REG - Alpha Bank A.E. - Half-year Report <Origin Href="QuoteRef">ACBr.AT</Origin> - Part 5
31/08/2017 18:15
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4. Alpha Supporting Services Α.Ε. Greece 100.00 100.00
5. Real Car Rental A.E. Greece 100.00 100.00
6. Evisak Α.Ε. Greece 85.71 85.71
7. Emporiki Management Α.Ε. Greece 100.00 100.00
8. Alpha Bank Notification Services Α.Ε. Greece 100.00 100.00
b. Joint ventures
1. APE Commercial Property Α.Ε. Greece 72.20 72.20
2. APE Investment Property A.E. Greece 72.80 72.80
3. Alpha ΤΑΝΕΟ Α.Κ.Ε.S. Greece 51.00 51.00
4. Rosequeens Properties Ltd. Cyprus 33.33 33.33
5. Cepal Holding A.E. Greece 45.00
APE Investment Property is the parent Company of a Group of Companies, in which the subsidiaries SYMET SA, Astakos Terminal
SA, Akarport SA and NA.VI.PE SA are included. Furthemore, Rosequeens Properties Ltd is the Parent Company of a group of
Companies in which the subsidiary Rosequeens Properties SRL is included.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 %
30.6.2017 31.12.2016
1. ΑΕDEP Thessalias and Stereas Ellados Greece 50.00 50.00
2. A.L.C. Novelle Investments Ltd Cyprus 33.33 33.33
3. Banking Information Systems Α.Ε. Greece 23.77 23.77
4. Propindex Α.Ε.D.Α. Greece 35.58 35.58
5. Olganos Α.Ε. Greece 30.44 30.44
6. Alpha Investment Property Eleona A.E. Greece 50.00 50.00
7. Selonda Aquaculture A.E.G.E. Greece 21.97 21.97
8. Nireus Aquaculture AE Greece 20.65 20.65
9. Famar S.A. (28i) Luxembourg 47.04
10. Cepal Holding AE (28c, 28m, 28n) Greece 42.77
During the current period the Bank acquired 47,04% of the share capital of the company Famar S.A., which is parent company
of a group, at a price of four euro and seventy cents. This acquisition of the shares by the Bank as well as by three other
Greek banks, lenders of the company, took place within the context of the French pre-bankruptcy procedure, that Famar
entered into with a view to its restructuring. At the same time, the banks and a loan management company entered into an
agreement, which determines the way of decision making regarding the management of Famar, in order to maximize the recovery
potential of the value of the loans granted to the company by the Greek Banks. In addition, it is noted that according to
Famar's Articles of Association, there are corporate issues for which decision making is based on the number of
shareholders instead of the percentage of shares held. The company's shares are pledged for loans granted by the
aforementioned Greek banks to the previous shareholder of Famar S.A, both before and after the restructuring agreement. The
Bank assesses the above and classified the participation of Famar S.A. investments in associates.
Cepal Holdings S.A. is the parent company of the group companies with subsidiaries the companies Cepal Hellas Financial
Services Societe Anonyme for the Management of Receivables from Loans and Credits, Kaican Services Limited and Kaican
Hellas S.A.
Bank's participation in Cepal Holdings S.A. reclassified from joint ventures to associates following the agreement of
company's shareholders, signed during the second quarter of 2017, and the 4.5.2017 company's amended Articles of
Association.
Consolidated financial statements do not include the Commercial Bank of London Ltd which is a dormant company and Smelter
Medical Systems A.E., Aris-Diomidis Emporiki S.A., Metek S.A., Flagbright 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.
21. 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
Turnover in Greece on 31.12.2016 amounted to E 3,150,986 thousands, results before tax amounted to gains E 138,516
thousands, credit taxes on results amounted to E 123,529 thousands 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.Ε.Υ.
2. Alpha Α.Ε. Investment Holdings
3. Alpha A.E. Ventures Capital Management -ΑΚΕS
4. Emporiki Management Α.Ε.
Financing Companies
1. Alpha Leasing A.E.
2. ABC Factors A.E.
3. Diners Club Greece Α.Ε.P.P.
Asset Management
1. Alpha Asset Management Α.Ε.D.Α.Κ.
Insurance
1. Alpha Insurance Agents Α.Ε.
2. Alphalife A.A.E.Z.
Real estate and hotels
1. Alpha Astika Akinita Α.Ε.
2. Ioniki Hotel Enterprises Α.Ε.
3. Oceanos Α.Τ.Ο.Ε.Ε.
4. Emporiki Development and Real Estate Management Α.Ε.
5. Alpha Investment Property Chalandriou Α.Ε.
6. Alpha Investment Property Attikis Α.Ε.
7. Alpha Investment Property Attikis II Α.Ε.
8. Alpha Investment Property Amarousion Ι Α.Ε.
9. Alpha Investment Property Amarousion ΙΙ Α.Ε.
10. APE Fixed Assets Α.Ε.
11. Αlpha Investment Property Neas Kifisias Α.Ε.
12. Αlpha Investment Property Kalirois Α.Ε.
13. Αlpha Investment Property Levadias Α.Ε..
14. Αlpha Investment Property Kefalariou Α.Ε.
15. Alpha Investment Property Neas Erythraias Α.Ε.
16. Alpha Investment Property Chanion AE
Special purpose and holding entities
1. Ionian Holdings Α.Ε.
Other companies
1. Kafe Alpha A.E.
2. Alpha Supporting Services Α.Ε.
3. Real Car Rental A.E.
4. Evisak Α.Ε.
5. Alpha Bank Notification Services Α.Ε.
Bulgaria
Turnover in Bulgaria on 31.12.2016 amounted to E 2,614 thousands, results before tax amounted to losses E (2,384)
thousands, taxes on results amounted to E (42) thousands and the following companies included:
Real estate and hotels
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.
Cyprus
Turnover in Cyprus on 31.12.2016 amounted to E 232,317 thousands, results before tax amounted to losses E (90,680)
thousands, credit taxes on results amounted to E 1,793 thousands 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 hotels
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-RRE Arsinoe Ltd
21. AGI-SRE Ariadni Ltd
22. AGI-Cypre Alaminos Ltd
23. AGI-Cypre Tochni 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
Turnover in United Kingdom on 31.12.2016 amounted to E 27,451 thousands, results before tax amounted to gains E 3,761
thousands, taxes on results amounted to E (794) thousands, the number of employees was 42 and the following companies
included were:
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
Jersey
Turnover in Jersey on 31.12.2016 amounted to E 454 thousands and the results before tax amounted to losses E (79)
thousands.
Special purpose and holding entities
1. Alpha Group Jersey Ltd
Serbia
Turnover in Serbia on 31.12.2016 amounted to E 41,037 thousands, results before tax amounted to gains E 6,037 thou-sands,
tax on results amounted to E (32) thousands, the number of employees was 836 and the following companies included were:
Banks
1. Alpha Bank Srbija A.D.
Real estate and hotels
1. Alpha Real Estate D.O.O. Beograd
Special purpose and holding entities
1. AGI-SRE Ariadni DOO
Romania
Turnover in Romania on 31.12.2016 amounted to E 159,666 thousands, results before tax amounted to gains E 20,286 thousands,
taxes on results amounted to E (4,533) thousands, the number of employees was 1,882 and the following companies included
were:
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 hotels
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
Turnover in Albania on 31.12.2016 amounted to E 22,924 thousands, results before tax amounted to losses E (10,238)
thousands, tax on results amounted to E (92) thousands the number of employees was 415 and the following companies
included were:
Banks
1. Alpha Bank Albania SH.A.
FYROM
Turnover in FYROM on 31.12.2016 amounted to E 2,090 thousands, results before tax amounted to losses E (991) thou-sands,
credit tax on results amounted to E 21 thousands and the following companies included were:
Banks
1. Alpha Bank AD Skopje
Real estate and hotels
1. Alpha Astika Akinita D.O.O.E.L. Skopje
Ireland
On 31.12.2016, turnover in Ireland amounted to E 383 thousands.
Special purpose and holding entities
Alpha Proodos D.A.C.
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)%).
22. Operating segments
(Amounts in million of Euro)
1.1 - 30.6.2017
Retail Banking Corporate Banking Asset Management/Insurance Investment Banking/ Treasury South Eastern Europe Other Group
Net interest income 483.6 320.6 6.4 43.4 120.1 2.0 976.1
Net fee and commission income 51.5 59.9 23.5 13.3 12.6 0.7 161.5
Other income 4.4 (30.5) 1.6 79.1 9.0 (3.2) 60.4
Total income 539.5 350.0 31.5 135.8 141.7 (0.5) 1,198.0
Total expenses before impairment losses and provisions to cover credit risk (325.0) (80.1) (15.0) (14.1) (85.4) (40.2) (559.8)
Impairment losses (436.3) 58.3 (85.4) (463.4)
Profit/(Loss) before income tax (221.8) 328.2 16.5 121.7 (29.1) (40.7) 174.8
Income tax (56.8)
Profit/(Loss) after income tax from continuing operations 118.0
Profit/(Loss) from discontinued operations (68.5) (68.5)
Profit/(Loss) after income tax 49.5
Assets 30.6.2017 24,870.8 15,277.2 383.2 9,595.6 7,676.1 4,907.1 62,710.0
Liabilities 30.6.2017 22,443.8 5,630.6 1,549.3 17,714.0 5,736.4 178.5 53,252.6
---------------------------
* According to European Securities and Markets Authority guidelines (ESMA), the definition and precise calculation of
the ratio is presented in the Semi Annual Report's Appendix.
(Amounts in million of Euro)
1.1 - 30.6.2016
Retail Banking Corporate Banking Asset Management/Insurance Investment Banking/ Treasury South Eastern Europe Other Group
Net interest income 506.0 349.0 7.6 (40.5) 129.1 1.6 952.8
Net fee and commission income 54.1 67.0 16.6 4.6 12.7 0.7 155.7
Other income 3.3 5.8 (0.7) 18.6 26.4 32.3 85.7
Total income 563.4 421.8 23.5 (17.3) 168.2 34.6 1,194.2
Total expenses before impairment losses and provisions to cover credit risk (326.1) (75.3) (13.3) (14.5) (90.8) (37.1) (557.1)
Impairment losses (166.0) (357.2) (82.7) (605.9)
Voluntary separation scheme cost (31.5) (31.5)
Profit/(losses) before income tax 71.3 (10.7) 10.2 (31.8) (36.8) (2.5) (0.3)
Income tax (24.5)
Profit/(losses) after income tax from continuing operations (24.8)
Profit/(losses) from discontinued operations 5.9 5.9
Profit/(losses) after income tax (18.9)
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
i. Retail Banking
Includes all individuals (retail banking customers), professionals, small and very small companies operating in Greece and
abroad excluding countries in South Eastern Europe.
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
Includes all medium-sized and large companies, corporations with international business activities, corporations managed by
the Corporate Banking Division and shipping companies operating in Greece and abroad except from South Eastern European
countries. The Group offers working capital facilities, corporate loans, and letters of guarantee for the abovementioned
corporations. This sector also includes leasing products which are provided by the subsidiary company Alpha Leasing A.E. as
well as factoring services which are provided by the subsidiary company ABC Factors A.E.
iii. Asset Management/Insurance
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 former
subsidiary Alpha Insurance A.E. or through the subsidiary Alphalife A.A.E.Z.
iv. Investment Banking/Treasury
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
Consists of the Bank's branches and 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 and Alpha Bank Srbija A.D, are not included anymore in
the results of the continuing activities in this sector anymore. Their financial result is included in the category
"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 relevant figures of subsidiaries abroad are included in the Southeast Europe operating segment.
The following lending figures of the Bank are included in the assets of "Retail Banking" operating segments. In addition,
ABC Factors S.A. and Alpha Leasing S.A. lending figures, that are administered by Non-Performing Loans Division and
Wholesale Banking, according to the internal procedures of the Bank, are included in the Southeast Europe operating
segment.
30.6.2017 31.12.2016
Balance before Impairment Accumulated Impairment Balance after Impairment Balance before Impairment Accumulated Impairment Balance after Impairment
Mortgages 7,732,369 2,347,510 5,384,859 7,655,203 2,032,511 5,622,692
Consumer loans 4,312,369 2,400,266 1,912,103 4,336,599 2,394,214 1,942,385
Corporate loans 13,522,060 6,991,109 6,530,951 14,030,221 7,785,885 6,244,336
Total 25,566,798 11,738,885 13,827,913 26,022,023 12,212,610 13,809,413
23. 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
service of public debt, the Group monitors the credit risk from its exposure to the Greek State as well as the remaining
peripheral Eurozone countries.
i. Exposure to the Greek State
The table below presents the Group's total exposure in Greek Government securities:
30.6.2017 31.12.2016
Portfolio Nominal value Carrying amount Nominal value Carrying amount
Available for sale 4,100,876 3,757,756 4,175,594 3,589,720
Trading 5,591 4,715 2,861 2,256
Total 4,106,467 3,762,471 4,178,455 3,591,976
All Greek Government securities are classified in Level 1 based on the quality of inputs used for the estimation of their
fair value.
In addition the carrying amount of securities issued by the public entities/organizations on 30.6.2017 amounted to E 111.1
million (31.12.2016: E 151.9 million.).
The Group's exposure to Greek State credit risk from other financial instruments, excluding securities and loans and
advances is depicted in the table below:
On balance sheet exposure
30.6.2017 31.12.2016
Carrying amount Carrying amount
Derivative financial instruments - assets 319,387 342,737
Derivative financial instruments - liabilities (45,648) (69,299)
Derivative financial liabilities from public sector entities/organizations amounted to E 5.4 million as at 30.6.2017
(31.12.2016: E 8.4 million assets).
The Group's exposure in loans granted to public sector entities/organizations as at 30.6.2017 amounted to E 1,135.5 million
(31.12.2016: E 1,112 million). The Group for the above receivables has recognized impairment amounted toE 48.3 million as
at 30.6.2017 (31.12.2016: E 49.1 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) as at 30.6.2017 amounted to E 695.3 million
(31.12.2016: E 720.6 million). For these loans the Bank has recognized impairment amounted to E 122.7 million as at
30.6.2017 (31.12.2016: E 149.2 million).
Off balance sheet exposure
30.6.2017 31.12.2016
Nominal value Fair Value Nominal value Fair Value
Greek Government Treasury Bills received as guarantee for financing 56,100 55,999 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 E 88 million (31.12.2016: E 114.5 million), bonds issued by the Italian Republic with a book value of E 9.7 million
(31.12.2016: E 9.8 million) and bonds issued by the Spanish Republic with a book value of E 12.4 million (31.12.2016: E
10.8 million).
As at 30.6.2017 the Group had no exposure to bonds issued by Portugal and Ireland.
24. Disclosures relevant to the fair value of financial instruments
Fair value of financial instruments measured at amortized cost
30.6.2017 31.12.2016
Fair value Carrying amount Fair value Carrying amount
Financial Assets
Loans and advances to customers 43,475,123 43,785,350 44,102,220 44,408,760
Investments securities
- Held to maturity 19,902 21,356 41,859 44,999
- Loans and receivables 1,963,832 1,919,723 2,743,600 2,682,655
Financial Liabilities
Due to customers 33,117,609 33,140,798 32,913,723 32,946,116
Debt securities in issue * 505,174 505,377 599,743 602,870
The table above presents the fair value and the carrying amount of financial instruments which are measured at amortized
cost.
The fair value of loans is estimated based on the interbank market yield curves by adding a liquidity premium and
adjustments for credit 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 of these cases, the future cash flows (floating rate)
are calculated based on the implied forward rates until their maturity.
The fair value of held to maturity securities and debt securities in issue is calculated using market prices, as long as
the market is active. In all other cases as well as for the loans and receivables portfolio the discounted cash flows
method is used and all significant variables are based either on observable market data or on a combination of observable
and unobservable market data.
The fair value of other financial assets and liabilities which are valued at amortized cost does not differ materially from
the respective carrying amount.
-------------------
* On 31.12.2016 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. The convertible bond matured on 1.2.2017.
Hierarchy of financial instruments measured at fair value
30.6.2017
Level 1 Level 2 Level 3 Total
Fair value
Derivative Financial Assets 3,874 547,179 18,346 569,399
Securities held for trading
- Bonds and Treasury bills 4,715 4,715
- Shares 2,563 2,563
Available for sale securities
- Bonds and treasury bills 5,047,791 433,365 30,220 5,511,376
- Shares 62,674 20,035 52,489 135,198
- Other variable yield securities 24,144 24,144
Derivative financial liabilities 6 1,136,136 1,136,142
Convertible bond - - - -
31.12.2016
Level 1 Level 2 Level 3 Total
Fair value
Derivative Financial Assets 4,224 624,740 5,359 634,323
Securities held for trading
- 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 loan 13,995 13,995
The tables above present the fair value of hierarchy financial instruments which are measured at fair value based on the
inputs used for the fair value measurement.
Securities traded in an active market and exchange-traded derivatives are classified as 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.
Shares whose fair value is assessed based on calculations are classified either in Level 2 or Level 3, depending on the
extent of the contribution of unobservable data to the estimation of their fair value. The fair value of both non listed
shares and shares not traded in an active market is determined based either on multiples valuation method or 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.
In particular, with respect to investments in quoted shares for which it has not been used market price, the market was
considered inactive because the number of daily transactions was low, whilst no transactions were inquired at a substantial
numer of daily sessions. On the basis of the above and after taking into account the fact that the main shareholders hold a
high share of voting rights resulting to a low degree of diversification in the Athens Stock Exchange over time, the market
price of the shares was not considered to be representative of their fair value and the Group determines the fair value
using the multiples method. These shares were classified at Level 3 and their fair value stood at euro 9.5 million.
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 in the context of the daily process of collaterals's endowement 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.
Regarding derivatives, the Group estimates a Credit Valuation Adjustment by taking into account counterparty credit risk
for Derivative Financial Instruments trading in OTC.
Credit valuation adjustments (CVA) are estimated in order to account for the credit risk of the counterparty inherent in
OTC derivative transactions. In order to consider the bilateral nature of counterparty risk, Alpha Group estimates
bilateral credit valuation adjustments (BCVA) for the OTC derivatives held on a counterparty level taking into
consideration netting and collateral agreements in force. BCVA is calculated across all counterparties with a material
effect on the respective derivative fair values taking into consideration the default probability of both the counterparty
and Alpha Group, the impact of first to default, the expected OTC derivative exposure and loss given default of the
counterparty and of Alpha Group and the specific characteristics of netting and collateral agreements in force.
Collateral is simulated along with the derivative portfolio exposure over the life of the related instruments. Calculations
performed depend largely on observable market data. Market quoted counterparty and group CDS spreads are used in order to
derive the respective probability of default, a market standard recovery rate is assumed for developed market
counterparties, correlations between market data are taken into account and a series of simulations is performed to model
the portfolio exposure over the life of the related instruments. In the absence of quoted market data, counterparty
probability of default and loss given default are provided by the group's internal credit and facility rating systems for
the valuation of collaterals and credit worthiness.
A breakdown of BCVA across counterparty sectors and credit quality (as defined for presentation purposes of the table
"Analysis of neither past due nor impaired Loans and Advances to customers) is given below:
30.6.2017 31.12.2016
Counterparty Sector
Corporate (8,028) (7,874)
Sovereign (40,789) (71,084)
30.6.2017 31.12.2016
Counterparty Credit Quality
Strong (347)
Satisfactory (41,191) (72,337)
Watch List (higher Risk) (7,279) (6,621)
The Group used the discount cash flow method to assess the contingent sale price of Ionian Hotel Enterprises S.A., which
reached the amount of E 4.5 million and was classified to"Other assets". The above method used was based to a business plan
submitted by Ionian Hotel Enterprises A.E. Net present value of discounted cash flows amounted to E 9.7 million on
30.6.2017. Taking into account that the cost for preferred shares' acquisition of Ionian Hotel Enterprises S.A. amounts to
E 5.2 million, the estimated fair value of sales price as of 30.6.2017 amounted to E 4.5 million. The above valuation is
classified to Level 3 as for the estimation of fair value unobservable inputs were used.
Finally, the valuation of the convertible bond was based on its estimated share price at the maturity date of the bond, as
reflected in the Group's business plan, which is unobservable market parameter.
The Group recognizes the transfer between fair value hierarchy Levels at the end of each reporting period.
Within the period, E 6.6 million of Greek corporate bonds were transferred from Level 1 to Level 2 as the liquidity margin
(bid-ask spread) exceeded the limit set out for the characterization of market as an active one.
The table below presents the valuation methods used for the measurement of Level 3 fair value:
30.6.2017
Total Fair Value Valuation Method Significant
Fair Value non-observable inputs
Derivative Financial Assets 18,346 3,588 Discounted cash flows with interest rates being the underlying instruments, taking into account the credit risk The probability of default and the loss given default of the counterparty (BCVA adjustment) is calculated with an internal model
14,594 Discounted option taking into account the counterparty's credit risk Credit Risk Spread
164 Discounted cashflows with interest rates being the underlying instrument Valuation of reserve adequacy for payment of hybrid securities' dividends
Available for sale bonds 30,220 30,220 Based on issuer price - Market prices due to low market activity - Discounted cash flows with estimation of credit risk - Discounted cash flows with estimation of bond's return and estimation of shares return as a Issuer's Price - Margin of Credit Risk / Return of Bonds and Shares
result of expected restructuring
Available for sale shares 52,489 52,489 Discounted cash flows - Multiples valuation method Future profitability of the issuer
31.12.2016
Total Fair Value Valuation Method Significant
Fair Value 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 Issuer price / Credit spread
Available for sale shares 46.326 46.326 Discounted cash flows - Multiples valuation method Future profitability of the issuer
Convertible bond 13.995 13.995 Discounted cash flows - Multiples valuation method Assessment of issuers market price
Material unobservable inputs that were used for the valuation of Ionian Hotel Enterprises A.E. contingent sale price, which
amounted to E 4.5 million, is the cost of equity for both Ionian Hotel Enterprises S.A. and the Bank.
The table below presents changes in financial instruments that are estimated in fair value and classified as Level 3:
30.6.2017
Assets Liabilities
Available for sale securities Derivative Financial Assets Derivative Financial Liabilities Convertible Bond
Opening balance 1.1.2017 63,313 5,359 (13,995)
Total gain or loss recognized in the income statement 8,801 14,324 1,790
Total gain or loss recognized directly in equity 241
Purchases/issues 10,206
Sales/repayments/settlements/redemptions (22,813) (961) 12,205
Transfers to Level 3 from Level 2 22,971 482
Transfers to Level 2 from Level 3 (10) (858)
Balance 30.6.2017 82,709 18,346 -
Amounts included in the income statement and relate to financial instruments included in the balance sheet at the end of the reporting period 1.1 - 30.6.2017 595 14,324
During the period, a bond was transferred from Level 2 to Level 3 amounting to E 23 million, since non observable
parameters were used for valuation purposes. In addition, during the period, a bond was transferred from Level 3 to Level 2
amounting to E 10, since observable parameters were used for valuation purposes.
Finally, in the context of the debt restructuring of acertain borrower, the Bank acquired the option to purchase a stake in
its share capital for a symbolic price. This option was recognized as a derivative with a fair value of E 14,594.49.
31.12.2016
Assets Liabilities
Available for sale securities Derivative Financial Assets Derivative Financial Liabilities Convertible Bond
Opening balance 1.1.2016 62,797 3,530 (24,600)
Total gain or loss recognized in the income statement (706) (112) 9,300
Total gain or loss recognized directly in equity 1,962
Purchases/Issues 420
Sales/Repayments/Settlements (1,281) (177)
Transfers to Level 3 from Level 1 4,838
Transfers to Level 3 from Level 2 3,672 (1,570)
Balance 30.6.2016 68,030 6,913 (1,570) (15,300)
Changes for the period 1.7 - 31.12.2016
Total gain or loss recognized in the income statement 320 (691) 119 1,305
Total gain or loss recognized directly in equity 942
Purchases/Issues 36
Sales/Repayments/Settlements (5,083) (355) 638
Transfers to Level 3 from Level 2 852
Transfers to Level 1 from Level 3 (932)
Transfers to Level 2 from Level 3 (1,360) 813
Balance 31.12.2016 63,313 5,359 - (13,995)
Amounts included in the income statement and relate to financial instruments included in the balance sheet at the end of the reporting period 1.1 - 30.6.2016. (579) (113) 9,300
During the period, E 4.8 million of shares were transferred from Level 1 to Level 3 as non-observable data were used for
their valuation and E 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 derivative financial assets 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) effected significantly the final valuation. On 31.12.2016 the above parameter did not
contribute significantly in the final valuation of those derivatives resulting in getting transferred to Level 2.
Sensitivity analysis for Level 3 financial instruments that their valuation on 30.6.2017 was based on significant
non-observable data is presented in the following table:
Significant Significant Total effect Total effect
non-observable inputs non-observable inputs change in Income Statement 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 credit ratings by 2 grades / Increase the loss given default by 10% (760)
Assessment of the adequacy of reserves for the payment of hybrid securities dividends Increase the probability of dividend payments to 100% (121)
Credit Risk Spread Increase credit risk's spread by 10% (851)
Available for sale bonds Issuer price / Adjustment due to low trading / Credit spread/ Return of Bond's and Share Price Variation +/-10% in issuer's price, -/+ 10% on the adjustment due to low marketability and estimation of credit risk, -/+ 10% on estimated return, furthermore +/-10% on the estimated valuation of shares 1,877 (1,857)
Available for sale shares Future profitability of the Issuer Variation +/- 10% in P/B and EV/Sales ratios (multiples valuation method) (89) 1,433 (1,344)
Total (1,821) 3,310 (3,201)
As far as Ionian Hotel Enterprises A.E. contingent 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 of E 4.06 million and at a
maximum value of E 4.54 million.
25. Capital adequacy
The policy of the Group is to maintain a strong capital base, in order to ensure the Group's development, and the trust of
depositors, shareholders, markets and business partners.
Share capital increases are conducted following resolutions of the General Meeting of Shareholders or of the Board of
Directors, in accordance with the Articles of Incorporation and the relevant laws.
The Group is allowed to purchase treasury shares, as permitted under the applicable laws.
The capital adequacy is supervised by the Single Supervisory Mechanism (SSM) of the European Central Bank (ECB), to which
reports are submitted on a quarterly basis. The minimum capital requirements regarding Common Equity Tier I (CET1), Tier 1
and Capital
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