2012 ANNUAL REPORT/media/com/downloads/investo… · 2012 Annual Report PIRAEUS BANK 4 HISTORIC OVERVIEW 1916 Establishment of Piraeus Bank. 1918 The shares of Piraeus Bank are listed

2012 ANNUAL REPORT

2012 Annual Report

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Light excites view intuition, makes things brighter and uncovers the passage for a new step.There is an image of light in every page of this report.

2012 Annual Report

The clarity, purity and allurement of light as they are reflected at Piraeus Group headquarters, at CityLink and at PIOP sites and museums were exquisitely captured by photographer Platon Rivellis.

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HISTORIC OVERVIEW

1916 Establishment of Piraeus Bank.1918 The shares of Piraeus Bank are listed in the Athens Stock

Exchange.1963 Integration of Piraeus Bank into the Emporiki Bank Group

in Greece.1975 Piraeus Bank comes under state control as subsidiary of

Emporiki Bank.1991 Privatisation of Piraeus Bank.1992 Year of restructuring, reform and growth. Stake in Private Investment Fund SA, renamed Piraeus In-

vestments SA in 1995.1993 Establishment of Piraeus Leasing SA, Piraeus Mutual.

Funds SA and Piraeus Insurance Agency SA.1996 Establishment of Tirana Bank I.B.C.1997 Absorption of the assets and liabilities of Chase Manhattan

Bank in Athens. Acquisition of a 30% stake in Sigma Securities SA with

agreement for acquisition of a further 21%, completed in 1998.

1998 Acquisition of Macedonia-Thrace Bank and Credit Lyon-nais Hellas.

Agreement on the acquisition of a majority stake of Xios Bank (completion at the beginning of 1999).

Agreement on the acquisition of a 56% stake in Marathon National Bank of New York (completion in mid 1999).

1999 Absorption of the assets and liabilities of National West-minster Bank in Greece.

Operating and administrative integration of Piraeus Group’s three commercial banks (Piraeus, Macedonia-Thrace Bank, Xios Bank) Agreement on the acquisition of Pater Credit Bank in Romania (integrated into the Group in April 2000 as Piraeus Bank Romania).

Establishment of the London branch.2000 Completion of merger by absorption of Macedonia-Thrace

Bank and Xios Bank by Piraeus Bank. Subsidiary PICAR SA undertakes Hellenic Army Pension

Fund Building management. Creation of winbank - the first integrated e-banking plat-

form in Greece.2001 Completion of restructuring of asset and investment bank-

ing management through: merger of similar mutual funds; absorption of Xios Securities S.A. and. Macedonia-Thrace Securities S.A. by SIGMA Securities; sale of Piraeus Prime Bank and absorption part of its assets and client base by Pi-raeus Bank.

Agreement on the acquisition of ETBAbank, enlarging the

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Group’s market share in banking operations, as well as in leasing and asset management operations.

2002 Completion of acquisition of 57.8% of ETBAbank.2003 Merger by absorption of ETBAbank by Piraeus Bank, Pi-

raeus Investment by Hellenic Investment Company and ETBA Leasing by Piraeus Leasing.

2004 Acquisition of Interbank NY by the Group’s subsidiary Marathon Banking Corporation in New York and merger by absorption by Marathon Bank.

Merger by absorption of Devletoglou Securities SA by Sig-ma SA (now Piraeus SA) and absorption of Piraeus Fi-nance, Piraeus Asset Management S.A and Piraeus Capital Management SA by Piraeus Bank.

2005 Acquisition of 99.7% of Piraeus Eurobank AD.in Bulgaria (renamed Piraeus Bank Bulgaria A.D.) Acquisition of 80% Piraeus Atlas Banka A.D.in Serbia (renamed Piraeus Bank BeogradA.D.) Acquisition of 69.3% (which in August rose to 87.97%)of Egyptian Commercial Bank in Egypt (re-named Piraeus Bank Egypt).

2006 Merger and integration of operations of Piraeus Bank branches in Bulgaria with Piraeus Bank Bulgaria.

2007 Acquistion of remainder of stake in Piraeus Securities (20%). Acquisition of AVIS SA in Greece. Acquisition of International Commerce Bank in the

Ukraine (renamed Piraeus Bank ICB). Acquisition of local branch network of Arab Bank in Cyprus. Renewal of exclusive agreement with ING in the field of

life bancassurance. Piraeus Bank capital stock increase by €1,350mn with cash

payment.2008 Establishment of Piraeus Bank Cyprus Ltd. Increase of stake in Piraeus Leases SA to 100% and com-

mencement of deregistration process for Leases SA from ATHEX (completed on 27.01.2009).

2009 Issuance of non-voting preference shares totalling €370mn in favour of the Greek State in accordance with Law 3723/2008.

Strategic partnership with BNP Paribas Wealth Manage-ment in wealth management.

Agreement with Victoria General Insurance Company SA-subsidiary of Ergo International in Greece and member of the German insurance Group Munich Re-for the imple-mentation of agreement for a 10-year exclusive cooperation in the general insurance field.

Merger of two Group companies – AVIS and Best Leasing. 2010 Creation of winbank Direct-the first online bank product

sales channel in Greece directed at customers of all banks (www.winbankdirect.gr).

2011 Completion of €807mn capital stock increase totalling €807mn.

The Bank participates in the Greek State bond exchange program (PSI), with total eligible titles, resulting in total related pre-tax impairment reaching €5.9bn in2011.

Issuance of additional non-voting preference shares total-ling €380mn in favour of the Greek State in accordance with Law 3723/2008.

Issuance of loan covered bonds amounting to €1,250mn with 3-year duration for the Bank’s liquidity enhancement.

2012 The Bank participates in the Greek bond exchange pro-gram (PSI) with total eligible securities in its possession to the amount of €7.7bn, resulting in the impairment amount-ing to €5.9mn pre-tax recognized in the 2011 report.

Acquisition of healthy sectors (select assets and liabilities) of the credit institution “Agricultural Bank of Greece” un-der special liquidation, pursuant to the relevant decision of the Bank of Greece Resolution Measures Committee.

Sale of Piraeus Bank’s 98.8% stake in subsidiary Marathon Banking Corporation to Investors Bancorp Inc in New York.

Acquisition of GENIKI Bank’s total stake (99.1%) in So-ciété Générale.

€6.25bn Capital Advance and €1.1bn Commitment Letter by the Hellenic Financial Stability Fund (HFSF) in the framework of its participation in Piraeus Bank’s recapitali-zation plan; Piraeus Bank’s capital needs – amounting to €7.3bn –as determined by the Bank of Greece.

The Bank participates in the Greek bond Buy Back pro-gram, with pre-tax profit €0.4bn (counterbalancing €0.3bn impairment in 2012 from redefining of the fair value of the new GGB’s following PSI).

2013 March 26: Signing of agreement for acquisition of all de-posits, loans and branches in Greece of the Bank of Cy-prus, Cyprus Popular Bank and Hellenic Bank, including loans and deposits of their subsidiaries in Greece (leasing, factoring and Investment Bank of Greece - IBG).

April 18: Piraeus Bank signs agreement for sale of its stake (93.27%) in the share capital of ATE Bank Romania SA to the amount of €10.3mn.

April 21: The Bank signs agreement with Millennium BCP for acquisition of total share capital of Millennium Bank Greece. The transaction was completed on June 19, 2013 following receipt of all necessary licenses and ap-provals.

June 11-25: Piraeus Bank’s Share Capital Increase by €8.429bn as decided by the General Meeting of Share-holders held on 23.04.2013 and the Board of Directors’ resolution on 29.05.2013.

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PIRaEuS Bank GROuP PROfIlE

TaRGETS

The Group consists of companies in the financial sector established both in Greece and the broader region. Founded in 1916, Piraeus Bank’s contemporary history begins with its privatization in 1991. Through its organic growth and a series of successful acquisitions, Piraeus Bank has managed to become the largest financial institution in Greece and has gradually built its presence in south-east Europe and the eastern Mediterranean, initially following the development of Greek businessmen and then serving the local banking needs of its customers.

Pursuant to the acquisition of the healthy part of ATEbank and Geniki Bank as well as the more recent acquisition of Millennium Bank, of the operations of the Cypriot banks in Greece (Bank of Cyprus, Cyprus Popular Bank and Hellenic Bank), Piraeus Bank continues to play a leading role in restructuring of the Greek banking system.

Although the Bank offers the entire range of financial services in almost all market segments, it has a clear orientation towards serving enterprises, especially medium and small-sized, and individuals. As well as providing traditional banking services, Piraeus Bank also has a leading role in developing sectors such as e-banking and green banking, foreseeing their potential and dynamics in the years to come.

Piraeus Group’s medium-term key policies are: to ensure liquidity, capital adequacy and loan quality as well as to achieve high operational efficiency through drastic cost containment and exploiting synergies.

Piraeus Bank will continue to focus on medium and small-sized enterprises as well as retail banking, fields in which it possesses strong expertise, through its branch network in Greece and abroad as well as its e-banking networks.

The smooth integration of all banking companies and operation acquired by Piraeus Bank since mid-2012 constitute a key strategic goal with the aim of safeguarding the new Group’s financial position as well as responding to the increased responsibility of the banking sector towards re-launching the Greek economy and strengthening its competitiveness.

The Bank possesses extensive experience in integrating acquired activities as it has undertaken more than 15 bank acquisitions therefore it can confidently assess that these recent acquisitions will be smoothly integrated. Completion of the integration process is expected to provide Piraeus Group with even greater competitive advantage.

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kEy fInanCIal DaTa

- 20 years of solid growth, mainly organic, but also through se-lective M&A in Greece and abroad.

- Operations in Greece (1st market place) and in 9 other coun-tries, 4 of which are EU members.

- Approx. 1,750 branches1, of which 1,300 in Greece and 450 abroad.

- 25,000 employees1: of a young age, IT familiar, well-trained and flexible in adopting new methods and practices as well as cross-border cooperation.

- Leadership in support of green entrepreneurship. - Leadership in environmentally- and user-friendly e-banking,

by means of the integrated e-banking winbank platform. - 6.7mn customers1 in Greece and the countries where the Group

is active. - Steadily among the first in classification banks in Greece in

customer satisfaction and loyalty. - Contribution to society, the environment and culture through

a framework of systematised actions and initiatives.

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1 Following the 2013 acquisition of the loans and deposits and Greek operations of the Bank of Cyprus, Cyprus Popular Bank, Hellenic Bank, and Millennium Bank.

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Τotal Assets (in €bn)

54.9

-2008

54.3

-2009

57.7

-2010

49.4

-2011

78.8 i

-2012

i Pro-forma for the €8.4bn capital increase.

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Group Νet Loans and Deposits (in €bn)

-2008

38.3

Loans

28.4

Deposits-

2009

37.7

Loans

30.0

Deposits-

2010

37.6

Loans

29.5

Deposits-

2011

34.5

Loans

22.1

Deposits-

2012

44.6

Loans

37.0

Deposits

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Branch Network

889

Greece-

2012

358

Greece-

2008

537

International Operations

359

Greece-

2009

513


360

Greece-

2010

522


346

Greece-

2011

486


449


Τοtal895

Τοtal872

Τοtal882

Τοtal832

Τοtal1,338

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Human Resources

7,366


6,757


6,950


6,476


6,890

Greece-

2008

6,660

Greece-

2009

6,370

Greece-

2010

6,172

Greece-

2011

12,365

Greece-

2012

6,232


Τοtal14,256

Τοtal13,417

Τοtal13,320

Τοtal12,648

Τοtal18,597

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Pre-tax and provisions Profits (€mn)

774

-2008

778

-2009

611

-2010

367

-2011

1,323

-2012

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Group Operating Costs (€mn)

897

-2008

893

-2009

884

-2010

823

-2011

909

-2012

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Consolidated Data 31 Dec. 2012 31 Dec. 2011

Selected Volume Figures (€mn)

Total Assets (pro-forma in 2012, for €8,429mn recapitalization) 78,835 49,352

-of which discontinued Operationsi 377 683

Gross Loans 50,573 37,211

Cumulative Provisionsii 5,961 2,690

Customer Deposits 36,971 22,134

Total Equity (pro-forma in 2012 for recapitalization) 6,114 -1,940

Selected Results (€mn)

Net Interest Income 1,028 1,173

Net Fee & Commission Income 218 198

Net Trading Income & Gainless losses from Investment Security 635 -109

Other income & dividend income 337 -39

Total Net Revenues 2,217 1,222

Total Operating Costs -909 -823

Profit before Tax and Provision 1,323 367

Impairment of Loans and Other Assets -2,197 -1,973

Impairment losses of GGBs -311 -5,910

Net Profit/(Loss) from Continued Operations attributable to Shareholders -513 -6,617

Net Profit/(Loss) from Discontinued Operations after Tax attributable to Shareholdersi 13 4

2012 kEy fInanCIal fIGuRES

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Consolidated Data 31 Dec. 2012 31 Dec. 2011

Selected Key Ratios (%)

Cost to Income 41% 67%

Provision Expense to Average Loans 4.7% 4.1%

Non-Performing Loans (NPLs) >90 days 23.3% 13.7%

Coverage of NPLs >90 days 50.7% 52.6%

Staff-Branches

Staff 18,597 12,648

Branches 1,338 832

i Discontinued Operations: For Balance Sheet, ATE Insurance SA -ΑΤΕ Insurance Romania for 31.12.12, for Marathon Bank results (profit from activities up to time of sale and profit of sale in 3d quarter 2013) and ATE Insurance SA - ΑΤΕ Insurance Romania for 27.07.12 - 31.12.12.

ii Loans and Provisions: includes adjustment for fair value amounting to €2,128mn attributable to credit risk of loans obtained from the acquisition of ATEbank and Geniki Bank.

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CHaIRman’S lETTER

The year 2012 was characterized by intense political, social events and most importantly by the economic developments in Greece. The Greek economy remained in deep recession. The an-nual GDP in 2012 contracted for the fifth consecutive year, this time by 6.4%, with a major decline of 8.2% in final consumption and the rise of the average unemployment rate at 24.2%. Inflation pressure eased in 2012, as the consumer price index increased 1.5% compared to 3.3% in 2011; however, the price increase of energy goods was significant due to the indirect taxes which were im-posed. At the same time, the current account deficit in 2012 was significantly decreased compared to 2011 (€5.6bn in 2012 vs. €20.6bn in 2011), since on the one hand the trade deficit declined, primarily due to the drop in imports and secondarily due to the in-crease in exports, and on the other hand the income balance deficit was contained due to public debt interest payment reduction. More-over, the notable reduction in unit labor cost has contributed in the recovery of about 75% from the cost competitiveness that was lost in Greece during the past decade.

The general government budget deficit for 2012 amounted to €12.8bn compared to €20.0bn in 2011, whereas the primary deficit in 2012 stood at €2.5bn from €4.9bn the year before. It is worth not-ing that the general government deficit for the period 2009-2012 was reduced by about 9 percentage points of GDP to 6.7% from 15.6% (source: Hellenic Statistical Authority, IMF), whereas for 2013 the goal is to achieve a balanced budget on a primary level.

During the course of 2012, two programmes were implement-ed by the Greek government that aimed to recover the viability of Greek public debt, the bond exchange programme (PSI) in the spring of 2012 and the offer for the repurchase of new Greek gov-ernment bonds at the end of the year. In parallel, implementation of the second economic adjustment programme for Greece com-menced. The goal of the new programme is to provide the time needed for the required fiscal adjustment, the implementation of structural reforms and the gradual further strengthening of com-petitiveness in order for the negative course of economic activity to be reversed. The political uncertainty caused after two succes-sive elections in spring and the more intense than anticipated reces-sion of the Greek economy both led to the reevaluation of the pro-

gramme terms. Following intense negotiations on a national and international level, on November 27, 2012 the basic terms and ac-tions were defined, and they are expected to lead to the viability of Greek public debt from the level of 178% of GDP in 2013 (source: IMF) to 124% in 2020 and even lower than 110% by 2022; further-more, the extension of the programme was approved, through the transfer from 2014 to 2016 of the goal for a primary surplus of 4.5% of GDP. The proper implementation of the 2nd economic adjust-ment programme during the period 2012-2014 will permit the dis-bursement of about €145bn from the EFSF, with IMF’s contribution for the time period, under the EFSF mechanism, being around €19bn as part of a four-year loan amounting to €28bn (final install-ment at the beginning of 2016).

Moreover, a basic pillar of the new programme is the recap-italization of the Greek banking system, since following the imple-mentation of the PSI programme, Greek banks suffered serious capital losses. The Greek banking system decisively contributed to both the PSI implementation and the new Greek government bond repurchase offer in December 2012.

At the end of December 2012, the Bank of Greece published the Report on the Recapitalization and Restructuring of the Greek Banking Sector, and the capital needs of all Greek banks were cal-culated at €40.5bn for the period up to 2014, of which €27.5bn in-volve the 4 systemic banks (NBG, Eurobank, Alpha Bank, Piraeus Bank). In this report, the Bank of Greece considers the total re-served amount of €50bn to be adequate to cover the Greek banking sector’s recapitalization and restructuring costs. Recapitalization of the Greek systemic banks is being implemented and expected to be completed in mid 2013, within the framework of Law 3864/2010 and according to the provisions of the Cabinet Act 38/2012.

The minimum participation threshold of the private sector in the common share rights issues is 10%, whereas unsubscribed shares are undertaken by the HFSF. Moreover, private investors were granted warrants in order to purchase the common shares ac-quired by the HFSF in three of the four banks, since Eurobank was fully recapitalised by HFSF.

Regarding the Greek market basic figures, it should be noted that the deposit reduction during the first half of 2012 (-13%), was

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offset with an increase of 9% in deposits taking place during the second half of the year (total annual change of Greek market de-posits for 2012 at -5%). Loans in the Greek market declined in 2012 as well, with an annual decrease of -4%. At the end of 2012, Euro-system financing for Greek banks amounted to €121bn, of which only €19bn through ECB financing. Conditions of restricted liquid-ity and the use of the Emergency Liquidity Assistance (ELA) mechanism by the Greek banks in 2012 have contributed to a sig-nificant rise in their funding cost, while deposits’ cost remained at a particularly elevated level.

Amid these conditions, the Greek banks experienced an impor-tant consolidation phase. Since the beginning of the crisis, 8 cred-it institutions have been placed under liquidation (Proton, T-bank, Hellenic Postbank, ATEbank, First Business Bank and three coop-erative banks), of which: - Proton, T-bank, and the Hellenic Postbank have been separated

in “good” and “bad” parts, with the HFSF undertaking the management of the “good” part (the assumption of T-bank by the Hellenic Postbank preceded this).

- ATEbank followed a similar process, with its “good” part be-ing undertaken by Piraeus Bank as was the case for First Busi-ness Bank, with its healthy part being incorporated into NBG.

- The three cooperative banks have been absorbed by NBG.Furthermore, Emporiki Bank and Geniki Bank, both subsidi-

aries of European banking groups, were acquired by Greek banks (Alpha Bank and Piraeus Bank respectively) within 2012. Finally, Piraeus Bank acquired in March 2013 the banking operations in Greece of Bank of Cyprus, Cyprus Popular Bank and Hellenic Bank, following the recent crisis outbreak in Cyprus. A month lat-er, Piraeus Bank signed an agreement for acquisition of the total share capital of Millennium Bank in Greece, with the transaction receiving final approval in June 2013.

In the midst of a dynamic but at the same time volatile environ-ment, Piraeus Bank plays a major role in the restructuring of the Greek banking system. On a corporate level, the most important events for Piraeus Bank Group during 2012 were the following: - On March 7, 2012 the Board of Directors of Piraeus Bank unan-

imously decided the participation in the exchange program for Greek government bonds (GGBs) and other eligible securities under Law 4046/2012 (PSI). Piraeus Bank Group participated in the PSI bond exchange with all eligible Greek Government Bonds and loans in its portfolio, with the face value at € 7.7bn. In this context, the total impairment recognized in the full year 2011 and associated with the Group’s participation in the PSI reached € 5.9bn before tax.

- On June 14, 2012 Piraeus Bank signed an agreement to transfer its 98.5% participation in its subsidiary Marathon Banking Cor-poration in New York. The cash consideration from the transfer of its holdings was USD 133 mn. The conclusion of the afore-

mentioned transaction took place at the end of September 2012. - On July 27, 2012 Piraeus Bank acquired by absorption the

“good” part (selected assets and liabilities) of the under special liquidation credit institution Agricultural Bank of Greece SA, following the relevant decision of the Resolution Measures Committee of BoG (meeting 4/27.07.12, Government Gazette 2209/27.07.12), for a cash consideration of €95 mn. The even-tual €7.5bn funding gap between the valued transferred assets and liabilities was covered by the HFSF, according to the law provisions (finalization of the perimeter and the funding gap was concluded by BoG at the end of January 2013 - Resolution Measures Committee decisions 9/1/28.01.13 and 8/1/24.1.13, Government Gazette 112/24.01.13, following the financial and legal due diligence conducted by auditor).

- On July 31, 2012 Piraeus Bank announced the termination of the sale process for its subsidiary Piraeus Bank Egypt. Piraeus Bank focuses on providing full support to its banking opera-tions in Egypt.

- On October 19, 2012 Piraeus Bank signed a definitive agree-ment with Société Générale regarding the acquisition of So-ciété Générale’s total stake (99.08%) in Geniki Bank. The ag-gregate cash consideration for the acquisition was agreed at €1 mn. The transaction was consummated on December 14, 2012 after receiving all necessary regulatory approvals.

- Piraeus Bank announced that on the December 7, 2012 meet-ing of the BoD, Mr. Anthimos Thomopoulos was elected as new Executive Member of the BoD, in succession of the re-signed member Mr. Alexander Manos in order for Mr. Manos to assume the role of CEO at Geniki Bank. Mr. Thomopoulos will act as Deputy CEO at Piraeus Bank Group.

- Following the decision on December 7, 2012 of its BoD, Pi-raeus Bank participated in the exchange offer for Hellenic Gov-ernment bonds, targeting the reduction of Greek government debt, with its total portfolio of eligible bonds, in response to the relevant invitation of the Hellenic Ministry of Finance of De-cember 3, 2012. Within this framework, bonds of a total nom-inal value of approximately €4.3bn were exchanged.In 2012, the HFSF provided Capital Advances amounting to

€4.7bn in May and €1.5bn in December and a Commitment Letter of €1.1bn for its participation in the recapitalization programme of Piraeus Bank. Hence, the total Capital Advances and the Commit-ment Letter that the HFSF has provided to Piraeus Bank amount to €7.3bn, corresponding to the Bank’s total capital needs as de-fined by the BoG. In addition to that, Piraeus Bank has received a Commitment Letter of €570 mn in April 2013 for the undertaking of the “good” part of ATEbank. Furthermore, HFSF has approved and provided Piraeus Bank with a further capital contribution of €524 mn in connection with the domestic portfolios of the 3 Cyp-riot banks.

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At the end of March, 2013 Piraeus Bank signed an agreement to acquire all of the Greek deposits, loans and branches of Bank of Cyprus, Cyprus Popular Bank and Hellenic Bank, including loans and deposits of their Greek subsidiaries (leasing, factoring and the Investment Bank of Greece-IBG), for a total consideration of €524mn. The agreement followed the proposal of Piraeus Bank to acquire the branch network and operations of the 3 Cypriot banks in Greece, as part of the relevant invitation addressed to Greek banks by the Greek Government, the BoG and the HFSF. The transaction ensures the stability of the Greek banking system and ensures depositors, customers and employees of the 3 Cypriot banks in Greece following the recent developments.

Finally, in the end of April 2013, Piraeus Bank signed an agree-ment for the acquisition of Millennium Bank in Greece. Following the incorporation of these operations, Piraeus Bank Group will em-ploy approximately 25,000 persons and possess a total network of 1,750 branches with a presence in 10 countries, including Greece.

The second Iterative General Meeting of Piraeus Bank’s share-holders which was held at the end of April 2013 decided to proceed with a capital increase through the issuance of new common shares as follows:A. Up to €7,335mn in order to meet regulatory capital requirements of the Bank as set by the Bank of Greece, which will be covered:(a) in cash

(i) through private placement to investors and partial waiv-er of the pre-emption rights of existing shareholders up to the amount of €400mn;

(ii) through the exercise of pre-emption rights and presub-scription rights by existing shareholders; and

(iii) through the allocation of unsubscribed shares by the Board of Directors, as well as

(b) through contribution in kind by the HFSF for the amount which will not be covered as per the above in cash. B. Up to the amount of €570mn through contribution in kind by the HFSF in order to meet the regulatory capital requirements of the Bank that arose from the purchase of balance sheet items of Agri-cultural Bank of Greece S.A. under special liquidation; and C. Up to the amount of €524mn through contribution in kind by the HFSF in order to meet the regulatory capital requirements of the Bank that arose from the purchase of balance sheet items of the Greek branches of Cypriot banks.

Balance sheet figures of December 31, 2012 for Piraeus Bank Group have incorporated the assets and liabilities of the “good” AT-Ebank and Geniki Bank. Financial results include the contributions of the “good” ATEbank from July 27, 2012 up to December 31, 2012 and of Geniki Bank from December 14, 2012 up to December 31, 2012.

Moreover, it should be noted that the operations of ATE Insur-ance and its subsidiary ATE Insurance Romania have been classi-

fied as discontinued, for both the balance sheet and P&L, and the financial result stemming from Marathon Bank (operating profit until disposal date and disposal gain).

Regarding Piraeus Group’s financial performance in the year 2012, total assets at the end of December 2012 amounted to €70.4bn or to €78.8bn pro-forma, if the €8.4bn of advances and commit-ments by the HFSF are also included.

The Group’s total deposits amounted to €37.0bn on December 31, 2012. The Group’s deposits in Greece amounted to €32.4bn. Deposits of the Group’s international operations stood at €4.6bn, incorporating, as a result of the undertaking of ATEbank, its sub-sidiary ATEbank Romania and the operations of the Frankfurt branch.

The Group’s gross loans at end December 2012, amounted to €50.6bn. Total loans in Greece were €43.2bn, of which €2.1bn in-volved the disbursement of a seasonal loan to OPEKEPE (Greek Payment and Control Agency for Guidance and Guarantee Com-munity Aid) for the payment of EU agricultural support to approx-imately 700 thousand Greek farmers (the amount has currently been repaid). Loans stemming from international operations amounted to €7.3bn. Regarding customer category breakdown of loans at end December 2012, the total Group business loan portfolio stood at €32.6bn, representing 64% of the total, whereas retail loans amount-ed to €18.0bn or 36% of the total loan portfolio. Net loans amounted to €44.6bn, with Piraeus Group’s loans to deposits ratio having im-proved significantly to 121% from 156% in 2011, and if the season-al loan to OPEKEPE is excluded the ratio reaches 116%.

The Group’s loans in arrears over 90 days (NPLs) ratio reached 23% of gross loans at the end of December 2012 compared to 14% in 2011, incorporating in 2012 the “good” ATEbank and Geniki Bank. In Greece, the respective NPL ratio reached 23% at the end of 2012 from 13% at the end of 2011. At end December 2012, the NPL ratio for the total Greek market stood at 24.5%. The NPLs>90 days coverage by cumulative provisions ratio for the Group stood at 51% at the end of 2012. It is worth mentioning that the cumula-tive provisions to gross loans ratio for the Group amounted to 12% at end December 2012 from 7% the previous year.

Due to the prolonged economic recession, and given the down-turn in demand for banking products and services, the Group’s net interest income stood at €1.0bn in 2012 from €1.2bn the previous year. It should be noted that the increased funding costs stemming from both deposits and the Eurosystem (mainly Emergency Liquid-ity Assistance mechanism) have significantly burdened the net in-terest result for 2012. It should be noted that since mid January 2013, the Greek banking system has regained access to funding through the ECB and this is expected to contribute to a reduction in the cost of funding.

Net commission income amounted to €0.2bn in 2012, of which 91% contributed from commercial banking operations. Net reve-

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nues for 2012 stood at €2.2bn, with positive contributions of €0.3bn from the buy-back of Piraeus Bank debt securities, of €0.4bn from the participation in the Greek government new bond repurchase offer, and of €0.35bn from the negative goodwill due to the acqui-sition of Geniki Bank.

The Group’s operating costs for 2012 amounted to €0.9bn, in-cluding operating costs of ATEbank since 27 July, 2012 and those of Geniki Bank since 14 December, 2012. Excluding the operating costs of ATEbank and Geniki Bank and other one-off costs (e.g. the unamortized cost of branches that ceased operation in 2012 which amounted to €12 mn), the Group’s operating costs on a like for like basis stood 9% lower, hence achieving the goal set for the year 2012.

As a result, Group pre-tax and provision profit for 2012 stood at €1.3bn. However, 2012 results were burdened by increased im-pairment losses for loans and receivables amounting to €2.2bn, due to the significant deterioration of the macroeconomic environment, especially in Greece.

Moreover, the Group re-determined the fair value of the new securities received from the Greek bond exchange (PSI), based on their market value at the dates these securities were exchanged. Due to the redetermination of the fair value, an additional loss of €0.3bn was accounted for in the first quarter of 2012 and therefore burdened 2012 consolidated results.

The 2012 Group pre-tax results amounted to a loss of €1.2bn, while after tax results attributable to shareholders from continuing operations amounted to a loss of €0.5bn.

The Group’s total equity at the end of December 2012 amount-ed to €6.1bn, including the capital enhancement of €8.4bn from the HFSF. The total capital adequacy ratio at the end of December 2012 stood at 12.2% and the Core Tier I EBA ratio was 11.7% (pro-for-ma), including the capital advances of €7.9bn from the HFSF re-ceived by the end of 2012.

The Group’s branch network comprised 1,338 branches at the end of December 2012, 889 of which were in Greece and 449 in 9 other countries. On 31 December, 2012 the Group employed 18,597 people, 12,365 in Greece and 6,232 abroad. At the end of Decem-ber 2012, the Group’s international operations comprised 13.5% of its total assets, and 33.5% of both the total branch network and hu-man resources.

Regarding the challenges being faced by the Greek banking sector, despite improvements on a financial level, the economic situation in Greece, though improving fiscally, still remains the main risk factor for the Greek banking sector in general and for Pi-raeus Bank in particular. Negative developments in this area sig-nificantly affect the Bank’s liquidity, the quality of its loan portfo-lio, its profitability, and ultimately, its capital adequacy. The voting in the Greek parliament in November 2012 of additional structural and financial measures amounting to €13bn for the period 2013-2016, of which €9bn pertaining to the current year, although in the

short term will prolong the recession, constitute an important step towards achieving primary surplus as of 2013, implementing struc-tural reforms, improving competitiveness and enabling the Greek economy to recover in general.

Moreover, there was heightened pressure due to the crisis in Cyprus, with the recent adverse developments, mainly on liquidity, but also due to the recession in the European South. It should be noted that the Group’s total exposure in Cyprus, in balance sheet terms, amounted to €1.6bn on December 31, 2012, which consti-tutes 2.0% of the Group’s total assets.

Furthermore, as a result of the consolidation in the banking sector, Piraeus Bank, along with the other systemic banks in Greece, are confronted with a project of major importance related with the integration of operations and IT infrastructure. The Bank places particular emphasis on this by means of specialized work teams and specific action plans that will enable the smooth and un-hindered integration of the operations that were acquired.

Following the acquisitions of selected assets and liabilities of ATEbank, Geniki Bank, the Greek operations of Cypriot banks in Greece as well as Millennium Bank Greece, Piraeus Bank im-proves its funding sources, while it strengthens its marketing posi-tion in the under formation new Greek banking landscape.

Realization of the estimated significant synergies between Pi-raeus Bank, ATEbank, Geniki Bank and the Greek operations of the three Cypriot banks and Millennium is deemed achievable based on the track record of operational mergers by Piraeus Bank, while they will enhance the Group’s profitability and capital adequacy.

In the coming months, the Greek banking system will undergo a process of major developments that will determine the day after and will lay the foundations for its smooth continuity. The imple-mentation of the recapitalization plan of the Greek banks constitutes the first significant step towards this end. Following its completion, Piraeus Bank’s capital position is expected to be safeguarded.

Piraeus Bank, despite having been adversely affected by the international and Greek economic crisis, has proceeded with a se-ries of important business moves that have established it not just as a viable and systemic Bank, but also as a credit institution able to overcome particularly adverse economic conditions and emerge stronger. Having achieved a market share approaching 30% and a customer base of 5.5 mn, a major concern for Piraeus Bank will continue being the support of the recovery of the Greek economy in favour of all stakeholders (customers, employees, shareholders and society in general).

Michalis G. SallasChairman of the Board of Directors

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Final review date for the Annual Report: June 20, 2013

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COnTEnTSEconomy Developments 25

2012 Financial Performance 31

Developments in Equity Markets 37

Targets and Outlook for 2013 43

Operations in Greece 47

Retail Banking 48Business Banking 51Financial and Operating Leasing 56Business Factoring 56e-Banking - winbank 57Agricultural Banking 59Green Banking 61Investment Banking 65Asset Management 66

International Operations 73

Technology and Infrastructure 83

Risk Management 97

Chapter 1

Chapter 6

Chapter 2

Chapter 7

Chapter 3

Chapter 8

Chapter 4

Chapter 5

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Εconomy Developments

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ΕCOnOmy DEVElOPmEnTS

International Economy

Fiscal consolidation and developments in the US monetary policy combined with developments in the Eurozone crisis are expected to constitute the key regulatory factors in development of the world economy. Moreover, a shift in targets of Japanese economic (particu-larly of monetary) policy as well as continuing Chinese economy restructuring efforts - with a turn towards domestic demand – are also significant parameters. According to IMF estimates, China is expected to have slight growth rate acceleration (to 8.0% from 7.8%) and Japan a slowdown (to 1.5% from 2.0%).

More specifically, the US growth rate is expected to be slightly decelerated in 2013 at 1.9% versus 2.2% in 2012, resulting from the nec-essary deficit-reducing fiscal measures, with the timely agreement between the two political parties regarding the mixture of measures – to prevent further slowdown – constituting an issue of great importance.

In the EU, milder shrinking of the economy is expected in 2013 (to -0.4% from -0.6%), as fiscal consolidation will have a smaller impact on domestic demand, while there will be positive progress in transition activities towards a more unified (fiscally and financially) econ-omy. Nevertheless, elections in Germany in 2013 are slowing down crucial decision-making, while the very high unemployment rate in EU Periphery countries is placing great pressure on governments.

At the same time, The US Federal Reserve Bank is not expected to abruptly withdraw provision of additional liquidity (quantitative eas-ing) with the intervention rate expected to be maintained at 0.25% for quite some time. The ECB is expected to maintain the interven-tion rate at 0.50% as more emphasis will need to be placed on adjustments to the austerity programs being implemented compared to monetary policy.

Greek Economy

The year 2012 was a period of intense political and social and mainly of economic developments. During the same year the Greek econ-omy remained in recession. The real GDP declined by 6.4% due to reduced domestic demand, with the unemployment rate reaching on average 24.2%. The intensity of inflation declined as the consumer price index rose by 1.5% versus 3.3% in 2011; however, it should be noted that the most important factor of inflationary pressure remains the rise price in energy goods. At the same time, the current account deficit was significantly reduced versus the previous year (to €6.5bn in 2012 from €20.6bn in 2011, ie to almost 3.4% of GDP versus 9.9% in 2011) as there was a decrease in the trade deficit primarily due to a drop in imports and secondarily to a rise in exports. At the same


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time, the income account deficit was limited, mainly due to a decrease in net interest payments on Greek bonds held by residents abroad as part of the PSI as well as the time extension for interest payment on ECB support mechanism loans resulting from interest readjust-ment. Additionally, there was increased surplus in current transfers balance and services balance.

From a fiscal point of view, based on the second EU assessment report (May 2013), general government deficit in 2012 stood at 6.3% of GDP, improved from the 6.6% target set in December 2012, with primary deficit at 1.3% of GDP versus the 1.5% target set. At the same time, in 2012, the general government debt reached 157% of GDP versus 170% in 2011, a development connected to PSI and the debt buy-back process, among others.

However, the political uncertainty created by two national elections and by a more severe than expected recession in the Greek economy resulted in reassessment of the program terms, as debt sustainability was questioned. Following intense national and international de-liberations, on November 27th 2012 the key terms and actions were defined, which are expected to lead to public debt sustainability from 175% of GDP in 2016 to 124% in 2020 and under 110% in 2022. Moreover, extension of the program, by transferring the 4.5%of GDP primary surplus target from 2014 to 2016, was ratified. Among the issues dealt with are: interest rate reduction in transnational loans, time extension for payment of transnational and EFSF loan installments, and transfer of interest payment period for EFSF loans. How-ever, these actions are subject to limitations such as strict program implementation by Greece. Aiming for public debt reduction, in De-cember 2012, the Public Debt Management Agency (PDMA) proceeded with the debt buyback process. Total tenders amounted to ap-proximately € 31.9bn in nominal value, with a weighted average price of 33.8% of nominal price. Buyback of total bonds offered required issuance of EFSF 6-month bills of €11.3bn nominal value (incl. accrued interest).

In the EU and IMF assessment reports for the Second Economic Adjustment Program for Greece, it was noted that Greece continues to make progress in implementing the support program and the reforms. In 2013, forecasts estimate a -4.2% recession with a positive growth rate of 0.6% in 2014. Additionally, a drop in prices is forecast in 2013 and 2014, with harmonized inflation at -0.8% and -0.4% respec-tively. Unemployment is expected to reach 27% in 2013 with a slight decrease to 26% in 2014. Greece’s achievement of the 2012 fiscal deficit targets set is recognized, with the 2013 primary balance targets set also expected to be met. The ameliorated economic climate is also recognized. Nevertheless, the EU and IMF note that the challenges remain and state the need for continued implementation of the required reforms, for proper program implementation and for promotion of the privatization program.

From all the above it can be concluded that Greece is currently at a critical juncture. The economic climate is starting to turn positive even though this trend is going to be reflected in the country’s macroeconomic data with some delay. It should be noted that the first 6 months of this year will be adversely affected by the new fiscal adjustment measures. In order to offset these negative consequences, strict program implementation is deemed necessary; this will ensure unobstructed funding from the EU and IMF and further enhance-ment of the climate of confidence. Another key element will be promotion of privatizations, utilization of public property and absorption of available EU funds, which will constitute the driving force in recommencing investment activity. Finally, efforts to repay Greek State debts to third parties in arrears are expected to strengthen liquidity and the business environment.

Southeast Europe

The economies of Southeast Europe made efforts in 2012 to redefine the growth models they had in the last decade, which were based on credit expansion and foreign investments. Economic recovery and stability were key priorities; however, the continuing economic crisis in the EU limited these efforts. In 2012, an increase in domestic demand was noted but adverse weather conditions limited agri-cultural production more than expected. The governments and central banks of Southeast Europe countries turned their attention towards ameliorating their growing fiscal deficits, supporting their currencies, enhancing economic activity and reducing external imbalances. In the framework of this program, the majority of these countries managed to limit their fiscal deficit, to sustain slow but steady eco-nomic growth and to limit inflationary pressure. In addition to the negative external environment, a significant number of countries in this region, such as Romania, Serbia, the Ukraine, had to deal with the political uncertainty connected to presidential elections in 2012. IMF presence, however, is a key factor in restoring confidence domestically as well as externally, in rectifying imbalances and in imple-

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menting the necessary reforms. Governmental consent of the recommended reforms is necessary if these countries are to maintain a growth course.

Regarding Cyprus, in early 2013, it was included in the EU Stability Mechanism as international aid from alternative sources did not prove sufficient. The country is in recession with the domestic financial system being radically restructured.

For 2013, the prospects for Southeast Europe remain positive compared to the developments in the EU Periphery and the EU. Neverthe-less, in 2013, growth rate will not achieve pre-crisis levels. Medium-term prospects for the broader region remain favorable as emerging economies in the region will continue their course towards convergence with the more developed countries.

In the case of Cyprus, the economy is expected to remain in deep recession due to the massive restructuring and the severe constraints being imposed on the banking sector, as well as the restrictive fiscal measures in the framework of the support program. Indicatively, the Cypriot memorandum forecasts significant economic activity shrinkage by 8.7% in 2013 and by 3.9% in 2014. Recovery is expected from 2015 onwards, with the unemployment rate also forecast to be high. Nevertheless, it should be noted that the measures that the gov-ernment has been implementing since 2012 as well as signing of the memorandum will suffice to limit public deficit, will allow for pub-lic debt sustainability and will redefine the country’s economic growth.


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2012 Financial Performance

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Volumes Evolution

At the end of December 2012, the Group’s total assets amounted to €70,406mn, up from 31.12.11 (€49,352mn) as the “healthy” ATEbank assets and liabilities as well as Geniki Bank have been incorporated. Total pre-provision loans stood at €50,573mn, of which €43,235mn in Greece. Total Group deposits reached €36,971mn on 31.12.12, of which €32,413mn in Greece, representing 19% of the Greek banking market – following inclusion of ATEbank and Geniki Bank volumes. The Group’s total equity on 31.12.2012 stood in negative territory -€2,316mn, following significant capital loss from GGB impairment (PSI) in 2011. Including the €8,429mn capital enhancement, total equity reached €6,114mn at year-end 2012.

Per customer category, total Group business portfolio reached €32,579mn at year-end 2012, representing 64% of total portfolio. It should be noted that following absorption of “healthy” part of ATEbank on 27.07.12, Piraeus Group proceeded with disbursement of €2.1bn in EU funds to 700 thousand farmers in Greece through OPEKEPE – the Greek Payment Authority of Common Agricultural Policy (C.A.P.) Aid Schemes. Loans to individuals stood at €17,994mn or 36% of total portfolio, of which €12,713mn were mortgages (€6,788mn on 31.12.11) and €5,281mn consumer loans (ie consumer/personal and other loans and credit cards, €4,018mn on 31.12.11). Net loan balanc-es stood at €44,613mn with Piraeus Group’s loans to deposits ratio significantly improved at 121% from 156% in 2011, while excluding the OPEKEPE seasonal loan, the ratio was 116%.

The ratio of loans in arrears over 90 days stood at 23.3% of total Group loans at the end of December 2012 from 13.7% in 2011, with the inclusion of “healthy” ATEbank and Geniki Bank. The same ratio in Greece reached 23.0% at year-end 2012 versus 13.2% the previous year. It should be noted that the Greek market loans in arrears ratio at the end of December 2012 is estimated at 24.5% (source: BoG). The Group’s NPL’s > 90 days coverage by cumulative provisions was 51% at year-end 2012. It should be noted that the Group’s cumula-tive provisions to gross loans ratio reached 12% at year-end 2012, from 7% in 2011.

In 2012, the HFSF provided Capital Advances of €6.25bn and Commitment Letter of €1.1bn in the framework of its participation in Piraeus Bank’s recapitalization. In total, the Capital Advance and Commitment Letter provided by the HFSF amounted to €7.3bn, as determined by the BoG. In addition, Piraeus Bank has received a Commitment Letter of €570mn related to acquisition of “healthy” ATEbank. The Group’s total capital adequacy ratio reached 12.2% at year-end 2012 and Core Tier I-ΕΒΑ capital at 11.7% pro-forma.

The quality of the domestic loan portfolio of Greek banks and their subsidiaries in Greece was extensively examined during the Black-Rock Solutions diagnostic exercise-commissioned by the Bank of Greece (BoG). Piraeus Bank was ranked as the best among the 4 sys-temic banks and versus the market average as to expected loss rate, both in the basic scenario (13.5%) and in the adverse scenario (18.4%).


fInanCIal PERfORmanCE

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Results Evolution of Piraeus Bank Group

Total net income amounted to €2,217mn in 2012 versus €1,222mn in 2011, with positive contribution from: participation in new GGB buyback program amounting to €394mn (it is noted that in 2012 there was a further €311mn impairment from the new GGB’s); Piraeus Bank’s own bond buyback program amounting to €283mn; the negative goodwill resulting from acquisition of Geniki Bank amounting to €351mn.

Additionally, 2012 net revenues include contributions stemming following their acquisition from the “healthy” ATEbank (from 27.07.12 to 31.12.12) and Geniki Bank (for ½ a month in 2012).

In 2012, the basic elements of net revenue - interest income and commissions - reached €1,245mn from €1,370mn in 2011. It should be noted that in 2012, net interest income was burdened by the increased cost of liquidity as the delay of recapitalization did not allow for de-escalation of the cost of deposits in Greece as well as by the use of ELA mechanism instead of ECB funding.

Due to the continued recession and the decline in demand for banking products and services, the Group’s net interest income (NII) stood at €1.028mn in 2012 versus €1,173mn in 2011. It is noted that the increased funding cost both deposits and the Eurosystem (esp. ELA mechanism) significantly burdened 2012 net interest results. In mid-January 2013, the Greek banking system regained access to ECB funding, which is expected to lead to reduction in the cost of funding.

Per category, net commission income from commercial banking demonstrated resilience despite the adverse economic environment, amounting to €197mn (91% of total) versus €175mn in 2011. Net commission income from investment banking amounted to €10mn ver-sus €15mn in 2011, as a result of the adverse conditions in the capital markets. In contrast, net income from asset management rose to

Volume Analysis (€mn) Dec. 2011 Dec. 2012

Gross Loans per Category

Loans to Businesses 26,405 32,579

Loans to Individuals 10,806 17,994

Total Loans 37,211 50,573

Greece 29,729 43,235

International Operations 7,482 7,338

Deposits per Category

Savings-Sights 7,147 17,117

Fixed Term 14,987 19,854

Total Deposits 22,134 36,971

Greece 17,814 32,413

International Operations 4,320 4,559

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€10mn in 2012 versus €8 the previous year, with the contribution of the acquired ATE Mutual Funds Management SA (ATE AEDAK) for 5 months in 2012 (from 27.07.12 to 31.12.12) as well as that of wealth management services.

Piraeus Bank Group’s operating costs (pre impairment for losses on loans and receivables and other provisions) in 2012 reached €909mn, with inclusion of ATEbank for 5 months and Geniki Bank for ½ a month. Excluding operating costs which were related to the aforemen-tioned acquisitions as well as other one off expenses (eg, depreciation of branches closed in 2012 amounting to €12mn), the Group’s operating costs fell 9% y-o-y, thus achieving the goal set for 2012 by Management at the beginning of the year.

Group personnel costs amounted to €424mn in 2012 -with inclusion of ATEbank for 5 months and Geniki Bank for ½ a month- versus €390mn in 2011. It should be noted that following the incorporation of these banks’ operation, on 31.12.12 the Group had an extended network of 1,338 branches and 18,597 employees. At year-end 2011, the respective numbers were 832 and 12,648. Personnel costs are related to the evolution of the number of employees as well as to a policy of operating cost containment.

Due to the notable deterioration of the macroeconomic environment, total provisions were at high levels in 2012 (€2,508mn), of which €2,043mn regarded loan provisions, €311mn additional impairment on the new GGB’s, €94mn impairment on securities and €60mn im-pairment of tangible and intangible assets. It should be noted that the impairment on the new GGB’s regard additional losses from fair value adjustment of the new bonds received in the PSI exchange program, marked to market on the dates of exchange. The cost of im-pairment of loans, bonds and other receivables amounted to €7,884mn in 2011, including PSI impairment as well as increased loan pro-visions due to conditions of the macroeconomic environment.

Following the BoD decision of 7.03.12, Piraeus Bank participated in the PSI bond exchange program with its total of GGB’s and loans, with nominal amount of €7.7bn.In this framework, total impairment in 2011, which is related to the Group’s participation in PSI, reached €5.9 pre-tax. It is duly noted that there was additional burdening from valuation of GGB trading portfolio of €0.4bn nominal value, which on 31.12.11 received €0.1bn fair value and was reflected in the 2011 financial results.

Pre-tax results in 2012 suffered losses at €1,185mn versus €7,516mn losses in 2011 (mainly resulting from GGB impairment from PSI).

The Group’s net losses attributable to shareholders for 2012 amounted to €513 versus losses of €6,617mn in 2011 (in which PSI impair-ment was included).

In the fiscal year 2012, discontinued operations’ results include the results of ATE Insurance SA, ΑΤΕ Insurance Romania as well as of Marathon Banking Corporation results up to time of sale (30.09.12). In the fiscal year 2011, discontinued operations’ results include the results of Marathon Banking Corporation.

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Developments in Equity Markets

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Despite concerns at the end of 2011, 2012 ended up being positive for equity markets, which delivered two-digit gains: S&P500 13%, Eurostoxx50 14%, DAX 29%, MSCI Emerging Markets Index 15% with the Greek share market also profitable (33%). At the same time, most bonds markets in the EU Periphery were also notably profitable, with Italian 10-year yields dropping by 261bps, the Portuguese by 640bps and the Greek (following PSI in March) by 700bps; Spanish and Irish ones remained almost unchanged. Corporate bonds also yielded returns of 12% (ΒΒΒ USD), 15% (high yield USD). EUR USD equivalence also followed an upward trend of 1.8% with the trade-weighted dollar index remaining unchanged. Concerning commodities, the Continuous Commodity Index fell by 1.5%, with metals outperforming (gold 7%, copper 5%, platinum 10%). Less negative with the inferior performance for oil prices had a smaller negative trend (Brent 4%, Crude -7%). There was significant weakening of shipping (Baltic Dry Index -60%). Greek bonds, in contrast, showed positive trends, while regarding German and USA government bonds, the yield of 10-year bonds fell by 51 and 12 bps respectively.

The positive market performance of 2012 is mainly due to two key factors: 1) the EU political will to maintain a unified Eurozone, and 2) the decisiveness of central banks in their efforts to either restart the economy (FED) or protect their structural weaknesses (ECB).

DEVElOPmEnTS In EquITy maRkETS

Equity Indices (values at year end) 31.12.2012 Δ% y-o-y

S&P 500 1,426.19 13%

KBW Bank Index BKX 50.59 29%

Eurostoxx 50 (SX5E) 2,635.93 14%

ESTX Euro Stoxx Bank Index 111.77 11%

Nikkei 225 10,395.18 23%

MSCI Emerging Market Index 1,055.2 15%

ATHEX General Index 907.90 33%

FTSE/ΧΑ Large Cap 309.68 17%

FTSE/XA Banking Index 226.28 -14%

Piraeus Bank Share Price (€) 0.338 34%


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At year-end 2012, markets were on standby for a possible US economy fiscal deadlock. Although it is highly likely there will be a medi-um-term political solution, in the long-term there are serious obstacles against sustainable economic acceleration- namely, government debt to GDP ratio at 102% and a 6.9% deficit. However, as long as the FED continues to purchase Treasuries, inflationary expectations remain contained and foreign central banks (Asia) remain buyers, the US debt could have a small medium-term effect on growth. In the Eurozone, in 2012, the markets underestimated the commitment towards a unified monetary EU; now, we are at a point where they may be overestimating the ability to implement the necessary measures for a union with both centralized control and financial solidarity.

In 2012, investors remained concerned about the course of the Chinese economy. Given that the Chinese authorities’ growth target of 7.5% is in the lower level of the 6.0%-12.4% growth zone for 1998-2012, the likelihood of positive developments in 2013 is high and such a result would have a significantly positive impact on markets and the global economy.

At this stage, equity market valuations remain “fair to cheap”. Indicatively, the price-earnings ratio of the S&P 500 is at 14.8, slightly under the 17.3 average since 1954, while in emerging markets the MSCI is at 12.5 (with a 16 average since 1995). European shares are more expensive, with the price-earnings ratio of the Eurostoxx 50 at 18.8. Concerning share markets, although from a cyclical point of view the environment is positive with reasonable valuations, from a structural point of view we remain in an uncertain period. The need for government deleveraging (following deleveraging of the private sector) is expected to, at some point, adversely affect either business profitability (due to more modest growth) or borrowing costs (with increase in long-term interest).

In 2012, bank shares outperformed compared to the basic indices. In the US, the BKX (ratio P/E 11.7) noted a 29% rise, with an increase in profitability of 16.3%. In Europe the respective SX7P also noted a 23% rise despite the fact that the banks recorded decrease in prof-itability. In the Eurozone, banks began outperforming from mid-summer, with the announcements of the Outright Monetary Transac-tions (OMT) program, and are supported by expectations of a proposed European Banking Union.

The Greek share market had very notable yields, mainly based on the downward trend of bond yields, which reflect the significantly re-duced likelihood of Greece exiting the Eurozone as well as the overall improvement in the investment climate. According to the share-bond correlation for the recent crisis period (2011-2012) as well as the present levels of ATHEX General Index (around 1,000 units), the share market as a whole seems to have absorbed, for the most part, the benefits of the narrowed Greek spreads. An increase in listed shares profitability is necessary if significantly higher share price levels are to be achieved.

The combination of high public deficit and provision of high liquidity from central banks creates concerns for bond markets. These con-cerns will grow as we reach the FED targets for unemployment and/or inflation. The likelihood of pressures on the bond markets is sig-nificant as yields on government bonds remain too low in relation to the progress of macroeconomic volumes such as industrial produc-tion, inflation, monetary circulation as well as public debt and deficits. This deviation is more intense in the US, where a policy of direct bond purchase from FED has strengthened their safe haven character. An upward surge in bond yields would constitute a risk both for the other markets and for economic growth due to a disproportionate (in relation to the present growth trend)increase in loan cost for businesses and households.

Piraeus Bank Share

The equity market development of the Bank’s share price was affected primarily by the negative Greek macroeconomic developments, thus presenting great volatility. The share price closed the year with a 34% increase y-o-y at €0.338 with €0.4bn in capitalization. The average daily trading volume in 2012 reached 7mn shares.

On April 23, 2013, the Second Iterative General Meeting of Piraeus Bank shareholders decided on the Bank’s share capital increase through the issuance of new ordinary shares, expected to be completed in the end of June 2013, as follows:

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A. Up to €7,335mn in order to meet regulatory capital requirements of the Bank as set by the Bank of Greece, which will be covered:(a) in cash

(i) through private placement to investors and partial waiver of the pre-emption rights of existing shareholders up to the amount of €400mn;

(ii) through the exercise of pre-emption rights and presubscription rights by existing shareholders; and(iii) through the allocation of unsubscribed shares by the Board of Directors, as well as

(b) through contribution in kind by the HFSF for the amount which will not be covered as per the above in cash. B. Up to the amount of €570mn through contribution in kind by the HFSF in order to meet the regulatory capital requirements of the Bank that arose from the purchase of balance sheet items of Agricultural Bank of Greece S.A. under special liquidation; and C. Up to the amount of €524mn through contribution in kind by the HFSF in order to meet the regulatory capital requirements of the Bank that arose from the purchase of balance sheet items of the Greek branches of Cypriot banks.

Moreover, for technical reasons regarding recapitalization, the General Meeting decided on an increase of the nominal value of each or-dinary share and parallel reduction in the number of the Bank’s ordinary shares (reverse split) and subsequent creation of a special re-serve of article 4, para. 4a, c.l. 2190/1920. It granted the Bank’s BoD authorization to specialize the above amendments to the number of shares and their nominal value. Furthermore, the General Meeting granted the Bank’s BoD authorization to specialize the terms of the share capital increase, including the subscription price of new shares.

On 29 May 2013, the Board of Directors resolved upon the following: - Increase of the nominal value of each ordinary share from €0.30 to €3.00 and parallel reduction in the number of the Bank’s ordinary

shares from 1,143,326,564 to 114,332,657 (reverse split with 10 old shares for every new share) and subsequent share capital increase of the Bank with capitalization of €1.80 of the reserve of article 4 par. 4a c.l. 2190/1920 for the purpose of achieving an integer num-ber of shares.

- Creation of special reserve of par. 4a in article 4 of c.l. 2190/1920, of €308,698,173.90 with reduction of Bank’s share capital by de-creasing the nominal value of each ordinary share from €3.00 to €0.30 without changing the number of ordinary shares (114,332,657),

- The determination, according to the provisions of the Cabinet Ministers’ Act. 38/2012 (a) of the subscription price at €1.70 per new share after the reverse split (corresponding to a value €0.170 prior to the implementation of the reverse split) and (b) the number of the new shares to be issued under the capital increase to 4,958,235,292. Hence, after the capital increase the total number of the new ordinary shares will be 5,072,567,949.


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Τargets and Outlook for 2013

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TaRGETS anD OuTlOOk

fOR 2013

In an intensely volatile external environment, Piraeus Group adjusted its strategic choices and business objectives in time to the new conditions. This enabled the Group to strengthen its position and with the proper business decisions to double its size and activities in less than a year. The choice for growth was driven by the objective to achieve greater efficiencies and economies of scale in the context of the restructuring and recapitalization of the banking system, which have been in progress for some time.

Piraeus Bank’s extensive experience regarding mergers and acquisitions proved to be a competitive advantage towards this goal, and has already been applied productively for the rapid operational integration of six banks / networks that were recently acquired. With the suc-cessful integration of ATEbank’s operations which was completed on June 24, 2013, a new cycle of integration has commenced for Pi-raeus Bank, with a view to serving the total of 5.5 million customers stemming from all activities in Greece, by mid-2014.

The concomitant strengthening of the Bank’s position in terms of market share, with its capital enhancement through the recapitaliza-tion process and the restoration of capital ratios at the highest levels amongst European banks (14.5% index Core Tier I), create the con-ditions for assuming a more active role in financing and restructuring the Greek economy. In this respect, the priorities of the Group’s strategy are fully aligned with the real needs of the economy among which are the following: - financing of medium and small enterprises and establishing the Bank as the de facto bank of choice for small and medium-sized

businesses,professionals as well as individuals in Greece, - establishing the Bank as the main bank for the primary sector, as a successor of ATEbank’s activities with emphasis on agricultural

entrepreneurship and contractual farming, - maintaining the Group’s leading position in selective markets, with special focus on products and services that demonstrate innova-

tion, and promote technological and ecological advances with e-banking and green banking at the epicenter, - managing the Group’s international activities, with the aim of making them self-funded, well- capitalized and profitable subsidiaries

of the Group, - implementing the smooth integration of all acquired operations and companies in the financial sector, to the benefit of shareholders,

customers and employees as well as achieving the targeted cost and revenue synergies, which will give Piraeus Group added value, - preserving the Group’s leading position in technological advances regarding financial services and e-banking systems, - supporting and developing all employees stemming from the newly acquired operations, - contributing to Greek economic recovery by providing banking services to healthy and extroverted activities, to businesses and

households, as well as financing of the necessary infrastructure and projects for sustainable growth in Greece, and - combining profitable business activity with corporate responsibility initiatives.

Τargets and Outlook for 2013

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With the completion of the share capital increase and the enhancement of its capital adequacy ratios, a key priority for the Group is to strengthen its balance sheet by means of: - managing effectively its loan portfolio by aiming for quality optimization, - restructuring its funding sources and adjusting them to its activities, - differentiating its deposit base with low concentration, - optimizing its capital structure in order to provide flexibility in dealing with market developments.

In 2013, the economic recession is expected to continue in Greece for a sixth consecutive year, thus resulting in further contraction of the national income. The recession is expected to be milder this year versus 2012, as gradual economic recovery is expected to com-mence during the second half of the year, with a turn to a positive growth rate in 2014.

In 2013, the Group’s domestic loans, which incorporate the portfolios of the Cypriot banks in Greece, Millennium Bank as well as those of Piraeus Bank, ATEbank and Geniki Bank, are not expected to increase versus the previous year. Regarding deposits, there has been a reversal in the negative course of both market and Group balances in Greece by the second half of 2012, which is expected to continue in 2013 as well. As a result of the gradual return of deposits in the Greek market since June 2012, the Bank’s funding from the Eurosys-tem was reduced, while since early 2013, transactions in interbank repo market outside the Eurosystem have been reestablished. At the same time, the funding costs are expected to gradually deescalate due to both reduced utilization of the ELA mechanism and improved composition of deposit portfolio.

Operating costs are not expected to increase compared to 2012, as cost containment and cost saving measures are being applied at all Group levels and activities. Nevertheless, within this year, infrastructure and network integration processes are to be implemented thus allowing for the achievement of cost synergies; yet at the same time there will be an additional burden from the cost of integration of the recently acquired operations. It should be noted that total pre-tax costs, funding and revenue synergies which the integration of acquisi-tions may generate are estimated at approx. €550mn after three years, with the integration costs estimated at approx. €420mn for the 2013-2015 period.

2013 is expected to be a year of significant challenges for Piraeus Bank;the completion of the recapitalization was followed by the inte-gration of ATEbank’s IT systems, which was concluded in June 2013, thus leading the way for the other processes of infrastructure in-tegration and process harmonization of the remaining acquired operations to commence within the year and to be gradually completed by mid 2014. Thesmooth integration of the acquired operations and companies of the financial sector which Piraeus Bank acquired from mid-2012 onwards constitutes a key strategic goal both for ensuring the new Group’s financial position with management of all assumed risk and for achieving targeted cost and revenue synergies. The Bank possesses an extensive experience in integrating acquired opera-tions as it has undertaken more than 15 bank acquisitions.Therefore, it can confidently assess that these recent acquisitions will be smooth-ly integrated. Completion of the integration process is expected to provide Piraeus Group with an even greater competitive advantage.

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Operations in Greece

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OPERaTIOnS In GREECE

In Greece, the Group is among the key providers of banking services and credit to small and medium-sized businesses with annual turn-over of €2.5mn - €100mn with a focus on medium-sized businesses. Moreover, the Bank is among the key banks offering banking ser-vices and credit to individuals and one of the main providers of advisory services of capital markets and investment banking, leasing and shipping banking in Greece. Additionally, the Group holds a leading position in e-banking services and applications, green banking as well as financing of the agricultural sector, with products and services adjusted to each customer’s needs.

At the end of July, 2012, Piraeus Bank acquired the “healthy” part (selected assets and liabilities) of the financial institution Agricultur-al Bank of Greece, thus significantly upgrading the Group’s presence and position in banking activities in Greece. Three months later, the Bank acquired Geniki Bank.

In March 2013 Piraeus Bank acquired the banking activities in Greece of the Bank of Cyprus, Cyprus Popular Bank and Hellenic Bank. In April 2013, Piraeus Bank signed definitive agreement for acquisition of Millennium Bank in Greece which was concluded in June after receiving required regulatory approvals. The above transactions constitute significant steps towards restructuring of the Greek banking system, a process in which the Bank has had a key role from the start.

Piraeus Bank continues to have a broadly dispersed presence in various sectors of the economy, while its credit exposures are signifi-cantly secured with collateral and guarantees.

As far as the Bank’s financial performance in 2012 is concerned, gross loans of Piraeus Bank and its subsidiaries in Greece amounted to €43.2bn, of which €2.1bn regard a seasonal loan to OPEKEPE in order to enable the disbursement of EU funds to 700 thousand farm-ers (which has been repaid). Total business portfolio constitutes 63% of total portfolio, while loans to individuals 37%. The non-perform-ing-loans over 90 days ratio in Greece reached 23% at year-end 2012 versus 13% the previous year. It should be noted that the Greek market non-performing-loans ratio at the end of December 2012 is estimated at 24.5%.

The economic recession, the increased tax liabilities of depositors, an expected further-reduced economic activity, and less disposable income, and economic uncertainty are once again the factors which have a negative impact on business and household deposits. The Group’s deposits in Greece amounted to €32.4bn, representing 19% of the Greek deposit market at year-end 2012. Time and savings de-posits had a higher decrease both in the market and in Piraeus Bank, a consequence of the fact that households and businesses used their available funds to settle obligations and to continue operation of their transaction cycle.

Due to the continued economic recession and with reduced demand for banking products and services, net interest income in Greece amounted to €0.6bn in 2012 from €0.7bn in 2011. It is noted that the increased funding cost through deposits and the Eurosystem (esp. ELA mechanism) significantly burdened 2012 net interest results. In mid-January 2013, the Greek banking system regained access to ECB funding, which is expected to lead to reduction in the cost of funding.


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The Group’s total operating costs in 2012 amounted €0.7bn, including ATEbank costs beginning 27.7.12 and Geniki Bank costs begin-ning 14.12.12.

The results in 2012 were adversely affected by increased provisions for loans and other receivables, amounting to €1.7bn, due to the sig-nificant deterioration of the macroeconomic environment.

Branch network in Greece numbered 889 units and human resources 12,365 employees on 31 December 2012.

Main Domestic Figures 31.12.2011 31.12.2012

Gross Loans (€mn) 29,729 43,235

Customer Deposits (€mn) 17,814 32,413

Branches (#) 346 889

Employees (#) 6,172 12,365

RETAIL BANKING

All the Group’s activities regarding retail banking in Greece are executed by the Bank and its branch network as well as by alternative distribution channels, such as the e-banking platform “winbank”. Retail banking customers are provided with a multitude of deposit, loan and investment products, including savings accounts, time and term deposit accounts, investment products, mortgage and consum-er products, credit cards, bancassurance products and insurance brokerage as well as a broad range of banking services.

Retail Deposits - Investment Products

The Group offers retail banking customers a broad range of deposit and investment products in euros and other main currencies. In Greece, total Group retail deposits, including ATEbank and Geniki Bank, amounted to €26.2bn on 31.12.2012.

Extended exclusion of Greek banks from international funding markets combined with the political uncertainty caused by two na-tional elections in May and June 2012, contributed to limiting of bank liquidity and to deposit outflows particularly during the first 6 months of 2012 (-13% decrease in Greek market deposits in the first 6 months of 2012); this trend, however, was offset by the liquid-ity measures provided by the Eurosystem. From July to December 2012, there was a stabilization of Greek market deposits, with a 9% positive turn in the second 6 months of 2012. In total, during 2011-2012 Greek market deposits were reduced by €50bn, with 81% having occurred in 2011.

Preserving customer capital remains the Bank’s policy in combination with effective management of the cost for raising this capital, while at the same time, the Bank aims at expanding the numbers of customers and customizing the product portfolio to their needs according to the market trends.

Within this framework and placing particular emphasis on innovative services designed to provide complete solutions to customers, the Bank designed the innovative and unique in Greece service “Financial Check-up”. With the use of a tool of 18 simple questions, this free of charge service advises customers on their finances and recommends the products best suited to their individual needs. In relation to other products and services, in 2012 Piraeus Bank launched a new time deposit “+Plus-Minus”, which offers customers the possibility of depositing or withdrawing funds at any time with no charge.

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2012 marked one complete year of operation of Piraeus Bank’s Axia Personal Banking program, a special service model for affluent customers in 143 Bank branches. The aforementioned program offers added-value advisory services by specialized executives as well as finance organization and management services. Recently, this service model was enriched with a special debit card (Axia Debit Card) as well as the Active Portfolio Management Service, an innovative service of professional management of the amount the customer de-cides to invest, with professional Asset managers and within a specific investment framework. Approximately 20,000 customers make use of this service, through Piraeus Bank’s Axia Personal Banking and despite the particularly adverse conditions of the banking market in 2012, these customers obtained 8,000 new products.

Finally, during the last 6 months of 2012, the integration of ATEbank initiated the process of defining a new range of deposit and invest-ment products, aimed at improved efficiency and restructuring of product portfolio. In this framework, at the end of 2012, the first com-mon deposit product – “Axizei” savings account - became available from both branch networks.

Mortgage and Consumer Credit

Under the weight of the economic crisis, Piraeus Bank placed greater emphasis on credit policy criteria concerning new mortgage and consumer credit loans.

Total retail credit product portfolio in Greece, including mortgages, consumer and personal loans, credit cards and other consumer prod-ucts amounted to €16.0bn on 31.12.2012, constituting 37% of consolidated loan portfolio in Greece, from €8.7bn one year before; this increase is mainly due to incorporation of “healthy” ATEbank.

2012 was marked by the Bank’s active participation in the subsidized Program “Energy Saving at Home” managed by E.T.E.AN. SA (Hellenic Fund for Entrepreneurship and Development SA) and co-funded by national and European resources. In March 2012, the Pro-gram was updated and simplified to provide further incentives aimed at: additional support to low-income households, facilitation of citizens’ participation in the Program as well as the inclusion of more homes to it and provision of greater liquidity to the market. Fol-lowing the absorption of ATEbank, the Program has also been promoted by its Network since last September. The Bank remains one of the basic pillars of the Program, with 30% of the signed loan agreements while more than 2,500 households have already completed the required interventions to improve their homes’ energy-efficiency.

At the same time, in the framework of the Bank’s environmental policy and strategy, provision of loans for the purchase and installation of photovoltaic systems in homes was continued.

In 2012 as well, despite the low demand for consumer loans due to the adverse economic conjuncture, the product portfolio was enhanced and enriched in order to cover a broader funding scope such as debts to the State, green repairs, purchases, transportation and other per-sonal needs.

Additionally, particular care was given restructuring facilitation measures to our customers facing difficulties in regular loan repayment due to the economic crisis.

Piraeus Group’s mortgage credit balances in Greece reached €12.0bn and its market share 16%. The Group’s total consumer credit bal-ance (excluding credit cards) in Greece amounted to €3.0bn, with the Group’s market share at 12%.

Credit Cards

The difficult economic conjuncture had an adverse effect on the number of credit cards in circulation as well as to total turnover from the cards, leading to further shrinking of this specific market. The Bank is one of the main credit card issuers in Greece, having issued more than 400 thousand cards, with loan balances amounting to €1.1bn at year-end 2012.


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In 2012, transition of total Bank credit cards to Chip & Pin technology was completed while efforts to incorporate customers to e-ac-count services were enhanced. Additionally, loyalty programs were strengthened and more categories of service/payment to the State were added.

Portfolio Management & Collections

In 2012, the existing programs that supported customers to address the consequences of the crisis continued. The aim of these restruc-turing programs is the offering of a variety of proposals and alternative choices to customers in order for the Bank to better respond to their needs. Moreover, the Bank’s policy was implemented and new rescheduling products were added to former ATEbank’s retail port-folio, thus achieving uniform customer management.

At the same time, the system managing loan delinquencies was upgraded to allow for monitoring of all stages of registering of compul-sory prenotation of customers’ property aiming for more rapid securing of unsecured Bank debt.

Moreover, the use of statistical models of credit behavior was upgraded and new models were created with information from TIRESIAS Bank Information Systems. Strengthening of the collections process (temporary and permanent loan delinquencies) with statistical tools that describe total customer risk within or outside the Bank resulted in upgrading of collection strategies and consequently in increase of collections and limiting of operating costs. Moreover, credit risk ratio reports were upgraded with former ATEbank portfolio data.

Finally, Retail Banking portfolio analyses were implemented with the aim of monitoring of delinquency ratio, enhancing loan restruc-turing, policy changing and targeted portfolio management in order to achieve better credit risk management. These analyses were ex-panded further to provide fuller and speedier information on the progress of the portfolio of Piraeus Bank and former ATEbank.

Bancassurance Products and Insurance Brokerage

Piraeus Bank’s Bancassurance Unit was established in 2008 with the aim of developing systematic sales in Greece and abroad mainly through its branch network but also through alternative channels of communication with customers (call centre, the e-banking platform winbank).With its specialized know-how, the Bank aims to make use of strategic collaborations with the insurance companies ING and ERGO, thus maximising the value for the Bank.

In collaboration with subsidiaries Piraeus Insurance Agency and the other bank units, the Group aims to create complete bancassurance products and mechanisms for automated customer management and service.

The key axes for improvement and monitoring are: a) effective bancassurance product sales combined with proper and direct serving of customers, through motivation and development of coaching of new sales people, andb) improvement of the required sales procedures.

In 2012, the following actions were implemented: - Automation of premium payments by credit card in 12 interest-free installments. - Payment and receipt of insurance policies at any Piraeus Bank branch. - Automated notifications on customer’s mobile phone and email for issuance, payment and receipt of insurance policy. - Sale of car insurance on the Internet. - Creation and promotion of new products, adjusted to modern customer needs.

Subsidiaries Piraeus Insurance Agency and Piraeus Insurance Brokerage comprise the joint arm of mediating insurance services pro-

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vided by the Bank, which aims to cover Piraeus Group’s customer insurance needs. Total Group managed portfolio in 2012 reached €20.0mn, total profit from insurance business €20.0mn which is a 17% increase versus 2011.

It is duly noted that ATE Insurance and its direct participation in ATE Insurance Romania are included in the Group’s discontinued operations.

Piraeus Insurance Agency SA

Maximising on its business synergies with insurance companies ING and ERGO, the know-how of its staff, as well as Bancassurance segment of Piraeus Bank, the company offers insurance solutions responding to the needs of its customers. Its scope of business focus-es on enhancing the sales of standard Life, Health, Pension and Retail General Insurance (vehicle, property, liability, personal accident) products, using the Piraeus Bank network. It is also in charge of providing top training to the Bank’s branch network staff, as well as new product design and all the necessary marketing activities.

Piraeus Insurance and Reinsurance Brokerage SA

The company operates as a broker for all types of insurance contracts. The company’s activities are primarily intended to cover the in-surance needs of the Bank’s customers as well as the needs of the Group as a whole. At the same time, it focuses on broadening the Group’s customer base by developing relations with prospective individual or corporate clients. Proper organization and experience cou-pled with solid synergies with first class insurance companies in Greece and abroad enable the company to ensure complete coverage, low premiums and high quality services.

BUSINESS BANKING

In Greece, Piraeus Bank Group has always held a key position in services providing funding to businesses active in all sectors of the economy. It offers a wide range of deposit and funding products to businesses, including financial and investment advisory services, loans (in euro and other currencies), foreign currency services, insurance products, custody services and import-export services.

The Bank’s focus of attention, is on selecting high quality customers and to systematically monitoring them by means of the most ad-vanced risk management tools, while with particular attention the following are implemented: exposure to the most promising sectors of the economy, ensuring that its lending is with strong collateral and guarantees, pricing relative to risk assumed, and continued efforts for cross-selling enhancement.

In an effort to maintain the quality of sound management of credit risk deriving from its business portfolio, the Bank’s Credit Division actively and systematically participates in the process by applying uniform credit policy and practices and by strictly abiding by the pro-cesses of approval, renewal and close monitoring of credit limits.

For the achievement of the above, teams of specialized executives have been formed, which deal with the evaluation and monitoring of the business loan portfolio of Bank customers as well as that of its subsidiaries in Greece and abroad.

More specifically, the Group’s Credit Division is responsible for the following: - Active participation in approval process (Approval Committees) to define, amend and/or renew credit limits of businesses and bank

groups. - Close monitoring of quality of business loan portfolio. - Continual updating of Credit Policy and Practices Manual and monitoring of its proper application.


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- Participation in Group Account Officers / Credit Analysts training. - Active support of Bank subsidiaries on issues of credit policy and processes as well as management of specific category loan re-

quirements.

With the aim of shielding the Bank’s balance sheet, in 2012, even stricter evaluation criteria for business portfolio were applied, targeted at enhancing the Bank’s position by means of restructuring of funding, strengthening of collateral and risk-based pricing.

Moreover, the Bank has shaped and adopted approval procedures which are aimed at uniform handling, evaluation and management of risk of Piraeus Bank and ATEbank.

Business Deposits

Business deposit balances in Greece on 31.12.2012 amounted to €6.3bn. The domestic economic and political developments in 2012 af-fected business deposits, leading them to particularly intense volatility. Total business deposits of the Greek market was reduced in 2012 by €2.4bn (€5.7bn reduction in first 6 months of 2012 followed by €3.2bn increase in the second 6 months of the year).

It should also be noted that despite the adverse economic conditions, the Bank continues to take advantage of its know-how of operations with legal entities of the wider public sector. In 2012, it participated in more than 600 tender offers for broad collaboration with munici-palities, municipal businesses, prefectures, hospitals, secondary and tertiary educational institutions, pension funds and other legal en-tities – this resulted in initiation of a satisfactory number of new cooperations and deposits, in a significant increase in the customer base, with over 28,000 new payroll customers as well as a significant potential for cross-selling enhancement.

In total, in the payroll segment the Bank serves more than 800,000 employees in the public and private sector.

Business Loans and Advances

Piraeus Bank Group holds a strong position in business financing in the domestic market, with considerable diversity in all sectors of the economy and emphasis on services to medium and small-sized enterprises. At year-end 2012, total loans to businesses in Greece reached €27.2bn. Loans to large businesses reached €9.6bn, while loans to medium and small-sized businesses were €17.6bn.

Business loans are granted, for the most part, in the form of credit lines with floating interest rates. Moreover, the Group provides letters of credit and guarantees for its customers. It has also granted loans to all business sectors with particular emphasis on commerce, indus-try, construction, tourism and shipping.

The table below presents business loan balances in Greece:

(Amounts in €mn) 31.12.2011 31.12.2012

Large Businesses-Shipping 7,583 9,609

Small and Medium-sized Businesses 13,425 17,590

Total 21,009 27,199

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Large Enterprises and Structured Finance

Piraeus Bank Group’s Large Corporate and Structured Finance (LCSF) offers businesses: accounts with overdraft option, loans in for-eign currency, floating interest rate loans and currency swaps as well as options. At year-end 2012, large business portfolio in Greece amounted to €9.6bn.

Large Corporate and Structured Finance operations consist of the provision of banking services, funding of complex transactions, pro-vision of financial advisory services to large corporate, project finance, real estate finance, debt restructuring advisory services and in-frastructure advisory.

The key factors that shape the Group’s policy in this market sector are the quest to achieve optimum results in managing and developing the business portfolio as well as to create added value both for the Bank and for its customers through the timely identification and ho-listic approach to their needs. More specifically, the highlights of the operational model are flexibility and immediate response to requests by business customers, and the important synergies that are formed from cross-selling the Bank’s entire product range.

The particularly adverse market conditions throughout 2012 resulted in the LCSF aligning itself with domestic market conditions, which are characterized mainly by a significant program of restructuring and refinancing of existing loans of business customers, and exten-sive changes to loan terms, such as extension of loan margin, reduction of financial leverage levels, reduction of loan duration and strengthening of repayment security framework.

More specifically, the main strategic axes, were as follows: - continuing support of existing customers taking into consideration creditworthiness, aiming for better loan repayments, as well as

income increases from parallel activities, - support of the sector for financing of large infrastructural projects –mainly Renewable Energy Sources Projects (RES)– combined

with further development of parallel activities from Infrastructure Advisory.

It is worth noting that Piraeus Bank, amidst a particularly adverse economic environment in 2012, continued proving with actions its support of the infrastructure sector –which is considered the “locomotive” of the re-launching of the Greek economy. In particular, the Bank’s specialised project finance team: - actively contributes to the efforts to re-launch major infrastructure projects in Greece, as a key member of the steering committee

on works in: a) Maliakos-Kleidi section Motorway, and b) Central Greece Motorway, - through its role as financial consultant and key financial sponsor, the Bank organises the funding of one of the largest private invest-

ments of total value approximately €320mn which concerns the construction and operation of a 423 MWp combined cycle gas tur-bine power plant, and

- in the framework of the European Investment Bank’s tender offer for the implementation of the EU initiative JESSICA in Greece, the Bank participated and undertook the formation and management of the Urban Development Funds (UDF) of Central Macedonia and Thessaly for the promotion and implementation of JESSICA initiative.

The UDF’s aim is to utilize EU funds for the creation of urban development actions which will be in the form of sustainable investments. The relevant contract was enacted in February 2012.

Shipping Finance

Piraeus Bank has significant presence in financing of shipping, which constitutes one of the most dynamic and extroverted sectors of the Greek economy. The services provided by Shipping Banking mainly focus on financing of purchase or construction of ships, financing of shipping companies’ operating needs, issuance of letters of guarantee as well as serving other needs.

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The Bank aims to support its shipping customers against fluctuations in the shipping market while also placing special emphasis on care-ful risk management. Financing focuses on two basic ship categories (dry bulk cargo ships and tankers), avoiding too specialized ships.

As far as customer selection is concerned, the strategy being followed is particularly careful, as parameters considered and required are extensive experience in the sector, a good record and proven ability of the customer to manage shipping cycles.

2012 was a difficult year for the shipping sector internationally. The dry bulk cargo market was at a low level throughout the year, with dry bulk cargo income (for ships of almost all sizes) on average slightly above operating costs. The same was observed in the tanker mar-ket – with the exception of smaller sizes (MRs-LRs) which transport processed oil products, which in Q4 marked a notable rise. In con-clusion, the container ship sector remained unchanged in 2012, at the already low 2011 levels.

Under the present adverse economic conditions and in the framework of the broader policy of the Bank, Shipping Banking’s strategy is mainly focused on covering the needs of its existing customers. In the last years, emphasis has been placed on repricing of existing loans as well as developing parallel activities with shipping companies (such as attracting payroll, raising volume of wire transfers and cash activities).

A second shipping branch the Bank’s Shipping Banking is involved in is financing of ferry companies for purchase and/or construction of ships as well as coverage of their operating needs. A variety of external factors, such as greatly increased fuel price, strict regulatory framework of the market as well as decreased demand due to adverse economic conditions, have created a very tight operating frame-work for Greek ferry lines in the last years. Piraeus Bank, recognizing the importance of this sector in connecting the islands with the mainland as well as connecting Greece with Central Europe through the Adriatic Sea lines, maintains its support of ferry companies, aiming for the best possible coverage of their needs in parallel with best protection of the Bank’s interests.

Loan portfolio regards mainly financing of seagoing ships and amounted to €1.4bn at year-end 2012, unchanged from the previous year. Of this, 56.6% regarded dry bulk cargo ship financing, 37.7% tanker financing and 5.7% container financing. Within the past year, al-most all of the loans the Bank had committed itself to gradually paying out according to progress of ship-building work was disbursed.

Medium and Small Enterprises Banking

The segment of medium and small sized enterprises has been the prime business field of Piraeus Bank in Greece for almost two decades. Traditionally the Bank has been collaborating primarily with medium-sized Greek enterprises. However, in recent years it has gradu-ally established a notable presence in small enterprises and self-employed professionals.

The Bank provides services to the two sectors of small and medium-sized enterprises by means of the special Small Businesses and Pro-fessionals division (SBLs) with an annual turnover under €2.5mn, while the specialized Business Centers of the Bank cover SMEs cus-tomers with an annual turnover of €2.5mn to €100mn.

The prolonged recession in Greece has significantly affected the growth of medium and small sized enterprises. The downturn in de-mand impacted business turnover, which, combined with limited liquidity and uncertainty about the developments in the economy, cre-ate a particularly difficult environment for business activity. However, approach of this market offers a great margin for exploitation of opportunities for new products and services promotion.

The Bank’s specialized Business Centers and its branch network cover the upper range of SMEs. The growth model, which has as its starting point a customer-centered approach, has led to increase in customer numbers and consequently to the level of know-how of its executives. The high-quality standards of service have resulted in harmonization of credit criteria and better loan quality monitoring. This was particularly apparent in 2009-2012, the years of negative economic conditions in Greece, which changed conditions for busi-nesses as well as banks. In this framework, for a number of years, Piraeus Bank has followed a business loan policy with a great degree of collateral in this loan sector.

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It should be noted that the Bank’s Business Centers additionally undertake to evaluate applications for businesses whose financing ap-plications are of a specific or complex character (eg, Association of Local Authorities- OTA- loans or with Greek State guarantees or with Joint Ministerial Decision.)

Small Businesses and Professionals

In the last years Piraeus Bank has developed its collaboration with small businesses and self-employed professionals with an annual turnover under €2.5mn by means of the specialized sector of responsibility Small Businesses and Professionals Division. This sector of-fers complete services to customers and manages a multitude of development programs (guaranteed and co-financed), while also par-ticipating in the Hellenic Fund for Entrepreneurship and Development (ETEAN SA) for programs being developed.

With the aim of providing proposals and financing solutions to its business-customers, the Bank also participated in the Export Credit Insurance Organization (ECIO) Extroversion Program aimed at businesses with an exporting orientation. In conclusion, the Bank is committed to participating in any development-financing program that may arise in the future and is targeted at small businesses.

In December 2012, the Bank signed a Collaboration Agreement with the European Investment Bank (EIB) initially amounting to €50mn aimed at financing SME’s operating in Greece. This loan constitutes the first of a series of EIB loans amounting to a total of €200mn aimed at providing liquidity to businesses, development of innovative entrepreneurship and creation of new job positions.

With the acquisition of ATEbank, integration of procedures and systems became a high priority for the small business sector, which re-sulted in the Approval Centers of northern and southern Greece and the Small Businesses and Professionals division’s credit evaluation and procedures to be immediately adjusted to common network customers of Piraeus Bank and ATEbank’s networks.

Development Programs

Piraeus Bank holds a leading position in the banking market as Intermediate Managing Authority on State Aid of the NSRF (National Strategic Reference Framework) and in this capacity supports small and medium-sized Greek businesses in their efforts to develop and enhance their competitiveness.

In the years 2003-2012, Management received and evaluated 22,022 applications from SME’s, of which it monitored 8,221 investment plans with total budget of €525mn and disbursed State funds amounting to €276mn to 5,231 businesses.

In 2012, Piraeus Bank disbursed State funds amounting to €34.1mn to 572 businesses, executing an equal number of on-site certifica-tions of investment completion.

At the end of 2012, complete integration of ATEbank’s portfolio of such projects was completed, with unification of operating proce-dures and application of a uniform management framework. Consequently, total portfolio amounts to 2,311 projects of which 1,055 have been completed, collecting the corresponding funds.

Additionally, in the framework of the “Innovative Entrepreneurship, Logistics, Food, Drinks” Action in conjunction with the Hellenic Fund for Entrepreneurship and Development (ETEAN), the Bank offers SME’s the opportunity to finance their investment plans with low-interest long-term loans with very favourable terms. This funding of business investment plans aims to promote innovation and en-hancement of their competitiveness in products and services.

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FINANCIAL AND OPERATING LEASING

Financial Leasing - Piraeus Leases SA

Piraeus Leases SA is a member of the International Finance and Leasing Association (IFLA) and is responsible for total Piraeus Group leasing activities in Greece. In the past year, particular emphasis was placed on effective asset management, loan reduction and devel-opment of property leasing, in accordance with new market conditions.

In 2012, new activities amounted to €28mn versus €50mn in 2011, while leased assets to €945mn at year-end 2012, reduced by 8%y-o-y.

Key axes of company activities are support of its customers and – in collaboration with them –exhausting all possibilities of collectabil-ity of receivables, exploitation of all possibilities for healthy growth, additional monitoring of expenses and improvement of operation.

Operating Leases - Olympic Commercial and Tourist Enterprises SA (AVIS-Piraeus Best Leasing)

Olympic Commercial and Tourist Enterprises SA, which operates under the AVIS trademark is involved both in short-term and long-term leases of vehicles. More specifically, in long-term leases, which account for 80% of the company’s leasing activities, there was sig-nificant effort to maintain both the market share and leases in spite of the crisis in the Greek car sector due to increased taxation and the particularly adverse economic climate during 2012.

The 2012 total company fleet reached approximately 30,000 cars. The company faced 12% turnover losses from long-term rentals, with short-term rentals noting an 11% increase.

In 2012, new vehicle purchase market suffered significant decreases of almost 40%. At the same time, and with liquidity as one of the greatest problems being faced by companies in the Greek market, the company achieved positive cash flow, reduced its borrowing and has sufficient liquidity for development and potential investments.

In the framework of the company’s growth, Olympic Commercial and Tourist Enterprises SA acquired VISA Rent A Car –active in the in short-term car rental in Attica. The company operates as a licensee of BUDGET trademark, with Olympic as its Master Licensee in Greece since 2008.

In 2012, the company relocated to a unified building of AVIS and BUDGET operations in Athens, thus achieving economies of scale.

According to the most recently published data, the company is the largest in the car rental sector in relation to the number of vehicles in its possession, achieving the greatest turnover of total rentals.

BUSINESS FACTORING

Piraeus Factoring SA, 100% subsidiary of Piraeus Group, was founded in 1998 and is a member of the international organization Fac-tors Chain International (FCI), collaborates with the most important factoring organizations abroad thus substantially contributing to attainment of insurance limits aimed at safer cargo transportation internationally.

Since November 2009, the company has been a founding member of the Hellenic Factors Association, with representation both in the Board of Directors and in its sub-committees.

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The company provides services that cover the entire range of Domestic and Exports Factoring to businesses by funding their receivables and ensuring effective management and constant evaluation of the solvency of existing or new partnerships, as well as providing insur-ance coverage of credit risk.

In the framework of the Group’s policy, the company is at the absorption stage of ATEbank’s portfolio, with key aim being promotion of exports through Export Factoring.

In 2012, shrinking of activities took place in domestic Factoring without Recourse (insurance of receivables) due to reduction of insur-ance limits provided by insurance companies active in Greece.

It should be noted that the investment in the automated computerized commercial application (Proxima +) was implemented; it is a strict automated risk management system through which better monitoring of receivables as well as provision of services through internet platform are attained.

WINBANK

2012 was another year of awards for Piraeus Bank’s winbank services in Greece and abroad. More specifically, 2012 was an excellent year for mobile banking, as the distinguished magazine “Global Finance” awarded it the distinction of “Best in Mobile Banking” in Eu-rope. On a national level, winbank easypay App received the “Innovation” award at the 2013 E-volution Awards, at which the paycenter platform also received the first award in the “Payment Systems” category.

2012 was a successful year for winbank e-banking as well, as it was ranked at the top of customer penetration in the Greek banking sec-tor, with the greatest pertentage of 17%. In absolute terms, the average monthly number of active users noted a 14% increase. Phone banking users increased by 24% while phone cashless mandates increased by 20%. Contribution of e-banking channels to Bank activi-ties also increased, as 74% of remittances, 80% of capital transfers within the bank and 61% of share market transactions were through winbank web-banking. Moreover, further improvement and development of services provided was continued, with the most notable be-ing operation of a new share market platform which expanded e-transactions to more than 30 select international share markets in Eu-rope, America, Asia, Australia and Africa.

There was 190% increase in mobile banking transactions, with 64% increase in active users of the service as well. The “Instant Cash” service (ordered via web/phone/ATM and received through ATM cardless) continues being used by steadily increasing number of users as a 34% increase was noted in transaction’s volume for the first time totalling more than €10mn.

In 2012, the task of Piraeus Βank Romania migration to winbank international platform, thus constituting the 7th consecutive country of Group activity to be included in it, after Egypt, Albania, Bulgaria, Cyprus, the Ukraine and Greece. By utilizing the platform’s com-mon infrastructure, all participating countries – with the exception of Egypt – obtained the winbank mobile service.

Winbank Direct, the only online channel for bank and insurance product sales in Greece, noted great increase in sales. New Bank cus-tomers rose by 28% by means of this channel, while total customer balances rose by 170%. At the end of May, 2012, online car and mo-torbike insurance became available, with sales reaching 18% of total Bank branch network sales in 2012.

In the field of payments, in 2012the www.easypay.gr payment portal changed appearance. Available payments rose by 7% versus 2011 with value of payments made through the portal rose by 140%. Similarly, the mobile version of the winbank easypay App service, for iPhone or Android smartphones, was updated with new applications such as login, automated card data reading and saving with password. As a result, a 177% increase in transactions was noted, while 10% of new users of easypay services registered through mo-bile version.

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The portfolio of companies and Organizations collecting their customers’ debts through Piraeus Bank increased by 71%. Total transac-tions from various Bank payment channels – traditional and electronic – rose by 19% with a 13% increase in amounts.

In 2012,despite adverse economic conditions, there was continued volumes growth of the awarded paycenter platform (collections through the internet and phone by Greek commercial businesses with charge to their customer’s cards). Total transactions served by the platform rose by 10%, with a 36% increase in conducted turnover, aided by an increase in transactions with Piraeus Bank cards for payment of various debts to the State (income tax, VAT, circulation tax, among others). It is noteworthy that in 2012, commercial businesses using paycenter hold a 64% share of turnover and 56% of collected fees, although they constitute 24% of businesses collaborating with the Bank which collect debts by means of cards.

At the same time, the eBusiness team designed solutions completely adapted to the particular demands of companies - Bank customers, such as automation of the network of shipping agents and ferry companies, OPAP profit payments, collaboration with Attiki Odos, tax and fee payments, electronic pricing, collaboration with the Municipalities of Thessaloniki and Athens, the Athens Bar Association and other government bodies.

At year-end 2012, Piraeus Bank’s ATM network numbered 651 machines, of which 326 were installed inBank branches and 325 at oth-er points outside the Bank. Transaction volumes remained at 2011 levels. 88% of total Bank withdrawals were made at ATMs and 10% of total deposits. Including ATEbank, at year-end 2012 Piraeus Bank Group’s ATMs in Greece numbered 1,566, of which 841 within the Bank and 725 outside the Bank.

At year-end 2012, total easypay machines numbered 367, of which 279 within Bank branches in Greece and 88 outside the Bank. Trans-actions rose by 16% and their total value 23%. More specifically, at easypay machines within the Bank branches, 15% of total deposits were made, as well as 51% of credit card payments, 44% of loan payments and 9% of bank statement updates at the 44 branches where the easypassbook service is available. These numbers prove that apart from providing faster service, these machines significantly con-tribute to reduction of branch cashier overcrowding.

Piraeus Bank debit card volumes noted notable increase versus 2011, concerning their use for purchases (24% increase in POS) and a decrease in withdrawal transactions and value of transactions. More specifically, total activated debit cards exceeded 1.1mn, noting a 13% increase, in contrast to market trends, which noted a 16% decrease in total activated debit cards. In 2012, two new debit card prod-ucts became available: winbank Direct Debit for customers using winbank Direct and Piraeus Axia Debit, exclusively for Piraeus Axia Personal Banking customers.

As far as pre-paid cards are concerned, in 2012, the portfolio was enriched with two new innovative products: Piraeus Business Prepaid card, the first intangible prepaid card for businesses, and Piraeus Prepaid card for individuals, available in two tangible versions: a) Pi-raeus Prepaid Gift Card and b) rechargeable and labeled Piraeus Prepaid Reloadable Card. In their basic volumes, virtual prepaid win-bank WEBUY and Piraeus Business Prepaid cards reached almost 70,000, noting a 19% increase. Purchase transactions also noted a similar increase, 17%, exceeding 640,000.

As far as the Bank’s presence in social media is concerned, in May 2012, the Bank inaugurated the “Greece, By Your Side” platform, a network group for friends of the Greek national football team as an extension of the sponsorship by the same name. At year-end 2012, this group exceeded 21,500 members/friends. The already existing platforms “winbank” and “Think Green” had similar growth and ac-ceptance, as a result of the complete redesigning of their Facebook pages to include many new tabs, infographics as well as new content categories. These pages raised the number of friends, reaching more than 21,500 and 16,000 friends respectively at year-end 2012.

In 2012, in the framework of the emphasis placed on online communication, the Group inaugurated four new websites: the www.piraeuswm.com of subsidiary Piraeus Wealth Management, the www.piraeusconferencecenter.gr of the Bank’s Conference Center in Thessaloniki, the www.pjtechcatalyst.com of PJ Tech Catalyst Fund and the portal www.greenbanking.gr. Moreover, within 2012, a new series of digital tools was developed and made available to the public, such as financial checkup for individuals, the climabiz calculator, which evaluates the economic and environmental effects of climate change on business operation.

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In order to further contribute to improvement of customer experience with the Bank both in person (at Branch Network) and from a dis-tance (by means of the Call Center) the Bank completed within the framework of the “e-Business Academy” project in all the Network, the training cycles on e-banking and technological trends, while a multitude of sub-projects monitoring the provision of primary support to customers also having been implemented. Customer service indices achieved in 2012, for a total of approx.830,000 managed issues, prove the high quality of services provided: 93% of calls were dealt with from the 1st call, the average processing time of a call was at less than 4 minutes, and the rate of abandoned call did not exceed 9%. With the aim of promoting the quality of Piraeus Bank e-banking services provided as well as placing emphasis on continual improvement of customer service provision, the Bank’s e-Banking Division was re-certified for the 9th consecutive year by TUV Hellas and maintained its ISO 9001:2008 certification. Concerning actions related to the enhancement of the overall experience a customer receives across the Bank’s channels, the Customer Experience Management unit implemented the following actions:

The Transaction Migration Program “Save Time” began as a pilot program in 2010, aiming at sustainable reduction in customer service costs in branches, by promoting the use of alternative channels to customers queuing at the branch teller.

In 2012, this Program achieved training of a significant number of customers in the new service methods, thus achieving the migration of 2% of teller transactions to alternative channels. In 2013, the Program will continue, with the goal of additional 4% migration of tell-er transactions to alternative channels and will be enriched with a new service channel, winbank web banking for the 41 green branch-es which have the necessary winbank Corner.

In 2010, Piraeus Bank became the first Greek bank to introduce the Voice of the Customer (VoC) programme. The programme, which provides structured and measurable monitoring of the customer experience across the bank’s channels, is aimed at improving the expe-rience at specific contact points, important to the customer (Moments of Truth - MoT), and improve the customer perception and overall loyalty to the Bank.

During 2012, the Bank has initiated the measurement and analysis of the experience of the “digital customer” by examining all the ser-vice channels they transact with (winbank web banking, branch network, Contact Center etc) and thus highlighting significant areas of improvement, aiming at offering digital customers the best possible experience when using the Bank’s products and services.

In 2013, measurement of the digital customer’s experience will continue being measured and will gradually be extended to select Bank customer divisions (Piraeus Axias Personal Banking & Small and Medium-sized Businesses). In addition, in 2012 Piraeus Bank began systematic recording and categorization of complaints arising from customers by means of the “Multi-channel Customer Complaint Management”, aimed at raising customer satisfaction by defining the real cause of the problem/complaint as well as a spherical approach to complaints.

In 2012, the Bank continued providing the innovative Piraeus Customer Protection service. In case of loss, theft or suspicion of theft of personal and/or bank data, the service assists the customer through wallet & shopping protection whether they are in Greece or abroad. For this year, enrichment of existing services will continue as well as further coverage of Bank customer needs.

AGRICULTURAL BANKING

Acquisition of the healthy ATEbank has given Piraeus Bank a comparative advantage, as it gains direct and almost exclusive to a sig-nificant segment of the Greek market – the agricultural sector. Given the regression or stagnation of other economic activities, this sec-tor may constitute a ‘springboard’ for Bank activity growth.

Despite the adverse economic conditions, the Bank continued to actively support the Primary Sector. The key targets set at the begin-ning of the year, were preservation of existing balances, customers and market share as well as containment of negative results, which for the most part was achieved. Loans for farmland purchase were continued as were the short-term loans (eg, pre-collection of agricul-

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tural grants) with the aim of assisting Greek farmers with cultivation expenses by providing liquidity to very small cultivations, which faced survival challenges.

Since November 2012, the Agricultural Development Activities Division was created in the Bank with the basic mission of forming mu-tually beneficial agreements with the key agencies involved in Agricultural Credit, such as the Greek Ministry of Agriculture and Food, OPEKEPE, the Greek Agricultural Insurance Organization (EL.G.A) and the Agricultural Insurance Organization (OGA).

In the framework of the Bank’s contribution to support and development of the agricultural sector of the economy, Piraeus Bank ap-proved the funding to OPEKEPE – the Greek Payment Authority of Common Agricultural Policy (C.A.P.) Aid Schemes. The aim of this funding is timely disbursement of EU funds to Greek farmers. On December 18th, 2012, Piraeus Bank successfully completed disburse-ment of the EU 2012 funds to 700 thousand farmers, amounting to approx. €2.1bn (seasonal loan, paid in February 2012). With these funds, liquidity was channeled to the market, in a critical period for the Greek economy. At the same time, disbursement of the funds to the Greek Agricultural Insurance Organization (EL.G.A) and Agricultural Cooperative Unions were also completed. The EU funds de-rive from the European Agricultural Guarantee Fund (EAGF) and the European Agricultural Fund for Rural Development (EAFRD). Disbursement of the 2012 agricultural funds was completed successfully and on time by Piraeus Bank, in collaboration with the Greek Ministry of Agriculture and Food and OPEKEPE.

On the matter of financing of farmers (whether professional or not) as well as of small, individual agricultural businesses (approx. 110 thousand customers), the process of centralizing specific loan categories, with emphasis on existing credit limits, was completed.

There was continued provision of a range of loans to agricultural businesses, including flexible financing of young farmers, organic prod-uct funding program, medium-term loans to agriculture, fishery and aquaculture, open loans to farmers and loans for energy production (agricultural photovoltaics). Open loans to farmers constitute the most important loan category both in the number of loan holders (ap-prox.65,000, as a main occupation farmers) and in the total agricultural loan share (over 40%).

In autumn of 2012, Piraeus Bank reached an agreement with the Greek Ministry of Agriculture and Food with the aim of creating a new funding tool totaling €700mn to strengthen liquidity and promote implementation of the “Agricultural Development Plan Document” (ADPD) and the “Agricultural Development and Reform of the Countryside” (OPADRC) (Measure 121 & Measure 123A)

These investments are aimed at: - Raising the value of agricultural and livestock products by adopting and developing innovative and technological equipment, en-

hancement of their quality, hygiene and safety, and - Modernizing sheep and goat units and adjusting them to new, modern conditions and demands of investments in primary produc-

tion agricultural products.

The Bank created two products that suit all investor needs and cover the proposed investment by 100%: “Agricultural Activities Invest-ment for Housing and Equipment ” and the “Agricultural Development Working Capital”.

Contract Farming

In its effort to actively participate in promoting the primary economic sector as a pillar of growth of the Greek economy, Piraeus Bank created a new financing program for agricultural production: Contract Farming/livestock breeding. This program substantially contrib-utes to enhancement of liquidity, to modernization of transactions and to reorganization of the agricultural economy. It regards partial financing of the cost of agricultural/livestock production of producers contractually bound with specific buyer-processor of their agri-cultural production (cooperatives-groups of producers, manufacturing businesses etc). The key benefits of the program for the producer are the following:

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- With: Contract Farming /livestock breeding, the Bank offers producers the opportunity to cover their farming/breeding needs by providing the necessary capital.

- All the funds required to cover production costs are available to producers at the exact moment they need them, thus allowing them to make their purchases at the best possible price, to ensure the best breeding of their livestock and to have good quality production.

- By buying in cash, producers reduce farming/breeding costs. - Financing by means of the Contract Farming card does not require mortgaging of the producers’ farming land or other personal assets. - The most significant benefit for producers is the fact that the funds are available at the right moment (eg. fodder harvesting period)

thus allowing them to achieve lower and more favorable prices.

More than 1,700 producers are already participating in the program, with at least 30 more programs expected to be implemented by year-end 2013.

GREEN BANKING

Restructuring of the Greek economy, redesigning of its production and a turn towards a growth model which will allow for the creation of new jobs, are some of the critical issues of Greek society. Moreover, ensuring energy self-sufficiency, proper management and pres-ervation of natural resources, compliance with the relevant legal framework and EU directives are all parameters not only of climate change and environmental protection but also of the way in which society chooses to shape a new, sustainable business mentality. In the resulting economic environment due to the continuing recession, it is made clear that Green Entrepreneurship can constitute one of the key ‘vehicles’ that will lead the Greek economy to growth rates with sustainable results.

Piraeus Bank realized early on the prospects and necessity for growth of this particular sector, which was strengthened by the creation of the first green banking product in Greece in 2008 and by the June 2010 decision of the Executive Committee to turn the first network branches into Green Branches. This decision laid the foundations for the strategy that was followed in 2012. Implementation of extend-ed support to any effort with a scope of :green entrepreneurship-renewable energy sources (RES), energy-saving, alternative waste & water management, green chemistry, green transportation, organic farming, eco-tourism & agro-tourism, has led to further enhance-ment of Green Banking, both in absolute numbers (financing) and in operating sizes (green branches, training, subsidiaries).

Development of green banking products, which directed towards servicing the above sectors, has commenced and is being built on sol-id foundations, thus enriching the Group’s specialization in Green Banking.

Piraeus Bank Strengthens its Presence in Green Entrepreneurship

In 2012, abiding by its commitment to support any form of business or individual activity which respects economic, social and environ-mental parameters, Piraeus Bank strengthened its presence in Green Banking. This was achieved by: - the support of customers on Green Entrepreneurship issues by means of network and branch organization and enhancement of the

role of green partners at all network branches, - the continual training projects for both Bank employees and customers, - the providing of new green products and services to individuals and businesses/organizations, - the providing of technical assessments of green entrepreneurship projects, - the implementation of green investments by Group subsidiaries, - the creation of a website with the aim of developing and promoting synergies among businesses active in the field of green entrepre-

neurship, and - the support of green investments through funding tools.

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Network

The Bank provides full support to investors by means of the green points and network branches in Greece, giving them the opportunity to consult employees specialized in green entrepreneurship. Moreover, the Bank offers the possibility of e-meetings between the green business investors and specialized staff to cover any need that arises by using specialised electronic audiovisual equipment.

By applying these actions, Piraeus Bank proves once more that its goal is to provide its customers with complete, high-quality services. These services go beyond traditional bank loans and they promote a complex and constructive advisory role to serve customers at every stage and process of the investment.

Information - Training

For the high-level training of its human resources and with the aim of providing more complete information to its investors and custom-ers, the Bank implemented the following in the 2010-2012 period: - Intensive training programs in classrooms, consisting of 118 seminar cycles, which resulted in the training of 1,625 branch network

employees and 78 executives of the Bank’s approval centers on green entrepreneurship issues, - E-learning programs specialized in green entrepreneurship issues, completed by 2,200 employees, - Specially-designed e-tests certifying knowledge of Green Entrepreneurship, which were successfully completed by over 464 em-

ployees, - Seminars on climate change and green entrepreneurship entitled “Doing Business in a New Environment”, in the framework of the

“climabiz” program – co-funded by the European Committee of the program – which were offered in a specialized manner accord-ing to geographical region both in Greece and in the other countries of the Group’s operations,

- Review of the training material with the aim of covering new developments in green technologies and the relevant legislation, - Design and organizing of training program for ATEbank employees on issues of green entrepreneurship and banking, which will be

implemented in 2013, - Quarterly publication of internal “GreenBiz” newsletter, aimed at informing Group employees about current developments in green

entrepreneurship, possible changes in the legal framework and in the products and services provided as well green entrepreneurship loan volume data.

Green Products and Services

In order to promote green entrepreneurship, the Bank: - Directed significant volume of new loans to investments in green entrepreneurship, - Adjusted its green products to respond to the new market conditions and the relevant legislative framework, and - Developed a series of innovative green services which directed at individual investors and State agencies.

Unification of Piraeus Bank and ATEbank creates great opportunities for synergies by utilizing the two institutions’ knowledge base. The definite specialization of ATEbank executives in products directed at farmers is the first level of growth of new products with em-phasis on responsible farming and agro/eco-tourism.

Piraeus Bank at present offers a multitude of loans, insurance and other choices, thus covering an extensive range of needs of individu-als, businesses and farmers in RES’s, energy-saving, responsible farming, alternative waste & water management, green chemistry, ec-otourism – agrotourism and green transportation.

Green Products for Enterprises: These regard to environmental upgrading of current business activities/premises or to engagement in new investments that fall under the aforementioned green business sectors (eg, photovoltaic or wind parks, biomass). Piraeus Bank of-

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fers medium and/or long-term loans, adjusted to each investment’s needs and combining customer, installer and legislative requirements with the most flexible procedures possible.

Green Products for Individuals, such as: - Mortgages to customers who purchase or construct a property with a higher energy category than the minimum required by the new

legislation on energy efficiency of buildings, - Green Repair & Consumer Loans for individuals wishing to install photovoltaic systems in their home or business or to improve the

energy efficiency of their home/business with repairs/retrofits or purchase of environmentally-friendly equipment. The Ministry of Environment, Energy and Climate Change programme, titled “Energy Efficiency at Household Buildings”.

Green Products for Farmers, such as: - Specialized loans for installation of photovoltaic stations with nominal power up to 100KW - Bridge financing of the subsidies for professionals and certified organic farmers.

Green Leasing Products for Enterprises: through Piraeus Leasing SA, which offer the opportunity to acquire the necessary equipment for photovoltaic parks by leasing it.

Green Insurance Products for Individuals and Businesses: among which are specialised insurance packages for photovoltaic parks, covering both construction/assembly phase and the operation of the system.

Green Services: through its subsidiaries, Piraeus Group designed and developed a package of green, innovative services for individuals, businesses and organizations covering all fields of Green Entrepreneurship. The current needs of businesses in relation to their environ-mental management and sustainable growth, is the field in which Piraeus Bank Group can contribute decisively, both in the assessment of investment plans and in the provision of advanced consultant services. The Group’s accumulated knowledge and specialization in green entrepreneurship, offer the advanced technical expertise required for implementing such projects, ensure full support and com-plete guidance in every step of the investment, from the business plan assessment, to the very project execution, through the green ser-vices provided.

Technical Evaluation of Projects

In 2012, the procedure of Technical Evaluation of Green Entrepreneurship Projects, which is an integral part of the procedure of techni-cal evaluation of green investments, was enriched and optimized. By means of this procedure, the technical excellence of all funded green entrepreneurship projects is ensured and the interests primarily of the investors and consequently those of the Bank’s, are fully protected.

Implementation of the Technical Evaluation in Group activities in Greece usher for systematic efforts of expanding it to activities of Group subsidiaries as well, priorities being Bulgaria and Romania, where technical evaluation was applied to RES projects in 2012. In-creased investor interest in green entrepreneurship projects, with an emphasis on RES’s and energy-saving, requires proper implemen-tation of the procedures in these markets as well.

Green Investments

Piraeus Group, through Piraeus Capital Management (PCM), had extensive participation in the new cycle of capital raising of Advent Group, which was completed in October 2012. Advent Group consists of the greek company Advent Technologies SA and the newly-founded american company Advent Technologies Inc., both of which specialize in bio-fuel technologies. At the same time, PCM is also a shareholder in the company ASA Recycle SA with total share in both companies amounting to €2.4mn.

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Moreover, through Private Equity Group was created Piraeus Clean Energy Fund, which invests in the energy sector in south-east Eu-rope and had invested €2mn by year-end 2012.

In 2012 as well, following the announced development program of ETVA-VIPE, Piraeus Group completed construction of five photo-voltaic stations in an equal number of industrial properties in the regions of Kavala (2 stations), Preveza (2 stations), and in the develop-ing region of Pella (1 station). Total rated power of the five stations amounts to 15.45 MWp and total budget to €24.6mn.

What is distinctive about this investment is the fact that total annual electricity consumption from photovoltaic stations is expected to reach approx. 22,000MWh, the amount of energy consumed by over 5,000 households annually. At the same time, the new stations are expected to significantly contribute to air quality improvement, as the stations’ operation will reduce CO2 emissions by 20,000 tons an-nually, which would require 1.5 million trees for it to be absorbed.

Green Networking

Piraeus Bank Group can contribute significantly to the modern needs of businesses on issues of environmental management and sustain-able growth, by assessing investment plans and providing advisory services. In this framework, Piraeus Bank once again pioneers with the creation of the Green Banking Portal (www.greenbanking.gr), which aims to be a benchmark of green entrepreneurship. This portal, which was launched in November 2012, promotes and allows for networking of businesses and organizations which adopt good prac-tices in reducing their environmental impact or provide products and services that are included in the green entrepreneurship sector. Si-multaneously, the public is informed about issues of the environment, climate change and green entrepreneurship. The Green Banking Portal enhances networking, communication and synergies among participants, it informs and updates on the progress and innovation of modern, clean technologies and substantially benefits the growth of one of the most ‘alive’ sectors of Greek economic activity today. The only prerequisite for participation is the organizations’ and the businesses’ commitment to adopt specific environmental, economic and social criteria, a fact which ensured the high quality of the website. The Green Banking Portal was created with co-funding from LIFE program of the EU, in the framework of the climabiz project.

Results

At year-end 2012, Piraeus Bank had €1,300mn in approved credit limits and €861mn in outstanding loan balances, with an annual 26% increase in credit limits and 26% in outstanding loan balances versus 2011, of total green entrepreneurship investment funding. This means that the Bank, despite adverse conditions, remains firm in its commitment to support green entrepreneurship.

Individual loans are of particular interest, as outstanding balances amounted to €120mn, up 65% versus 2011 and green loan numbers reaching 7,627, up by 120% versus 2011. More specifically, for rooftop photovoltaics, the Bank had 4,010 approved loans, raising bal-ances to €101mn (53% increase) and achieving 12% of market share. By year-end, 12,350 applications had been submitted for the “En-ergy Efficiency at Household Buildings” programme, with approx. 7,300 already approved, totalling €92mn. According to ETEAN da-ta, Piraeus Bank holds the 2nd place (29%) in the programme’s qualifying decisions stage as it had 5,768 of a total of 20,125 applications, on 27/12/2011 (143% increase).

Regarding green entrepreneurship loans for businesses, the Small Enterprises and Professionals Division green loans balances reached at €202mn, which corresponds to an 18% increase versus 2011. As a result, green loans now constitute 17% of the Bank’s Small Enter-prises and Professionals total portfolio.

Particular emphasis was placed on financing the installation of photovoltaic parks with capacity up to 150 kW, with 1,671 parks in op-eration and a total capacity of 102.2 MW (31% increase), constituting 16% of market share. Similarly, the Bank has funded large photo-voltaic projects (over 150 kW) of total capacity 125 MW (116% increase), reaching 21% of total market share. In total, the Bank has funded 262.3 MW, 17% of the total installed capacity in photovoltaic systems currently in operation.

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By the year-end 2012, the Bank had funded total capacity of 178 MW wind parks, constituting 11% of total capacity of wind parks in operation in Greece. Loan balances in this sector reached €41mn with approved limits of €58mn. In small hydro-electric parks, the Bank raised the total loan capacity to 31.1 MW, having funded a 15% market share of total capacity of parks in operation in Greece.

The total capacity of RES projects that have been funded by Piraeus Bank is 471 MW. The above financing activities averted the annu-al emission of 775thousand tonnes of CO2 into the atmosphere, a quantity that would require 59.1mn trees to be absorbed.

Environmental Gains from Green Financing 2012

Prevented CO2 emissions 775 thousand tonnes

Credit limits in green financing €1.3bn

Loan balances in green financing €0.9bn

Indicatively, the above data have been calculated based on the assumption that an average photovoltaic system of 1MW capacity prevents the annual emission into the atmosphere approx.1,320 tonnes of CO2. A wind and a hydro-electric park of equal capacity prevent the an-nual emission of 1,935 tonnes and 2,700 tonnes CO2 respectively.

INVESTMENT BANKING

Capital Market Operations & Advisory Services

Piraeus Bank provides underwriting and advisory services throughout the capital market product spectrum. In the field of providing ad-visory services, Piraeus Bank in 2012 continued to participate in projects of privatization, acquisitions, mergers, capital increases etc.

Moreover, the Bank also played a significant role in providing financial advisory services in the process of privatizations of the Greek State. Piraeus Bank assumed the role of financial advisor for further privatization of Piraeus Port Authority SA, of Thessaloniki Port Authority SA, and of 10 other ports. It also undertook financial advisory services for the development of the former Athens airport “El-linikon”, the sale and lease back of public property as well as utilization of public property such as the property in the area of Afandou on the island of Rhodes, Astir Vouliagmenis, etc.

In 2012, the Bank acted as financial advisor to OPAP SA, which was in charge of the consortium of companies which won the tender bid for concession of contract for exclusive right to organize, conduct, circulate, promote and have overall management of Greek lottery games for 12 years.

The Bank, amongst others, also acted as rights issue consultant for the capital raise and issue of two convertible bond loans for Probank SA in the summer of 2012.

Finally, in 2012 as well, Piraeus Bank completed and delivered to Piraeus Port Authority SA feasibilty & viability studies for the exten-sion program of the southern section of the central port for the development of support structures to cater for cruise ships as well as a similar study for the construction of a sea wall to cater for cruise ships in the area of Agios Nikolaos.

Stock Exchange Operations – Piraeus Securities SA

In 2012, despite the adverse economic conditions, Piraeus Securities SA maintained its position in all the spectrum of brokerage servic-es and specifically in stock trading on international stock markets, bond trading, research and analysis and the derivatives markets.

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In 2012 as well, the company ranked as one of the top in transactions – 5th place with 7.1% market share.

The company’s key activities were the role of intermediary in the trading of Greek and international shares, Greek and international de-rivatives, state and corporate bonds, margin accounts while also processing stock market transactions performed through the Bank’s branch network. It also offers individual investors the opportunity to make their transactions, in the Greek and in international markets, fast and safe through its fully updated e-transaction platform.

During its long-standing collaboration with foreign institutional investors, Piraeus Securities SA has responded to their demands success-fully. As a result, most international organizations with presence in Greece have selected the company for their stock market activities.

In the derivatives sector, Piraeus Securities SA was the first securities company which operated in Greece. Through its capacity of Mar-ket Maker and through the Sales Division, has continual presence in all derivatives products and, more specifically, in Stocks Futures and FX Put Options of shares and Indices. The International Markets Division offers investment proposals covering the investors’ needs on an international scale.

In order to better serve its customers outside Athens, in addition to its head offices, the company has 2 branch offices in Thessaloniki and Patra as well as several associated Investment Brokerage Companies around Greece.

Participations

With the aim of capital strengthening of subsidiaries, in 2012 Piraeus Bank raised its participation in Piraeus Bank Beograd A.D. (Ser-bia), Piraeus Bank Cyprus Ltd and in us Bank Egypt SAE.

Moreover, on 15.10.2012 sale of Marathon Banking Corporation to Investors Bancorp Inc. was finalized.

During 2012 and in the framework of the Greek banking system’s restructuring and strengthening of financial stability, the following were implemented: - The transfer of select assets and liabilities of Agricultural Bank of Greece S.A on 27.07.2012. Acquired assets include subsidiary

companies ΑΤΕbank Romania S.A., ATE Mutual Funds Management SA (ATE AEDAK) ΑΤΕ Insurance SA, and ΑΤΕ Insurance Romania S.A.

- The acquistiton of 99.077% of Geniki Bank on 14.12.2012 while for acquistiton of the remainder 0.923% the Bank submitted a man-datory Public Announcement towards the other shareholders in early 2013. During the Acceptance Period, the shareholders who had accepted the Public Announcement provided 97,233 shares – 0.14% of total share capital and voting rights of the company.

- As far as Group company transformations are concerned, subsidiaries Piraeus Auto Leasing Bulgaria EAD and Piraeus Best Leas-ing Bulgaria EAD were absorbed by subsidiary Piraeus Leasing Bulgaria EAD while subsidiary Piraeus Cards SA was absorbed by Piraeus Bank SA.

ASSET MANAGEMENT

Treasury

2012 was a year of further shrinking of the Greek economy and intense fluctuations in Greece and internationally as well. It was, un-doubtedly, the most difficult year for the Greek banking market.

Political uncertainty conbined with greater than expected recession and the inability to access international markets were the key factors that placed intense pressure on Greek banking system liquidity, threatening its strength and stability.

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Consequently, liquidity management was once again a key priority for the Bank, demanding not only full utilization of finance-raising mechanisms available but also utilization of altenative sources and the effective allocation of available funds within the Group.

In this framework and in concern of minimizing deposit outflows, a strategy of direct and sincere communication with the majority of executives from the Branch Network who come in contact with customers, aimed at managing with arguments the concerns that arise with every announcement of unfavourable news. Although outflows of deposits was not averted, this strategy in combination with tar-geted interest rate policies, contributed to limiting the rate of decrease in a manner which ensures timely replacement of these funds with other sources.

Despite the adverse economic and political conjuncture, the Bank achieved complete and unfailing response to the needs of its deposi-tors as well as affirming the trust that its customers have steadily shown. Treasury, was able to systematically provide the Bank’s cus-tomers access to intenational share markets, enabling them to transact in a wide product range.

In addition to deposit retention, refinancing of marketable and non marketable assets from ECB and the Bank of Greece was optimally used to ensure sufficient liquidity and substitution of other sources. Great effort was placed on fully covering the Bank’s financing needs in foreign currency as well as on reciprocal circulation of liquidity with Group subsidiaries.

Constant monitoring and informing of regulatory authorities on estimating future liquidity needs of the system was a key area of activ-ity. In this framework, timely and optimal use of available support mechanisms was made both by receiving guarantees from the Greek State and by using them to refinance the Bank.

The Bank’s contribution to the Grrek Statre’s efforts to reduce public debt and prevent bankruptcy was decisive through its participation in the PSI - Greek State bond exchange program – with its total held GGBs. The Bank also participated in the Greek Debt buy-back at the end of 2012, thus significantly reducing its exposure to GGBs. Additionally, the Bank’s continuous participation in Treasury Bill auc-tions provided the Greek State with vital liquidity to deal with serious cashflow problems.

In addition to the significant reduction of its GGB portfolio, bond portfolio balance was re-evaluated, simplifying existing positions and releasing liquidity and regulatory capital.

As far as the Bank’s activities in international financial markets are concerned, it conducted a public announcement of Bank secutities buy-back (subordinated and hybrid). Simultaneously, there was buy-back of a significant ratio of securities issued by Piraeus Bank in the secondary market at prices below bar, thus contributing to enhancement of Core Tier 1 ratio.

In the second half of the year, a significant part of activities was dedicated to the smooth absorption of healthy ATEbank assets. Partic-ular emphasis was palced on integration of its human resources, uninterrupted operation of the unified network, additions to its bond portfolio as well as more effective management of collateral that were transferred.

Through the recapitalization process of the Greek banking system, as well as with the acquisition of former ATEbank’s assets, the Bank now has in its posession a notable number of EFSF bonds with varied maturity. High credit rating collateral combined with expected gradual mitigation of risk aversion for Greek banks are expected to hold a defining role in the efforts to raise liquidity in the interbank market, thus contributing to the target set for progressively reducing exposure to ECB financing.

Wealth Management

Piraeus Wealth Management SA, a subsidiary of Piraeus Bank and BNP Paribas Wealth Management, the largest bank in the EU. It of-fers high-standard Wealth Management services by combining Piraeus Bank’s strong presence in Greece and international know-how from BNP Paribas.

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The company provides guidance to its customers on how to invest in a full range of products in the largest international markets (depos-its, shares, bonds, mutual funds, foreign exchange). Having defined their investment profile, customers select the personalized advisory and support level from the Investment Advisor. There is also the possibility of unlimited portfolio management order with other addi-tional services in specialized sectors such as advisory services for tax issues, property in large European cities, works of art etc., through BNP Paribas. For customers wishing to receive Wealth Management services abroad, access is provided through the BNP Paribas inter-national network. Assets under management amounted to €0.7bn at year-end 2021.

Piraeus Asset Management Mutual Funds SA

Piraeus Asset Management Mutual Funds SA is the Bank’s investment arm in the management of mutual funds (M/F) and institution-al investors. In 2012, Piraeus Asset Management continued its collaboration with the international financial firms Goldman Sachs Asset Management, JP Morgan Asset Management, Pioneer Asset Management, ING Luxembourg, BNP Paribas Asset Management Luxem-bourg, PICTET Funds Luxembourg and Schroder Investment Management (Luxembourg) SA. Furthermore, provision of M/F in the Romanian, Bulgarian and Cypriot markets was continued. The company manages/represents a total of 303 Mutual Funds. At year-end 2012, total M/F assets amounted to €0.3bn as in 2011.

At the same time, through the acquisition of former ATEbank, Piraeus Group also obtained participation in ATE Mutual Funds Manage-ment SA (by 100%). The company managed a total of 11 M/F, total assets amounting to €0.15bn in 2012, similar to 2011.

Venture Capital and Private Equity

The Group Venture Capital and Private Equity, with subsidiary Piraeus Equity Partners, is Piraeus Bank Group’s investment arm for investment activities in the fields of Private Equity and Venture Capital. Piraeus Bank Group has invested, through its subsidiary com-panies, in the following fields: in 8 newly-founded technology companies through O.F. Investments and in collaboration with Openfund thus reinforcing new entrepreneurship; in 5 companies in the fields of technology, renewable energy/ the environment and other special-ized fields of the Greek economy with a purely exporting character through Piraeus-TANEO Capital Fund and the management com-pany of Piraeus Capital Management; in 2 RES projects through Piraeus Clean Energy LP. Additionally, in Q4 of 2012, the new fund - Piraeus JEREMIE Technology Catalyst Fund (“PJ Tech Catalyst”) – was created to invest in shares of newly-founded innovative com-panies in Information Technolοgy Communications (ICT) in Greece, thus strengthening new entrepreneurship in a strategic sector for Greece. PJ Tech Catalyst was created in the framework of the EU Initiative JEREMIE, implemented with funding from the Ministry of Development and utilizing EU Structural Funds by means of the European Investment Fund and Piraeus Bank.

REAL ESTATE MANAGEMENT AND DEVELOPMENT

In the past decade, Piraeus Group has developed a notable presence in the sector of real estate management and development, aiming to take advantage of the investment opportunities and the synergies that the real estate market offers.

Picar SA

The company has undertaken the utilization and operation of the Citylink Complex, covering an area of 65,000 m2, located on the build-ing block surrounded by Stadiou, Voukourestiou, Panepistimiou and Amerikis streets in the centre of Athens, until 2052. The users of Citylink include the most reliable and well-know companies in the Greek and global market, thus adding prestige to the entire complex and the company.

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The Citylink Complex houses Piraeus Bank’s headquarters, Attica Department Store, the “Pallas”, “Aliki” and “Mikro Pallas” theatres, the reputable “Holmes Place Athens” Health Club Spa, as well as premium dining halls (Zonar’s, Clemente, Pasaji) and some of the most known international designers’ stores.

Picar also holds equity participation in the company “North Landmark SA” that manages and operates the “Attica Golden” department store, having made notable collaborations with well-known fashion houses, cosmetics and accessories companies. This specific com-pany holds equity participation in the newly-founded company “Department stores Northern Greece SA”, which operated a similar de-partment store in Thessaloniki, in 2012.

Piraeus Real Estate SA

Piraeus Real Estate SA is the key arm of the Group’s presence in the field of Real Estate and heads other subsidiary companies of the Group in Greece and abroad.

The company provides a full range of real estate design, development and management services. It is involved in real estate develop-ment, project management and administration, integrated real estate management on behalf of one owner-investor and property valua-tions, mediations as well as offering investment advisory services invested in real estate companies and capitals.

In 2012, the company managed the construction and design of property in Greece and abroad with a total budget of €164mn, performed valuations of property with a total estimated value of €3.9bn, provided financial and technical advisory services amounting to €1.5mn, and continued the management of five major commercial and recreation centers with participation of Piraeus Group companies and third parties.

In collaboration with Piraeus Bank, the company manages the Urban Development Funds of the JESSICA programme for the regions of Central Macedonia and Thessaly (management of €40mn from the EE Structural Funds as well as €16.8mn in co-funding from Pi-raeus Bank) based on a contract signed at the beginning of 2012 with the European Investment Bank (EIB).

In partnership with Piraeus Bank and other companies, Piraeus Real Estate contracted agreements for providing financial advisory ser-vices with the Greek State/ Hellenic Republic Asset Development Fund SA (HRADF) on issues of public property use and privatiza-tions, such as: - the use of the former “Ellinikon” airport site (estimated investment programme amounting to €3-5bn); - the recording and use of Greek State Property as well as the use office buildings of the Greek State through sale & leaseback. - the project of providing financial advisory services for the materialization of a complete management system of solid waste in the

region of Western Macedonia (estimated €1.1mn); - the project of Piraeus Port Authority SA for the development of support structures to cater for cruise ships (estimated total value of

investment of €250mn).

ETVA Industrial Parks SA

ETVA Industrial Parks SA is a subsidiary of Piraeus Group with the Greek State holding a 35% stake through the Ministry for Region-al Development, Competitiveness, Infrastructure, Transport and Networks. It was founded in 2003, after the Industrial Parks sector was spun-off from ETVAbank during its acquisition by Piraeus Group.

ETVA Industrial Areas SA main scope of activity is the design, development, use and management of Industrial Areas (Industrial Ar-eas/VI.PE - Industrial and Entrepreneurial Areas/VE.PE - Small Business Park/VIOPA) and Business Parks (EP). ΕΤVΑ Industrial Parks SA operates 26 industrial areas, in which approx. 2,300 businesses are established and over 30,000 people are employed. ETVA Indus-

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trial Parks SA in collaboration with Piraeus Bank and the Ministries of Development, Competitiveness, Ιnfrastructure, Transport and Networks and the Ministry of the Environment, Energy and Climate Change promote investments for the upgrading of existing indus-trial areas and the creation of a new “green business parks” model.

The actions of this specific plan of green development include the following: - environmental upgrading of existing industrial areas; - energy investments in existing industrial areas; - composting units and recycling sorting plants in existing industrial areas; - creation of 3 new Eco-Industrial Parks; - 10 completed Environmental Business Parks on islands.

In the framework of energy investment actions in existing ETVA, at year-end 2012, ETVA Industrial Parks SA, through its subsidiaries Astraios Energeiaki SA and Orion Energiaki SA, initiated construction of 5 photovoltaic parks in three ETVA (Kavala, Preveza, Petraia), of total power 15.45MWp amounting to €23.7mn. completion of construction and initiation of trial operation were done in January 2013.

With the support of Piraeus Bank’s Green Banking, ETVA Industrial Parks SA began procedures for the development of the first Busi-ness Park in Greece, which shall be constructed and operate with EcoIndustrial Parks specifications, i.e. with zero environmental foot-print. The park will be created in 1,700 acres in Petraia Industrial Park, placing emphasis on sustainable entrepreneurship in the agri-cultural sector.

GENIKI BANK

On 19.10.2012, Société Générale agreed on the sale of its total stake (99.08%) in Geniki Bank. Acquisition of Société Générale’s total stake in Geniki Bank was finalized on 14.12.2012. with completion of this acquistition, Geniki Bank is now a member of Piraeus Group, with activities in the Greek market.

Geniki Bank offers a wide range of products including retail banking, small, medium-sized and large dusiness banking, credit cards, leasing and factoring services. All these services are drovided through its network of 104 branches around Greece as well as by alterna-tive channels – made up of three service channels: e-banking, contact center and 173 ATMs.

Its axes of business activity consist of: - Operation growth with special emphasis on deposit retention and attraction, - reduction of bad debts through a stricter policy of risk taking and risk management, and - investment in bad debt collection.

Given the lack of liquidity in the Greek market and the problems it creates, Geniki Bank is focusing its efforts on attracting deposits.

Placing emphasis on retail customers and small amd medium-sized businesses, in 2012 new deposit, savings and investment programs were designed and promoted. These programs were designed based on flexibility and adjustment to customer needs in difficult financial conditions.

At year-end 2012 total deposits amounted to €2.0bn. Concerning loans, Geniki Bank’s basic principle is steady and continual support of customers, by means of a system of wise risk-taking with total net loans amounting to €1.9bn.

With its inclusion in Piraeus Group, Geniki Bank is called upon to utilize all synergies and opportunities the Group offers and to take advantage of its experience, size and long standing operations in Greece and internationally, thus providing its customers an extended network, innovative products as well as modern and reliable services.

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Ιnternational Operations

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Piraeus Group’s presence abroad is mainly focused in SE Europe and the Eastern Mediterranean. The main international business ac-tivities regard retail banking, large-business banking, investment banking and capital management and treasury.

By year-end, Piraeus Group had a presence in 9 countries with complete branch networks in Albania, Bulgaria, Romania, Serbia, the Ukraine, Cyprus and Egypt, and with one branch in London and one in Frankfurt. It also had a presence in Russia through a Represent-ative Office. Of these countries, some presented positive growth rates while others entered a recession period, such as Serbia and Cy-prus. In general, however, the business environment remained sluggish and demand at low levels, thereby affecting banking activities accordingly.

With the absorption of of ATEbank in July of 2012, Piraeus Bank obtained ATEbank’s international activities, which included: - ATEbank Romania, with 23 branches in Romania. - A branch in Frankfurt, making Piraeus Bank the only Greek bank with presence in Germany.

In 2012, the Group decided on the strategic exit from the US market, which led to the agreement for the transfer of Piraeus Bank’s stake (98.5%) in subsidiary Marathon Banking Corporation to Investors Bancorp Inc. in New York, on June 14, 2012. Piraeus Bank received the amount of USD 133mn from this sale, which corresponds to 1.5 times the tangible book value of Marathon. This Bank had 13 branch-es and was active in community banking. The sale was finalized at the end of September, 2012.

On July 31, 2012, Piraeus Bank announced termination of the sale process for subsidiary Piraeus Bank Egypt as it was deemed unpro-ductive and will now focus on providing full support to Group banking activities in Egypt.

In 2012, Bank policy in international operations was adopted to each country’s unique conditions, but focused on deposit growth, pres-ervation of loan portfolio quality and reduction of operating costs.

With reference to operating cost containment, the stringent policy of rationalization and close monitoring of expenses was maintained. Particular emphasis was also placed on restructuring the branch network and on improving its efficiency. In this framework, operation of 74 branches, including the 13 branches from the sale of Marathon Bank, was discontinued.

The merger of three Leasing companies in Bulgaria was also part of the framework of organizational structure adjustment that was im-plemented to improve efficiency and achieve economies of scale. Specifically, Piraeus Best Leasing Bulgaria, which specialized in Op-erating leasing, and Piraeus Auto Leasing Bulgaria, specializing in car leasing, merged under Piraeus Leasing Bulgaria, which was, and still is, the Group’s main Leasing company in Bulgaria.

The Group’s international network included 449 branches, versus 499 in 2011. Staff numbers were reduced by 402 people, at 6,232 from 6,634 at year-end 2011.

ΙnTERnaTIOnal OPERaTIOnS


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International Branches 2012 2011 Δ

Albania 56 56 -

Bulgaria 83 100 -17

Romania 167 178 -11

Serbia 42 44 -2

Egypt 47 48 -1

Ukraine 38 45 -7

Cyprus 14 14 -

London 1 1 -

Frankfurt 1 - +1

Total International Activities Branches 449 486 -37

New York - 13 -13

Total 449 499 -50

Key International Figures (€mn) 2012 2011i Δ%

Assets 9,363 10,497 -11%

Gross Loans 7,338 7,910 -7%

Deposits 4,559 4,912 -7%

Employees 6,232 6,634 -6%

-of which Marathon Bank - 158

The Group’s image in each country of operation is markedly enhanced by the fact that Piraeus Group has a significant number of sub-sidiary companies in each country, which provide specialized services οf the broader financial sector (leasing, real-estate, insurance and investment services), thus significantly expanding its customer base.

Pre-tax and pre-provision profits of the Group’s international activities amounted to €247.2mn, slightly lower than 2011 (€269.6mn). Nev-ertheless, adverse economic conditions led to increased provisions in the loan portfolio, which resulted in negative results. After-tax re-sults from international activities attributable to shareholders amounted to losses of €47.3mn in 2012.

At year-end 2012, Group international activities constituted 12% of Group assets and 34% of both branch network and human resources of the Group.

i 2011 includes the figures of Marathon Bank in New York, the activities of which where transferred in 2012.

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GROUP CORRESPONDENT BANKING

The unfavourable conditions that prevailed in the Greek market in 2012 greatly affected interbank relations, rendering Correspondent Banking relations of utmost importance. In 2012, operations of this sector focused on: - evaluation of risk assumed in relation to other credit institutions and countries, which gained particular importance due to the crisis, - integration of ATEbank’s international banking activities, - promotion and development of cross-border partnerships at Group level, - better promotion of the Bank and of the Group abroad, - direct and high-quality information gathering on events in the international economic field, through direct contact with other credit

institutions abroad.

In this context, meetings with 160 banks and other related financial organizations in Greece and abroad were implemented.It should be noted that at present, Piraeus Group maintains correspondent relations with more than 1,500 credit institutions world-wide.

PIRAEUS BANK BULGARIA

Piraeus Bank Bulgaria started operating in 1993, when a branch was set up in Sofia, making it the first foreign bank operating in Bul-garia. Today, it possesses a network of 83 branches, providing extensive geographical coverage of banking services, and is one of the major banks in Bulgaria.

In 2012, Piraeus Bank Bulgaria focused its attention to: - restructuring and limiting its network, which resulted in the cease of operation of 17 branches, - reserving sufficient and steady financial ratios, in accordance with the Central Bank’s requirements, - preserving the breadth and quality of customers, aiming for deposit retention and increase, - reducing operating costs.

With the aim of improving the effectiveness of its organizational structure as well as achieving economies of scale, in 2012, Piraeus Au-to Leasing Bulgaria- specialized in car leasing- was incorporated into Piraeus Leasing Bulgaria as was Piraeus Best Leasing Bulgaria- specialized in operating leasing.

At the same time, Piraeus Group in Bulgaria is also active in other financial sectors, such as property management, project finance, as-set management and private banking, as well as insurance brokerage.

At year-end 2012, customer deposits rose by 15% to €748mn from €653mn in 2011, with Group gross loans in Bulgaria amounted to €1,467mn, reduced by 5% versus 2011.

Data concerning Group activities in Bulgaria in 2011-2012 are presented in the following table:

Key Financial Figures of Piraeus Bank Bulgaria (€mn) 2012 2011 Change

Assets 1,653 1,717 -4%

Gross Loans 1,467 1,547 -5%

Deposits 748 653 15%

Branches 83 100 -17

Employees 908 947 -39

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PIRAEUS BANK ROMANIA

Piraeus Bank Romania was established to cover the needs of Greek businesses operating in Romania, but it quickly expanded to all bank sectors for local businesses and households and developed into an important bank in the country. Piraeus Bank Group has been present in Romania since 2000, and in December 2012 its network numbered 167 branches.

In 2012, Piraeus Bank Romania placed particular emphasis on: - efforts towards high quality customer retention and expansion of deposit base, - reduction of costs and enhancement of operating efficiency, - network restructuring with cease of operation of 34 branches, - careful liquidity management, - effective management of portfolio quality.

With the absorption of ATEbank in July 2012, Piraeus Group obtained the activities of ΑΤΕbank Romania S.A. Ιn mid-April, 2013, Piraeus Bank signed an agreement for the sale of total Bank participation (93.27%) in the Bank Romania S.A share capital for the amount of €10.3mn.

At year-end, 2012 customer deposits amounted to €896mn from €915mn in 2011. Group gross loans amounted to €3,052mn in 2012 from €3,002mn in 2011.

Piraeus Group in Romania also offers leasing and insurance services through subsidiaries Piraeus Leasing Romania and Piraeus Insur-ance Reinsurance Brokerage Romania.

Data concerning Group activities in Romania in 2011-2012 are presented in the following table:

Key Financial Figures of Piraeus Bank Romania (€mn) 2012 2011 Change

Assets 3,402 3,504 -3%

Gross Loans 3,052 3,002 +2%

Deposits 896 915 -2%

Branches 167 178 -11

Employees 1,935 1,870 +65

TIRANA BANK

Tirana Bank was founded in September 1996 and was the first privately-owned Bank in Albania. At the end of 2012, it numbered 56 branches and was the 4th largest Bank in the country in terms of loans.

Despite the deterioration of the economic climate in Albania, Tirana Bank managed to increase its deposit base to €522mn from €503mn in 2011, thus continuing to operate as an independent unit without need for financing from the parent bank.

Gross loans amounted to €414mn, reduced by 5% versus 2011 (€435mn)

In addition to banking services, subsidiary Tirana Leasing has also been operating in Albania since 2004 in the field of finance leasing.

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Data concerning Group activities in Albania in 2011-2012 are presented in the following table:

Key Financial Figures of Tirana Bank (€mn) 2012 2011 Change

Assets 713 690 +3%

Gross Loans 414 435 -5%

Deposits 522 503 +4%

Branches 56 56 0


PIRAEUS BANK BEOGRAD

Piraeus Bank entered the Serbian market in 2005 with the acquisition of Atlas Bank, later renamed Piraeus Bank Beograd. At the end of 2012, it operated 42 branches, providing a broad range of banking services to individuals and businesses.

In 2012, Piraeus Bank Beograd AD placed particular emphasis on expanding its deposit base, which was achieved through enhancement of the quality of services provided, as well as provision of targeted products in the Serbian market. On the other hand, the loan portfolio noted a slight increase while systematic actions were taken in order to retain its quality. At year-end 2012, gross loans amounted to €595mn, up by 3% versus year-end 2011. Finance leasing subsidiaries Piraeus Leasing Beograd and Piraeus Best Leasing Beograd have been operating in Serbia since 2007.

Data concerning Group activities in Servia in 2011-2012 are presented in the following table:

Key Financial Figures of Piraeus Βank Beograd (€mn) 2012 2011 Change

Assets 719 694 +4%

Gross Loans 595 576 +3%

Deposits 307 252 +22%

Branches 42 44 -2

Employees 566 565 +1

PIRAEUS BANK EGyPT

Piraeus Bank Group has been active in Egypt since mid-2005, with the acquisition of Egyptian Commercial Bank, renamed Piraeus Bank Egypt SAE and has 47 branches (data from 31.12.2012).

In 2012, political unrest which had begun in the previous year, continued in Egypt, intensely affecting the country’s economic environ-ment. Despite adverse conditions, Piraeus Bank aims to continue supporting Piraeus Bank Egypt’s activities, investing in the great pos-sibilities of the Egyptian economy when the political environment settles and in its particular connection to the rest of the Arab world. For this reason, it continues to strengthen the Bank’s internal structure and procedures, thus enhancing its business potential. At the same time, Piraeus Group in Egypt is also active in other financial sectors such as finance leasing, property management, provision of finan-cial services and insurance brokerage).


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Data concerning Group activities in Egypt in 2011-2012 are presented in the following table:

Key Financial Figures of Piraeus Βank Egypt (€mn) 2012 2011 Change

Assets 935 1,157 -19%


Deposits 794 930 -15%

Branches 47 48 -1

Employees 1,397 1,559 -162

JSC PIRAEUS BANK ICB

Piraeus Bank began activities in the Ukraine in 2007 with the acquisition of the local Bank International Commerce Bank ICB. At the end of 2012, it had 38 branches around the country.

In 2012, the economy of the Ukraine posted a positive rate of growth but the instability of the past few years remained at an economic and a political level.

Amidst these conditions, the Bank placed emphasis on 3 axes: attracting new customers with the aim of expanding its customer base mainly through e-banking, reducing the Bank’s operating costs and systematic management of loan portfolio quality.

Data concerning Group activities in the Ukraine in 2011-2012 are presented in the following table:

Key Financial Figures of JSC Piraeus Βank ICB (€mn) 2012 2011 Change

Assets 328 358 -8%


Deposits 96 107 -10%

Branches 38 45 -7


PIRAEUS BANK CyPRUS

Piraeus Bank (Cyprus) Ltd began operating in 2008 when absorbed the local activities of Arab Bank. At year-end 2012, it numbered 14 branches.

In addition, Piraeus Group in Cyprus is also active in other financial sectors such as property management, asset management, provi-sion of stock-brokerage services as well as insurance brokerage.

The recent unexpected adverse developments in Cyprus constitute an additional highly significant risk mainly in terms of the liquidity problem and in general resurgence of the debt crisis in southern Europe. Piraeus Bank Group’s total exposure in Cyprus in balance sheet

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data amounts to €1.6bn on 31.12.2012, an amount which represents 2.0% of total group assets. The aforementioned exposure regards a) assets of the 100% subsidiary Piraeus Bank Cyprus and other Group participations in Cyprus amounting to approx. €1.3bn, b) loans amounting to approx. €0.3bn, and c) investment in Bank of Cyprus London bond amounting to €2.2mn. In addition, on 31.12.2012, there were contingent obligations amounting to €0.1bn. In conclusion, it is duly noted that the percentage of net profits of Group activities in Cyprus in 2012 represents 1.4% of total Group net profits.

Data concerning Group activities in Cyprus in 2011-2012 are presented in the following table:

Key Financial Figures of Piraeus Βank Cyprus (€mn) 2012 2011 Change

Assets 1,278 1,457 -12%

Gross Loans 856 858 0%

Deposits 1,069 920 +16%

Branches 14 14 0


PIRAEUS BANK LONDON BRANCh

Piraeus Bank Group has had a presence in London since 1999. The London Branch key activities are: - provision of deposit products combined with specialised personal banking services; - provision of mortgage loans to Greek and UK citizens who live in the UK and seek to acquire real estate property both in the UK

and Greece, and in any other country where the Group is active; - raising of capital (main debt, reduced security, hybrid capital and securitisations from the European and International markets), and - support of the operations of Piraeus Bank and its subsidiaries.

Key Financial Figures of Piraeus Bank London Branch (€mn) 2012 2011 Change

Assets 194 230 -16%


Deposits 21 40 -48%

Branches 1 1 0

Employees 18 16 +2

-

PIRAEUS BANK FRANKFURT BRANCh

With the absorption of the healthy ATEbank, Piraeus Group also obtained the branch that ATEbank had in Frankfurt. ATEbank has had a presence in Germany since 1985 and following restructuring of its network, it retained 1 branch which provides loan, deposit and trade finance services. More specifically, the advantages of this branch are the following: - it is the only Greek bank branch in Germany and the only Piraeus Group branch in an EU country except Greece, - it is monitored by the Supervisory Authorities on Germany as an autonomous business unit, - it has web banking and online connection with accounts held in former ATEbank branches,


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- offers advisory services for supplier and customer quality in Grece and in Germany, - provides trade finance and payment services, - offers deposit products and loan services which combine the advantages of the German market with the ease of execution from both

Germany and Greece.

Key Financial Figures of Frankfurt Branch (€mn) 2012

Assets 141

Gross Loans 23

Deposits 105

Branches 1

Employees 14

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Τechnology and Infrastructure

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TECHnOlOGyanD

InfRaSTRuCTuREIn the framework of the Bank’s business and operational plan in 2012, a series of projects and activities were implemented. The basic guiding principles were continuous harmonization of systems and procedures in a volatile – due to the economic conditions – regula-tory, legal and business framework, further reduction of the Bank’s operating cost, increased productivity and enhancement of its qual-ity of operation, shielding of its security systems and data as well as harmonization of the Bank subsidiaries’ mode of operation to the Group’s standards.

In the second half of the year, priority was given to projects regarding integration of systems and procedures of former ATEbank into the respective Piraeus Bank ones.

For appropriate and systematic monitoring of operational integration actions, in accordance with Management decision, a special Ex-ecutive Steering Committee was established. In order to prepare and implement integration of IT procedures and systems, a special steer-ing committee as well as the necessary project teams and project management offices were established.

ORGANIZATIONAL INTERVENTIONS AND CENTRALIZED SUPPORT

In 2012, the Organization Division implemented a multitude of process and system upgrading projects and activities aimed at further safeguarding the Bank against credit and operating risk and at complying with a constantly changing regulatory framework, as shaped by the state’s tax control and development programs. The most significant interventions are the following:

Data and Customer Account Management

A number of interventions were implemented in the Bank’s ICE customer-centered system in order to enrich Customer image (natural and legal entities) with parallel updating of the relevant operating procedures. In this framework, migration of the ICE codification sys-tem of objects of activity according to NACE II was completed, aimed more at the effective monitoring of customers’ economic sectors of activity. Moreover, identification and individualization projects are still ongoing in the Bank’s customer-centered system.

Upgrading of Loan-covering Collateral/Guarantee Management Systems

In the framework of activies for the settlement of collateral and guarantees against loans granted, the link of contracts and secured lim-its to the CSS system was completed and new types of guarantees were created in the system (for mortgages, forced underwritings, forced


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mortgages). At the same time, the process of locating property that have been underwritten as collateral for multiple loans was contin-ued, while the process of annual reassessment of business property has become fully automated, with mass dispatch of reassessment requests by the LS loan management system in the Geobanking application.

Moreover, the automated procedure for registering of rights at the Hellenic Cadastre by means of the APPIAN platform was set into op-eration, while actions to correct entries in the Hellenic Cadastre continued.

Upgrading of Systems and Processes for Monitoring Loans, Loans in Arrears and Adjustments

Significant efforts have been made to implement actions for more effective recording and monitoring of credit risk from loans in arrears or under adjustment. In this framework, the Organization Division participated in updating of the credit policy and the automated pro-cedure of small business and professionals loan in arrears management. Processes were developed for the transfer of loans to foreign currencies and of overdraft accounts and loans to non-performing loans; announcement of bad cheques and bills of exchange in TIRE-SIAS was automated. Additionally, automated management of retail pre-approved loan adjustments was set into motion; integration of adjusted loan data into the ICE customer-centered system; and guidelines were set for special customer category debts, such as poultry – livestock farms.

Restructuring of Branch Network and Business Center Portfolios

In 2012, the Organization and Centralized Support Division once again coordinated branch relocations and mergers, thus contributing to operating cost rationalization as well as ensuring smooth branch network operation and high-quality customer service, by modifying the processes and systems to monitor transrerred pending customer requests.

At the same time, it coordinated redistribution of business portfolios among the relevant Monitoring Units and set guidelines to the Bank’s Monitoring Units for settling of pending issues related to their credit portfolio; it adjusted the relevant procedures for creating and man-aging cooperation proposals, issuing Position and other purpose loan requests.

Development of Systems and Processes for Collaboration with Organizations, Associations and Agencies

Necessary changes to processes and applications were implemented and guidelines were set for the Branch Network in order to effec-tively support the Bank’s collacoration with Organizations and Associations on a wide range of transactions and products (Public Em-ployees’ Health Fund -OPAD, Social Security Staff Supplementary Insurance Fund – TEAPOKA, Municipal and Community Officials Insurance Division-TADKY, Bar Associations, etc).

Adaptation to Changes in the Public Operating Mechanism

In the framework of the State’s program for elimination of tax evasion and rastionalization of public mechanism operation, the Organi-zation Division was called upon to study the changes and coordinate the Bank’s adjustment to/ participation in these changes: - PSI - GGB exchange program: a series of processes was developed to support both the implementation of the exchange program

and the management of the relevant bonds in the framework of the Bank’s activities. At the same time, the relevant procedures for Bank customer participation in the PSI were developed.

- Registering of pensioners and public organisation benefit recipients of the Greek State, of the Social Security Institute – IKA, the Sup-plementary Insurance Funds of the Fire Brigade – TEAPYS, the Security Forces –TEAPASA, the Navy-NAT/KEAN, the Agricultur-

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al Insurance Organization-OGA, the Public Power Corporation-ETAM/TAP DEI, the Public Health- ΕΤΑΑ/ΤΣΑΥ and the Self-Em-ployed Workers’ Insurance-OAEE. It also aided the process of making-inventory of persons with disabilities receiving State benefits.

- Payment of taxes and other contributions: all necessary actions were taken to support citizens with payment of extraordinary con-tributions, property tax, certified debts to IRS, circulation tax, mass circulation tax etc. by means of various Bank service channels. Additionally, it ensured adjustment of the Bank’s systems and processes to the Ministry of Finance’s circular 1135/4.10.2010 on in-terest charge and withholding of Bond Loan Tax; it updated the processes for certification, verification and updating of Customer income. Finally and in the same framework, the process of implementation of Greek State Interest Safeguarding Measures was amended; the project of automating procedures concerning management of seizure documents received by the Bank as third party by means of the automated procedure platform APPIAN was initiated.

Suppοrt of Greek State Funding, Subsidy, Compensation Programs

Procedures were analyzed and develoded in connection with: - Support of development programs, and specifically for the programs: Export Credit Insurance Organization -“ECIO-EXTROVER-

SION” Program (for credit provision to export companies); the Hellenic Fund for Entrepreneurship and Development ETEAN – AC-TION 6 “Innovative Entrepreneurship, Logistics, Food, Drinks” (for credit provision to businesses with related activities); and Meas-ure 121 & Measure 123A of the Greek Ministry of Agriculture and Food (business investment programs for agricultural produce processing),

- subsidy and compensation credit and more specifically of: the Definitive Amount Compensatory Allowance to Farmers; the Single Payment to entitled farmers; the loan pay-off with Greek State guarantee to regions affected by fires; and Fuel Tax Refund to cus-tomers.

Support of Collaborations for Product Provision through Brokers

Operation of the Credit Express (Velti) system was expanded to support the procedures for submission and processing of requests for consumer Credit through Brokers. The aim of the application is to offer collaborating Brokers a new, sophisticated platform for speedi-er and electronic processing of requests and required documentation, more complete data entry required for assessment and effective monitoring of requests submitted. Utilization of the Credit Express (Velti) system for loans through Brokers is also aimed at uniformity of approval procedure in a unified platform for all Consumer Credit product request entry channels. The system is being implemented on pilot basis.

Integration of ATEBank Operation

In the second half of 2012, the Organization Division focused on projects and actions aimed at integrating operation of Piraeus Bank with that of former ATEbank. In this framework, the first integrated customer services actions were implemented, such as the applica-tion for payment of customer commissions and expenses of both banks (now as one) concerning remittance and credit card transactions between the two banks; entry of ATEbank loan-holder requests into the LOS loan system for specific loan products; and the possibility for ATEbank customer to pay debts to the Greek State as well as taxes in installments through credit cards.

Moreover, the procedures requiring unified handling by Piraeus Bank were assessed and amended, including uniform management of management of seizure documents received by the Bank as third party, handling of customer complaints through Customer Service di-vision, monitoring of Hellenic National Cadastre documents concerning mortgaged properties of both banks, in collaboration with the company First Data. In the framework of credit risk monitoring, a process for transfer of ATEBank non-performing loans was devel-oped. Finally, the projects for IT system integration and transition were initiated, with the development of specifications for transition of ATEbranch network to the customer-centered ICE system as well as for the digitization and transfer of its Business Customer portfolio.


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IT SySTEMS

In 2012, the guiding parameters for development and improvement of IT systems were infrastructure optimization, which is dictated by the present economic environment, and integration of ATEbank.

Deposit, Investment & Insurance Product Systems

Materialization and distribution of new investment products led to the development of the “Syn-Plin” deposit program, which offers the possibility of altering the initial capital of a term deposit up to 50% without changing the interest or duration. This program can be in-corporated into all existing term deposit types. Another product developed in the past year is Direct Saver. It is a modification of the ex-isting current account winbank Direct, which offers higher interest to customers who regularly transfer capital in the account through remittance or the Interbanking Systems S.A. (DIAS SA). These products aim to attract capital from existing and new customers who receive their monthly salary or other types of regular payment (eg. rent) in other banks.

In 2011, apart from the new deposit and investment products, notable improvements were made, such as the “white list” solvency rating check from Tiresias SA in the checkbook issuance process as well as automatic link to the bounced check circuit of Tiresias systems, with the aim of improving and expanding the approval and management processes of business customer requests as well as better mon-itoring and management of the Bank’s business credit limits, collateral and contracts.

In the field of Insurance Operations, two new “Life” products were created: Single Premium Pension Deferred/ Immediate Annuity and Pure Endowment. Moreover, in the second half of 2012, the new UNISEX products were completed, based on the requirements of the Bank of Greece and the Hellenic Association of Insurance Companies.

Payment Systems

In 2012, the new “Bill Payment Hub” platform was greatly extended with new functionality: 178 organizations from the DIAS interbank payment platform were included in it as well as 15 organizations from the Bank’s bilateral contracts. Special partnerships were also cre-ated in the new platform (payment of agents) for the shipping lines MINOAN & ANEK, which ensure real-time information provision to the companies on every payment at all available Bank channels (real-time web-services).

In the framework of the regulatory requirements, the necessary adjustments were completed for migration of the DIASDEBIT platform to the DIAS CREDIT-TRAΝSFER infrastructure. Similarly, in the second half of 2012, migration of the DISPLAY platform to the DIAS CREDIT-TRAΝSFER infrastructure was also completed.

The necessary infrastructure for collaboration with the Supplementary Insurance Fund for Public Employees (TEADY) and the Sup-plementary Insurance Fund for Employees Social Security Funds (TEAPOKA) was implemented. These collaborations have resulted an increase in customer numbers as well as significantly strengthening of the Bank’s liquidity. Collaboration with OPAP followed a sim-ilar course, with implementation of Online payments of high winnings (>€1,500) to beneficiaries through the Bank’s cashiers as well as a new, special payment transaction for issuance of US visa for the American Embassy.

Taking into consideration the importance the Bank places on issues concerning the Agricultural sector, the necessary improvements and adjustments were made to the credit application for beneficiaries of OPEKEPE subsidies as well as charges in favor of the Greek Agri-cultural Insurance Organisation (EL.G.A) and of the Agricultural Cooperative Unions (EAS).

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e-Banking Systems (winbank)

Following the strategic upgrade and centralization of the winbank infrastructure, in 2012, important e-banking operations were trans-ferred to the winbank International platform, through which e-banking services are provided to almost all Group subsidiary banks (Greece, Albania, Bulgaria, Cyprus, the Ukraine, Egypt, Romania). Centralization of the infrastructures, hardware and software has resulted in economies of scale, increased security, advanced functionality and uniform experience for the end user at Group level.

In the framework of further system and e-banking data security shielding, Anti-Phising improvements were executed in the “Instant Cash” transactions and in the purchase of cell phone airtime, while specialized connections to the Actimize system of malicious e-bank-ing transaction prevention were executed and a Security Notifications mechanism was created.

Retail Loan System

A management and automation circuit of pre-approved mortgage and consumer loan adjustments was developed from the stage of re-cording the request in the system to the stages of printing additional acts and implementing the loan adjustment. This specific function significantly facilitated the Bank’s management Units by greatly reducing implementation time. At the same time, the following were developed: a mechanism to remove loans for fire victims in accordance with the provisions of Law 3816/2010; a new function of debt certificates for guaranteed Greek State loans; and a process of discontinuing Greek Workers’ Housing Organisation (OEK) subsidies for loans in arrears < 180 days.

Business Loan Systems

In 2012, the business need arose to redistribute customer relations from the branches to centralized services. To support this transfer, improvements were made to LOS (Loan Origination System) in order to, on the one hand, maintain a connection of existing proposals as well as of newly-transerred approvals, and on the other, to enable users to process requests, for which the approval process workflow has not been completed before the transfer.

The approval process workflow was improved and expanded by providing automatic routing to the following steps of the process as well as entering the Tiresias scoring system. In addition to workflow, reports were also created in the Special Credit division for monitoring incoming/outgoing requests as well as for the categorization of customers.

Additionally, LOS was connected to the Internal Announcement system for the automatic formation of Internal Announcement re-quests. A similar interconnection was executed with Piraeus Factoring IT, through which the company creates and processes LOS workflow requests.

In order to improve the approval process, credit-officers’ access was amended, based on total Group borrowers’ limit, and the new Moody’s Risk Advisor was integrated into LOS.

Regarding the CSS (Collateral & Security System) application, an automatic weekly collateral allocation process was developed, through which all the other Bank’s systems are updated. In this way, there is an overall picture in all the Bank’s systems and users regarding loan portfolio coverage rate.

Improvements and extensions were made to the DMS (Document Management System) as well as its interconnection to the Appian workflow platform to allow for digitization of legal documents by means of the automatic document classification application as well as for direct document dispatch to the Documentum filing system (document auto-attach function). In order to ensure operationality of le-gal documents, digitized documents were transferred from the Filenet system.


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Treasury Systems

Treasury accounting services concerning Bonds, Repos, Warrants, Futures, IRS activities were upgraded, expanded and unified. More-over, internal Treasury information was expanded through the design and production of new reports.

A system was implemented to support PSI+ and the GGB buy-back program as well as a Treasury mechanism to provide information on the development of deposits and their pricing.

Risk Management Systems

Installation of the new Fermat system for capital adequacy calculation and risk management was completed with parallel upgrading of the RiskPro system for market and liquidity risk management.

For improved loan management of the Bank and its subsidiaries, overdraft and late bucket Factoring loan behavioral models were cre-ated with parallel recalibration of existing early bucket models.

Business Process Management Systems

The key targets that were achieved in 2012 regarding Business Process Management system utilization were related to cost reductions, increased productivity, compliance with policies and regulations of supervisory authorities as well as to enhanced flexibility and risk minimization.

Notable projects that were executed through utilization of the Appian workflow platform were: automation of the process of issuance process of legalization documents of Legal Entities & Heirs with parallel transfer of digitized legalization documents to the Documen-tum document management system as well as automationof the process of property rights recording in the Hellenic Cadastre.

The application and approval process of Credit-Express system was improved to provide real-time information to the ICE customer-centered system regarding the course of every customer’s application.

Business Intelligence Systems

In the framework of the challenging business environment, real-time decision making applications regarding liquidity monitoring were developed thus enabling all Bank levels to monitor the evolution of deposits on an hoyrly basis by means of transactions executed by customers. These applications offer an overall picture regarding liquidity but can also provide more detailed information by identifying the particular customer who may have made noteworthy transactions in our bank environment.

There was also close collaboration with the Regulatory Compliance Division for enhanced information provision and for expansion of the SMART Anti-Money-Laundering application to all Group banks in Greece and abroad.

Customer Relationship Management Systems (CRM)

The “Relationship Management Application” (RMA) acquired content and functionality appropriate for managing and monitoring pro-motional campaigns, by which were used to target and organize key business actions, mainly business loan pricing (for interest rate in-crease), collateral increase and management of business loans in arrears.

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Integration of ATEbank Information Systems/ Preliminary Projects

Following the acquisition of selected ATEbank assets and liabilities by Piraeus Bank, a series of high-priority projects requiring imme-diate implementation was organized with the exclusive aim of best possible facilitation and quality servicing of all customers of both banks. The projects described below were executed within approx. 4 months until the end of 2012, with the large project of complete systemic integration of the two banks already being executed and expected to be completed in mid 2013.

INTRA-GROUP CASh TRANSACTIONSThe new structure of intra-Group Cash Transactions commenced operation in December 2012 and gave all the customers of the new, extended Bank the possibility of executing their transactions regardless of whether they visited a Piraeus Bank or former ATEbank branch. These basic transactions that can be executed at the branches of the new network are: withdrawals, cash deposits, money trans-fers, payment of bank and personal cheques and are executed in real-time.

PAyMENTSIn 2012, ATEbank’s ATMs were integrated in order to relieve customers from additional costs of interbank transactions as well as to prevent the Group from incurring additional costs from these transactions. This resulted in improved service and financial benefit to customers as they can now utilize, free of charge, an exceptionally expanded network of over 1,500 ATMs around Greece. Similar ac-tions were undertaken for remittance commissions between the two banks.

Also in 2012, payments to the Greek State (taxes, etc.) increased and for the first time, the integrated Bank gave all Piraeus and ATEbank credit card holders the possibility of repaying their debts in 12 interest-free installments at all available electronic and con-ventional channels.

JOINT USE OF CUSTOMER-CENTERED PLATFORM ICE (CUSTOMER INTEGRATED ENVIRONMENT) The first key transition project regards integration of the customer base of the two banks to the customer-centered platform ICE. ICE was designated as the basic infrastructure of customer relations management in the unified Piraeus/ATEbank network. From this transition arise significant benefits concerning: integration and consolidation of the customer management process; the existence of a common customer profile across the Piraeus-ATEbank network; facilitation and immediate initiation of improvements in the quality of customer data (Data-Cleansing); and, direct utilization of the unified customer base by all branch network users.

LOANSIn November 2012, ATEbank’s Collections monitoring system was consolidated with the Group’s Eispraxis system, thus providing no-table management and business benefits. New ATEbank employee products were created in the LS loans system, integration of “Energy Saving at Home” requests through ATEbank network was completed, and the logo was changed on all LS loan system documents.

RISK MANAGEMENT Since September 2012, ATEbank data have been integrated into Piraeus Bank’s Risk Management systems both for capital adequacy calculation purposes (Basel II) and for optimization of risk management and portfolio analysis.

Moreover, a report of ATEbank retail loans in arrears was executed in order to serve the branch network’s needs for monitoring these loans.

Technological Infrastructure

In 2012, emphasis was placed on upgrading infrastructures, with the aim of enhancing system and application availability as well as in-corporating the most updated and widespread technological advances into the Group’s infrastructure. During the second half of the year, emphasis was placed on the following projects: - Change in the centralized data storage infrastructure: transfer of systems to the new data storage infrastructure EMC vMAX was

completed. The specific project was initiated in August 2011 and included the transfer of over 1,000 systems.


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- Upgrading of IT infrastructure: 175 new servers were installed to support applications and to cover new business needs. The two central servers (production and back-up) of the Group’s ATM network central system were replaced. At the same time, utilization of the application virtualization (Citrix) technology was expanded and pilot opearation of the first Bank branches in this environment commenced. With the particular infrastructure, there is no need to install a server at every branch and the use of PC by employees is minimized as it is now only a simple terminal.

- Integration of ATEbank’s telecommunications network: in order to cover the telecommunications needs of the ATEbank IT integra-tion projects, the networks were integrated and its branch telecommunications lines were upgraded.

- Equipment upgrading and enrichment of services provided by ATMs and APSs: a series of actions were implemented to assist the provision of more complete customer services as well as to ensure safe operation and management of ATMs – Easypay network equipment. More specifically, shielding of the cover of select network ATMs was strengthened; the ATM network monitoring-man-agement system (NCR Aptravision) was updated; bank book printers were installed in the branch APS devices. In order for the ser-vices provided to be compliant with the Regulatory framework, ATM and Easypay software was upgraded to abide by the EU Di-rective ECB6.

IT System Security

In 2012, a series of system interventions and installations were finalized with the aim of providing the best possible shielding of the in-frastructural security of the Bank’s IT Systems as well as for its customers’ protection. The following are indicative of these actions:

INFORMATION SySTEM AND INFRASTRUCTURE SAFETy ChECKSIn the framework of safety checks of the information system of the Bank and its subsdiaries, a series of regular and ad hoc checks were executed. More specifically, Penetration Tests were conducted at the e-banking applications both by specialized Bank personnel, as well as third parties..

UPGRADE OF SECURITy SySTEMSGiven the importance of system and data security issues, a series of equipment and security software were upgrated to allow for timely identification of weaknesses and effective handling of malicious actions.

In line with the above, all internet firewalls were updated with the new versions, the security of the Central Systems’ internal network was shielded, operation of the Anti-Denial of Service service was optimized, and Piraeus Bank and former ATEbank’s internal networks were redesigned.

IDENTITy MANAGEMENT SySTEM (IDM) ENRIChMENTIn 2012, particular emphasis was placed on expanding access rights management of IDM users to additional systems and applications, thus also automating user management in the Bank’s Central Services.

A significant number of former ATEbank users were integrated into the Identity Management system during the last quarter, acquiring automated access to the information systems their position requires.

Technological and Organizational Support of International Subsidiary Banks

Aiming for harmonization of the manner of operation of Subsidiary Banks with Group standards as well as improvement of services provided to final customers, a series of projects were executed regarding new systems and enrichment of existing ones.

Particular emphasis was placed on implementation of International Data Warehouse to the Group’s subsidiary banks, while Group Data Warehouse was developed to collect and integrate data from countries for information provision at Group level.

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More specifically:Piraeus Bank Bulgaria: a series of extensions to exisiting systems were implemented as well as development of new ones with the aim of improving operating quality and raising productivity. The most important of these were: implementation of the functionality of cred-it card commissions; online Watch List Management information provision; and the possibility of temporary blocking and recall of debit card.

Piraeus Bank Cyprus: emphasis was placed on interventions to systems aimed at improved functionality, increased productivity and upgrading of customer services. More specifically, functionality of the receivables management system Eispraxis was enhanced; a work-flow system was implemented for monitoring business loans; e-banking operations were enriched with the addition of “Instant Cash”, Phone Banking and Mobile Banking services.

Piraeus Bank Egypt: functionality of central banking systems was enriched. In particular, improvements were implemented to the real-time customer check system (Norkom Watch List Management) to prevent illegal money transfers; the delayed payment collection sys-tem was connected to the credit card system and, the interconnection between the Trade Finance system and the central ICBS system was enriched.

Piraeus Bank Romania: projects targeted at improvement of technological infrastructures were implemented. More specifically, the Document Management System application was installed, a new system of debit card commission management was installed, all e-banking applications were transferred to the new, centralized winbank International platform.

With the aim of better information provision at both local and Group level, implementation of Local Data Warehouse and its intercon-nection to the Group Data Warehouse was successfully completed to allow for joint information provision and reporting at both local and Group level.

Piraeus Bank Beograd: functionality of the delayed payment collection system was enriched. Additionally, a series of changes, improve-ments and extensions were made based on the requirements of the regulatory framework (such as Basel II calculation and reporting) and of the Central Bank of Serbia.

Tirana Bank: in 2012, priority was placed on projects aimed at improving the services provided to Tirana Bank’s customers. Within this framework, the Instant Embossing project was implemented, through which requests for debit card issuance are processed immediately at the branch; the specialized Misys software was installed, limiting non-availability of e-banking systems to 20 minutes daily; and, term deposit management software was also installed.

Moreover, aiming to harmonize the applications utilized, the Group’s PPS (Piraeus Payments System) was installed, a system for corpo-rate customer limit management was implemented and the Group’s Mobile Banking functionality was offered to the Bank’s customers.

Piraeus Bank Ukraine: a series of IT projects were executed at Piraeus Bank Ukraine aimed at enhancing the e-banking services pro-vided. The most noteworthy of these are: Utilities Payments, Mobile Banking, opening of term deposits and Phone Banking.

FUNDS TRANSFER

Searching for more economical, more modern and speedier ways of executing transactions, the Bank’s customer base showed a clear preference for e-payments, which in 2012 noted a significant increase by 18% versus 2011. Efforts to attract customers focused on legal entities, resulting in a 19% increase in Funds Transfer legal entity customers. Our coordinated efforts in conjunction with the know-how, the advanced payment systems, reliability and quality customer service all resulted in a slight increase in commissions and a 5% increase in income, which are extremely satisfactory given the adverse economic conditions and the continuing market recession.


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The general trend towards reduction of expenses and total costs also constituted one of the greatest challenges in 2012. In this direc-tion, systematic efforts were made, which resulted in a boom in SEPA payments, as they constitute the most automated and economi-cal way of making payments, which combined with other targeted actions led to a significant reduction of expenses versus 2011.

The quality of the Bank’s Funds Transfer sector was once again recognized by Deutsche Bank, which awarded it for its excellence of transactions in euros (for the 9th consecutive year) as well as in dollars (for the 5th consecutive year).

As far as systems are concerned, together with continual structural improvements, transfer of DiasPay and DiasDebit to SEPA Credit Transfer was also completed, in the framework of the national plan for transfer of domestic means of payment to the European SEPA platform. Moreover, a specialized infrastructure for share market companies was completed to allow for their participation in the new manner of clearance of HELEX and the Cyprus Stock Exchange shares through TARGET2.

Concerning subsidiaries, a particularly significant project that was successfully completed in 2012 was the installation of the Group’s PPS payment system at Tirana Bank, which is believed to give the Bank the possibility of dynamically entering the payment sector and to claim a notable share in the local market.

Cash Services

In 2012, efforts that had begun in 2011 were intensified regarding restructuring of cash services and re-evaluation of products. Results at income and profitability level as well as expanded the customer base confirmed once again the high quality of services provided. Par-allel actions were implemented to reduce operating costs, stagnant cash, operating risk and enhancement of unit operation.

The study that was commenced and is now at implementation stage regarding optimum operating model of the Bank’s cash centers, computerization of its central treasuries and automation of cash processes is extremely important for the Bank. The ultimate goal of the study is enhancement of productivity, reduction of CIT costs, further shrinking of total operating cost and increased profitability.

Custody Operations

Custody Operations’ many years of experience and know-how, its reliability, quality service provision and customer Post Trading ser-vice reinforce its position among the top domestic custodians.

Custody Operations responded successfully to the demands of the PSI+ and GGB Buy-back programs which took place in 2012 in the framework of a broader support program of Greece by the EU, the IMF and the ECB.

The adverse economic conditions had a negative effect on Custody Operations services and resulted in decreased funds under custody. Despite this, efforts were made to minimize these effects by focusing on broadening the spectrum of activities, optimizing systems and processes as well as provision of high quality services.

LOAN ADMINISTRATION

Throughout 2012, the Loan Administration Division’s efforts continued to focus on improving internal operations and procedures of loan management by the Bank to all business categories.

Particular emphasis was placed once again on optimizing systems and procedures that support the operation of the Business Centres, with the aim of offering further upgraded quality service to customers, reducing operating costs and reducing operational risk.

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In the framework of enhancing operational quality, all the processes of receipt, handling and management of pledged customer invoices, including collections management and contract performance, were examined and redesigned in mid 2012, thus leading to the disengage-ment of the branch network from this procedure and freeing up significant time to benefit their daily operation as well as allowing for more effective monitoring and checking of this process.

In the framework of continued efforts towards simplifying and improving all checking and processing of loan management procedures, towards proper data-keeping in the Bank’s systems, diligent maintenance of collateral and guarantees and systematic monitoring of re-quest implementation, in 2012 the following were executed: - Implementation of the process of Non-Performing loan transfer with complete Bank system utilization. - Design and implementation of insured mortgaged properties process. - Completion of automation of monthly FIRE/EARTHQUAKE premium registering for non-performing mortgages. - Implementation of automatic print-out of additional acts regarding pre-approved mortgage adjustments, which significantly facili-

tated the task of Management and of Branch Network as well as facilitating timely customer loan adjustments. - Implementation of monitoring of repeat, non-automated bond loan commission, monitoring of owed commission from letters of

guarantee as well as the possibility of its automatic collection from customer current accounts, upon their request. - Redesign of the bond loan process with the aim of updating it based on trading rules, the present legal framework and the valid or-

ganizational structure of the Bank. - Redesign of the letter of guarantee transfer process, with the aim of more effective monitoring and implementation of actions regard-

ing Bank loanholder debts and consequently those of the Bank towards third parties or other credit institutions as well as redesign of the letter of credit payment process with the aim of more effective monitoring of loanholder debts.

- Design and preparation of processes and actions necessary for the true transferring of ATEbank loanholders and their related ac-tivities in collaboration with the relevant Bank units.


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Risk Management

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Risk management is at the focus of attention and a key concern of the Management, as it is one of the key functions of the Group. The Bank’s Management, aiming for business stability and continuity, has as its top priority the constant development and implementa-tion of an effective risk management framework to mitigate any possible negative consequences of the Group’s financial results and capital base.

The Board of Directors (BoD) is fully responsible for the development and supervision of the risk management framework. In order to ensure effective monitoring and uniform control of all forms of risk and in order to provide timely, specialised handling and coordina-tion, the BoD has appointed a Risk Management Committee (BRC), which is in charge of implementing and supervising the financial risk management principle and policy. The Risk Management Committee convenes on a quarterly basis at least and reports to the BoD on its activities. It should be noted that the Committee convened seven (7) times in 2012.

The Assets and Liabilities Committee (ALCO) plays an active role in the Group’s market and liquidity risk management. The Commit-tee convenes on a weekly basis in order to review market developments (in combination with financial risk exposures undertaken by the Bank and its subsidiaries). In 2012 emphasis remained on matters of liquidity management, with the aim of securing sufficient liquidity for the Group, given the extremely adverse conditions in the Greek and international markets.

Piraeus Group reviews the adequacy and effectiveness of the risk management framework on an annual basis, so as to respond to mar-ket dynamics, changes in products offered and the recommended international practices. Group Risk Management is responsible for the design, specification and implementation of the risk management framework, according to guidelines set by the BoD’s Risk Manage-ment Committee. Group Risk Management consists of the Group Credit Risk Management Division, the Group Capital Management Unit and the Group Market and Operational Risk Management Division. It is subject to the independent audit of the Internal Audit Di-vision’s review in terms of the adequacy and effectiveness of the applied risk management procedures.

Credit Risk Management

The Bank’s business activity and profitability entail the assumption of credit risk. Credit risk is the risk of financial loss for the Group that results when debtors are unable to fulfil their contractual / transactional obligations. Credit risk is the most significant source of risk for the Group, therefore, its effective monitoring and management constitute a top priority for Management. The Group’s overall expo-sure to credit risk mainly originates from approved credit limits and financing of corporate and retail credit, from the Group’s investment and transaction activities, from trading activities in the derivative markets, as well as from the placement in securities and from settle-ment of transactions. The level of risk associated with any credit exposure depends on various factors, the most important being the pre-vailing economic and market conditions, the debtors’ financial condition, the amount, the type, the duration of the exposure, as well as the presence of any collateral and guarantees.

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The Group’s credit risk management principles are stipulated in the consolidated Credit Policy, thereby ensuring effective and uniform credit risk monitoring and control. Piraeus Bank Group applies a uniform policy and practices with respect to the credit assessment, ap-proval, renewal and monitoring procedures.

Credit Risk Measurement and Monitoring

Reliable credit risk measurement is of top priority within the Group’s risk management framework. The continuous development of in-frastructure, systems, and methodologies aimed at quantifying, monitoring and evaluating credit risk, both for business and retail port-folio, is an essential prerequisite in order to timely and efficiently support the Management and business units in relation to management decision making, policy control and formulation and the fulfilment of the regulatory requirements.

For more details on Measurement and Monitoring of Loans and Debts Risk, please refer to: Annual Financial Report 2012, note 3.1.2a

Corporate Credit: the credit rating models applied depend on the type of operations and size of the enterprise. Piraeus Bank Group ap-plies the Moody’s Risk Advisor (MRA) borrower credit rating system for the assessment of credit risk that arises from loans to medium and large-sized enterprises. It should be noted that the MRA system has been used in domestic financial subsidiaries in Greece since 2005, while from 2006 its application has been extended to include all the Group’s bank subsidiaries abroad (ESM-English standard Model). The Bank has optimised the existing (GSM-Greek Standard Model) MRA credit rating model applicable to the corporate port-folio that concerns borrowers keeping class “C” accounting books with a turnover in excess of €2.5mn. Furthermore, the Bank has also applied a new model for the corporate portfolio that concerns borrowers keeping class “C” accounting books with a turnover of up to €2.5mn. Regarding small-sized enterprises, internally developed (in-house) rating systems, as well as scoring systems, are applied. Mod-el validation takes place every six months at least. In accordance with the regulatory framework for credit institutions (Basel II), the Bank has developed and applies a distinct credit rating model for specialised lending that concerns sea-going shipping (object finance). This model is currently being optimised.

Corporate credit borrowers are ranked according to credit rating grades, which represent different levels of credit risk and are linked to different default probabilities, thus allowing for the possibility of differentiating the cooperation policy with the business borrowers and certain provisions to be made for specific exposures.

In order to connect the assumed risk with the pricing of products and services, a project for the development of a methodology adapted to the credit risk of business loan pricing has been completed. This methodology is at the stage of implementation for its incorporation in the approval process.

Retail Credit: Piraeus Group places special emphasis on the adoption and implementation of up-to-date methods for credit risk monitor-ing and management. Retail credit risk monitoring concerned with the evaluation of the credit risk scoring parameters (credit scoring), analysis of the portfolio structure, distribution of the debtor population, as well as monitoring of current and/or potential problem loans. Concerning consumer credit in the Bank, since 2002 application of scoring models have been implemented to assess the creditworthi-ness of prospective borrowers (application scoring), which were then applied to all retail credit portfolios. At the same time, behaviour scoring models have been used to evaluate existing customers’ transactional behaviour (behaviour scoring) both at product and custom-er levels. Additionally, the credit rating model of Tiressias SA (Credit Bureau) is used, which takes into account all adverse and credit exposures that an applicant has in the Greek market, and the use of which has already improved the performance of existing models (which are used in the approval procedure). This model is also used in the pricing, adjusted to credit risk. The evaluation ability of all the scoring models applied is validated at least every six months.

It should be noted that Piraeus Bank has intensified the use of behaviour models in the production process. More specifically, models are applied throughout the collection process cycle, resulting in better customer service and lower operating costs. Other ways of monitor-

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ing credit risks include: a) portfolio structure review, b) distribution of debtor population, c) monitoring of problem loans, and d) the de-velopment of expected and unexpected loan losses. These analyses are being further extended to provide fuller and faster updates on the portfolio’s development for the direct and effective management of the retail banking portfolio.

Regarding subsidiary banks abroad, it is worth noting that in 2012 further progress was made in the procedure of development and im-plementation of creditworthiness scoring models. On a Group level, analyses are being conducted concerning the degree of application of credit policy and of its effectiveness.

For the measurement and evaluation of credit risk entailed in debt securities, ratings from external agencies are mainly applied. The way the Group’s exposure to credit risk from debt securities (Bonds and other bills) is calculated varies depending on portfolio category, in accordance with IFRS classification. Moreover, the positions are monitored for market value for internal reasons.

The table below displays the evolution of Piraeus Group’s Loans in arrears > 90 days ratio.

Piraeus Bank Group Dec. 2012 Dec. 2011

Loans in arrears > 90 days 23% 14%

Greece 23% 13%

Greek Banking Market (avg) 25% 16%

Credit Risk Mitigating Techniques

Piraeus Bank Group applies credit limits in order to manage and control its credit risk exposure and concentration. Credit limits define the maximum acceptable risk undertaken per counterparty, per group of counterparties, per credit rating, per product and per country.

Additionally, limits are set and applied against exposures to credit institutions. Total credit risk exposure to debtors, including financial institutions, is further controlled by the implementation of sub-limits, which address on- and off-balance sheet exposures.

In order to set customer limits, the Group takes into consideration any collateral or security which reduces the level of risk assumed. The Group categorizes the risk of credits into risk classes, based on the type of associated collateral / security and their liquidation potential. The maximum credit limits that may be approved per risk class are determined by the BoD. Credit limits of the Group are set with an effective duration of up to twelve months and are subject to annual or more frequent review. Monitoring of outstanding balances based on approved limits is performed on a daily basis and any violations are reported and dealt with immediately. The relevant approval lev-els are established based on the value and the category of the overall credit risk that the Group undertakes for each debtor or group of debtors that are related to each other.

Collateral & Guarantees

The Group accepts collateral and/or guarantees against credits granted to customers, thus reducing the overall credit risk and ensuring timely payment of debts.

For more details on Collateral & Guarantees, please refer to: Annual Financial Report 2013, note 3.1.3 a

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Liquidity Risk Management

Liquidity risk management is associated with Piraeus Group’s ability to maintain adequate liquidity positions in order to meet its pay-ment obligations. In order to manage this risk, future liquidity requirements are monitored thoroughly, along with the respective loan needs, depending on the projected expiry of outstanding transactions. Monitoring liquidity management entails balancing cash flows within time bands, so that, the Group may meet all its payment obligations, as they fall due.

In order to monitor liquidity risk and to timely identify potential future problems, regular and emergency exercises simulating liquidity crisis scenarios are performed, through which the consequences of extreme adverse changes on the Group’s liquidity position are exam-ined. The Group’s liquidity risk management remained a top priority in 2012 as well, due to the extremely adverse liquidity conditions that prevailed in the Greek economy throughout the year. To that end, functions related to the close monitoring of the Bank’s liquidity position, the regular flow of information to Management as well as the constant assessment of the effectiveness of the measures taken to sustain adequate liquidity, were further enhanced. Significant emphasis was placed on the management and monitoring of collaterals which formed the basis from which liquidity was raised through the financial mechanisms provided by the Central Bank. In addition, the liquidity needs of the subsidiary companies were successfully met. It should also be noted that a tightening of the local regulatory liquidity requirements took place in countries where the Group operates.

With the acquisition of ATEbank, Piraeus Bank significantly improved the composition of its financial sources, expanding and diversi-ficating its deposit base. Moreover, the Bank acquired further liquidity with EFSF Bonds, of nominal value €7,300mn, in the framework of covering the financing gap of the acquired ATEbank.

In addition, the Bank participates in the provisions of the law for the “Enhancement of the economy’s liquidity” (L. 3723/2008). Specif-ically, it has raised liquidity through the issuance of preference shares (Pillar I), Guarantees (Pillar II) and Special Bonds (Pillar III) of the Greek State, of nominal value €12,380mn.

Liquidity levels were also maintained at a satisfactory level as a result of the ability of refinancing the Bank’s assets (Bonds, Loans), through the European Central bank and the Bank of Greece. In the framework of the banking system recapitalization, Piraeus Bank has received in advance, EFSF Bonds of nominal value €6,253mn.

For more details on Liquidity Risk Management, please refer to: Annual Financial Report 2012, note 3.5

Market Risk Management

Market risk concerns the risk of losses due to adverse changes in the level or the volatility of market prices (equity prices, interest rates, commodity prices and currency exchange rates) as well as their correlation.

The Bank has established a Group-wide market risk limit system. The adequacy of the system and the limits are reviewed annually. Pi-raeus Bank has adopted and applies widely accepted techniques for the measurement of market risk. The Value-at-Risk / VaR measure is an estimate of the maximum potential loss in the net present value of a portfolio, over a specified period and within a specified confi-dence level. Piraeus Bank implements the parametric Value-at-Risk method, assuming a one-day holding period and utilizing a 99% confidence level. Value-at-Risk is measured for the positions in the Trading Book as well as the Available for Sale Equity portfolio.

The Value-at-Risk rate for the Group’s Trading Portfolio on December 31, 2012 was €1.32mn. This estimate consists of €0.46mn Value-at-Risk rate for interest rate risk, €0.01mn for equity risk, €1.13mn for foreign exchange risk and €0.1mn for commodities risk. The di-versification effect for the total portfolio on 31.12.12 resulted in a €0.38mn reduction to the overall trading portfolio Value at Risk.

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In 2012, a decrease was noted in the Group’s Trading Portfolio’s Value at Risk, mainly due to the significant decrease in the interest vol-atility of the positions in Greek Government Bonds (as a result of the participation in the PSI and debt buy back).

The above are summarized as follows (amounts in million euro):

year Group TradingBook

Total VaR

VaR Interest Rate

Risk

VaR Equity Risk

VaRForeign

Exchange Risk

VaR Commodities

Risk

DiversificationEffect

2012 1.32 0.46 0.01 1.13 0.10 -0.38

2011 8.81 8.06 0.04 2.41 0.21 -1.91

Aside from Value at Risk, sensitivity measures are also calculated, and include PV100 (adverse impact to the net present value of all bal-ance sheet items for a 100 basis points parallel move in the yield curve for all currencies) as well as the Earnings-at-Risk (EaR) measure/index, which denotes the negative effect on the expected annual interest income, as a result of a parallel shift in interest rates for all cur-rencies considered.

For PV100 as well as for Earnings-at-Risk adequate limits have been assigned and are monitored on a regular basis. The table below pre-sents data regarding the PV100 and EaR values on 31/12/2012:

Amounts in €mn EUR USD ChF Other

PV100 -131,6 1,01 -0,47 0,82

EaR -98,47 -3,57 -0,46 -2,91

Market Risk Stress Testing Exercises

Regarding market risk, Piraeus Bank Group applies a series of methodologies to estimate the consequences from crisis situations (sim-ulation of crisis situations). Specifically, the Group has created a series of scenarios simulating crisis situations which concern the chang-es in the rate and volatility of interest curves, stock market indices, foreign exchange rates and commodities as well as the limits con-cerning assumed credit risk through investments in securities of countries or other issuers. In each case the scenario in question is one of adverse volatility of parameters (interest, foreign exchanges rate, equity prices and credit margins) for the Bank’s present position.

The stress scenarios are based on total portfolio exposure to various risk factors. Different scenarios are selected depending on the com-position of the total portfolio, i.e., which risk factors will change and by how much. The proper scenarios are selected (i.e. which sce-nario combinations will be applied) depending on market conditions and portfolio composition.

The methodological approach for measuring the consequences of crisis situations is consistent with the methods already applied for cal-culating internal capital for market risk. Moreover, the method of approach also depends on the type of portfolio based on categoriza-tion, according to the International Accounting Standards (Held at Fair Value, Available for Sale, etc), as this categorization has a direct impact on the manner in which the results of the activity affect capital.

For more details on Market Risk Management, please refer to:Annual Financial Report 2012, note 3.2

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Operational Risk Management

Operational risk is defined as the risk of loss stemming from the inadequacy or failure of internal processes and systems, human factors or external events. Piraeus Bank Group acknowledges its exposure to operational risk deriving from its daily operation and from the implementation of business and strategic objectives.

For effective management and mitigation of operational risk, in 2012 the Group continued to implement and develop the uniform opera-tional risk management framework in all of its activities.

The operational risk management framework is implemented locally in the Bank’s units as well as in the Group’s Subsidiary banks, while ensuring the dissemination of uniform understanding of risk management to all parties involved.

The basic axes of risk management are: data collection of internal losses; assessment of potential assumed risks; and implementation of actions aimed at monitoring and reducing these risks.

Also, in 2012, significant actions for constant development and expansion of the operational risk management framework were complet-ed at Group level. In brief, the operating risk policy was updated, the method and the reports on evaluation of potential losses were im-proved, while the Unit for the Assessment of the Group’s Operating Risk was established, for more effective monitoring.

Moreover, taking into account the transition of former ATEbank activities as well as acquisition of Geniki Bank, in 2012 a programme for their integration was developed and is being implemented in the Group’s uniform operational risk management framework.

In total, with implementation of the above framework, the Group aims to optimize the Internal Audit System operations, to minimize financial losses from operational risk events, to raise human resource efficiency, to reduce operational costs as well as to prevent unex-pected and catastrophic losses from future operational risk events.

Piraeus Group Capital Adequacy

Ensuring a strong capital base constitutes one of the key strategic axes of Piraeus Group. In the framework of the Greek banking sys-tem’s recapitalization, capital adequacy ratios are being restored in order to enable Piraeus Bank to respond to the Greek economy’s growth needs from a stronger position, especially following the recent acquisitions of ΑΤΕbank, Geniki Bank, the Greek activities of Cypriot banks (Bank of Cyprus, Cyprus Popular Bank –CPB- and Hellenic Bank) and of Millenium Bank.

In the framework of Greek banks’ recapitalization, Piraeus Bank Group obtained through the HFSF capital amounting to €8.4bn (€7.3bn + €570mn for ATEbank + €524mn for the Cypriot banks’ domestic operations) for its participation in the capital enhancement program of Piraeus Bank. More specifically: - On 28.05.2012, the HFSF provided the Bank with Capital Advance amounting to €4.7bn, - On 21.12.2012, the HFSF provided additional Capital Advance amounting to €1.6bn as well as a Commitment Letter of additional

€1.1bn - On 10.04.2013, the HFSF provided additional Capital Advance amounting to €570mn (regarding coverage of ATEbank capital needs,

as determined by the BoG), - The HFSF has approved disbursement of the amount of €524mn to cover the capital needs of Cypriot banks’ operations in Greece.

It should be noted that in the regulatory capital of December 31, 2012 only the amount of €570mn has been taken into consideration and not the Commitment Letter amounting to €1.1bn.

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Recapitalization of Piraeus Bank and of the other systemic Greek banks was implemented in 3 phases in the framework of L.3864/2010 and pursuant to the terms of Cabinet Act 38/9.11.12. The first phase regarded provision of advanced payment by the HFSF, which was completed at end of December 2012, allowing the Core Tier I ratio to reach a minimum of 9%. The second regarded issuance of contin-gent convertible bonds to be entirely covered by the HFSF. Finally, the third phase regarded share capital increase with common shares with any unsubscribed shares to be undertaken by the HFSF (completed in the end of June 2012).

Taking into consideration the HFSF capital enhancement and with the inclusion of former ATEbank and Geniki Bank, the Group’s cap-ital adequacy volumes at year-end 2012 (31.12.2012) were as follows:

Group Regulatory Capital €4.2bnWeighted Assets €43.2bnTotal Capital Adequacy Ratio 9.7 %

There was substantial progress in the continuous improvement of the infrastructure as the process of the transition to an advanced risk management and capital adequacy calculation platform was completed and is expected to gradually serve the corresponding needs of subsidiary banks at local level.

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PIRAEUS BANK GROUPSelected Consolidated Balance Sheet Information

(in thousand euros)

31.12.2012 31.12.2011

AssetsCash and balances with Central Banks 3,307,503 2,552,717

Loans and advances to credit institutions 380,384 316,136

Reverse repos with customers 35,924 57,395

Loans and advances to customers and debt securities receivables (net of provisions) 52,628,683 35,633,795

Trading securities 370,700 474,236

Investment securities 4,910,481 3,994,914

Other assets 8,395,301 5,165,900

Assets from discontinued operations 377,184 1,157,214

TOTAL ASSETS 70,406,161 49,352,308

LiabilitiesDue to credit institutions 32,561,322 25,412,221

Liabilities at fair value through profit or loss 21,953 18,475

Deposits & retail bonds 36,971,208 22,038,103

Debt securities & other borrowed funds to institutional investors 857,843 1,525,963

Other liabilities 1,703,516 1,290,043

Liabilities from discontinued operations 605,824 1,007,341

Total Liabilities 72,721,666 51,292,146

Capital and reserves attributable to equity holders of the parent entity (3,203,270) (2,810,538)

Preference Shares 750,000 750,000

Amounts recognized directly in equity relating to non-current assetsfrom discontinued operations 9,301 (14,529)

Non controlling interest 128,464 135,228

Total Equityi (2,315,505) (1,939,838)

TOTAL LIABILITIES AND EQUITy 70,406,161 49,352,308

i Total equity amounts to €6.1bn pro-forma for the recapitalization of €8.4bn.

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2012 Annual Report

1.1 - 31.12.2012 1.1 - 31.12.2011

Net interest income 1,027,520 1,172,615

Net fee and commission income 217,589 197,778

Dividend income 7,295 4,752

Results from trading and investment securities 635,490 (108,719)

Other operating income 329,446 (44,207)

Total net income 2,217,339 1,222,220

Staff costs (423,966) (389,584)

Administrative expenses (379,273) (336,596)

Gains/(Losses) from sale of assets (850) (515)

Depreciation and amortisation (105,388) (96,720)

Total operating costs (909,477) (823,416)

Share of profit of associates 14,666 (31,308)

Profit before Tax & Provisons 1,322,528 367,496

Provisions and impairment (2,507,895) (7,883,647)

Profit/(Loss) before tax (1,185,367) (7,516,151)

Income tax expense 663,104 894,125

Profit/(Loss) after tax from continuing operations (522,264) (6,622,026)

Profit/(Loss) after tax from discontinued operations 13,022 3,907

Non controlling interest 8,939 4,740

Profit/(Loss) after tax attributable to equity holders of the parent entity (500,303) (6,613,379)

Profit/ (loss) after tax attributable to equity holders of the parent entity from continuing operations (513,279) (6,617,196)

Total comprehensive income net of tax (404,180) (6,358,231)

PIRAEUS BANK GROUPSelected Consolidated Income Statement Information

(in thousand euros)

31.12.2012 31.12.2011

Number of staff employed 18,872 12,806

-of which related to discontinued operations 275 158

Number of branches 1,338 832

-of which related to discontinued operations 13

Number of Staff Employed and Branches

Concept & Design: mnp

Editing, Layout & Production Management: ez-dot

The 2012 Piraeus Bank Annual Report was printed on 3 types of paper, deriving from sustainably managed forests and obtained by environmentally-friendly processes.

Covers

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Interior Photographs

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Documents

2012 ANNUAL REPORT/media/com/downloads/investo… · 2012 Annual Report PIRAEUS BANK 4 HISTORIC OVERVIEW 1916 Establishment of Piraeus Bank. 1918 The shares of Piraeus Bank are listed