HELLENIC BANK GROUP - cse.com.cy · PDF file5 HELLENIC BANK GROUP Condensed Consolidated Income Statement for the three-month period from 1 April 2016 to 30 June 2016 Three-month period

HELLENIC BANK GROUP

Condensed Consolidated Financial Statements

for the six-month period ended 30 June 2016

2

HELLENIC BANK GROUP Condensed Consolidated Financial Statements for the six-month period ended 30 June 2016

Contents

Page

Independents’ auditors report on review of condensed consolidated interim financial information to the members of Hellenic Bank Public Company Limited

3

Condensed Consolidated Income Statement for the six-month period ended 30 June 2016

4

Condensed Consolidated Income Statement for the three-month period from 1 April 2016 to 30 June 2016

5

Condensed Consolidated Statement of Comprehensive Income for the six-month period ended 30 June 2016

6

Condensed Consolidated Statement of Comprehensive Income for the three-month period from 1 April 2016 to 30 June 2016

7

Condensed Consolidated Statement of Financial Position at 30 June 2016 8

Condensed Consolidated Statement of Changes in Equity for the six-month period ended 30 June 2016

9-10

Condensed Consolidated Statement of Cash Flows for the six-month period ended 30 June 2016

11

Notes to the Condensed Consolidated Financial Statements 12-50

Interim Management Report for the six-month period ended 30 June 2016

51-55

Declaration by the Members of the Board of Directors and the Bank officials responsible for the drafting of the Condensed Interim Consolidated Financial Statements

56

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INDEPENDENT AUDITORS’ REPORT ON REVIEW OF CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION TO THE MEMBERS OF HELLENIC BANK PUBLIC COMPANY LIMITED Introduction We have reviewed the accompanying condensed consolidated statement of financial position of Hellenic Bank Public Company Limited (the “Bank”) and its subsidiaries (the “Group”) as at 30 June 2016, the condensed consolidated statements of income, comprehensive income, changes in equity and cash flows for the six-month period then ended, and notes to the interim financial statements (“the condensed consolidated interim financial statements”) on pages 4 to 50. The Board of Directors is responsible for the preparation and presentation of these condensed consolidated interim financial statements in accordance with IAS 34 “Interim Financial Reporting”. Our responsibility is to express a conclusion on these condensed consolidated interim financial statements based on our review. Scope of Review We conducted our review in accordance with the International Standard on Review Engagements 2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity”. A review of interim financial statements consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed consolidated interim financial statements as at 30 June 2016 are not prepared, in all material respects, in accordance with IAS 34 “Interim Financial Reporting”. Panayiotis A. Peleties, FCA Certified Public Accountant and Registered Auditor for and on behalf of KPMG Limited Certified Public Accountants and Registered Auditors 14 Esperidon Street 1087 Nicosia, Cyprus Nicosia, 30 August 2016

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HELLENIC BANK GROUP Condensed Consolidated Income Statement for the six-month period ended 30 June 2016

Six-month period ended 30 June

Continuing operations

Note

2016 €'000

2015 €'000

Turnover

152.160

158.450

Net interest income

74.735

73.279

Net income from fees, commissions, net gains on disposal and revaluation of foreign currencies and financial instruments and other income 5

56.297

45.571

Total net income 131.032

118.850

Total expenses 6

(72.282)

(76.878) Profit from ordinary operations before impairment losses and provisions to cover credit risk

58.750

41.972

Impairment losses and provisions to cover credit risk 7

(48.750)

(47.010)

Profit/(loss) before taxation

10.000

(5.038)

Taxation 8

(8.897)

755

Profit/(loss) for the period from continuing operations

1.103

(4.283)

Discontinued operations

Profit from discontinued operations after taxation 9

--

4.826

Profit for the period

1.103

543

Profit/(loss) attributable to: Shareholders of the parent company from continuing operations

704

(4.751)

Shareholders of the parent company from discontinued operations

--

4.826

704 75

Non-controlling interest 399 468 Profit for the period

1.103

543

Basic and diluted earnings per share (€cent) 10 0,36 0,04

Basic and diluted earnings/(loss) per share (€cent) from continuing operations 10 0,36 (2,5)

5

HELLENIC BANK GROUP Condensed Consolidated Income Statement for the three-month period from 1 April 2016 to 30 June 2016

Three-month period from 1 April to 30 June

2016 €'000

2015 €'000

Turnover 82.039 73.178

Net interest income 37.003 27.946 Net income from fees, commissions, net gains on disposal and revaluation of foreign currencies and financial instruments and other income 34.301 27.320

Total net income 71.304 55.266

Total expenses (35.289) (35.474) Profit from ordinary operations before impairment losses and provisions to cover credit risk 36.015 19.792 Impairment losses and provisions to cover credit risk (27.151) (33.933)

Profit/(loss) before taxation 8.864 (14.141)

Taxation (8.453) 2.387 Profit/(loss) for the period 411 (11.754)

Profit/(loss) attributable to: Shareholders of the parent company from continuing operations 369 (11.875) Shareholders of the parent company from discontinued operations -- --

369 (11.875)

Non-controlling interest 42 121 Profit/(loss) for the period 411 (11.754)

6

HELLENIC BANK GROUP Condensed Consolidated Statement of Comprehensive Income for the six-month period ended 30 June 2016


Note

2016 €'000

2015 €'000

Profit for the period 1.103 543

Other comprehensive income/(expenses)

Items that will not be reclassified in the income statement

Taxation relating to components of other comprehensive income (59) (11)

(59) (11)

Items that are or may be reclassified subsequently in the income statement

Surplus/(deficit) on revaluation of investments in equity and debt securities available for sale 2.423 (24)

Transfer to the income statement on disposal of investments in equity available for sale (12.381) (314)

Amortisation of revaluation of reclassified debt securities available for sale 13 (393) (623)

(10.351) (961)

Other comprehensive expenses for the period net of taxation (10.410) (972)

Total comprehensive expenses for the period (9.307) (429)

Total comprehensive (expenses)/income for the period attributable to: Shareholders of the parent company from continuing operations (9.744) (5.663) Shareholders of the parent company from discontinued operations -- 4.826

(9.744) (837)

Non-controlling interest 437 408

(9.307) (429)

7

HELLENIC BANK GROUP Condensed Consolidated Statement of Comprehensive Income for the three-month period from 1 April 2016 to 30 June 2016

Three-month period from 1 April to 30 June

2016 €'000

2015 €'000

Profit/(loss) for the period 411 (11.754)

Other comprehensive income/(expenses)

Items that will not be reclassified in the income statement

Taxation relating to components of other comprehensive income 37 7

37 7

Items that are or may be reclassified subsequently in the income statement

Surplus/(deficit) on revaluation of investments in equity and debt securities available for sale 2.193 (3.740)

Transfer to the income statement on disposal of investments in equity available for sale (12.381) (314)

Amortisation of revaluation of reclassified debt securities available for sale (185) (291)

(10.373) (4.345)

Other comprehensive expenses for the period net of taxation (10.336) (4.338)

Total comprehensive expenses for the period (9.925) (16.092)

Total comprehensive (expenses)/income for the period attributable to:

Shareholders of the parent company (9.981) (16.151)

Non-controlling interest 56 59

(9.925) (16.092)

8

HELLENIC BANK GROUP Condensed Consolidated Statement of Financial Position at 30 June 2016

30 June

2016 31 December

2015

Note €'000 €'000

Assets

Cash and balances with Central Banks 1.932.264 2.029.180

Placements with other banks 857.346 909.849

Loans and advances to customers 11 3.061.891 3.092.773

Debt securities 12,13 929.831 1.043.012

Equity securities & Collective Investment Units 17.104 15.140

Property, plant and equipment 14 99.213 98.564

Intangible assets 14 24.675 22.640

Tax receivable 75 66

Deferred tax asset 15 49.629 58.094

Other assets 16 118.606 128.055

Total assets 7.090.634 7.397.373

Liabilities Deposits by banks 94.720 76.938

Amounts due to Central Banks 17 -- 236.373

Customer deposits and other customer accounts 6.059.050 6.138.705

Tax payable 5.509 5.314

Deferred tax liability 1.646 1.472

Other liabilities

114.752 114.307

6.275.677 6.573.109

Loan capital 18 181.468 181.468

Equity

Share capital 19 99.217 99.217

Reserves 530.636 540.380

Equity attributable to shareholders of the parent company 629.853 639.597

Non-controlling interest

3.636 3.199 Total equity

633.489 642.796

Total liabilities and equity 7.090.634 7.397.373

Contingent liabilities and commitments 849.949 790.047

I. A. Georgiadou Chairwoman of Board of

Directors

H.L Pijls Chief Executive Officer

L. Papadopoulos Chairman of the Audit Committee

of the Board

A. Rouvas Group Chief Financial Officer

9

HELLENIC BANK GROUP Condensed Consolidated Statement of Changes in Equity

for the six-month period ended 30 June 2016

Attributable to shareholders of the parent company

Share capital (Note 19)

Reduction of share

capital reserve

Share premium

reserve

Revenue reserve

Translation reserve

Revaluation reserve

(Note 20)

Total

Non-controlling interest

Total

€'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000 Balance 1 January 2016 99.217 260.269 515.592

(286.013)

39

50.493

639.597

3.199

642.796

Total comprehensive (expenses)/income for the period net of taxation

Profit for the period -- -- -- 704 -- -- 704 399 1.103 Other comprehensive

(expenses)/income -- -- -- -- -- (10.448) (10.448) 38

(10.410)

Transfer of excess depreciation on revaluation surplus -- -- -- 146 -- (146) -- --

--

-- -- -- 850 -- (10.594) (9.744) 437 (9.307)

30 June 2016 99.217 260.269 515.592

(285.163)

39

39.899

629.853

3.636

633.489

10

HELLENIC BANK GROUP Condensed Consolidated Statement of Changes in Equity for the six-month period ended 30 June 2015

Attributable to shareholders of the parent company

Share capital (Note 19)

Reduction of share capital

reserve

Share premium reserve

Revenue reserve

Translation reserve

Revaluation reserve

(Note 20)

Own shares reserve

Total

Non-controlling

interest

Total

€'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000 Balance 1 January 2015 93.010 260.269 499.057

(297.345)

39

36.561

(1.604)

589.987

4.358

594.345

Total comprehensive income/(expenses) for the period net of taxation

Profit for the period -- -- -- 75 -- -- -- 75 468 543 Other comprehensive

income/(expenses) -- -- -- -- -- (912) -- (912) (60)

(972) Transfer of excess depreciation on revaluation surplus -- -- -- 146 -- (146) -- -- --

--

93.010 260.269 499.057 (297.124) 39 35.503 (1.604) 589.150 4.766 593.916

Disposal of own shares -- -- -- (1.062) -- -- 1.604 542 --

542

Transactions with shareholders

Contributions and distributions

Issue of shares from the exercise of rights 874 -- 2.404 -- -- -- -- 3.278 --

3.278

Expenses from issue of shares -- -- (36) -- -- -- -- (36) --

(36)

Dividends by subsidiary -- -- -- -- -- -- -- -- (2.063) (2.063)

874 -- 2.368 -- -- -- -- 3.242 (2.063) 1.179

30 June 2015 93.884 260.269 501.425

(298.186)

39

35.503

--

592.934

2.703

595.637

11

HELLENIC BANK GROUP Condensed Consolidated Statement of Cash Flows for the six-month period ended 30 June 2016


Note 2016 €'000

2015 €'000

Cash flow from operating activities

Profit for the period 1.103 543

Adjustments to profit for the period 33.444 35.667

Operating profit before working capital changes 34.547 36.210

Working capital changes (288.663) (84.974)

Cash flow used in operations (254.116) (48.764)

Tax paid

(132) (139)

Net cash flow used in operating activities (254.248) (48.903)

Cash flow from investing activities

Disposal of discontinued operations, net of cash disposed of 9 -- 4.021

Income from investments in debt and equity securities 12.611 5.078 Net disposals/maturity/(additions) of investment in debt and equity securities

116.985 (107.681)

Additions less proceeds from disposal of property, plant and equipment and intangible assets (5.499) (3.183)

Proceeds from disposal of assets held for sale 11.935 14.000

Net cash flow from/(used in) investing activities 136.032 (87.765)

Cash flow from financing activities

Subsidiary dividends paid to non-controlling interest

-- (2.063)

Proceeds from the issue of share capital --

3.278

Proceeds from disposal of own shares -- 542

Expenses from issue of shares

-- (36)

Interest paid on loan capital (415) (459)

Net cash flow (used in)/from financing activities (415) 1.262

Net decrease in cash and cash equivalents

(118.631) (135.406)

Cash and cash equivalents at the beginning of the period

2.787.955 3.127.423

Cash and cash equivalents at the end of the period

2.669.324 2.992.017

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Notes to the Condensed Consolidated Financial Statements The Condensed Consolidated Financial Statements for the six-month period ended 30 June 2016 have not been audited by the external auditors of the Group.

The external auditors of the Group have conducted a review in accordance with the International Standard on Review Engagements 2410, “Review of Interim Financial Information performed by the Independent Auditor of the Entity” issued by the International Auditing Assurance Standards Board.

1. General information Hellenic Bank Public Company Limited (the “Bank”) was incorporated in Cyprus and is a public company in accordance with the provisions of the Companies Law Cap. 113, the Cyprus Stock Exchange Laws and Regulations and the Income Tax Laws. The Bank’s registered office is located at 200, Corner of Limassol and Athalassa Avenues, 2025 Strovolos, P.O. Box 24747, 1394 Nicosia. The Bank is the holding company of Hellenic Bank Group (the “Group”). The principal activity of the Group is the provision of a wide range of banking and financial services, which include financial, investment and insurance services, as well as custodian and factoring services. The Condensed Consolidated six-month Financial Statements (hereafter refer to as “Financial Statements”) comprise of the Financial Statements of Hellenic Bank Public Company Limited and its subsidiary companies, which together are referred to as the Group. 2. Significant accounting policies 2.1 Basis of preparation The Financial Statements have been prepared in accordance with International Accounting Standard (IAS) 34 “Interim Financial Reporting” as adopted by the European Union and should be read in conjunction with the Audited Consolidated Financial Statements for the year ended 31 December 2015. The Financial Statements are presented in Euro (€), which is the functional currency of the Bank. All figures have been rounded to the nearest thousand, except where otherwise indicated. 2.2 Comparatives The comparative figures included in the Financial Statements are restated, where considered necessary, to conform with changes in the presentation of the current period. 2.3 Adoption of new and revised International Financial Reporting Standards (IFRSs) and interpretations The accounting policies adopted in respect of items considered material in relation to the Financial Statements are consistent with the accounting policies adopted in the Annual Report and Financial Statements for the year ended 31 December 2015, except for the adoption of new and revised standards, interpretations and amendments to existing standards with effect from the 1st of January 2016. The adoption of new and revised IFRSs, interpretations and amendments to existing standards did not have a material effect on the Financial Statements of the Group.

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Notes to the Condensed Consolidated Financial Statements 2. Significant accounting policies (continued) 2.4 Standards and interpretations not yet effective On 24th of July 2014, the International Accounting Standards Board (IASB) published the final version of IFRS 9 “Financial Instruments” which will replace IAS 39 “Financial Instruments: Recognition and Measurement”. IFRS 9 abolishes the four categories of classification of financial assets and they are classified under one of the three measurement categories: amortised cost, fair value through other comprehensive income and fair value through profit or loss. The new standard is effective for periods beginning on or after 1st of January 2018 with early adoption permitted, if the Group decides so. IFRS 9 changes significantly the way provisions for impairment are calculated, since it involves losses in relation to events that have occurred, as well as part of losses that are expected to occur in the future (“expected credit loss”). Particular criteria are established to determine for which loans expected credit losses that may occur in the next 12 months will be recognised and for which loans expected credit losses that may occur by the final payment of these loans will be recognised. The Group is currently evaluating the impact of the standard on its Financial Statements. 3. Use of estimates and judgements The preparation of Financial Statements requires Management to make use of judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. The estimates and underlying assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances and the results of which form the basis of making judgments about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Therefore, they involve risks and uncertainties as they relate to events and depend on circumstances that will occur in the future. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and in future periods if the revision affects both current and future periods. The accounting policies that are deemed critical to the Group’s results and financial position and which involve significant estimates and judgments are set out below: 3.1 Provision for impairment of loans and advances to customers The Group reviews the loans and advances to customers to assess whether impairment losses should be recognised in the income statement and accumulated in an impairment loss reserve. The Group assesses whether there is objective evidence of impairment of the loan portfolio on an individual and collective basis. Indicatively, the following events may be considered by the Group as an evidence of impairment. However, one event alone may not constitute evidence of impairment while the absence of a specific event does not preclude the existence of impairment:

1) Credit facilities classified as non-performing 2) Restructured credit facilities included in performing loans and advances

3) Significant and sustained reduction of total income/future cash flows of the borrower

4) Apparent deterioration of the debt servicing capacity of the borrower

5) The possibility of the debtor's insolvency

6) Significant reduction in the value of collateral

7) Credit facilities which are impaired

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Notes to the Condensed Consolidated Financial Statements 3. Use of estimates and judgements (continued) 3.1 Provision for impairment of loans and advances to customers (continued)

8) Credit facilities with internal credit rating that represents high credit risk

9) Credit facilities which are pending renewal, violating the relevant credit policy of the Bank

10) Macroeconomic indications that may affect the expected future cash flows of the borrowers such as increase in unemployment rates and decline in real estate prices.

The loan portfolio which is assessed on an individual basis includes significant loans of economic groups that are above certain thresholds set by the Bank in accordance with the provisions of the Central Bank of Cyprus Directive on Loan Impairment and Provisioning Procedures as well as all credit facilities to: (i) Shareholders with holdings in excess of 10% of the Bank’s share capital and their connected persons. (ii) members of the Management Body of the Bank and their connected persons. (iii) managers of the Bank and their connected persons. The amount of impairment loss on the value of loans and advances to customers which are examined on an individual basis, is measured as the difference between the carrying amount of the credit facility and the present value of estimated future cash flows, discounted at the credit facility’s original effective interest rate. In cases where the interest rate of the loan is variable, the original effective interest rate is measured with reference to the initial margin corresponding to the current base variable interest rate and the current variable interest rate. The estimated future cash flows are based on assumptions about a number of factors and therefore the actual losses may be different. To determine the amount of impairment loss on the value of loans and advances to customers, judgment is involved regarding the amount and timing of estimated future cash flows. The estimated future cash flows include any expected cash flows from the borrowers operations, any other sources of funds and the expected proceeds from the liquidation of collateral, where applicable. The timing of these cash flows is estimated on a case by case basis. Where the future expected cash flows relate to realisation of the property collateral, the expected amount to be received at the point of liquidation is estimated taking into account the projected property prices at the time of liquidation, net of any selling, taxes and other expenses to be incurred by the Bank in relation to the repossession and the disposal of the collateral. Loans and advances assessed on an individual basis and for which no impairment loss is recognised are assessed on a collective basis for losses that have been incurred but not yet identified. Loans and advances that are below the materiality threshold are assessed on a collective basis for probable losses. For the calculation of impairment loss on a collective basis, loans and advances are grouped based on similar credit risk characteristics and appropriate models are applied that take into account the recent historical loss experience of each group with similar credit risk characteristics adjusted for current conditions using appropriate probabilities of default and loss given default. Restructured facilities are classified in separate group with higher risk parameters. These calculations include estimates and the use of judgment to supplement, assess and adjust accordingly the historical information and past experience events which determine the parameters and calculation of impairment losses as at the reporting date. The main assumptions used to estimate loss given default relate to the treatment of property collateral such as the time needed for collateral liquidation and the force sale discount at the point of liquidation. For loans and advances assessed individually, the specifics of each case are taken into consideration in determining the property parameters. For collectively assessed loans, the Bank assumes a liquidation period that depends on the status of the customer. For performing loans, the liquidation period assumption is 6 years. For non performing loans, a segmentation is carried out depending on the ageing of the loans in the default status and different liquidation periods are assumed which result in an average of approximately 5 years. The liquidation haircut assumption in the collective assessment is 25%. Accumulated impairment losses of the Group's loans and advances are inherently uncertain due to their sensitivity to economic and credit conditions of the environment in which the Group operates. Conditions are affected by many factors with a high degree of interdependency and there is not one single factor to which these conditions are particularly sensitive. It is possible for the actual conditions in the next financial year to

15

Notes to the Condensed Consolidated Financial Statements 3. Use of estimates and judgements (continued) 3.1 Provision for impairment of loans and advances to customers (continued) differ significantly from the assumptions made during the current year, so that the carrying amount of loans and advances to be adjusted significantly. 3.2 Provisions for pending litigations or complaints and/or claims or cases subject to arbitration proceedings The Group examines whether reliable estimates can be made for amounts which an outflow of resources embodying economic benefits to settle present obligations (legal or constructive) of the Group is probable as a result of a past event, in order to assess whether a provision must be recognised in the Group’s income statement and reflected in the Group’s administrative and other expenses. The amounts recognised as provisions are the best estimates of the expenditure required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the facts and circumstances of any pending litigations or complaints and/or claims or case subject to arbitration proceedings. Any provision recognised does not constitute an admission of wrongdoing or legal liability. The Group obtains legal advice on the value of the provision of specific complaints and/or claims and arbitration. Where the effect of the time value of money is material, the amount of the provision is the present value of the estimated future expenditures expected to be required to settle the obligation. When a separate liability is measured, the most likely outcome may be considered the best estimate of the liability. 3.3 Impairment of goodwill and investments in subsidiaries The process of identifying and evaluating impairment of goodwill and investments in subsidiaries is inherently uncertain because it requires significant Management judgement in making a series of estimates, the results of which are highly sensitive to the assumptions used. The review of impairment represents Management’s best estimate of the factors below. Firstly, significant Management judgement is required in estimating the future cash flows of the acquired entities. The values are sensitive to the cash flows projected for the periods for which detailed forecasts are available, and to assumptions regarding the long-term pattern of sustainable cash flows thereafter. The cash flow forecasts are compared with actual performance and verifiable economic data in future years. However, the cash flow forecasts necessarily and appropriately reflect Management’s view of future business prospects. Additionally, the cost of capital used to discount future cash flows, can have a significant effect on the entity’s valuation. Any impairment of goodwill of the acquired entities affects the Group's results while any impairment of investments in subsidiaries affects the Bank's results. 3.4 Fair value of investments The best evidence of fair value of investments is a quoted price in an actively traded market. If the market for a financial instrument is not active, a valuation technique is used. The majority of valuation techniques employed by the Group use only observable market data and thus the reliability of the fair value measurement is relatively high. The Group uses only models with unobservable inputs for the valuation of non-listed investments. In these cases, the Group takes into account, amongst others, the net positions of the entities in which the investment has been made, as well as estimates of the Group’s Management to reflect uncertainties in fair values resulting from the lack of data and significant adverse changes in technology, market, economic or legal environment in which the entity operates.

16

Notes to the Condensed Consolidated Financial Statements 3. Use of estimates and judgements (continued) 3.5 Impairment of available for sale investments Available for sale investments in equity securities are impaired when there has been a significant or prolonged decline in their fair value below cost. In such a case, the total loss previously recognised in equity is recognised in the consolidated income statement. The determination of what is significant or prolonged requires judgment by Management. The factors which are taken into account in these estimates include the percentage reduction in the cost or impaired cost, as well as the net positions of the entities. Available for sale investments in debt securities are impaired when there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the investment and the loss event (or events) has an impact on the estimated future cash flows of the investment. The identification of impairment requires judgment by Management. An individual assessment of impairment is carried out on debt securities whose fair value as at the date of the financial position has significantly decreased as well as the issuer has been downgraded. 3.6 Stock of properties held for sale Volatility in the markets is reflected in the real estate market with negative impact on both the volume and value of property transactions. Under these circumstances, the degree of uncertainty is greater than that which exists in a more active market for determining the market value of properties. Stock of properties held for sale are measured at the lower of cost and net realisable value (NRV). NRV is determined by Management at each reporting date and calibrated to valuations, carried out at regular intervals, by professionally qualified valuers based on market conditions for their existing use. 3.7 Taxation The Group is subject to corporation tax in the countries in which it operates. Estimates are required in determining the provision for corporation taxes as at the date of the financial position. There is the possibility of a change in the tax treatment of impairment losses on the value of loans and advances other than those concerning customers individually assessed, as indicated in correspondence from the office of the Commissioner of Taxation and contrary to the policy applied by the Bank to date. Where the final tax is different from the amounts initially recognised in the income statement, such differences will impact the tax expense, the tax liabilities and deferred tax assets or liabilities of the period in which the final tax is agreed with the relevant tax authorities. Deferred tax assets arising from tax losses are recognised based on judgements on the ability to generate future taxable profits. These judgements are based on available information including historical data, improved macroeconomic estimates, the reduction in deposit rates, the stabilisation of the non-performing exposures and the expected increase in operations based on the strategic plan of the Group. It is therefore probable that the Bank will generate future taxable profits against which these assets can be utilised. The applicable tax rate is 12,5%. 4. Segmental analysis For management purposes, the Group is organised into two operating segments based on the provision of services, as follows:

• Banking and financial services segment - principally providing banking and financial services, including financing and investment services, as well as custodian and factoring services.

• Insurance services segment - principally providing life and general insurance services in Cyprus. The table below presents income, expenses, impairment losses and provisions to cover credit risk, profit/(loss) before taxation and information on assets regarding the Group's operating segments.

17

Notes to the Condensed Consolidated Financial Statements 4. Segmental analysis (continued)

Banking & Financial services

Insurance Services Inter-segment

transactions/balances

Total Six-month period ended 30

June Six-month period ended 30



June

2016 2015 2016 2015 2016 2015 2016 2015 €’000 €’000 €’000 €’000 €’000 €’000 €’000 €’000 Turnover 144.486 157.904 9.601 9.473 (1.927) (8.927) 152.160 158.450

Net interest income 74.548 73.077 187 237 -- (35) 74.735 73.279 Net income from fees, commissions, net gains on disposal and revaluation of foreign currencies and financial instruments and other income

49.745

46.222

7.244

7.064

(692)

(7.715)

56.297

45.571

Total net income 124.293 119.299 7.431 7.301 (692) (7.750) 131.032 118.850 Total expenses (68.597) (73.059) (3.728) (3.857) 43 38 (72.282) (76.878) Profit /(loss) from ordinary operations before impairment losses and provisions to cover credit risk

55.696

46.240

3.703

3.444

(649)

(7.712)

58.750

41.972 Impairment losses and provisions to cover credit risk (48.750) (47.010) -- -- -- -- (48.750) (47.010)

Profit/(loss) before taxation 6.946 (770) 3.703 3.444 (649) (7.712) 10.000 (5.038)

Banking & Financial services Insurance Services

Inter-segment transactions/balances Total

30 June 2016

31 December 2015

30 June 2016

31 December 2015

30 June 2016

31 December 2015

30 June 2016

31 December 2015

€’000 €’000 €’000 €’000 €’000 €’000 €’000 €’000

Total assets 7.028.939 7.342.725 94.890 83.921 (33.195) (29.273) 7.090.634 7.397.373

18

Notes to the Condensed Consolidated Financial Statements 5. Net income from fees, commissions, net gains on disposal and revaluation of foreign currencies and financial instruments and other income During 2015 Visa Inc. expressed an interest in acquiring the 100% of the issued and outstanding share capital of Visa Europe Limited. On 21st June 2016, the acquisition of Visa Europe by Visa Inc. was completed. Upon the completion of the transaction, the gain on disposal of Visa Europe shares amounted to €14,0 million and recognized in the income statement of the Bank. The deal valued Visa Europe at approximately €18,37 billion and the proportion attributable to Hellenic Bank was split and valued as follows:

I. Cash consideration of €11mln received upon closing date. II. Preferred stock in Visa Inc.:

The value of the convertible shares received was estimated by converting each of the 4.090 Series C Visa Inc. shares into 13,952 Class A Common Stock at closing price on 30 June 2016. Due to the conversion of the shares taking place on the 12th anniversary of the closing date of the agreement after settling any unresolved and outstanding cover claims, it was considered prudent to apply a haircut of 50% on the calculated value of the shares. As at 30 June 2016, Visa Inc. shares were valued at €1,9 million.

III. Deferred cash payment: The amount of deferred cash payment due to the Bank amounts to €1,0 million. The value of the deferred payment that was accounted for is €0, 9 million and represents the net present value of the estimated due amount which will be paid shortly after the 3rd anniversary of the closing date of the agreement.

6. Total expenses Consultancy and other professional services fees The Board of Directors of the Bank proceeded with the appointment of international advisory firms to provide advisory services in a wide range of issues relating to the Bank’s operations. For the six-month period ended 30 June 2016, an amount of €2,9 million (30 June 2015: €9,3 million) was charged to the income statement. Provisions for pending litigations or complaints and/or claims

There are risks and uncertainties surrounding the facts and circumstances of any litigations or complaints and/or claims. The amount recognised as a provision is based on the Group’s best estimates of the expenditure required to settle the present obligation as at 30 June 2016. For the six-month period ended 30 June 2016, an amount of €0,6 million (30 June 2015: €3,8 million) was charged to the income statement. Central Bank of Cyprus Penalty Administrative expenses include an amount of €973.250 that relates to a financial penalty issued by the Central Bank of Cyprus (CBC) on 13 July 2016, relating to controls omissions and weaknesses in the implementation of due diligence measures and customer identification procedures, as part of the Bank’s anti-money laundering and know-your-customer framework. The historical shortcomings were identified in an audit conducted by the CBC in September 2014 and related to the preceding years. The penalty does not relate to any identification of incidents of suppression of proceeds from any illegal activities. The penalty paid was discounted by fifteen per cent after Hellenic Bank agreed to settle in a timely manner. Hellenic Bank has made significant progress in rectifying these issues, following an independent review and subsequent restructuring of part of its business initiated since September 2014 and overseen by the Board of Directors. As part of this restructuring, a number of client accounts have been closed. At the same time, the Bank is continuing repositioning its International Banking Division strategy reflecting the changing regulatory environment with specific focus on anti-money laundering issues. Impairment of stock property held for sale For the six-month period ended 30 June 2016, provision for impairment of stock of properties held for sale of €2,4 million (30 June 2015: €0,1 thousand) was charged to the income statement.

19

Notes to the Condensed Consolidated Financial Statements 7. Impairment losses and provisions to cover credit risk

30 June 2016 €'000

30 June 2015 €'000

Impairment losses on the value of loans and advances (see Note 11) 51.698 45.485

Provisions to cover credit risk for contractual commitments and guarantees (2.948) 1.525

48.750 47.010

8. Taxation

30 June

2016 €'000

30 June 2015 €'000

Corporation tax (264) (269)

Taxes withheld at source (54) (10)

Deferred tax (8.579) 1.034

(8.897) 755

According to the Income Tax Law 118(I)/2002 as amended, the Bank’s profit and that of its subsidiaries in Cyprus, is subject to corporation tax at the rate of 12,5%. Tax losses of Group companies in Cyprus can be offset against taxable profits of other Group companies in Cyprus and any tax losses not utilised can be carried forward and offset against the same entity’s taxable profits of the next five years. As of 1st January 2015 onwards cross-border relief is allowed only in the case of losses of an EU subsidiary that has exhausted all other possibilities to use the said losses in its country of tax residence. Profits earned by subsidiary companies and permanent establishments outside Cyprus are subject to taxation at the rates applicable in the country in which the operations are carried out. Tax exemptions, allowances, deductions and offsets pursuant to Articles 8, 9, 10 and 13 of the Income Tax Law 118(I)/2002 are taken into consideration for the calculation of the tax liability. According to the provisions of the Special Contribution for the Defence of the Republic Law, Companies that do not distribute 70% of their profits after tax, as these profits are defined by this Law, during the two years following the end of the year to which the profits refer, will be deemed to have distributed this amount as dividend. Special contribution for defence at 17% will be payable on such deemed dividends to the extent that the shareholders (individuals and companies), at the end of the period of two years from the end of the fiscal year to which the profits refer, are Cyprus residents for the purposes of this Law. The amount of the deemed dividend distribution is reduced by any actual dividend already distributed in respect of the year to which the profits refer. The special contribution for defence is paid by the Bank on behalf of the shareholders. A deferred tax asset, according to IFRS, shall be recognized for the carry forward of unused tax losses to the extent that it is probable that future taxable profit will be available against which the unused tax losses can be utilised. Deferred tax assets arising from tax losses are recognised based on judgements on the ability to generate future taxable profits. These judgements are based on available information including historical data, improved macroeconomic estimates, the reduction in deposit rates, the stabilisation of the non-performing loans and the expected increase in operations based on the strategic plan of the Group. It is therefore probable that the Bank will generate future taxable profits against which these assets can be utilised. The applicable tax rate is 12,5%. An amount of €8,5 million deferred tax asset arising from tax losses is derecognised and charged to the income statement for the six-month period ended 30 June 2016.

20

Notes to the Condensed Consolidated Financial Statements 9. Profit from discontinued operations after taxation On the 6th of February 2015, the Bank proceeded with the disposal of its subsidiary Borenham Holdings Limited. Borenham Holdings Limited owned 100% of the share capital of the Russian company Limited Liability Company “Format Invest”, owner of the building facilities of its former Russian banking subsidiary “Limited Liability Company Commercial Bank “Hellenic Bank”. The effect of the discontinued operations on the Group’s results is presented below and is analysed as follows:


Note

2016 €’000

2015 €’000


Turnover -- --

Net interest income -- -- Net income from fees, commissions, net gains on disposal and revaluation of foreign currencies and financial instruments and other income

--

--

Total net income -- --

Total expenses -- (60)

Loss before taxation -- (60)

Taxation -- --

Loss after taxation -- (60)

Profit on disposal of subsidiary company

-- 4.886

Profit for the period -- 4.826 Basic and diluted earnings per share (€cent) 10 -- 2,6

21

Notes to the Condensed Consolidated Financial Statements 9. Profit from discontinued operations after taxation (continued) Russia Segment - Borenham Holdings Limited


2016 €’000

2015 €’000


Turnover -- --

Net interest income -- -- Net income from fees, commissions, net gains on disposal and revaluation of foreign currencies and financial instruments and other income

--

--

Total net income -- --

Total expenses -- (60)

-- (60)

Profit on disposal of subsidiary company

-- 4.886

Profit for the period -- 4.826

The profit resulted from the sale of the subsidiary’s assets and liabilities, under the signed agreement on the 6th of February 2015, which constitutes the difference between the net payable amount and the carrying amount of the Net Assets is analysed as follows:

Assets

€'000

Cash and balances with Central Banks

30

Property, plant and equipment 3.828 Other assets 53

Total Assets 3.911

Liabilities Intercompany loan undertaken by new company shareholders

3.514 Other liabilities

1.231

Total Liabilities 4.745

Net Liabilities 834

Disposal consideration 4.052

Profit on disposal of subsidiary company 4.886

22

Notes to the Condensed Consolidated Financial Statements 9. Profit from discontinued operations after taxation (continued)

The effect of the discontinued operations on the Condensed Consolidated Statement of Cash Flows was as follows:


2016 €'000

2015 €'000

Cash flows from discontinued operations

Net cash from investing activities -- 4.021

Net cash used in operating activities -- (863)

Net cash flows for the period -- 3.158

10. Basic and diluted earnings/(loss) per share


Basic and diluted earnings per share 2016 2015

Profit attributable to shareholders of the parent company (€ thousand) 704 75

Average number of shares in issue during the period (thousand) 198.435 187.463

Basic and diluted earnings per share (€cent) 0,36 0,04


Basic and diluted earnings/(loss) per share from continuing operations 2016 2015

Profit/(loss) attributable to shareholders of the parent company from continuing operations (€ thousand) 704 (4.751)

Average number of shares in issue during the period (thousand) 198.435 187.463

Basic and diluted earnings/(loss) per share from continuing operations (€cent) 0,36 (2,5)


Basic and diluted earnings per share from discontinued operations 2016 2015

Profit attributable to shareholders of the parent company from discontinued operations (€ thousand) -- 4.826

Average number of shares in issue during the period (thousand) -- 187.463

Basic and diluted earnings per share from discontinued operations (€cent) -- 2,6

For the calculation of the basic and diluted profit per share for the period ended 30 June 2015, the average number of shares issued is adjusted in accordance with IAS 33 to take into account the issue of shares during 2015 and the reverse split of the share capital. As at 30 June 2016 there were no options or instruments convertible into new shares and so basic and diluted earnings per share are the same.

23

Notes to the Condensed Consolidated Financial Statements 11. Loans and advances to customers

As of 1st January 2016, gross values of impaired loans are booked on a non-interest accrual basis. The amount of contractual interest that was not accrued for the six-month period ended 30 June 2016 amounted to €86,5 million. In previous years gross impaired loans included contractual interest accrued. Accumulated impairment losses on the value of loans and advances:

30 June 2016 €'000

31 December 2015 €'000

Individual impairment losses

1 January 1.269.536 1.133.574

Net write-offs of loan impairment losses

(74.055)

(121.248)

Interest accrued on impaired loans -- 202.185

Charge for the period/year 53.979 116.559

Unwinding of discount (31.103) (75.551)

Exchange difference 882 14.017

(50.297) 135.962

30 June/31 December 1.219.239 1.269.536

Collective impairment losses

1 January 33.587 50.453

Net write-offs of loan impairment losses (2.108) (2.670)

Release for the period/year (2.281) (15.122)

Exchange difference 37 926

(4.352) (16.866)

30 June/31 December 29.235 33.587

Accumulated impairment losses 1.248.474 1.303.123

Impaired loans and advances Represent the loans and advances for which the Group determines that there is objective evidence for impairment as a result of one or more loss events occurring after initial recognition and which have an impact on the estimated future cash flows. These loans and advances are classified Grade 3 (high risk) based on the Group’s credit risk assessment system. Loans with renegotiated terms due to the deterioration of the financial position of the customer are usually considered impaired, if the Group determines that, according to the loan contractual terms, non-repayments of the total principal and contractual interest due is possible.

Interest income on the present value of estimated future cash flows discounted at the original effective interest rate of the loan corresponds to the unwinding of discount and is recognised in the income statement.

30 June 2016 €'000

31 December 2015 €'000

Loans and advances to customers 4.310.365 4.395.896

Accumulated impairment losses

(1.248.474)

(1.303.123)

3.061.891 3.092.773

24

Notes to the Condensed Consolidated Financial Statements 11. Loans and advances to customers (continued) For the six-month period ended 30 June 2016 the unwinding of discount recognised in the income statement, amounted to €31,1 million (31 December 2015: €75,6 million). Non-impaired loans and advances The loans and advances which were not found to be impaired, are presented in risk categories based on the credit risk assessment system of the Group. The risk categories are as follows: Grade 1 (Low Risk): An immediate ability to repay the credit facility is assumed. Grade 2 (Medium Risk): The probability of indirect recovery of the credit facility is assumed. Grade 3 (High Risk): The debtor presents a higher risk compared to Grade 1 and 2 on the existence of direct and indirect recovery of the credit facility. Past due but not impaired loans and advances Represent non-impaired loans and advances for which the contractual interest or principal repayments are past due and the Group determines that there is no objective evidence of impairment by taking into account, among others, the value of available collateral. Collateral On the basis of the Group’s policy, the amount of credit facilities granted should be based on the repayment capacity of the relevant counterparties. Furthermore, policies are applied for the hedging and mitigation of credit risk through the holding of collateral. These policies define the types of collaterals held and the methods for estimating their fair value. The main collaterals held by the Group include mortgage interests over property, pledging of cash, government and bank guarantees, charges over business assets as well as personal and corporate guarantees. Property collateral relates to immovable commercial, residential and land real estate collateral. The open market value is indexed to today using publicly available indices. The value of tangible collateral for loans and advances classified as impaired both under Collective and Individual assessments amounted to €1.889 million as at 30 June 2016 (31 December 2015: €2.053 million). The value of tangible collateral for loans and advances past due but not impaired amounted to €162,1 million as at 30 June 2016 compared to €295,1 million as at 31 December 2015. Forborne Exposures According to the European Banking Authority’s (EBA) technical standards, forborne exposures are (i) exposures which involve changes in their terms and/or conditions and (ii) the forbearance measures consist of concessions towards a debtor which aim to address existing or anticipated difficulties on the part of the borrower to service debt in accordance with the current repayment schedule. Changes in the terms and conditions of a contract that do not occur because the customer is not able to meet the terms and conditions of the contract due to financial difficulties do not constitute forbearance measures (see details below). The most significant prerequisite for the forbearance of an exposure is the existence of customer repayment ability i.e. the customer is viable. The Bank’s Forbearance Policy includes the terms and conditions on which the Bank determines whether or not a renegotiated repayment schedule shall be granted. The forbearance measures to be taken and their duration thereof are determined on the basis of specific customer information, based on the prevailing economic conditions and in accordance with relevant legislation or regulatory Directives. The monitoring of forborne loans is performed by both, Business Units and the Credit Risk Management Department.

25

Notes to the Condensed Consolidated Financial Statements 11. Loans and advances to customers (continued) Every effort is taken by the Bank for the proper assessment of the new repayment schedule on the basis of the forbearance measures, in order to avoid a new default. Non-performing and forborne exposures according to the European Banking Authority’s (EBA) technical standards

The European Banking Authority (EBA) published in 2014 its technical standards with respect to non-performing and forborne exposures. Exposures include all debt instruments (loans and advances and debt securities) and off-balance sheet exposures, except those held for trading exposures. As per the EBA technical standards, the following are considered as NPEs: (i) Material exposures that are over 90 days past due, (ii) The debtor is assessed as unlikely to pay its credit obligations in full without realisation of collateral,

regardless of the existence of any past-due amount or of the number of days past due, (iii) Exposures in respect of which a default is considered to have occurred in accordance with Article 178

of Regulation (EU) No 575/2013, (iv) Exposures of debtors against whom legal action has been taken by the Bank or exposures of bankrupt

debtors, (v) Exposures that are found impaired as per the applicable accounting framework, (vi) Forborne exposures reclassified from NPE status that were NPE at forbearance or became NPE after

forbearance and which are re-forborne while under probation (the probation period for forborne exposures begins once the contract is considered as performing and lasts for two years minimum),

(vii) Forborne exposures reclassified from NPE status that were NPE at forbearance or became NPE after

forbearance (the probation period for forborne exposures begins once the contract is considered as performing and lasts for two years minimum) that present arrears 30 days past due while under probation,

(viii) Further to the above the all-embracing criteria apply as follows: (a) for debtors classified as retail

debtors as per the EU Regulation 575/2013, when the Bank has on-balance sheet exposures to a debtor that are material and are past due by more than 90 days the gross carrying amount of which represents more than 20% of the gross carrying amount of all on-balance sheet exposures to that debtor, all on and off-balance sheet exposures to that debtor shall be considered as non-performing and (b) for debtors classified as non-retail debtors as per the EU Regulation 575/2013, when the Bank has any on-balance sheet exposures to a debtor that are non-performing (if the exposure is non-performing due to over 90 days past due it must pass the materiality thresholds), all on and off-balance sheet exposures to that debtor shall be considered as NPE. Else, only exposures that are non-performing will be classified as such.

The below materiality thresholds apply only for the NPE criterion of arrears over 90 days past due. For exposures to debtors classified as Retail as per the EU Regulation 575/2013: • For term loans: if the past due amount of each exposure is over €500 the exposure shall be classified

as material. • For overdrafts/current accounts: if the past due amount or the excess of the exposure exceeds €500

or 10% of the limit approved by the Bank the exposure shall be classified as material. For exposures to debtors not classified as Retail as per the EU Regulation 575/2013: • If the total excesses/past dues of debtors exceed €1.000 or exceed 10% of their total on balance sheet

exposures then all the exposures of the debtor shall be classified as material.

26

Notes to the Condensed Consolidated Financial Statements 11. Loans and advances to customers (continued) If as per the above the exposures are not classified as material, then they may be classified as performing NPEs even if they present arrears over 90 days past due. Exposures may be considered to have ceased being non-performing when all of the following conditions are met: (a) the situation of the debtor has improved to the extent that full repayment, according to the original or

when applicable the modified conditions, is likely to be made; (b) the debtor does not have any amount past-due by more than 90 days. When forbearance measures are extended to non-performing exposures or to exposures which had been non-performing at forbearance or became non-performing after forbearance, the exposures may be considered to have ceased being non-performing only when all the following conditions are met: (a) the extension of forbearance does not lead to the recognition of impairment or default; (b) one year has passed since the forbearance measures were extended; (c) there is not, following the forbearance measures, any past-due amount or concerns regarding the full

repayment of the exposure according to the post-forbearance conditions. (d) the debtor does not have any amount past-due by more than 90 days. As per EBA technical standards evidence of a concession towards a debtor which aim to address existing or anticipated difficulties on the part of the borrower to service debt in accordance with the current repayment schedule, includes: (a) the modification of the previous terms and conditions of a contract would not have been granted had

the debtor not been in financial difficulties;

(b) a difference in favour of the debtor between the modified and the previous terms of the contract;

(c) cases where a modified contract includes more favourable terms than other debtors with a similar risk profile could have obtained from the same institution.

Examples of exposures that should be classified as forborne as per the new EBA technical standards include: (a) Exposures that were non-performing at forbearance. (b) Exposures that were past due more than 30 days anytime within 3 months prior to forbearance. (c) Forbearance measures such as partial write-offs. The forbearance classification shall be discontinued when all of the following conditions are met: (a) the contract is considered as performing, including if it has been reclassified from the non-performing

category after an analysis of the financial condition of the debtor showed it no longer met the conditions to be considered as non-performing,

(b) a minimum 2 year probation period has passed from the date the forborne exposure was considered

as performing;

(c) regular payments of more than an insignificant aggregate amount of principal or interest have been made during at least half of the probation period;

(d) none of the exposures to the debtor is more than 30 days past-due at the end of the probation period.

27

Notes to the Condensed Consolidated Financial Statements 11. Loans and advances to customers (continued) Based on the above categories, loans and advances to customers of the Group, are presented as follows:

Loans and advances to customers

30 June 2016 €’000

31 December 2015 €’000

Carrying amount 3.061.891 3.092.773

Impaired: Grade 3 (high risk) 2.424.739 2.528.751 Individual impairment losses (1.219.239) (1.269.536)


Of which loans with forbearance measures 540.039 552.765

Past due but not impaired: Grade 1 (low risk) 45.309 90.129 Grade 2 (medium risk) 59.287 88.435 Grade 3 (high risk) 5.978 10.030

Carrying amount 110.574 188.594

Past due comprises: 0+ up to 30 days 46.170 64.903 30+ up to 60 days 15.815 58.441

60+ up to 90 days 34.861 40.452 90 days+ 13.728 24.798

Carrying amount 110.574 188.594


Neither past due nor impaired: Grade 1 (low risk) 1.314.876 1.227.706 Grade 2 (medium risk) 425.181 423.873 Grade 3 (high risk) 34.995 26.972



Balances after individual impairment losses 3.091.126 3.126.360 Collective impairment losses (29.235) (33.587)

Total carrying amount 3.061.891 3.092.773

28

Notes to the Condensed Consolidated Financial Statements 11. Loans and advances to customers (continued)

The movement of the net carrying amount of the Group’s impaired loans and advances to customers is as follows:

30 June

2016

31 December

2015

€’000 €’000

1 January 1.259.215 1.235.219

Transfer to non-impaired loans and advances during the period/year (81.881) (160.757)

Net movement of impaired loans and advances (43.044) (51.014)

1.134.290 1.023.448

Loans and advances classified as impaired during the period/year 71.210 235.767

30 June/31 December 1.205.500 1.259.215

The Group’s loans and advances with forbearance measures are analysed below:

After individual impairment

30 June

2016

31 December

2015

30 June

2016

31 December

2015

€’000 €’000 €’000 €’000

Trade 99.372 97.275 70.799 67.769

Construction and Real Estate 635.457 650.651 421.826 418.626

Manufacturing 56.734 57.346 36.707 41.251

Tourism 81.795 87.031 74.551 63.574

Other sectors 270.531 246.886 218.846 200.361

Retail 187.588 177.457 145.385 138.058

1.331.477 1.316.646 968.114 929.639

The tangible collateral relating to loans and advances with forbearance measures amounted to €1.574 million as at 30 June 2016 (31 December 2015: €1.638 million).

Non-Performing Exposures

According to the CBC directive on Loan Impairment and Provisions Practices (February 2014), the credit institutions are obliged to announce Tables A and B as presented below. The non-performing loans portfolio of the Group as at 30 June 2016 amounted to €2.487 million (31 December 2015: €2.602 million). The ratio of NPEs to gross loans was 57,7% (31 December 2015: 59,2%). The coverage of the NPEs by provisions (coverage ratio) was 50,2% (31 December 2015: 50,1%).

29

Notes to the condensed consolidated financial statements 11. Loans and advances to customers (continued) Analysis of loan portfolio according to the counterparty sector as at 30 June 2016 Table Α

Total loan portfolio Cumulative Impairment losses

of which non-performing exposures

of which exposures with forbearance measures



of which on non-performing exposures


€000 €000 €000 €000 €000 €000 €000 €000

Loans and advances* 4.310.365 2.486.838 1.331.477 930.654 1.248.474 1.219.239 371.596 363.363

General Governments 1.817 203 -- -- 21 -- -- --

Other financial corporations 81.206 45.071 44.153 28.797 21.424 20.622 14.510 13.922

Non-financial corporations 2.879.998 1.753.613 1.065.161 749.925 845.929 826.382 305.035 299.339

of which: Small and Medium-sized enterprises 2.710.074 1.687.821 1.016.708 720.273 815.940 798.166 293.428 287.821

of which: Commercial real estate 463.830 243.752 161.770 111.743 88.374 84.046 37.468 35.886

By sector

1. Construction 817.414 665.765

292.205

2. Wholesale and retail trade 685.181 407.873 231.430

3. Real estate activities 269.176 168.368 77.832

4. Accommodation and food service activities 318.624 153.787 55.396

5. Manufacturing 254.031 115.591 57.002

6. Other sectors 535.572 242.229 132.064

Households 1.347.344 687.951 222.163 151.932 381.100 372.235 52.051 50.102

of which: Residential mortgage loans 603.714 239.655 93.373 53.546 95.488 92.785 15.236 14.453

of which: Credit for consumption 242.953 138.465 16.974 11.225 105.898 103.222 3.565 3.272

* Non-including loans and advances to central banks and credit institutions.

30

Notes to the Condensed Consolidated Financial Statements 11. Loans and advances to customers (continued) Analysis of loan portfolio according to the counterparty sector as at 31 December 2015 Table Α

Total loan portfolio Cumulative Impairment losses







€000 €000 €000 €000 €000 €000 €000 €000

Loans and advances* 4.395.896 2.602.383 1.316.646 958.884 1.303.123 1.269.536 396.297 387.007

General Governments 2.029 6 -- -- 40 4 -- --

Other financial corporations 93.426 50.821 36.395 34.697 22.577 20.917 14.395 14.228

Non-financial corporations 2.942.086 1.843.684 1.070.462 777.770 896.188 874.040 334.246 327.015

of which: Small and Medium-sized enterprises 2.737.472 1.758.353 1.031.318 746.204 848.777 829.728 322.757 315.775

of which: Commercial real estate 587.535 297.974 153.612 118.090 125.320 120.276 48.591 46.967

By sector

1. Construction 820.662 692.827

294.439

2. Wholesale and retail trade 704.041 428.633 247.651

3. Real estate activities 296.312 181.288 91.307

4. Accommodation and food service activities 326.775 180.750 77.930

5. Manufacturing 265.287 117.495 54.068

6. Other sectors 529.009 242.691 130.793

Households 1.358.355 707.872 209.789 146.417 384.318 374.575 47.656 45.764

of which: Residential mortgage loans 655.928 282.162 89.005 53.360 115.941 112.552 15.680 14.873

of which: Credit for consumption 247.965 142.582 15.986 10.245 106.253 103.517 2.901 2.574

* Non-including loans and advances to central banks and credit institutions.

31

Notes to the condensed consolidated financial statements 11. Loans and advances to customers (continued) Analysis of loan portfolio* on the basis of loan origination date as at 30 June 2016 Table Β

Loan origination date**

Total loan portfolio Loans to non-financial corporations Loans to other financial corporations Loans to households

€000

Non-performing exposures

Cumulative Impairment

losses



losses



losses



losses

€000 €000 €000 €000 €000 €000 €000 €000 €000 €000 €000

Within 1 year 355.265 8.505 4.302 256.501 7.254 3.684 1.845 --

6 96.919 1.251 612

1 - 2 years 70.656 4.735 1.473 37.097 4.281 1.235 477 1 9 33.082 453 229

2 - 3 years 58.144 26.169 10.710 31.971 22.799 8.770 83 14 4 26.090 3.356 1.936

3 - 5 years 481.304 244.277 110.810 315.279 180.296 78.799 7.725 3.828 1.691 158.300 60.153 30.320

5 - 7 years 832.039 488.451 236.913 533.597 347.026 172.865 8.181 534 286 290.261 140.891 63.762

7 - 10 years 1.451.292 992.509 483.402 943.301 670.973 305.234 49.414 31.665 15.506 458.577 289.871 162.662

Over 10 years 1.059.848 721.989 400.843 762.252 520.984 275.342 13.481 9.029 3.922 284.115 191.976 121.579

Total 4.308.548 2.486.635 1.248.453 2.879.998 1.753.613 845.929 81.206 45.071

21.424 1.347.344 687.951 381.100

*Non-including loans and advances to general governments. **Loan origination date is defined as the contractual loan origination date for each account. For restructured loans the origination date was derived based on the origination date of the original loan that was restructured.

32

Notes to the condensed consolidated financial statements 11. Loans and advances to customers (continued) Analysis of loan portfolio* on the basis of loan origination date as at 31 December 2015 (Note) Table Β

Loan origination date**

Total loan portfolio Loans to non-financial corporations Loans to other financial corporations Loans to households

€000



losses



losses



losses



losses

€000 €000 €000 €000 €000 €000 €000 €000 €000 €000 €000

Within 1 year 280.704 12.573 4.829 204.829 11.580 4.388 618 --

15 75.257 993 426

1 - 2 years 34.694 4.421 1.840 13.556 3.586 1.503 41 4 5 21.097 831 332

2 - 3 years 133.255 60.721 28.118 86.041 48.418 21.895 271 166 27 46.943 12.137 6.196

3 - 5 years 616.475 333.089 141.672 402.327 242.151 103.424 10.249 3.702 1.743 203.899 87.236 36.505

5 - 7 years 771.136 452.832 218.375 482.377 315.852 155.618 7.357 531 281 281.402 136.449 62.476

7 - 10 years 1.599.330 1.097.637 541.286 1.056.862 759.839 357.829 63.226 40.064 16.601 479.242 297.734 166.856

Over 10 years 958.273 641.104 366.963 696.094 462.258 251.531 11.664 6.354 3.905 250.515 172.492 111.527

Total 4.393.867 2.602.377 1.303.083 2.942.086 1.843.684 896.188 93.426 50.821

22.577 1.358.355 707.872 384.318

Note: The figures disclosed on this table were restated to conform to the change of definition of ‘loan origination date’ adopted in the current period. *Non-including loans and advances to general governments. **Loan origination date is defined as the contractual loan origination date for each account. For restructured loans the origination date was derived based on the origination date of the original loan that was restructured.

33

Notes to the Condensed Consolidated Financial Statements 12. Debt Securities

30 June 2016 €'000

31 December 2015 €'000

Securities held for trading

Listed -- 1.819

Securities held to maturity

Listed 45.386 45.501

Securities classified as loans and receivables

Listed 329.082 226.963

Securities available for sale

Listed 545.417 758.842

Unlisted 9.983 9.961

Provisions for impairment (37) (74)

555.363 768.729

929.831 1.043.012

Analysis of Debt securities by sector: 30 June

2016 €'000

31 December 2015 €'000

Concentration by sector:

Governments 656.072 561.411

Banks 22.553 180.853

Other sectors 251.206 300.748

929.831 1.043.012

As at 30 June 2016 the Group’s exposure in Cyprus Government Bonds amounted to €515.801 thousand (31 December 2015: €393.903 thousand). The category ‘Other sectors’ mainly consists of debt securities of supranational organisations.

34

Notes to the Condensed Consolidated Financial Statements 12. Debt Securities (continued) The Group closely monitors developments in the international markets so that any measures needed to reduce credit risk are promptly taken. The monitoring of exposure in countries of high risk is centralised through systems that fully and on an ongoing basis cover all material exposures to these countries such as interbank placements, debt securities, other investments, etc. Also, maximum acceptable levels are specified according to the rankings of the countries and taking into account their credit ratings, political, economic and other factors. For the classification of a country as “High Risk” country, the credit ratings of the countries, the bond implied ratings which incorporate information about credit spreads of government bonds as well as other available financial data of the countries, are primarily considered. Some of the debt securities listed in the table below, based on the three level hierarchy depending on the source of data used to determine fair value, are classified in Level 2 and 3. The table below shows the Group's exposure to investments in debt securities in countries with high credit risk, at the reporting date:

Nominal value Book value Market value €’000 €’000 €’000 Cyprus:

Government Bonds 501.062 515.801 514.762

Ireland:

Bank bonds 10.000 9.946 9.946

On 30th of June 2016 the Group did not have any exposures with issuers from Greece, Spain, Hungary, Italy, Portugal, Slovenia, Pakistan, Brazil, Turkey, South Africa, Russia, Kazakhstan, Egypt, Ukraine or Vietnam. 13. Reclassification of debt securities On the 1st of January 2009, the Group proceeded with a review of its intention for the holding of debt securities and consequently of its policy for classifying them under the various categories. As a result of this review, a number of debt securities, which were included in the held for trading and available for sale categories, were reclassified to the held to maturity and loans and receivables categories. For the years 2010 to 2015, as well as the six-month period ending 30 June 2016, there has been no other reclassification of debt securities in other categories. All reclassified held for trading debt securities had matured by 2011. Reclassification of available for sale investments In accordance with the provisions of the amended IAS 39, the Group has reclassified certain available for sale debt securities to loans and receivables, in view of the fact that there was no active market for these debt securities and the Group did not have the intention to sell these securities in the foreseeable future.

35

Notes to the Condensed Consolidated Financial Statements 13. Reclassification of debt securities (continued) The carrying amount and fair value of the reclassified debt securities is presented below: 1 January 2009 30 June 2016 Carrying amount

and fair value Carrying amount

Fair value

€’000 €’000 €’000

Available for sale debt securities reclassified as loans and receivables 139.001 132.909 133.553

Had the Group not reclassified the available for sale debt securities to loans and receivables on the 1st of January 2009, the Group’s equity would have included losses from change in fair value of these debt securities of €5.448 thousand that would have been included in the revaluation reserve for available for sale investments. In addition, on the 1st of January 2009, the Group reclassified certain available for sale debt securities, that it intends to hold to maturity, to the held to maturity category. The carrying amount of these debt securities transferred on the 1st of January 2009 amounted to €1.019 million. On 30th of June 2016 the carrying value of these remaining bonds amounted to €6.633 thousand (31 December 2015: €6.795 thousand). As a result of the above decision, for the period ended 30 June 2016, an amount of €393 thousand (30 June 2015: €623 thousand), being amortisation of revaluation of reclassified debt securities available for sale, was transferred from the investment revaluation reserve to the income statement. 14. Property, plant and equipment and intangible assets

15. Deferred Tax Asset

Deferred taxation arises from: 30 June

2016 €’000

31 December 2015 €’000

Property revaluation differences and differences between depreciation and capital allowances

1

1

Tax losses 49.628 58.093

49.629 58.094

Movement of Deferred taxation: 2016 Balance

1 January Effect on income

statement Balance 30 June

€'000 €'000 €'000 Property revaluation differences and differences between depreciation and capital allowances

1

--

1

Tax losses 58.093 (8.465) 49.628

58.094 (8.465) 49.629

Property, plant and equipment

Intangible assets

€'000 €'000

Net book value 1 January 2016 98.564 22.640

Additions less disposals 2.823 2.688

Depreciation/amortisation (2.174) (653)

Net book value 30 June 2016 99.213 24.675

36

Notes to the Condensed Consolidated Financial Statements 15. Deferred Tax Asset (continued) 2015

Balance 1 January

Effect on income statement

Balance 31 December

€'000 €'000 €'000

Property revaluation differences and differences between depreciation and capital allowances

159

(158)

1 Tax losses 52.312 5.781 58.093

52.471 5.623 58.094

As at 30 June 2016, the deferred tax asset of €49,6 million which arises from tax losses and is based on the Bank’s assessment of the current and future profitability, relates to accumulated tax losses of €397 million which expire within 5 years. 16. Other assets As at 30 June 2016, the other assets amounted to €118.606 thousand of which €70.442 thousand relate to stock of properties held for sale. Out of stock of properties held for sale, €69.716 thousand relate to assets acquired in satisfaction of debt and the remaining €726 thousand relate to assets not in use. The Group’s movement of assets from customers’ debt settlement on 30 June 2016 is presented as follows:

Banking & Financial services

Insurance Services

Total

€'000

€'000

€'000

31 December 2015 69.655 828 70.483

Additions 2.515 -- 2.515

Disposals (851) -- (851)

Impairment losses (2.414) (17) (2.431)

30 June 2016 68.905 811 69.716

Properties acquired from customers’ debt settlement amounting to €41.406 thousand, are held by subsidiary special purpose entities (SPEs) which were formed with the purpose of holding and managing these immovable properties acquired under these arrangements. As at 30 June 2016, the properties held by these SPEs were included in stock of properties held for sale. 17. Amounts due to Central Banks 30 June

2016 €'000

31 December 2015 €'000

Between one and five years -- 236.373

On 5th of June 2014, in pursuing its price stability mandate, the Governing Council of the European Central Bank (ECB) decided to introduce measures to enhance the functioning of the monetary policy transmission mechanism by supporting lending to the real economy. One particular measure announced by the ECB in relation to achieving this objective, was the decision of ECB to conduct a series of targeted longer-term refinancing operations (TLTROs) over a period of two years. In implementing this plan, the Governing Council aimed to support bank lending to the non-financial private sector, meaning households and non-financial corporations, in the Eurozone member states. This measure did not propose to deal with lending to households for the purposes of house purchases. Under the scheme, banks were entitled to an initial borrowing allowance equal to 7% of a specific part of their loans in two parts, in September and December 2014.

37

Notes to the Condensed Consolidated Financial Statements 17. Amounts due to Central Banks (continued) The Bank participated in the TLTRO program in December 2014 by borrowing €236 million at an interest rate of 0,15% for 4 years. On 29th of June 2016, the Bank proceeded with the full early repayment of the TLTRO borrowing. 18. Loan capital

30 June 2016 €'000

31 December 2015 €'000

Tier 1 Capital

Convertible Capital Securities 1-CCS 1 1.597 1.597 Convertible Capital Securities 2-CCS 2 128.070 128.070

129.667 129.667

Tier 2 Capital

Non-Convertible Bonds 2016 41.801 41.801 Non-Convertible Bonds 2018 10.000 10.000 51.801 51.801

181.468 181.468

Full details/terms of issue of the Bonds and Securities of the Bank are included in the Prospectus and the Supplementary Prospectuses of each issue.

Convertible Capital Securities 1/ Convertible Capital Securities 2 (CCS 1/CCS 2) Pursuant to the terms of the Prospectus, CCS1/CCS2 holders may exercise the right to convert the CCS1/CCS2 into ordinary shares, during the periods between 15-31 January and 15-31 July of each year (“the Conversion Period”) with the first Conversion Period commencing on 15 January 2016 and the last Conversion Period commencing on 15 July 2023. If a CCS1/CCS2 holder exercises his Right to convert, any interest accrued ceases to be calculated and becomes due until the end of the conversion period during which the holder has exercised voluntary conversion, according to the provisions of Paragraph 10.B.(d) of Part IV/B/III and 11.B.(d) of Part IV/C/III. The first Conversion Period for 2016 for CCS1/CCS2 commenced on 15 January 2016 and ended on 29 January 2016. The Bank did not receive a Voluntary Conversion Application from any CCS1 /CCS2 holder.

The second Conversion Period for 2016 for CCS1/CCS2 commenced on 15 July 2016 and ended on 29 July 2016. The Bank did not receive a Voluntary Conversion Application from any CCS1 /CCS2 holder. Non-Convertible Bonds 2016

In implementing the provisions of the Prospectus dated 11th May 2006, the Bank proceeded on the 1st of July 2016 with the full redemption of Bonds 2016 (HBDF). Following the redemption of the Bonds, any obligations the Bank may otherwise had in relation to all or any of the Bonds and the holders thereof ceased to apply. The interest on the Bonds for the period from the 1st April 2016 to 30 June 2016 with a rate of 1,257% was paid on 1st July 2016. Individuals entitled to receive the interest payment were all registered holders of the Bonds as at 23rd of June 2016 (record date). Bonds last cum-interest trading date was the 21st of June 2016.

38

Notes to the Condensed Consolidated Financial Statements 19. Share capital

30 June 2016

€’000

Number of shares

(thousand)

31 December 2015 €’000

Number of shares

(thousand)

Authorised

1.032 million shares €0,50 each 516.000 1.032.000 516.000 1.032.000

30 June 2016 €'000

Number of shares

(thousand)

31 December 2015 €'000

Number of shares

(thousand)

Issued

Fully paid shares

1 January 99.217 198.435 93.010 9.300.974

Allotment of unexercised 2014 rights

--

--

874

87.422

Reverse split

--

--

--

(9.200.628)

Issue of shares to EBRD

--

--

5.333

10.667

Total issued share capital 99.217 198.435 99.217 198.435

During the six-month period to 30 June 2016 there was no movement to the Bank’s issued or authorised share capital. As at 30 June 2016, 198.434.584 fully paid shares were in issue, with a nominal value of €0,50 each (2015: 198.434.584 shares with a nominal value €0,50 each). 20. Revaluation reserves

30 June 2016 €'000

31 December 2015 €'000

Property revaluation reserve 1 January 29.740 30.098

Deferred taxation on revaluation of property (59) (41) Transfer to revenue reserve of excess depreciation on revaluation surplus (146) (317)

29.535 29.740

30 June 2016 €'000

31 December 2015 €'000

Revaluation reserve of available for sale securities 1 January 20.753 6.463 Revaluation of equity securities (391) 14.478 Revaluation of debt securities 2.776 1.619 Amortisation of revaluation of reclassified debt securities (393) (1.492) Transfer to the income statement on disposal of investments in equity available for sale (12.381) (315)

10.364 20.753

Total revaluation reserves 39.899 50.493

39

Notes to the Condensed Consolidated Financial Statements 21. Contingent liabilities and commitments Capital Commitments At 30 June 2016, the Group’s commitments for capital expenditure, not recognised in the statement of financial position, amounted to €4.936 thousand (31 December 2015: €1.749 thousand). Other Commitments At 30 June 2016, the Group’s commitments for expenditure, not recognised in the income statement, relating to future periods/years, amounted to €5.710 thousand (31 December 2015: €2.153 thousand). 22. Fair value Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the Group has access at that date. The fair value of a liability reflects its non-performance risk. The Group measures the fair value of an instrument using the quoted price in an active market, when available, for that instrument. A market is regarded as active if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. If there is no quoted price in an active market, then the Group uses valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs. The chosen valuation technique incorporates all of the main factors that market participants would take into account in pricing a transaction. Fair value of financial instruments The table below presents the analysis of the Group’s financial instruments measured at fair value on the basis of the three-level hierarchy by reference to the source of data used to derive the fair values. The levels of hierarchy of fair value are as follows:

• Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.

• Level 2:Data other than quoted prices included within Level 1 that is observable for the asset or liability, either directly or indirectly.

• Level 3: Import data for the asset or liability that is not based on observable market data (non- observable import data).

40

Notes to the Condensed Consolidated Financial Statements 22. Fair value (continued)

30 June 2016 Level 1 Level 2 Level 3 Total

€'000 €'000 €'000 €'000

Financial assets

Derivatives:

Foreign currency forwards -- 448 -- 448

Options -- 145 -- 145

Interest rate swaps -- 2.432 -- 2.432

Currency swaps -- 3.533 -- 3.533

-- 6.558 -- 6.558

Other financial assets at fair value through profit or loss

Debt securities:

Banks -- -- -- --

Other issuers -- -- -- --

Equity securities 361 -- -- 361

361 -- -- 361

Investments available for sale

Debt securities:

Government 258.905 22.700 -- 281.605

Banks 12.607 -- 9.946 22.553

Other issuers 251.205 -- -- 251.205

Equity securities 896 -- 8.432 9.328

Collective investments units 7.415 -- -- 7.415

531.028 22.700 18.378 572.106

Total 531.389 29.258 18.378 579.025

30 June 2016 Level 1 Level 2 Level 3 Total

€'000 €'000 €'000 €'000

Financial liabilities

Derivatives:


Options -- 145 -- 145


Currency swaps -- 530 -- 530

Total -- 5.439 -- 5.439

41

Notes to the Condensed Consolidated Financial Statements 22. Fair value (continued)

31 December 2015 Level 1 Level 2 Level 3 Total

€'000 €'000 €'000 €'000

Financial assets

Derivatives:


Options -- 136 -- 136


Currency swaps -- 3.258 -- 3.258

-- 6.653 -- 6.653

Other financial assets at fair value through profit or loss

Debt securities:

Banks 269 -- -- 269

Other issuers 1.550 -- -- 1.550

Equity securities 282 -- -- 282

2.101 -- -- 2.101


Debt securities:

Government 287.200 1.747 -- 288.947

Banks 170.697 -- 9.887 180.584

Other issuers 299.198 -- -- 299.198

Equity securities 1.287 -- 6.525 7.812

Collective investments units 7.046 -- -- 7.046

765.428 1.747 16.412 783.587

Other Assets -Equity held for sale -- -- 12.381 12.381

Total 767.529 8.400 28.793 804.722

31 December 2015 Level 1 Level 2 Level 3 Total

€'000 €'000 €'000 €'000

Financial liabilities

Derivatives:


Options -- 136 -- 136


Currency swaps -- 522 -- 522

Total -- 7.362 -- 7.362

42

Notes to the Condensed Consolidated Financial Statements 22. Fair value (continued) The tables below present the movement of financial instruments categorised at Level 3 hierarchy:


Debt securities

Equity

securities

Shares held for

sale

Total €'000 €'000 €'000 €'000 1 January 2016 9.887 6.525 12.381 28.793 Gains recognised in consolidated income statement in the category ‘Net gains on disposal and revaluation of foreign currencies and financial instruments’

59

--

-- 59 Additions -- 1.907 -- 1.907 Disposals -- -- (12.381) (12.381)

30 June 2016 9.946 8.432 -- 18.378


Debt securities

Equity

securities

Shares held for

sale

Total €'000 €'000 €'000 €'000 1 January 2015 11.339 7.280 -- 18.619 Gains recognised in consolidated income statement in the category ‘Net gains on disposal and revaluation of foreign currencies and financial instruments’

178

--

-- 178 Repayments (1.630) -- -- (1.630) Disposals -- (2.609) -- (2.609) Gains recognised in consolidated statement of comprehensive income in the category ‘Surplus on revaluation of available for sale equity and debt securities’

--

1.854

12.381 14.235

31 December 2015 9.887 6.525 12.381 28.793

For the valuation at fair value of the investments in equity securities which are classified as Level 3, a valuation method based on the company's equity at which the investment in shares is held as well as estimates of the Management of the Group have been used. Investments in debt securities, classified in Level 3, were valued using unobservable data that reflect however the assumptions that market participants would make to assess the value of an asset or a liability, based on the best available information under current conditions. On 30th June 2016 the fair value of investments in debt securities classified in the category ‘Assets held to maturity’ and which are not measured at fair value amounted to €48.694 thousand (31 December 2015: €46.108 thousand) and in the three-level hierarchy would be classified as Level 1. Also the fair value of investments in debt securities classified in the category ‘Loans and receivables’ and which are not measured at fair value, amounted to €328.042 thousand (31 December 2015: €229.122 thousand) and in the three-level hierarchy would be classified as Level 2. The fair value of loans and advances to customers is based on the present value of expected future cash flows. Future cash flows have been based on the future expected loss rate per loan category, taking into account expectations in the credit quality of the borrowers. The discount rate includes components that capture: the Group’s funding cost, cost of capital and an adjustment for the future cost of risk.

43

Notes to the Condensed Consolidated Financial Statements 22. Fair value (continued) The fair value of Group loans and advances to customers not measured at fair value on 30th June 2016 amounted to €3.006 million, carrying amount 30 June 2016 €3.062 million (31 December 2015:€3.035 million, carrying amount 31 December 2015: €3.093 million) and have been classified at Level 3. 23. Related party transactions Members of the Board of Directors and connected persons Connected persons include the spouse, the children, the parents and the companies in which Directors hold, directly or indirectly, at least 20% of the voting rights at a general meeting.

30 June 2016 €'000

31 December 2015 €'000

Loans and advances 23 8

Tangible securities 25 6

Deposits 1.939 2.104

Additionally, at 30 June 2016, there were contingent liabilities and commitments in respect of Members of the Board of Directors and their connected persons in the form of documentary credits, guarantees and unused limits amounting to €320 thousand which did not exceeded 1% of the Bank’s net assets (31 December 2015: €324 thousand). For the period ended 30 June 2016 there was no interest income in relation to Members of the Board of Directors and their connected persons (30 June 2015: €nil), while interest expense in respect of Members of the Board of Directors and their connected persons amounted to €5 thousand (30 June 2015: €11 thousand). Emoluments and fees of Members of the Board of Directors

30 June 2016 €'000

30 June 2015 €'000

Emoluments and fees of Members of the Board of Directors:

Emoluments and benefits in executive capacity 369 332

Employer’s contributions for social insurance, etc 1 17

Retirement benefits 7 2

Total emoluments for Executive Directors 377 351

Fees 487 410

Employer’s contributions – Non Executive Directors 23 5

Other transactions with Members of the Board of Directors and related parties The sales of insurance policies for the period ended 30 June 2016 by the Group’s subsidiary, Pancyprian Insurance Ltd, to Members of the Board and their connected persons as defined above, amounted to €9 thousand (30 June 2015: €3 thousand), while sales of insurance policies by the Group’s subsidiary, Hellenic Alico Life Insurance Company amounted to €8 (30 June 2015: €12). For the period ended 30 June 2016, non-interest income amounting to €1 thousand was received which relates to Members of the Board of Directors and their connected persons.

44

Notes to the Condensed Consolidated Financial Statements 23. Related party transactions (continued) Key Management personnel who are not Directors and their connected persons Key Management personnel are those persons who have the authority and the responsibility for the planning, management and control of the Banks’ operations, directly or indirectly. The Group, according to the provisions of IAS 24 considers as Key Management personnel the General Managers of the Bank who were not Directors, the members of the Asset and Liability Committee (ALCO) as well as management personnel who refer directly to the Chief Executive Officer. Connected persons include spouses, minor children and companies in which the Key Management personnel who were not Directors hold, directly or indirectly, at least 20% of the voting rights at a general meeting.

30 June 2016 €'000

31 December 2015 €'000

Loans and other advances 682 688


Deposits 4.479 5.169

Emoluments of Key Management personnel of the Group The emoluments of Key Management personnel who were not Directors were:

30 June 2016 €'000

30 June 2015 €'000

Emoluments of Key Management personnel who were not Directors:

Salaries and other short term benefits 1.191 1.004

Employer’s contributions for social insurance etc 104 117

Retirement benefits 71 58

Amounts paid on termination 238 795

1.604 1.974

During the first quarter of 2015, the contracts of employment between four Key Management personnel and the Bank were terminated by mutual consent. The parties agreed to a consideration for the termination of the contract of employment, in cash and in kind, amounting in total to around €795 thousand. The Bank also paid to the four Key Management personnel the total amount of their accrued rights. During the first quarter of 2016, the contract of employment between one Key Management personnel and the Bank was terminated by mutual consent. The parties agreed to a consideration for the termination of the contract of employment, in cash and in kind, amounting in total approximately €238 thousand. The Bank also paid to the Key Management personnel the total amount of his accrued rights. In addition, on 30 June 2016, there were contingent liabilities and commitments to Key Management personnel who were not Directors and their connected persons amounting to €347 thousand (31 December 2015: €335 thousand).

45

Notes to the Condensed Consolidated Financial Statements 23. Related party transactions (continued) Interest income in relation to Key Management personnel and their connected persons for the period ended 30 June 2016 amounted to €6 thousand (30 June 2015: €9 thousand), while interest expense in relation to Key Management personnel and their connected persons amounted to €22 thousand (30 June 2015: €67 thousand). The sales of insurance policies for the period ended 30 June 2016 by the Group’s subsidiary, Pancyprian Insurance Ltd, to Key Management personnel and their connected persons, as defined above, amounted to €20 thousand (30 June 2015: €19 thousand) while the sales of insurance policies by the Group’s subsidiary, Hellenic Alico Life Insurance Company amounted to €12 thousand (30 June 2015:€14 thousand). Shareholders with significant influence and their connected persons Pursuant to the provisions of IAS 24, related parties are considered, among others, the Shareholders who have significant influence to the Bank or/and hold directly or indirectly more than twenty percent (20%) of the nominal value of the issued capital of the Bank. Connected persons include the entities controlled by Shareholders with significant influence as they are defined above.

30 June 2016 €'000

31 December 2015 €'000

Loans and advances 152 --


Deposits 27.595 20.616

On 30 June 2016, there were contingent liabilities and commitments in relation to Shareholders with significant influence and connected persons in the form of documentary credits, guarantees and unused limits amounting to €363 thousand (31 December 2015: €513 thousand). Interest income in relation to Shareholders and connected persons for the period ended 30 June 2016 amounted to €nil (30 June 2015: €nil) while the corresponding interest expense was €1 thousand (30 June 2015: €53 thousand). Other transactions with Shareholders with significant influence and their connected persons During the period ended 30 June 2016, there were no purchases of goods and services by Shareholders with significant influence and their connected persons as defined above (30 June 2015: €nil). In addition, the sales of insurance policies by the Group's subsidiary, Pancyprian Insurance Ltd, to Shareholders with significant influence and their connected persons as defined above, amounted to €126 thousand (30 June 2015: €90 thousand). On 30 June 2016, Shareholders with significant influence and their connected persons had in their possession Convertible Capital Securities 2 (CCS2) amounting to €15,7 million (31 December 2015: €15,7 million). For the period ended 30 June 2016 non-interest income amounting to €39 thousand was received which relates to Shareholders with significant influence and their connected persons. All transactions with Members of the Board of Directors, Key Management personnel, Shareholders with significant influence and their connected persons are at an arm’s length basis. Regarding the Key Management personnel, facilities have been granted based on current terms as those applicable to the rest of the Group’s personnel.

46

Notes to the Condensed Consolidated Financial Statements 24. Economic Environment Economic Environment and Group operations in Cyprus Cyprus exited the Memorandum of Understanding at end of March 2016, without a precautionary post-programme credit, having successfully completed the Economic Adjustment Programme agreed with the country’s international lenders in March 2013. Cyprus has implemented important fiscal reforms under its macroeconomic adjustment programme. Fiscal developments have largely out-performed the primary balance targets that were set at the beginning of the programme. Structural reforms, some of them in the fiscal area, are set to contribute to ensuring strong fiscal governance in the post-programme period. Also, significant progress has been made under the programme to restructure and restore confidence in the Cypriot financial system. However, Cyprus still faces the challenge of restoring normal lending to the economy and addressing the high level of non-performing exposures. The commitment regarding the implementation of the Economic Adjustment Programme has been the cornerstone in steering the economy out of recession. Economic growth continued during the first half of 2016 at an accelerating pace. The expansion of the economy was mainly driven by rising private consumption amid negative inflation and supported by the depreciation of the Euro and the low oil prices. Growth was also supported by resilient export performance in the services sectors of tourism and professional business. The positive macroeconomic performance, does not justify complacency and does not signal a relaxation of efforts to further reform the economy. On the contrary, more and longer efforts are needed to put the economy back on the track of sustainable growth. Important reforms which are still outstanding relate to privatisations of semi-governmental organisations and reforms within the public administration, local government and the health sector. In early March 2016 the Eurogroup, has issued a statement, where it supports the Cypriot government’s decision to exit its macroeconomic adjustment programme without a successor arrangement. Additionally, the International Monetary Fund accepted Cyprus's decision to end its bailout program in March 2016. As a result of the above, and the minimum credit rating requirement of the ECB’s quantitative easing programme the Cyprus Bonds will qualify for the programme when Cyprus returns to investment grade. Declining energy prices continued to weigh on the Harmonized Index of Consumer Prices inflation, which remained negative during the first half of 2016 (-1,9%). Signs of an improving labor market emerged over the course of the first half 2016, with the unemployment rate registering 11,9%. Youth unemployment reached 40% towards the end of 2013, but has since then declined significantly to 24%. The developments in the tourism sector for the first five months of 2016 continue to be encouraging with arrivals rising by 20,5% compared to the previous year. Revenue from tourism, for the same period, rose by 12,4% compared to the equivalent period in 2015. The housing market continued its adjustment in the course of 2016, bringing the cumulative fall in prices since mid-2008 to 31,7% (Central Bank of Cyprus’s Property Price Index). During the first seven months of 2016, property sales recorded a new increase according to Land Registry data. Specifically, for the relevant period, the deeds of sale recorded an increase of 28% to 3.637 against 2.844 during the corresponding period a year ago. Fitch Ratings, on 23rd April 2016, has affirmed Cyprus’ long-term credit rating at B+ with a positive outlook. On 25 April 2016, Fitch Ratings upgraded the long-term IDR of Hellenic Bank and Bank of Cyprus to Β and Β- respectively, from their previous B- and CCC respective positions. The same agency affirmed short-term IDR of Hellenic Bank to B. Finally, it upgraded the Hellenic Bank viability rating to B from B-. In March 2016 and May 2016, Moody’s and Standard & Poor’s respectively affirmed their long and short-term ratings on Cyprus, with a stable and positive outlook, correspondingly. Moreover, in August 2016, Moody’s has changed its outlook on the Cypriot banking system to positive from stable. On 19th July 2016, the Republic of Cyprus, rated B1/BB-/B+/B (stable/positive/positive/stable) by Moody's/S&P/Fitch/DBRS, priced a EUR1 billion RegS registered only fixed rate notes issue due 26 July 2023. The deal pays a coupon of 3,750% and has a reoffer price of 99.698 / reoffer yield is 3,8%. This transaction is the first from the Republic of Cyprus following the successful exit from the Economic Adjustment Programme in March 2016.

47

Notes to the Condensed Consolidated Financial Statements 24. Economic Environment (continued) Despite the important steps taken towards restoring the economic climate, some degree of uncertainty remains, as the country still has certain issues to resolve, such as the high volume of non-performing exposures, high unemployment and delays in the advancement of structural reforms. The high private indebtedness levels that have led to deleveraging and increased non-performing exposures, continue to pose significant risks to the stability of the domestic banking system and to the outlook for the economy, especially via developments in property prices. From an exogenous perspective, the country’s economy may be negatively influenced due to (i) weaker than expected growth in the EU and the euro area as a result of worsening growth prospects in emerging market economies, and (ii) a slowdown in output growth in the UK and further depreciation of the pound against the euro, as a result of increased political and economic uncertainty following the Brexit vote. Also, the negative outlook of the Russian economy and the increased geopolitical tensions in the Middle East and Eastern Mediterranean, could trigger adverse spillovers to economic confidence, tourism and consequently to the aggregate economic activity. Additionally, developments over a potential reunification of Cyprus along with the exploitation of Cyprus’ natural resources are being closely monitored in order to assess the potential prospects that are being developed. In spite of these challenges, Cyprus' macroeconomic outlook is positive. Official forecasts by the Ministry of Finance of the Republic of Cyprus anticipate growth of 2,2% in 2016 and 2,5% in 2017. The pick-up in domestic demand is expected to be reflected into improved labor market conditions, with unemployment starting to ease gradually. Inflation is also expected to remain low, weighed down by recent declines in oil prices. Consequences of the recent developments The Cyprus banking sector has gone through a reformation phase and is now in a strengthened capital and liquidity position. Its size has been reduced to a moderate 4 times the GDP or about the EU average. Foreign exposures have been eliminated and domestic operations form the main focus. While decisive steps were taken and swift progress has been achieved throughout the banking sector, the high share of non-performing exposures is impacting both on the banks’ balance sheets as well as on their ability to extend credit to the economy. The Bank has managed to navigate successfully through the banking crisis. It has maintained throughout the crisis its reputation for stability and trust and is concentrating in its strengthening and better focusing of its market positioning. Meanwhile, the Bank maintains sufficient liquidity to allow it to exploit opportunities while maintaining its focus on organic growth. The Bank has the ability to finance creditworthy businesses and households, helping in the restoration of the country’s economy. The Bank estimates there is potential and opportunities in various sectors of the economy. The focus of new loans will be companies that increase the competitiveness and productivity of the country, such as in the sectors of commercial activities, tourism, agriculture, European programs and specific projects on energy and shipping. At the same time, loans to the retail sector will be geared toward mortgages, small loans to new customers and supporting current clients who are deemed viable. The high levels of non-performing exposures (NPEs) pose major risks to the stability of the banking system and to the outlook for the economy. Ineffective implementation of the new insolvency and foreclosure legal framework could delay the resumption of healthy credit conditions and robust economic growth. Unavoidably, the high level of NPΕs causes an erosion of the Banks’ income and may cause additional provisions and effectively reduced profit from ordinary operations. At the same time the Bank recognises that the real estate market which is a significant driver of the provisions for impairment of customer loans continues to be subdued and puts further pressure on the profitability. Within the framework of tackling the Bank’s loan portfolio quality the Group is focusing on restructuring loans in a sustainable manner and on mutually beneficial terms. The Board of Directors and the Management of the Bank are taking decisive actions to address the high level of NPEs, including debts to assets swaps, in order to ensure improved performance, sustainable profitability and growth.

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Notes to the Condensed Consolidated Financial Statements 25. Capital Base and Adequacy The Capital Adequacy Ratios of the Group and the Bank as at 30 June 2016 under Pillar I (transitional basis) were as follows:

Capital Adequacy Ratios Group Bank

30 June 2016 FY2015 30 June 2016 FY2015

Capital Adequacy Ratio 17,15% 18,13% 17,10% 18,12%

Tier 1 Ratio 16,90% 17,68% 16,85% 17,66%

Common Equity Tier 1 (CET 1) 13,92% 14,75% 13,88% 14,73%

The decrease in Common Equity Tier 1 Ratio compared to FY2015 was mainly due to: • gradual elimination of transitional provisions towards full phase application of Regulation (EU) No 575/2013

on the calculation of Own Funds (effect of 37 basis points), • increased risk weighting classification due to adoption of the CBC’s recommendation (5 April 2016) and

respective EBA’s recommendation, regarding the risk weight to be assigned to high risk exposures (effect of 78 basis points).

According to Regulation No.2015/62 of the European Parliament and Council dated 10th of October 2014, as at 30 June 2016 the Leverage Ratio for the Group was 9,24% (Bank: 9,23%) compared to 9,05% (Bank: 9,04%) as at 31 December 2015. The CET 1 ratio on a fully loaded basis for the Group was formed at 13,18% (Bank: 13,14%) compared to 13,53% (Bank:13,51%) as at 31 December 2015. The leverage ratio on a fully loaded basis for the Group was formed at 9,00% (Bank: 8,98%) compared to 8,60% (Bank: 8,59%) as at 31 December 2015. The Group’s risk weighted assets (RWA) amounted to €4.017 million as at 30 June 2016 (31 December 2015: €3.958 million). The Central Bank of Cyprus (CBC) issued a circular letter addressed to all local supervised banking institutions on the 5th of April 2016, which recommended an amendment to the methodology employed for the calculation of RWA stemming from exposures associated with particularly high risk as per the Regulation 575/2013. Specifically, CBC suggested a stricter approach in the calculation of RWA, in the said circular letter, by withdrawing the national discretions granted in February 2014 regarding high risk items (that allow the assignment of lower than 150% Risk Weight in some cases) and recommending the assignment of 150% Risk Weight to all high risk exposures regardless of the collateral structure, provisions coverage or performing status. The additional RWA stemming from this change amounted to €214 million (out of the RWA as at 31 December 2015).

As from 20 November 2015 the Bank is required to maintain, on a consolidated basis, a Common Equity Tier 1 (CET1) capital ratio of 11,75%, as such ratio is defined in Regulation (EU) No 575/2013 of the European Parliament and of the Council. Notification to ECB is required if the Bank does not, or is likely not to, exceed by 25 basis points the CET1 minimum capital requirement of 11,75% listed in the ECB notification. In addition, the Bank is prohibited from paying out dividends to shareholders until 31 December 2016. The decision was based on the Supervisory Review and Evaluation Process (SREP) conducted pursuant to Article 4(1)(f) of Regulation (EU) No 1024/2013 on the information available on 31 December 2014, and any other relevant information received after that date. The supervisory review and evaluation process has been conducted under the lead of the ECB. The supervisory authorities are currently carrying out their 2016 SREP with reference date the 31 December 2015 financial results. The results of this exercise are expected to be finalised by the year end. The minimum CET 1 ratio set by the ECB for Hellenic Bank Group of 11,75% is covered by the Group’s CET1 ratio of 13,92%. The CET 1 ratio of 11,75% includes: (i) the minimum Common Equity Tier 1 ratio required to be maintained at all times under Article 92(1)(a) of Regulation (EU) No 575/2013; (ii) the Common Equity Tier 1 ratio required to be held in excess of that minimum Common Equity Tier 1 ratio and to be maintained at all times in accordance with Article 16(2)(a) of Regulation (EU) No 1024/2013; and (iii) the capital conservation buffer required under Article 129 of Directive 2013/36/EU as implemented in the national law of the Republic of Cyprus. Other Systemically Important Institution (O-SII) buffer will also be introduced gradually over four years, starting from 1st January 2019. The Bank must maintain an O-SII buffer of 1,5% of CET 1 capital (2022) of its total risk exposure amount calculated in accordance with Article 92(3) of Regulation (EU) No 575/2013, on an individual

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Notes to the Condensed Consolidated Financial Statements

25. Capital Base and Adequacy (continued) and consolidated basis. The Central Bank has set the counter-cyclical capital buffer at 0% for the period 1 July 2016 to 30 September 2016.

The Bank within the framework of the Bank Recovery and Resolution Directive (BRRD) is subject to the minimum requirement for own funds and eligible liabilities (MREL). The regulatory authorities are currently in the process of establishing the MREL requirement on a case-by-case basis. The first preliminary MREL requirement and the relevant transitional provisions (compliance timetable) is expected to be communicated to the Bank before the year end. 26. Decisions of the Annual General Meeting of the Shareholders of Hellenic Bank Public Company Limited The 42nd Annual General Meeting (“AGM”) of the Shareholders of the Bank, which was held on Wednesday 25th May 2016, was attended by 85 shareholders, either physically or by proxy, representing 156.777.111 shares, being 78,91% of the issued share capital of the Bank. The AGM examined and approved the Directors’ Report, the Financial Statements and the Auditors’ Report for the year ended 31st December 2015. Ms Marianna Pantelidou Neophytou, Mr Ioannis A. Matsis, Dr Evripides A. Polykarpou and Mr Andrew Charles Wynn were re-elected as Members of the Board of Directors, following voting by poll. Mr Stephen John Albutt was elected as a new Member of the Board of Directors. The election of Mr. Stephen John Albutt is subject to the approval of the Central Bank of Cyprus / European Central Bank and his appointment will be effective as from the date of such approval. The AGM examined and approved the Remuneration Policy Report for the year 2015 and fixed the Remuneration of the Directors for the year 2016 at the same level as last year. In accordance with section 153(2) of the Companies Law Cap. 113, and in view of the fact that (i) no notice was received by the Bank for the appointment of another auditor or requesting the removal of the current auditors of the Bank; and (ii) KPMG remain qualified and wish to be reappointed as Auditors of the Bank, KPMG Limited were automatically re-appointed as Auditors of the Bank for 2016. The AGM decided that the Board of Directors be authorised to fix the remuneration of the Auditors. The AGM also examined and approved the Amendment of Regulations 1,57,87,112,126 & 127 of the Articles of Association of the Bank and approved a number of special resolutions.

The AGM additionally approved, that the Board of Directors is authorised to exercise all powers of the Bank to establish an employee long-term incentive plan and for such purpose allot and/or issue to such employees of the Bank (including, without limitation, executive members of the Board of Directors, other than the Bank’s Chief Executive Officer), up to an aggregate of 9.921.725 ordinary shares in the Bank of a nominal value of €0,50 each. The long term incentive plan will be a performance-based share plan, with performance-based share awards being granted to employees for the period March 2017 to March 2022. Detailed announcement of the decisions of the AGM is available on the Bank’s official site www.hellenicbank.com. 27. Events after the reporting period On the 3rd of August 2016 the Bank announced the decision of its Chief Financial Officer, Mr Antonis Rouvas, to leave the Bank for personal reasons. The Bank is initiating the process for his replacement in cooperation with international recruitment agencies who specialise in recruiting high caliber professionals. Mr Rouvas will remain in his current position and continue to support the Bank until the completion of the replacement process.

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Notes to the Condensed Consolidated Financial Statements 27. Events after the reporting period (continued) The Bank also announced the revision of the Group’s organisational structure designed to meet the challenges of the competitive environment and to streamline/empower the Executive Committee, which will comprise of the following members:

• Henricus Lambertus (Bert) Pijls- Executive Director/Chief Executive Officer, Chairman of the Executive

Committee

• Georgios Fereos-Executive Director/Group General Manager, Group Corporate Development

• Kyriaki Papadopoulou-Group General Manager, Group Arrears Management Division

• Phivos Stasopoulos-Group General Manager Business& Insurance

• George Karageorgis-Group General Manager, Retail & International Banking

• Vladislav Botic-Chief Operating Officer

• Antonis Rouvas (until his replacement)-Chief Financial Officer

• Stefano Capodagli-Chief Risk Officer (as of September 2016) The present Chief Risk Officer, Nicos Hadjimarkou will be taking over CEO/Single Mechanism Office in September 2016. The heads of the independent control functions (risk management, internal audit, compliance and information security) continue to report to the relevant Board Committees. 28. Approval of Financial Statements The Condensed Consolidated six-month Financial Statements were approved by the Board of Directors on the 30th of August 2016.

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HELLENIC BANK GROUP Interim Management Report for the six-month period ended 30 June 2016 Results Overview Profit for the six-month period ended 30 June 2016 amounted to €1,1 million (6M-2015: €0,5 million). The Group’s profitability before impairment losses and provisions to cover credit risk, improved both on Year on Year (YoY) as well as on a Quarter on Quarter (QoQ) basis, mainly due to the gain of €14 million from the disposal of the shares in VISA Europe Limited held by the Bank since the transaction was completed at the end of 2Q2016. Profit from ordinary operations before impairment losses and provisions to cover credit risk for the six-month period ended 30 June 2016 amounted to €58,7 million out of which €36,0 million relate to 2Q2016 results and €22,7 million to 1Q2016 results registering an increase of 58% from 1Q2016 to 2Q2016. Compared to the results of the six-month period ended 30 June 2015 there was an increase of 40%. In both cases the increase was mainly due to the gain from the disposal of the VISA Europe Limited shares. Profit attributable to the Bank’s shareholders for the six-month period ended 30 June 2016 amounted to €0,7 million (6M-2015: €0,1 million). In the six-month period ended 30 June 2015, profit attributable to the Bank’s shareholders includes a profit of €4,8 million from discontinued operations that related to the disposal of a building owned by the Group in Moscow, following the sale of its Russian banking subsidiary in 2014. During the 2Q2016 the Bank derecognised a deferred tax asset of €8,5 million arising from tax losses. Income Statement Analysis Net interest income Net interest income for the six-month period ended 30 June 2016 reached €74,7 million, a 2% increase compared to the corresponding period ended 30 June 2015. Net interest income in 2Q2016 is generally in line with 1Q2016 with a minor decrease of 2% reflecting the competitive interest rate environment. The Group’s net interest margin for the six-month period ended 30 June 2016 amounted to 2,1% (6M-2015: 2,0%). Non-interest income Total non-interest income for the six-month period ended 30 June 2016 amounted to €56,3 million, registering an increase of 24% compared to the corresponding period ended 30 June 2015. This increase was mainly due to the increase in Net gain on disposal and revaluation of foreign currencies and financial instruments which is explained with the gain of €14 million from the disposal of the shares in Visa Europe Limited included in the six-month period ended 30 June 2016. Total non-interest income in 2Q2016 amounted to €34,3 million and increased by 56% compared to the €22 million of 1Q2016, mainly again due to the gain of €14 million from the disposal of the shares in Visa Europe Limited, as the transaction incurred in 2Q2016. For more details for the transaction please refer to Note 5 to these Interim Condensed Consolidated Financial Statements. Expenses The total expenses for the six-month period ended 30 June 2016 decreased by 6% compared to the respective six-month period ended 30 June 2015. Total expenses for 2Q2016 decreased by 5% compared to 1Q2016. The reduction was mainly attributable to decreases in administrative and other expenses both on YoY as well as on a QoQ basis. The cost to income ratio for the six-month period ended 30 June 2016 was 55,2% compared to the 64,7% for the six-month period ended 30 June 2015. Adjusting for the gain on disposal of the Visa Europe Limited shares, the cost to income ratio for the six-month period ended 30 June 2016 was 61,8%.

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Interim Management Report for the six-month period ended 30 June 2016 Income Statement Analysis (continued) Expenses (continued) Staff costs Staff costs for the six-month period ended 30 June 2016 represented the 56,3% of the Group’s total expenses (30 June 2015: 50,9%), showing an increase of 4% compared to the respective six-month period ended 30 June 2015. The increase was mainly due to the increase in the number of employees from 1.528 to 1.611, mainly due to recruitment of additional employees at the Arrears Management, Business, Technology and Risk Management Unit. Staff costs for 2Q2016 represented 57,0% (1Q2016: 55,7%) of the Group’s total expenses showing a 2% decrease compared to 1Q2016. Administrative and other expenses Total administrative and other expenses for the six-month period ended 30 June 2016 amounted to €28,7 million, and were reduced by 19% compared to the €35,4 million for the corresponding six-month period ended 30 June 2015 mainly due to the decrease of the cost of advisory services. For the six-month period ended 30 June 2016, the amount charged to the income statement relating to the cost of advisory services was €2,9 million (6M-2015: €9,3 million). For more details for the Administrative and other expenses please refer to Note 6 to these Interim Condensed Consolidated Financial Statements. Impairment losses and provisions to cover credit risk For the six-month period ended 30 June 2016, the total provision charge for impairment losses to cover credit risk amounted to €48,8 million showing an increase of 4% in comparison to the respective six-month period ended 30 June 2015. The provision charge for impairment losses to cover credit risk for 2Q2016 amounted to €27,2 million and for 1Q2016 to €21,6 million. The cost of risk for the six-month period ended 30 June 2016 was 2,4% (31 December 2015: 2,3%, 30 June 2015: 2,1%). Statement of Financial Position Analysis As at 30 June 2016, the Group’s total assets amounted to €7,1 billion and indicated a decrease of 4% compared to 31 December 2015. This was mainly due to the decrease of the deposits with other banks as well as the Bonds portfolio. The Bank maintained a net loans to deposits ratio of 50,5% as at 30 June 2016 (31 December 2015: 50,4%). Deposits Customer deposits amounted to €6,1 billion as at 30 June 2016 (31 December 2015: €6,1 billion). They comprised of €4,6 billion deposits in Euro and €1,5 billion deposits in foreign currencies, mostly US Dollars. The Group’s focus in the deposit market is in attracting deposits which are sticky. Total deposits recorded a 1% decrease from 31 December 2015. The Bank’s deposits market share1 as at 30 June 2016 was 13,1% (31 December 2015: 13,5%). Loans Total new lending for the six-month period ended 30 June 2016 reached €152 million. The Bank continued providing lending to creditworthy businesses and households while examining other growth opportunities. Gross loans as at 30 June 2016 amounted to €4.310 million (31 December 2015: €4.396 million). As of 1st

January 2016, gross values of impaired loans are booked on a non-interest accrual basis. The amount of contractual interest that was not accrued for the six-month period ended 30 June 2016 amounted to €86,5 million. In previous years gross impaired loans included contractual interest accrued. The Bank’s loan market share2 as at 30 June 2016 was 7,9% (31 December 2015: 7,0%). During the six-month period ended 30 June

1 Source: Central Bank of Cyprus and Hellenic Bank. 2 Source: Central Bank of Cyprus and Hellenic Bank.

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Interim Management Report for the six-month period ended 30 June 2016 Statement of Financial Position Analysis (continued) 2016 exposures of €76 million were written off. Adjusting for this amount, gross loans suggest a decrease of 0,2% compared to 31 December 2015. Loan Portfolio Quality Committed efforts to resolve problematic loans continued. The level of NPEs has been reduced for a third quarter in a row. As at 30 June 2016, NPEs decreased by 2% to €2.487 million compared to €2.536 million as at 31 March 2016 and by 4% compared to the figure as at 31 December 2015. Terminated loans included in NPEs amounted to €1.500 million as at 30 June 2016 (31 December 2015: €1.477 million). Gross loans with forbearance measures as at 30 June 2016 amounted to €1.331 million (31 December 2015: €1.317 million). During the six-month period ended 30 June 2016 the Bank continued focusing on the restructuring of its NPEs, using a toolset of sustainable solutions, such as debt to asset swaps, balance reductions, extensions of maturity and instalments amount reduction, grace periods, servicing support, etc. An amount of €334 million3 relating to total customers’ exposures, was restructured during the six-month period ended 30 June 2016, while an amount of €76 million was written off. The stock of properties held for sale, which are mostly from customers’ debt settlement, amounted to €70,4 million as at 30 June 2016 (31 March 2016: €68,9 million, 31 December 2015: €71,2 million). The ratio of NPEs to gross loans as at 30 June 2016 was reduced to 57,7% (31 March 2016: 58,3%, 31 December 2015: 59,2%). Including the contractual interest on impaired loans not accrued of €86,5 million, the ratio of NPEs to gross loans was 58,5% (31 March 2016: 58,7%). Accumulated impairment losses, amounted to €1.248 million as at 30 June 2016 (31 March 2016: €1.245 million, 31 December 2015: €1.303 million) and represented 29,0% of the total gross loans (31 March 2016:28,6%, 31 December 2015: 29,6%). The coverage of the NPEs by provisions (coverage ratio) as at 30 June 2016 was 50,2% (31 March 2016: 49,1%, 31 December 2015: 50,1%). The financial effects of collaterals4 on NPEs amounted to €1.592 million which together with the total impairment losses result to a coverage of 114,2%. For more details for the Loan portfolio please refer to Note 11 to these Interim Condensed Consolidated Financial Statements. Investment Assets

The total value of investment assets amounted to €3,7 billion (31 December 2015: €4 billion) and represented 52,7% of the total assets of the Group at 30 June 2016 (31 December 2015: 54,2%). Investment assets are comprised of cash and balances with Central Banks, placements with other banks, investments in bonds, investments in shares and collective investment units. The Group’s cash and placements with other banks and Central Banks amounted to €2,8 billion at 30 June 2016 (31 March 2016: €3,1 billion, 31 December 2015: €2,9 billion), and included a placement of €1,9 billion with the European Central Bank (31 March 2016: €2,1 billion, 31 December 2015: €1,9 billion ). Most foreign currency placements were with P1 rated banks5. The Group’s investments in bonds at 30 June 2016 amounted to €0,9 billion (31 December 2015: €1,0 billion), which represented 13% of total assets (31 December 2015: 14%). They comprised mainly of Cyprus Government Bonds and supranational organisations debt securities. The 41% of debt securities were Aaa rated6.

3 Client basis (distressed). 4 Based on open market values (capped at client exposure and legally collectible amount).

5 Prime-1 short term rating by Moody’s. 6 Moody’s ratings or Moody’s ratings equivalents - based on the CRR 575/2013 and CRD IV 2013/36/EU for the RWA calculation (as per Section 4, Article 138 of the regulation).

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Interim Management Report for the six-month period ended 30 June 2016 Capital Base and Adequacy

The Group maintains capital adequacy ratios, above the minimum required by the relevant regulatory authorities. The Capital Adequacy Ratios of the Group and the Bank as at 30 June 2016 under Pillar I (transitional basis) were as follows: • Total Capital Adequacy Ratio: 17,15% (Bank: 17,10%) • Tier 1 Ratio: 16,90% (Bank: 16,85%) • Common Equity Tier 1 Ratio (CET 1): 13,92% (Bank: 13,88%) The Group’s risk weighted assets amounted to €4.017 million as at 30 June 2016 (31 December 2015: €3.958 million). As from 20 November 2015 the Bank is required to maintain, on a consolidated basis, a Common Equity Tier 1 (CET1) capital ratio of 11,75%, as such ratio is defined in Regulation (EU) No 575/2013 of the European Parliament and of the Council. Notification to ECB is required if the Bank does not, or is likely not to, exceed by 25 basis points the CET1 minimum capital requirement of 11,75% listed in the ECB notification. In addition, the Bank is prohibited from paying out dividends to shareholders until 31 December 2016. The decision was based on the Supervisory Review and Evaluation Process (SREP) conducted pursuant to Article 4(1)(f) of Regulation (EU) No 1024/2013 on the information available on 31 December 2014, and any other relevant information received after that date. The supervisory review and evaluation process has been conducted under the lead of the ECB. The supervisory authorities are currently carrying out their 2016 SREP with reference date the 31 December 2015 financial results. The results of this exercise are expected to be finalized by the year end. The capital base and adequacy of the Group are further described in Note 25 to to these Interim Condensed Consolidated Financial Statements. Details for the capital management of the Group for the year 2015 are disclosed in Note 48 to the Annual Financial Statements for the year ended 31 December 2015. Related party transactions

Related party transactions for the six-month period ended 30 June 2016 are presented in Note 23 to these Interim Condensed Consolidated Financial Statements. Risk Management The main risks to which the Group is exposed and how they are monitored and managed are presented in Note 48 to the Annual Financial Statements for the year ended 31 December 2015. In addition, the accounting policies that are deemed critical to the Group’s results and financial position and which involve significant estimates and judgements are set out in Note 3 to these Interim Condensed Consolidated Financial Statements. Correspondent Banks The Bank carries its activities involving foreign currency through correspondent banks for the respective currencies. For the major currencies, the Bank maintains three bank relationships for USD, including one which is a full service relationship servicing all customers, three full bank relationships for GBP, four bank relationships for RUB including two which are a full service relationship, and two full bank relationships for CHF.

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Interim Management Report for the six-month period ended 30 June 2016 Strategic Targets and Outlook The Bank’s strategy focuses on two aspects: “Fix” and “Build”. The “Fix” aspect of the strategy predominantly relates to the reduction of the high level of NPEs. The “Build” aspect of the strategy relates to the growth of the loan portfolio and furthering the customer relationships, be those of a deposit or lending nature. It also relates to advancements in technology and enhancement of the customer service, as well as simplification of procedures and processes. The Bank is continuing repositioning its International Banking Division strategy reflecting the changing regulatory environment with specific focus on anti-money laundering issues. Further, in order to meet the challenges of the competitive environment and streamline/empower the Executive Committee, the Bank revised its Group organisational structure. Cyprus exited the Memorandum of Understanding at end of March 2016 having successfully completed the Economic Adjustment Programme agreed with the country’s international lenders in March 2013. The commitment regarding the implementation of the Economic Adjustment Programme has been the cornerstone in steering the economy out of recession. The successful implementation of Cyprus’ macroeconomic adjustment program has significantly enhanced confidence in the Cypriot economy, both domestically and internationally. Also, significant progress has been made under the program to restructure and restore confidence in the Cypriot financial system. However, the banking system still faces the challenge of restoring normal lending to the economy and addressing the high level of Non-Performing Exposures (NPEs). The high private indebtedness levels that have led to deleveraging and increased Non-Performing Exposures, continue to pose significant risks to the stability of the domestic banking system and to the outlook of the economy, especially via developments in property prices. As part of implementing its strategic targets, the Group is focused on supporting the economy’s recovery and contributing towards sustainable economic growth. The Bank maintains sufficient liquidity to exploit opportunities while maintaining its focus on organic growth. In order to undertake this, a key priority is to address the high level of Non-Performing Exposures which remain at unprecedented levels. Unavoidably, the high level of NPΕs causes an erosion of the Banks’ income and may cause additional provisions and effectively reduce profitability. At the same time the Bank recognises that the real estate market which is a significant driver of the provisions for impairment of customer loans continues to be subdued and puts further pressure on the profitability. Improvement in the level of NPEs in the economy has been slow. The economic recovery is expected to accelerate the pace of improvement, which nonetheless still remains volatile and partly dependent on real estate prices. Within the framework of tackling the Bank’s loan portfolio quality, the Group is focusing on restructuring loans in a sustainable manner and on mutually beneficial terms. Within the framework of tackling the Bank’s loan portfolio quality, the Group is focusing on restructuring loans in a sustainable manner and on mutually beneficial terms using a toolset of sustainable solutions, such as debt to asset swaps, balance reductions, extensions of maturity and instalments amount reduction, grace periods, servicing support, etc. The Bank has managed to navigate successfully through the banking crisis. It has maintained throughout the crisis its reputation for stability and trust and is concentrating on strengthening and better focusing of its market positioning. Through its focus on its “Fix” and “Build” initiatives, the Group has all the ingredients to continue the implementation of its strategy. At the same time the environment remains fragile and volatile and the Bank will remain vigilant of developments to turn them into opportunities both in Cyprus and internationally.

Events after the reporting period The events after the reporting period of 30 June 2016 are presented in Note 27 to these Interim Condensed Consolidated Financial Statements.

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DECLARATION BY THE MEMBERS OF THE BOARD OF DIRECTORS AND THE BANK’S OFFICIALS RESPONSIBLE FOR THE DRAFTING OF THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

In accordance with Article 10, sections (3)(c) and (7) of the 2007 Law on Transparency Requirements (Securities Listed for Trading on a Regulated Market) (the “Law”), we the Members of the Board of Directors and the Bank’s officials responsible for the drafting of the condensed interim consolidated financial statements of Hellenic Bank Public Company Ltd (the “Bank”) for the period of six months ended 30 June 2016, confirm to the best of our knowledge, that: (a) The condensed interim consolidated financial statements presented in pages 4 to 50:

(i) have been prepared in accordance with International Financial Reporting Standard 34 “Interim Financial Reporting” as adopted by the European Union, and in accordance with the provisions of Article 10, section (4) of the Law, and

(ii) give a true and fair view of the assets and liabilities, the financial position and the profits or

losses of Hellenic Bank Public Company Ltd and of the entities included in the consolidated financial statements as a whole and

(b) The interim management report presented in pages 51 to 55 provides a fair review of the information required by Article 10, section (6) of the Law. Members of the Board of Directors Irena A. Georgiadou Non-Executive Chairwoman………….................................................... Marinos S. Yannopoulos Non-Executive Vice Chairman............................................................... David Whalen Bonanno Non-Executive Member of the Board..................................................... Marianna Pantelidou Neophytou Non-Executive Member of the Board..................................................... Ioannis A. Matsis Non-Executive Member of the Board..................................................... Andrew Charles Wynn Non-Executive Member of the Board..................................................... Dr. Evripides A. Polycarpou Non-Executive Member of the Board..................................................... Christodoulos A. Hadjistavris Non-Executive Member of the Board..................................................... Andreas Christofides Non-Executive Member of the Board.................................................... Lambros Papadopoulos Non-Executive Member of the Board..................................................... Georgios Fereos Executive Member of the Board............................................................. Henricus Lambertus (Bert) Pijls Executive Member of the Board............................................................ Company official responsible for the drafting of the financial statements

Antonis Rouvas, Group Chief Financial Officer Nicosia, 30 August 2016

COMMENTARY GROUP RESULTS for the six-month period ended 30 June 2016

30 August 2016

Commentary - Group Results for the six-month period ended 30 June 2016 2

TABLE OF CONTENTS

Page

1. Fix and Build strategy is delivering results 3

2. Strategic targets and outlook 3-4

3. Results Overview 4-5

4. Income Statement 5-7

5. Statement of Financial Position 7-11

6. Appendix Group Income Statement Group Statement of Financial Position

12 13


1. FIX AND BUILD STRATEGY IS DELIVERING RESULTS

“Fix” elements

• Reduced for three quarters in a row; NPE ratio at 58%.

• €334 million restructurings1 in the first six months of 2016.

• 50,2% NPE coverage ratio; supports actions for resolving problematic loans.

“Build” elements

• €152 million of new lending were approved in the first half.

• Year-on -Year increase of NIM to 2,1%.

• Continuous investment in digital transformation; continuous internet banking upscaling, provision of

digital customer solutions

Results

• €1,1 million profit for the period ended 30 June 2016.

• 13,92% Common Equity Tier 1 (CET 1) ratio, above the 11,75% minimum required by the SSM.

• A stable net loans to deposits ratio of 50,5% allowing for further growth.

2. STRATEGIC TARGETS AND OUTLOOK

The Bank’s strategy focuses on two aspects: “Fix” and “Build”. The “Fix” aspect of the strategy predominantly

relates to the reduction of the high level of NPEs. The “Build” aspect of the strategy relates to the growth of the

loan portfolio and furthering the customer relationships, be those of a deposit or lending nature. It also relates to

advancements in technology and enhancement of the customer service, as well as simplification of procedures

and processes. The Bank is continuing repositioning its International Banking Division strategy reflecting the

changing regulatory environment with specific focus on anti-money laundering issues. Further, in order to meet

the challenges of the competitive environment and streamline/empower the Executive Committee, the Bank

revised its Group organisational structure.

Cyprus exited the Memorandum of Understanding at end of March 2016 having successfully completed the

Economic Adjustment Programme agreed with the country’s international lenders in March 2013. The

commitment regarding the implementation of the Economic Adjustment Programme has been the cornerstone in

steering the economy out of recession. The successful implementation of Cyprus’ macroeconomic adjustment

program has significantly enhanced confidence in the Cypriot economy, both domestically and internationally.

Also, significant progress has been made under the program to restructure and restore confidence in the Cypriot

financial system. However, the banking system still faces the challenge of restoring normal lending to the

economy and addressing the high level of Non-Performing Exposures (NPEs). The high private indebtedness

levels that have led to deleveraging and increased Non-Performing Exposures, continue to pose significant risks

to the stability of the domestic banking system and to the outlook of the economy, especially via developments

in property prices.

As part of implementing its strategic targets, the Group is focused on supporting the economy’s recovery and

contributing towards sustainable economic growth. The Bank maintains sufficient liquidity to exploit opportunities

while maintaining its focus on organic growth. In order to undertake this, a key priority is to address the high

level of Non-Performing Exposures which remain at unprecedented levels. Unavoidably, the high level of NPΕs

causes an erosion of the Banks’ income and may cause additional provisions and effectively reduce profitability.

At the same time the Bank recognises that the real estate market which is a significant driver of the provisions

for impairment of customer loans continues to be subdued and puts further pressure on the profitability.

Improvement in the level of NPEs in the economy has been slow. The economic recovery is expected to

1 Client basis (distressed).


accelerate the pace of improvement, which nonetheless still remains volatile and partly dependent on real estate

prices. Within the framework of tackling the Bank’s loan portfolio quality, the Group is focusing on restructuring

loans in a sustainable manner and on mutually beneficial terms using a toolset of sustainable solutions, such as

debt to asset swaps, balance reductions, extensions of maturity and instalments amount reduction, grace

periods, servicing support, etc.

The Bank has managed to navigate successfully through the banking crisis. It has maintained throughout the

crisis its reputation for stability and trust and is concentrating on strengthening and better focusing of its market

positioning. Through its focus on its “Fix” and “Build” initiatives, the Group has all the ingredients to continue the

implementation of its strategy. At the same time the environment remains fragile and volatile and the Bank will

remain vigilant of developments to turn them into opportunities both in Cyprus and internationally.

3. RESULTS OVERVIEW

Profit for the six-month period ended 30 June 2016 amounted to €1,1 million (6M-2015: €0,5 million). The

Group’s profitability before impairment losses and provisions to cover credit risk, improved both on Year on Year

(YoY) as well as on a Quarter on Quarter (QoQ) basis, mainly due to the gain of €14 million from the disposal of

the shares in VISA Europe Limited held by the Bank, since the transaction was completed at the end of

2Q2016.

Income Statement (€000) 6M-2016 6M-2015 ∆ 2Q2016 1Q2016 ∆ QoQ

Profit from ordinary operations before impairment losses and provisions to cover credit risk

58.750 41.972 +40% 36.015 22.735 +58%

Taxation (8.897) 755 -1.278% (8.453) (444) +1.804%


1.103 (4.283) -126% 411 692 -41%

Profit from discontinued operations

- 4.826 -100%

-

-

0%

Profit for the period 1.103 543 +103% 411 692 -41%

Profit attributable to the shareholders of the parent company

704 75 +840% 369 335 +10%

Profit from ordinary operations before impairment losses and provisions to cover credit risk for the six-month

period ended 30 June 2016 amounted to €58,7 million out of which €36,0 million relate to 2Q2016 results and

€22,7 million to 1Q2016 results registering an increase of 58% from 1Q2016 to 2Q2016. Compared to the

results of the six-month period ended 30 June 2015 there was an increase of 40%. In both cases the increase

was mainly due to the gain from the disposal of the VISA Europe Limited shares.

Profit attributable to the Bank’s shareholders for the six-month period ended 30 June 2016 amounted to €0,7

million (6M-2015: €0,1 million). In the six-month period ended 30 June 2015, profit attributable to the Bank’s

shareholders includes a profit of €4,8 million from discontinued operations that related to the disposal of a

building owned by the Group in Moscow, following the sale of its Russian banking subsidiary in 2014. During the

2Q2016 the Bank derecognised a deferred tax asset of €8,5 million arising from tax losses.


Basic Financial Position highlights (€million)

30 June 2016

FY2015 ∆

31 March 2016

∆

Gross loans 4.310 4.396 -2% 4.348 -1%

Loans (net of provisions for impairment) 3.062 3.093 -1% 3.103 -1%

Investment assets 3.737 4.010 -7% 3.995 -6%

Total assets 7.091 7.397 -4% 7.388 -4%

Deposits 6.059 6.139 -1% 6.028 +1%

Shareholders’ Funds 630 640 -2% 640 -2%

Risk Weighted Assets (RWA) 4.017 3.958 +1% 4.106 -2%

As at 30 June 2016, the Group’s total assets amounted to €7,1 billion and indicated a decrease of 4% compared

to 31 December 2015. This was mainly due to the decrease of the deposits with other banks as well as the

Bonds portfolio.

Key performance Indicators 30 June

2016 31 March

2016 ∆

FY2015 ∆

Common Equity Tier 1 (CET 1) 13,92% 13,81% +11 bps 14,75% -83 bps

Non performing Exposures (NPEs) (%) of gross loans 57,7% 58,3% -63 bps

59,2% -151 bps

Coverage ratio 50,2% 49,1% +109 bps 50,1% +13 bps

Net Interest Margin 2,1% 2,1% +1 bps 2,01% +13 bps

Cost to income ratio 2 55,2%/61,8% 61,9% -10 bps 59,3% //3

4. INCOME STATEMENT

4.1 Net interest income (NII)

Net Interest Income (€000) 6M-2016 6M-2015 ∆ 2Q2016 1Q2016 ∆ QoQ

Interest income 93.502 110.368 -15% 46.600 46.902 -1%

Interest expense (18.767) (37.089) -49% (9.597) (9.170) +5%

Net interest income 74.735 73.279 +2% 37.003 37.732 -2%

Net interest income for the six-month period ended 30 June 2016 reached €74,7 million, a 2% increase

compared to the corresponding period ended 30 June 2015. Net interest income in 2Q2016 is generally in line

with 1Q2016 with a minor decrease of 2% reflecting the competitive interest rate environment. The Group’s net

interest margin for the six-month period ended 30 June 2016 amounted to 2,1% (6M-2015: 2,0%).

4.2 Non-interest income

Non-interest Income (€000) 6M-2016 6M-2015 ∆ 2Q2016 1Q2016 ∆ QoQ

Net fee and commission income 25.293 27.579 -8% 12.299 12.994 -5%

Net gain on disposal and revaluation of foreign currencies and financial instruments

20.749 6.930 +199% 17.030 3.719 +358%

Other income 10.255 11.062 -7% 4.972 5.283 -6%

Total non-interest income 56.297 45.571 +24% 34.301 21.996 +56%

2 Cost to income ratio adjusted for the €14m profit from the sale of the investment in Visa Europe: 61,8%, non adjusted

55,2%. 3 // : non comparable


Total non-interest income for the six-month period ended 30 June 2016 amounted to €56,3 million, registering

an increase of 24% compared to the corresponding period ended 30 June 2015. This increase was mainly due

to the increase in Net gain on disposal and revaluation of foreign currencies and financial instruments which is

explained with the gain of €14 million from the disposal of the shares in Visa Europe Limited included in the six-

month period ended 30 June 2016. Excluding the gain of €14 million, total non-interest income amounted to

€42,3 million and is in line with corresponding period ended 30 June 2015 after deducting a gain on disposal of

financial instruments amounting to €2,9 million. Total non-interest income in 2Q2016 amounted to €34,3 million

and increased by 56% compared to the €22 million of 1Q2016 mainly again due to the gain of €14 million from

the disposal of the shares in Visa Europe Limited, as the transaction incurred in 2Q2016.

4.3 Expenses

Expenses (€000) 6M-2016 6M-2015 ∆ 2Q2016 1Q2016 ∆ QoQ

Staff costs 40.716 39.121 +4% 20.126 20.590 -2%

Administrative and other expenses 28.739 35.381 -19% 13.734 15.005 -8%

Depreciation and amortisation 2.827 2.376 +19% 1.429 1.398 +2%

Total expenses 72.282 76.878 -6% 35.289 36.993 -5%

The total expenses for the six-month period ended 30 June 2016 decreased by 6% compared to the respective

six-month period ended 30 June 2015. Total expenses for 2Q2016 decreased by 5% compared to 1Q2016. The

reduction was mainly attributable to decreases in administrative and other expenses both on YoY as well as on

a QoQ basis.

Staff costs for the six-month period ended 30 June 2016 represented the 56,3% of the Group’s total expenses

(30 June 2015: 50,9%), showing an increase of 4% compared to the respective six-month period ended 30 June

2015. The increase was mainly due to the increase in the number of employees from 1.528 to 1.611, mainly due

to recruitment of additional employees at the Arrears Management, Business, Technology and Risk

Management Unit. Staff costs for 2Q2016 represented 57,0% (1Q2016: 55,7%) of the Group’s total expenses

showing a 2% decrease compared to 1Q2016.

Total administrative and other expenses for the six-month period ended 30 June 2016 amounted to €28,7

million, and were reduced by 19% compared to the €35,4 million for the corresponding six-month period ended

30 June 2015 mainly due to the decrease of the cost of advisory services.

The administrative and other expenses for 2Q2016 amounted to €13,7 million, showing a decrease of 8%

compared to 1Q2016. The decrease was mainly attributable to the provision for impairment of stock of

properties held for sale of €2,4 million included in 1Q2016. This decrease was partly offset by a penalty4 of €1

million imposed by the Central Bank of Cyprus (CBC), included in 2Q2016 (1Q2016: €nil), resulting in a net

decrease of €1,4 compared to 1Q2016. During 2Q2016, besides the CBC penalty mentioned above, the

administrative and other expenses also included cost of advisory services from international advisory firms of

€1,1 million (1Q2016: €1,8 million, 6M-2015: €9,3 million) and provisions for pending litigations or complaints of

€0,4 million (1Q2016: €0,2 million, 6M-2015: €3,8 million).

The cost to income ratio for the six-month period ended 30 June 2016 was 55,2% compared to the 64,7% for the

six-month period ended 30 June 2015. For 2Q2016, the cost to income ratio was 49,5% compared to 61,9% in

4 CBC financial penalty relating to controls omissions and weaknesses in the implementation of due diligence measures and

customer identification procedures identified in 2014 and related to preceding years. The penalty does not relate to any identification of incidents of suppression of proceeds from any illegal activities. Hellenic Bank has made significant progress in rectifying these issues, following an independent review and subsequent restructuring of part of its business initiated since 2014 and overseen by the Board of Directors. At the same time, the Bank is continuing repositioning its International Banking Division strategy reflecting the changing regulatory environment with specific focus on anti-money laundering issues.


1Q2016. Adjusting for the gain on disposal of the Visa Europe Limited shares, the cost to income ratio for the

six-month period ended 30 June 2016 was 61,8% and for 2Q2016 was 61,6%.

4.4 Impairment losses and provisions to cover credit risk

Impairment losses and provisions (€000)

6M-2016 6M-2015 ∆ 2Q2016 1Q2016 ∆ QoQ

Impairment losses on the value of loans and advances

51.698 45.485 +14% 26.388 25.310 +4%

Provisions to cover credit risk for contractual commitments and guarantees

(2.948) 1.525 -293% 763 (3.711) -121%

Total impairment losses and provisions 48.750 47.010 +4% 27.151 21.599 +26%

For the six-month period ended 30 June 2016, the total provision charge for impairment losses to cover credit

risk amounted to €48,8 million showing an increase of 4% in comparison to the respective six-month period

ended 30 June 2015. The provision charge for impairment losses to cover credit risk for 2Q2016 amounted to

€27,2 million and for 1Q2016 to €21,6 million. The cost of risk for the six-month period ended 30 June 2016 was

2,4% (31 December 2015: 2,3%, 6M-2015: 2,1%).

5. STATEMENT OF FINANCIAL POSITION

5.1 Deposits and Loans

The Bank maintained a net loans to deposits ratio of 50,5% as at 30 June 2016 (31 December 2015: 50,4%).

5.1.1 Deposits

Customer deposits amounted to €6,1 billion as at 30 June 2016 (31 December 2015: €6,1 billion). They

comprised of €4,6 billion deposits in Euro and €1,5 billion deposits in foreign currencies, mostly US Dollars. The

Group’s focus in the deposit market is in attracting deposits which are sticky. Total deposits recorded a 1%

decrease from 31 December 2015. The Bank’s deposits market share5 as at 30 June 2016 was 13,1% (31

December 2015: 13,5%).

The composition of the customer deposits portfolio by currency was as follows:

Deposits by currency 30 June 2016 31 March

2016 ∆ FY2015 ∆

Euro 75% 75% - 73% +200 bps

US Dollars 21% 21% - 23% -200 bps

GBP 2% 2% - 2% -

Rubles 1% 1% - 1% -

Other currencies 1% 1% - 1% -

The composition of the customer deposits portfolio by deposit category was as follows:

Composition of customer deposits portfolio 30 June 2016 31 March

2016 ∆ FY2015 ∆

Demand Deposits 48% 48% - 49% -100 bps

Time Deposits 40% 40% - 39% +100 bps

Savings Deposits 9% 9% - 9%

-

Notice Deposits 3% 3% - 3%

-

5 Source: Central Bank of Cyprus and Hellenic Bank.


The composition of the customer deposits portfolio based on the customer’s country of origin was as follows:

Deposits by depositors’ country of origin 30 June 2016 31 March

2016 ∆ FY2015 ∆

Cyprus 52% 51% +100 bps 50% +200 bps

Russia 20% 21% -100 bps 23% -300 bps

Other countries of European Union 16% 16% - 16% -

Other European countries 7% 7% - 6% +100 bps

Other countries 5% 5% - 5% -

5.1.2 Loans

Total new lending for the six-month period ended 30 June 2016 reached €152 million. The Bank continued

providing lending to creditworthy businesses and households while examining other growth opportunities.

Gross loans as at 30 June 2016 amounted to €4.310 million (31 December 2015: €4.396 million). As of 1st

January 2016, gross values of impaired loans are booked on a non-interest accrual basis. The amount of

contractual interest that was not accrued for the six-month period ended 30 June 2016 amounted to €86,5

million. In previous years gross impaired loans included contractual interest accrued. The Bank’s loan market

share6 as at 30 June 2016 was 7,9% (31 December 2015: 7,0%).

During the six-month period ended 30 June 2016 exposures of €76 million were written off. Adjusting for this

amount, gross loans suggest a decrease of 0,2% compared to 31 December 2015.

The composition of the loans and advances to customers was as follows (net of provisions for impairment):

Composition of loan portfolio 30 June

2016 31 March

2016 ∆ FY2015 ∆

Retail 29% 29% - 30% -100 bps

Construction and Real Estate 24% 24% - 24% -

Other 17% 17% - 17% -

Trade 15% 16% -100 bps 15% -

Manufacturing 7% 7% - 7% -

Tourism 8% 7% +100 bps 7% +100 bps

5.2 Loan Portfolio Quality

Non Performing Exposures 30 June

2016 31 March

2016 ∆ FY2015 ∆

Non-Performing Exposures (NPEs)* (in €million)

2.487 2.536 -2% 2.602 -4%

NPEs (%) of gross loans 57,7% 58,3% -63 bps 59,2% -151 bps

Coverage ratio 50,2% 49,1% +109 bps 50,1% +13 bps

* including suspended interest not recognised in the income statement. In 1Q2016 and 2Q2016, impaired loans were booked on non interest accrual basis.

Committed efforts to resolve problematic loans continued. The level of NPEs has been reduced for a third

quarter in a row. As at 30 June 2016, NPEs decreased by 2% to €2.487 million compared to €2.536 million as at

31 March 2016 and by 4% compared to the figure as at 31 December 2015. Terminated loans included in NPEs

amounted to €1.500 million as at 30 June 2016 (31 December 2015: €1.477 million). Gross loans with

forbearance measures as at 30 June 2016 amounted to €1.331 million (31 December 2015: €1.317 million).

6 Source: Central Bank of Cyprus and Hellenic Bank.


During the six-month period ended 30 June 2016 the Bank continued focusing on the restructuring of its NPEs,

using a toolset of sustainable solutions, such as debt to asset swaps, balance reductions, extensions of maturity

and instalments amount reduction, grace periods, servicing support, etc. An amount of €334 million7 relating to

total customers’ exposures, was restructured during the six-month period ended 30 June 2016, while an amount

of €76 million was written off. The stock of properties held for sale, which are mostly from customers’ debt

settlement, amounted to €70,4 million as at 30 June 2016 (31 March 2016: €68,9 million, 31 December 2015:

€71,2 million).

The ratio of NPEs to gross loans as at 30 June 2016 was reduced to 57,7% (31 March 2016: 58,3%, 31

December 2015: 59,2%). Including the contractual interest on impaired loans not accrued of €86,5 million, the

ratio of NPEs to gross loans was 58,5% (31 March 2016: 58,7%).

Accumulated impairment losses, amounted to €1.248 million as at 30 June 2016 (31 March 2016: €1.245

million, 31 December 2015: €1.303 million) and represented 29,0% of the total gross loans (31 March

2016:28,6%, 31 December 2015: 29,6%).

The coverage of the NPEs by provisions (coverage ratio) was 50,2% as at 30 June 2016 (31 March 2016:

49,1%, 31 December 2015: 50,1%). The financial effects of collaterals8 on NPEs amounted to €1.592 million

which together with the total impairment losses result to a coverage of 114,2%.

The NPEs as at 30 June 2016 based on the counterparty sector are analysed below:

30 June 2016

Provisions Coverage

(% of NPEs)

31 March 2016 FY 2015 Analysis of Non-Performing Exposures (NPEs)

€million % of total €million % of total €million % of total

Total Non-Performing Exposures

2.487 100% 50% 2.536 100% 2.602 100%

of which Non-financial corporations:

1.754 71% 48% 1.783 70% 1.844 71%

Construction 666 27% 44% 677 27% 693 27%

Wholesale and retail trade

408 16% 57% 416 16% 429 16%

Real estate activities 168 7% 46% 168 7% 181 7%

Accommodation and food service activities

154 6% 36% 161 6% 181 7%

Manufacturing 116 5% 49% 117 5% 117 5%

Other sectors 242 10% 55% 243 10% 243 9%

of which Households:

688 28% 55% 702 28% 708 27%

of which Residential mortgage loans

240 10% 40% 275 11% 282 11%

of which Credit for consumption

138 6% 76% 141 6% 143 5%

Note: Numbers may not add up due to rounding

5.3 Investment Assets

The total value of investment assets amounted to €3,7 billion (31 December 2015: €4 billion) and represented

52,7% of the total assets of the Group at 30 June 2016 (31 December 2015: 54,2%). Investment assets are

comprised of cash and balances with Central Banks, placements with other banks, investments in bonds,

investments in shares and collective investment units.

7 Client basis (distressed). 8 Based on open market values (capped at client exposure and legally collectible amount).


The Group’s cash and placements with other banks and Central Banks amounted to €2,8 billion at 30 June

2016 (31 March 2016: €3,1 billion, 31 December 2015: €2,9 billion), and included a placement of €1,9 billion

with the European Central Bank (31 March 2016: €2,1 billion, 31 December 2015: €1,9 billion). Most foreign

currency placements were with P1 rated banks9.

The Group’s investments in bonds at 30 June 2016 amounted to €0,9 billion (31 December 2015: €1,0 billion),

which represented 13% of total assets (31 December 2015: 14%). They comprised mainly of Cyprus

Government Bonds and supranational organisations debt securities. The 41% of debt securities were Aaa

rated10.

The Cyprus Government bonds held by the Group at 30 June 2016 amounted to €516 million (31 December

2015: €394 million) of which €329 million will mature within 5 and 10 years, €30 million within 1 and 5 years and

the remaining €157 million within a period of less than 1 year.

At 30 June 2016, the carrying amount of investments in bonds, based on their issuer, is analysed as follows:

5.4 Amounts due to Central Banks

The Bank participated in the targeted longer-term refinancing operations (TLTRO) program in December 2014

by borrowing €236 million at an interest rate of 0,15% for 4 years. On 29 June 2016, the Bank proceeded with

the full early repayment of the TLTRO borrowing.

5.5 Capital Base and Adequacy

The Capital Adequacy Ratios of the Group and the Bank as at 30 June 2016 under Pillar I (transitional basis)

were as follows:

Capital Adequacy Ratios

Group Bank

30 June

2016 31 March

2016 FY2015

30 June 2016

31 March 2016

FY2015

Capital Adequacy Ratio 17,15% 17,05% 18,13% 17,10% 17,03% 18,12%

Tier 1 Ratio 16,90% 16,74% 17,68% 16,85% 16,73% 17,66%

Common Equity Tier 1 (CET 1) 13,92% 13,81% 14,75% 13,88% 13,79% 14,73%

9 Prime-1 short term rating by Moody’s. 10 Moody’s ratings or Moody’s ratings equivalents - based on the CRR 575/2013 and CRD IV 2013/36/EU for the RWA calculation (as per Section 4, Article 138 of the regulation).

Investment in Bonds - €million Governments Bonds - €million

516

81

1420 19 6

Cyprus - 516

USA - 81

Canada - 14

Germany - 20

Netherlands - 19

Israel - 6

Government 656Banks 23

Supranational

251


The increase in Common Equity Tier 1 Ratio compared to 1Q2016 was mainly due to the decrease in risk

weighted assets as a result of the reduction of the balance of the NPEs.

The decrease in Common Equity Tier 1 Ratio compared to FY2015 was mainly due to:

- gradual elimination of transitional provisions towards full phase application of Regulation (EU) No 575/2013 on

the calculation of Own Funds (effect of 37 basis points),

- increased risk weighting classification due to adoption of the Central Bank of Cyprus’s recommendation (5

April 2016) and respective European Banking Authority’s (EBA) recommendation, regarding the risk weight to

be assigned to high risk exposures (effect of 78 basis points).

The Group’s risk weighted assets (RWA) amounted to €4.017 million as at 30 June 2016 (31 March 2016:

€4.106, 31 December 2015: €3.958 million). The additional RWA stemming from the increased risk weighting

classification mentioned above, amounted to €214 million (out of the RWA as at 31 December 2015).

According to Regulation No.2015/62 of the European Parliament and Council dated 10th of October 2014, as at

30 June 2016 the Leverage Ratio for the Group was 9,24% (Bank: 9,23%) compared to 8,76% (Bank: 8,75%)

as at 31 March 2016 and 9,05% (Bank: 9,04%) as at 31 December 2015.

The CET 1 ratio on a fully loaded basis for the Group was formed at 13,18% (Bank: 13,14%) compared to

13,02% (Bank: 13,00%) as at 31 March 2016 and 13,53% (Bank: 13,51%) as at 31 December 2015. The

leverage ratio on a fully loaded basis for the Group was formed at 9,00% (Bank: 8,98%) compared to 8,46%

(Bank: 8,45%) as at 31 March 2016 and 8,60% (Bank: 8,59%) as at 31 December 2015.

As from 20 November 2015 the Bank is required to maintain, on a consolidated basis, a Common Equity Tier 1 (CET1) capital ratio of 11,75%, as such ratio is defined in Regulation (EU) No 575/2013 of the European Parliament and of the Council. Notification to ECB is required if the Bank does not, or is likely not to, exceed by 25 basis points the CET1 minimum capital requirement of 11,75% listed in the ECB notification. In addition, the Bank is prohibited from paying out dividends to shareholders until 31 December 2016. The decision was based on the Supervisory Review and Evaluation Process (SREP) conducted pursuant to Article 4(1)(f) of Regulation (EU) No 1024/2013 on the information available on 31 December 2014, and any other relevant information received after that date. The supervisory review and evaluation process has been conducted under the lead of the ECB. The supervisory authorities are currently carrying out their 2016 SREP with reference date the 31 December 2015 financial results. The results of this exercise are expected to be finalized by the year end.

The minimum CET 1 ratio set by the ECB for Hellenic Bank Group of 11,75% is covered by the Group’s CET1

ratio of 13,92%. The CET 1 ratio of 11,75% includes: (i) the minimum Common Equity Tier 1 ratio required to

be maintained at all times under Article 92(1)(a) of Regulation (EU) No 575/2013; (ii) the Common Equity Tier 1

ratio required to be held in excess of that minimum Common Equity Tier 1 ratio and to be maintained at all

times in accordance with Article 16(2)(a) of Regulation (EU) No 1024/2013; and (iii) the capital conservation

buffer required under Article 129 of Directive 2013/36/EU as implemented in the national law of the Republic of

Cyprus.

The Bank within the framework of the Bank Recovery and Resolution Directive (BRRD) is subject to the

minimum requirement for own funds and eligible liabilities (MREL). The regulatory authorities are currently in

the process of establishing the MREL requirement on a case-by-case basis. The first preliminary MREL

requirement and the relevant transitional provisions (compliance timetable) is expected to be communicated to

the Bank before the year end.

Other Systemically Important Institution (O-SII) buffer will also be introduced gradually over four years, starting

from 1st January 2019. The Bank must maintain an O-SII buffer of 1,5% of CET 1 capital (2022) of its total risk

exposure amount calculated in accordance with Article 92(3) of Regulation (EU) No 575/2013, on an individual

and consolidated basis. The Central Bank has set the counter-cyclical capital buffer at 0% for the period 1 July

2016 to 30 September 2016.


6. APPENDIX

GROUP INCOME STATEMENT (€million) 6M-2016 6M-2015 ∆ 2Q2016 1Q2016 ∆ QoQ

Interest income 93,5 110,4 -15% 46,6 46,9 -1%

Interest expense (18,8) (37,1) -49% (9,6) (9,2) +5%

Net interest income 74,7 73,3 +2% 37,0 37,7 -2%

Fee and commission income 27,7 30,1 -8% 13,4 14,2 -5%

Fee and commission expense (2,4) (2,5) -6% (1,1) (1,2) -7%

Net fee and commission income 25,3 27,6 -8% 12,3 13,0 -5%

Net gains/(loss) on disposal and revaluation of foreign currencies and financial instruments

20,7 6,9 +199% 17,0 3,7 +358%

Other income 10,3 11,1 -7% 5,0 5,3 -6%

Total net income 131,0 118,9 +10% 71,3 59,7 +19%

Staff costs (40,7) (39,1) +4% (20,1) (20,6) -2%

Depreciation and amortisation (2,8) (2,4) +19% (1,4) (1,4) +2%

Administrative and other expenses (28,7) (35,4) -19% (13,7) (15,0) -8%

Total expenses (72,3) (76,9) -6% (35,3) (37,0) -5%

Profit from ordinary operations before impairment losses and provisions to cover credit risk

58,8 42,0 +40% 36,0 22,7 +58%

Impairment losses and provisions to cover credit risk (48,8) (47,0) +4% (27,2) (21,6) +26%

Profit/(loss) before taxation 10,0 (5,0) -299% 8,9 1,1 +680%

Taxation (8,9) 0,8 -1.278% (8,5) (0,4) +1.804%


1,1 (4,3) -126% 0,4 0,7 -40%

Profit for the period from discontinued operations after tax

- 4,8 -100%

-

-

0%

Profit for the period 1,1 0,5 +103% 0,4 0,7 -40%

Non-controlling interests (0,4) (0,5) -15% (0,0) (0,4) -88%

Profit attributable to the shareholders of the parent company

0,7 0,1 +841% 0,4 0,3 +10%



6. APPENDIX

GROUP STATEMENT OF FINANCIAL POSITION (€million) 30 June 2016 FY2015 ∆

Cash balances with Central Banks 1.932 2.029 -5%

Placements with other banks 857 910 -6%

Loans and advances to customers 3.062 3.093 -1%

Debt securities 930 1.043 -11%

Equity securities and collective investment units 17 15 +13%

Property, plant and equipment 99 99 +1%

Intangible assets 25 23 +9%

Deferred tax asset 50 58 -15%

Other assets 119 128 -7%

Total assets 7.091 7.397 -4%

Deposits by banks 95 77 +23%

Amounts due to Central Banks - 236 -100%

Customer deposits and other customer accounts 6.059 6.139 -1%

Tax payable 6 5 +4%

Deferred tax liability 2 1 +12%

Other liabilities 115 114 0%

Loan capital 181 181 0%

Share capital 99 99 0%

Reserves 531 540 -2%

Non-controlling interest 4 3 +14%

Total liabilities and equity 7.091 7.397 -4%


Notes to the Group results for the six-month period ended 30 June 2016: The Condensed Consolidated Financial Statements have been prepared in accordance with International Accounting Standard (IAS) 34 “Interim Financial Reporting” as adopted by the European Union and should be read in conjunction with the Audited Consolidated Financial Statements for the year ended 31 December 2015. The Condensed Consolidated Financial Statements for the six-month period ended 30 June 2016 have not been audited by the external auditors of the Group. The external auditors of the Group have conducted a review in accordance with the International Standard on Review Engagements 2410, “Review of Interim Financial Information performed by the Independent Auditor of the Entity” issued by the International Auditing Assurance Standards Board. The Condensed Consolidated Financial Statements and the presentation of the financial results for the six-month period ended 30 June 2016 have been posted on the Group’s website on the internet at the page www.hellenicbank.com (Investor Relations).

1

Hellenic Bank: Profitable first 6 months

Progress on Key Indicators

Hellenic Bank had a marginally profitable first half of 2016, realising a profit of €1.1 million. The Bank continued to

support the economic recovery of the country by approving €152 million of new lending in the first half of 2016.

During the same period, the Bank also completed further restructurings of €334 million. Overall, the Bank is on the

right track, given the challenging economic environment both in Cyprus and internationally.

NPEs

The Management of the Bank is totally focused and fully dedicated to addressing the Bank’s non-performing

exposures (NPEs). NPEs recorded decrease for a 3rd quarter in a row. As at 30th June 2016, NPEs decreased by

2% from 31 March 2016 and by 4% compared to 31 December 2015, with the NPE ratio declining to 57.7% whilst

the coverage ratio improved to 50,2%.

NPE’s ratio down to 57.7%, decreasing for a 3rd consecutive quarter

o €334 million restructurings in the first 6 months of 2016

Profit of €1.1 million for the first half of 2016

Total expenses reduced by 6% compared to last year’s respective period

€152 million of new lending approved in the first 6 months

Common Equity Tier 1 ratio (CET 1) at 13,9%

Net interest margin increased to 2,1%

2

Net interest margin increased to 2,1%

Despite moving into a low interest rates environment, Hellenic Bank’s net interest margin increased to 2.1% at 30th

June 2016. The improvement is the result of the continued repricing of the deposits and the income generated from

the new exposures.

Strong Capital Position

The Group maintains robust capital adequacy ratios, above the minimum required by the relevant Regulatory

Authorities. As at 30th June 2016, the Common Equity Tier 1 (CET 1) ratio stood at 13,92%, compared to the

minimum CET 1 ratio set by the ECB for Hellenic Bank of 11,75%. At the end of 2Q2016, the Group’s Capital

Adequacy Ratio was 17,15% and the Tier 1 ratio was 16,9%.

Strong Liquidity

During the first half of 2016 the Group maintained its strong liquidity position. The net loan to deposits ratio stood

at 50,5% as at 30th June 2016. On 30th June 2016, total deposits amounted to €6,1billion while total gross loans

reached €4,3 billion.

Expenses

The total expenses for the 6-month period ended 30th June 2016 decreased by 6% compared to the respective

period of 2015. The cost to income ratio for the first 6 months of 2016 was 55,2% compared to 64,7% for the first

six months of 2015.

Main Targets for the Remainder of the Year

The Management’s top priorities for the remaining of 2016 is the handling of the still high level of NPEs and the

growth of the loan portfolio.

Hellenic Bank will intensify restructuring efforts with viable customers and those demonstrating improved customer

behavior. However, for non-cooperative customers Hellenic Bank will demonstrate zero tolerance and will make

full use of available tools through the recent amendments on the legal and judicial framework.

Hellenic Bank is supporting the economic recovery of Cyprus and contributing towards sustainable economic

growth by providing new lending to the local economy. At the same time the Bank is exploring opportunities to

deploy its liquidity both abroad and in new sectors of the economy.

30th August 2016

https://twitter.com/HellenicBank

https://www.facebook.com/HellenicBankOfficial

3

Statement by Mr Bert Pijls CEO:

“It is encouraging to see that the Bank is making progress against its strategic

priorities, which are to reduce non performing exposures (NPE) on the one

hand and growth on the other. Our NPE ratio dropped for the third consecutive

quarter. As I have repeatedly stated, Hellenic Bank will continue to explore all

available options in an effort to decisively tackle the NPE problem. Our

expenses are below previous year, loan growth is on track and our market

share has increased, and our net interest margin has improved. That being said, the effects of the crisis

are still being felt and we have had to build some additional provisions during the first 6 months of the

year, which resulted in a profit for the Group of €1 million during the first 6 months of 2016.”

ΟΜΙΛΟΣ ΕΛΛΗΝΙΚΗΣ ΤΡΑΠΕΖΑΣ

ΑΠΟΤΕΛΕΣΜΑΤΑ ΟΜΙΛΟΥ ΚΑΙ ΕΠΕΞΗΓΗΜΑΤΙΚΗ ΚΑΤΑΣΤΑΣΗ ΓΙΑ ΤΗΝ ΕΞΑΜΗΝΙΑ ΠΟΥ ΕΛΗΞΕ ΣΤΙΣ 30 ΙΟΥΝΙΟΥ 2016

• Στο 57,7% και σε πτωτική πορεία για 3ο συνεχόµενο τρίµηνο ο δείκτης των ΜΕΧ

• €334 εκατ. αναδιαρθρώσεις στους πρώτους 6 µήνες του 2016.

• Κέρδος €1,1 εκατ. για το πρώτο εξάµηνο του 2016

• 152 εκατ. νέα δάνεια στους πρώτους 6 µήνες

• ∆είκτης Κεφαλαίου Κοινών Μετοχών (CET 1) στο 13,92%

• Αύξηση επιτοκιακού περιθωρίου σε 2,1%

• Μείωση συνολικών εξόδων κατά 6% σε σχέση µε την αντίστοιχη περσινή περίοδο

Λογαριασµός Αποτελεσµάτων (€000)

1η

Εξαµηνία 2016

1η Εξαµηνία

2015

Εξαµηνιαία ∆

2η

Τριµηνία 2016

1η Τριµηνία

2016

Τριµηνιαία ∆

Κέρδος από συνήθεις εργασίες πριν τις ζηµιές αποµείωσης και προβλέψεις για την κάλυψη του πιστωτικού κινδύνου

58.750 41.972 +40% 36.015 22.735 +58%

Φορολογία (8.897) 755 -1.278% (8.453) (444) +1.804%

Κέρδος/(ζηµιά) για την περίοδο από συνεχιζόµενες δραστηριότητες

1.103 (4.283) -126% 411 692 -41%

Κέρδος από δραστηριότητες που τερµατίστηκαν µετά τη φορολογία

- 4.826 -100%

-

-

0%

Κέρδος για την περίοδο 1.103 543 +103% 411 692 -41%

Κέρδος που αναλογεί στους κατόχους µετοχών της µητρικής εταιρείας

704 75 +840% 369 335 +10%

Το κέρδος για την περίοδο που έληξε στις 30 Ιουνίου 2016 ανήλθε σε €1,1 εκατ. (30 Ιουνίου 2015: €0,5 εκατ.).Το κέρδος του Οµίλου πριν τις ζηµίες αποµείωσης και προβλέψεις για την κάλυψη του πιστωτικού κινδύνου βελτιώθηκε σε σύγκριση µε την αντίστοιχη περσινή περίοδο και σε σύγκριση µε την προηγούµενη τριµηνία κυρίως λόγω του κέρδους ύψους €14 εκατ. που προέκυψε από την διάθεση των µετοχών που κατείχε η Τράπεζα στην VISA Europe Limited η οποία ολοκληρώθηκε κατά το τέλος της δεύτερης τριµηνίας του 2016.

Το κέρδος από συνήθεις εργασίες πριν τις προβλέψεις για την κάλυψη του πιστωτικού κινδύνου για την εξαµηνία που έληξε στις 30 Ιουνίου 2016 ανήλθε σε €58,7 εκατ. εκ των οποίων €36,0 εκατ. αφορούν την 2η τριµηνία του 2016 και €22,7 εκατ. την 1η τριµηνία του 2016 , καταγράφοντας αύξηση 58%. Σε σύγκριση µε την περσινή αντίστοιχη περίοδο η αύξηση ανέρχεται σε 40%. Και στις δύο περιπτώσεις η αύξηση οφείλεται κυρίως στο κέρδος που προέκυψε από την διάθεση των µετοχών στην VISA Europe Limited.

Το κέρδος που αναλογεί στους µετόχους της µητρικής εταιρείας για την περίοδο που έληξε στις 30 Ιουνίου 2016 ανήλθε σε €0,7 εκατ. (30 Ιουνίου 2015: €0,1 εκατ.). Κατά την περίοδο που έληξε στις 30 Ιουνίου 2015, τα κέρδη που αναλογούν στους µετόχους της Τράπεζας περιείχαν κέρδος ύψους €4,8 εκατ. από δραστηριότητες που τερµατίστηκαν και αφορά την διάθεση κτηρίου στην Μόσχα που ανήκε στον Όµιλο, µετά την πώληση της θυγατρικής τράπεζας στην Ρωσία το 2014. Κατά την 2η τριµηνία του 2016 η Τράπεζα διέγραψε αναβαλλόµενες φορολογικές απαιτήσεις ύψους €8,5 εκατ. που αφορούσαν φορολογικές ζηµιές.

Ζηµιές αποµείωσης και προβλέψεις (€000)

1η

Εξαµηνία 2016

1η Εξαµηνία

2015

Εξαµηνιαία ∆

2η

Τριµηνία 2016

1η Τριµηνία

2016

Τριµηνιαία ∆

Ζηµιές αποµείωσης της αξίας των χορηγήσεων

51.698 45.485 +14% 26.388 25.310 +4%

Προβλέψεις για την κάλυψη του πιστωτικού κινδύνου που αφορά ανειληµµένες υποχρεώσεις και εγγυήσεις

(2.948) 1.525 -293% 763 (3.711) -121%

Συνολικές ζηµιές αποµείωσης και προβλέψεις

48.750 47.010 +4% 27.151 21.599 +26%

Για την εξαµηνία που έληξε στις 30 Ιουνίου 2016, η συνολική χρέωση για ζηµιές αποµείωσης και προβλέψεις για την κάλυψη του πιστωτικού κινδύνου διαµορφώθηκε στα €48,8 εκατ. παρουσιάζοντας αύξηση της τάξης του 4% σε σύγκριση µε την αντίστοιχη εξαµηνία που έληξε στις 30 Ιουνίου 2015. Η χρέωση για ζηµιές αποµείωσης και προβλέψεις για την κάλυψη του πιστωτικού κινδύνου διαµορφώθηκαν σε €27,2 εκατ. για την 2η τριµηνία του 2016 και σε €21,6 εκατ. για την 1η τριµηνία του 2016.

Ο ∆είκτης ετήσιου κόστους ζηµιών αποµείωσης έναντι των χορηγήσεων για την περίοδο που έληξε στις 30 Ιουνίου 2016 ανήλθε στο 2,4% (31 ∆εκεµβρίου 2015: 2,3%, 30 Ιουνίου 2015: 2,1%).

Βασικά στοιχεία Κατάστασης Οικονοµικής Θέσης (€εκατ.)

30 Ιουνίου 2016

Ετήσια 2015

∆ 31 Μαρτίου

2016 ∆

Μεικτές Χορηγήσεις σε πελάτες 4.310 4.396 -2% 4.348 -1%

Καθαρές Χορηγήσεις σε πελάτες 3.062 3.093 -1% 3.103 -1%

Στοιχεία προς επένδυση 3.737 4.010 -7% 3.995 -6%

Σύνολο Περιουσιακών στοιχείων 7.091 7.397 -4% 7.388 -4%

Καταθέσεις 6.059 6.139 -1% 6.028 +1%

Ίδια κεφάλαια που αναλογούν στους κατόχους µετοχών της µητρικής εταιρείας

630 640 -2% 640 -2%

Σταθµισµένα περιουσιακά στοιχεία (ΣΠΣ) 4.017 3.958 +1% 4.106 -2%

Στις 30 Ιουνίου 2016 το σύνολο των περιουσιακών στοιχείων του Οµίλου ανήλθε σε €7,1 δισ. και παρουσίασαν µείωση της τάξης του 4% σε σχέση µε τις 31 ∆εκεµβρίου 2015. Αυτό οφείλεται κυρίως στη µείωση στις καταθέσεις σε άλλες τράπεζες καθώς και του χαρτοφυλακίου οµολόγων. Η Τράπεζα διατήρησε δείκτη καθαρών χορηγήσεων προς καταθέσεις ύψους 50,5% στις 30 Ιουνίου 2016 (31 ∆εκεµβρίου 2015: 50,4%). Στις 30 Ιουνίου 2016, οι καταθέσεις πελατών ανήλθαν σε €6,1 δισ. (31 ∆εκεµβρίου 2015: σε €6,1 δισ.). Οι καταθέσεις αποτελούνταν από καταθέσεις σε Ευρώ ύψους €4,6 δισ. και καταθέσεις σε ξένα νοµίσµατα, κυρίως Αµερικάνικα ∆ολάρια, ύψους €1,5 δισ. Το ενδιαφέρον του Οµίλου στην αγορά καταθέσεων επικεντρώνεται στην προσέλκυση καταθέσεων οι οποίες είναι σταθερές. Οι συνολικές καταθέσεις σηµείωσαν µείωση 1% από τις 31 ∆εκεµβρίου 2015. Το µερίδιο αγοράς1 της Τράπεζας όσον αφορά τις καταθέσεις στις 30 Ιουνίου 2016 ανήλθε στο 13,1% (31 ∆εκεµβρίου 2015: 13,5%).

Το σύνολο των νέων χορηγήσεων για την εξαµηνία που έληξε στις 30 Ιουνίου 2016 ανήλθε σε €152 εκατ. Η Τράπεζα συνέχισε την παροχή χορηγήσεων προς φερέγγυες επιχειρήσεις και νοικοκυριά, ενώ εξετάζει και άλλες ευκαιρίες ανάπτυξης. Οι µεικτές χορηγήσεις σε πελάτες ανήλθαν σε €4.310 εκατ. στις 30 Ιουνίου 2016 (31 ∆εκεµβρίου 2015: €4.396 εκατ.). Από την 1η Ιανουαρίου 2016, οι µεικτές αποµειωµένες χορηγήσεις λογιστικοποιούνται χωρίς τους συµβατικούς τόκους. Το ύψος των συµβατικών τόκων που δεν αναγνωρίστηκαν στην εξαµηνία που έληξε στις 30 Ιουνίου 2016 ανήλθε σε €86,5 εκατ. Στις προηγούµενες χρονιές οι µεικτές αποµειωµένες χορηγήσεις περιλαµβάνουν τους συµβατικούς τόκους. Το µερίδιο αγοράς2

χορηγήσεων της Τράπεζας στις 30 Ιουνίου 2016 διαµορφώθηκε στο 7,9% (31 ∆εκεµβρίου 2015: 7,0%). Κατά την διάρκεια της εξαµηνίας που έληξε στις 30 Ιουνίου 2016 χορηγήσεις ύψους €76 εκατ. έχουν διαγραφεί. Οι µεικτές χορηγήσεις παρουσίασαν µείωση 0,2% σε σύγκριση µε τις 31 ∆εκεµβρίου 2015.

Μη εξυπηρετούµενες χορηγήσεις 30 Ιουνίου

2016

31 Μαρτίου

2016 ∆

Ετήσια 2015

∆

Μη εξυπηρετούµενες χορηγήσεις (ΜΕΧ) * ( €εκατ.) 2.487 2.536 -2% 2.602 -4%

ΜΕΧ (%) στο σύνολο των µεικτών χορηγήσεων 57,7% 58,3% -63 µβ 59,2% -151 µβ

∆είκτης κάλυψης 50,2% 49,1% +109 µβ 50,1% +13 µβ

* συµπεριλαµβάνουν τόκους που αναστάληκαν και δεν αναγνωρίστηκαν στην κατάσταση λογαριασµού αποτελεσµάτων. Την 1η και 2η τριµηνία του 2016, αποµειωµένες χορηγήσεις αναγνωρίστηκαν στη βάση των µη δεδουλευµένων τόκων.

Οι προσπάθειες για την µείωση των προβληµατικών δανείων συνεχίζονται. Οι ΜΕΧ του Οµίλου έχουν µειωθεί για τρίτη συνεχόµενη τριµηνία. Στις 30 Ιουνίου 2016, οι ΜΕΧ µειώθηκαν κατά 2% σε €2.487 εκατ., σε σύγκριση µε €2.536 εκατ. στις 31 Μαρτίου 2016 και κατά 4% σε σύγκριση µε το ποσό στις 31 ∆εκεµβρίου 2015. Οι τερµατισµένοι λογαριασµοί οι οποίοι περιλαµβάνονταν στις ΜΕΧ ανήλθαν σε €1.500 εκατ. στις 30 Ιουνίου 2016 (31 ∆εκεµβρίου 2015: €1.477 εκατ.). Οι µεικτές χορηγήσεις µε όρους που ήταν

1 Πηγή: Κεντρική Τράπεζα Κύπρου και Ελληνική Τράπεζα.

2 Πηγή: Κεντρική Τράπεζα Κύπρου και Ελληνική Τράπεζα.

αντικείµενο επαναδιαπραγµάτευσης στις 30 Ιουνίου 2016 ανήλθαν σε €1.331 εκατ. (31 ∆εκεµβρίου 2015: €1.317 εκατ.). Κατά τη διάρκεια της περιόδου που έληξε στις 30 Ιουνίου 2016, η Τράπεζα συνέχισε να επικεντρώνεται στην αναδιάρθρωση του χαρτοφυλακίου των ΜΕΧ χρησιµοποιώντας ένα πακέτο βιώσιµων λύσεων, όπως οι ανταλλαγές χορηγήσεων µε περιουσιακά στοιχεία, µειώσεις υπολοίπων, παρατάσεις αποπληρωµής και µειώσεις δόσεων, περίοδοι χάριτος, υπηρεσίες υποστήριξης κλπ. Ποσό ύψους €334 εκατ.3 που αφορά συνολικές πελατειακές χορηγήσεις είχε αναδιαρθρωθεί κατά τη διάρκεια της εξαµηνίας που έληξε στις 30 Ιουνίου 2016, καθώς επίσης ποσό ύψους €76 εκατ. χορηγήσεων διαγράφηκαν. Τα αποθέµατα ακινήτων προς πώληση, τα οποία ως επί το πλείστον προέκυψαν από τον διακανονισµό χρεών των πελατών, ανήλθαν σε €70,4 εκατ. στις 30 Ιουνίου 2016 (31 Μαρτίου 2016: €68,9 εκατ., 31 ∆εκεµβρίου 2015: €71,2 εκατ.). Ο δείκτης των MEX στο σύνολο των µεικτών χορηγήσεων στις 30 Ιουνίου 2016 µειώθηκε σε 57,7% (31 Μαρτίου 2016: 58,3%, 31 ∆εκεµβρίου 2015: 59,2%). Συµπεριλαµβανοµένου των συµβατικών τόκων των αποµειωµένων χορηγήσεων που δεν καταχωρήθηκαν ύψους €86,5 εκατ., ο δείκτης των MEX στο σύνολο των µεικτών χορηγήσεων ανήλθε σε 58,5% (31 Μαρτίου 2016: 58,7%).

Οι συσσωρευµένες ζηµιές αποµείωσης στην αξία των χορηγήσεων, ανήλθαν σε €1.248 εκατ. στις 30 Ιουνίου 2016 (31 Μαρτίου 2016: €1.245 εκατ., 31 ∆εκεµβρίου 2015: €1.303 εκατ.) και αποτελούν το 29,0% των συνολικών µεικτών χορηγήσεων (31 Μαρτίου 2016: 28,6%, 31 ∆εκεµβρίου 2015: 29,6%).

Ο δείκτης κάλυψης ανήλθε στο 50,2% στις 30 Ιουνίου 2016 (31 Μαρτίου 2016: 49,1%, 31 ∆εκεµβρίου 2015: 50,1%). Οι χρηµατοοικονοµικές επιδράσεις των εξασφαλίσεων4 των ΜΕΧ ανήλθαν σε €1.592 εκατ. οι οποίες µαζί µε το σύνολο των ζηµιών αποµείωσης έχουν ως αποτέλεσµα την διαµόρφωση του δείκτη κάλυψης σε 114,2%.

Κεφαλαιακή Επάρκεια

Με βάση τον Πυλώνα I (µε µεταβατικές διατάξεις), οι ∆είκτες Κεφαλαιακής Επάρκειας του Οµίλου και της Τράπεζας στις 30 Ιουνίου 2016, διαµορφώθηκαν ως ακολούθως:

∆είκτες Κεφαλαιακής Επάρκειας Όµιλος Τράπεζα

30 Ιουνίου

2016 31 Μαρτίου

2016 Ετήσια

2015 30 Ιουνίου

2016 31 Μαρτίου

2016 Ετήσια

2015

∆είκτης Κεφαλαιακής Επάρκειας 17,15% 17,05% 18,13% 17,10% 17,03% 18,12%

∆είκτης Κεφαλαίου της Κατηγορίας 1 16,90% 16,74% 17,68% 16,85% 16,73% 17,66%

∆είκτης Κεφαλαίου Κοινών Μετοχών της Κατηγορίας 1 (CET 1) 13,92% 13,81% 14,75% 13,88% 13,79% 14,73%

Η αύξηση του ∆είκτη Κεφαλαίου Κοινών Μετοχών της Κατηγορίας 1 (CET 1) σε σύγκριση µε την 1η τριµηνία του 2016, οφείλεται κυρίως στην µείωση των σταθµισµένων περιουσιακών στοιχείων ως αποτέλεσµα της µείωσης των υπολοίπων των ΜΕΧ. Η µείωση του ∆είκτη Κεφαλαίου Κοινών Μετοχών της Κατηγορίας 1 (CET 1) σε σύγκριση µε τον ∆εκέµβριο του 2015, οφείλεται κυρίως: - στην σταδιακή προσαρµογή των µεταβατικών διατάξεων µέχρι την πλήρη εφαρµογή του Κανονισµού (ΕU) αρ. 575/2013 για τον υπολογισµό των Ιδίων Κεφαλαίων (επίδραση 37 µονάδες βάσης), - σε αυξηµένους συντελεστές στάθµισης µετά την υιοθέτηση της εισήγησης της Κεντρικής Τράπεζας της Κύπρου (5 Απριλίου 2016) καθώς και της αντίστοιχης εισήγησης της Ευρωπαϊκής Αρχής Τραπεζών σχετικά µε τους συντελεστές στάθµισης που εφαρµόζονται σε χρηµατοδοτικά ανοίγµατα µε υψηλούς κινδύνους (επίδραση 78 µονάδες βάσης). Στις 30 Ιουνίου 2016, τα σταθµισµένα περιουσιακά στοιχεία (ΣΠΣ) του Οµίλου ανήλθαν σε €4.017 εκατ. (31 Μαρτίου €4.106 εκατ., 31 ∆εκεµβρίου 2015: €3.958 εκατ.). Τα επιπρόσθετα ΣΠΣ που προκύπτουν από την αύξηση του συντελεστή στάθµισης, που αναφέρεται πιο πάνω, υπολογίζονται στα €214 εκατ. (από τα ΣΠΣ στις 31 ∆εκεµβρίου 2015). Σύµφωνα µε τον Κανονισµό αρ.2015/62 του Ευρωπαϊκού Κοινοβουλίου και Συµβουλίου της 10ης Οκτωβρίου 2014, στις 30 Ιουνίου 2016 ο ∆είκτης Μόχλευσης του Οµίλου διαµορφώθηκε σε 9,24% (Τράπεζα: 9,23%) σε σύγκριση µε 8,76% (Τράπεζα: 8,75%) στις 31 Μάρτιου 2016 και 9,05% (Τράπεζα: 9,04%) στις 31 ∆εκεµβρίου 2015.

3 Βάση ∆ανειοληπτών (∆ανειολήπτες µε οικονοµικές δυσκολίες). 4 Βάση της αγοραίας αξίας (µε ανώτατο όριο την έκθεση του πελάτη και το νοµικά ανακτήσιµο ποσό).

Ο ∆είκτης Κεφαλαίου Κοινών Μετοχών της Κατηγορίας 1 (CET 1), χωρίς τις µεταβατικές διατάξεις, του Οµίλου διαµορφώθηκε σε 13,18% (Τράπεζα: 13,14%) σε σύγκριση µε 13,02% (Τράπεζα: 13,00%) στις 31 Μαρτίου 2016 και 13,53% (Τράπεζα: 13,51%) στις 31 ∆εκεµβρίου 2015. Ο ∆είκτης Μόχλευσης, χωρίς τις µεταβατικές διατάξεις, του Οµίλου διαµορφώθηκε σε 9,00% (Τράπεζα: 8,98%) σε σύγκριση µε 8,46% (Τράπεζα: 8,45%) στις 31 Μαρτίου 2016 και 8,60% (Τράπεζα: 8,59%) στις 31 ∆εκεµβρίου 2015. Από τις 20 Νοεµβρίου 2015 η Τράπεζα απαιτείται να διατηρεί, σε ενοποιηµένη βάση, ∆είκτη Κεφαλαίου Κοινών Μετοχών της Κατηγορίας 1 (CET 1) ύψους 11,75%, όπως αυτός καθορίζεται από τον Κανονισµό Κεφαλαιακών Απαιτήσεων (ΕΕ) αρ.575/2013 του Ευρωπαϊκού Συµβουλίου και Κοινοβουλίου. Εάν ο ∆είκτης CET 1 της Ελληνικής Τράπεζας δεν υπερβαίνει ή πιθανόν να µην υπερβαίνει κατά 25 µονάδες βάσης τις ελάχιστες κεφαλαιακές απαιτήσεις του ∆είκτη Κεφαλαίου Κοινών Μετοχών της Κατηγορίας 1 (CET 1) 11,75%, όπως αναφέρεται στην γνωστοποίηση της ΕΚΤ, η Τράπεζα απαιτείται να ενηµερώσει την ΕΚΤ. Επιπρόσθετα, η Τράπεζα υπόκειται σε απαγόρευση, για διανοµή µερίσµατος προς τους µετόχους µέχρι τις 31 ∆εκεµβρίου 2016. Η απόφαση αυτή βασίστηκε στη ∆ιαδικασία Εποπτικής Επιθεώρησης και Αξιολόγησης (∆ΕΕΑ/SREP) η οποία διεξήχθη σύµφωνα µε το Άρθρο 4(1)(f) του Κανονισµού (ΕΕ) Αρ. 1024/2013 σε πληροφορίες διαθέσιµες στις 31 ∆εκεµβρίου 2014, και σε οποιαδήποτε σχετική πληροφόρηση που λήφθηκε µετά την ηµεροµηνία αυτή. Οι εποπτικές αρχές διεξάγουν επί του παρόντος την Εποπτική Επιθεώρηση και Αξιολόγηση (∆ΕΕΑ/SREP) για το 2016 βάσει οικονοµικών αποτελεσµάτων στις 31 ∆εκεµβρίου 2015. Τα αποτελέσµατα της άσκησης αυτής αναµένεται να ολοκληρωθούν µέχρι το τέλος του έτους.

Ο ελάχιστος ∆είκτης CET 1 όπως καθορίστηκε από την ΕΚΤ για τον Όµιλο ύψους 11,75%, καλύπτεται από τον ∆είκτη 13,92% του Οµίλου. Ο ∆είκτης CET 1 ύψους 11,75% περιλαµβάνει: (i) τον ελάχιστο ∆είκτη Κεφαλαίου Κοινών Μετοχών της Κατηγορίας 1 που απαιτείται να διατηρείται σε συνεχή βάση σύµφωνα µε το Άρθρο 92(1)(α) του Κανονισµού (ΕΕ) αρ.575/2013, (ii) τον ∆είκτη Κεφαλαίου Κοινών Μετοχών της Κατηγορίας 1 που απαιτείται να διατηρείται πέραν του ελάχιστου ∆είκτη Κεφαλαίου Κοινών Μετοχών της Κατηγορίας 1 σε συνεχή βάση σύµφωνα µε το Άρθρο 16(2)(α) του Κανονισµού (ΕΕ) αρ.1024/2013 και (iii) το απόθεµα ασφαλείας διατήρησης κεφαλαίου (capital conservation buffer) που απαιτείται σύµφωνα µε το Άρθρο 129 της Οδηγίας 2013/36/ΕΕ, όπως εφαρµόζεται στο Κυπριακό ∆ίκαιο. Επιπρόσθετα, η τήρηση αποθέµατος ασφαλείας για Άλλο Συστηµικά Σηµαντικό Ίδρυµα (O-SII) θα εισαχθεί σταδιακά σε περίοδο τεσσάρων ετών, αρχίζοντας από την 1η Ιανουαρίου 2019. Σύµφωνα µε το Άρθρο 92(3) του Κανονισµού (ΕΕ) αρ.575/2013, η Τράπεζα απαιτείται να τηρεί απόθεµα ασφαλείας O-SII ύψους 1,5% (2022) του συνολικού ποσού της έκθεσης σε κίνδυνο, σε ατοµική και ενοποιηµένη βάση. Η Κεντρική Τράπεζα καθόρισε το αντικυκλικό κεφαλαιακό απόθεµα ασφαλείας στο 0% για την περίοδο από 1 Ιουλίου 2016 µέχρι 30 Σεπτεµβρίου 2016. Η Τράπεζα, στα πλαίσια της Οδηγίας σχετικά µε την Εξυγίανση και Ανάκαµψη των Τραπεζών (Bank Recovery and Resolution Directive - BRRD) υπόκειται στην ελάχιστη απαίτηση ιδίων κεφαλαίων και επιλέξιµων υποχρεώσεων (Minimum Requirement for own funds and Eligible Liabilities - MREL). Οι ρυθµιστικές αρχές βρίσκονται στη διαδικασία θέσπισης απαιτήσεων ιδίων κεφαλαίων και επιλέξιµων υποχρεώσεων για κάθε περίπτωση ξεχωριστά. Η πρώτη προκαταρκτική απαίτηση ιδίων κεφαλαίων και επιλέξιµων υποχρεώσεων και οι σχετικές µεταβατικές διατάξεις (χρονοδιάγραµµα συµµόρφωσης) αναµένεται να κοινοποιηθούν στην Τράπεζα πριν από το τέλος του έτους.

Στρατηγικοί στόχοι και προοπτικές

Η στρατηγική της Τράπεζας επικεντρώνεται σε δύο πτυχές: "αναδιοργάνωση" και "ανάπτυξη". Η πτυχή "αναδιοργάνωση" της στρατηγικής σχετίζεται κυρίως µε τη µείωση του υψηλού επιπέδου των ΜΕΧ. Η πτυχή "ανάπτυξη" της στρατηγικής αφορά την αύξηση του δανειακού χαρτοφυλακίου και την προώθηση των σχέσεων µε τους πελάτες, είτε πρόκειται για καταθετικής είτε δανειστικής φύσης. Σχετίζεται επίσης µε τις προόδους στην τεχνολογία και τη βελτίωση της εξυπηρέτησης των πελατών καθώς επίσης και της απλούστευσης των διαδικασιών και διεργασιών. Η Τράπεζα επανατοποθετεί τη στρατηγική της για τον Τοµέα ∆ιεθνούς Τραπεζικής, αντικατοπτρίζοντας το µεταβαλλόµενο κανονιστικό περιβάλλον µε ιδιαίτερη έµφαση σε θέµατα ξεπλύµατος χρήµατος. Επιπλέον, προκειµένου να ανταπεξέλθει στις προκλήσεις του ανταγωνιστικού περιβάλλοντος και να εξορθολογήσει/ενδυναµώσει την Εκτελεστική Επιτροπή, η Τράπεζα αναθεώρησε την οργανωτική δοµή του Οµίλου. Η Κυπριακή οικονοµία βρίσκεται από τα τέλη Μαρτίου του 2016 εκτός της Μνηµονιακής Σύµβασης αφού ολοκληρώθηκε επιτυχώς το Οικονοµικό Πρόγραµµα Προσαρµογής που είχε συµφωνηθεί µε τους διεθνείς δανειστές της χώρας τον Μάρτιο του 2013. Η προσήλωση όσον αφορά στην υλοποίηση του Προγράµµατος Οικονοµικής Προσαρµογής αποτέλεσε τον ακρογωνιαίο λίθο για την έξοδο της οικονοµίας από την ύφεση. Η επιτυχηµένη εφαρµογή του µακροοικονοµικού προγράµµατος προσαρµογής της Κύπρου, ενίσχυσε

σηµαντικά την εµπιστοσύνη προς την Κυπριακή οικονοµία, τόσο σε τοπικό όσο και σε διεθνές επίπεδο. Επίσης, έχει σηµειωθεί σηµαντική πρόοδος στο πλαίσιο του προγράµµατος για την αναδιάρθρωση και αποκατάσταση της εµπιστοσύνης στο χρηµατοπιστωτικό σύστηµα της Κύπρου. Ωστόσο, το τραπεζικό σύστηµα εξακολουθεί να αντιµετωπίζει την πρόκληση της αποκατάστασης της κανονικής ροής δανειοδότησης στην οικονοµία και την αντιµετώπιση του υψηλού επιπέδου των Μη Εξυπηρετούµενων Χορηγήσεων (ΜΕΧ). Τα ψηλά επίπεδα ιδιωτικού δανεισµού που έχουν οδηγήσει σε αποµόχλευση αλλά και σε αυξηµένα επίπεδα Μη Εξυπηρετούµενων Χορηγήσεων, συνεχίζουν να ενέχουν σηµαντικούς κινδύνους για τη σταθερότητα του εγχώριου τραπεζικού συστήµατος και τις οικονοµικές προοπτικές, ειδικότερα µέσω µεταβολών στις τιµές των ακινήτων. Ως µέρος της υλοποίησης των στρατηγικών του στόχων, ο Όµιλος επικεντρώνεται στη στήριξη της ανάκαµψης της οικονοµίας, συµβάλλοντας παράλληλα στην αειφορία της οικονοµικής ανάπτυξης. Η άνετη ρευστότητα που διαθέτει η Τράπεζα, της επιτρέπει να εκµεταλλευτεί ευκαιρίες που παρουσιάζονται, µε κύριο στόχο την οργανική ανάπτυξη. Προς αυτήν την κατεύθυνση, βασική προτεραιότητα είναι η αντιµετώπιση του υψηλού επιπέδου των ΜΕΧ, τα οποία παραµένουν σε πρωτοφανή επίπεδα. Αναπόφευκτα, το υψηλό επίπεδο των ΜΕΧ διαβρώνει τα εισοδήµατα της Τράπεζας, δηµιουργεί την ανάγκη για επιπρόσθετες προβλέψεις και κατ’ επέκταση µειώνει την κερδοφορία. Παράλληλα, η Τράπεζα αναγνωρίζει ότι η αγορά ακινήτων, η οποία είναι ένας σηµαντικός οδηγός για τις προβλέψεις για αποµειώση των χορηγήσεων σε πελάτες, εξακολουθεί να είναι άτονη και δηµιουργεί περισσότερη πίεση στην κερδοφορία. Η βελτίωση των επιπέδων των ΜΕΧ στην οικονοµία υπήρξε αργή. Η οικονοµική ανάκαµψη αναµένεται όπως επιταχύνει το ρυθµό βελτίωσης, ο οποίος ωστόσο εξακολουθεί να παραµένει ασταθής και να εξαρτάται εν µέρει από τις τιµές των ακινήτων. Μέσα σε αυτό το πλαίσιο της αντιµετώπισης της ποιότητας του δανειακού χαρτοφυλακίου της Τράπεζας, ο Όµιλος επικεντρώνεται σε βιώσιµες αναδιαρθρώσεις δανείων µε αµοιβαία επωφελείς όρους χρησιµοποιώντας ένα πακέτο βιώσιµων λύσεων, όπως οι ανταλλαγές χορηγήσεων µε περιουσιακά στοιχεία, µειώσεις υπολοίπων, παρατάσεις αποπληρωµής και µειώσεις δόσεων, περίοδοι χάριτος, υπηρεσίες υποστήριξης, κλπ. Η Τράπεζα έχει καταφέρει να ανταπεξέλθει µε επιτυχία µέσα από την τραπεζική κρίση. Έχει διατηρήσει καθ' όλη τη διάρκεια της κρίσης τη φήµη της για σταθερότητα και εµπιστοσύνη και επικεντρώνεται στην ενίσχυση και στην βελτίωση της θέσης της στην αγορά. Με την επικέντρωση σε πρωτοβουλίες "αναδιοργάνωσης" και "ανάπτυξης" ο Όµιλος έχει όλα τα συστατικά για την συνέχιση της εφαρµογής του στρατηγικού του πλάνου. Παρ’ όλο που το περιβάλλον παραµένει εύθραυστο και ασταθές η Τράπεζα θα συνεχίσει να επαγρυπνεί ώστε να µετατρέψει τις εξελίξεις σε ευκαιρίες τόσο στην Κύπρο όσο και στο εξωτερικό. Σηµειώσεις:

1. Οι συνοπτικές ενοποιηµένες οικονοµικές καταστάσεις για την περίοδο που έληξε στις 30 Ιουνίου 2016 δεν

έχουν ελεγχθεί από τους εξωτερικούς ελεγκτές του Οµίλου. Οι εξωτερικοί ελεγκτές του Οµίλου έχουν διενεργήσει ανασκόπηση σύµφωνα µε το ∆ιεθνές Πρότυπο για Εργασίες Ανασκόπησης 2410 «Ανασκόπηση Ενδιάµεσης Οικονοµικής Πληροφόρησης που διενεργείται από τον Ανεξάρτητο Ελεγκτή της Οικονοµικής Μονάδας» όπως εκδόθηκε από το ∆ιεθνές Συµβούλιο Ελεγκτικών Προτύπων ∆ιασφάλισης.

2. Οι συνοπτικές ενοποιηµένες οικονοµικές καταστάσεις για την περίοδο που έληξε στις 30 Ιουνίου 2016 αποτελούνται από τις οικονοµικές καταστάσεις της Ελληνικής Τράπεζας ∆ηµόσιας Εταιρείας Λίµιτεδ και των θυγατρικών εταιρειών της που µαζί αναφέρονται ως ο Όµιλος.

3. Οι συνοπτικές ενοποιηµένες οικονοµικές καταστάσεις για την περίοδο που έληξε στις 30 Ιουνίου 2016 έχουν ετοιµαστεί σύµφωνα µε τα ∆ιεθνή Πρότυπα Χρηµατοοικονοµικής Αναφοράς (∆ΠΧΑ) όπως αυτά υιοθετήθηκαν από την Ευρωπαϊκή Ένωση. Επιπρόσθετα, τα προκαταρκτικά αποτελέσµατα έχουν ετοιµαστεί σύµφωνα µε τις απαιτήσεις του Περί Εταιρειών Νόµου, Κεφ. 113 της Κύπρου και τους Περί Αξιών και Χρηµατιστηρίου Αξιών Κύπρου Νόµους και Κανονισµούς.

4. Οι συνοπτικές ενοποιηµένες οικονοµικές καταστάσεις για την περίοδο που έληξε στις 30 Ιουνίου 2016 παρουσιάζονται σε Ευρώ, το οποίο είναι το κυρίως νόµισµα λειτουργίας της Τράπεζας που παρουσιάζει καλύτερα την ουσία των οικονοµικών πράξεων και δραστηριοτήτων των οντοτήτων του Οµίλου.

5. Τα συγκριτικά ποσά που περιλαµβάνονται στις συνοπτικές ενοποιηµένες οικονοµικές καταστάσεις για την περίοδο που έληξε στις 30 Ιουνίου 2016 αναπροσαρµόστηκαν, όπου κρίθηκε αναγκαίο, για να συνάδουν µε τις αλλαγές στην παρουσίαση της τρέχουσας περιόδου.

6. Οι συνοπτικές ενοποιηµένες οικονοµικές καταστάσεις για την περίοδο που έληξε στις 30 Ιουνίου 2016

καθώς και η παρουσίαση θα διατίθενται προς τους µετόχους και το κοινό στο Εγγεγραµµένο Γραφείο της Ελληνικής Τράπεζας ∆ηµόσιας Εταιρείας Λίµιτεδ στη Γωνία Λεωφ. Λεµεσού & Λεωφ. Αθαλάσσας 200, 2025 Στρόβολος, και έχουν αναρτηθεί στην ιστοσελίδα του Οµίλου στο διαδίκτυο, στην ηλεκτρονική διεύθυνση www.hellenicbank.com (Σχέσεις Επενδυτών).

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HELLENIC BANK GROUP - cse.com.cy · PDF file5 HELLENIC BANK GROUP Condensed Consolidated Income Statement for the three-month period from 1 April 2016 to 30 June 2016 Three-month period