009. For 2010, a tax audit is currently in progress. For 2011 up to 2015 a tax certificate with no qualifications has been issued. Former Emporiki Bank has been audited by the tax authorities for the years up to and including 2008. For the years 2011 up to 2013 a tax certificate with no qualifications.
Alpha Bank's branches in London and Bulgaria have been audited by the tax authorities for 2013 and 2015 respectively. For the Bulgaria Branch, a tax audit for the year 2016 is in progress. The branch of former Emporiki Bank in Cyprus has not been audited by the tax authorities since the commencement of its operations (year 2011) until its deletion from the department of Registrar of companies of Cyprus (August 2015), meanwhile it has ceased its operations since September of 2014.
On 30.9.2014, the acquisition of the Retail Banking operations of Citibank International Plc (CIP) in Greece was completed. The acquisition does not affect the tax liabilities of the Bank since any obligations against the State until the date of acquisition remain with CIP.
On 2.6.2015, the merges via absorption of Diners Club of Greece A.E.P.P was completed. Diners Club of Greece A.E.P.P. has been audited by the tax authorities for the years up to and including 2010. The years 2011, 2012, 2013 a tax certificate with no qualifications was issued.
Additional taxes and penalties may be imposed for the unaudited years due to the fact that some expenses may not be recognized as deductible by the tax authorities.
The Group's subsidiaries have been audited by the tax authorities up to and including the year indicated in the table below:
Name
Year
Banks
1. Alpha Bank London Ltd (voluntary settlement of tax obligation)
2014
2. Alpha Bank Cyprus Ltd (tax audit is in progress for years from 2008 - 2011)
2007
3. Alpha Bank Romania S.A.
2006
4. Alpha Bank A.D. Skopje (the company was transferred on 10.5.2016)
2009
5. Alpha Bank Srbija A.D.
2004
6. Alpha Bank Albania SH.A.
2011
Leasing Companies
1. Alpha Leasing A.E. **
2010
2. Alpha Leasing Romania IFN S.A.
2007
3. ABC Factors A.E.** (tax audit is in progress for year 2010)
2009
Investment Banking
1. Alpha Finance A.E.P... **/***
2009
2. SSIF Alpha Finance Romania S.A.
2002
---------------------------------------------
** These companies received tax certificate for the years 2011 until 2015 without any qualification (note 11).
*** These companies have been audited by the tax authorities up to and including 2009 in accordance with Law 3888/2010 which relates to voluntary settlement for the unaudited tax years.
Name
Year
3. Alpha .. Investment Holdings **/***
2009
4. Alpha .. Ventures Capital Management - S **/***
2009
5. Emporiki Ventures Capital Developed Markets Ltd
2007
6. Emporiki Ventures Capital Emerging Markets Ltd
2008
Asset Management
1. Alpha Asset Management ..D... **/***
2009
2. ABL Independent Financial Advisers Ltd (voluntary settlement of tax obligation)
2014
Insurance
1. Alpha Insurance Agents .. **/***
2009
2. Alpha Insurance Brokers S.R.L.
2005
3. Alphalife A.A.E.Z. **/*** (tax audit is in progress for 2010)
2009
Real Estate and Hotel
1. Alpha Astika Akinita ..** (tax audit is in progress for 2010)
2009
2. Ionian Hotel Enterprises ..** (the company was transferred on 16.12.2016 and tax audit is in progress for 2011)
2010
3. Oceanos ..... **/***
2009
4. Emporiki Development and Real Estate Management ..
2008
5. Alpha Real Estate D.O.O. Beograd
2008
6. Alpha Astika Akinita D.O.O.E.L. Skopje (the company was transferred on 21.10.2016)
2005
7. Alpha Real Estate Bulgaria E.O.O.D. (commencement of operation 2007)
*
8. Chardash Trading E.O.O.D. (commencement of operation 2006)
*
9. Alpha Real Estate Services S.R.L. (commencement of operation 1998)
*
10 Alpha Investment Property Chalandriou .. (commencement of operation 2012)
* *
11. Alpha Investment Property Attikis .. (commencement of operation 2012)
* *
12. Alpha Investment Property Attikis .. (commencement of operation 2012)
* *
13. Alpha Investment Property Amaroussion .. (commencement of operation 2012)
* *
14. Alpha Investment Property Amaroussion .. (commencement of operation 2012)
* *
15. AGI-RRE Participations 1 S.R.L. (commencement of operation 2010)
*
16. AGI-BRE Participations 1 E.O.O.D. (commencement of operation 2012)
*
17. Stockfort Ltd (commencement of operation 2010)
*
18. Romfelt Real Estate SA (commencement of operation 1991)
*
19. AGI-RRE Zeus S.R.L. (commencement of operation 2012)
*
20. AGI-RRE Athena S.R.L. (commencement of operation 2012)
*
21. AGI-RRE Poseidon S.R.L. (commencement of operation 2012)
*
22. AGI-RRE Hera S.R.L. (commencement of operation 2012)
*
23. AGI-BRE Participations 2 E.O.O.D. (commencement of operation 2012)
*
24. AGI-BRE Participations 2BG E.O.O.D. (commencement of operation 2012)
*
25. AGI-BRE Participations 3 E.O.O.D. (commencement of operation 2012)
*
26. AGI-BRE Participations 4 E.O.O.D. (commencement of operation 2012)
*
27. APE Fixed Assets A.E.**/***
2009
28. SC Cordia Residence S.R.L.
2013
29. HT-1 E.O.O.D (commencement of operation 2013)
*
30. AGI-RRE Venus S.R.L. (commencement of operation 2014)
*
31. AGI-RRE Cleopatra S.R.L. (commencement of operation 2014)
*
32. AGI-RRE Hermes S.R.L. (commencement of operation 2014)
*
33. SC Carmel Residential S.R.L. (commencement of operation 2013)
*
34. Alpha Investment Property Neas Kifisias .. (commencement of operation 2014)
*
35. Alpha Investment Property Kalirois .. (commencement of operation 2014)
*
36. Alpha Investment Property Livadias .. (commencement of operation 2014)
*
37. AGI-SRE Ariadni DOO (commencement of operation 2015)
*
38. Alpha Investment Property Kefalariou .. (commencement of operation 2015)
*
39. Alpha Investment Property Neas Erythraias .. (commencement of operation 2015)
*
40. Alpha Investment Property Chanion .. (former Anaplasi Plagias ..) (commencement of operation 2011)
*
41. Asmita Gardens S.R.L.
2010
42. Ashtrom Residents S.R.L. (commencement of operation 2006)
*
43. Cubic Center Development S.A. (commencement of operation 2010)
*
44. AGI-BRE Participations 5 EOOD (commencement of operation 2015)
*
45. AGI-SRE Participations 1 DOO (commencement of operation 2016)
*
--------------------------------------
* These companies have not been audited by the tax authorities since the commencement of their operations.
** These companies received tax certificate for the years 2011 until 2015 without any qualification (note 11).
*** These companies have been audited by the tax authorities up to and including 2009 in accordance with Law 3888/2010 which relates to voluntary settlement for the unaudited tax years.
Name
Year
Special purpose and holding entities
1. Alpha Credit Group Plc (voluntary settlement of tax obligation)
2014
2. Alpha Group Jersey Ltd
****
3. Alpha Group Investments Ltd (commencement of operation 2006)
*
4. Ionian Holdings ..**/*** (tax audit is in progress for 2010)
2009
5. Ionian Equity Participations Ltd (commencement of operation 2006)
*
6. Emporiki Group Finance Plc (voluntary settlement of tax obligation)
2014
7. AGI-BRE Participations 1 Ltd (commencement of operation 2009)
*
8. AGI-RRE Participations 1 Ltd (commencement of operation 2009)
*
9. Alpha Group Ltd (commencement of operation 2012)
*
10. Katanalotika Plc (voluntary settlement of tax obligation)
2014
11. Epihiro Plc (voluntary settlement of tax obligation)
2014
12. Irida Plc (voluntary settlement of tax obligation)
2014
13. Pisti 2010-1 Plc (voluntary settlement of tax obligation)
2014
14. Alpha Shipping Finance Ltd (commencement of operation 2014)
*
15. Alpha Proodos DAC (commencement of operation 2016)
*
16. AGI-RRE Athena Ltd (commencement of operation 2011)
*
17. AGI-RRE Poseidon Ltd (commencement of operation 2012)
*
18. AGI-RRE Hera Ltd (commencement of operation 2012)
*
19. Umera Ltd (commencement of operation 2012)
*
20. AGI-BRE Participations 2 Ltd (commencement of operation 2011)
*
21. AGI-BRE Participations 3 Ltd (commencement of operation 2011)
*
22. AGI-BRE Participations 4 Ltd (commencement of operation 2010)
*
23. Alpha Real Estate Services Ltd (commencement of operation 2010)
*
24. AGI-RRE Ares Ltd (commencement of operation 2010)
*
25. AGI-RRE Venus Ltd (commencement of operation 2012)
*
26. AGI-RRE Artemis Ltd (commencement of operation 2012)
*
27. AGI-BRE Participations 5 Ltd (commencement of operation 2012)
*
28. AGI-RRE Cleopatra Ltd (commencement of operation 2013)
*
29. AGI-RRE Hermes Ltd (commencement of operation 2013)
*
30. AGI-Cypre Arsinoe Ltd (commencement of operation 2013)
*
31. AGI-SRE Ariadni Ltd (commencement of operation 2014)
*
32. Zerelda Ltd (commencement of operation 2012)
*
33. AGI-Cypre Alaminos Ltd (commencement of operation 2014)
*
34. AGI-Cypre Tochni Ltd (commencement of operation 2014)
*
35. AGI-Cypre Evagoras Ltd (commencement of operation 2014)
*
36. AGI-Cypre Tersefanou Ltd (commencement of operation 2014)
*
37. AGI-Cypre Mazotos Ltd (commencement of operation 2014)
*
38. AGI-Cypre Ermis Ltd (commencement of operation 2014)
*
39. AGI-SRE Participations 1 Ltd (commencement of operation 2016)
*
Other companies
1. Alpha Bank London Nominees Ltd
****
2. Alpha Trustees Ltd (commencement of operation 2002)
*
3. Flagbright Ltd
****
4. Kafe Alpha A.E.**/***
2009
5. Alpha Supporting Services ..**/*** (tax audit is in progress for 2012)
2009
6. Real Car Rental A.E.**/***
2009
7. Evisak ..**/***
2009
8. Emporiki Management ..***
2009
9. Alpha Bank Notification Services .. (commencement of operation 2015)
*
c) Operating leases
The minimum future lease payments are:
31.12.2016
31.12.2015
- Less than one year
41,708
43,930
- Between one and five years
104,517
112,402
- Over five years
146,383
164,421
Total
292,608
320,753
------------------------------------------------------
* These companies have not been audited by the tax authorities since the commencement of their operations.
** These companies received tax certificate for the years 2011 until 2015 without any qualification (note 11).
*** These companies have been audited by the tax authorities up to and including 2009 in accordance with Law 3888/2010 which relates to voluntary settlement for the unaudited tax years.
**** These companies are not subject to tax audit.
The minimum future lease fees are:
31.12.2016
31.12.2015
- Less than one year
13,419
10,423
- Between one and five years
43,754
41,694
- Over five years
48,527
46,474
Total
105,700
98,591
d) Off balance sheet commitments
The Group as part to its normal operations, is bound by contractual commitments, that in the future may result to changes in its asset structure. These commitments are monitored in off balance sheet accounts and relate to letters of credit, letters of guarantee, undrawn credit facilities and credit limits.
Letters of credit are used to facilitate trading activities and relate to the financing of contractual agreements for the transfer of goods locally or abroad, by undertaking the direct payment on behalf of the third party bound by the agreement on behalf of the Group's client. Letters of credit, as well as letters of guarantee, are commitments under specific terms and are issued by the Group for the purpose of ensuring that its clients will fulfill the terms of their contractual obligations.
The outstanding balances are as follows:
31.12.2016
31.12.2015
Letters of credit
47,993
35,159
Letters of guarantee and other guarantees
3,519,793
3,940,146
In addition, contingent liabilities for the Group arise from undrawn loan agreements and credit limits that may not be fulfilled immediately or may be partly fulfilled as long as the agreed upon requirements are fulfilled by counterparties.
Committed limits that can not be recalled in case where counterparties fail to meet their contractual obligations as at 31.12.2016 amounts to 494.7 million (31.12.2015: 278.9 million) and are included in the calculation of risk weighted assets.
e) Assets pledged
Assets pledged, as at 31.12.2016 are analyzed as follows:
Deposits pledged amounting to 1.1 billion concerning the Group's obligation to maintain deposits in Central Banks according to percentages determined by the respective country.
Deposits pledged amounting to 0.2 billion concerning guarantees provided on behalf of the Greek Government.
Deposits pledged to credit institutions amounting to 1.1 billion which have been provided as guarantee for derivative transactions.
Deposits pledged to credit institutions amounting to 0.07 billion which have been provided for Letter of Credit or Guarantee Letters that the Bank issue for facilitating customer imports.
Pledged deposits of 3 million have been provided to the Resolution Fund as irrevocable payment commitment, as part of the 2016 contribution. This commitment must be fully covered by collateral as decided by Single Resolution Board.
Due from banks of an amount of 10.5 million has been pledged to Central Banks in order to participate in main financing operations.
Due from customers:
i. amount of 21.4 billion pledged to central banks for liquidity purposes.
ii. a carrying amount of 3.1 billion which relates to corporate, consumer loans and credit cards has been securitized for the issuance of Special Purpose Entities' corporate bond of a nominal value of 4.2 billion, which are held by the Bank and pledged to central banks for liquidity purposes.
iii. a carrying amount of 0.6 billion, which is related to the shipping loans and they have been entitled from third parties through a Special Purpose Entitiy, which amounts to 0.3 billion on 31.12.2016.
iv. a carrying amount of 0.6 billion which relates to corporate loans and have been entitled from third parties through a special purpose entity which amounts to 0.3 billion on 31.12.2016.
v. amount of nominal value 0.2 billion has been given as collateral in terms of other acts of lending.
Securities held for trading and investment securities portfolio out of which:
i. A nominal value of 3.92 billion of Greek Government securities out of which a nominal amount of 3.53 billion has been pledged to Central Banks for liquidity purposes, an amount of 0.03 billion have been pledged as collateral for other lending transactions, while an amount of 0.36 billion have been pledged as collateral for repo agreements.
In addition, amount of 0.06 billion refers to Greek Government securities received as collateral for reverse repos and have been pledged to Central Banks for liquidity purposes.
ii. An amount of nominal value 2.66 billion relates to securities issued by the European Financial Stability Facility (EFSF), that the Bank received by the HFSF in the context of: a) its participation to the share capital increase that was completed on 6.6.2013 and b) due to the coverage of the difference between the values of assets and liabilities transferred from Cooperative Banks and the amount of 2.46 billion has been pledged to Central Banks for participation in main refinancing operations.
iii. An amount to 0.3 billion has been given as collateral for repurchase agreements (repo).
iv. An amount of 11 million of other government bond has been pledged as a collateral for repo agreements.
In addition an amount of nominal value of 1 billion that relates to securities issued with the guarantee of the Greek Government in accordance with Law 3723/2008 and are held by the Bank, are pledged to Central Banks for liquidity purposes.
38. Group Consolidated Companies
The consolidated financial statements, apart from the parent company Alpha Bank include the following entities:
a. Subsidiaries
Name
Country
Group's ownership interest %
31.12.2016
31.12.2015
Banks
1. Alpha Bank London Ltd
United Kingdom
100.00
100.00
2. Alpha Bank Cyprus Ltd
Cyprus
100.00
100.00
3. Alpha Bank Romania S.A.
Romania
99.92
99.92
4. Alpha Bank AD Skopje (48i)
FYROM
100.00
5. Alpha Bank Srbija A.D. (48y, 50d)
Serbia
100.00
100.00
6. Alpha Bank Albania SH.A.
Albania
100.00
100.00
Leasing Companies
1. Alpha Leasing A.E.
Greece
100.00
100.00
2. Alpha Leasing Romania IFN S.A.
Romania
100.00
100.00
3. ABC Factors A.E.
Greece
100.00
100.00
Investment Banking
1. Alpha Finance A.E.P...
Greece
100.00
100.00
2. SSIF Alpha Finance Romania S.A.
Romania
100.00
100.00
3. Alpha .. Ventures
Greece
100.00
100.00
4. Alpha A.E. Ventures Capital Management - S
Greece
100.00
100.00
5. Emporiki Ventures Capital Developed Markets Ltd
Cyprus
100.00
100.00
6. Emporiki Ventures Capital Emerging Markets Ltd
Cyprus
100.00
100.00
Asset Management
1. Alpha Asset Management ..D...
Greece
100.00
100.00
2. ABL Independent Financial Advisers Ltd
United Kingdom
100.00
100.00
Insurance
1. Alpha Insurance Agents ..
Greece
100.00
100.00
2. Alpha Insurance Brokers S.R.L.
Romania
100.00
100.00
3. Alphalife A.A.E.Z. (50b)
Greece
100.00
100.00
Real estate and hotel
1. Alpha Astika Akinita .. (48v, 48z)
Greece
93.17
93.17
2. Ionian Hotel Enterprises .. (48u, 48bb)
Greece
97.27
3. Oceanos ..... (48u)
Greece
100.00
100.00
4. Emporiki Development and Real Estate Management ..
Greece
100.00
100.00
Name
Country
Group's ownership interest %
31.12.2016
31.12.2015
5. Alpha Real Estate D.O.O. Beograd
Serbia
93.17
93.17
6. Alpha Astika Akinita D.O.O.E.L. Skopje (48z)
FYROM
93.17
7. Alpha Real Estate Bulgaria E.O.O.D.
Bulgaria
93.17
93.17
8. Chardash Trading E.O.O.D.
Bulgaria
93.17
93.17
9. Alpha Real Estate Services S.R.L.
Romania
93.17
93.17
10. Alpha Investment Property Chalandriou .. (48d)
Greece
100.00
100.00
11. Alpha Investment Property Attikis .. (48aa)
Greece
100.00
100.00
12. Alpha Investment Property Attikis II .. (48aa)
Greece
100.00
100.00
13. Alpha Investment Property Amaroussion .. (48d)
Greece
100.00
100.00
14. Alpha Investment Property Amaroussion .. (48d)
Greece
100.00
100.00
15. AGI-RRE Participations 1 S.R.L.
Romania
100.00
100.00
16. AGI-BRE Participations 1 E.O.O.D.
Bulgaria
100.00
100.00
17. Stockfort Ltd
Cyprus
100.00
100.00
18. Romfelt Real Estate S.A.
Romania
98.86
98.86
19. AGI-RRE Zeus S.R.L.
Romania
100.00
100.00
20. AGI - RRE Athena S.R.L.
Romania
100.00
100.00
21. AGI - RRE Poseidon S.R.L. (48dd)
Romania
100.00
100.00
22. AGI - RRE Hera S.R.L.
Romania
100.00
100.00
23. AGI-BRE Participations 2 E.O.O.D.
Bulgaria
100.00
100.00
24. AGI-BRE Participations 2BG E.O.O.D. (48ee)
Bulgaria
100.00
100.00
25. AGI-BRE Participations 3 E.O.O.D.
Bulgaria
100.00
100.00
26. AGI-BRE Participations 4 E.O.O.D.
Bulgaria
100.00
100.00
27. APE Fixed Assets .. (48w)
Greece
72.20
72.20
28. SC Cordia Residence S.R.L.
Romania
100.00
100.00
29. -1 E.O.O.D.
Bulgaria
100.00
100.00
30. AGI-RRE Venus S.R.L. *
Romania
100.00
100.00
31. AGI-RRE Cleopatra S.R.L.
Romania
100.00
100.00
32. AGI-RRE Hermes S.R.L. *
Romania
100.00
100.00
33. SC Carmel Residential S.R.L.
Romania
100.00
100.00
34. Alpha Investment Property Neas Kifissias .. (48d)
Greece
100.00
100.00
35. Alpha Investment Property Kalirois .. (48d)
Greece
100.00
100.00
36. Alpha Investment Property Livadias .. (48aa)
Greece
100.00
100.00
37. AGI-SRE Ariadni DOO
Serbia
100.00
100.00
38. Asmita Gardens SRL (48l)
Romania
100.00
100.00
39. Alpha Investment Property Kefalariou .. (50a, 50e)
Greece
100.00
100.00
40. Ashtrom Residents S.R.L.
Romania
100.00
100.00
41. AGI-BRE Participations 5 E.O.O.D.
Bulgaria
100.00
100.00
42. Cubic Center Development S.A.
Romania
100.00
100.00
43. Alpha Investment Property Neas Erythraias ..
Greece
100.00
100.00
44. Alpha Investment Property Chanion .. (former Anaplasi Plagias ..) (48x)
Greece
100.00
100.00
45. AGI-SRE Participations 1 DOO (48m)
Serbia
100.00
Special purpose and holding entities
1. Alpha Credit Group Plc
United Kingdom
100.00
100.00
2. Alpha Group Jersey Ltd
Jersey
100.00
100.00
3. Alpha Group Investments Ltd (48c, 48d, 48h, 48j, 48s, 48u, 48v, 48x, 48aa, 48cc, 50a, 50e)
Cyprus
100.00
100.00
4. Ionian Holdings .. (48u)
Greece
100.00
100.00
5. Ionian Equity Participations Ltd (48u)
Cyprus
100.00
100.00
6. Emporiki Group Finance Plc
United Kingdom
100.00
100.00
7. AGI - BRE Participations 1 Ltd
Cyprus
100.00
100.00
8. AGI - RRE Participations 1 Ltd (48l)
Cyprus
100.00
100.00
9. Alpha Group Ltd
Cyprus
100.00
100.00
10. Katanalotika Plc
United Kingdom
------------------------------------------
* The companies are inactive.
Name
Country
Group's ownership interest %
31.12.2016
31.12.2015
Special purpose and holding entities
11. Epihiro Plc
United Kingdom
12. Irida Plc
United Kingdom
11. Epihiro Plc
United Kingdom
12. Irida Plc
United Kingdom
13. Pisti 2010-1 Plc
United Kingdom
14. Alpha Shipping Finance Ltd
United Kingdom
15. Alpha Proodos DAC
Ireland
16. AGI - RRE Athena Ltd
Cyprus
100.00
100.00
17. AGI - RRE Poseidon Ltd (48cc, 48dd)
Cyprus
100.00
100.00
18. AGI - RRE Hera Ltd
Cyprus
100.00
100.00
19. Umera Ltd
Cyprus
100.00
100.00
20. AGI-BRE Participations 2 Ltd (48cc, 48ee)
Cyprus
100.00
100.00
21. AGI-BRE Participations 3 Ltd
Cyprus
100.00
100.00
22. AGI-BRE Participations 4 Ltd
Cyprus
100.00
100.00
23. Alpha Real Estate Services LLC (48v)
Cyprus
93.17
100.00
24. AGI-RRE Ares Ltd
Cyprus
100.00
100.00
25. AGI-RRE Venus Ltd
Cyprus
100.00
100.00
26. AGI-RRE Artemis Ltd
Cyprus
100.00
100.00
27. AGI-BRE Participations 5 Ltd
Cyprus
100.00
100.00
28. AGI-RRE Cleopatra Ltd
Cyprus
100.00
100.00
29. AGI-RRE Hermes Ltd
Cyprus
100.00
100.00
30. AGI-RRE Arsinoe Ltd
Cyprus
100.00
100.00
31. AGI-SRE Ariadni Ltd
Cyprus
100.00
100.00
32. Zerelda Ltd
Cyprus
100.00
100.00
33. AGI-Cypre Alaminos Ltd (48n)
Cyprus
100.00
100.00
34. AGI-Cypre Tochni Ltd (48p)
Cyprus
100.00
100.00
35. AGI-Cypre Evagoras Ltd
Cyprus
100.00
100.00
36. AGI-Cypre Tersefanou Ltd
Cyprus
100.00
100.00
37. AGI-Cypre Mazotos Ltd (48o)
Cyprus
100.00
100.00
38. AGI-Cypre Ermis Ltd (48n, 48o, 48p)
Cyprus
100.00
100.00
39. AGI-SRE Participations 1 Ltd (48h, 48m)
Cyprus
100.00
Other companies
1. Alpha Bank London Nominees Ltd
United Kingdom
100.00
100.00
2. Alpha Trustees Ltd
Cyprus
100.00
100.00
3. Kafe Alpha A.E.
Greece
100.00
100.00
4. Alpha Supporting Services .. (48u)
Greece
100.00
100.00
5. Real Car Rental A.E.
Greece
100.00
100.00
6. Evisak ..
Greece
85.71
85.71
7. Emporiki Management ..
Greece
100.00
100.00
8. Alpha Bank Notification Services ..
Greece
100.00
100.00
b. Joint ventures
1. APE Commercial Property ..
Greece
72.20
72.20
2. APE Investment Property A.E.
Greece
72.80
72.80
3. Alpha ...S. (48b, 48t)
Greece
51.00
51.00
4. Rosequeens Properties Ltd.
Cyprus
33.33
33.33
5. Aktua Hellas Holdings A.E (48a, 48e, 48g, 48r, 50c)
Greece
45.00
APE Investment Property constitutes the parent company of the group of companies, in which the subsidiaries SYMET A.E., Astakos Terminal A.E., Akaport A.E. and NA.VI.PE A.E. are included. Furthemore, Rosequeens Properties Ltd. and Aktua Hellas Holdings A.E. are the parent companies of the groups companies with subsidiaries the companies Rosequeens S.R.L. and Aktua Greece Financial Solutions A.E. respectively. The Group accounts for the above groups of companies under the equity method based on the consolidated financial statements.
c. Associates
Name
Country
Group's ownership interest %
31.12.2016
31.12.2015
1. DP Thessalias and Stereas Ellados
Greece
50.00
50.00
2. A.L.C. Novelle Investments Ltd
Cyprus
33.33
33.33
3. Bank Information Systems ..
Greece
23.77
23.77
4. Propindex ..D..
Greece
35.58
35.58
5. Olganos ..
Greece
30.44
30.44
6. Alpha Investment Property Eleona A.E. (48s)
Greece
50.00
7. Selonda A.E.G.E. (48q)
Greece
21.97
23.01
8. Nireus S.A.
Greece
20.65
20.72
Consolidated financial statements do not include the Commercial Bank of London Ltd which is a dormant company and Smelter Medical Systems AEBE, Aris-Diomidis Emporiki SA, Metek SA, Flagbird Ltd which have
been fully impaired and are in the process of liquidation.The Group hedges the foreign exchange risk arising from the net investment in subsidiaries through the use of derivatives in their functional currency.
Group subsidiaries with non controlling interests
The table below presents information concerning the Group's subsidiaries with non controlling interests.
Name
Country
Non controlling interests %
Profit/(loss) attributable to non controlling interests
Other comprehensive income recognized directly in Equity for non controlling interests
Non controlling interests
31.12.2016
31.12.2015
1.1.2016 - 31.12.2016
1.1.2015 - 31.12.2015
1.1.2016 - 31.12.2016
1.1.2015 - 31.12.2015
31.12.2016
31.12.2015
1. APE Fixed Assets ..
Greece
27.8
27.8
(72)
(75)
10,953
11,025
2. Evisak ..
Greece
14.29
14.29
8
9
(1)
531
524
3. Ionian Hotel Enterprises ..
Greece
2.73
17
59
(1)
3,116
4. Alpha Astika Akinita ..
Greece
6.83
6.83
194
204
(1)
(1)
9,095
8,902
5. Alpha Real Estate Bulgaria E.O.O.D.
Bulgaria
6.83
6.83
7
9
22
16
6. Chardash Trading E.O.O.D.
Bulgaria
6.83
6.83
(61)
31
30
91
7. Alpha Bank Romania S.A.
Romania
0.08
0.08
21
(5)
(8)
22
275
262
8. Romfelt Real Estate S.A.
Romania
1.14
1.14
(17)
(27)
1
(137)
(121)
9.Alpha Astika Akinita Romania S.R.L.
Romania
6.83
6.83
10
10
1
47
36
10.Alpha Real Estate D.O.O. Beograd
Serbia
6.83
6.83
55
43
(4)
(5)
181
130
11.Alpha Astika Akinita D.O.O.E.L. Skopje
FYROM
6.83
2
17
12. Alpha Real Estate Services Ltd
Cyprus
6.83
Total
162
260
(12)
15
20,997
23,998
The percentage of voting rights of non controlling interests in subsidiaries does not differ from their participation in the share capital.
From the subsidiaries presented above, Alpha Astika Akinita A.E. and APE Fixed Assets .. have material non- controlling interests. APE fixed Assets haven been classified as assets held for sale since 30.6.2016 (note 47).
Condensed financial information for Alpha Astika Akinita is presented below. Their respective data is based on amounts before the elimination of intercompany transactions.
Condensed Statement of Comprehensive Income
Alpha Astika Akinita ..
1.1-31.12.2016
1.1-31.12.2015
Total income
10,919
11,125
Total expenses
(6,890)
(6,961)
Profit/(loss) for the year after income tax
2,838
2,989
Total comprehensive income for the year, after income tax
2,838
2,981
Condensed Balance Sheet
Alpha Astika Akinita ..
31.12.2016
31.12.2015
Total non-current assets
76,130
77,269
Total current assets
61,527
57,554
Total short-term liabilities
2,773
2,903
Total long-term liabilities
2,054
1,914
Total Equity
132,830
130,006
Condensed Statement of Cash Flows
Alpha Astika Akinita ..
1.1-31.12.2016
1.1-31.12.2015
Total inflows/(outflows) from operating activities
1,637
4,131
Total inflows/(outflows) from investing activities
1,297
890
Total inflows/(outflows) from financing activities
(12)
(12)
Total inflows/(outflows) for the year
2,922
5,009
Cash and cash equivalents at the beginning of the year
54,760
49,751
Cash and cash equivalents at the end of the year
57,682
54,760
Alpha Astika Akinita .. did not pay any dividends for 2016 and 2015.
Significant Restrictions
Group's significant restrictions regarding the use of assets or the settlement of obligations, are those imposed by the regulatory framework in which subsidiaries supervised for their capital adequacy, mainly operate. In particular, the regulatory authorities request, where appropriate and depending on the nature of the company, the compliance with specific thresholds, as in example the maintenance of a specific level of capital buffers and liquid assets, the limitation of exposure to other Group companies and the compliance with specific ratios. The total assets and liabilities of the subsidiaries operating in the banking, insurance and other mainly financial sectors with significant restrictions amount to 9,534 million (31.12.2015 9,877 million) 8,093 million (31.12.2015 8,406 million) respectively. In addition, all subsidiaries are subject to the restrictions imposed by the regulatory framework (Codified Law 2190/1920 or a more specific legislation depending on the nature of activities) regarding the minimum threshold of the share capital and equity as well as the potential dividend distribution.
Moreover apart from the cash withdrawals and free capital flows restrictions imposed by Legislative Act within 2015, and any ministerial or other decision issued, impose restrictions to Greek subsidiaries of the Group, to move capitals out of Greece.
There are no protective rights for non controlling interest, which could restrict the Group's ability to use assets or settle Group's obligations.
Consolidated structured entities
The Group consolidates six structured entities which were established to accommodate transactions related to securitized loans issued by Group companies. Securitization transactions aim to raise liquidity by issuing bonds or other legal form of borrowing. In all cases, the Group has concluded that it controls these companies since it has the power over their activities and has a significant exposure to their returns.
Bonds and other financial instruments which are issued by the consolidated structured companies are fully -owned by the Bank with the exception of shipping and corporate (SME) loans securitization transaction through the company Alpha Shipping Finance Ltd and Alpha Proodos DAC, where all the high-priority payment debt is held by third parties outside the Group.
Depending on the criteria required for each securitized portfolio, the Group, without having any relevant contractual obligation, proceeds in ad hoc repurchases of securitized loans. In addition, for the securitization transactions that are in replacement period the Group proceeds with new securitization of loan portfolios transferring them to those companies, in order to meet specific quantitative criteria related to the amount of debt securities. The intention of the Group is to continue this practice. The table below presents the balances of debt securities or other form of debt issued per consolidated special structure entity that constitute tools of raising liquidity.
Entity
Nominal value
31.12.2016
31.12.2015
Epihiro Plc
1,593,400
1,593,400
Katanalotika Plc
1,520,000
1,520,000
Pisti 2010-1 Plc
586,200
586,200
Irida Plc
474,800
474,800
Alpha Shipping Finance Ltd
254,194
342,516
Alpha Proodos DAC
640,000
-
Furthermore, on 31.12.2016, the Group had granted subordinated loans amounting to 380.3 million (31.12.2015: 344.8 million) to the structured entities for credit enhancement purposes of the securitization transactions. Further to the above loans, the Group has no contractual obligation to grant additional funding to the companies, except for Alpha Proodos DAC and Alpha Shipping Finance Ltd to which the Group is required, if needed to grant additional subordinated loan.
Changes of ownership interest in subsidiaries which did not result in loss of control
The transactions with minority interests shareholders (in which the Group retained the control) are presented below.
On 14.9.2016 the subsidiary of the Group, Alpha Astika Akinita A.E. (93.17%), proceeded to the acquisition from the 100% subsidiary Alpha Group Investments Ltd of the total number of shares of Alpha Real Estate Services LLC for the amount of 11 thousand. The above transaction resulted in a change in the percentage of the Group's participation from 100% to 93.17%.
On 7.5.2015 the subsidiary company of the group, AGI-RRE Poseidon Ltd bought the 2.96% of the minor shareholder, Romfelt Real Estate S.A. and therefore the Group owns the 98.86%.
The effect from the changes in subsidiary participation in total equity attributed to the shareholders of the company during the years 2016 and 2015 is presented in the following tables:
Change in ownership interest
1.1.2016 - 31.12.2016
Alpha Real Estate Sevices Ltd
Carrying amount of allocated non-controlling interest
-
Contribution paid to a company of the Group
11
Amount attributable to Bank's shareholders
-
Change in ownership interest
1.1.2015 - 31.12.2015
Romfelt Real Estate S.A.
Carrying amount of acquired non controlling interest
(457)
Contribution paid
-
Amount attributable to Bank's shareholders
(457)
Loss of control in subsidiary due to sale
On 10.5.2016 the sale of all shares of the Bank's subsidiary, Alpha Bank A.D. Skopje was completed (note 47).
On 21.10.2016, the subsidiary of the Group, Alpha Astika Akinita A.E. sold all the shares of the company Alpha Astika Akinita D.O.O.E.L. Skopje for the amount of 775 thousand. The transaction burdened the Group's financial results by 122 thousand.
On 16.12.2016 the sale of the Bank's entire participation (approximately 97.3%) to the share capital of the company Ionian Hotel Enterprises A.E. for an amount of 76.1 million was completed (note 47).
On 16.1.2015 the sale of the total number of shares of subsidiary company in Cyprus Alpha Insurance Ltd was completed.
Exposure to non-consolidated structured entities
The Group, through its subsidiary Alpha Asset Management AEDAK, manages 27 (31.12.2015: 27) mutual funds which meet the definition of structured entities and on each reporting date, it assesses whether it exercises any control on these entities according the provisions of IFRS 10.
The Group, as the manager of the mutual funds has the ability to direct the activities which significantly affect their rate of return through selecting the investments made by the funds, always within the framework of permitted investments as described in the regulation of each fund. As result, the Group has power over the mutual funds under management but within a clearly defined decision making framework. Moreover the Group is exposed to variable returns, through its involvement in the mutual funds as it receives fees for the disposal, redemption and management of the funds under normal market levels for similar services. The Group also holds direct investments in some of the funds under management, the level of which does not lead to a significant variability in the return compared to the respective total rate of return variability for the mutual fund. Due to these factors, the Group assesses that for all mutual funds under management, it exercises, for the benefit of unit holders, the decision making rights assigned to it acting as an agent without controlling the mutual funds.
The following table presents the figures of the mutual funds under Group's management, grouped by type of investments held. The amounts shown include the total assets of the funds at the balance sheet date and the income recognized in the Group's income statement during the year from the funds under management concerning fees for the disposal, redemption and management services.
Total Assets
Commission income
Category of Mutual Funds
31.12.2016
31.12.2015
1.1-31.12.2016
1.1-31.12.2015
Total Bond Funds
343,282
326,415
3,946
3,271
Total Money Market Funds
229,997
157,123
1,075
891
Total Equity Funds
264,031
271,711
6,074
7,334
Total Balanced Funds
200,307
186,551
3,012
3,255
Total Fund of Funds
119,094
131,071
2,245
2,799
Total
1,156,711
1,072,871
16,352
17,550
The Group's direct investment in mutual funds under management, has been recognized in Available for sale portfolio. The carrying amount of shares held by the Group amounts to 34.9 million (31.12.2015: 34.8 million). The Group has also entered into derivative transactions with the mutual funds that it manages as a counterparty. The carrying amount of assets and liabilities of these derivative financial instruments amounts to 41 (31.12.2015: 5) and 1,026 (31.12.2015: 1,185), respectively. It is noted that the Group has fully hedged its position in these derivatives. During 2016 an amount of 1.5 million (2015: 4.2 million) was recognized in the Group's income statement as impairment losses over the mutual funds of the available for sale portfolio that it manages.
It should be noted that there is no contractual obligation for the Group to provide financial support to any of the mutual funds under management nor does it guarantee their rate of return.
In addition, the Group manages Alpha TANEO Ventures Capital Management Mutual Fund through its subsidiary Alpha A.E. Venture Capital Management -AKES. The unit holders of this mutual fund are the Bank owning 51% and the New Economy Development Fund S.A owning 49%. Both parties mutually control the mutual fund and as a result the Group's investment in Alpha ...S is measured under the equity method.
The carrying amount of the Group's investment on 31.12.2016 amounts to 3.2 million (31.12.2015: 3.3 million) and is included in Associates and Joint Ventures. The Group's share of Alpha TANEO S profit or loss is presented in note 19. Company's total assets amounted to 6.5 million as at 31.12.2016 (31.12.2015: 6.3 million). The Group's commission income for the management of the mutual fund for 2016 amounted to 163 (2015: 517). The Bank has undertaken the obligation to participate in additional investments in the Mutual Fund amounting up to 0.3 million. This commitment along with participation's carrying amount represent the maximum exposure of the Group to Alpha TANEO AKES.
The Group also participates in other structured entities through investment in private equity mutual funds which are not managed by it, as well as in companies whose operation involves the issuance of asset-backed securities through its investment in their securities. The following table presents the abovementioned Group's investments. As indication of the size of the structured entities the total assets of the private equity mutual funds according to the most recent available financial statements and the total nominal value of the issue of asset backed securities are given.
31.12.2016
31.12.2015
Category of Structured Entity
Carrying
ValueTotal
Assets/ Value of issueCarrying Value
Total
Assets/ Value of issueInvestment securities available for sale
Private Equity Mutual Funds
28,622
470,398
31,910
511,588
Asset- backed securities
7,185
1,090,928
7,323
1,192,257
Investment securities held to maturity
Asset- backed securities
319
3,816
337
4,040
Investments in associates and joint ventures
Private Equity Mutual Funds
1,012
3,050
1,020
3,545
The Group has committed to participate in further investments of these mutual funds up to the amount of 2 million (31.12.2015: 2.7 million) This commitment and the carrying amount of the investment, consist the maximum Group's exposure to these investments. During 2016, an amount of 0,3 million was recognized in Group results as impairment losses from the above mutual funds of the available for sale portfolio (2015: 2.6 million).
From its investment in asset-backed securities the Group recognized during 2016 interest income amounting to 294 (2015: 412) and profits amounting to 137 (2015: losses 7 million) in gains on financial transactions. There is no contractual obligation of providing financial support to the companies which have issued these securities by the Group. The maximum exposure of the Group to losses from the asset-backed securities is not different from their carrying value.
39. Disclosures of Law 4261/5.5.2014
Article 81 of Law 4261/5.5.2014 incorporated into Greek legislation the Article 89 of Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013, according to which, it is adopted for the first time the obligation to disclose information on a consolidated basis by Member State and third country in which the Group has headquarters and specified as follows: name or names, nature of business, geographic location, turnover, results before tax, taxes on results, public subsidies received and number of full time employees.
The required information is listed below:
Greece
Income in Greece on 31.12.2016 amounted to 3,150,896 thousand, results before tax amounted to profit 138,516 thousand taxes on results amounted to 123,529 thousand and the number of employees was 8,918 for the following companies that included:
Banks
1. Alpha Bank A.E.
(Bank's branches in Bulgaria and United Kingdom are included)
Investment Banking
1. Alpha Finance A.E.P...
2. Alpha Ventures
3. Alpha A.E. Ventures Capital Management -S
4. Emporiki Management ..
Financing Companies
1. Alpha Leasing A.E.
2. ABC Factors A.E.
Asset Management
1. Alpha Asset Management ..D...
Insurance
1. Alpha Insurance Agents ..
2. Alphalife A.A.E.Z.
Real estate and hotel
1. Alpha Astika Akinita ..
2. Ionian Hotel Enterprises ..
3. Oceanos .....
4. Emporiki Development and Real Estate Management ..
5. Alpha Investment Property Chalandriou ..
6. Alpha Investment Property Attikis ..
7. Alpha Investment Property Attikis II ..
8. Alpha Investment Property Amarousion ..
9. Alpha Investment Property Amarousion ..
10. APE Fixed Assets ..
11. lpha Investment Property Neas Kifisias ..
12. lpha Investment Property Kalirois ..
13. lpha Investment Property Levadias ...
14. lpha Investment Property Kefalariou ..
15. Alpha Investment Property Neas Erythraias ..
16. Alpha Investment Property Chanion ..
Special purpose and holding entities
1. Ionian Holdings ..
Other companies
1. Kafe Alpha A.E.
2. Alpha Supporting Services ..
3. Real Car Rental A.E.
4. Evisak ..
5. Alpha Bank Notification Services ..
Cyprus
Income in Cyprus on 31.12.2016 amounted to 232,317 thousand, results before tax amounted to losses (90,680) thousand, taxes on results amounted to 1,793 thousand, the number of employees was 656 and the following companies were included:
Banks
1. Alpha Bank Cyprus Ltd
Investment Banking
1. Emporiki Ventures Capital Developed Markets Ltd
2. Emporiki Ventures Capital Emerging Markets Ltd
Real Estate and Hotel
1. Stockfort Ltd
Special purpose and holding entities
1. Alpha Group Investments Ltd
2. Ionian Equity Participations Ltd
3. AGI-BRE Participations 1 Ltd
4. AGI-RRE Participations 1 Ltd
5. Alpha Group Ltd
6. AGI-RRE Athena Ltd
7. AGI-RRE Poseidon Ltd
8. AGI-RRE Hera Ltd
9. Umera Ltd
10. AGI-BRE Participations 2 Ltd
11. AGI-BRE Participations 3 Ltd
12. AGI-BRE Participations 4 Ltd
13. Alpha Real Estate Services LLC
14. AGI-RRE Ares Ltd
15. AGI-RRE Venus Ltd
16. AGI-RRE Artemis Ltd
17. AGI-BRE Participations 5 Ltd
18. AGI-RRE Cleopatra Ltd
19. AGI-RRE Hermes Ltd
20. AGI-Cypre Arsinoe Ltd
21. AGI-SRE Ariadni Ltd
22. AGI-Cypre Alaminos Ltd
23. AGI-Cypre Tochini Ltd
24. AGI-Cypre Evagoras Ltd
25. AGI-Cypre Tersefanou Ltd
26. AGI-Cypre Mazotos Ltd
27. AGI-Cypre Ermis Ltd
28. AGI-SRE Participations 1 Ltd
Other companies
1. Alpha Trustees Ltd
2. Zerelda Ltd
United Kingdom
Income in United Kingdom on 31.12.2016 amounted to 27,451 thousand, results before tax amounted to gains 3,761 thousand, taxes on results amounted to (794) thousand, the number of employees was 42 and the following companies were included:
Banks
1. Alpha Bank London Ltd
Asset Management
1. ABL Independent Financial Advisers Ltd
Special purpose and holding entities
1. Alpha Credit Group Plc
2. Emporiki Group Finance Plc
3. Alpha Finance Shipping LTD
Other companies
1. Alpha Bank London Nominees Ltd
2. Flagbright Ltd
Bulgaria
Income in Bulgaria on 31.12.2016 amounted to 2,614 thousand, results before tax amounted to losses (2,384) thousand, taxes on results amounted to (42) thousand and the following companies were included:
Real Estate and Hotel
1. Alpha Real Estate Bulgaria E.O.O.D.
2. Chardash Trading E.O.O.D.
3. AGI-BRE Participations 1 E.O.O.D.
4. AGI-BRE Participations 2 E.O.O.D.
5. AGI-BRE Participations 2BG E.O.O.D.
6. AGI-BRE Participations 3 E.O.O.D.
7. AGI-BRE Participations 4 E.O.O.D.
8. HT-1 E.O.O.D
9. AGI-BRE Participations 5 E.O.O.D..
Jersey
Income in Jersey on 31.12.2016 amounted to 454 thousand and the results before tax amounted to losses (79) thousand.
Special purpose and holding entities
1. Alpha Group Jersey Ltd
Serbia
Income in Serbia on 31.12.2016 amounted to 41,037 thousand, results before tax amounted to profit 6,037 thousand, tax on results amounted to (32) thousand, the number of employees was 836 and the following companies were included:
Banks
1. Alpha Bank Srbija A.D.
Real Estate and Hotel
1. Alpha Real Estate D.O.O. Beograd
Special purpose and holding entities
1. AGI-SRE Ariadni DOO
Ireland
Income in Ireland on 31.12.2016 amounted to 383 thousand.
Special purpose and holding entities
1. Alpha Proodos D.A.C.
Romania
Income in Romania on 31.12.2016 amounted to 159,666 thousand, results before tax amounted to profit 20,286 thousand, taxes on results amounted to (4,533) thousand, the number of employees was 1,882 and the following companies were included:
Banks
1. Alpha Bank Romania S.A.
Leasing companies
1. Alpha Leasing Romania IFN S.A.
Investment Banking
1. SSIF Alpha Finance Romania S.A.
Insurance
1. Alpha Insurance Brokers S.R.L.
Real Estate and Hotel
1. Alpha Astika Akinita Romania S.R.L.
2. AGI-RRE Participations 1 S.R.L.
3. Romfelt Real Estate S.A.
4. AGI-RRE Zeus S.R.L.
5. AGI - RRE Athena S.R.L.
6. AGI - RRE Poseidon S.R.L.
7. AGI - RRE Hera S.R.L.
8. AGI-RRE Venus S.R.L.
9. AGI-RRE Cleopatra S.R.L.
10. AGI-RRE Hermes S.R.L.
11. SC Cordia Residence S.R.L.
12. SC Carmel Residential S.R.L.
13. Asmita Gardens S.R.L.
14. Ashtrom Residents S.R.L.
15. Cubic Center Development S.A.
Albania
Income in Albania on 31.12.2016 amounted to 22,924 thousand, results before tax amounted to losses (10,238) thousand, tax on results amounted to (92) thousand the number of employees was 415 and the following companies were included:
Banks
1. Alpha Bank Albania SH.A.
FYROM
Income in FYROM on 31.12.2016 amounted to 2,090 thousand, results before tax amounted to losses (991) thousand, tax on results amounted to 21 thousand.
Banks
1. Alpha Bank AD Skopje
Real Estate and Hotel
1. Alpha Astika Akinita D.O.O.E.L. Skopje
Neither the Bank nor the Group companies have received any public subsidies. According to article 82 of Law 4261/5.5.2014 with which incorporated into Greek legislation the article 90 of Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 is established the requirement to disclose the total return on assets.
The overall performance of the assets of the Group* for the year of 2016 amounted to 0.1% (31.12.2015: (1.9)%).
-----------------------------------
* In accordance with the guidance of European Securities and Markets Authority (ESMA), the definition and the detailed calculation of the ratio is included in the appendix of the Annual Financial Statements.
40. Operating segments
a. Analysis by operating segment
(in millions of Euro)
1.1-31.12.2016
Retail
Corporate
Banking
Asset Management/
Insurance
Investment Banking/ Treasury
South-Eastern Europe
Other
Group
Net interest income
1,001.7
684.8
14.7
(38.3)
257.8
3.4
1,924.1
Net fee and commission income
111.3
136.3
35.6
8.3
25.0
1.4
317.9
Other income
6.9
12.6
(1.5)
66.5
39.1
18.2
141.8
Total income
1,119.9
833.7
48.8
36.5
321.9
23.0
2,383.8
Total expenses*
(664.3)
(153.5)
(26.7)
(29.7)
(182.2)
(137.4)
(1,193.8)
Impairment losses
(352.2)
(536.4)
-
-
(273.8)
(5.6)
(1,168.0)
Cost for Voluntary Separation Scheme
(31.7)
(31.7)
Profit/(losses) before income tax
103.4
143.8
22.1
6.8
(165.8)
(120.0)
(9.7)
Income tax
29.2
Profit/(losses) after income tax from continuing operations
19.5
Profit/(losses) from discontinued operations
22.8
22.8
Profit/(losses) after income tax
42.3
Assets 31.12.2016
24,887.3
15,379.1
380.7
10,436.6
8,813.3
4,975.3
64,872.3
Liabilities 31.12.2016
22,459.0
5,809.3
1,658.7
19,634.3
6,125.6
72.0
55,758.9
Capital expenditure
74.0
73.9
1.9
1.3
25.0
9.9
186.0
Depreciation and Amortization
(53.4)
(20.2)
(1.6)
(2.1)
(10.3)
(9.8)
(97.4)
(in millions of Euro)
1.1-31.12.2015
Retail
Corporate
Banking
Asset Management/
Insurance
Investment Banking/ Treasury
South-Eastern Europe
Other
Group
Net interest income
1,027.2
728.4
16.4
(147.2)
272.1
0.6
1,897.5
Net fee and commission income
106.8
133.9
43.5
(3.2)
26.2
1.4
308.6
Other income
3.1
12.3
1.0
82.1
(4.4)
(89.2)
4.9
Total income
1,137.1
874.6
60.9
(68.3)
293.3
(87.2)
2,211.0
Total expenses*
(669.7)
(148.3)
(30.4)
(31.4)
(182.1)
(140.7)
(1,202.6)
Impairment losses
(1,328.4)
(1,334.6)
-
(2.6)
(320.9)
(1.1)
(2,987.6)
Provision for Voluntary Separation Scheme
(64.3)
(64.3)
Profit/(losses) before income tax
(861.0)
(608.3)
30.5
(102.3)
(209.1)
(293.3)
(2,043.5)
Income tax
806.8
Profit/(losses) after income tax from continuing operations
(1,236.7)
Profit/(losses) from discontinued operations
(134.8)
(134.8)
Profit/(losses) after income tax
(1,371.5)
Assets 31.12.2015
25,189.1
16,711.1
483.5
11,943.3
9,808.8
5,161.7
69,297.5
Liabilities 31.12.2015
22,417.8
4,827.8
1,359.0
25,038.3
6,309.0
292.4
60,244.3
Capital expenditure
58.6
30.5
1.4
0.9
9.4
6.8
107.6
Depreciation and Amortization
(54.5)
(19.3)
(2.1)
(2.2)
(9.1)
(15.4)
(102.6)
------------------------------------------------------
* Excluding the cost/provision for separation schemes.
i. Retail Banking
It includes all individuals (retail banking customers), professionals, small and very small companies operating in Greece and on abroad, except from South-Eastern Europe countries.
The Group, through its extended branch network, offers all types of deposit products (deposits/ savings accounts, working capital/ current accounts, investment facilities/ term deposits, Repos, Swaps), loan facilities (mortgages, consumer, corporate loans, letters of guarantee) and debit and credit cards of the above customers.
ii. Corporate Banking
It includes all medium-sized and large companies, with international activities, corporations with international business activities, entrerprises which cooperate with the Corporate Banking Division, as well as shipping corporations operating in Greece and on abroad except from South Eastern European countries. The Group offers working capital facilities, corporate loans, and letters of guarantee of the abovementioned corporations. This sector also includes leasing products which are provided by Alpha Leasing A.E. as well as factoring services which are provided by the subsidiary company ABC Factors A.E.
iii. Asset Management/Insurance
It consists of a wide range of asset management services offered through Group's private banking units and its subsidiary, Alpha Asset Management A.E.D.A.K. In addition, it includes income received from the sale of a wide range of insurance products to individuals and companies through either AXA insurance, which is the corporate successor of the subsidiary Alpha Insurance A.E. or the subsidiary Alphalife A.A.E.Z.
iv. Investment Banking/Treasury
It includes stock exchange, advisory and brokerage services related to capital markets, and also investment banking facilities, which are offered either by the Bank or specialized subsidiaries (Alpha Finance A.E.P.E.Y., Alpha Ventures S.A.). It also includes the activities of the Dealing Room in the interbank market (FX Swaps, Bonds, Futures, IRS, Interbank placements Loans etc.).
v. South-Eastern Europe
It consists of the Group's subsidiaries, which operate in South Eastern Europe. It is noted that Bulgaria's Branch and Alpha Bank's subsidiary Alpha Bank AD Skopje, as well as Alpha Bank Srbija, are not included anymore in the results of the continuing activities in this sector anymore. Their financial result is included in caption "Profit/Loss from discontinued operations".
vi. Other
This segment consists of the non-financial subsidiaries of the Group and Bank's income and expenses that are not related to its operating activity.
The assets of the operating segments "Retail" and "Corporate Banking" include the following figures of the Bank's loans, which are being managed by the non performing loans retail and wholesale banking units, based on Bank's internal procedures. The relevant figures for the foreign subsidiaries are included in the operating segment South-Eastern Europe.
31.12.2016
31.12.2015
Total Gross Amount
Allowance for impairment losses
Total Net Amount
Total Gross Amount
Allowance for impairment losses
Total Net Amount
Mortgages
7,655,203
2,032,511
5,622,692
7,637,046
2,176,285
5,460,761
Consumer Credit Division
4,336,599
2,394,214
1,942,385
4,100,482
2,412,186
1,688,296
Corporate Loans
14,030,221
7,785,885
6,244,336
13,192,810
7,568,345
5,624,465
Total
26,022,023
12,212,610
13,809,413
24,930,338
12,156,816
12,773,522
b. Analysis by geographical sector
(in millions of Euro)
1.1 - 31.12.2016
Greece
Other countries
Total
Net interest income
1,648.5
275.6
1,924.1
Net fee and commission income
289.2
28.7
317.9
Other income
99.8
42.0
141.8
Total income
2,037.5
346.3
2,383.8
Total expenses*
(996.0)
(197.8)
(1,193.8)
Impairment losses
(894.2)
(273.8)
(1,168.0)
Cost for voluntary separation scheme
(31.7)
(31.7)
Profit/(losses) before incomem tax
147.3
(157.0)
(9.7)
Income tax
29.2
Profit/(losses) after income tax from continuing operations
19.5
Profit/losses from discontinued operations
22.8
22.8
Profit/(losses) after income tax
42.3
Total Assets 31.12.2016
55,796.4
9,075.9
64,872.3
(in millions of Euro)
1.1 - 31.12.2015
Greece
Other countries
Total
Net interest income
1,605.9
291.6
1,897.5
Net fee and commission income
278.4
30.2
308.6
Other income
6.7
(1.8)
4.9
Total income
1,891.0
320.0
2,211.0
Total expenses*
(1,000.4)
(202.2)
(1,202.6)
Impairment losses
(2,666.6)
(321.0)
(2,987.6)
Provision for voluntary separation scheme
(64.3)
(64.3)
Profit/(losses) before income tax
(1,840.3)
(203.2)
(2,043.5)
Income tax
806.8
Profit/(losses) after income tax from continuing operations
(1,236.7)
Profit/losses from discontinued operations
(134.8)
(134.8)
Profit/(losses) after income tax
(1,371.5)
Total Assets 31.12.2015
59,110.7
10,186.8
69,297.5
---------------------------------
* Excluding the cost/provision for separation schemes.
41. Risk Management
Alpha Group has established a thorough and prudent risk management framework which is being built on the best supervisory practices and based on the common European legislation and banking system rules, principles and standards and is evolved over time and implemented in a coherent and effective manner on the bank's conduct of the day-to-day business to strengthen its sound corporate governance under a challenging macroeconomic and financial environment.
The Group's critical focus in 2016 was to maintain the highest operating standards, ensure compliance with regulatory risk rules and retain confidence in the conduct of its business activities through sound and robust provision of financial services.
41.1 Credit Risk Management
RISK MANAGEMENT ORGANIZATION
Board of Directors
The Board of Directors supervises the overall operations of the Risk Management Unit. Regarding Risk Management, the Board of Directors is supported by the Risk Management Committee. The Risk Management Committee through monthly meetings reports to the Board of Directors issues regarding the Group's risk-taking strategy and capital management. It is responsible for the implementation and monitoring compliance with the risk management policies.
The Group re-assesses the effectiveness of the risk management framework on a regular basis in order to ensure compliance with International best practices.
For a more comprehensive and effective identification and monitoring of all risk types, Management Committees have been established (Assets and Liabilities Committee, Operational Risk Committee and Credit Risk Committee).
Risk Management Committee
The General Manager and Group Chief Risk Officer supervise the Risk Management Unit and report on a regular basis and ad hoc to the Management Committees, the Risk Management Committee and to the Board of Directors. As far as credit risk is concerned the reporting to the above mentioned committees covers the following areas:
The portfolio risk profile by rating grade.
The transition among rating grades (migration matrix).
The estimation of the relevant risk parameters by rating grade, group of clients, etc.
The trends of basic rating criteria.
The changes in the rating process, the criteria or in each specific parameter.
The concentration risk (by risk type, sector, country, collateral and portfolio etc.).
Organizational Structure of Risk Management Divisions
Under the supervision of the General Manager and Group Chief Risk Officer the following Risk Management Divisions operate within the Group and have been assigned with the responsibility of implementing the risk management framework, according to the directions of the Risk Management Committee.
Market and Operational Risk Division
Credit Risk Data and Analysis Division
- Credit Risk Data Management Division
- Credit Risk Analysis Division
Credit Control Division
- Credit Risk Policy and Control Division
- Credit Risk Methodologies Division
Wholesale Credit Division - Greece
Wholesale Credit Division - International
Retail Credit Division
For credit risk management purposes, facilities are separated into Wholesale and Retail.
WHOLESALE BANKING PORTFOLIO
Wholesale Banking credit facilities
Wholesale Banking credit facilities are included in each of the following categories subject to the characteristics of the credit facility and the obligor, as shown in the table below:
Portfolio
Characteristics
Obligors under the competence of Wholesale Banking
Corporate
Companies with turnover > Euro 75 million
Includes financing in shipping companies, as well as, obligors under the management of the Investment Banking Division
SME
Euro 2.5 million < Companies with turnover < Euro 75 million or companies with credit limit > Euro 1 million
1. Credit Risk Approval Process
The limits of the Wholesale Banking Credit Committees are determined in accordance to Total Credit Exposure, defined as the sum of all credit facilities of the obligor (single company or group of associated companies) which can be approved by the Group and include the following:
Total credit requested exposure
Working Capital limits
Withdrawal limits from unclear deposits
Letters of Credit/Letters of Guarantee limits
Factoring limits
Derivative transaction limits
Corporate Cards limits
Medium and long-term loans (current outstanding/exposure for facilities that have been fully drawn or limit amount of undrawn facilities).
Leasing Facilities (current outstanding/exposure for leasing facilities that have been fully drawn or limit amount for undrawn/unused facilities).
Special credit limits or loans, or any form of personal financing to the company's business owners (mortgage loans, consumer loans, shares' purchase, credit cards etc.).
Credit Approval Limits Wholesale Banking Credit Committees
Credit Committees Structure:
General Management Credit Committee
Wholesale Banking Credit Committees
- Under the General Managers
- Under the Divisions Managers
- Under the Divisions Assistant Managers
- Commercial Centers Credit Committee
Credit Limit Expiry/Renewal date:
The credit limits' expiry/renewal date is determined by the relevant Wholesale Banking Credit Committees. The basic factor for the determination of the credit limit expiry is the client's credit rating, which is not a standalone approval or rejection criterion, but the basis for determining the minimum security/collateral required and the respective pricing. As a rule, for obligors that have been rated in the Low, Medium and Acceptable credit risk zones, reviews are carried out on an annual basis, for Watch List clients, on a semi-annual basis while obligors that have been rated in the High Risk zone are reviewed on a quarterly basis. Deviations from the above rule are not allowed, except when the request by the responsible Business Units is approved by the competent Credit Committees.
2. Credit Risk Measurement and Internal Ratings
The assessment of the borrowers' creditworthiness and their rating in credit risk scales is established through rating systems.
The rating of the Group's borrowers with the use of credit risk rating systems constitutes a basic tool for:
The decision-making process of Credit Committees for the approval/ renewal of credit limits and the implementation of the appropriate pricing policy (interest rate spreads etc.).
The estimation of the future behavior of borrowers which belong to a group with similar characteristics.
The early recognition of potential troubled facilities (early alert mechanism) and the prompt, effective action for the minimization of the expected loss for the Group.
The assessment of the quality of the Group's loan portfolio and the credit risk undertaken.
The aim of the credit risk rating systems is the estimation of the probability that the borrowers will not meet their contractual obligations to the Group.
The rating systems employed by the Group are the Alpha Bank Rating System (ABRS) and the Moody's Risk Advisor (MRA) which incorporate different credit rating models.
All current and future clients of the Group are assessed based on the appropriate credit risk rating model and within pre-specified time frames.
For the estimation of the probability of default of the obligors of the Group the credit risk rating models evaluate a series of parameters, which can be grouped as follows:
Obligor's Financial Ability (liquidity's ratios, debt to income, etc.)
Peers' Analysis: Obligor's comparative position in the market in which it operates mostly compared to its peers.
Behavioral status and history of the obligor with the Group and with third parties (debt in arrears, adverse transaction records, etc).
Obligor's qualitative characteristics (solid and healthy administration, management succession, appropriate infrastructure and equipment etc.).
The credit rating models which are currently employed by the Group are differentiated according to:
The turnover of the company.
The level of the total credit risk exposure.
The credit facility's specific characteristics.
The available information for the obligor's assessment. Specifically, for the financial analysis the differentiation relates to the type of the local accounting standards and the International Financial Reporting Standards.
For each of the credit rating models, different parameters may be used, each of which contributes in a specific manner to the relevant assessment.
The statistical validation of the credit risk rating models is reviewed regularly in order to ensure the maximum predictive ability according to the best international practices.
Obligors Rating Scale
Borrowers are rated in the following rating scales:
, +, , -, +, , -,B+, , -, CC+, CC, CC-, C, D, D0, D1, D2,
For presentation purposes of the table "Analysis of neither past due nor impaired Loans and Advances to customers", the "strong" rating includes the rating scales AA, A+, A, A- and BB+, "satisfactory" rating includes the rating scales BB, BB-, B+, B, B-, CC+ and CC and "under close monitoring" (higher risk) includes the rating scales CC- and lower than CC-.
Facility Rating Model
In the context of the alignment with the current Basel II supervisory requirements and the reinforcement of credit risk management processes, the Bank has developed a risk rating model that incorporates the transaction characteristics (facility rating), in case of a customer's default.
The model is complementary to the existing models of credit risk assessment, calibrating separately each credit facility based on the collateral. The specific assessments of existing and proposed credit facilities are weighted, yielding the final classification of the expected loss at the level of the overall credit risk exposure of the borrower.
The grading scales of the facility rating system consist of 6 grades for covered credit facilities plus 1 grade for the uncovered credit facilities: 1, 2, 3, 4, 5, 6, 7.
3. Impairment Policy
The Group has defined as 'significant for individual assessment' customers loans that are managed by the Wholesale Banking Unit.
The assessment for impairment is performed on a quarterly basis, as follows:
The Group assesses whether objective evidence for individual assessment for impairment exists. The process for identifying loans for impairment and estimating their impairment allowance consists of the following steps:
1. Identification of loans which will be individually assessed and for which events exist which constitute objective evidence that an impairment loss has occurred.
2. Impairment calculation on an individual basis for the loans identified in the previous step, as the difference between the recoverable amount and the carrying amount of the loan.
3. In cases where the impairment allowance under individual assessment was zero, these loans will be assessed for impairment on a collective basis, based on similar credit risk characteristics. For example, groups of loans are created per collateral coverage, days in arrears, credit rating etc, where the corresponding impairment factor will be applied.
The individual assessment for impairment is performed by the Wholesale Banking Unit and is approved by the WholesaleCredit Division.
Significant loans are assessed individually if one of the following conditions are met:
Clients that are experiencing or about to experience difficulties in meeting their financial commitments and credit obligations to the Group ("financial difficulty").
Clients with credit risk rating D, D0,D1, D2 and E.
Clients with credit risk rating CC- and C.
Significant deterioration in the industry outlook in which the borrower operates taking into account the five sectors that have had the worst deterioration on an annual basis, according to the high risk sectors' segmentation .
Derogatory items including but not limited to :. payment orders, bounced cheques, auctions, bankruptcies, overdue payments to the State, to Social Security Funds, or to employees.
Occurrence of unexpected, extreme events such as natural disasters, fraud, etc.
Interventions and actions by regulatory bodies/local authorities against the borrower (e.g. Athens Stock Exchange, Hellenic Capital Market Commission).
Breach of contractual terms and conditions.
Adverse changes in the shareholders' structure or the management of the company or serious management issues/ problems.
Significant adverse changes in cash flows potentially due to ceased cooperation with a key/major customer, significant reduction in demand of a main product or service, ceased cooperation with a key/major supplier or suppliers cut credit, etc.
Significant deterioration of financial ratios of the obligor (Reduction of equity due to losses, debt ratio etc) and of estimated future cash flows of the obligor.
Collective Assessment for Impairment
Collective assessment should be performed for exposures as follows:
a. Exposures that have been individually assessed and were found not to be impaired on an individual basis -the impairment allowance estimated was zero- are subsequently assessed for impairment on a collective basis, after they are grouped in pools based on common credit risk characteristics.
b. Exposures with no impairment triggers and therefore are assessed collectively in pools formed based on similar credit risk characteristics.
The future cash flows of a group of exposures that are collectively evaluated for impairment are calculated based on the estimated contractual cash flows, and historical loss experience for exposures with credit risk characteristics similar to those in the group. The need for objective evidence in order for the loss to be recognized and effectively the impairment loss to be identified on individual loans, may lead to a delay in the recognition of a loan's impairment, which has already occurred. Within this context and in accordance with IAS 39, it is appropriate to recognize impairment losses for those losses "which have been incurred but have not yet been reported (Incurred But Not Reported - IBNR).
4. Credit Risk Concentration Management
Concentration Risk is a specific form of credit risk and arises due to the low degree of diversification between counterparties, products or group of counterparties, sectors, geographic regions, or collaterals.
The Group monitors on a regular basis concentration risk through detail reporting which informs Senior management and the Board of Directors. According to the supervisory framework, the Group complies with the regulatory directives regarding large exposures, while the capital requirements for single name and sector concentration risks are estimated in the context of Pillar 2 of Basel II.
5. Credit Control
The Alpha Bank Group has adopted a Credit Control mechanism so as to provide assurance that the credit policy and forbearance frameworks are being consistently followed.
More, specifically, on site credit controls are conducted in Wholesale Banking Business Units of the Bank as well as desktop controls that cover the adherence and the compliance to the Group's Credit Policy, the portfolio analysis and the confirmation of the completeness and correctness of the data in the Bank's systems through sample checks.
RETAIL BANKING PORTFOLIO
Retail banking involves the lending facilities offered to borrowers covering traditional banking products and services such as:
Housing loans/Mortgages
Consumer Loans and Credit Cards
Small companies and small business (SB): Legal entities with turnover up to Euro 2.5million and credit limit up to Euro 1million.
1. Credit Risk Approval Process
The Group monitors customer Total Credit Risk Exposure (For Individuals and Small Businesses), which refers to the sum of all revolving limits of an obligor, all the balances of long term facilities and for the case of legal entities the total exposure of facilities given to stakeholders of customer companies. Additionally, facilities for which the customer is guarantor or co-debtor are also taken into account.
The Group has developed and implemented a strict framework for the conduct of credit policy (legislative and supervisory / regulatory) and has also formulated and put into effect an internal system of credit principles, procedures and rules clearly applicable to the Group's lending business, in order to promote sound practices for managing credit risk.
Credit policies establish the framework for lending and guide the credit-granting activities of Retail Banking through:
Sound lending management.
Prudent client selection through in-depth assessment of both financial and qualitative data of the borrower
Assessing the risk/reward relationship with a respective determination of pricing policy and collateral coverage after taking into account the level of credit risk.
Monitoring and management of the Total Credit Risk Exposure, which is defined as the sum of all credit risks arising from all credit facilities provided by the Alpha Bank Group as a whole, to a single obligor.
The enforcement of the Credit Policy requires certain criteria to be met. These criteria play a significant role to the achievement and maintenance of a healthy portfolio and to the Group's Capital allocation. More specifically:
Individuals
The approval process of credit to individuals is performed on the basis of the classification of borrowers into risk groups (risk groups), which represent a certain level of undertaken risk. The level of risk undertaken by the Group is adjusted, when deemed necessary, according to its credit policy.
The credit assessment for individuals is based upon the following pillars:
Application fraud detection;
Willingness to pay;
Ability to pay;
Collateral risk.
Small Businesses
Small Business are defined as following:
Personal Companies with turnover up to 2.5 million and a credit limit up to 1 million
Entrepreneurs with a credit limit up to 1 million
Legal entities with turnover up to 2.5 million and a credit limit up to 1 million.
The creditworthiness of Small Businesses in the Retail Banking sector is related to the creditworthiness of agencies/competent of the company and vice versa. Therefore the evaluation of claims in this category is based on two dimensions:
The valuation of the creditworthiness of entities or business managers.
The valuation of the creditworthiness of the company.
The valuation of the creditworthiness of a company is based on the specific pillars:
willingness to pay.
ability to pay.
Hence, the credit assessment for the small businesses is based on the following:
Application fraud detection;
Demographics;
Financials;
Behavior;
Credit Bureau;
Qualitative data; and
Collateral risk.
2. Internal Ratings
The fundamental parameter in assessing Retail Banking Credit Risk is the Credit Scoring Models that are developed and employed throughout the credit cycle at the Group level. The above models segments populations into homogenous risk groups (pools) and are categorized as follows:
Behavior Models, which assess the customer's performance and predict the probability of defaulting within the following months;
Application Credit Scoring Models, which assess application data-mainly demographic that predict the probability of defaulting within the following months; and
Basel II Models, according to the regulatory framework,(e.g., IRB compliant models).
These models and the probabilities of default that derive from them, contribute a significant role in risk management and decision making throughout Alpha Bank Group. Specifically, the models are used in the following segments:
In decision making of credit assessment and credit limit assignment.
In impairment tests
In predicting future performance of customers belonging to the same pool of common characteristics.
In tracing high risk accounts in time to schedule all necessary actions so as to reduce expected losses for the Bank.
In assessing the Bank's portfolio quality and credit risk.
The parameters taken into account vary, according to the model's type and product category that it assesses. Indicatively, some factors are:
Personal/ demographic data: the customer's age, profession, marital status, or current address;
Loan characteristics: product applied for, loan term, loan amount, or financing purpose;
Behavioral data: payments during latest period of time, maximum delinquency, outstanding loan balance versus loan limit, transaction type;
Financial data: sales change, liabilities versus sales; and
Qualitative data: experience, seat of business (company registry).
Models are reviewed, validated and updated on a yearly basis and are subject to quality control so as to ensure at their predictive power at any point in time.
Furthermore, on a regular basis the Group conducts exercises simulating crisis situations (Stress Tests), which explore the potential impact on the financial results of the Group due to unfavorable developments both in obligors' transactional behavior as well as in the broader financial macroeconomic environment.
3. Impairment Policy
The process for determining the loans eligible for impairment and the estimation of their provision comprises the following steps:
1. Identification of loans which will be individually assessed.
2. Impairment calculation on individual basis for the loans identified in the previous step.
3. Recognition of the loans to be assessed collectively, including cases where the impairment allowance under individual assessment was zero
4. Collective provision calculation for the loans identified in the previous step (3).
For provision purposes, under collective assessment, loans are separated based on similar credit risk characteristics. These characteristics are selected based on the future cash flows of the abovementioned Retail Banking loan categories which depict customers' ability to repay their debts according to the contractual agreements.
Loss Rate is calculated based on credit risk characteristics of the segment and portfolio in which the facility or the customer belongs to. The Loss Rate is determined with statistical methods.
Trigger Events for the Individual Assessed Exposures
For the Retail Banking portfolios, loans are assessed on an individual basis if one of the trigger events mentioned below is met and if the following criteria are met:
Consumer Loans: Customers with total exposures more than 500 thousand;
Housing Loans: Customers with total exposures more than 2 million; and
Small Business Loans: Customers with total exposures more than 850 thousand.
The above limits differ from country to country according to size and characteristics of the portfolio.
3.1.1. Trigger Events for Individuals
1. Customers with loans past due over 90 days;
2. Customers with loans past due more than 30 days and less than 90 days;
3. Customers with restructured loans;
4. Unemployed Customers;
5. Deceased Customers;
6. Occurrence of unexpected, extreme events such as fraud, natural disasters, etc.;
7. Freelancers or Personal Company owners who ceased their business activity due to retirement;
8. Freelancers or Personal Company owners with significant adverse changes in cash flows potentially due to ceased cooperation with a key/major customer, significant reduction in demand of a main product or service, ceased cooperation with a key/major supplier or suppliers cut credit etc.;
9. Stakeholders of Companies have filled for inclusion in Article 99 (pre-bankruptcy law);
10. Stakeholders of Companies with loans past due more than 90 days (rating D, D0 or D1 or D2 or E) or with rating CC- or C;
11. Stakeholders of Companies with detrimentals (e.g. payment orders, denounced checks, auctions, bankruptcies, overdue amounts to the State, overdue amounts to Social Security or employees);
12. Stakeholders of Companies with interventions and actions of regulatory bodies/local authorities against their companies (e.g. Athens Stock Exchange, Hellenic Capital Market Commission);
13. Stakeholders of Companies with significant adverse changes in cash flows potentially due to ceased cooperation with a key/major customer, significant reduction in demand of a main product or service, ceased cooperation with a key/major supplier or suppliers cut credit etc.;
14. Stakeholders of Companies which operate in industries with significant deterioration in their outlook (taking into account the five sectors with the foremost deterioration annually, according to the risk classification of sectors of Risk Analyst);
15. Customers with impairment amount in the previous impairment test for which none of the above criteria is met; and
16. Customers with detrimental (e.g. payment orders, denounced checks, auctions, bankruptcies, overdue amounts to the State, overdue amounts Social Security or employees).
3.1.2 Trigger Events for Legal Entities
1. Customers with credit risk rating D, D0 or D1 or D2 or E or with overdue amount above 90 days;
2. Customers with loans past due more than 30 days and less than 90 days;
3. Customers with rating CC- or C;
4. Obligors which operate in industries with significant deterioration in their outlook (taking into account the five higher risk sectors according to Risk Analyst classification);
5. Customers with impairment amount in the previous impairment test for which none of the above criteria is met.
6. Customers with detrimentals (e.g. payment orders, denounced checks, auctions, bankruptcies, overdue amounts to the State, overdue amounts to Social Security or employees);
7. Occurrence of unexpected, extreme events such as fraud, natural disasters, etc.;
8. Interventions and actions of regulatory bodies/local authorities against their companies (e.g. Athens Stock Exchange, Hellenic Capital Market Commission);
9. Breach of contract or credit terms and conditions;
10. Adverse changes in the shareholders' structure or the management of the company or serious management issues/ problems;
11. Significant adverse changes in cash flows potentially due to ceased cooperation with a key/major customer, significant reduction in demand of a main product or service, ceased cooperation with a key/major supplier or suppliers cut credit etc.;
3.2. Trigger Events for the Collective assessment per portfolio
The specific trigger events for the collective assessment for the Retail Banking portfolios are the following:
Accounts up to 89 days past due with or without signs of unlikeliness to pay;
Accounts more than 90 days past due;
Forborne exposures; and
Accounts with partial write off.
4. Credit Control
The Alpha Bank Group in order to ensure that all Credit Units fully comply with the Credit Policy, has adopted and introduced a Credit Control mechanism on a monthly basis, so as to review and assess whether the credit policy framework is being consistently followed. In addition Data Integrity Verification controls are conducted in credit requests elements of Retail Banking Loans. Quality analysis of the credit approval process is also conducted.
INTERNATIONAL FINANCIAL REPORTING STANDARD 9 (IFRS9).
Effective from 1.1.2018 the Alpha Bank Group is obliged to adopt the new IFRS9 standard which specifies the accounting standards for the Classification & Measurement of Financial instruments, impairment methodology and hedge accounting.
Following the issuance of IFRS 9 Financial Instruments, Alpha Bank Group has already designed their IFRS 9 Implementation Program which include a significant number of projects necessary for the timely alignment with new requirements. The projects extend to the areas of Finance, Risk Management and IT system & data.
Regarding credit risk, the IFRS9 standard completely redesigns the approach for impairment of financial assets. In particular, new impairment rules present a fundamental redesign of the provisioning model, moving from the current incurred loss model to an expected credit loss model. The expected credit loss model provides for lifetime expected credit loss in cases of significant credit deterioration since initial recognition, resulting in earlier recognition of credit losses and increased sensitivity to credit risk parameters and assumptions about future conditions.
CREDIT RISK MITIGATION
1. Collaterals
Collaterals are received both for Wholesale and Retail lending in order to mitigate credit risk that may arise from the obligor's inability to fulfill his contractual obligations.
Collaterals include all kind of assets and rights which are made available to the Group either by their debtors or by third parties, in order to be used as complementary liquidity sources of relative loans.
The mitigation tools applied by the Group include two broad categories: intangible and tangible collaterals.
2. Intangible Collaterals
Intangible collaterals form the framework of the obligations and rights that are typically included and described in specific contractual documents that bind the Group and the borrowers during the lending process with specific commitments. The commitments involve a third party who substitutes for the primary debtor in the event of the latter's default or the primary debtor itself (natural or legal entities) to honor the contractual loan agreements and their prompt repayment to the Group and on the other hand the Group has the right to claim them.
The main type of intangible collateral that the Group uses to protect the bank against the risk of losses due to debtor insolvency is the Guarantee.
3. Tangible Collaterals
Tangible collaterals provide the Group with the rights over an asset (movable or immovable),owned by the obligor or the guarantor, providing priority in the satisfaction of the creditor by the liquidation preceeds of the asset.
Tangible collaterals are distinguished between mortgages and prenotation on mortgages which are registered over immovable properties and pledges on movable assets (e.g., commodities, checks, bills of exchange) or on claims and rights.
In order to better secure credit facilities granted, all mortgage and pledged assets are covered by an insurance contract, with assignment of the relevant insurance contract to the Bank.
3.1. Mortgages - Prenotation on Mortgages
Mortgages are registered on real estate or immovable assets which can be liquidated as indicatively reported below:
Residential Real Estate;
Commercial Real Estate;
Industrial Buildings;
Land;
Mines;
Ships and aircrafts; and engines, whether or not mobile
Machinery or other facilities (engineering, mechanical, electrical, etc.), if they are permanently and consistently connected with the mortgaged estate
Periodic revaluation of mortgaged property
According to the Group's Credit Policy, the existence and the valuation of mortgaged property is closely monitored. The frequency of the appraisal does not usually exceed one year.
Valuations are carried out by certified real estate appraisers either:
Using statistical indicators (such as PropIndex), depending on the type of property; or
By qualified engineers, after their visit to the property used as collateral or via desktop assessment.
3.2. Pledges
Pledges provide seniority rights over liquidation proceeds from a movable third party asset.
Pledges can be registered on movable assets or on rights that have not been excluded or banned from exchanges and are liquid , including:
Raw materials, products or commodities;
Machinery (movable);
Bill of Lading;
Bill of exchange;
Cheques;
Securities;
Deposit; and
Any type of claim that can be pledged
Periodic revaluation of pledges
Depending on the right or the underlying asset on which a pledge is registered, the periodic revaluation varies from one month to one year.
4. Acceptable Value
The Group calculates the value of the securities/collaterals received based on the potential proceeds that could arise if and when these are liquidated. This calculation refers to the acceptable value/haircut of the securities/collaterals provided to the Group by its obligors.
For the calculation of the forced-sale value, the following factors are involved in the consideration:
The quality of the securities/assets;
Their market value;
The degree of ability to liquidate;
The time required for their liquidation;
Their liquidation cost;
The current charges on the assets; and
The privileged priority of third parties on the product of liquidation (e.g. Public Sector, employees, etc.)
The above have to be accounted for when determining the haircuts for each collateral/security. Haircuts, depending on their nature are expressed as a percentage of their market value, their nominal value or their weighted average value.
ENVIRONMENTAL AND SOCIAL RISK
Within Credit Risk Management Framework and Credit Policy, it has been integrated the assessment of the strict compliance of the principles of an environmentally and socially responsible financing towards legal enitites .
The main purpose is the management of potential risk arising from the operations of obligors that may be connected with a damage to the environment or the society or with any direct threat of such a damage, having as a result a negative impact on the business operations and financial results of the Group.
FORBEARANCE
Maintaining a healthy loan portfolio depends on the constant monitoring and assessment of the borrowers in order to allow early detection of future liquidity problems, which could affect the normal repayment of their obligations to the Group.
The credit tools which are normally used by the Group for managing the liquidity problems that borrowers are facing for repaying their obligations are the restructuring of debt through the renegotiation of the original terms and conditions of the loan agreement they have entered into.
The Executive Committee "Act 42" as amended by the Executive Committee "Act 47" and the Executive Committee "Act 102" of the Bank of Greece, has determined the supervisory framework for the management of loans in arrears and non-performing loans, over and above the already applicable requirements of Law 4261/2014, the CRR, and delegated the decision authority to the Bank of Greece.
Furthermore, in the context of the Commission Implementing Regulation (EU) 2015/227 of the European Commision dated January 9, 2015 and the executive technical standards of the European Banking Authority, the Group assumes the resulting regulatory obligations for forborne exposures.
Forbearance measures should be applied on the basis of the risk, cooperativeness and viability of each debtor and consist of concessions that are robust and sustainable, through the renegotiation of the initial terms and conditions of the debt contract duly taking into account the causes of the debtor's financial difficulties.
Forbearance measures may be applied a) on the basis of a customer's request, b) in accordance with the Code of Conduct under Law 4224/2013, as currently is in force, which is a State initiative under the supervision of the Bank of Greece. Apart from the forbearance measures applied to existing Retail lending exposures, which are initiated by the Group in accordance with the directives of the Executive Committee Acts of the Bank of Greece (No. 42 / 30.5.14 47/9.2.2015 & 102/30.8.2016) and Arrears Resolution Process (ARP) of the Code of Conduct under L.4224/2013 as currently is in force, there are restructuring solutions according to the Legislative Framework.
The existence of more favorable terms for renegotiating and modifying the terms and conditions of the bilateral arrangement between the Group and the debtor (concession), who is facing or is about to face difficulties in meeting his financial commitments ("financial difficulty"), are defined with respect to:
Difference in favour of the debtor between the modified and the previous terms of the contract; and
Cases where a modified contract includes more favourable terms than other debtors with a similar risk profile could have obtained.
MONITORING OF FORBORNE EXPOSURES
Following the Executive Committee Act 42 / 30.05.2014, ("Act 42") as subsequently amended by the Act 47 / 09.02.2015 ("Act 47") and by the Act 102/30.08.2016 ("Act 102") of the Bank of Greece, the Group has undertaken a series of actions to ensure adherence to the supervisory obligations and requirements arising from the above Acts. These changes cover the following distinct sections:
Adaptation of Information Systems of the Group;
Amendments of the existing processes, such as the customization of new types of forborne exposures according to what is provided in Act 42, Act 47 and Act 102;
Creation of data structures (Data Marts) aiming at:
- Automation of the processes related to the production of both internal (Risk Management) and external (Supervisory) reports;
- Perform analyses on the portfolio of the Group; and
- Production of Management Information Reporting (MIS)
Additionally, the Bank has introduced independent operation management for the "Troubled Assets" (Troubled Asset Committee). This is achieved by the representation of the Administrative Bodies in the Evaluation and Monitoring of Denounced Customers Committee as well as in the Arrears Councils.
WRITE-OFFS AND WRITE-DOWNS OF BAD DEBTS
1. Write-offs
Write-offs are defined as the accounting reduction of a debt, which does not entail waiving the legal claim against the debtors and, hence, the debt may be revived.
Proposals for writing-off a part or the whole of the debts may be submitted to the competent committee on condition that the following have been carried out:
The relevant agreements with the clients have been terminated,
Payment Orders have been issued against all the liable parties and the procedure for the registration of compulsory encumbrances has commenced;
At least one real estate property has been auctioned, in order for the privileged claims (through the final creditors priority list) and, as a result, for the possible losses of the Group to be finalized;
Amounts to be written off must be fully provided for from the previous quarter preceding the proposal.
2. Write downs
Write-downs are defined as the permanent accounting reduction of a debt, as a result of a legally binding decision or agreement (court decision, contractual agreement etc.), which is no further claimable and, hence, is considered as definitively non-revivable, whereas it also entails the fact that the Group definitively and irrevocably waives its right to claim the written-down debt, unless (in case of settlement) it is ascertained that the terms set by virtue of the aforementioned decision or agreement were violated.
According to the Agreement for Financial Support to be provided by the European Stability Mechanism, in the third quarter of 2015 a comprehensive assessment ("CA") was conducted for the four Greek systemic financial institutions, by the Single Supervisory Mechanism - SSM. The CA included the following steps (a) Asset Quality Review (AQR),( b) a stress test. In particular the AQR was a regulatory exercise that was based upon a single standardized procedure applied by the ECB to assess the quality of the loan portfolio in Greece as of 30.6.2015. The result of the AQR amounted to 1.7 billion before income tax.
According to the Group's assessment, the AQR results are not related to accounting errors nor did they lead to a change in accounting policy regarding the recognition of impairment losses on loans and advances to customers as mentioned in note 1.13. The Group took into consideration the results from the AQR when calculating the allowance for impairment and considers that AQR findings have been properly addressed.
DEFINITIONS:
The following definitions are provided as guidance to tables that follow:
Public Sector
The Public Sector includes:
The Greek Central Government (all departments or Ministries and Public Administration);
Local Authorities;
Companies controlled and fully or partially owned by the State; and
Companies associated with the State
Past Due Exposures
Past due exposures are defined as exposures that are more than one (1) day past due.
Non-Performing Exposures
An exposure is considered as non-performing when one of the following criteria is satisfied:
The exposure is more than 90 days past due;
An exposure against which legal actions have been undertaken by the Group;
The debtor is assessed as unlikely to pay its credit obligations in full;
The exposure is classified as impaired (as defined below);
The exposure is classified as forborne non-performing exposure, as defined in the Implementing Regulation (EU) 2015/227 Committee of 9 January 2015.
In particular:
Exposures which were non-performing prior to the extension of forbearance measures.
Forborne exposures which have been reclassified from the performing exposures category, including exposures under probation (forborne performing having been reclassified out of the Forborne Non Performing Loan (FNPL) status) having been re-forborne or that are more than 30 days past-due.
Performing Exposures
An exposure is considered as performing when the following criteria are met:
The exposure is less than 90 days past due;
No legal actions have been undertaken against the exposure;
The situation of the debtor has improved to the extent that full repayment, according to the original or when applicable the modified conditions, is likely to be made
The exposure is not classified as impaired; or
The exposure is classified as forborne performing exposure, as defined in the aforementioned Implementing Regulation (EU) 2015/227 of 9 January 2015.
Unlikely to pay Exposures
For the Wholesale Banking Portfolio: Customers , with exposures below 90 days past due, assessed as unlikely to pay based on either of the following criteria:
The debtor has been denounced in the competent Non-Performing Loans Unit
The deptor is impaired but not denounced in the competent Non-Performing Loans Unit
The debtor cannot repay its credit obligations in full without the realisation of security (if held) and regardless of the existence of any past due amount or of the number of days past due with the exception of cases of collaterals that are part of the production ane trade chain of the debtor (e.g. properties for Real Estate Companies, corporate shares for Holding companies etc).
For the Retail Banking Portfolio,unlikeness to pay exposures are considered those with less than 90 days past due and if one of the following criteria is met:
A trial date has been set for inclusion in Law 3869. (Bankrupty Law for Individuals)
Fraudelent cases
Deseased Customers
Unemployed Customers with lack of any source of income
Customers with heavy health problems
Insolvent companies (The company has filled for inclusion in Article 99)
Companies which have ceased their operations (inactive)
Impaired Exposures
Impaired exposures for Wholesale Banking are defined as follows:
a. Exposures for which an impairment amount has been allocated following the individual assessment for impairment;
b. Exposures in arrears more than 90 days or under legal workout status, for which an impairment amount has been allocated following the collective assessment for impairment;
c. Unlikely to pay exposures; and
d. Forborne Non Performing Exposures that are up to 89 days past due.
Accumulated provision for impairment
The accumulated provision for impairment, for disclosure purposes of credit risk as well as for the monitoring of credit risk, includes the adjustment for the contractual loans which were acquired at fair value during the acquisition of assets or companies (i.e. Emporiki Bank and Citibank's retail operations in Greece), since the Group monitors the respective adjustment as part of the provisions. It is noted that in note 17 Loans and Advances to customers, this adjustment is deducted from the gross balance of loans before impairment.
Collateral value
The collateral's latest market value available. In the case of immovable properties, collateral value is considered the lower figure between the prenotation amount and the market value. Values of guarantees include the value of guarantees that exceeds the value of collaterals. All collateral values are capped at 100% of the outstanding amount of the loan.
DUE FROM BANKS
Exposure to credit institutions relates to their own debt securities in issue and shares, loans, interbank transactions (which include positions in derivatives) and International Trade activities. Following the basic rules of designation, monitoring and revision of corporate lending, boundaries are established by the relevant Credit Committees for the monitoring of credit risk for the overall exposure per credit institution counterparty, excluding positions related to bonds issued by them. The approved credit limits are monitored on a daily basis. The validity period of the limits is specified in the approval of the limits in accordance with the counterparty credit institutions rating from international credit rating agencies.
In addition to the regular revisions of counterparty credit institutions limits, interim revisions may be carried out either due to circumstances associated with the trading activity of the Bank or due to markets conditions or problems associated with counterparty credit institutions. Trigger events for an extraordinary review are regularly monitored per counterparty in order to review the relevant limits when such trigger events exist.
In addition, at each reporting date an impairment test is performed as follows:
1. The respective credit institutions are separated to be tested for impairment.
2. Due from Banks will be evaluated individually by credit institution.
3. Credit institutions are reviewed for events that constitute objective evidences for impairment.
4. Impairment provisions per receivable are calculated, as the difference between the recoverable amount and the carrying amount of the claim on an individual basis for the credit institution for which there are objective evidences for impairment.
INVESTMENTS IN DEBT SECURITIES
Investments in debt securities relate to securities that are classified into loans and receivables portfolios, held to maturity and available for sale. If there is a loan relationship with the counterparty issuer at the time of classification of the security position as investment, the Corporate Credit Policy procedures apply. In each case, the classification of the position is subject for approval by the relevant Committee of the Bank. These positions are subject to Bank investment limits and country limits and are monitored on a daily basis.
In addition, at each reporting date an impairment test is performed as follows:
1. The respective securities are separated to be tested for impairment.
2. Securities are reviewed for events that constitute objective evidence for impairment losses.
3. Impairment provisions are calculated on a individual basis per each security, for which there are objective evidences that impairment losses exist, as: a) the difference between the present value of future cash flows and the carrying amount of securities that are classified into loans and receivables portfolio and held to maturity and b) the difference between acquisition costs and current fair value, less the impairment loss which has already been recognized in income statement for securities classified as available for sale.
FINANCIAL INSTRUMENTS CREDIT RISK
31.12.2016
31.12.2015*
Exposure before impairment
Impairment
Net exposure for credit risk
Exposure before impairment
Impairment
Net exposure for credit risk
. Credit risk exposure relating to balance sheet items
Balances with Central Banks
1,163,432
1,163,432
1,321,124
1,321,124
Due from banks
2,011,242
41,961
1,969,281
1,985,238
8,965
1,976,273
Loans and advances to customers
60,316,012
15,907,252
44,408,760
62,014,915
15,828,799
46,186,116
Derivative financial assets
634,323
634,323
793,015
793,015
Trading securities:
- Government bonds
2,256
2,256
1,888
1,888
Total
2,256
2,256
1,888
1,888
Available for sale securities:
- Available for sale (Govenrment bonds)
4,117,545
4,117,545
4,488,819
4,488,819
- Available for sale (other)
953,721
22,385
931,336
1,141,571
57,874
1,083,697
Total
5,071,266
22,385
5,048,881
5,630,390
57,874
5,572,516
Held to maturity securities:
- Held to maturity (Government bonds)
15,430
15,430
18,983
18,983
- Held to maturity (other)
29,569
29,569
60,726
60,726
Total
44,999
44,999
79,709
79,709
Loans and receivables (HFSF)
2,682,655
2,682,655
4,289,482
4,289,482
Total amount of balance sheet items exposed to credit risk (a)
71,926,185
15,971,598
55,954,587
76,115,762
15,895,638
60,220,124
Other balance sheet items not exposed to credit risk
9,503,684
586,005
8,917,679
9,558,378
480,960
9,077,418
Total Assets
81,429,869
16,557,603
64,872,266
85,674,140
16,376,598
69,297,542
. Credit risk exposure relating to off balance sheet items:
Letters of guarantee, letters of credit and other guarantees
3,567,786
3,195
3,564,591
3,975,305
4,713
3,970,592
Undrawn loan agreements and credit limits than can not be recalled (committed) **
494,734
494,734
278,913
278,913
Total amount of off balance sheet items exposed to credit risk (b)
4,062,520
3,195
4,059,325
4,254,218
4,713
4,249,505
Total credit risk exposure (a+b)
75,988,705
15,974,793
60,013,912
80,369,980
15,900,351
64,469,629
The maximum credit risk per category, in which the Group is exposed, is presented in the "Net exposure for credit risk".
----------------------------------------------
* Some figures of the comparative year have been restated as presented in note 49.
** Undrawn loan agreements and credit limits that can not be recalled (committed) in cases where it becomes apparent that the counterparties will fail to meet their contractual obligations.
LOANS AND ADVANCES TO CUSTOMERS
LOANS AND ADVANCES TO CUSTOMERS BY ASSET QUALITY
(impaired or not impaired - impairment allowance - value of collateral)
31.12.2016
Non Impaired Loans
and AdvancesImpaired Loans
and AdvancesTotal gross amount
Accumulated
Impairment AllowanceTotal net amount
Value of collateral
Neither past due nor impaired
Past due but not impaired
Individually assessed
Collectively assessed
Individually assessed
Collectively assessed
Retail lending
11,530,952
3,024,872
980,454
18,787,549
34,323,827
576,459
8,194,498
25,552,870
21,402,496
Mortgage
8,408,553
2,401,641
533,043
8,917,244
20,260,481
288,075
2,996,585
16,975,821
16,214,980
Consumer
1,405,844
259,534
146,868
3,934,845
5,747,091
87,658
2,163,984
3,495,449
1,476,939
Credit cards
1,073,608
96,896
829
505,088
1,676,421
462
356,914
1,319,045
39,435
Other (incl. SBL)
642,947
266,801
299,714
5,430,372
6,639,834
200,264
2,677,015
3,762,555
3,671,142
Corporate lending
11,845,804
610,758
12,028,567
302,460
24,787,589
6,784,070
300,603
17,702,916
16,069,343
Large
7,882,753
343,445
5,993,498
150,018
14,369,714
3,234,494
167,726
10,967,494
9,243,136
SME's
3,963,051
267,313
6,035,069
152,442
10,417,875
3,549,576
132,877
6,735,422
6,826,207
Public sector
1,159,315
3,357
41,924
0
1,204,596
31,995
19,627
1,152,974
305,167
Greece
1,067,060
2,968
41,924
0
1,111,952
31,995
17,138
1,062,819
298,457
Other countries
92,255
389
0
0
92,644
0
2,489
90,155
6,710
Total
24,536,071
3,638,987
13,050,945
19,090,009
60,316,012
7,392,524
8,514,728
44,408,760
37,777,006
The accumulated impairment allowance for collectively assessed loans and advances includes an amount of 767.7 million (2015: 753.2 million) concerning IBNR provisions on 31.12.2016.
The impaired loans and advances to retail customers and small companies include also past due exposures up to 89 days that are collectively assessed and amount to 4.4 billion as at 31.12.2016 (31.12.2015: 3.7 billion).
31.12.2015*
Non Impaired Loans
and AdvancesImpaired Loans
and AdvancesTotal gross amount
Accumulated
Impairment AllowanceTotal net amount
Value of collateral
Neither past due nor impaired
Past due but not impaired
Individually assessed
Collectively assessed
Individually assessed
Collectively assessed
Retail lending
12,614,545
3,237,400
908,770
18,387,664
35,148,379
590,755
8,332,795
26,224,829
22,145,811
Mortgage
9,068,373
2,402,251
481,458
8,887,674
20,839,756
287,513
3,019,100
17,533,143
17,055,454
Consumer
1,585,339
381,010
130,599
3,775,741
5,872,689
81,236
2,234,476
3,556,977
1,371,612
Credit cards
1,082,475
114,184
744
511,562
1,708,965
357
379,790
1,328,818
38,528
Other (incl. SBL)
878,358
339,955
295,969
5,212,687
6,726,969
221,649
2,699,429
3,805,891
3,680,217
Corporate lending
12,222,239
1,299,427
11,429,594
502,272
25,453,532
6,530,561
330,689
18,592,282
17,357,280
Large
8,304,664
965,395
5,649,635
108,635
15,028,329
2,983,937
154,650
11,889,742
10,031,244
SME's
3,917,575
334,032
5,779,959
393,637
10,425,203
3,546,624
176,039
6,702,540
7,326,036
Public sector
1,367,302
1,927
42,574
1,201
1,413,004
31,810
12,189
1,369,005
452,288
Greece
1,251,879
1,927
42,574
1,201
1,297,581
31,810
10,317
1,255,454
425,793
Other countries
115,423
115,423
1,872
113,551
26,495
Total
26,204,086
4,538,754
12,380,938
18,891,137
62,014,915
7,153,126
8,675,673
46,186,116
39,955,379
During the year ended 31.12.2015, balances amounting to 770.7 million were transferred from Corporate lending SME portfolio to the Retail Lending SBL portfolio. The transfer was made to allow for a more efficient management since those customers present similar credit risk characteristics with Small Business Retail lending customers.
-----------------------------------------------------------
* Certain figures of the comparative year have been reclassified in order to be comparable.
ANALYSIS OF NEITHER PAST DUE NOR IMPAIRED LOANS AND ADVANCES TO CUSTOMERS
31.12.2016
Strong
Satisfactory
Watch list
(higher risk)Total
neither past due nor impairedValue
of collateralRetail lending
11,530,952
11,530,952
8,304,272
Mortgage
8,408,553
8,408,553
7,505,280
Consumer
1,405,844
1,405,844
325,015
Credit cards
1,073,608
1,073,608
1,156
Other (incl. SBL)
642,947
642,947
472,821
Corporate lending
2,110,550
8,777,841
957,413
11,845,804
8,321,051
Large
1,590,229
5,735,913
556,611
7,882,753
5,406,829
SME's
520,321
3,041,928
400,802
3,963,051
2,914,222
Public sector
355,299
801,432
2,584
1,159,315
279,265
Greece
355,120
709,462
2,478
1,067,060
272,944
Other countries
179
91,970
106
92,255
6,321
Total
2,465,849
21,110,225
959,997
24,536,071
16,904,588
31.12.2015*
Strong
Satisfactory
Watch list
(higher risk)Total
neither past due nor impairedValue
of collateralRetail lending
12,614,545
12,614,545
9,097,485
Mortgage
9,068,373
9,068,373
8,174,238
Consumer
1,585,339
1,585,339
306,997
Credit cards
1,082,475
1,082,475
1,305
Other (incl. SBL)
878,358
878,358
614,945
Corporate lending
1,697,219
9,333,618
1,191,402
12,222,239
8,829,816
Large
1,290,699
6,356,427
657,538
8,304,664
5,710,890
SME's
406,520
2,977,191
533,864
3,917,575
3,118,926
Public sector
371,166
932,378
63,758
1,367,302
425,890
Greece
361,531
832,085
58,263
1,251,879
399,395
Other countries
9,635
100,293
5,495
115,423
26,495
Total
2,068,385
22,880,541
1,255,160
26,204,086
18,353,191
-------------------------------------------------------
* Certain figures of the comparative period have been reclassified in order to be comparable.
AGEING ANALYSIS OF PAST DUE BUT NOT IMPAIRED LOANS AND ADVANCES TO CUSTOMERS BY PRODUCT LINE
31.12.2016
Retail lending
Corporate lending
Public sector
Total past due but not impaired
Mortgage
Consumer
Credit cards
Other
(incl. SBL)Large
SME's
Greece
Other countries
1 - 29 days
1,656,237
167,448
74,086
181,805
194,102
159,727
2,261
389
2,436,055
30 - 59 days
438,786
60,532
14,427
38,630
75,269
61,644
707
689,995
60 - 89 days
306,618
31,554
8,383
46,366
51,145
33,555
477,621
90 - 179 days
6,093
1,583
7,676
180 - 360 days
10,115
1,089
11,204
> 360 days
6,721
9,715
16,436
Total
2,401,641
259,534
96,896
266,801
343,445
267,313
2,968
389
3,638,987
Value of collateral
2,046,994
66,938
27
193,960
288,584
216,100
1,254
389
2,814,246
31.12.2015
Retail lending
Corporate lending
Public sector
Total past due but not impaired
Mortgage
Consumer
Credit cards
Other
(incl. SBL)Large
SME's
Greece
Other countries
1 - 29 days
1,506,020
252,144
78,054
196,815
433,557
182,613
1,541
2,650,744
30 - 59 days
456,078
77,057
21,469
52,133
290,890
63,574
360
961,561
60 - 89 days
440,153
51,356
14,661
91,007
218,952
76,417
26
892,572
90 - 179 days
453
6,024
924
7,401
180 - 360 days
2,642
686
3,328
> 360 days
13,330
9,818
23,148
Total
2,402,251
381,010
114,184
339,955
965,395
334,032
1,927
4,538,754
Value of collateral
2,092,653
77,757
65
240,871
768,226
285,764
1,897
3,467,233
AGEING ANALYSIS OF IMPAIRED LOANS AND ADVANCES TO CUSTOMERS BY PRODUCT LINE
31.12.2016
Retail lending
Corporate lending
Public sector
Total
Mortgage
Consumer
Credit cards
Other
(incl. SBL)Large
SME's
Greece
Other countries
Current
786,801
509,724
64,525
194,581
1,083,531
743,707
6,584
3,389,453
1 - 29 days
407,283
166,252
24,015
133,980
112,522
94,658
938,710
30 - 59 days
270,397
153,505
17,071
67,240
286,220
71,569
866,002
60 - 89 days
375,297
101,260
13,670
100,051
164,463
72,090
826,831
90 - 179 days
59,366
86,322
14,023
74,379
96,523
54,950
385,563
180 - 360 days
200,385
89,555
7,840
105,765
320,819
74,784
16
799,164
> 360 days
4,483,397
802,669
19,533
2,211,334
807,049
1,468,369
3,329
9,795,680
Total net amount
6,582,926
1,909,287
160,677
2,887,330
2,871,127
2,580,127
9,929
17,001,403
Value of collateral
6,662,706
1,084,986
38,252
3,004,361
3,547,723
3,695,885
24,259
18,058,172
31.12.2015
Retail lending
Corporate lending
Public sector
Total
Mortgage
Consumer
Credit cards
Other
(incl. SBL)Large
SME's
Greece
Other countries
Current
901,922
370,342
33,663
182,698
1,173,669
665,452
6,994
3,334,740
1 - 29 days
275,985
121,473
7,805
73,676
208,505
89,033
50
776,527
30 - 59 days
155,785
115,538
4,446
35,310
110,999
64,679
486,757
60 - 89 days
400,700
105,452
3,428
89,132
244,533
73,491
119
916,855
90 - 179 days
57,360
101,442
16,877
10,559
60,538
95,525
821
343,122
180 - 360 days
198,824
124,664
34,565
83,000
311,679
144,777
13
897,522
> 360 days
4,474,098
738,831
41,255
2,170,682
627,929
1,384,527
3,631
9,440,953
Total net amount
6,464,674
1,677,742
142,039
2,645,057
2,737,852
2,517,484
11,628
16,196,476
Value of collateral
6,788,563
986,858
37,158
2,824,401
3,552,128
3,921,346
24,501
18,134,955
RECONCILIATION OF IMPAIRED LOANS AND RECEIVABLES ADVANCES PER CATEGORY
Retail lending
Corporate lending
Public sector
Total
Mortgage
Consumer
Credit cards
Other
(incl. SBL)Large
SME's
Greece
Other countries
Balance 1.1.2016
9,369,134
3,906,340
512,306
5,508,657
5,758,272
6,173,597
43,775
31,272,081
New impaired loans
854,931
599,136
50,029
684,511
1,565,410
477,574
561
4,232,152
Transfer to non-impaired loans
(447,177)
(172,108)
(14,428)
(152,554)
(128,027)
(45,513)
(959,807)
Repayments and recoveries from collaterals
(96,010)
(60,247)
(13,459)
(46,801)
(540,261)
(140,566)
(726)
(898,070)
Write-offs of impaired loans
(236,278)
(146,951)
(29,370)
(261,934)
(302,503)
(260,261)
(1,237,297)
Disposals of impaired loans
(14,868)
(14,868)
Foreign exchange differences and other movements
13,420
(8,812)
6,524
181
11,195
(15,651)
(1,685)
5,172
Loans classified as held for sale
(7,736)
(35,645)
(5,683)
(1,974)
(205,703)
(1,668)
(258,409)
Balance 31.12.2016
9,450,284
4,081,713
505,919
5,730,086
6,143,515
6,187,512
41,925
32,140,954
Accumulated impairment allowance
(2,867,361)
(2,172,426)
(345,240)
(2,842,756)
(3,272,389)
(3,607,384)
(31,995)
(15,139,551)
Net amount of impaired loans and advances
6,582,923
1,909,287
160,679
2,887,330
2,871,126
2,580,128
9,930
17,001,403
Retail lending
Corporate lending
Public sector
Total
Mortgage
Consumer
Credit cards
Other
(incl. SBL)Large
SME's
Greece
Other countries
Balance 1.1.2015
8,521,675
3,503,070
402,711
4,539,571
4,776,987
6,208,280
33,407
27,985,701
Loans classified as held for sale
(48,582)
(21,679)
(940)
(5,771)
(56,599)
(32,053)
(165,624)
New impaired loans
1,306,596
710,575
129,472
598,914
1,508,230
816,426
1,369
5,071,582
Transfer to non-impaired loans
(297,881)
(229,123)
(7,721)
(11,966)
(87,545)
(89,957)
(724,193)
Repayments of impaired loans
(78,613)
(51,550)
(9,428)
(38,941)
(150,900)
(148,144)
(633)
(478,209)
Write-offs of impaired loans
(107,221)
(11,600)
(1,410)
(191,028)
(166,856)
(33,500)
(511,615)
Disposals of impaired loans
(26,850)
(26,850)
Foreign exchange differences and other movements
73,158
6,647
(378)
(1,857)
(38,197)
72,278
9,632
121,283
Reclassification between portfolios
619,734
(619,734)
Balance 31.12.2015
9,369,132
3,906,340
512,306
5,508,656
5,758,270
6,173,596
43,775
31,272,075
Accumulated impairment allowance
(2,904,458)
(2,228,598)
(370,267)
(2,863,599)
(3,020,418)
(3,656,112)
(32,147)
(15,075,599)
Net amount of impaired loans and advances
6,464,674
1,677,742
142,039
2,645,057
2,737,852
2,517,484
11,628
16,196,476
RECONCILIATION OF THE ACCUMULATED IMPAIRMENT ALLOWANCE
The accumulated impairment allowance for disclosure purposes of credit risk as well as for credit risk monitoring purposes includes the adjustments for the contractual balances of loans which were acquired at fair value either individually or in the context of acquisitions (eg Emporiki Bank and Citibank Greece), since the Group monitors such adjustment as part of the impairments. It is noted that in Note 17 Loans and advances to customers this adjustment is deducted from the gross balance of loans before impairments
31.12.2016
Retail lending
Corporate lending
Public sector
Total
Balance 1.1.2016
6,675,906
5,324,778
21,071
12,021,755
Impairment losses for the year
471,040
716,295
6,413
1,193,748
Reclassification to assets held for sale
(38,094)
(133,486)
(171,580)
Use of accumulated provisions for other transactions
(16,425)
(16,425)
Disposals of impaired loans
(17,795)
(17,795)
Change in present value of the allowance account
243,171
169,752
912
413,835
Foreign exchange differences
1,946
5,948
(1)
7,893
Loans written-off during the year
(520,460)
(352,718)
(873,178)
Balance 31.12.2016
6,833,509
5,696,349
28,395
12,558,253
Fair value adjustments
1,937,448
1,388,324
23,227
3,348,999
Total 1.1.2016
8,770,957
7,084,673
51,622
15,907,252
31.12.2015
Retail lending
Corporate lending
Public sector
Total
Balance 1.1.2015
4,811,992
4,011,905
6,380
8,830,277
Impairment losses for the year
1,409,237
1,591,659
14,131
3,015,027
Impairment losses for the year due to discontinued operations
7,113
25,701
32,814
Reclassification to assets held for sale
(38,430)
(73,481)
(111,911)
Change in present value of the allowance account
404,721
142,707
568
547,996
Change in present value of the allowance account due to discontinued operations
1,434
1,434
Foreign exchange differences
35,049
19,732
54,781
Loans written-off during the year
(232,565)
(116,098)
(348,663)
Reclassification between portfolios
278,789
(278,781)
(8)
0
Balance 31.12.2015
6,675,906
5,324,778
21,071
12,021,755
Fair value adjustments
2,247,644
1,536,472
22,928
3,807,044
Total 31.12.2015
8,923,550
6,861,250
43,999
15,828,799
LOAN-TO-VALUE RATIO (LTV) OF MORTGAGE LENDING
Mortgages
31.12.2016
31.12.2015
< 50%
2,859,898
3,111,114
50% - 70%
2,292,400
2,539,514
71% - 80%
1,285,597
1,444,774
81% - 90%
1,414,234
1,599,455
91% - 100%
1,485,001
1,688,280
101% - 120%
2,683,050
2,832,900
121% - 150%
3,349,705
3,307,140
> 150%
4,890,596
4,316,579
Total exposure
20,260,481
20,839,756
Simple average LTV (%)
78
75
REPOSSESSED COLLATERALS
31.12.2016
Balance Sheet balances
Disposals during the year
Value of collaterals repossessed 31.12.2016
Of which Within 2016
Accumulated impairment allowance 31.12.2016
Of which Within 2016
Carrying amount of collaterals repossessed 31.12.2016
Net
disposal valueNet
gain/(loss) on disposalReal estate
938,977
41,141
148,857
39,863
790,120
31,053
(592)
Other
11,171
83,209
262
106
10,909
68,359
(5,497)
31.12.2015
Balance Sheet balances
Disposals during the year
Value of collaterals repossessed 31.12.2016
Of which Within 2016
Accumulated impairment allowance 31.12.2016
Of which Within 2016
Carrying amount of collaterals repossessed 31.12.2016
Net
disposal valueNet
gain/(loss) on disposalReal estate
893,658
96,943
111,509
34,111
782,149
15,913
1,318
Other
3,438
469
2,100
318
1,338
744
87
POLICY OF DISPOSAL OF REPOSSESSED ASSETS
The Bank has assigned to a subsidiary of the Group the management of repossessed assets of Bank and Group's subsidiaries. When a Group company acquires, due to the debtor's default, the legal title of property which had been given as collateral for the respective asset, then the respective company is in charge of legal, accounting and tax settlement of property in cooperation with the competent Bank's division and in parallel performs a valuation of the asset. Taking into account the characteristics of the asset and based on the market conditions,it assesses the ability of promoting it for sale or leasing. Based on the above assessment, a proposal is submitted to the responsible Committee, which decides the sale or leasing of the assets or their own use from a Group company. Based on the decision, the asset is classified into the suitable category for reporting purposes. Classification of assets is reassessed on a regular basis in order to ensure that the classification is in line with current market conditions.
BREAKDOWN OF COLLATERAL AND GUARANTEES
31.12.2016
Value of collateral received
Guarantees received
Real estate collateral
Financial collateral
Other collateral
Total value of collateral
Retail lending
20,597,468
339,737
465,291
21,402,496
3,277,664
Corporate lending
10,631,426
1,155,701
4,282,216
16,069,343
5,139,073
Public sector
58,235
1,365
245,567
305,167
243,373
Total
31,287,129
1,496,803
4,993,074
37,777,006
8,660,110
31.12.2015*
Value of collateral received
Guarantees received
Real estate collateral
Financial collateral
Other collateral
Total value of collateral
Retail lending
21,496,935
170,453
478,423
22,145,811
2,304,099
Corporate lending
11,627,386
1,200,250
4,529,644
17,357,280
5,035,571
Public sector
64,766
429
387,093
452,288
241,834
Total
33,189,087
1,371,132
5,395,160
39,955,379
7,581,504
There are no cases of transfer or repledge of collateral received from customer for which a liability to return has been recognized.
----------------------------------------------
* The value of the "Guarantees received" of the previous year has been restated to include the value of the guarantee up to 100% of the loan balance, after taken into account the value of tangible collateral.
LOANS AND ADVANCES TO CUSTOMERS, IMPAIRED LOANS AND IMPAIRMENT ALLOWANCE BY PRODUCT LINE, INDUSTRY AND GEOGRAPHICAL REGION
31.12.2016
Greece
Rest of Europe
Gross Amount
Impaired Amount
Gross Amount
Impaired Amount
Gross Amount
Impaired Amount
Retail lending
30,167,325
17,678,812
7,733,753
4,156,502
2,089,191
1,037,204
Mortgage
16,717,187
7,657,124
2,397,157
3,543,294
1,793,163
887,503
Consumer
5,238,674
3,843,038
2,128,814
508,417
238,675
122,828
Credit cards
1,638,525
495,429
349,801
37,896
10,488
7,575
Other (incl. SBL)
6,572,939
5,683,221
2,857,981
66,895
46,865
19,298
Corporate lending
20,025,110
9,674,883
5,551,606
4,762,479
2,656,144
1,533,067
Financial institutions
440,185
190,752
144,595
78,939
6,953
4,431
Manufacturing
5,440,618
2,319,978
1,421,369
360,467
176,215
90,362
Construction and real estate
3,127,672
1,830,293
1,074,375
3,088,430
1,963,457
1,138,090
Wholesale and retail trade
4,862,657
2,872,434
1,795,036
545,972
223,647
130,728
Transportation
646,383
121,481
72,685
80,813
19,586
5,462
Shipping
1,537,945
412,590
137,186
720
0
9
Hotels - Tourism
1,655,037
741,905
259,360
256,295
117,428
41,205
Services and other sectors
2,314,613
1,185,450
647,000
350,843
148,858
122,780
Public sector
1,111,952
41,924
49,133
92,644
0
2,489
Total
51,304,387
27,395,619
13,334,492
9,011,625
4,745,335
2,572,760
31.12.2015*
Greece
Rest of Europe
Gross Amount
Impaired Amount
Gross Amount
Impaired Amount
Gross Amount
Impaired Amount
Retail lending
30,694,075
17,203,511
7,939,909
4,454,304
2,092,923
983,641
Mortgage
17,152,831
7,638,418
2,536,565
3,686,925
1,730,714
770,048
Consumer
5,228,208
3,605,993
2,134,921
644,481
300,347
180,791
Credit cards
1,656,931
496,290
367,283
52,034
16,016
12,864
Other (incl. SBL)
6,656,105
5,462,810
2,901,140
70,864
45,846
19,938
Corporate lending
20,414,645
9,293,941
5,472,439
5,038,887
2,637,925
1,388,811
Financial institutions
127,279
42,541
40,724
103,332
21,298
19,282
Manufacturing
5,549,886
2,268,877
1,386,501
388,216
192,157
112,345
Construction and real estate
3,240,735
1,952,745
1,049,997
3,149,523
1,914,941
964,878
Wholesale and retail trade
4,751,358
2,634,396
1,719,212
602,477
219,640
120,401
Transportation
279,881
137,611
74,973
91,969
26,911
14,180
Shipping
1,835,080
279,881
97,988
830
3
Hotels - Tourism
1,600,774
567,477
269,353
267,865
119,354
37,174
Services and other sectors
3,029,652
1,410,413
833,691
434,675
143,624
120,548
Public sector
1,297,581
43,775
42,127
115,423
1,872
Total
52,406,301
26,541,227
13,454,475
9,608,614
4,730,848
2,374,324
-----------------------------------------------
* Certain figures of the comparative year have been reclassified in order to be comparable.
INTEREST INCOME BY CREDIT QUALITY AND TYPE OF LOANS AND ADVANCES
31.12.2016
Interest income on non impaired Loans and Advances
Interest income on impaired Loans and Advances
Total interest income
Retail lending
724,291
584,119
1,308,410
Corporate lending
772,314
179,734
952,048
Public sector
28,082
245
28,327
Total interest income
1,524,687
764,098
2,288,785
31.12.2015*
Interest income on non impaired Loans and Advances
Interest income on impaired Loans and Advances
Total interest income
Retail lending
831,638
614,334
1,445,972
Corporate lending
820,122
208,669
1,028,791
Public sector
33,135
399
33,534
Total interest income
1,684,895
823,402
2,508,297
FORBORNE LOANS
On 31.12.2014, the Group reassessed the perimeter of forborne loans for all the portfolios based on the Executive Regulation (EU) 2015/227 of European commission dated 9 January 2015 and the Executive technical standards of the European banking authority and incorporated the related definitions to its credit risk policy. In this respect, the evolution, the quality and the effectiveness of these loans are monitored according to the above definition.
The forborne loans perimeter includes loaans:
- which have been restructured within the last 36 months and were not past due more than 90 days, and
- forborne loans past duemore than 90 days.
The restructuring of loans is performed through renegotiation of the original contractual terms and include changes such as:
Extension of the credit duration
Write-off of a portion of debtor's amounts due
Grace period for the principal and interests
Decrease in the interest rate
As a rule the forborne measures which are extended include a combination of the above amendments to the contractual terms. The carrying amount of forborne loans of the Group is amounted to 12.816 million on 31.12.2016.
In addition, in the context of renegotiations of the terms of loans granted, the Group has participated in agreements for the exchange of debt securities or loans with debtors' shares. On 31.12.2016, the Group included in its Available for Sale portfolio shares of fair value amounting to 2.7 million (31.12.2015: 3.4 million) which were acquired from respective transactions. The shares that have been classified as assets held for sale are related to the companies Selonda A.E.G.E. and Nireus S.A. (note 19). Additionally, the Group during the year acquired the control of Asmita Gardens SRL, through debt to equity transaction which amounted to 1.07 million.
---------------------------------------------------------
* Certain figures of the comparative year have been restated due to modification of the presentation of Alpha Bank Srbija A.D. as discontinued operations.
ANALYSIS OF FORBORNE LOANS AND ADVANCES TO CUSTOMERS BY TYPE OF FORBERANCE MEASURE
31.12.2016
31.12.2015
Interest payment only
256,478
214,263
Reduce payments scheme
6,010,250
5,892,166
Grace period
935,761
883,053
Loan term extension
2,477,019
1,758,622
Arrears capitalization
2,260,847
1,726,226
Partial write-off in borrower's obligations
71,108
137,185
Hybrid forbearance measures
152,964
110,730
Debt for equity transactions
38,396
Other
647,619
367,709
Total net amount
12,812,046
11,128,350
FORBORNE LOANS AND ADVANCES TO CUSTOMERS BY PRODUCT LINE
31.12.2016
31.12.2015
Retail lending
9,830,261
8,799,666
Mortgage
6,213,940
5,623,626
Consumer
2,015,715
1,817,034
Credit cards
174,724
97,026
Other (incl. SBL)
1,425,882
1,261,980
Corporate lending
2,974,180
2,319,146
Large
1,893,174
1,436,017
SME's
1,081,006
883,129
Public sector
7,605
9,538
Greece
7,605
9,538
Total net amount
12,812,046
11,128,350
FORBORNE LOANS AND ADVANCES TO CUSTOMERS BY GEOGRAPHICAL REGION
31.12.2016
31.12.2015
Greece
11,041,455
9,327,650
Europe
1,770,591
1,800,700
Total net amount
12,812,046
11,128,350
FORBORNE LOANS AND ADVANCES TO CUSTOMERS ACCORDING TO THEIR CREDIT QUALITY
31.12.2016
Total amount of Loans
and AdvancesTotal amount of Forborne Loans and Advances
Forborne Loans
and Advances (%)Neither past due nor impaired
24,536,071
3,413,688
14
Past due but not impaired
3,638,987
1,842,999
51
Impaired
32,140,954
13,061,887
41
Exposure before impairment
60,316,012
18,318,574
30
Individual Impairment Allowance
(7,392,524)
(2,131,292)
29
Collective Impairment Allowance
(8,514,728)
(3,375,236)
40
Total net amount
44,408,760
12,812,046
29
Value of collateral
37,777,006
11,307,369
30
31.12.2015
Total amount of Loans
and AdvancesTotal amount of Forborne Loans and Advances
Forborne Loans
and Advances (%)Neither past due nor impaired
26,204,086
3,325,294
13
Past due but not impaired
4,538,754
1,891,117
42
Impaired
31,272,075
10,481,388
34
Exposure before impairment
62,014,915
15,697,799
25
Individual Impairment Allowance
(7,153,126)
(1,326,157)
19
Collective Impairment Allowance
(8,675,673)
(3,243,292)
37
Total net amount
46,186,116
11,128,350
24
Value of collateral
39,955,379
10,037,095
25
RECONCILIATION OF NET FORBORNE LOANS
Forborne loans
(Net Value):
Balance 1.1.2016
11,128,350
Transfer of Loans and Receivables to Assets Held for sale
(29,963)
Forbearance measures during the period
2,774,716
Interest income
471,230
Repayment of Loans and Receivables (partial or total)
(583,184)
Loans and Receivables that exited forbearance status
(750,533)
Impairment loss
(314,990)
Other
116,420
Balance 31.12.2016
12,812,046
Forborne loans
(Net Value):
Balance 1.1.2015
10,574,215
Transfer of Loans and Receivables to Assets Held for sale
(39,143)
Forbearance measures during the period
2,516,120
Interest income
461,778
Repayment of Loans and Receivables (partial or total)
(381,259)
Loans and Receivables that exited forbearance status
(690,530)
Impairment loss
(1,428,743)
Other
115,912
Balance 31.12.2015
11,128,350
BALANCES WITH CENTRAL BANKS - DUE FROM BANKS - DERIVATIVE FINANCIAL INSTRUMENTS AND DEBT SECURITIES - Analysis per rating
31.12.2016
Balances with Central Banks
Due from Banks
Derivatives Financial Instruments
Trading securities
Available for sale securities
Held to maturity securities
Loans and receivables securities
Total
AAA
10,500
225,118
367,753
603,371
AA+ to AA-
19,024
76,204
38,421
76,103
9,010
2,682,655
2,901,417
A+ to A-
1,026,939
136,252
3,402
19,241
1,185,834
BBB+ to BBB-
498,729
417,104
343,317
218,260
10,009
1,487,419
Lower than BBB-
370,653
138,786
116,033
2,256
4,162,180
6,739
4,796,647
Unrated
264,526
127,091
300
243,568
635,485
Exposure before impairment
1,163,432
2,011,242
634,323
2,256
5,071,266
44,999
2,682,655
11,610,173
31.12.2015
Balances with Central Banks
Due from Banks
Derivatives Financial Instruments
Trading securities
Available for sale securities
Held to maturity securities
Loans and receivables securities
Total
AAA
81,429
381,202
9,013
471,644
AA+ to AA-
33,484
60,941
91,700
4,289,482
4,475,607
A+ to A-
1,286,856
248,578
258
47,884
1,583,576
BBB+ to BBB-
475,933
408,931
263,116
10,016
1,157,996
Lower than BBB-
702,332
67,535
483,140
1,888
4,677,289
12,796
5,944,980
Unrated
61,430
188,432
356
216,825
467,043
Exposure before impairment
1,321,124
1,985,238
793,015
1,888
5,630,390
79,709
4,289,482
14,100,846
BALANCES WITH CENTRAL BANKS - DUE FROM BANKS - DERIVATIVE FINANCIAL INSTRUMENTS AND DEBT SECURITIES - Analysis by asset quality
31.12.2016
Balances with Central Banks
Due from Banks
Derivatives Financial Instruments
Trading securities
Available for sale securities
Held to maturity securities
Loans and receivables securities
Total
Neither past due nor impaired
1,163,432
1,969,281
634,323
2,256
5,038,172
44,999
2,682,655
11,535,118
Past due but not impaired
Impaired
41,961
33,094
75,055
Exposure before impairment
1,163,432
2,011,242
634,323
2,256
5,071,266
44,999
2,682,655
11,610,173
Less: Allowance for impairment losses
(41,961)
(22,385)
(64,346)
Net exposure
1,163,432
1,969,281
634,323
2,256
5,048,881
44,999
2,682,655
11,545,827
31.12.2015
Balances with Central Banks
Due from Banks
Derivatives Financial Instruments
Trading securities
Available for sale securities
Held to maturity securities
Loans and receivables securities
Total
Neither past due nor impaired
1,321,124
1,976,273
793,015
1,888
5,561,806
79,709
4,289,482
14,023,297
Past due but not impaired
Impaired
8,965
68,584
77,549
Exposure before impairment
1,321,124
1,985,238
793,015
1,888
5,630,390
79,709
4,289,482
14,100,846
Less: Allowance for impairment losses
(8,965)
(57,874)
(66,839)
Net exposure
1,321,124
1,976,273
793,015
1,888
5,572,516
79,709
4,289,482
14,034,007
The following tables present the financial instruments exposed to credit risk by financial sectors of the counterparties.
FINANCIAL INSTRUMENTS CREDIT RISK - Analysis by industry sector
31.12.2016
Financial Institutions and other financial services
Manufacturing
Construction and real estate
Wholesale and retail trade
Public sector/ Government securities/ Derivatives
Transportation
Shipping
Hotels-Tourism
Services and other sectors
Retail and small businesses
Total
Credit risk exposure relating to balance sheet items:
Balances with Central Banks
1,163,432
1,163,432
Due from banks
2,011,242
2,011,242
Loans and advances to customers
519,124
5,801,085
6,216,102
5,408,629
1,204,596
727,196
1,538,665
1,911,332
2,665,456
34,323,827
60,316,012
Derivative financial assets
174,519
10,578
79,891
754
342,737
1,579
10,709
13,556
634,323
Trading securities
2,256
2,256
Available for sale securities
472,348
217,570
21,539
4,117,545
242,264
5,071,266
Held to maturity securities
29,250
319
15,430
44,999
Loans and receivables securities
2,682,655
2,682,655
Total amount of balance sheet items exposed to credit risk (a)
7,052,570
6,029,233
6,296,312
5,430,922
5,682,564
727,196
1,540,244
1,922,041
2,921,276
34,323,827
71,926,185
Other balance sheet items not exposed to credit risk
541,782
49,819
174,049
49,265
6,087
83
8,388,947
293,652
9,503,684
Total assets
7,594,352
6,079,052
6,470,361
5,480,187
5,682,564
733,283
1,540,244
1,922,124
11,310,223
34,617,479
81,429,869
Credit risk exposure relating to off-balance sheet items:
Letters of guarantee, letters of credit and other guarantees
29,859
556,869
1,506,602
488,509
94,823
34,332
7,205
72,897
702,359
74,331
3,567,786
Undrawn loan agreements and credit limits that can not be recalled (committed)
50,645
133,553
94,349
216,187
494,734
Total amount of off-balance sheet items exposed to credit risk (b)
29,859
556,869
1,506,602
488,509
145,468
34,332
140.758
167,246
918,546
74,331
4,062,520
Total credit risk exposure (a+b)
7,082,429
6,586,102
7,802,914
5,919,431
5,828,032
761,528
1,681,002
2,089,287
3,839,822
34,398,158
75,988,705
31.12.2015*
Financial Institutions and other financial services
Manufacturing
Construction and real estate
Wholesale and retail trade
Public sector/ Government securities/ Derivatives
Transportation
Shipping
Hotels-Tourism
Services and other sectors
Retail and small businesses
Total
Credit risk exposure relating to balance sheet items:
Balances with Central Banks
1,321,124
1,321,124
Due from banks
1,985,238
1,985,238
Loans and advances to customers
230,611
5,938,102
6,390,258
5,353,835
1,413,004
371,850
1,835,910
1,868,639
3,747,971
34,864,735
62,014,915
Derivative financial assets
326,987
14,408
57,511
794
362,700
7
10,637
13,235
6,736
793,015
Trading securities
1,888
1,888
Available for sale securities
621,731
233,318
20,984
4,488,819
265,538
5,630,390
Held to maturity securities
60,389
337
18,983
79,709
Loans and receivables securities
4,289,482
4,289,482
Total amount of balance sheet items exposed to credit risk (a)
8,835,562
6,185,828
6,448,107
5,375,613
6,285,394
371,857
1,846,547
1,881,874
4,020,245
34,864,735
76,115,762
Other balance sheet items not exposed to credit risk
660,532
57,653
69,765
48,498
7,457
10,204
8,437,119
267,150
9,558,378
Total assets
9,496,094
6,243,481
6,517,872
5,424,111
6,285,394
379,314
1,846,547
1,892,078
12,457,364
35,131,885
85,674,140
Credit risk exposure relating to off-balance sheet items:
Letters of guarantee, letters of credit and other guarantees
34,858
624,432
1,669,331
548,840
132,428
61,914
966
97,415
802,935
2,186
3,975,305
Undrawn loan agreements and credit limits that can not be recalled (committed)
85,846
79,517
20,000
5,511
88,039
278,913
Total amount of off-balance sheet items exposed to credit risk (b)
34,858
710,278
1,748,848
548,840
152,428
61,914
6,477
97,415
890,974
2,186
4,254,218
Total credit risk exposure (a+b)
8,870,420
6,896,106
8,196,955
5,924,453
6,437,822
433,771
1,853,024
1,979,289
4,911,219
34,866,921
80,369,980
* The balancing figures of prior year were reclassified as described in note 49.
EXPOSURE IN CREDIT RISK FROM DEBT ISSUED BY THE PERIPHERAL EUROZONE COUNTRIES
Due to the prolonged turmoil in the Eurozone countries, and the issues which the Greek economy faces concerning the services of the public debt, the Group monitors credit risk from its exposure to the Greek State as well as the remaining peripheral countries.
i. Exposure to the Greek State
The table below presents the Group's total exposure in Greek Government securities:
31.12.2016
31.12.2015
Portfolio
Nominal value
Carrying amount
Nominal value
Carrying amount
Available for sale
4,175,594
3,589,720
4,659,672
3,930,081
Trading
2,861
2,256
2,783
1,888
Total
4,178,455
3,591,976
4,662,455
3,931,969
All Greek Government securities are classified in level 1 based on the quality of inputs used for the estimation of their fair value.
Furthermore, the securities issued by public entities amounted to 151.9 million on 31.12.2016 (31.12.2015: 162.1 million)
The Group's exposure to Greek State from other financial instruments, excluding securities and loans and advances is depicted in the tables below:
On balance sheet exposure
31.12.2016
31.12.2015
Carrying amount
Carrying amount
Derivative financial instruments - assets
342,737
362,700
Derivative financial instruments - liabilities
(59,299)
(271,711)
Derivative financial assets from public sector entities amounted to 8.4 million on 31.12.2016 (31.12.2015: 16.6 million).
The Group exposure in loans to public entities/organizations on 31.12.2016 amounted 1,112 million (31.12.2015: 1,297.6 million). The Group for the above receivables has recognized impairment amounted to 49.1 million on 31.12.2016 (31.12.2015: 42.1 million).
In addition the balance of Group's loans guaranteed by the Greek State (directly guaranteed by Greek government, loans guaranteed by TEMPE, Loans guaranteed by Common Ministerial Decisions) on 31.12.2016 amounted to 720.6 million (31.12.2015: 764 million). For these loans the Bank has recognized impairment amounted to 149.2 million on 31.12.2016 (31.12.2015: 144.3 million).
Off balance sheet exposure
31.12.2016
31.12.2015
Nominal value
Share value
Nominal value
Share value
Bonds used as collaterals for refinancing operation
56,373
57,162
ii. Exposure to other peripheral Eurozone countries debt
The Group holds in its available for sale portfolio, bonds and treasury bills of the Republic of Cyprus with a book value of 114.5 million (31.12.2015: 96.9 million), bonds issued by the Italian Republic with a book value of 9.8 million (31.12.2015: 6.9 million) and bonds issued by the Spanish Republic with a book value of 10.8 million (31.12.2015: 8 million).
As at 31.12.2016 the Group had no exposure to bonds issued by Portugal and Ireland.
41.2. Market risk
Market risk is the risk of losses arising from unfavourable changes in the value or volatility of interest rates, foreign exchange rates, stock exchange indices, equity prices and commodities. Losses may also occur either from the trading portfolio or from the Assets-Liabilities management.
i. Trading portfolio
The market risk is measured by the Value at Risk - VAR. The method applied for calculating Value at Risk is historical simulation.
The Bank uses a holding period of one and ten days, depending on the time which is required for the liquidate of the portfolio.
1 day value at risk, 99% confidence interval (2 years historical data)
(Amounts in Euro)
2016
2015
Foreign
currency riskInterest
rate riskPrice risk
Covariance
Total
Total
31 December
1,216,957
174,020
79,163
(221,350)
1,248,790
1,815,473
Average daily value (annual)
1,752,271
117,635
27,930
(133,385)
1,764,451
1,725,496
Maximum daily value (annual)*
1,992,659
89,315
31,773
(115,652)
1,998,095
3,144,948
Minimum daily value (annual)*
1,216,957
174,020
79,163
(221,350)
1,248,790
741,067
* relating to the total value at risk within one year
The above items concern the Bank. The Group's subsidiaries and branches have limited trading positions, which are immaterial compared to the positions of the Bank. As a result, the market risk effect deriving from these positions on the total income, is immaterial.
The Value at Risk methodology is complemented with scenario analysis and stress testing, in order to estimate the potential size of losses that could arise from the trading portfolio for hypothetical as well as historical extreme movements of market parameters (stress-testing).
Within the scope of policy-making for financial risk management, exposure limits, maximum loss (stop loss) and value at risk for various products of the trading positions have been set.
In particular the following limits have been set for the following risks:
Foreign currency risk regarding spot and forward positions and FX options
Interest rate risk regarding positions on bonds, Interest Rate Swaps, Interest Futures, Interest Options
Price risk regarding positions in shares, index Futures and options, Commodity Futures and Swaps
Credit risk regarding interbank transactions and bonds
Positions held in these products are monitored on a daily basis and are examined for the corresponding limit percentage cover and for any limit excess.
ii. The financial risks of the banking portfolio
The financial risks of the banking portfolio derive from the structure of assets and liabilities and primarily from the portfolio of loans and deposits of the Group. The financial risks of the banking portfolio concern foreign exchange risk, interest rate risk and liquidity risk.
a. Foreign currency risk
The Bank takes on the risk arising from the fluctuations in foreign exchange rates.
The management of foreign currency position is centralized.
The policy of the Bank is the positions to be closed immediately using spot transactions or currency derivatives. In case that positions are still open, they are daily monitored by the competent department and they are subject to limits. The total position arises from the net balance sheet position and derivatives forward position as presented in the tables below.
31.12.2016
USD
GBP
CHF
JPY
RON
RSD
Other FC
Euro
Total
ASSETS
Cash and balances with Central Banks
10,203
19,677
504
23
137,060
17,506
1,329,634
1,514,607
Due from banks
192,636
2,764
21,687
6,796
20,999
16,657
12,229
1,695,513
1,969,281
Trading securities
1
4,700
4,701
Derivative financial assets
634,323
634,323
Loans and advances to customers
1,796,851
395,932
1,681,322
30,864
761,657
7,358
101,171
39,633,605
44,408,760
Investment securities
- Available for sale
148,572
17,521
244,825
82,034
4,724,101
5,217,053
- Held to maturity
6,991
6,338
31,670
44,999
- Loans and receivables
2,682,655
2,682,655
Investments in associates and joint ventures
21,792
21,792
Investment property
144,208
52,113
417,771
614,092
Property, plant and equipment
1,640
25,472
3,640
6,712
756,504
793,968
Goodwill and other intangible assets
281
1,618
167
369,248
371,314
Deferred tax assets
926
722
4,517,398
4,519,046
Other assets
7,094
(2,989)
20,570
2
12,316
1,622
7,246
1,404,598
1,450,459
Assets held for sale
13,869
2,431
557,521
51,395
625,216
Total Assets
2,169,226
434,826
1,724,083
37,685
1,358,503
586,798
286,238
58,274,907
64,872,266
LIABILITIES
Due to banks and customers
1,763,230
243,494
42,787
1,347
969,440
141
395,815
48,635,439
52,051,693
Derivative financial liabilities
1,336,227
1,336,227
Debt securities in issue and other borrowed funds
254,456
362,409
616,865
Liabilities for current income tax and other taxes
392
5,117
7
461
27,801
33,778
Deferred tax liabilities
102
4,470
110
579
15,958
21,219
Employee defined benefit obligations
91,828
91,828
Other liabilities and liabilities related to Assets held for sale
7,558
(2,332)
5,952
556
2,774
408,762
3,514
858,755
1,285,539
Provisions
98
2
1
2,853
1,729
317,021
321,704
Total liabilities
2,025,342
241,658
48,740
1,903
984,654
409,020
402,098
51,645,438
55,758,853
Net balance sheet position
143,884
193,168
1,675,343
35,782
373,849
177,778
(115,860)
6,629,469
9,113,413
Derivatives forward foreign exchange position
(118,002)
(195,742)
(1,673,390)
(35,214)
(239,078)
(1,006)
196,100
1,980,992
(85,340)
Total Foreign exchange position
25,882
(2,574)
1,953
568
134,771
176,772
80,240
8,610,461
9,028,073
Undrawn loan agreements and credit limits that can not be recalled (committed)
133,553
-
-
-
47,307
11,656
-
302,218
494,734
31.12.2015*
USD
GBP
CHF
JPY
RON
RSD
Other FC
Euro
Total
ASSETS
Cash and balances with Central Banks
45,714
46,726
945
20
141,999
66,804
21,402
1,406,717
1,730,327
Due from banks
231,755
(107,501)
12,499
3,950
39,199
(368)
18,685
1,778,054
1,976,273
Trading securities
1
238
2,540
2,779
Derivative financial assets
793,015
793,015
Loans and advances to customers
1,794,260
428,223
1,837,068
32,198
603,949
95,135
74,763
41,320,520
46,186,116
Investment securities
- Available for sale
131,592
32,750
245,117
92,729
66,021
5,226,275
5,794,484
- Held to maturity
9,971
69,738
79,709
- Loans and receivables
4,289,482
4,289,482
Investments in associates and joint ventures
45,771
45,771
Investment property
173,520
11,271
32,500
406,371
623,662
Property, plant and equipment
2,073
25,220
20,966
36,784
775,858
860,901
Goodwill and other intangible assets
220
966
1,463
135
342,367
345,151
Deferred tax assets
2,162
3,661
929
4,391,424
4,398,176
Other assets
7,318
2,530
3,061
2
6,913
3,191
1,485,618
1,508,633
Assets held for sale
2,455
660,608
663,063
Total Assets
2,210,640
405,021
1,853,573
36,170
1,241,738
294,852
261,190
62,994,358
69,297,542
LIABILITIES
Due to banks and customers
1,709,533
264,304
31,687
1,005
815,445
102,068
382,180
53,243,407
56,549,629
Derivative financial liabilities
1,550,529
1,550,529
Debt securities in issue and other borrowed funds
345,574
55,155
400,729
Liabilities for current income tax and other taxes
479
1,706
488
431
35,088
38,192
Deferred tax liabilities
4,281
40
403
16,128
20,852
Employee defined benefit obligations
214
108,336
108,550
Other liabilities and liabilities related to Assets held for sale
15,622
1,734
3,301
524
10,543
2,514
1,140
1,242,026
1,277,404
Provisions
5,196
1,139
1,681
290,442
298,458
Total liabilities
2,070,729
266,517
34,988
1,529
837,171
106,463
385,835
56,541,111
60,244,343
Net balance sheet position
139,911
138,504
1,818,585
34,641
404,567
188,389
(124,645)
6,453,247
9,053,199
Derivatives forward foreign exchange position
(130,085)
(102,446)
(1,648,064)
(30,065)
(21,265)
7,412
195,518
1,529,328
(199,667)
Total Foreign exchange position
9,826
36,058
170,521
4,576
383,302
195,801
70,873
7,982,575
8,853,532
Undrawn loan agreements and credit limits that can not be recalled (committed)
5,511
22,975
22,388
228,039
278,913
* Certain figures of the comparative year have been restated as noted in note 49.
The net foreign exchange position on 31.12.2016 presents the following sensitivity analysis:
Currency
Exchange rate variation scenario against Euro (%
Impact on net income before tax
Impact on Equity
USD
5% Depreciation EUR against USD
1,362
5% Appreciation EUR against USD
(1,233)
GBP
5% Depreciation EUR against GBP
(135)
5% Appreciation EUR against GBP
123
CHF
5% Depreciation EUR against CHF
103
5% Appreciation EUR against CHF
(93)
JPY
5% Depreciation EUR against JPY
30
5% Appreciation EUR against JPY
(27)
AUD
5% Depreciation EUR against AUD
44
5% Appreciation EUR against AUD
(40)
RON
5% Depreciation EUR against RON
7,093
5% Appreciation EUR against RON
(6,418)
RSD
5% Depreciation EUR against RSD
9,304
5% Appreciation EUR against RSD
(8,418)
ALL
5% Depreciation EUR against ALL
45
5% Appreciation EUR against ALL
(41)
b. Interest rate risk
In the context of analysis of the Banking portfolio, Interest Rate Gap Analysis is performed. In particular, assets and liabilities are allocated into time bands (Gaps) according to their repricing date for variable interest rate instruments, or according to their maturity date for fixed rate instruments.
An interest rate gap analysis of Assets and Liabilities is set out in the table below:
31.12.2016
< 1 month
1 to
3 months3 to
6 months6 to
12 months1 to
5 years> 5 years
Non-interest bearing
Total
ASSETS
Cash and balances with Central Banks
858,659
655,948
1,514,607
Due from Banks
1,412,045
375,067
21,334
1,930
158,905
1,969,281
Securities helf for trading
222
518
1,516
2,445
4,701
Derivative financial assets
634,323
634,323
Loans and advances to customers
23,533,657
6,547,771
2,541,640
1,365,640
6,520,234
3,899,818
44,408,760
Investment securities
- Available for sale
346,599
663,162
1,012,010
277,939
1,215,539
1,568,485
133,319
5,217,053
- Held to maturity
319
1,884
12,244
1,525
9,777
19,250
44,999
- Loans and receivables
1,964,564
171,048
547,043
2,682,655
Investments in associates and joint ventures
21,792
21,792
Investment property
614,092
614,092
Property, plant and equipment
793,968
793,968
Goodwill and other intangible assets
371,314
371,314
Deferred tax assets
4,519,046
4,519,046
Other assets
1,450,459
1,450,459
Non-current assets held for sale
524,080
101,136
625,216
Total Assets
26,785,602
7,587,884
6,075,872
1,645,326
7,919,046
6,195,017
8,663,519
64,872,266
LIABILITIES
Due to banks
17,242,163
312,898
52,273
1,498,243
19,105,577
Derivative financial liabilities
1,336,227
1,336,227
Due to customers
6,786,681
4,650,913
6,524,205
2,884,014
7,596,146
4,500,130
4,027
32,946,116
Debt securities in issue held by institutional investors and other borrowed funds
227,486
376,521
12,858
616,865
Liabilities for current income tax and other taxes
33,778
33,778
Deferred tax liabilities
21,219
21,219
Employee defined benefit obligations
91,828
91,828
Other liabilities
879,185
879,185
Provisions
321,704
321,704
Liabilities related to assets held for sale
402,002
4,352
406,354
Total Liabilities
25,592,557
5,340,332
6,991,338
2,884,014
9,094,389
4,500,130
1,356,093
55,758,853
EQUITY
Share capital
461,064
461,064
Share premium
10,790,870
10,790,870
Reserves
332,061
332,061
Retained earnings
(2,506,711)
(2,506,711)
Non-controlling interests
20,997
20,997
Hybrid securities
15,132
15,132
Total Equity
9,113,413
9,113,413
Total Liabilities and Equity
25,592,557
5,340,332
6,991,338
2,884,014
9,094,389
4,500,130
10,469,506
64,872,266
Open exposure
1,193,045
2,247,552
(915,466)
(1,238,688)
(1,175,343)
1,694,887
(1,805,987)
Cumulative exposure
1,193,045
3,440,597
2,525,131
1,286,443
111,100
1,805,987
31.12.2015*
< 1 month
1 to
3 months3 to
6 months6 to
12 months1 to
5 years> 5 years
Non-interest bearing
Total
ASSETS
Cash and balances with Central Banks
1,123,073
607,254
1,730,327
Due from Banks
1,463,112
324,983
1,762
1,550
22,586
161,020
1,260
1,976,273
Securities helf for trading
350
1,538
891
2,779
Derivative financial assets
793,015
793,015
Loans and advances to customers
22,853,610
7,174,432
2,787,093
1,358,749
7,761,777
4,250,455
46,186,116
Investment securities
- Available for sale
525,269
1,227,726
987,027
125,556
1,319,479
1,422,276
187,151
5,794,484
- Held to maturity
337
6,112
54,002
19,258
79,709
- Loans and receivables
4,289,482
4,289,482
Investments in associates and joint ventures
45,771
45,771
Investment property
623,662
623,662
Property, plant and equipment
860,901
860,901
Goodwill and other intangible assets
345,151
345,151
Deferred tax assets
4,398,176
4,398,176
Other assets
1,508,633
1,508,633
Non-current assets held for sale
663,063
663,063
Total Assets
26,758,416
8,727,141
8,071,476
1,485,855
9,158,194
5,854,547
9,241,913
69,297,542
LIABILITIES
Due to banks
23,059,899
252,111
2,876
1,800,477
25,115,363
Derivative financial liabilities
1,550,529
1,550,529
Due to customers
6,298,049
5,120,140
5,851,901
2,284,717
7,651,060
4,224,596
3,803
31,434,266
Debt securities in issue held by institutional investors and other borrowed funds
340,227
23,912
11,990
24,600
400,729
Liabilities for current income tax and other taxes
38,192
38,192
Deferred tax liabilities
20,852
20,852
Employee defined benefit obligations
108,550
108,550
Other liabilities
910,623
910,623
Provisions
298,458
298,458
Liabilities related to assets held for sale
366,781
366,781
Total Liabilities
31,248,704
5,396,163
5,866,767
2,284,717
9,476,137
4,224,596
1,747,259
60,244,343
EQUITY
Share capital
461,064
461,064
Share premium
10,790,870
10,790,870
Reserves
308,920
308,920
Retained earnings
(2,546,885)
(2,546,885)
Non-controlling interests
23,998
23,998
Hybrid securities
15,232
15,232
Total Equity
9,053,199
9,053,199
Total Liabilities and Equity
31,248,704
5,396,163
5,866,767
2,284,717
9,476,137
4,224,596
10,800,458
69,297,542
Open exposure
(4,490,288)
3,330,978
2,204,709
(798,862)
(317,943)
1,629,951
(1,558,545)
-
Cumulative exposure
(4,490,288)
(1,159,310)
1,045,399
246,537
(71,406)
1,558,545
-
-
* Certain figures of the comparative year have been restated as noted in note 49.
From the Interest Rate Gap Analysis and from the application of alternative scenarios regarding the changes in the market interest rates or changes in the base interest rates of the Bank and the companies of the Group, the Group is able to calculate the immediate changes in the net interest income and equity relating to available for sale securities. In the interest rate decrease scenarios the change is assessed up to a feasible point (interest rate set to zero) in accordance with the effective yield curves per currency.
Interest rate variation scenario
(parallel fall or rise in yield curves)
Sensitivity for net interest income (annual)
Sensitivity of Equity
(100)
(61,174)
174,227
100
69,999
(158,890)
41.3 Liquidity risk
Liquidity risk relates to the Bank's ability to maintain sufficient funds to cover its planned or extraordinary obligations. In fact, the total funding can be divided into two main categories:
. Customer deposits
1. Customer deposits on demand for cash flow needs
Deposits that are intended to meet short term needs of customers are the savings accounts and the sight deposits. Although these deposits may be withdrawn on demand, the number of accounts and type of depositors ensure that unexpected significant fluctuations are limited. Therefore, these deposits constitute a significant factor of stability of the deposit base.
2. Customer term deposits and bonds for investment purposes
The customer term deposits and bonds for investment purposes issued by the Group companies usually consist of customer deposits for a certain period and customer repurchase agreements (repos), whereas the bonds issued by the Group companies are disposed through outright sale. Customers have the ability of early withdrawal of deposits or early liquidation of bonds which may result in potential need of finding alternative liquidity in case of extensive outflows.
For this purpose and for the general safety of customer deposits, the Bank takes care for the existence of adequate liquidity surpluses which are calculated based on stress testing exercises due to loss of liquidity or the existence of sufficient credit lines of financial instruments as shown below.
. Wholesale funding
1. Medium-term borrowing from international capital markets
The Bank's constant aspiration is to cooperate with international investors who may offer medium term financing through purchase of securities issued by the Group companies. For this purpose, the Bank retains special financing programs appealing to international investors and provides adequate coverage of credit needs through international capital markets by planning asset level needs on an annual basis. However, the Bank acknowledges that the demand of these bonds may not be enough to fully meet the needs in specific time intervals as a result of factors which concern the credit assessment in the domestic and international economic environment.
2. Funding by Central Banks
An alternative way of Bank funding is the liquidity from financial instruments of the Central Banks- Euro system and especially from the European Central Bank (ECB). This funding regards loan granted with pledge of assets according to instructions and the eligible assets determined by the ECB. During the last years this additional source funding has become a major financial instrument by hedging the inadequate or loss of basic forms of Bank funding. Furthermore, under the period on which Greece is under the restructuring program of economy and fiscal improvement of financial figures and simultaneously servicing financing needs of the network of institutions that have the supervision of the program, the Bank can use available assets in order to increase liquidity from the Eurosystem to cover any financing gap. The Bank recognizes the short-term nature of this liquidity source and pursues gradually to release, if circumstances allow. However, for as long as the country is experiencing financial and economic crisis, the Bank ensures the smooth financing from these financial instruments which may be either conventional marginal lending from the ECB (MRO), or Emergent Liquidity Assistance from Bank of Greece (ELA). The Bank ensures the adequacy of collateral required in order to serve the financing from the above financial instruments, while recognizing both the type and the amount of financing that is under the discretion of the Eurosystem.
Based on the Liquidity Gap Analysis, the cash flows arising from balance sheet items are calculated and
classified into time periods in accordance with the contractual maturity date or the estimated date based on a statistical analysis (convention). An exception to the above, are the securities portfolios, which can contribute directly to raise liquidity, and they are allocated in the first period under the condition that they have not been used to raise liquidity either by the Central Bank or through interbank repos.
31.12.2016
< 1 month
1 to 3 months
3 to
6 months6 to
12 months> 1 year
Total
ASSETS
Cash and balances with Central Banks
1,514,607
1,514,607
Due from banks
1,339,217
405,623
26,536
44
197,861
1,969,281
Trading securities
4,701
4,701
Derivative financial assets
634,323
634,323
Loans and advances to customers
3,501,282
2,178,064
1,554,192
3,857,891
33,317,331
44,408,760
Investment securities
- Available for sale
4,964,609
252,444
5,217,053
- Held to maturity
11,496
3,403
30,100
44,999
- Loans and receivables
2,682,655
2,682,655
Investments in associates and joint ventures
21,792
21,792
Investment property
614,092
614,092
Property, plant and equipment
793,968
793,968
Goodwill and other intangible assets
371,314
371,314
Deferred tax assets
4,519,046
4,519,046
Other assets
59,924
121,660
179,773
362,893
726,209
1,450,459
Non current assets held for sale
517,847
107,369
625,216
Total Assets
12,018,663
2,705,347
2,289,844
4,331,600
43,526,812
64,872,266
LIABILITY
Due to banks
17,227,822
89,838
1,075
2,673
1,784,169
19,105,577
Derivative financial liabilities
1,336,227
1,336,227
Due to customers
6,368,861
4,571,701
3,798,701
3,115,974
15,090,879
32,946,116
Debt securities in issue held by institutional investors and other borrowed funds
18,831
7,238
590,796
616,865
Liabilities for current income tax and other taxes
33,778
33,778
Deferred tax liabilities
21,219
21,219
Employee defined benefit obligations
91,828
91,828
Other liabilities
144,107
735,078
879,185
Provisions
321,704
321,704
Liabilities related to assets held for sale
406,058
296
406,354
Total Liabilities
25,077,017
4,680,370
4,246,850
3,118,943
18,635,673
55,758,853
EQUITY
Share capital
461,064
461,064
Share premium
10,790,870
10,790,870
Reserves
332,061
332,061
Retained earnings
(2,506,711)
(2,506,711)
Non-controlling interests
20,997
20,997
Hybrid securities
15,132
15,132
Total Equity
9,113,413
9,113,413
Total Liabilities and Equity
25,077,017
4,680,370
4,246,850
3,118,943
27,749,086
64,872,266
Open liquidity gap
(13,058,354)
(1,975,023)
(1,957,006)
1,212,657
15,777,726
-
Cumulative liquidity gap
(13,058,354)
(15,033,377)
(16,990,383)
(15,777,726)
-
-
31.12.2015*
< 1 month
1 to 3 months
3 to
6 months6 to
12 months> 1 year
Total
ASSETS
Cash and balances with Central Banks
1,730,327
1,730,327
Due from banks
1,420,989
331,911
4,636
24
218,713
1,976,273
Trading securities
1,888
891
2,779
Derivative financial assets
793,015
793,015
Loans and advances to customers
2,886,348
2,039,558
1,799,782
2,854,971
36,605,457
46,186,116
Investment securities
- Available for sale
4,816,465
978,019
5,794,484
- Held to maturity
6,112
73,597
79,709
- Loans and receivables
4,289,482
4,289,482
Investments in associates and joint ventures
45,771
45,771
Investment property
623,662
623,662
Property, plant and equipment
860,901
860,901
Goodwill and other intangible assets
345,151
345,151
Deferred tax assets
4,398,176
4,398,176
Other assets
61,986
125,854
185,959
375,394
759,440
1,508,633
Non current assets held for sale
390,862
272,201
663,063
Total Assets
11,711,018
2,888,185
2,268,690
3,230,389
49,199,260
69,297,542
LIABILITY
Due to banks
23,057,911
3,807
928
2,747
2,049,970
25,115,363
Derivative financial liabilities
1,550,529
1,550,529
Due to customers
6,328,964
4,591,349
3,219,322
2,550,700
14,743,931
31,434,266
Debt securities in issue held by institutional investors and other borrowed funds
400,729
400,729
Liabilities for current income tax and other taxes
38,192
38,192
Deferred tax liabilities
20,852
20,852
Employee defined benefit obligations
108,550
108,550
Other liabilities
209,271
701,352
910,623
Provisions
298,458
298,458
Liabilities related to assets held for sale
277,675
89,106
366,781
Total Liabilities
31,146,675
4,911,023
3,309,356
2,553,447
18,323,842
60,244,343
EQUITY
Share capital
461,064
461,064
Share premium
10,790,870
10,790,870
Reserves
308,920
308,920
Retained earnings
(2,546,885)
(2,546,885)
Non-controlling interests
23,998
23,998
Hybrid securities
15,232
15,232
Total Equity
-
-
-
-
9,053,199
9,053,199
Total Liabilities and Equity
31,146,675
4,911,023
3,309,356
2,553,447
27,377,041
69,297,542
Open liquidity gap
(19,435,657)
(2,022,838)
(1,040,666)
676,942
21,822,219
-
Cumulative liquidity gap
(19,435,657)
(21,458,495)
(22,499,161)
(21,822,219)
-
-
Held for trading and available for sale portfolios are listed based on their liquidation potential and not according to their maturity.
Cash flows arising from financial liabilities including derivative financial liabilities, are allocated into time bands according to their maturity date. Estimated interest payments are also included. Liabilities in foreign currency have been converted into Euro. Outflows and inflows relating to derivatives are estimated according to their contractual terms.
* Certain figures of the comparative year have been restated as noted in note 49.
31.12.2016
Total Balance Sheet
Nominal inflows / (outflows)
TOTAL
to
1 month1 to
3 months3 to
6 months6 to
12 monthsMore than
1 year
Liabilities
- non-derivative
Due to banks
19,105,577
(17,256,804)
(121,577)
(53,408)
(107,383)
(2,227,240)
(19,766,412)
Due to customers
32,946,116
(6,392,878)
(4,953,031)
(3,799,259)
(3,137,464)
(15,015,201)
(33,297,833)
Debt securities in issue held by institutional investors and other borrowed funds
616,865
(1,869)
(22,655)
(13,793)
(13,854)
(651,692)
(703,863)
Other liabilities
879,185
(144,107)
(735,078)
(879,185)
Derivative held for assets fair value hedge
1,480
- Outflows
(13)
(720)
(660)
(1,393)
- Inflows
576
638
1,214
Derivatives held for liabilities fair value hedge
629,067
- Outflows
(272)
(471)
(40,102)
(802,151)
(842,996)
- Inflows
10,158
20,213
768,282
798,653
Derivatives held for trading
705,680
- Outflows
(404,407)
(98,618)
(64,086)
(250,934)
(1,967,831)
(2,785,876)
- Inflows
397,355
71,048
48,048
204,624
1,619,511
2,340,586
Total
54,883,970
(23,802,995)
(5,125,304)
(3,913,162)
(3,284,222)
(19,011,422)
(55,137,105)
Off balance sheet items
Undrawn loan agreements and credit limits that can not be recalled (committed)
(494,734)
(494,734)
Financial guarantees
(48,421)
(14,094)
(23,546)
(7,328)
(152,774)
(246,163)
Total off Balance sheet items
(543,155)
(14,094)
(23,546)
(7,328)
(152,774)
(740,897)
31.12.2015*
Total Balance Sheet
Nominal inflows / (outflows)
TOTAL
to
1 month1 to
3 months3 to
6 months6 to
12 monthsMore than
1 year
Liabilities
- non-derivative
Due to banks
25,115,363
(23,084,150)
(45,240)
(77,398)
(155,083)
(2,795,305)
(26,157,176)
Due to customers
31,434,266
(6,582,440)
(4,965,139)
(3,277,774)
(2,674,216)
(15,613,556)
(33,113,125)
Debt securities in issue held by institutional investors and other borrowed funds
400,729
(2)
(83)
(789)
(35)
(406,065)
(406,974)
Other liabilities
910,623
(209,271)
(701,352)
(910,623)
Derivative held for assets fair value hedge
52,376
- Outflows
(128)
(407)
(40,004)
(173)
(1,216,128)
(1,256,840)
- Inflows
948
10,636
20,722
1,144,647
1,176,953
Derivatives held for liabilities fair value hedge
568,037
- Outflows
(72)
(8,601)
(9,425)
(21,299)
(1,335)
(40,732)
- Inflows
7,297
7,443
16,363
1,746
32,849
Derivatives held for trading
930,116
- Outflows
(359,401)
(430,618)
(356,444)
(472,700)
(4,395,043)
(6,014,206)
- Inflows
317,049
431,491
302,030
431,820
4,313,738
5,796,128
Total
59,411,510
(29,918,415)
(5,010,352)
(3,441,725)
(2,854,601)
(19,668,652)
(60,893,745)
Off balance sheet items
Undrawn loan agreements and credit limits that can not be recalled (committed)
(278,913)
(278,913)
Financial guarantees
(34,454)
(35,370)
(27,320)
(118,099)
(264,379)
(479,622)
Total off Balance sheet items
(313,367)
(35,370)
(27,320)
(118,099)
(264,379)
(758,535)
* Certain figures of the comparative year have been restated as noted in note 49
41.4 Fair value of financial assets and liabilities
Hierarchy of financial instruments not measured at fair value
31.12.2016
Level 1
Level 2
Level 3
Total Fair value
Total Carrying amount
Financial Assets
Loans and advances to customers
44,102,220
44,102,220
44,408,760
Investment securities
- Held to maturity
25,165
6,649
10,045
41,859
44,999
- Loans and receivables
2,743,600
2,743,600
2,682,655
Financial liabilities
Due to customers
32,913,723
32,913,723
32,946,116
Debt securities in issue*
19,912
579,831
599,743
602,870
31.12.2015
Level 1
Level 2
Level 3
Total Fair value
Total Carrying amount
Financial Assets
Loans and advances to customers
46,107,498
46,107,498
46,186,116
Investment securities
- Held to maturity
36,823
28,990
13,121
78,934
79,709
- Loans and receivables
4,364,715
4,364,715
4,289,482
Financial liabilities
Due to customers
31,422,161
31,422,161
31,434,266
Debt securities in issue*
26,338
338,680
365,018
376,129
The above table presents the fair value as well as the carrying amount of financial instruments measured at amortized cost, classified by fair value hierarchy.
The fair value of loans is estimated based on the interbank market yield curves by adding a liquidity premium and spread per loan category and business unit for the expected loss. The fair value of deposits is estimated based on the interbank market yield curves by deducting customer's spread depending on the type of deposit. In both above mentioned cases, the future cash flows (floating rate) are calculated based on the implied forward rates until their maturity.
The held to maturity securities and debt securities in issue whose fair value is calculated based on market prices, are classified into Level 1.
The held to maturity securities and securities in issue whose fair value is calculated based on non-binding market prices provided by dealers-brokers or on the application of income approach methodology using interest rates and credit spreads which are observable in the market, are classified into Level 2. The fair value of the loans and receivables securities relating to securities issued by the European Financial Stability Facility (E.F.S.F.), was determined by discounted cash flows using relevant E.F.S.F. issues inputs.
Level 3 classification includes securities whose fair value is estimated using significant unobservable inputs. In this case the fair value is quoted by the issuers of the securities and confirmed by the Group or calculated by the Group.
Furthermore at Level 3 is included the Bank's liability to special purpose entities relating to securitized loans. The fair value of the liabilities above were calculated by discounting the future cash flows taking into account the unobservable market inputs.
The fair value of other financial assets and liabilities which are valued at amortized cost does not differ materially from the respective carrying amount.
* Debt securities in issue do not include the convertible bond loan issued by the Bank in the context of the agreement with Credit Agricole S.A. regarding the acquisition of Emporiki Bank since this security is measured at fair value.
Hierarchy of financial instruments measured at fair value
31.12.2016
Level 1
Level 2
Level 3
Total
Fair value
Derivative Financial Assets
4,224
624,740
5,359
634,323
Trading securities
- Bonds and Treasury bills
2,256
2,256
- Shares
2,445
2,445
Available for sale securities
- Bonds and Treasury bills
4,686,091
345,803
16,987
5,048,881
- Shares
68,945
18,048
46,326
133,319
- Other variable yield securities
34,853
34,853
Derivative Financial Liabilities
1,336,227
1,336,227
Convertible bond
13,995
13,995
31.12.2015
Level 1
Level 2
Level 3
Total
Fair value
Derivative Financial Assets
6,665
782,820
3,530
793,015
Trading securities
- Bonds and Treasury bills
1,888
1,888
- Shares
891
891
Available for sale securities
- Bonds and Treasury bills
4,927,352
625,704
19,460
5,572,516
- Shares
143,815
43,337
187,152
- Other variable yield securities
34,816
34,816
Derivative Financial Liabilities
21
1,550,508
1,550,529
Convertible bond
24,600
24,600
The tables above present the fair value hierarchy of financial instruments which are measured at fair value based on the inputs used for the fair value measurement.
Securities which are traded in an active market and exchange-traded derivatives are classified into Level 1.
The available for sale securities whose fair value is calculated based on non-binding market prices provided by dealers-brokers or on the application of the income approach methodology using interest rates and credit spreads which are observable in the market, are classified as Level 2. Level 3 classifications include securities whose fair value is estimated using significant unobservable inputs.
Securities whose fair value is calculated are classified to Level 2 or Level 3, depending on the extent of the contribution of unobservable data to calculate final fair value. The fair value of non listed shares, as well as shares not traded in an active market is determined based on the estimations made by the Group which relate to the future profitability of the issuer taking into account the expected growth rate of its operations, as well as the weighted average rate of capital return which is used as discount rate. Given that the above parameters are mainly non observable, the valuation of these shares is classified in Level 3.
For the valuation of over the counter derivatives income approach methodologies are used: discounted cash flow models, option-pricing models or other widely accepted valuation models. Valuations are checked on a daily basis with the respective prices of the counterparty banks in the context of the daily process of provision of collaterals and settlement of derivatives. If the non observable inputs are significant, the fair value that arises is classified as Level 3 or otherwise as Level 2.
The valuation of the convertible bond was based on the estimated share price at the mauturity date of the bond, as reflected in the Group's business plan, which is unobservable market parameter. Finally, the Group used the discount cash flow method, to assess contingent sale price of Ionian Hotel Enterprises S.A., which reached the amount of 4.5 million and was classified to other assets. The above method used was based to a business plan submitted by Ionian Hotel Enterprises S.A. Net present value of disounted cash flows amounted to 9.7 million on 31.12.2016. Taking into account that the cost for premium shares' acquisition of Ionian Hotel Enterprises S.A. amounts to 5.2 million, the estimated fair value of sales price as of 31.12.2016 amounted to 4.5 million. The above valuation is classified to Level 3 as for the the estimation of fair value unobservable inputs were used.
The Group recognizes the transfer between fair value hierarchy Levels at the end of the reporting period.
Within the period, 100.1 million of Greek corporate bonds were transferred from Level 2 to Level 1 due to the satisfaction of the active market criteria. Also 46.3 million of Greek corporate bonds were transferred from Level 1 to Level 2, as the liquidity margin (bid-ask spread) moved above the limit set for the characterization of market as active.
The table below presents the valuation methods used for the measurement of Level 3 fair value:
31.12.2016
Total Fair Value
Fair Value
Valuation Method
Significant Non-observable Inputs
Derivative Financial Assets
5,359
5,226
Discounted cash flows with interest being the underlying instruments, taking into account the credit risk
The probability of default and loss given default of the counterparty (BCVA adjustment) calculated using an internal model
133
Discounted cash flows with interest rates being the underlying instrument
Valuation of reserve adequacy for payment of hybrid securities' dividends
Available for sale bonds
16,987
16,987
Based on issuer price /Discounted cash flows with estimation of credit risk
Issuer price / Credit spread
Available for sale shares
46,326
46,326
Discounted cash flows - Multiples valuation method - Equity
Future profitability of the issuer
Convertible bond loan
13,995
13,995
Discounted cash flows - Multiples valuation method
Assessment of issuers market price
31.12.2015
Total Fair Value
Fair Value
Valuation Method
Significant Non-observable Inputs
Derivative Financial Assets
3,530
3,185
Discounted cash flows with interest being the underlying instruments, taking into account the counterparty's credit risk
The probability of default and loss given default of the counterparty (BCVA adjustment) calculated using an internal model
345
Discounted cash flows with interest rates being the underlying instrument
Valuation of reserve adequacy for payment of hybrid securities' dividends
Available for sale bonds
19,460
19,460
Based on issuer price
Price
Available for sale shares
43,337
43,337
Discounted cash flows - Multiples valuation method
Future profitability of the issuer
Convertible bond loan
24,600
24,600
Discounted cash flows - Multiples valuation method
Assessment of issuers market price
Material unobservable inputs that were used for the valuation of Ionian Hotel Enterprises S.A. sale price, which amounted to 4.5 million, is the cost of equity for both Ionian Hotel Enterprises S.A. and the Bank.
A reconciliation for the movement of financial instruments measured at fair value in Level 3 is depicted below.
31.12.2016
Assets
Liabilities
Available for sale securities
Derivative financial liabilities
Available for sale securities
Derivative financial liabilities
Opening balance 1.1.2016
62,797
3,530
(24,600)
Total gain or loss recognized in Income Statement
(386)
(803)
119
10,605
Total gain or loss recognized in Equity
2,904
Purchases/ Issues
456
Sales/ Repayments/ Settlements
(6,364)
(532)
638
Transfers in Level 3 from Level 1
4,838
Transfers in Level 3 from Level 2
4,524
(1,570)
Transfers out Level 3 from Level 1
(932)
Transfers out Level 3 from Level 2
(1,360)
813
Balance 31.12.2016
63,313
5,359
(13,995)
Amounts included in the Income Statement for financial instruments held at the year end.
(39)
(522)
During the period 4.8 million of shares were transferred from Level 1 to Level 3 as non-observable data were used for their valuation and 0.9 million of shares were transferred from Level 3 to Level 1 as for their valuation observable stock market price was used.
A transfer of derivatives from Level 2 to Level 3 occurred as the probability of default and loss given default of the counterparty calculated using an internal model due to the credit risk (BCVA adjustment). On 31.12.2016 the above parameter did not contribute significantly in the final valuation of those derivatives resulting in getting transferred back at Level 2.
31.12.2015
Assets
Liabilities
Available for sale securities
Derivative financial liabilities
Available for sale securities
Derivative financial liabilities
Opening balance 1.1.2015
76,453
(5,393)
Total gain or loss recognized in Income Statement
(9,766)
2,566
5,373
Total gain or loss recognized in Equity
(2,683)
Purchases/ Issues
14,355
Sales/ Repayments/ Settlements
(15,573)
20
Transfers in Level 3 from Level 2
11
964
(24,600)
Balance 31.12.2015
62,797
3,530
0
(24,600)
Amounts included in the Income Statement for financial instruments held at the year end
(8,322)
7,939
During the period 2015, purchases of corporate bonds amounting to 11.3 million as well as other variable yield securities amounting to 3 million took place that were classified in Level 3, since non observable parameters were used for valuation purposes. In addition, sales-repayments of foreign corporate bonds amounting to 6.4 million and other variable yield securities sales amounting 9.2 million took place. A transfer of derivatives from Level 2 to Level 3 occurred since the use of non-observable inputs was significant.
Finally during 2015 a transfer of convertible bond from Level 2 to Level 3 occurred as a different valuation method was applied.
Sensitivity analysis for Level 3 financial instruments that their valuation was based on significant non-observable data is presenting in the following table.
Significant
non-observable inputsSignificant
non-observable inputs changeTotal effect
in income statementTotal effect in Equity
Favourable Variation
Unfavourable Variation
Favourable Variation
Unfavourable Variation
Derivative Financial Assets
The probability of default and the loss given default of the counterparty (BCVA adjustment) are calculated with the use of an internal model
Increase the probability of default through reduction of internal ratings by 2 scales/ Increase the loss given default by 10%
(894)
Assessment of the adequacy of reserves for the payment of hybrid securities dividends
Increase the probability of dividend payments to 100%
(102)
Available for sale bonds
Issuer Price/ Credit spread
Variation +/- 10%
663
(652)
Available for sale shares
Future profitability of the Issuer
Variation +/- 10% in P/B and EV/Sales ratios (multiples valuation method)
1,429
(167)
1,429
(1,262)
Convertible bond loan
Assessment of issuers market price
Alpha Bank share price in the range of 1.5-2.5
3,768
(3,050)
3,768
(3,050)
Total
5,197
(4,213)
5,860
(4,964)
As far as Ionian Hotel Enterprises S.A. sale price is concerned, according to the sensitivity analysis performed and fluctuation to 0.50% in cost of equity, the range in sale price is at a minimum value 4.06 million and at a higher value of 4.54 million.
41.5. Transfers of financial assets
The Group in its ordinary course of business, transfers financial assets. In cases that, despite the fact that the contractual right to receive cash flows has been transferred the risks and rewards remain with the Group, these assets continue to be recognized on the balance sheet.
On 31.12.2016, the financial assets that have not been derecognized despite the contractual transfer of their cash flows, are derived from the following two categories of transactions:
a) Securitizations of financial assets
The Bank has securitized corporate, consumer loans and credit cards while its subsidiary Alpha Leasing A.E. finance lease receivables, in order to absorb liquidity from the Eurosystem. In the context of these transactions, these items have been transferred to special purpose entities fully consolidated by the Group, which have proceeded to the issuance of bonds. Securitized financial assets continue to be recognized as loans and advances to customers, since the Group continues in all cases to retain the rewards and risks associated with them. This is justified by several factors which include the full consolidation of special purpose entities, the fact that the Bank owns these bonds and the entitlement bonds to the deferred consideration from the transfer. Given that bonds are owned by the Group, no liabilities actually arise from the transfer. The carrying amount of the securitized loans and credit cards on 31.12.2016 amounts to 3,048,146 (31.12.2015: 3,386,485).
In addition, during the current year, the Bank proceeded to shipping loans securitization transaction through the fully consolidated special purpose company Alpha Shipping Finance Ltd. These loans are recognized in the category of loans and trade receivables as the Group retains the risks and benefits of the portfolio through entitlement to deferred consideration paid. The carrying amount of the securitized shipping loans and the bonds which are issued of the SPE, which are not held, as at 31.12.2016 amounted to 569,476 and 252,320 respectively (31.12.2015: 639,654 and 340,272 respectively). The fair value of loans as at 31.12.2016 amounted to 550,181 (31.12.2015: 587,737) and the debt security at 251,017 (31.12.2015: 338,680).
Finally, within 2016, the Bank securitized corporate loans to small and medium enterprises, through Alpha Proodos DAC, a fully consolidated special purpose entity. These loans continue to be recognized in loans and advances to customers considering that the Group retains the risks and rewards of these, by owning the subordinated bonds and the entitlement of deferred consideration. The carrying value of the above securitized loans and the bonds issued from the special purpose entity that are not owned amounts to 627,302 and 320,053 at 31.12.2016, respectively. On 31.12.2016, fair value of loans amounts to 570,411 and 319,616 for the bonds respectively.
b) Sale and repurchase agreements of debt securities
The Group on 31.12.2016 proceeded with the transfer of Greek Government Treasury Bills, bonds of other issuers, bonds of other countries and EFSF bonds with a repurchase agreement. These securities are still included in the Group's investment portfolio and the respective figures are presented in the following table.
31.12.2016
Avalaible for sale portfolio
Held to Maturity portfolio
Greek Government Treasury Bills
Bonds of other issuers
Bonds of other countries
Bonds EFSF
Carrying amount of transferred securities
355,164
297,213
11,602
200,672
Carrying amount of related liability
(210,055)
(193,004)
(8,855)
(209,390)
Fair value of transferred securities
355,164
297,213
11,602
206,982
Fair value of related liability
(210,055)
(193,004)
(8,855)
(209,390)
Equity
145,109
104,209
2,747
(2,408)
31.12.2015
Avalaible for sale portfolio
Held to Maturity portfolio
Greek Government Treasury Bills
Bonds of other issuers
Bonds of other countries
Bonds EFSF
Carrying amount of transferred securities
422,013
Carrying amount of related liability
(269,292)
Fair value of transferred securities
422,013
Fair value of related liability
(269,292)
Equity
152,721
The Group on 31.12.2015 proceeded with the transfer of bonds of other issuers with a repurchase agreement. These securities are still included in the Group's investment portfolio and the respective figures are presented in the above table.
41.6. Offsetting financial assets - liabilities
The following tables present derivative transactions under contracts of the International Swaps and Derivatives Association (ISDA), which are signed with credit institutions as counterparties. In accordance with these contracts, the Group is able to offset its assets and liabilities relating to a counterparty in case of a credit default.
Financial assets subject to offsetting
31.12.2016
Gross amount of recognized financial assets
Gross amount of recognized financial liabilities offset
Net amount of financial assets presented in the balance sheet
Related amounts not offset
Net amount
Financial instruments
Cash collateral received
Derivatives
512,898
512,898
(206,892)
(22,100)
283,906
On 31.12.2016 the Group possesses a reverse repo with a book value of 50.48 million with a counterparty, with whom there is a valid global master repurchase agreement, but there is no corresponding financial liability or a cash collateral for possible offsetting.
31.12.2015
Gross amount of recognized financial assets
Gross amount of recognized financial liabilities offset
Net amount of financial assets presented in the balance sheet
Related amounts not offset
Net amount
Financial instruments
Cash collateral received
Derivatives
682,676
682,676
(497,643)
(53,942)
131,091
Financial liabilities subject to offsetting
31.12.2016
Gross amount of recognized financial liabilities
Gross amount of recognized financial assets offset
Net amount of financial liabilities presented in the balance sheet
Related amounts not offset
Net amount
Financial instruments
Cash collateral given
Derivatives
1,326,826
0
1,326,826
(206,892)
(1,115,828)
4,105
31.12.2015
Gross amount of recognized financial liabilities
Gross amount of recognized financial assets offset
Net amount of financial liabilities presented in the balance sheet
Related amounts not offset
Net amount
Financial instruments
Cash collateral given
Derivatives
1,527,244
0
1,527,244
(497,643)
(1,019,181)
10,420
Reconciliation of the net amount of financial assets and liabilities presented in the balance sheet
31.12.2016
Note
Net amount presented in the balance sheet
Carrying amount of financial assets in the balance sheet
Financial assets not in scope of offsetting disclosures
Type of financial asset
Derivatives
16
512,898
634,323
121,425
31.12.2016
Note
Net amount presented in the balance sheet
Carrying amount of financial liabilities in the balance sheet
Financial assets not in scope of offsetting disclosures
Type of financial liability
Derivatives
16
1,326,826
1,336,227
9,401
31.12.2015
Note
Net amount presented in the balance sheet
Carrying amount of financial assets in the balance sheet
Financial assets not in scope of offsetting disclosures
Type of financial asset
Derivatives
16
682,676
793,015
110,339
31.12.2015
Note
Net amount presented in the balance sheet
Carrying amount of financial liabilities in the balance sheet
Financial assets not in scope of offsetting disclosures
Type of financial liability
Derivatives
16
1,527,244
1,550,529
23,285
42. Recapitalization framework - Restructuring Plan
Recapitalization framework
On 23.7.2015, Law 4335/2015 was voted that incorporates European Directive 2014/59, in relation to recovery and resolution of credit institutions and investment firms. This Directive established a set of rules to deal with banking crises across the EU, in order to avoid significant adverse effects on financial stability and to ensure that shareholders and creditors (including unsecured depositors) will share the burden of a potential recapitalization and/or the liquidation of troubled banks.
In accordance with Law 4335/2015 the Bank of Greece is designated as the resolution authority and has the power to apply resolution tools and exercise resolution powers.
The main resolution tools provided by Law that may be applied individually or in any combination, in cases where the institution is considered insolvent or under imminent insolvency threat, are the following:
the sale of business tool,
the bridge institution tool,
the asset separation tool (the legal framework states that this tool should be applied only in conjunction with other resolution tools), and
the bail-in tool (write-down or/and conversion of capital instruments and liabilities).
Exceptionally, however, Law 4335/2015 provides that in cases of exceptional systemic crisis the Ministry of Finance has the ability to provide extraordinary state financial support through state financial stabilization measures.
Where the institution is not insolvent or on imminent insolvency situation, it may receive capital support for preventive recapitalization purposes. The support measures in this case have a preventive and temporary nature and are limited to the necessary funds to overcome the capital shortfall that derived from stress tests or asset quality review.
In this context, on 1.11.2015 came into force, pursuant to Law 4340/2015, some amendments to the provisions of Law 3864/2010 for the operation of the Financial Stability Fund. These changes, among others, laid the conditions for providing capital support for preventive recapitalization purposes to Greek banks by the Financial Stability Fund.
In particular, in order for a credit institution to be eligible to receive preventive capital support, the following two conditions must be met:
coverage of the Capital Requirements for Existing Losses (base scenario) and
mandatory burden sharing for holders of capital instruments and other liabilities of the receiving institution, without these measures to cause or trigger contractual clauses or to account for as non-fulfillment of contractual obligations.
In particular with respect to capital support, this is provided through the participation of the Fund in the share capital increase of the credit institution through the issuance of common shares with voting rights or the issuance of contingent convertible bonds or other convertible instruments.
During the year and due to significant deterioration of the economic environment the need of recapitalization of Greek credit institutions arose based on the above framework.
The Group covered the total of its capital needs through an exchange offer for securities issued and share capital increase of the Bank with cash.
Specifically, on 28.10.2015 the Bank announced separate invitations to holders of all outstanding series of securities issued by the Group's subsidiaries, Alpha Credit Group Plc, Emporiki Group Finance Plc and Alpha Group Jersey Limited to offer all outstanding securities for exchange with non-transferable receipts issued by the Bank (Liability Management Excersice).
The Proposal concerned Senior securities of 985 million and Subordinated and Hybrid securities of a total amount of 100.9 million. The total amount of securities to be exchanged amounted to about 1.1 billion.
Through the exchange offers funds amounting to 1,011 million arose which oversubscribed the capital needs of the basic scenario as these arose from the Comprehensive Assessment which was conducted by the Single Supervisory Mechanism.
Furthermore, on 25.11.2015, the Bank completed its share capital increase through a private placement to qualified and other eligible investors, which amounted to 1,552 million.
The total funds raised, amounting to 2,563 million, covered the basic and adverse scenario and as a result the Bank did not receive capital support for preventive recapitalization purposes.
Restructuring Plan
After the respective request of the Directorate-General Competition (DG Comp) of the European Committee on 21 September 2015, the Bank proceeded in reconsideration of the Restructuring Plan so as to represent the current conditions, including the recapitalization of the Bank. The revised Restructuring Plan was approved by the DG Comp on 26 November 2015.
The revised Restructuring Plan includes the following main commitments for the Bank:
Reduction of the number of branches in Greece up to a maximum of 563 by the end of year 2017.
Limiting the number of employees in Greece, in banking and non-banking activities, up to a maximum of 9,504 by the end of year 2017.
Reduction of the total costs ot the Bank in Greece (Greek banking and non-banking activities) up to a maximum amount of 933 million, by the end of the year 2017, with the exemption of redundancy scheme costs and costs related to the Bank's contribution in favor of deposit guarantee funds or resolution funds.
Reduction of the cost of funding through the decrease of cost of deposits collected in Greece, taking into account the macroeconomic factors at each time
To further strengthen Bank's balance sheet through compliance to net loans to deposits ratio, up to a maximum of 119% on 31 December 2018, as regards to Greek banking activities.
Reduction of the total size of the portfolio of foreign assets by 30 June 2018.
Restriction on providing additional capital to foreign subsidiaries.
Divestment of listed and unlisted companies' securities portfolio (except for specific cases).
Reduction of the Bank's venture portfolio to 40 million up to the end of year 2017.
Restriction on the purchase of non-investment grade securities.
Apply a maximum limit of annual remuneration packages that the Bank pays to any employee or manager up to the end of year 2017.
Adoption of guidelines regarding Group credit policy, and the corporate governance framework, as well as, other commitments, which include restrictions on Bank's ability to proceed to specific acquisitions.
It is noted that in the revised Restructuring Plan there are no longer restrictions on the distribution of dividends over securities included in equity or subordinated securities. Also there are no restrictions on repurchases or the exercise of prepayment options for securities included in equity or subordinated securities.
The macroeconomic estimates and assumptions on which the provisions of the revised Restructuring Plan were based, are listed below:
2014
2015
2016
2017
2018
Nominal GDP %
(1.8)
(3.2)
(0.7)
3.4
4.1
Real GDP %
0.8
(2.3)
(1.3)
2.7
3.1
Unemployment rate %
26.5
26.9
27.1
25.7
24.2
Inflation rate %
(1.4)
(0.4)
1.5
0.9
1
Alpha Bank has already made significant restructuring actions of its activities, to fully restore viability, according to the rules of the European Commission for financial institutions that have received public subsidies and, to fully comply with the commitments undertaken in the context of the revised Restructuring Plan, while the above compliance has already been achieved to a large extent before the relevant deadline. The Bank's progress regardings its full compliance with the commitments included in the revised Restructuring Plan is being monitored and reported to the European Commission on a quarterly basis by Mazars LLP, which has been designated as the Monitoring Trustee of the Restructuring Plan.
43. Capital adequacy
The Group's policy is to maintain a robust capital base to safeguard the Bank's development and retain the trust of depositors, shareholders, markets and business partners.
Share capital increases are performed after Shareholders' General Meeting or Board of Directors' decisions in accordance with the articles of association or the relevant laws.
Treasury shares are allowed to be purchased based on the terms and conditions of law.
The capital adequacy is supervised by Single Supervising Mechanism of ECB, to which reports are submitted every quarter. The minimum requirements regarding Tier I ratio and the capital adequacy ratio of the Group are stipulated by Bank of Greece Governor's Acts.
The capital adequacy ratio compares regulatory capital with the risks assumed by the Bank (risk-weighted assets). Regulatory capital includes Tier I capital (share capital, reserves and non-controlling interests), additional Tier I capital (hybrid securities) and Tier II capital (subordinated debt). Risk-weighted assets include the credit risk of the investment portfolio, the market risk of the trading portfolio and operational risk.
Since January 1, 2014 EU Directive 2013/36/EU dated 26 June 2013 which was incorporated into the Greek Justice System through the law 4261/2014 along with the EU Regulation 575/2013/EU, dated June 26, 2013 "CRD IV" came into force, which gradually introduce the new capital adequacy framework (Basel III) of credit institutions.
According to the above regulatory framework, for the calculation of capital adequacy ratio the effective transitional arrangements are followed.
Moreover:
besides the 8% capital adequacy limit, there are limits of 4.5% for Common Equity ratio and 6% for Tier I ratio, and
is required the maintenance of capital buffers additional to the Common Equity Capital, from 1.1.2016 and gradually until 31.12.2019.
In particular:
from 1.1.2016 a capital buffer of 0.625% exists which will gradually rise to 2.5% on 31.12.2019.
The Bank of Greece through the acts issued by the Executive Committee settled the following capital buffers:
- Countercyclical capital buffer rate for the fourth quarter of 2016 and the first quarter of 2017, "zero percent" (Act 103/6.9.2016 & 107/19.12.2016).
- Other systemically important institutions (O-SII) buffer for 2016 "zero percent" (Act 56/18.12.2015).
These limits should be met both on a standalone and on a consolidated basis.
31.12.2016
(estimate)
31.12.2015*
(restated)
31.12.2015 (published)
Common Equity Tier I
17.1%
16.6%
16.7%
Tier I
17.1%
16.6%
16.7%
Capital Adequacy Ratio
17.1%
16.8%
16.8%
On 8 December 2016, the ECB informed Alpha Bank that for 2017 the Total SREP Capital Requirement (TSCR) at 12,25%. The TSCR is composed of the minimum own fund requirements (8%), according to article 92(1) of the CRR and additional own fund requirements (P2R), according to article 16(2)(a) of the Regulation 1024/2013/EU, and also the combined buffer requirements (CBR, according to article 128(6) of the Directive 2013/36/EU. The above minimum ratio should be maintained on a phase-in basis under applicable transitional rules under CRR/CRD IV, at all times.
Data concerning the disclosure of information supervisory nature regarding capital adequacy risk management, (Pilar - Regulation 575/2013) will be published on the Bank's website.
* The change of 10 basis points in 31.12.2015 capital adequacy ratio is due to the final calculation of the credit risk weighted assets which became final after the publication of the 2015 Annual Financial Report.
44. Related party transactions
The Bank and the Group companies enter into a number of transactions with related parties in the normal course of business. These transactions are performed at arms length and are approved by the Bank's committees.
a. The outstanding balances of the Group's transactions with key management personnel consisting of members of the Bank's Board of Directors and Executive Committee, their close family members and the entities controlled by them, as well as, the results related to these transactions are as follows:
31.12.2016
31.12.2015
Assets
Loans and advances to customers
916
11,460
Liabilities
Due to customers
12,302
26,200
Employee defined benefit obligatins
260
453
Total
12,562
26,653
Letters of guarantee and approved limits
1,500
11,689
From 1 January to
31.12.2016
31.12.2015
Income
Interest and similar income
79
242
Fee and commission income
76
147
Total
155
389
Expenses
Interest expense and similar charges
47
166
Key management and close family members income
3,647
3,469
Total
3,694
3,635
b. The outstanding balances with the Group's subsidiaries, associates and joint ventures as well as the results related to these transactions are as follows:
31.12.2016
31.12.2015
Assets
Loans and advances to customers
229,559
161,890
Other Assets
229
527
Total
229,788
162,417
Liabilities
Due to customers
22,642
21,494
From 1 January to
31.12.2016
31.12.2015
Income
Interest and similar income
6,359
5,721
Fee and commission income
4
4
Other income
233
593
Total
6,596
6,318
Expenses
Interest expense and similar charges
142
262
Other expenses
2,236
2,042
Total
2,378
2,304
c. The Employees Supplementary Fund maintains deposits with the Bank amounting to 296 (31.12.2015: 4,590). Periods' interest expenses relating to deposits amount to 18.On 31.12.2016, the Supplementary Fund does not own Alpha Bank shares (31.12.2015: 114).
d. The Hellenic Financial Stability Fund (HFSF) exerts significant influence on the Bank. In particular, according to Law 3864/2010 and the Relationship Framework Agreement (RFA) signed on 23.11.2015, which replaced the previous signed in 2013, HFSF has participation in the Board of Directors and in other significant Committees of the Bank. Therefore, according to IAS 24, HFSF and its related entities are considered related parties for the Bank.
The outstanding balances of the transactions as well as the results related to these transactions are analyzed as follows:
From 1 January to
31.12.2016
31.12.2015
Income
Fee and commission income
10
49
45. Auditors' fees
During 2016, the total fees of "KPMG Certified Auditors A.E.", statutory auditor of the Bank, are analyzed below, as stated in paragraphs 2 and 32, article 29 of Law 4308/2014.
From 1 January to
31.12.2016
31.12.2015
Fees for statutory audit
1,502
1,527
Fees for the issuance of tax certificate
334
351
Fees for other audit related services
110
481
Fees for other non-audit services
41
79
Total
1,987
2,438
46. Disclosures of Law 4151/2013
According to Article 6 of Law 4151/2013, the capitals from dormant deposit accounts will be used by the Greek State to cover government needs, after the write off of the rights of depositors or their legal heirs.
According to Law 3601/2007, dormant deposit account to credit Institution is an account on which no transaction by depositors has been recorded for a period of 20 years from the day following the last transaction. The crediting or capitalizing of interest to an account will not constitute a transaction and do not interrupt the prescription.
Following the expiry of the 20-year period, the credit institutions in Greece are obliged to: a) transfer to the State the aggregate balance of dormant deposit accounts, including any interest, by the end of April of each year by depositing the relevant amount in a special account in the Bank of Greece b) notify the General Accounting Office (GAO) and the General Directorate of Public Property to fulfill the obligations arising from the Law 4151/2013, and c) to provide information to beneficiaries and heirs after the lapse of twenty years for the transfer of the respective amounts, if asked. The abovementioned amounts will be recorded as income in the Annual State Budget.
The auditors in the notes to the published annual financial statements of credit institutions will confirm whether or not they complied with the provisions of the law on dormant deposits indicating the amount that was transferred to the State.
Based on the combined provisions of paragraph 6 of Article 1 from 18/7/2015 PNP as amended and currently in force and ratified by the Law No. 4350/2015 and the corresponding Articles 7 & 8 of Law 4151/2013 (A' 103) the Bank must return until the end of April of 2016 the balances of the dormant deposits that complete 20 years period until Friday, 17th of June 2015. After this date the deadline of Articles 7 and 8 of that Law is suspended.
In accordance with the above laws and regulations, the Bank did not transfer principal of the dormant deposit accounts for the fiscal year 2016 (2015: 0.7 million, number of deposit accounts 3,813).
47. Assets held for sale and discontinued operations
The Bank, under the approved by the European Committee Restructuring Plan (note 42) and the fulfillment of the relevant commitment relating to the deleveraging of part of the assets of its international activities, proceeded to the sale of the operations of the Bulgaria Branch, to the sale of Alpha Bank A.D. Skopje and Ionian Hotel Enterprises S.A., while it also began the process for the sale of Alpha Bank Srbija, APE Fixed Assets A.E., APE Commercial Property A.E. and APE Investment Property A.E.
Bank's branch in Bulgaria
On 17.7.2015, the Bank and Eurobank, with a joint statement, announced their agreement, in main terms, for the transfer of operations of the Bank's Branch in Bulgaria to Eurobank's subsidiary in Bulgaria (PostBank). On 6.11.2015 the Bank and Postbank signed the relevant contract, finalizing the terms of the transfer which provided for a transfer price of Euro 1 and the partial undertaking of the Branch's debt obligations by the buyer. The transfer was completed on 1.3.2016.
From 30.6.2015 the assets of Bulgaria Branch, and directly related liabilities, meet the requirements to be classified as "Held for sale" in accordance with IFRS 5, as at that date the management had decided to sell the unit and was already in the process of negotiations with the prospective buyer. At the same time, Bulgaria Branch is a distinct geographical area of operations for the Group which is included in the Southeast Europe segment for operating segment disclosure purposes. After the classification of the Bulgaria Branch, which is the only company in the banking sector through which the Group operates in Bulgaria, as an asset held for sale, its activities are classified as "discontinued operations" for the Group.
Therefore, in the year 2015, the Group, in the preparation of financial statements, valued the assets and liabilities of the Bulgaria Branch at the lowest price between the book value and fair value less costs to sell recognizing the difference which was amounted to 89,007 as "Loss after income tax from discontinued operations" in the Income Statement.
After the above valuation, the Branch's assets on 31.12.2015 amounted to 387,947 and Branch's liabilities amounted to 277,675.
During 2016 the Group adjusted the loss from the sale of Bulgaria branch based on the net assets on the day of the transfer.
Income Statement and Total Comprehensive Income
The results and cash flows arising from Bulgaria Branch are presented as "discontinued operations" in the Income Statement and in the Statement of Cash Flows.
(Amounts in thousand of Euro)
From 1 January to
31.12.2016
31.12.2015
Interest and similar income
3,123
22,273
Interest expense and similar charges
(556)
(5,943)
Net interest income
2,567
16,330
Fee and commission income
842
6,183
Commission expense
(74)
(397)
Net fee and commission income
768
5,786
Dividend income
2
Gains less losses on financial transactions
64
604
Other income
79
844
Total income
3,478
23,566
Staff costs
(1,575)
(9,626)
General administrative expenses
(2,042)
(12,324)
Depreciation and amortization
(397)
(2,803)
Other expenses
(30)
(37)
Total expenses
(4,044)
(24,790)
Impairment losses and provisions to cover credit risk
1,563
(5,303)
Profit/(loss) before income tax
997
(6,527)
Income tax
Profit/(loss) after income tax
997
(6,527)
Difference due to valuation at fair value
(89,007)
Result from the disposal, after income tax
(748)
Profit/(loss) after income tax from discontinued operations
249
(95,534)
The amount of cash and cash equivalent of the Bulgaria Branch, which was transferred at disposal, amounted to 9,942.
Alpha Bank AD Skopje
The Bank, during the fourth quarter of 2015, began the process of selling its subsidiary Alpha Bank Skopje (ABS). ABS is the smallest Group subsidiary in the Balkans and it has a small presence in the local market in Skopje (market share<2%). As part of this process, investors, which were shortlisted from a broader investor list, were invited to submit their bids on the acquisition of the 100% of ABS shares and on the 100% of the hybrid instrument (subordinated loan) which was granted to ABS from the parent company (both of them combined the "Perimeter Transaction").
The disposal was completed on 10.5.2016 for a total amount of 3.2 million.
Based on the above, on 31.12.2015 ABS assets and the related liabilities satisfy the conditions for classification as "held for sale" in accordance with IFRS 5, while its operations, which constitute a distinct geographical area for the Group, included in the Southeast Europe segment for operating segment disclosure purposes, have been classified as "discontinued operations".
Therefore, for the preparation of the 31.12.2015 financial statements the Group valued the subsidiary's assets and liabilities at the lower of book and fair value less cost to sell, recognizing the difference which amounted to 14,414 as a loss in the income statement in "Net profit / (loss) after income tax from discontinued operations". The fair value was determined based on the financial bids which were received from the potential investors for the Transaction Perimeter and the Bank's estimate for the final price. After the above valuation, the assets of Alpha Bank AD Skopje on 31.12.2015 amounted to 84,470 and its liabilities to 80,714.
During 2016, the Group adjusted the result from the sale of its subsidiary by 1,535, based on its net assets on the transfer date.
Income Statement and Total Comprehensive Income
The results and cash flows arising from Alpha Bank AD Skopje are presented as "discontinued operations" in the Income Statement, in the Statement Comprehensive Income and in the Cash Flow Statement.
The following table analyzes the amounts presented in the Income Statement.
(Amounts in thousand of Euro)
From 1 January to
31.12.2016
31.12.2015
Interest and similar income
1,525
4,964
Interest expense and similar charges
(382)
(1,013)
Net interest income
1,143
3,951
Fee and commission income
404
1,136
Commission expense
(183)
(619)
Net fee and commission income
221
517
Dividend income
14
Gains less losses on financial transactions
132
401
Other income
40
125
Total income
1,536
5,008
Staff costs
(907)
(2,812)
General administrative expenses
(691)
(2,495)
Depreciation and amortization
(134)
(409)
Other expenses
(80)
(159)
Total expenses
(1,812)
(5,875)
Impairment losses and provisions to cover credit risk
(482)
(1,170)
Profit/(loss) before income tax
(758)
(2,037)
Income tax
21
199
Profit/(loss) after income tax
(737)
(1,838)
Difference due to valuation at fair value
(14,414)
Gain from the disposal after income tax
1,535
Profit/(loss) after income tax, from discontinued operations
798
(16,252)
Exchange differences on translating and hedging the net investment in foreign operations
(40)
47
Amounts that may be reclassified in the Income Statement from discontinued operations
(40)
47
Total Comprehensive Income after income tax
758
(16,205)
The amount of cash and cash equivalent of Alpha Bank Skopje, which was transferred at disposal, amounted to 10,973.
Ionian Hotel Enterprises ..
On 27.10.2016, the Group, following the announcement on 17.2.2016 for its intention to sell Ionian Hotel Enterprises .. through an Invitation for Expressions of Interest, signed the final sale agreement for the subsidiary. The sale was completed on 16.12.2016. The final price of the transaction, including the refinancing of the existing debt of the subsidiary (67.2 million), amounted to 143.3 million.
In addition, with the signature of the transfer agreement, the Group acquired the right to invest 5.2 million and take preference shares issued by the subsidiary or shares of the company that will emerge after the merger of the subsidiary with the buyer. The issuance of preference shares will be accompanied by sale/purchase option contracts between the Group and the buyer's shareholders. his mechanism enables the Group to collect an additional amount depending on how the value of the company will develop and therefore represents a contingent consideration. This right was recognised in other assets at fair value which was 4.5 million as at 31.12.2016.
The total result from the sale of Ionian Hotel Enterprises SA was a loss of 38,273 and was recorded in gains and losses from financial transactions.
From the above, an amount of 37,916 had already been recorded as a loss during the first nine month period of the year as the Group valued its assets and related liabilities at the lower of carrying amount and fair value less cost to sell, under IFRS 5, due to their classification as "Held for sale" on 31.12.2015. Assets of Ionian Hotel Enterprises AE as at 31.12.2015 amounted to 185,701 and liabilities amounted to 8,392. Because the company is not a separate material business segment for the Group, the requirements in order to be classified as discontinued operation are not met. The company is included in "Other" for operating segment disclosure purposes. The amount of cash and cash equivalents of Ionian Hotel Enterprises S.A which was transferred at disposal amounted to 67.8.
APE Fixed Assets .., APE Commercial Property .., APE Investment Property ..
Consultants were engaged in June of the current year and the liquidation procedure of the Bank's participations in APE Fixed Assets AE, APE Commercial Property AE and APE Investment Property AE started. APE Fixed Assets AE is a Bank's subsidiary, while APE Commercial Property AE and APE Investment Property AE are joint ventures, where the control is exercised jointly by the Bank and the other shareholder.
From 30.6.2016 the abovementioned investments meet the requirements to be classified as "held for sale" in accordance with IFRS 5, as on that date Management had decided their sale and initiated an active programme to find buyer, while the sale is expected to be completed within one year.
According to IFRS 5 the assets held for sale or disposal groups are valued at the lower of book and fair value less cost to sell and they are presented in the balance sheet separately from other assets and liabilities. As regards to the subsidiary APE Fixed Assets AE the Group proceeded to the measurement of the fair value of the assets and liabilities which it consolidates, while with regards to the joint ventures APE Commercial Property AE and APE Investment Property AE which are consolidated with the equity method, the Group measured the fair value of its participation and of the loans and receivables from those companies which constitute part of the net investment in them. From the abovementioned measurement losses amounting to 19.3 million arose which were recognized in caption Gains less losses on financial transactions in the Income Statement.
Taking into account that the companies are not a separate major line of business for the Group the criteria to be characterized as 'discontinued operations' are not met. The companies are included in "Other" for operating segment disclosure purposes.
In the table below an analysis of the assets and liabilities regarding APE Fixed Assets AE, APE Commercial Property AE and APE Investment Property AE is presented, which are classified in the Balance Sheet as assets held for sale.
Balance Sheet
(Amounts in thousand of Euro)
31.12.2016
ASSETS
Loans and advances to customers
47,570
Investments in associates and joint ventures
39,244
Investments in real estate
39,872
126,686
Valuation at fair value
(19,317)
Assets held for sale
107,369
LIABILITIES
Deferred tax liabilities
296
Total liabilities related to assets hed for sale
296
Amounts recognized directly in Equity related to assets held for sale
(122)
Non-controlling interest related to assets held for sale
10,953
Alpha Bank Srbija A.D.
In the fourth quarter of 2016, the Bank initiated the procedures in order to sell its subsidiary Alpha Bank Srbija A.D. In this context, on 30.1.2017, the Bank agreed with a potential buyer, to sell all the shares owned. The contract was signed on 23.2.2017 while the completion of transaction is subject to obtaining the relevant regulatory approvals. In addition to the transfer of all shares of the subsidiary, the agreement includes the assignment of a subordinated debt contract, which amounts to 27.11 million and was granted to the subsidiary by the Bank.
Based on the above, on 31.12.2016 the total assets of Alpha Bank Srbija A.D. and the related liabilities meet the criteria set under IFRS 5 to be classified as assets held for sale, while its business activities, which constitute a distinct geographical area of operation for the Group and are included in South East Europe segment for operating segment disclosure purposes, have been characterized as discontinued operations.
Consequently, for the purpose of the preparation of financial statements on 31.12.2016, the Group valued the subsidiary's assets and liabilities at the lower of carrying amount and fair value less cost to sell , recognizing a loss of of 72,722 in Profit/(Loss) after tax from discontinued operations. Taking into account the classification of subsidiary as held for sale and the tax laws (note 11), at this caption was also recorded a deferred tax income of amount 84,441 which was calculated as the difference between the carrying amount of assets and liabilities and their tax base, resulting in a profit after tax which amounts to 11,719. After the above valuation, on 31.12.2016 the assets of Alpha Bank Srbija A.D. amounted to 512,403, its liabilities to 406,058, while the amounts that have been recognized directly in equity amounted to a loss of 68,457. It must be noted that the amount that has been recognized directly in equity will be reclassified to income statement when the sale of subsidiary takes place.
The above figures of subsidiary are analyzed as follows:
Balance Sheet
(Amounts in thousand of Euro)
31.12.2016
ASSETS
Cash and balances with Central Banks
74,172
Due from banks
39,041
Loans and advances to customers
344,244
Investment securities
- Available for sale
93,225
Investment property
5,593
Property, plant and equipment
19,721
Goodwill and other intangible assets
1,366
Deferred tax assets
3,555
Other assets
3,758
584,675
Valuation at fair value
(72,272)
Assets held for sale
512,403
LIABILITIES
Due to banks
16,635
Due to customers (including debt securities in issue)
385,367
Liabilities for current income tax and other taxes
579
Defined benefit obligations to employees
222
Other liabilities
2,332
Provisions
923
Liabilities related to assets held for sale
406,058
Amounts recognized directly in Equity related to assets held for sale
(68,457)
Income Statement and Statement of Comprehensive Income
The results and cash flows arising from Alpha Bank Srbija AD presented as "discontinued operations" in the Income Statement, the Statement of Comprehensive Income and in the Cash Flow Statement with a restatement of comparative period 1.1.2015 to 31.12.2015.
The following table analyzes the amounts presented in the Income Statement.
(Amounts in thousand of Euro)
From 1 January to
31.12.2016
31.12.2015
Interest and similar income
30,607
41,696
Interest expense and similar charges
(4,905)
(7,442)
Net interest income
25,702
34,254
Fee and commission income
7,799
7,847
Commission expense
(1,707)
(2,297)
Net fee and commission income
6,092
5,550
Gains less losses on financial transactions
551
1,822
Other income
705
1,350
Total income
33,050
42,976
Staff costs
(11,620)
(13,488)
General administrative expenses
(13,700)
(16,598)
Depreciation and amortization
(2,059)
(2,414)
Other expenses
(90)
(1,276)
Total expenses
(27,469)
(33,776)
Impairment losses and provisions to cover credit risk
4,443
(32,160)
Profit/(loss) before income tax
10,024
(22,960)
Income tax
(24)
(56)
Profit/(loss) after income tax
10,000
(23,016)
Difference due to valuation at fair value
11,719
Profit/(loss) after income tax, from discontinued operations
21,719
(23,016)
Net change in available for sale securities reserve
(113)
2,747
Exchange differences on translatin and hedging the net investment in foreign operations
(1,307)
(838)
Income tax
2
3
Amounts that may be reclassified in the Income Statement from discontinued operations
(1,418)
1,912
Total Comprehensive Income after income tax
20,301
(21,104)
Other assets held for sale
Assets held for sale also include other held for sale assets of the Group which amount to 5.4 million (31.12.2015: 4.9 million) resulting to a total amount of 625,216, on 31.12.2016 (31.12.2015: 663,063).
In addition, the Bank's participations to the companies "Selonda A.E.G.E." and "Nireus A.E.G.E." have been classified to Assets held for sale, since it intends to transfer these companies in the near future at their fair value, which was determined in the amount of 1.
The Group assesses at each reporting date of the financial statements, the actions undertaken within the context of the restructuring plan's implementation in order, where criteria of IFRS 5 are met (listed in note 1.17 of financial statements on 31.12.2016) the assets and liabilities that are directly associated with them, to be classified as held for sale.
48. Corporate events
a. On 26.1.2016 the Bank participated in Aktua Hellas Holding A.E. establishment, which registered in Greece with 45% and share capital of 25 thousand.
b. On 2.2.2016 the Bank participated in the share capital increase of the joint venture Alpha TANEO AKES, with an amount of 51 thousand.
c. On 18.2.2016 the Bank participated in the share capital increase of its subsidiary, Alpha Group Investments Ltd with the amount of 57.82 million.
d. On 19.2.2016 the subsidiary of the Bank, Alpha Group Investments Ltd, participated in the share capital increase of Group subsidiaries, AEP Amarousioun I A.E., AEP Amarousion II A.E., AEP Chalandriou A.E., AEP Neas Kifisias A.E. and AEP Kallirois A.E. for 19.99 million, 13.19 million, 22.64 million, 1 million and 1 million, respectively.
e. On 24.2.2016 the joint venture Aktua Hellas Holding A.E. , established the company Aktua Hellas Financial Solutions A.E. with a share capital of 100 thousand.
f. On 1.3.2016 the transfer of operations of the Bank's branch in Bulgaria to Eurobank's subsidiary in Bulgaria (Postbank), was completed.
g. On 22.4.2016 the Bank participated in the share capital increase of joint ventures Aktua Hellas Holding A.E., with the amount 45 thousand.
h. On 4.5.2016 the subsidiary company of the Bank, Alpha Group Investments Ltd founded AGI-SRE Participations 1 Ltd company registered in Cyprus with the amount of 1 thousand
i. On 10.5.2016 the sale of all shares of the Bank's subsidiary, Alpha Bank A.D. Skopje was completed.
j. On 13.5.2016 the Bank participated in the share capital increase of its subsidiary Alpha Group Investments Ltd with the amount of 11.9 million.
k. On 17.5.2016 Alpha Bank, Eurobank and KKR Credit reached an agreement to assign the management of credit and equity exposures to a selected number of Greek companies into a platform managed by Pillarstone.
l. On 23.5.2016 the subsidiary company of the Group AGI-RRE Participations 1 Ltd participated in the share capital increase of the Group subsidiary Asmita Gardens S.R.L. with the amount of 2 million.
m. On 8.6.2016 the subsidiary company of the Group, AGI-SRE Participations 1 Ltd founded AGI-SRE Participations 1 D.O.O. company registered in Serbia, with the amount of 1 thousand.
n. On 9.6.2016 the subsidiary of the Group, AGI-CYPRE Ermis Ltd, proceeded to the acquisition of the total number of shares of AGI-CYPRE Alaminos Ltd with the amount of 1.8 thousand.
o. On 16.6.2016 the subsidiary of the Group, AGI-CYPRE Ermis Ltd, proceeded to the acquisition of the total number of shares of AGI-CYPRE Mazotos Ltd with the amount of 1.8 thousand.
p. On 16.6.2016 the subsidiary of the Group, AGI-CYPRE Ermis Ltd, proceeded to the acquisition of the total number of shares of AGI-CYPRE Tochni Ltd with the amount of 1.8 thousand.
q. On 14.7.2016 the Bank, as a result of relative restructuring agreement of the company Dias Aquaculture ABEE, acquired additional shares of Selonda Aquacultures AEGE, from the share capital increase, conducted by contribution in kind of all the assets and part of the liabilities of company Dias Aquaculture .... to the company Selonda Aquacultures AEGE. Therefore, the Bank's share in the latter changed from 23.01% to 21.97%. The Bank, which identified at zero the fair value of the shares acquired, intends to dispose all of its shares of Selonda Aquacultures AEGE in the near future.
r. On 22.7.2016 the Bank participated, proportionally to its share, in the share capital increase of the joint venture Aktua Hellas Holding A.E., by the amount of 570 thousand.
s. On 29.7.2016 the Bank's subsidiary, Alpha Group Investments Ltd, acquired the 50% of the shares of the company AEP Eleona A.E., for an amount of 11.9 million.
t. On 2.8.2016, the Bank participated proportionally to its share, in the share capital increase of the joint venture Alpha TANEO AKES by paying the amount of 90 thousand.
u. On 22.8.2016 the Bank proceeded to the acquisition of 97.27% of shares of Ionian Hotel Enterprises A.E. from the related companies Alpha Group Investments Ltd, Ionian Equity Participations Ltd, Ionian Holdings A.E., Oceanos A.T.O.E.E. and Alpha Supporting Services A.E. by 89.77%, 1.87%, 1.87%, 1.87% and 1.87% respectively in the context of the internal restructuring plan of the portfolio of Alpha Bank Group in order to service the business initiatives and under the agreed with the best practices terms which are followed in similar transactions.
v. On 14.9.2016 the subsidiary of the Group Alpha Astika Akinita A.E., proceeded to the acquisition from Alpha Group Investments Ltd of the total number of shares of Alpha Real Estate Services LLC for the amount of 11 thousand.
w. On 26.9.2016 the Bank participated in the share capital increase of its subsidiary, APE Fixed Assets A.E. with the amount of 72.2 thousand
x. On 29.9.2016 the subsidiary of the Bank , Alpha Group Investments Ltd participated in the share capital increase of the Group subsidiary, AEP Chanion A.E. with the amount of 10.6 million.
y. On 6.10.2016 the Bank has obtained one share of the subsidiary bank Alpha Bank Srbija A.D. without any payment, as a result of a donation by the minority shareholder. Therefore, the Bank's participation stood at 100%.
z. On 21.10.2016, the subsidiary of the Group, Alpha Astika Akinita A.E. sold the total number of shares of Alpha Astika Akinita D.O.O.E.L. Skopje for the amount of 775 thousand.
aa. On 24.11.2016 the subsidiary of the Bank , Alpha Group Investments Ltd participated in the share capital increase of the following Group subsidiaries, AEP Attikis A.E., AEP Attikis II A.E. and AEP Leivadias A.E., with the amounts of 300 thousand, 13.1 million and 200 thousand respectively.
bb. On 16.12.2016, the sale of the Bank's total participation in Ionian Hotel Enterprises A.E. share capital (approx. 97.3%) was completed. The price of the above transaction reached the amount of 76.1 million.
cc. On 19.12.2016, the subsidiary of the Bank, Alpha Group Investments Ltd participated in the share capital increase of the following Group subsidiaries, AGI RRE Poseidon Ltd and AGI BRE Participations 2 Ltd, with the amounts of 2.2 million and 2.1 million respectively.
dd. On 21.12.2016, the subsidiary of Group AGI RRE Poseidon Ltd participated in the share capital increase of the subsidiary of Group AGI RRE Poseidon Srl with the amount of 2.2 million.
ee. On 21.12.2016 the subsidiary of Group AGI BRE Participations 2 Ltd participated in the share capital increase of the Group subsidiary AGI BRE Participations 2BG EOOD with the amount of 2.1 million.
49. Restatement of financial statements
During the current period, the Group modified the way of presentation of figures related to the loyalty Bonus card program. These figures, which up to now were included in other expenses, other income and commissions are now included as a net amount in commission income. This modification is performed in order to reflect better the substance of the reward program. As a result of this change, some figures of the income statement of the comparative period reformed without changing the result.
Moreover the figures of the comparative period have been restated due to the presentation of Alpha Bank Srbija A.D. as a discontinued operation (note 47).
Restated Income Statement and Statement of Cash Flows for the period 1.1-31.12.2015 are presented below.
Consolidated Income Statement
(Amounts in thousands of Euro)
From 1 January to 31.12.2015
Published Amounts
Restatements due to changes in the presentation of figures relating to the loyalty Bonus card program
Restatements due to the presentation of Alpha Bank Srbija A.D. as discontinued operation
Restated amounts
Interest and similar income
3,014,436
(41,696)
2,972,740
Interest expense and similar charges
(1,082,721)
7,442
(1,075,279)
Net interest income
1,931,715
(34,254)
1,897,461
Fee and commission income
383,410
(1,772)
(7,847)
373,791
Commission expense
(68,684)
1,237
2,297
(65,150)
Net fee and commission income
314,726
(535)
(5,550)
308,641
Dividend income
3,308
-
3,308
Gains less losses on financial transactions
(45,047)
(1,822)
(46,869)
Other income
63,202
(3,523)
(1,350)
58,329
21,463
(3,523)
(3,172)
14,768
Total income
2,267,904
(4,058)
(42,976)
2,220,870
Staff costs
(533,114)
13,488
(519,626)
Provision of Voluntary Separation Scheme
(64,300)
(64,300)
General administrative expenses
(560,219)
4,058
16,598
(539,563)
Depreciation and amortization expenses
(105,001)
2,414
(102,587)
Other expenses
(42,069)
1,276
(40,793)
Total expenses
(1,304,703)
4,058
33,776
(1,266,869)
Impairment losses and provisions to cover credit risk
(3,019,806)
32,160
(2,987,646)
Share of profit/(loss) of associates and joint ventures
(9,821)
-
(9,821)
Profit/(loss) before income tax
(2,066,426)
-
22,960
(2,043,466)
Income tax
806,758
56
806,814
Profit/(loss) after income tax
(1,259,668)
-
23,016
(1,236,652)
Profit/(losses) after income tax from discontinued operations
(111,786)
(23,016)
(134,802)
Profit/(loss) after income tax
(1,371,454)
-
-
(1,371,454)
Profit/(loss) attributable to:
Equity owners of the Bank
- from continuing operations
(1,259,928)
23,016
(1,236,912)
- from discontinued operations
(111,786)
(23,016)
(134,802)
(1,371,714)
(1,371,714)
Non-Controlling Interests
- from continuing operations
260
260
Profit/(loss) per share:
Basic and diluted (per share)
(3.56)
(3.56)
Consolidated Statement Cash Flow
(Amounts in thousands of Euro)
From 1 January to 31.12.2015
Published amounts
Restatement due to the presentation of Alpha Bank Srbija A.D. as discontinued operation
Restated amounts
Cash flows from continuing operating activities
Profit/(loss) before income tax
(2,066,426)
22,960
(2,043,466)
Adjustments for gain/(losses) before income tax for:
Depreciation/Impairment/Write offs of fixed assets
95,430
(3,291)
92,139
Amortization/Impairment of/Write offs of intangible assets
45,935
(221)
45,714
Impairment losses from loans, provisions and staff leaving indemnity
3,149,215
(32,160)
3,117,055
(Gains)/losses from investing activities
75,511
185
75,696
(Gains)/losses from financing activities
31,714
31,714
(Gains)/losses ratio from associates and joint ventures
9,821
9,821
Other adjustments
9,529
9,529
1,350,729
(12,527)
1,338,202
Net (increase)/decrease in assets relating to continuing operating activities:
Due from banks
1,054,744
4,708
1,059,452
Trading securities and derivative financial assets
356,870
1
356,871
Loans and advances to customers
(185,928)
(37,098)
(223,026)
Other assets
(54,997)
487
(54,510)
Net increase /(decrease) in liabilities relating to continuing operating activities:
Due to banks
7,818,259
24,095
7,842,354
Derivative financial liabilities
(345,700)
(29)
(345,729)
Due to customers
(11,043,856)
34,942
(11,008,914)
Other liabilities
(229,971)
(345)
(230,316)
Net cash flows from continuing operating activities before taxes
(1,279,850)
14,234
(1,265,616)
Income taxes and other taxes paid
(40,794)
(40,794)
Net cash flows from continuing operating activities
(1,320,644)
14,234
(1,306,410)
Net cash flows from discontinued operating activities
13,365
(14,234)
(869)
Cash flows from continuing investing activities
Investments in subsidiaries and associates and joint ventures
(12,310)
(12,310)
Acquisitions during the period
9,151
9,151
Income from subsidiary disposal
15,392
15,392
Dividends received
3,308
3,308
Purchases of fixed and intangible assets
(107,691)
2,138
(105,553)
Disposals of fixed and intangible assets
15,915
(1,645)
14,270
Net (increase)/decrease in investement securities
31,265
(23,796)
7,469
Cash flows from continuing investment activities
(44,970)
(23,303)
(68,273)
Net cash flows from discontinued investing activities
9,949
23,303
33,252
Repayment of debt securities in issue and other borrowed funds
(9,640)
(9,640)
(Purchases)/sales of hybrid securities
(1,730)
(1,730)
Share capital increase
1,552,169
1,552,169
Share capital increase expenses
(61,276)
(61,276)
Net cash flows from continuing financing activities
1,479,523
-
1,479,523
Effect of exchange rate differences on cash and cash equivalents
(3,334)
(3,334)
Net increase/(decrease) in cash flows-continuing activities
110,575
(9,069)
101,506
Net increase/(decrease) in cash flows-discontinued activities
23,314
9,069
32,383
Cash and cash equivalents at the beginning of the year
1,194,244
1,194,244
Cash and cash equivalents at the end of the year
1,328,133
1,328,133
Within the first half of 2016, the Group completed the valuation of the net assets of Asmita Gardens S.R.L., which was acquired in the second quarter of 2015. The adjustments to the temporary fair values were recognized retrospectively as if the accounting treatment of the acquisition had been completed at the acquisition date.
Moreover the figures of the Consolidated Balance Sheet of the comparative period have been restated due to the accurate presentation of Alpha Bank AD Skopje's figures, which have been recorded directly in equity. Therefore on 31.12.2015 the figures of the Balance Sheet were modified as depicted below:
Consolidated Balance Sheet
(Amounts in thousands of Euro)
31.12.2015
Published amounts
Finalization of accounting treatment of Asmita Gardens SRL
Restatement due to the correct presentation of amounts recognized directly in equity of Alpha Bank A.D. Skopje
Restated amounts
ASSETS
Cash and balances with Central Banks
1,730,327
1,730,327
Due from banks
1,976,273
1,976,273
Securities held for trading
2,779
2,779
Derivative financial assets
793,015
793,015
Loans and advances to customers
46,186,116
46,186,116
Investment securities
- Available for sale
5,794,484
5,794,484
- Held to maturity
79,709
79,709
- Loans and receivables
4,289,482
4,289,482
Investments in associates and joint ventures
45,771
45,771
Investment property
623,662
623,662
Property, plant and equipment
860,901
860,901
Goodwill and other intangible assets
342,251
2,900
345,151
Deferred tax assets
4,398,176
4,398,176
Other assets
1,510,225
(1,592)
1,508,633
68,633,171
1,308
68,634,479
Assets held for sale
663,063
663,063
Total Assets
69,296,234
1,308
69,297,542
LIABILITIES
Due to banks
25,115,363
25,115,363
Derivative financial liabilities
1,550,529
1,550,529
Due to customers (including debt securities in issue)
31,434,266
31,434,266
Debt securities in issue and other borrowed funds
400,729
400,729
Liabilities of current income tax and other taxes
38,192
38,192
Deferred tax liabilities
20,852
20,852
Employee defined benefit obligations
108,550
108,550
Other liabilities
910,622
1
910,623
Provisions
296,014
2,444
298,458
59,875,117
2,445
59,877,562
Total Liabilities related to assets held for sale
366,781
366,781
Total Liabilities
60,241,898
2,445
60,244,343
EQUITY
Equity attributable to equity owners of the Bank
Share capital
461,064
461,064
Share premium
10,790,870
10,790,870
Reserves
301,223
(1,137)
8,794
308,880
Amounts recognized directly in equity for held for sale items
8,834
(8,794)
40
Retained earnings
(2,546,885)
(2,546,885)
9,015,106
(1,137)
-
9,013,969
Non-controlling interests
23,998
23,998
Hybrid securities
15,232
15,232
Total Equity
9,054,336
(1,137)
9,053,199
Total Liabilities and Equity
69,296,234
1,308
69,297,542
50. Events after the balance sheet date
a. On 5.1.2017, the subsidiary of the Bank, Alpha Group Investments Ltd sold the 45.84% of the share capital of the Group subsidiary AEP Kefalariou A.E. for 11 thousand.
b. On 16.1.2017, the Bank participated in the share capital increase of the subsidiary Alphalife A.A.E.Z. with the amount of 25 million.
c. On 25.1.2017, the subsidiary of the Group Aktua Greece Financial Solutions S.A was renamed to Cepal Hellas Financial Services S.A, asset management company of loans and credits.
d. On 30.1.2017, the Bank agreed with the Serbian group of companies, MK Group, to sale its total participation (100% of the share capital) in Alpha Bank Srbija A.D. The completion of the transaction is subject to obtaining the relevant regulatory approvals.
e. On 3.2.2017, the subsidiary of the Bank, Alpha Group Investments Ltd participated in the share capital increase of its subsidiary AEP Kefalariou A.E. with the amount of 9.75 million.
f. On 23.2.2017, as a result of exercising the conversion right of all bondholders, the Bank increased its share capital, due to the conversion of the convertible bond that was issued on 1.2.2013, under the agreement with Credit Agricole S.A for the acquisition of former Emporiki Bank. From the conversion 6,818,181 new common shares were issued, which represent a 0.44% of total shares.
g. On 3.3.2017, following the capitalization of the loan granted to the Group subsidiary, AGI-Cypre Ermis Ltd, the Bank participated in the share capital increase of the respective subsidiary and acquired 75% of its total share capital.
h. On 7.3.2017, as a result of restructuring plan, the Bank acquired 47% of the share capital of the company Famar S.A.
i. On 29.3.2017 the law "Incorporation into national law of Directive 2014/92/EU of the European Parliament and of the Council of 23 July 2014 on the comparability of fees associated with payment accounts, change payment account and access to payment accounts with basic features and other provisions" was voted, which concerns among others the modification of Law 4172/2013 legal provisions.
Article 43 of the voted Law amends the articles 27 and 27A of the Law 4172/2013 in order to arrange the treatment of deferred tax asset already recognized and can be converted under certain conditions into a final and settled claim from credit institutions in a manner consistent with the write-offs and forbearance of loans to customers.
The amendment facilitates the implementation of the financial institutions' target to reduce non-performing loans through write-offs and forbearance, without risking their capital adequacy.
Athens, 30 March 2017
THE CHAIRMAN
OF THE BOARD OF DIRECTORSTHE MANAGING DIRECTOR
THE GENERAL MANAGER
AND CHIEF FINANCIAL OFFICERTHE ACCOUNTING
AND TAX MANAGERVASILEIOS T. RAPANOS
ID No 666242DEMETRIOS P. MANTZOUNIS
ID No 166670
VASILEIOS E. PSALTIS
ID No 666591
MARIANNA D. ANTONIOU
ID No 694507
This information is provided by RNSThe company news service from the London Stock ExchangeENDFR WGUWWWUPMGMU
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