REG - Alpha Bank A.E. - Annual Financial Report <Origin Href="QuoteRef">ACBr.AT</Origin> - Part 6
31/03/2017 07:07
- Part 6: For the preceding part double click ID:nRSe0956Be
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 E 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 E 10.3 billion, was approved. The first disbursement of
E 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 E 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 E 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 E 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 E 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 E 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 E 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 E 12.25 billion upon completion of the transaction.
ii. The distribution of preferred shares.
iii. The payment of an amount of E 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 E 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 E 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 E 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 E 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 E 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 E 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
Án 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 E 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 E 64.3 million. In 2016 E 35.3 million from the recorded provision was used resulting to a balance amounting
to E 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 E 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 E 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 E 49.5 million (31.12.2015:
E 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 E 14.4 million (31.12.2015: E 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 E 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 E 124.6 million (31.12.2015: E 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 E 3,341,802
(31.12.2015: E 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 E 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 E 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 E 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
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