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FIRST INVESTMENT BANK 2018
CONFIDENTIAL
2CONFIDENTIAL
Table of contents
Section 1 Macro environment 3
Section 2 Banking system overview 10
Section 3 Fibank profile 16
Section 4 2017 Q4 Results and profitability 28
Section 5 Management and corporate governance 37
Section 6 Capitalization & leverage 40
Section 7 Funding and liquidity 45
Section 8 Appendix 48
3
MACROENVIRONMENT
SECTION 1
4CONFIDENTIAL
Country profile
Source: National Statistical Institute, Bulgarian National Bank, Ministry of Finance
• Full name: Republic of Bulgaria• Memberships: European Union (since 2007),
NATO (since 2004)• Population: 7.2 M• Capital: Sofia• Area: 110,994 sq km (42,855 sq miles)• Official language: Bulgarian• Traditional religion: Orthodox Christianity• Monetary unit: Bulgarian Lev (plural: Levs,
code: BGN)• A currency board arrangement was established
in 1997 through the Bulgarian National Bank Act.• Fixed Exchange rate: EUR 1 = BGN 1.95583
(BGN 1 EUR 0.51)• Main tax rates:
• corporate tax rate of 10%;• personal income tax rate of 10%;• Value Added Tax Act (VAT) rate of 20%;
• Main exports: Ferrous and non-ferrousmetals, petrol products, foods and drinks,textiles, machines and equipment
• Payment Systems: RINGS, TARGET2 BNB, BISERA, BISERA7EUR, BORICA, SEPA, ESROT, CENTRAL DEPOSITARY
FRANCE
SPAIN
SWITZ.
ITALY
ANDORRA
PORTUGAL
MONACO
Madrid
Lisbon
Rabat
Gibraltar (U.K.)Algiers
Balearic
Islands
MOROCCO
TUNISIA
MALTATunis
Tripoli
Cairo
Valletta
LEBANON
ISRAEL
CYPRUS
IRAQ
SYRIANicosia
Beirut
Damascus
AmmanTel Aviv-Yafo
JORDAN
TURKEY
Crete
COMMONWEALTH OF
INDEPENDENT STATES
ROMANIA
BULGARIA
HUNGARY
Sofia
GREECE
AUSTRIA
ALB.
SLOVENIA
CROATIA
BOSNIA-
HERZEGOVINASERBIA
KOS.
MACE-DONIA
MONT.
Mediterranean Sea
ALGERIA
LIBYA EGYPT
SAUDI ARABIA
Red
Sea
BLACKSEA
Bulgarian economy had strong results over past few years with high growth and low unemployment
KEY DRIVERS OF THE BULGARIAN ECONOMY
• GDP growth in 2017 driven mainly by strong gross fixed capital formation and domestic demand (4.2% - 2017)
• The unemployment rate declined to 8.0% at the end of 2016, and 2017 expected at 6.9%, driven by employment in trade, agriculture, hospitality industry and education
• In 2017, the consolidatedbudget surplus increased to BGN2.5 B (2.5% of GDP) from BGN -2.5B (-2.8% of GDP) in 2015 due to the increased collectability of taxes and fees
• The current account remained positive, at the amount of BGN 2.6B, or 5.1% of GDP in 2017
INFLATION & UNEMPLOYMENT
DECREASED SINCE 2012
HICP & Unemployment(%, 2012-2017E)
BULGARIAN GDP GROWTH ABOVE EU AVERAGE
GDP real growth(%, 2012-2017E)
Source: International Monetary Fund; European Commission; Bulgarian Ministry of Finance; National Statistical Institute; Bulgarian National Bank
4CONFIDENTIAL
Going forward, the economy is expected to continue strong growth anywhere between ~3-4% p.a.
KEY DRIVERS OF THE BULGARIAN ECONOMY
• Future GDP growth is hovering around 3-4% being driven by strong net exports and private consumption. The positive outlook is also supported by expected acceleration of EU funds absorption
5
• Unemployment rate is expected to continue the decline from previous years, but at a lower pace. The trend is driven by the recovery in domestic demand
• The inflation rate is expected to gradually increase to 1.8% in 2021 due to strong domestic demand, higher prices for utilities and recovering energy prices
UNEMPLOYMENT EXPECTED TO FURTHER DECREASE & INFLATION TO INCREASE
HICP & Unemployment(%, 2012-2016)
GDP GROWTH EXPECTED TO CONTINUE AT
ATTRACTIVE LEVELS
GDP real growth(%, 2016-2021F)
Source: International Monetary Fund; European Commission; Economist Intelligence Unit; Bulgarian Ministry of Finance
CONFIDENTIAL
7CONFIDENTIAL
Bulgarian Economic Overview
Growth of Real GDP, Consumption and Investments
Macroeconomic indicators 2017 2016 2015 2014 2013
GDPEUR M 50, 429 48, 127 45, 285 42, 761 42, 010
Growth, % 4.0 3.9 3.6 1.3 0.9
Current accountEUR M 2,268.9 1,091.1 (16.9) 35.1 535.6
% of GDP 4.5 2.3 0.0 0.1 1.3
FDIEUR M 950 1 080 2 476 1 161 1 384
% of GDP 1.9 2.2 5.5 2.7 3.3
Budget deficit/ surplus % of GDP 0.9 0.2 (1.6) (5.5) (0.4)
Bulgaria Current Ratings
Date Outlook Rating
4 July 2017 Stable Baa1
2 Dec 2016 Stable BB+
4 July 2017 Stable BBB
Source: Bulgarian National Bank, National Statistical Institute, Ministry of Finance
0.0 0,91.3
3.6 3.9 4
-15.0
-10.0
-5.0
0.0
5.0
10.0
15.0
-20
-10
0
10
20
30
40
50
2012 2013 2014 2015 2016 2017
Final consumption Net export Investments GDP
8CONFIDENTIAL
Macro environment: Key indicators historic development
Indicators 2017 2016 2015 2014 2013 2012
Gross domestic product (BGN million) 99, 624 94,130 88,571 83,634 82,166 82,040
Gross domestic product, real growth (%) 4.0 3.9 3.6 1.3 0.9 0.0
- Consumption, real growth (%) 4.3 3.3 3.8 2.2 (1.9) 2.0
- Gross fixed capital formation, real growth
(%)3.4 (6.6) 2.7 3.4 0.3 1.8
Export (% of GDP) 50.6 48.8 48.4 49.2 50.5 48.5
Inflation at period-end (%) 2.8 0.1 (0.4) (0.9) (1.6) 4.2
Average annual inflation (%) 1.1 (0.8) (0.1) (1.4) 0.9 3.0
Unemployment (%) 7.1 8.0 10.0 10.7 11.8 11.4
Current account (% of GDP) 3.9 5.3 0.4 0.1 1.3 (0.9)
Trade balance (% of GDP) (2.1) (2.0) (5.9) (6.5) (7.0) (9.5)
Foreign exchange reserves of BNB (EUR
million)23,662 23,899 20,285 16,534 14,426 15,553
Foreign direct investments (% of GDP) 1.8 1.5 5.5 2.7 3.3 3.1
Gross external debt (% of GDP) 64.4 73.9 75.3 92.0 87.9 89.9
Public debt (% of GDP) 25.1 29.7 26.3 27.2 18.1 17.9
Consolidated budget balance (% of GDP) 0.9 1.6 (2.8) (3.7) (1.8) (0.4)
Exchange rate of USD (BGN for USD 1) 1.63 1.86 1.79 1.61 1.42 1.48
Source: National Statistical Institute, Bulgarian National Bank, Ministry of Finance
9CONFIDENTIAL
Mid-term macro forecast
Spring forecast 2017, Ministry of Finance 2017F 2018F 2019F
GDP real growth, % 3.0 3.1 3.2
- consumption 2.6 2.8 2.9
- investment 2.8 3.8 4.6
- exports 5.2 5.4 5.4
- imports 4.8 5.3 5.6
Unemployment, % 6.9 6.5 6.3
Average HICP, % 1.2 1.3 1.7
Current account, % of GDP 3.8 3.8 3.7
Trade balance, % of GDP -3.5 -3.2 -3.2
FDI, % of GDP 2.3 2.3 2.3
M3 aggregate 8.1 8.4 8.7
Loans to corporates 3.5 5.2 6.5
Loans to individuals 4.5 4.7 5.5
MACRO ASSUMPTIONS2017-2019F
FAVOURABLE MACRO ENVIRONMENT IN THE MID TERM (2017-2019F)
▪ Positive assumptions of the economic development during the period 2017-2019;
▪ Stable growth in GDP to slow down in 2017 & then to gradually increase exceeding 3% y/o/y;
▪ The consumption will accelerate its growth up to 2.9% y/o/y until 2019;
▪ The growth in exports will reach 5.4% y/o/y in 2019;
▪ FDI are expected to remain stable around 2.3% of GDP;
▪ Full production capacity in the business;
▪ Additional increase in the share of goods with a high value added;
▪ Recovery of the labour market;
▪ Reduction in unemployment rate down to 6.3% in 2019;
▪ Strong fiscal position;
▪ Increased activity on the real estate market of residential and office space;
▪ Augmentation of public investments;
▪ Acceleration in the absorption of EU funds;
▪ Expected completion of important infrastructure projects.
10
BANKING SECTOR OVERVIEW
SECTION 2
Healthy and Stable Banking Sector with Significant Growth Potential
Source: Bulgarian National Bank, SNL, EIU, ECB.
Notes: (1) Not comparable with previous years due to methodology change (CRD IV implementation). Several groups of factors impacted the capital position dynamics in 2014: different risk weights and manner of treatment due to the
implementation of the new EU regulatory framework, removal of specific provisions for credit risk and exclusion of KTB from the scope of data at the end of 2014.
(2) Calculated as the ratio between net interest income and financial assets.
22%
20%
9%
6%6% 5% 5%
7%8%
11%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
95%
117% 117%109%
98%92%
85%78%
70% 66%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
13.8%14.9%
17.0% 17.5% 17.5%16.7% 16.9%
21.9% 22.2% 22.2%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
95%
89%
85%
81%
75%
70%
68%
66%
63%
60%
59%
58%
57%
53%
49%
47%
41%
37%
36%
31%
Gre
ece
Esto
nia
Neth
erlands
Malta
Fin
lan
d
Po
rtuga
l
Cyp
rus
Be
lgiu
m
Cze
ch R
epublic
Sp
ain
Slo
venia
Bu
lga
ria
Rom
ania
Hungary
Po
lan
d
Fra
nce
Italy
United K
ingdom
Au
str
ia
Germ
any
261%
219%
213%
177%
148%
146%
119%
111%
111%
76%
75%
62%
61%
60%
59%
57%
49%
30%
Neth
erla
nds
Sp
ain
Au
str
ia
Fra
nce
Be
lgiu
m
Germ
any
United K
ingdom
Gre
ece
Italy
Sw
itzerlan
d
Cze
ch R
epublic
Bu
lga
ria
Hungary
Po
lan
d
Tu
rkey
Norw
ay
Russia
Rom
ania
4.3
%
3.8
%
3.6
%
2.8
%
2.5
%
2.5
%
2.2
%
1.9
%
1.7
%
1.5
%
1.5
%
1.5
%
1.2
%
1.2
%
Bu
lga
ria
Hungary
Rom
ania
Gre
ece
Slo
venia
Po
lan
d
Sp
ain
Au
str
ia
Po
rtuga
l
Italy
Irela
nd
Neth
erla
nds
Germ
any
Fra
nce
(1)
Robust Capital PositionTotal Capital Ratio
Improving ProfitabilityBulgarian Banking Sector RoAE
Decreasing Leverage (Net) Loans / Deposits Ratio
Relatively Low Loan PenetrationBanking Loans / GDP Ratio, 2015
Superior NIM Within EUNet Interest Margin(2), 2015
Fragmented Banking SectorShare of Assets of Five Largest Credit Institutions, 2015
7
0
200
400
600
800
1000
1200
1400
2015 2016 2017
0
10 000
20 000
30 000
40 000
50 000
60 000
70 000
80 000
90 000
2015 2016 2017
Business Retail
0
10 000
20 000
30 000
40 000
50 000
60 000
2015 2016 2017
Business Retail
12CONFIDENTIAL
Sector prospects: gradual increase in loan demand, on-going consolidation & new upward interest rate cycle.
BNB FORECAST 2017-18
Annual rate of change 2017f 2018f
Claims on non-government sector 3.0% 3.6%
- claims on non-financial corporations 2.9% 3.7%
- claims on households 3.0% 3.5%
Deposits of the non-government sector 6.4% 7.0%
▪ In the 2017–2018 period funds attracted from the non-government sector in the banking system are expected to grow further, though at lower than the average 2016 rates, driven by the projected acceleration of private consumption and, correspondingly, by a slight decrease in the savings rate, as well as by the expectations of comparatively strong demand for currency in circulation. The expectations of retaining deposit rates at the attained low levels will also contribute to the foreseen trends regarding funds attracted from corporations and households in the banking system.
▪ The recovery of private consumption and investment amid relatively low lending rates will be a factor stimulating demand for loans from the non-government sector. Progressively improving economic activity is also expected to be a factor behind banks’ increasing lending risk appetite. The expectations of gradually accelerating credit growth correspond to the assumption of retaining positive trends in new loans to the private sector which have occurred since the second quarter of 2016.
Source: BNB Economic Review 4/2016
NET PROFIT
TOTALDEPOSITS
TOTALLOANS
Loans,BGNb
52 52 53
+2%+0%
6974
78
Deposits,BGNb
+5%+7%
0.9
1.31.2
Net profit,BGNb
Net profit
+44% -8%
13CONFIDENTIAL
Current Status of the Bank System
Banking Sector as at 31 December 2017
у/oy 2017 2016 2015 2014 2013 2012
Bank system assets, BGN M 97 807 92 095 87 524 85 135 85 747 82 416
Growth of assets in the bank system,% 6.2 5.2 2.8 (0.7) 4.0 7.3
Bank system profit, BGN M 1 174.0 1 262.3 898.4 746.3 584.9 566.8
Profit growth, %, y/oy (7.0) 40.5 20.4 27.6 3.2 (3.3)
Bank system deposits, BGN M 78 405 74 129 69 276 63 710 62 230 57 256
Growth of deposits, % 5.8 7.0 8.7 2.4 8.7 8.4
Bank system loans, BGN M 53 553 52 442 52 256 54 158 57 376 56 847
Growth of loans, % 2.1 (1.8) (3.5) (5.6) 0.9 3.0
Capital adequacy, % - 22.15 22.18 21.95 16.85 16.7
Liquidity, % 38.97 38.24 36.71 30.12 27.1 26.0
In the period September 2017– December 2017,
the dynamics of processes in the banking system
was impacted by the increase in assets and
balance sheet capital.
The liquid assets ratio, as calculated under BNB
Ordinance No. 11, reached 38.97%.
Source: Bulgarian National Bank, December 2017
Loans and Deposits % of GDP
70.9 71.5 73.2
57.1 55.0 53.1
67.6 69.064.0
70.1 74.2 72.6
0
20
40
60
80
100
2012 2013 2014 2015 2016 2017
Credits Deposits
14CONFIDENTIAL
Fibank and the Bulgarian Banking System
Banking Sector as at 31 December 2017
Source: Bulgarian National Bank, September 2017 and December 2017;
in BGN MSeptember 2017
December 2017 Growth, %
ASSETSBanking system 95 112 97 807 2.8
Fibank 8 551 8 642 1.1
DEPOSITS (other than from credit institution)
Banking system 76 633 78 405 2.3
Fibank 7 359 7 411 0.7
DEPOSIT OF INDIVIDUALS AND HOUSEHOLDS
Banking system 48 019 49 455 3.0
Fibank 6 112 6 075 (0.6)
LOANS TO NON-BANKSBanking system 53 818 53 553 (0.5)
Fibank 5,483 5 509 0.5
CONSUMER LOANSBanking system 9 147 9 151 0.0
Fibank 866 889 2.6
MORTGAGE LOANSBanking system 9 203 9 460 2.8
Fibank 589 604 2.5
CORPORATE LOANSBanking system 33 464 33 160 (0.9)
Fibank 3 943 4 011 1.7
in BGN M December 2016 December 2017 Growth
PROFITBanking system 1 262.3 1174.0 (7.0)
Fibank 90.1 85.4 (5.3)
15CONFIDENTIAL
The banking sector: 27 banks & foreign branches operated in the country. Fibank in Top5 banks at December17.
TOTAL ASSETS(Q4’17, BGNm)
MARKET SHARE (Q4’17, %)
Citi Bank Europe- Bulgaria Branch
855 0.87
Paribas S.A., Sofia Branch 735 0.75
ING Bank N.V., Sofia Branch
671 0.69
T.C. Ziraat Bank, Sofia Branch
107 0.12
Isbank Gmbh-Sofia Branch 113 0.00
GROUP 3: FOREIGN BRANCHES
GROUP 2: OTHER BANKSGROUP 1: TOP 5 BANKS
TOTAL ASSETS(Q4’17, BGNm)
MARKET SHARE (Q4’17%)
Unicredit Bulbank 19,096 19.52
DSK Bank 12,150 12.42
First Investment Bank 8,642 8.84
Eurobank Bulgaria 7,421 7.59
United Bulgarian Bank 7,349 7.51
TOTAL ASSETS(Q4’17, BGNm)
MARKET SHARE (Q4’17, %)
Raiffeisenbank Bulgaria 6,997 7.15
SG Expressbank 6,430 6.57
Central Cooperative Bank 5,411 5.53
Cibank 3,619 3.70
Piraeus Bank 3,036 3.10
Allianz Bank 2,559 2.62
Bulgarian Development Bank2,471 2.53
Investbank 1,981 2.03
ProCredit Bank 1,964 2.01
Municipal Bank 1,510 1.54
International Asset Bank 1,372 1.40
BACB 1,240 1.27
D Commerce Bank 758 0.78
TBI Bank 686 0.70
Tokuda Bank 388 0.40
Texim Bank 220 0.22
Bank Victoria 122 0.13
▪ Fibank is the largest Bulgarian-owned bank ▪ Fibank is the third largest overall, systemically important
to the Bulgarian banking system
16
FIBANK PROFILE
SECTION 3
17CONFIDENTIAL
Fibank aspires to be one of the best banks in Bulgaria, recognized as innovative & customer-oriented bank
BUSINESS MODEL IN LINE WITH BANK MISSION
VISION AHEAD TO GROW FORWARD IN
RETAIL & SME
STRONG COMPETITIVE ADVANTAGES SUPPORTIVE
TO OUTPACE PEERS
First-class customer service
Flexibility in decision
making
Deep knowledge
of the market
Solid market
positions
Wide branch
network
High professional standards
Well recognized
brand
▪ Fibank aspires to be among the best banks in Bulgaria, recognized as a steadily growing, innovative, client-oriented bank, offering outstanding products and services.
▪ Fibank aims to ensure excellent careers for its employees & social contribution to the community.
▪ The Bank seeks to continue to develop high-technological solutions providing its customers with opportunities for banking from any place at any time.
▪ Emphasis on mortgage & consumer lending, the card business & innovative payment solutions in line with client needs & digital trends in banking business
RETAIL BANKING
▪ Strong focus on products & services to micro, small & medium enterprises (SME), with flexible approach and knowledge of the market & local specifics
COMMERCIAL BANKING
▪ Continue to develop model in line with the best corporate governance & risk mgmt. standards in banking industry
BEST STANDARDS
1
2
3
18CONFIDENTIAL
Top 3 Player: 25 years of stable development with focus on innovation and customer experience
2000Assets:
€173m
2005Assets:
€1.3bn
2010Assets:
€2.6bn
2012Assets:
€3.6bn
2016Assets:
€4.6bn
Fibank was established
1993 1997 1999 2000 2005 2007 2010 2013 2015
Fibank was established
EBRD became a shareholder in Fibank with 20% stake. Sold
its shares in 2005.
Fibank Albania established as a
branch. Grew into a separate 100%-
owned entity, licensed by BoA in 2007
Fibank started developing its retail banking. Retail deposits grew 2.3 fold.
Fibank issued EUR200m
Eurobonds. First in Bulgaria to
issue perpetual tier 2 bonds
Fibank realized
the biggest banking IPO in
Bulgaria.
1998-2008: Fibank attracted > EUR800m on
international debt markets
Fibank welcomed
its one millionth
client
2011-2013: First in
Bulgaria to issue Basel 3
compliant tier 1 bonds
totaling EUR100m
Fibank acquired MKB Unionbankin a EUR 24m, 0.25x P/B deal
Joint project with the IFC for
enhancing corporate governance & risk mgmt.
2016
1993
Fibank is among the first banks in Bulgaria to implement new chip
technology (EMV) in issuing debit & credit cards
Fibank was the first bank in Bulgaria to
offer contact-less payments
based on PayPass (NFC)
technology
Fibank first in Bulgaria and the Balkans
launched an innovative platform for digital
payments via mobile devices, with contactless (NFC) function and the
use of digital bank cards.
2017
Fibankengages Citigroup
Global Markets
Limited as a financial
adviser
Fibankcredit ratings were
upgraded by Fitch and
Moody's
3.16
3.37
5.40
6.44
6.87
7.42
7.40
9.61
12.64
20.22
3.10
3.70
5.53
6.57
7.15
7.51
7.59
8.84
12.42
19.52
Piraeus
Cibank
CCB
SGE
RZB
UBB
Eurobank
Fibank
DSK
UniCredit
2.93
2.94
6.01
6.51
6.41
7.51
7.52
10.38
13.20
20.09
2.90
2.92
6.20
6.68
6.88
7.52
7.76
9.45
13.13
19.80
Piraeus
Allianz
CCB
SGE
RZB
UBB
Eurobank
Fibank
DSK
UniCredit
2017 2016
3.39
3.26
4.08
8.28
6.88
7.41
8.72
10.49
13.51
18.67
2.94
3.49
4.22
7.13
7.18
7.87
9.59
10.29
13.72
16.99
Piraeus
Cibank
CCB
UBB
SGE
RZB
Eurobank
Fibank
DSK
UniCredit
19CONFIDENTIAL
Fibank is top 3 player in assets, loans and deposits at December 2017. Committed to innovation & product leadership
LOANS DEPOSITSTOTAL ASSETS
33
3
Market share (%, 2016 & 2017) Market share (%, 2016 & 2017) Market share (%, 2016 & 2017)
4.49
3.63
4.88
4.49
6.38
6.85
7.10
7.02
12.23
22.09
3.75
4.17
4.66
6.32
6.84
7.33
7.77
8.38
12.10
20.10
Piraeus
Procredit
CCB
UBB
SGE
RZB
DSK
Eurobank
Fibank
UniCredit
2017 2016
1.83
3.78
4.21
6.28
5.24
6.87
10.50
15.64
18.88
21.74
2.78
3.66
4.57
6.39
6.56
6.96
9.18
15.70
18.54
20.52
CCB
Allianz
Cibank
Fibank
SGE
RZB
UBB
Eurobank
UniCredit
DSK
2017 2016
4.04
3.68
2.83
3.87
10.57
9.66
8.78
10.04
11.40
29.10
2.83
3.72
3.82
4.68
8.93
9.25
9.72
10.36
12.15
28.22
UniCredit
Cibank
TBI
CCB
UBB
Eurobank
Fibank
SGE
RZB
DSK
2017 2016
2.62
3.19
5.77
6.67
7.19
8.13
8.65
13.51
15.92
16.25
2.55
2.98
6.10
6.77
7.26
8.07
8.51
12.28
16.35
16.90
Allianz
Piraeus
RZB
SGE
CCB
UBB
Eurobank
Fibank
UniCredit
DSK
2017 2016
20CONFIDENTIAL
Increased market shares in consumer loans & retail
deposits at December 2017 as part of long-term strategy.
CONSUMERLOANS
MORTGAGELOANS
RETAILDEPOSITS
CORPORATE LOANS
3
4
7
2
Market share (%, 2016 & 2017) Market share (%, 2016 & 2017) Market share (%, 2016 & 2017) Market share (%, 2016 & 2017)
21CONFIDENTIAL
Fibank with diverse and stable business model. Business mix weighted towards traditional banking.
▪ Limited presence
▪ Traditional banking products and services
▪ Focus on retail & SME clients
BUSINESSMIX
RETAILBANKING
COMMERCIALBANKING
FOREIGNOPERATIONS
CYPRUS
ALBANIA
Mortgage lending
Card business
Consumer lending
Dep
osit
an
d s
avin
gs p
ro
du
cts
Paym
en
t servic
es,
е-b
an
kin
g
Priv
ate
ban
kin
g,
Go
ld &
co
ins
In
vestm
en
t &
dep
osit
ory s
ervic
es
Factoring
Microlending
Corporate lending
SME lending
Trade financing
Project financing
EU programs financing
▪ Retail banking
▪ Corporate banking
▪ SME lending
▪ Microlending
▪ Card payments
▪ E-banking
▪ Private banking
▪ Trade financing
▪ Project financing
▪ Factoring
▪ EU programs financing
▪ Deposit & savings
▪ Payment services
▪ Money and capital markets
▪ Foreign exchange
▪ Investment gold
▪ Package programs
UNIVERSAL & TRADITIONAL
BANKING
1.141
1.160
1.174
1.12
1.13
1.14
1.15
1.16
1.17
1.18
2015 2016 2017
Number of customers withloan products, thousands
Total number of customers,thousands
22CONFIDENTIAL
Fibank customer profile: 92% retail customers, 63% in 25-55 age group. Strong potential for cross selling
CUSTOMERS GREW 2% DURING 2016 TO
REACH ~1.16M
24% OF RETAIL CLIENTS WITH LOAN PRODUCTS. CROSS SALE POTENTIAL
YOUNG & WELL-BALANCED CUSTOMER
PROFILE
+2%
+1%
+1%
251
254
260
246
248
250
252
254
256
258
260
262
2015 2016 2017
+2%
DEPOSIT PRODUCTS
PAYMENT SERVICES
PACKAGE PROGRAMS
DEBIT & CREDIT CARDS
DINERS CLUB CARDS
MORTGAGE LOANS
CONSUMER LOANS
BUSINESS LOANS
TRADE FINANCING
PROJECT FINANCING
FACTORING
EU FINANCING
E-BANKING
INVESTMENT SERVICES
GOLD & COINS
23CONFIDENTIAL
Distribution platform: Country-wide branch network with 155 locations in Bulgaria & 11 abroad (Cyprus & Albania)
MAP OF BRANCHES
Q4 2017 Sofia Country Total
Branches 53 102 155
ATMs 155 486 641
POS 5 547 4 340 9 887
ATM&POS5 702 4 826
10 528
Grand total
5 755 4 92810
683
NETWORK IN BULGARIA
FULL RANGE OF SERVICES CYPRUS BRANCH
▪ Fibank Cyprus branch has operated since 1997, initially mainly in the area of corporate banking. Over the years, it systematically and consistently expanded its products and services.
▪ Currently, the branch offers standard credit and savings products, payment services and e-banking, with a strategic focus on retail & SMEs customers.
FIBANK ALBANIABRANCH NETWORK
Q4 2017 Total
Head Office 1
Branches 9
Total 10
ATMs 29
Grand total 39
▪ Much of the branch network operates with extended working hours, as well as at weekends.
RETAILCLIENTS
BUSINESS CLIENTS
24CONFIDENTIAL
Multi-channel distribution network with adequate balance between physical locations & remote banking channels
MULTI-CHANNEL DISTRIBUTION NETWORK
PHYSICAL DISTRIBUTION
CHANNELS
REMOTE DISTRIBUTION
CHANNELS
Branch network
Direct sales
Remote channels
Integrated platform for electronic banking
My Fibank
Physical channels
ATMnetwork
POSnetwork
Corporate blogContact
center
▪ Branch network is the main channel for distribution of bank products & services.
▪ Fibank maintains a country-wide branch network with 157 locations in Bulgaria & 11 abroad.
▪ Further focus on optimization & increase efficiency of the branch network.
▪ Strong network of ATM & POS devices places Fibank among the market leaders
▪ Direct sales to corp.& institutional clients
▪ New integrated e-platform for digital banking featuring:
➢ E-banking
➢ Mobile banking
➢ Utility payments
➢ E-statements
▪ New opportunity to apply for consumer loan via Contact center. In 2016, over 25 campaigns carried out; 150’000 outgoing calls with 75% respondents reached.
▪ Corporate blog functioning since 2008 to test client’s satisfaction on Bank products & services
Corporate website
Online store for gold products
25CONFIDENTIAL
Group structure: Clear strategic focus on business in Bulgaria
FIRST INVESTMENT BANK AD
Companies in the financial sector
• First Investment Bank – Albania Sh.a.
• Diners Club Bulgaria AD
• Fi Health Insurance AD
Ancillary services companies
• First Investment Finance B.V.
• Balkan Financial Services EAD
• Turnaround Management EOOD
• Creative Investment EOOD
• Lega Solutions EOOD
• AMC ImotiEOOD
• Debita OOD
• Realtor OOD
Subsidiary companies
Parent company
CORPORATE GROUP STRUCTURE
3 KEY SUBSIDIARIES IN FINANCIAL SECTOR
▪ Replication of the successful business model in Bulgaria & its adaptation to the Albanian banking market through a subsidiary bank in Albania with limited presence and focus on retail & SME business.
▪ Further develop the strategic focus on the card business through promoting and consistently increasing penetration of the Diners Club brand in the local market in Bulgaria by offering new services for cardholders, and expanding the network of POS terminals accepting payments with Diners Club cards.
▪ Offering of insurance products & services in line with license of FiHealth Insurance for attracting new customers in the retail & SME segments.
SHAREHOLDERS’ STRUCTURE
26CONFIDENTIAL
Key subsidiaries: Sound performance & results in 2016, growing contributors to Group profit
FIRST INVESTMENT BANK - ALBANIA
DINERS CLUB BULGARIA
FIHEALTHINSURANCE
BGNm 2017 2016 %
Total income 16 13.9 14%
Net profit 6 5.2 23%
Loans 140 102 37%
Total assets 309 272 14%
Deposits 255 233 9%
Equity 39 33.3 17%
BGNm 2017 2016 %
Total income 2.6 2.3 13%
Net profit 0.3 0.2 32%
Loans 10.5 9.1 15%
Total assets 12.1 11.2 8%
Overdraft 9.0 8.3 9%
Equity 2.4 2.1 14%
BGNm 2017 2016 %
Total income 4.0 3.4 18%
Net profit 0.1 0.3 (67%)
Finan.assets 4.9 4.5 9%
Receivables 2.4 2.0 20%
Total assets 8.7 7.8 12%
Equity 5.8 5.7 1.8%
▪ 47% growth in net profit in 2016 due to increasing operational income & further efforts for cost efficiency. ROE reached 17.6%.
▪ Stable growth in both loans & deposits resp. by 15% & 11% with a focus on retail & SME segments.
▪ Portfolio of FIs grew in line with market & the strong liquidity.
▪ Equity grew 28% to BGN 33m.
▪ 145% growth in net profit in 2016 supported by operational income & cost optimization in the general & financial expenses.
▪ Sustainable growth in loans & receivables due to growing card business to retail customers.
▪ The used amount of bank overdraft increased to BGN 8.3m to copy with lending demand & new customers.
▪ 106% growth in net profit in 2016 due to increased net premiums, which incl. illness & accident insurances.
▪ Total assets grew 5% supported by increase in financial assets to BGN 4.5m, which include bank deposits & Bulgarian government bonds.
▪ Equity reached BGN 5.7m or 5% more y/o/y.
27CONFIDENTIAL
Recent awards confirmed Fibank’s successful development & strong focus on innovation & digitalization
STP AWARDS FROM KBC &
COMMERZBANK2 AWARDS ON
DIGITAL CARDSCARDS FOR CHILDREN
ONLINE APPLICATION
CONSUMER LOANS
▪ Fibank received an STP award 2016 from Comerzbank for excellent quality in the delivery of commercial payments and financial institution transfers.
▪ Another STP award was received from KBC, thus confirming Fibank’s consistent approach in delivering high-class of customer service.
PRODUCTS OF THE YEAR 2016:
▪ In April 2017 Fibank was awarded three prizes for innovations in the consumer’s sector on “Product of the year”.
▪ Fibank received the first award for its digital cards, enabling clients to pay easy, secure and fast through their NFC phone.
▪ A Second award on digital cards was received on the Webitinnovation & technology festival, organized in Sofia in 2017.
▪ Fibank received another award for its debit cards for kids & teenagers during the competition “Product of the year”.
▪ With this product the Bank gives young people a modern solution for management of their funds and at the same time developing their financial culture.
▪ The third award of Fibank on “Product of the year” was for its “Online application form for consumer loans”.
▪ Fibank has the right to use the red logo of the competition “Product of the year” during 1 year as a symbol for customers’ satisfaction and gratitude for its work.
28
RESULTS & PROFITABILITY
SECTION 4
29CONFIDENTIAL
Fibank with BGN 92m net profit in 2017, used as a strong tool for internal capital generation.
FINANCIAL HIGHLIGHTS 2016/2015Income statement, BGNth 2017 2016 2015
Net interest income 260,926 319,179 263,546
Net fee & commission income 102,146 91,486 84,217
Net trading income 15,326 13,937 11,017
Other operating income 28,191 40,115 62,802
Total operating income 406,589 464,717 421,582
Administrative expenses 204,698 (192,307) (180,827)
Impairment 78,850 (156,120) (329,137)
Other income/(expenses), net 20,431 (6,177) 108,734
Group profit after tax 92,210 98,811 17,851
Balance-sheet indicators, BGNth
2017 2016 2015
Cash & balances with central banks 1,478,594 1,639,888 1,522,374
Portfolio of financial instruments 803,999 891,835 679,545
Loans & advances to customers 5,162,90 5,044,850 5,221,360
Repossessed assets 984,448 1,034,501 931,555
Investment property 218,212 222,267 206,244
Total assets 8,921,18 9,089,855 8,885,364
Customer deposits 7,583,81 7,911,911 7,203,969
Ministry of Finance deposit - - 450,922
Other borrowed funds 127,493 70,367 135,726
Perpetual debt - - 44,663
Hybrid debt 208,786 208,740 202,044
Total Group equity 947,315 856,836 749,846
1
2
3
4
5
6
7
8
9
▪ Net interest income grew 21% due mainly to interest expense optimization down by 45% in 2016.
▪ Net F&C income remained strong contributor to the top line with 20% share of total income.
▪ Other operated income reinforced with BGN 25m gain from acquisition deal of Visa Europe by Visa Inc.
▪ Administrative expenses up to BGN 192m due to AQR-related consultancy one-offs. Cost optimisation furthered with cost/income ratio down to 41%.
▪ More conservative provisioning in 2015 continued in 2016 with BGN 263m additional write-downs, incl. on AQR-related exposures. Strong reversals reported at BGN 107m supporting CoR ratio down to 2.7%.
▪ In 2015, BGN 112m one-off income reported on revaluation of a new class of assets – investment property, that includes land & buildings, for generating rentals & capital appreciation.
▪ Portfolio of FIs grew 31% due to increase in HTM portfolio & new USA government debt investments.
▪ Loan portfolio down 3% as part of de-risking & diversification actions undertaken.
▪ Deposits grew 10% (outpacing system averages), thus further supporting liquidity.
▪ Full state aid repayment in May’16 & EUR 21m perpetual debt further reduced interest expenses.
1
2
3
4
5
6
7
9
8
30CONFIDENTIAL
Fibank with sound financial indicators. Improved profitability & coverage ratios due to conservative policy
FINANCIAL HIGHLIGHTS 2016/2015Key ratios, % 2017 2016 2015
CET1 ratio 15.89 12.01 11.28
T1 capital ratio 15.87 15.10 14.23
Total Capital adequacy ratio 12.87 15.13 14.72
Leverage ratio 11.28 10.11 10.11
Group equity/total assets 10.62 9.43 8.44
Liquid assets ratio 25.07 28.12 25.37
Liquid assets/customer deposits
26.21 29.12 28.32
LCR 334.85 327.37 325.61
NSFR 136.43 137.61 132.25
Net loan/deposit ratio 68.08 63.76 72.48
Earnings per share (in BGN) 0.84 0.90 0.16
ROE (after tax) 10.24 12.17 2.43
ROA (after tax) 1.03 1.12 0.20
Income diversity ratio 64.17 68.68 62.51
Cost/income ratio (CIR) 50.35 41.38 42.89
Net interest margin 4.14 5.04 3.88
Operating profit/RWAs 7.03 7.52 6.63
Cost of risk (CoR) 1.37 2.66 5.53
NPL90+ ratio 17.48 17.51 14.80
Provisioning coverage ratio 10.44 14.19 12.32
NPL90+ coverage ratio 59.74 67.82 53.69
▪ T1 capital ratio up to 15.10% at YE16 due to retain earnings & de-risking exercise. Total RWAs were down 3%, while those related to credit risk down to 4%. Fibank well-above min. requirements.
▪ Strong liquidity ratios reported with liquid assets to total borrowings ratio at 28.12%, while liquid assets to customer deposits ratio at 29.12%, well above BNB prescribed minimum of 20%.
▪ Loan/deposit ratio down further to 63.76% showing the Bank’s conservative approach & high criteria in assessing credit risk.
▪ ROE up to 12.17% supported by strong net profit & displayed ability for internal capital generation.
▪ Cost optimization furthered on with CIR ratio down to 41.38% vs. 42.89% y/o/y.
▪ Net interest margin stayed solid at 5.04%, while income diversity ratio reached 68.68% indicating interest income as the major source of income.
▪ Cost of risk was down to 2.66% due to strong reversals & deleveraging efforts.
▪ Conservative provisioning continued with loan portfolio coverage ratio up to 14.19% & NPL90+ coverage ratio up to 67.82%. Unreserved NPL90+ down to 35.4% at YE16 vs. 43.6% y/o/y.
1
2
3
4
5
6
7
1
2
3
4
5
6
7
Cap
ital
Liq
uid
ity
Pro
fita
bilit
yA
sset quality
31 32 3441
5041 39
41
19
18 18
17
9 91
0
20
40
60
80
100
120
2014 2015 2016 2017
OtherCredit cardsMortgage loansConsumer loans
31CONFIDENTIAL
Retail business: Retail loans well-balanced in terms of products & FX. Growing share of consumer loans.
STRUCTURE OF RETAIL LOANS
KEY HIGHLIGHTS & COMMENTS
RETAIL LOANS BY PRODUCT
▪ Retail portfolio reached BGN 1,454m or 25% of gross loans, at levels close to YE15 figures, reflecting Bank’s aim of stronger growth in this segment in 2017.
▪ Portfolio well diversified across various products with mortgage loans forming 39% & consumer 34% of total retail lending. Retail loans well-balanced in terms of FX structure.
▪ High quality of mortgage portfolio with LTV+100% comprising only 12% of the portfolio at YE16.
▪ Fibank ranked sixth in terms of mortgage & consumer loans among banks in Bulgaria with a market shares of 6.3% & 8.8% respectively at end-2016.
▪ In 2016 a new lending program was developed for students and postgraduates.
▪ Fibank enabled fully online application for consumer loans at its www.credit.fibank.bg
1,313
1,4971,454
1,507
-3%Retail portfolio,BGNm
Retail portfolio,%
0
200 000
400 000
600 000
800 000
1 000 000
1 200 000
1 400 000
1 600 000
2014 2015 2016 2017
Consumer loans Mortgage loans
Credit cards Other
+4%
By product By currency
50 50 51
67
49 49 48
31
2014 2015 2016 2017
BGN EUR Other
89
102 109
121
-
20
40
60
80
100
120
140
2014 2015 2016 2017
Microlending portfolio BGNm
32CONFIDENTIAL
Retail business: Growing focus & share of Microlendingportfolio. Gross amount reached BGN 121m at YE17.
GROWING SHARE OF MICROLENDING
KEY HIGHLIGHTS & COMMENTS
MICROLENDINGPORTFOLIO
▪ Microlending portfolio grew 6%to reach BGN 109m at YE16. For the 2014-16 period it grew at a CAGR of 10% further diversifying corporate portfolio.
▪ Share of loans to micro companies increased their share to 2.5% of all business loans or 1.9% of Bank gross portfolio at end-2016 as part of long-term strategy to grow this segment & further diversify corporate loans.
▪ Fibank has developed specialisedmicrolending program since 2005, taking into account the financing needs of merchants, manufacturers, farmers, professionals and freelancers, including start-ups and companies with limited market experience.
▪ Microlending is part of the retail lending department, as per Fibank’s internal organization structure.
+6%
+11%
1.4
1.7
1.9
2.1
1.8
2.3
2.5
2.9
0
0.5
1
1.5
2
2.5
3
3.5
2014 2015 2016 2017
Microlending portfolio in %
% of gross loan portfolio % of business loans
48 50 51 55
42 40 39 35
10 10 10 10
-
20
40
60
80
100
120
2014 2015 2016 2017
Retail deposits by currency, %
BGN EUR Other
0
1 000 000
2 000 000
3 000 000
4 000 000
5 000 000
6 000 000
7 000 000
2014 2015 2016 2017
Deposits to individuals, BGNm
Term and savings accounts
Current accounts
33CONFIDENTIAL
Retail business: Stable & granular retail deposit base, >80% covered by deposit guarantee scheme
RETAIL DEPOSITS BY CURRENCY
KEY HIGHLIGHTS & COMMENTS
RETAIL DEPOSITS BY PRODUCT
▪ Bank’s policy is to build a sticky & granular deposit base by offering various and flexible deposit products, adapted to the market conditions and clients’ needs. >80% of retail deposits covered by Deposit Guarantee Scheme.
▪ Retail deposits grew 7% with increase both in current accounts & terms deposits which remained structure-determined with 87% share at end-2016.
▪ Retail deposits well-diversified in terms of FX with BGN forming 51.2% of total retail deposit base.
▪ Fibank ranked third in terms of retail deposits among banks in Bulgaria with increased market share of 13.5% at end-2016.
▪ In 2016, Fibank continued to optimize the conditions of deposit products, and developed new ones, offering competitive conditions in accordance with the market environment.
+7%
5,729
6,146
6,5946,305
100% 100% 100% 100%
-4%
34
Leading in Commercial Lending With Top 2 Position
Fibank’s loan book is predominantly commercial focused…Loan Portfolio by Type, Q4 2017(1)
Source: Company disclosure, Bulgarian National Bank.Notes:(1) As per EC Definition (SME: <250 employees AND ≤€50mn turnover OR ≤€43mn total assets; Business: >250 employees AND >€50mn turnover OR >€43mn total assets). Breakdown as per Fibank’s internal definition would be: 10% SME, 63% Business, 2% Microlending, 25% Retail. (2) Includes loans to general governments, other financial corporations and non-financial corporations. (3) Excludes credit cards and unsecured loans.
…with a leading position in the Bulgarian sector…Corporate Loans(2) Market Share, Q4 2017
…and diversified loan portfolioLoan Portfolio by Sectors of Economy(3), Q4 2017
Fibank’s main competitive advantages in the commercial banking market are its:• Focus on quality of service (consistently ranked as the bank with
the best service standards in Bulgaria)• Deep understanding of the Bulgarian market• Wide distribution network
• Product offering includes term loans, investment loans,working capital loans, overdrafts, guarantees and businesscredit cards
• Active participation (almost full take-up) supportingbeneficiary companies under the programs related to the EUstructural and cohesion funds (JEREMIE initiative)
• Limited exposure to construction and real estate as Fibank did not participate in the boom for these sectors during 2007/2008
• Low portion of the book is uncollateralised (85% of total loan book is collateralised(3))
9
Loan portfolio by business lines
20.10%
12.10%
8.38% 7.77% 7.33% 6.84% 6.32%4.66% 4.17% 3.75%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
UniCredit Eurobank DSK RZB SGE UBB CCB ProCredit Piraeus
Other; 3.42%
Communication; 0.81%
Agriculture; 3.68%
Finance; 1.90%
Tourist services; 3.02%
Construction; 3.54%
Transport; 5.61%
Infrastructure; 8.11%
Services; 10.94%
Private individuals;
26.36%
Trade; 17.66% Industry; 14.95%
41.30%
26.30%
26.00%
6.40%
SME, EU Retail Business Microlending
0
200 000
400 000
600 000
800 000
1 000 000
1 200 000
1 400 000
2014 2015 2016 2017
Corporate deposits by product, BGNm
Current accounts Term accounts
50.90%
22.10%
27.00%
BGN EUR Other
35CONFIDENTIAL
Commercial business: Deposits from corporates grew 25% in 2016 outpacing banking system averages.
CORPORATE DEPOSITS BY CURRENCY
KEY HIGHLIGHTS & COMMENTS
CORPORATE DEPOSITS BY PRODUCT
▪ Corporate deposits grew 25% in 2016 outpacing banking system averages, with increasing share of current accounts which formed 70% of all funds due from corporates.
▪ Term deposits reached BGN 391m at YE16 or 4% more y/o/y, forming a 30% share of all retail deposits.
▪ Corporate deposits well-diversified in terms of FX with BGN forming 50.9% & EUR 22.1% of total corporate deposit base.
▪ Fibank’s market share in terms of deposits from corporates increased to 4.9% at end-2016 (YE15: 4.3%).
▪ As at YE16 funds attracted by the thirty biggest non-banking clients represented a small 5.88% of the total customer deposits.
▪ In 2016, Fibank continued to optimize the conditions of deposit products, and developed new ones, offering competitive conditions in accordance with the market environment.
2016
Corporate deposits by currency, %+25%
2017
971
1,058
1,318 1,278
60.00%27.00%
13.00%
BGN EUR Other
-3%
104110
121
128
0
20
40
60
80
100
120
140
2014 2015 2016 2017
5.7
5.9
6.3
5.5
6.0
5.6
5
5.2
5.4
5.6
5.8
6
6.2
6.4
2015 2016 2017
Market share outgoing
Market share incoming
3.4533.592
4.013
4.611
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
2014 2015 2016 2017
36CONFIDENTIAL
Payment services: Registered growth in fund transfers in both BGN & FX. Well-established market position.
FUND TRANSFERS IN FX CURRENCY
SOLID MARKET SHARES
FUND TRANSFERS IN BGN
BISERA6 & RINGSPAYMENT SYSTEMS
Correspondent banking (SWIFT), TARGET2 & BISERA7-EUR
(SEPA compliant)
+12%
Outgoing transfersin BGN, (000’ numbers)
Outgoing transfersin FX, (000’ numbers)
+10%
Market share offund transfers in BGN, %
+0.2 ppt
+15% +0.4 ppt+6%
37
MANAGEMENT & CORPORATE GOVERNANCE
SECTION 5
Cooperation with the IFC: Successful CG & RM enhancement project during 2015
38
IFC COOPERATION MILESTONES
▪ In 2010, Fibank asked the IFC to prepare a diagnostic assessment of the Bank’s corporate governance & risk management. As a result, changes were implemented to the organizational structure and in 2012, ahead of its peers new committees to the SB were created in line with EBA latest guidelines.
▪ In 2014, at the initiative of Fibank and as a follow-up project, another independent review was performed. IFC’s recommendations were included as part of the Bank’s Restructuring Plan, committed to the European Commission.
▪ In 2015, the joint CG & RM implementation project was launched with detailed plan adopted and deliverables identified. Both Fibank & IFC teams worked together side-by-side with multiple on-site workshops delivered and off-line exchange of information. A steering committee was assigned to track implementation progress.
CORP.GOVERNANCE DELIVERABLES
RISK MANAGEMENT DELIVERABLES
✓Fibank introduced full CCO function in line with the latest Basel Committee principles on CG in banks.
✓A new independent member to the SB was elected with strong expertise and >20 years experience within the IFC.
✓A full CG Code & Disclosure policy were adopted in compliance with the latest best standards in this sphere.
✓The role of the Audit Committee was strengthened with new independent member elected and regular quarterly meetings with IA introduced.
✓Steps to strengthen the dialogue with minority shareholders were undertaken, e.g. a new Investor Club created and new initiative for regular meetings with minority shareholders.
✓Organizational changes were made, incl. full CEO, CRO & CCO functions being introduced. CFO was added as member of the MB.
✓Fibank introduced full CRO function based on the “three lines of defense” principle.
✓A new pricing policy was implemented for the setting of individual product price.
✓A new profitability tool was launched to better monitor the profitability per client, business line, portfolio.
✓RCSA methodology was enhanced to better assess operational risks at the process level, before & after controls.
✓A new rules for using KRIs in OP risk framework were adopted for improving processes for escalating & tracking tolerance limits.
✓Risk strategy was enhanced with risk appetite statement introduced and full risk map of the organization defined.
✓ALCO work was strengthen, i.e. a full fledged info pack in place for enhanced activity.
2015 Implementation Project
39CONFIDENTIAL
Organizational structure ensures effective running of key functions & clear separation of duties.
SUPERVISORY BOARD
(Chair: Evgeni Lukanov, Deputy Chair: Maya Georgieva, Members: Georgi Mutafchiev, Radka Mineva, Jordan Skortchev, Jyrki Koskelo)
NOMINATION COMMITTEE
Chair: Georgi Mutafchiev
REMUNERATION COMMITTEE
Chair: Jordan Skortchev
RISK COMMITTEE
Chair: Evgeni Lukanov
PRESIDING COMMITTEE
Chair: Maya Georgieva
AUDIT COMMITTEE
Chair: Radina Beneva
INTERNAL AUDIT
(Ralitsa Bogoeva)
MANAGING BOARD
(Chair: Nedelcho Nedelchev, Members: Sevdalina Vassileva, Chavdar Zlatev, Svetozar Popov, Jivko Todorov, Nadia Koshinska)
ALCOCREDIT
COUNCILRESTRUCTURING
COMMITTEEOPERATIONAL RISK
COMMITTEE
BUSINESS UNITS SUPPORTING UNITS
40
CAPITALIZATION & LEVERAGE
SECTION 6
41CONFIDENTIAL
Regulatory capital well in line with CRD IV (Basel III). Profit retention following GMS in May’17 to support CET1.
REGULATORY CAPITAL
OWN FUNDS CALCULATIONS
REGULATORY REQUIREMENTS
Own funds calculations, BGNth
YE2016 YE2017
Paid up capital instruments 110,000 110,000
(-) Indirect shareholding in CET1 capital instruments
(93) -185
Premium reserves 97,000 97,000
Other reserves 523,627 609,109
Minority interests 2,355 -
Accumulated other comprehensive income
25,043 25,931
Deductions from CET1 capital:
(-) Intangible assets (10,186) -6,885
Adjustments of CET1 capital (5,944) -3,809
Common Equity Tier 1 capital 741,802 831,161
Additional Tier 1 capital
Hybrid debt 195,583 195,583
Tier 1 capital deductions:
Transitional adjustments of Additional Tier 1 capital
(4,290) -1,439
Tier 1 capital 933,095 1,025,305
Tier 2 capital
Perpetual debt -
Adjustments of Tier 2 capital 1,800 900
Total own funds 934,895 1,026,205
▪ Since 1 January 2014, the provisions of the CRD IV package have been in force, transposing into European law the provisions of the Basel III capital standards for banks.
▪ CET1: a) issued and paid up capital instruments (ordinary shares); b) share premium from issuance of ordinary shares; c) audited retained earnings; d) accumulated other comprehensive income, including revaluation reserves; e) other reserves; f) minority interests. Deductions includes intangible assets.
▪ AT1: instruments include hybrid debt. Deductions include regulatory adjustments relating to items that are included in the capital or the assets of the Group, but are treated differently for capital adequacy regulation.
▪ Tier 2 capital: T2 capital consists of perpetual debt and regulatory adjustments related to revaluation reserve on land & buildings.
GMS in May’17 voted to capitalize the net profit for 2016, thus
ensuring strong internal capital generation with focus on CET1 In 2016 the Bank repaid perpetual debt
(T2 capital) with principal EUR 21M
1,026936
935939
0% +10%
0
200000
400000
600000
800000
1000000
1200000
2014 2015 2016 2017
Regulatory capital, BGN,m
CET1 Additional tier 1 capital Tier 2 capital
42CONFIDENTIAL
Fibank to maintain capital buffers in line with CRD IV. New O-SII capital buffer applicable since 2018.
CAPITAL BUFFERS COMMENTS
▪ In addition to the capital requirements, Fibank maintains capital buffers in compliance with the requirements of Ordinance No8 of the BNB on capital buffers.
▪ Capital conservation buffer, comprised of common equity tier 1 capital equal to 2,5% of the total risk exposure of the Bank
▪ Buffer for systemic risk amounting to 3% of the Bank’s total risk exposures in Bulgaria, which is covered by common equity tier 1 capital.
▪ Countercyclical capital buffer, applicable to credit risk exposures in the Republic of Bulgaria, the level of which is determined by the Bulgarian National Bank each quarter. During the whole of 2016 and for the first quarter of 2017, it was defined at 0%
▪ Buffer for O-SII on an individual and consolidated basis, determined as a share of the total value of the risk exposures, is in the amount of 0% for 2017 and it will gradually grow from 0.5% in 2018 to 1% in 2020.
0.0 0.00
Capital buffer for other systemically important institution
Pursuant to decision of MB of BNB / 2017
With a decision dated 10 November 2016, the BNB determined ten banks in Bulgaria as other systematically important institutions (O-SII), among which is First Investment Bank AD.
43CONFIDENTIAL
Capital indicators exceeds minimum requirements. Ratio calculations consistent with CRD IV.
CAPITAL INDICATORS
CAPITAL ADEQUACY RATIO CALCULATIONS
▪ Common Equity Tier 1 capital ratio is the Common Equity Tier 1 capital of the institution expressed as a percentage of the total risk exposure amount;
▪ Tier 1 capital ratio is the Tier 1 capital of the institution expressed as a percentage of the total risk exposure amount;
▪ Total capital ratio is the own funds of the institution expressed as a percentage of the total risk exposure amount.
▪ The total risk exposure amount is calculated as the sum of the risk-weighted assets for credit, market, and operational risk.
▪ The Group calculates the credit risk requirements for the exposures in its banking and trading portfolios based on the standardised approach. Exposures are taken into account at their book value. Off-balance sheet commitments are taken into account by applying conversion factors for the purpose of their approximation to book values. Positions are weighted for risk using different percentages depending on the class of exposure and its credit rating. A variety of techniques are used to reduce credit risk, such as collaterals and guarantees. For derivative instruments, such as forwards and options, the counterparty credit risk is estimated.
▪ The Group also calculates capital requirements for market risk for foreign exchange and commodity instruments in the trading and banking books.
▪ The Group calculates capital requirements for operational risk using the basic indicator approach. The capital requirement is equal to the average gross annual income over the last three years multiplied by a fixed percentage (15%). The respective risk weighted assets are calculated by further multiplication by 12.5.
0
2
4
6
8
10
12
14
16
18
CET1 ratio Tier 1 capital
ratio
Total capital
adequacy ratio
Capital adequacy indicators for 2016/ 2017, %
2016 2017
1213
1516
1516
14.9
14.7
15.1
15.9
14.0
14.2
14.4
14.6
14.8
15.0
15.2
15.4
15.6
15.8
16.0
2014 2015 2016 2017
TCA ratio, %
13.6
14.2
15.1
15.9
12
12.5
13
13.5
14
14.5
15
15.5
16
16.5
2014 2015 2016 2017
Tier 1 capital ratio, %
10.811.3
12.0
12.9
15.3
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
2014 2015 2016 2017 Target
2019f
CET1 ratio, %
44CONFIDENTIAL
Capital indicators improved due to de-leverage measures. Hybrid capital fully compliant to absorb losses.
CET1 RATIO
T1 RATIO
TCA RATIO
AT1:HYBRID CAPITAL
▪ As at YE16, Fibank had issued two hybrid instruments (bond issues) with original principal on the amount of EUR 40M and EUR 60M (ISIN: BG2100008114 & BG2100022123), which fully comply with the requirements of Regulation (EU) No 575/2013 and are included in the additional tier 1 capital.
▪ The bonds are registered, dematerialized, interest-bearing, perpetual, unsecured, freely transferable, non-convertible, deeply subordinated and without incentive to redeem.
▪ Both hybrid bond issues are admitted to trade on a regulated market at the Luxembourg Stock Exchange.
+0.7ppt +0.9ppt
+0.4ppt
+0.9ppt
+0.8ppt +0.8ppt
45
FUNDING & LIQUIDITY
SECTION 7
0
20
40
60
80
100
120
2014 2015 2016 2017
Structure of liabilities, %
Other Hybrid & Perpetual debt
Other borrowed funds Deposit MF
Customer deposits
86.7
72.5
63.868.08
0
10
20
30
40
50
60
70
80
90
100
2014 2015 2016 2017
Net loan/deposit ratio, in %
0.000
1.000
2.000
3.000
4.000
5.000
6.000
7.000
8.000
9.000
Customer deposits, BGNm
Retail Business
46CONFIDENTIAL
Customer deposits main source of funding with 89% of liabilities. Stable growth covered state aid repayment.
DEPOSITS: MAIN FUNDING SOURCE
STABLE GROWTH TO ADDRESS AID REPAYMENT
LDR SUPPORTING LIQUIDITY
7,5847,912
7,204
6,700
+10%
+13%
8,100 8,135 8,233 7,974 +8.7ppt +4.3ppt
-4%
YE14 YE15 YE16 YE17
26.325.4
28.1
25.1
27.028.3
29.1
26.2
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
2014 2015 2016 2017
Liquidity indicators, %
Liquid assets ratio
Liquid assets/customer deposits
350
326 327335
119132 138 136
0
50
100
150
200
250
300
350
400
2014 2015 2016 2017
LCR & NSFR indicators %
LCR NSFR
0
500 000
1 000 000
1 500 000
2 000 000
2 500 000
2014 2015 2016 2017
Liquid assets, BGNm
Debt securities and gold
Current accounts and amounts with banks
Central banks
47CONFIDENTIAL
Strong liquidity in line with market. Liquidity ratios well above minimum required levels.
LCR & NSFR WELL ABOVE MIN LEVELS
LIQUID ASSETS GREW DESPITE SA REPAYMENT
STRONG LIQUIDITY RATIOS
2,0402,120
2,304
1,986
+13%
Minlevel
Minlevel
-14%
48
APPENDIX
SECTION 8
49CONFIDENTIAL
Awards
Best Bank in Bulgaria
Bank of the year by market share, by Bank of the year association
201020112012
Bank of the year by Bank of the year association
200120112012
20012011
Mrs. Maya Georgieva Banker of the year, by financial magazine Banker
2012 Mr. Vasil Christov Banker of the year, by financial magazine Banker
Management
Best Bank in Bulgaria by the financial magazine Euromoney
2011
Quality of Service
2012 Bank of the Client by Bank of the year association
Mystery Client by Bank of the year association2012
2011STP Award, Excellent quality , Commerzbank
20102009
2013
2009
20102011
Straight-Through Processing (STP) Excellence Award, Deutsche Bank
Bank of the Customer,by the influential Bulgarian daily “Pari” (“Money”)
20022003200620082009
The best customers service of the year by International Finance Exhibition “Banks, Investments, Money”
2007
For achieving a Straight Through Processing Rate in excess of 97% for US Dollar payments sent to Citibank New York
2009
Best Retail Bank in Bulgaria by Global banking & Finance
2014
Innovation in Retail Banking Bulgaria and Best Private Bank Of The Year by Finance publishing
2014
Mr. Matthew Mateev Banker of the year
2005
20142016
50CONFIDENTIAL
Awards
Brand/ Products/ Web/Other awards
Fibank is the strongest brand in Bulgarian market by the Superbrands
201220142016
Golden Martenitsa by Made in Bulgaria union2012
Best brand in financial institutions by My love marks2012
2017
2011
OSCARD for innovative co-branded credit card Fibank-Vivatel
2008
Financial product of the year, by International Finance Exhibition “Banks, Investments, Money”
2004200520062007
Three awards for charity at the Fifth Annual Donors' Conference organized by the Bulgarian Donors' Forum
2009
VISA International Certificate
for VISA Cards Retail Sales Volume
The Bank’s corporate site won category “Business” by Bulgarian Web Awards 2009
2014
2009
2006
Most Innovative Banking Product (Credit and Debit Card) by Global banking & Finance
The best corporate blogs in Bulgaria by Nova Vizia2009
First prize for best corporate BG Site2009
2012
2014 Best maturity deposits by Handelsblattnewspaper
2014 Developing card payments and bringing innovations by MasterCard
20072008
Best public company on the Bulgarian Stock Exchange, by "Dnevnik" newspaper
2015 Card Product of the Customers by b2b magazine
2015 Best marketing team by Baawards
2016
2016
2016
Annual awards for charity and CSR“Golden heart” by “Business Lady”magazine
Investment in a digital and civilliterate society by Digital Kids
National charity campaign “Easter for everyone”.
2016 “Product of the Year”
51CONFIDENTIAL
Awards
Brand/ Products/ Web/Other awards
2017 “Product of the Year”
Debit card for children and teenagers - category “Bank cards”Consumer credit online - category “Consumer credit”Digital card - category “Mobile financial services”
Webit awards:Mobile Digital Card – “Best digital payment solution” 2017
2017
2017
2017“Best consumer banking brand”
“GBM – Best SME banking brand”
2017 “Superbrands”
2017 “Golden Heart”