NBGIF National Bank of Greece SA (PK)

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FORM 6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Report of Foreign Private Issuer

Pursuant to rule 13a-16 or 15d-16 of

The Securities Exchange Act of 1934

For the month of September , 2017

National Bank of Greece S.A.

(Translation of registrant’s name into English)

86 Eolou Street, 10232 Athens, Greece

(Address of principal executive offices)

[Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.]

[Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to rule 12g3-2(b) under the Securities Exchange Act of 1934.]

[If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-               ]

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Certification of the Board of Directors

on the financial statements as at 30 June 2017

Certification of Chairman, Chief Executive Officer and a member of the Board of Directors pursuant to Article 5 of Law 3556/07, as in force.

We, the members of the Board of Directors of National Bank of Greece S.A. certify that to the best of our knowledge:

(1)          The interim financial statements for the 6-month period ended 30 June 2017 has been prepared in accordance with the current accounting standards and present a true and fair view of the Statement of Financial Position, Income Statement, Statement of Comprehensive Income, Statement of Changes in Equity and Cash Flow Statement of the Bank and of the companies included in the consolidation.

(2)          The Board of Directors report for the 6-month period ended 30 June 2017 truly and fairly presents all information required by Article 5, Para 6 of Law 3556/07, as in force.

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Board of Directors Report

on the financial statements as at 30 June 2017

Financial & Macroeconomic environment

The global economic growth is picking up pace in 2017, albeit the balance of risks remains skewed to the downside

The global economic recovery continues in the first half of 2017, albeit the structure of growth is shifting among major economies. That said, improved euro area and emerging markets growth, mainly driven by fiscal and monetary policy support in China, counterbalanced modest United States (“U.S.”) growth during the first half of the year. In the details, the negative contribution from inventories in the first quarter, as well as a significant slowdown of private consumption took their toll in the U.S. economic activity. However, the economy gathered momentum in the second quarter amid a pick-up in consumer spending.  As a result, real Gross Domestic Product (“GDP”) increased by 2.6% q-o-q saar (quarter on-quarter “q-o-q” seasonally adjusted annual rate) from 1.2% q-o-q saar in the first quarter of 2017.

In the euro area, the economy continued to surprise to the upside. Real GDP increased by 2.5% q-o-q saar in the second quarter of 2017 from 2.0% q-o-q saar in the first quarter of 2017. Activity remains strong, due to resilient private consumption amid increasing labour market income, as well as robust business investment. In Japan, real GDP increased by a solid 4.0% q-o-q saar in the second quarter of 2017 from 1.5% q-o-q saar in the first quarter of 2017. Above-trend growth will likely be sustained due to fiscal support and a favourable external environment. Finally, Chinese real GDP growth accelerated slightly to 6.9% year-over-year (“y-o-y”) in the first half of 2017 from 6.8% y-o-y in the second half of 2016 reflecting front-loaded public investment. Nevertheless, the gradual and structural transition of the Chinese economy toward a more sustainable, albeit lower, pace of growth will continue (the Government’s target for 2017 is “around 6.5%”).

Financial markets demonstrated reassuring resilience in the first half of the year. Global equity prices in many advanced economies moved higher with banks at the forefront, particularly in the euro area, by finding support from continued monetary stimulus and strong corporate profitability (S&P500: +8.2%, Eurostoxx50: +4.6% in H1:17). At the same time, implied equity market volatility remained at historic low levels. High-rated nominal sovereign bond yields diverged significantly across majors. On the one hand, U.S. Treasury 10-Year Yields declined by 14 basis points (“bps”) to 2.31% as expectations linked with probable fiscal stimulus under the new U.S. Administration have waned considerably. On the other hand, German 10-Year Bund Yields increased materially by +26 bps to 0.47% reflecting strong growth, declining safe-haven demand and expectations for a gradual slowdown in the European Central Bank’s (“ECB”) quantitative easing policies. Global corporate credit spreads, both Investment Grade and High Yield, narrowed compared with end-2016 as global recession risks have subsidized and investors’ search for yield continued. Finally, the euro foreign exchange had appreciated by 8.6% against the U.S. Dollar in the first half of the year. In nominal effective terms, the euro had appreciated by 3.5% against the currencies of the euro area’s major trading partners since the start of the year, due to strong economic activity, higher nominal yields and lessening European political uncertainty. Note that entering the third quarter of the year, global equity prices have remained at elevated levels despite a modest pick-up in policy uncertainty (S&P500: +0.1% to 2426, Eurostoxx50: +0.1% to 3446 compared with end-June 2017), whereas government bond yields have declined further in the US by 11 bps to 2.20% and the euro exchange rate has continued to appreciate (as of 18 August 2017).

Monetary policies in advanced economies remain supportive, although a gradual removal of accommodation endures in the course of 2017. The U.S. Federal Reserve (“Fed”) has increased the target for the federal funds interest rate by a cumulative 50 basis points to the range of 1.0%-1.25% as of July 2017, communicating a gradual and data-dependent tightening path going forward. The Fed continued the policy of reinvesting principal payments and to roll-over maturing U.S. Treasuries and agency mortgage backed securities (“MBSs”), albeit it aims to start passively downsizing its balance sheet “relatively soon”, according to the July 2017 meeting statement. On the other side of the Atlantic, the ECB has kept its benchmark policy interest rates unchanged at 0.0% (main refinancing rate) and -0.4% (deposit facility rate) during 2017. At the same time, the ECB continues its asset purchase programme albeit at a reduced pace from April 2017, of EUR 60 billion per month, as deflationary concerns in the euro area economy have diminished. Finally, the Bank of Japan (“BoJ”) continues the aggressive expansion of its balance sheet mainly through purchases of Government bonds at an annual pace of JPY 80 trillion and equity exchange-traded funds’ (“ETFs”) purchases of JPY 6 trillion per annum. At the same time, the BoJ targets 10 year Japanese government bond yields to remain around zero percent under its “yield curve control” framework, in order to foster growth and achieve its inflation target of 2%.

The Greek economy stabilized in 2016 despite the considerable fiscal headwinds and shows signs of recovery since early 2017

The Greek economy stabilized in 2016 with GDP remaining flat on an annual basis (0.0%, y-o-y in constant prices, Source: EL.STAT., Quarterly National Accounts Press Release, June 2017), over performing compared to official forecasts for an annual recession of 0.3% (Sources: Ministry of Finance, State Budget 2017, November 2016 and EU Commission, Autumn Forecast, November 2016). GDP growth entered positive territory in Q1:2017 (+0.4%, y-o-y, Source: EL.STAT., Quarterly National Accounts Press Release, June 2017), supported by resilient private consumption and a pick-up in investment spending. This rather favorable GDP outcome occurred in a challenging environment of still high uncertainty related to prolonged negotiations with official lenders for the completion of the second review of the third financial support program for Greece (the “Third Program”), slowly improving liquidity conditions - partly related to a sharper than expected fiscal tightening that underpinned the fiscal over performance in 2016 and in the first half of 2017 (see reference below) - and a marginal loosening of capital controls during 2016.

As regards the progress in the Third Program implementation and disbursements of related financing the Hellenic Republic, by implementing the policy measures agreed with official lenders, received €21.4 billion of Third Program financing between August and

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December 2015 related to the first tranche of the financial support under the Third Program, including €5.4 billion for bank recapitalization (Source: European Stability Mechanism (“ESM”), Press Release, 22 December 2015). After the successful evaluation of Greece’s progress in implementing agreed actions and reforms under the first review of the Third Program - and the concomitant approval by the Eurogroup on 25 May 2016 in liaison with the ECB and the Board of Governors of the ESM - Greece and the European Commission signed a Supplemental Memorandum of Understanding (on 16 June 2016) which updated the conditionality of the Memorandum of Understanding of August 2015, as well as reviewed the progress in the implementation of the Third Program (Source: EU Commission, Supplemental Memorandum of Understanding, 16 June 2016). The completion of the first review led to the disbursement of the second tranche that amounted to €10.3 billion in several instalments between June and October 2016. More specifically, €7.5 billion were disbursed in June 2016 for debt servicing needs and arrears clearance, whereas the remaining instalments of €1.1 billion and €1.7 billion were released in October 2016 following positive reporting by the European institutions for the clearance of net arrears and the successful completion of a number of milestones (Source: ESM, FAQ on decisions concerning Greece at Eurogroup meeting on 25 May 2016, 3 June 2016).

The legislation and implementation by the Greek government of a new set of fiscal and structural policies and a list of related prior actions led in late May and early June 2017 to a positive assessment by the International Monetary Fund (“IMF”), ECB and the European Union (collectively, the “Institutions”) of the progress in completing the second review of the Third Program, which has been confirmed by the Eurogroup of 15 June 2017 (Source: Eurogroup Statement, 15 June 2017). Accordingly, the Institutions decided the disbursement of the third tranche of the ESM Program amounting to €8.5 billion “to cover current financing needs, arrears clearing, and possibly room to start building up a cash buffer” (Source: Eurogroup Statement, 15 June 2017). The amount has been planned to be released in various instalments. More specifically, the first installment of this tranche has already taken place (on 10 July 2017), following the ESM Board approval on 7 July 2017, and amounts to €7.7 billion, of which €6.9 billion to be used to repay maturing debt and the remaining €0.8 billion for arrears clearance. There will be another instalment for arrears clearance in the amount of €0.8 billion, that is expected to take place after the summer of 2017, under the condition that Greece will contribute with its own resources to the arrears clearance effort as agreed with the Institutions (Source: ESM, Press Release, 7 July 2017).

Against this backdrop, business sentiment showed a steady improvement in the first semester of 2017. The inflows of the Third Program funding, a considerable improvement in labor market conditions and a positive impact of increasing cashless payments on registered economic activity, supported consumer spending in the official economy (+1.4% y-o-y in FY:2016 and +1.7%, y-o-y in Q1:2017, Source: EL.STAT., Quarterly National Accounts Press Release, June 2017). Moreover, gross fixed capital formation stabilised in FY:2016 (+0.0% y-o-y) and recorded a healthy annual growth of 11.2% in Q1:2017, mainly reflecting higher spending on transportation equipment and especially merchant ships (Source: EL.STAT., Quarterly Gross fixed capital formation by Asset, Chain-linked volumes, reference year 2010, 1st Quarter 2017). On the same note, deflation pressures receded, with the GDP deflator increasing by 0.1%, y-o-y, in FY:2016 and by 0.5%, y-o-y, in Q1:2017, following an annual average decline of 1.5% in 2012-2015 (Source: EL.STAT. Quarterly National Accounts Press Release, June 2017).

Developments in the business sector, as reflected by the path of related conjunctural and forward looking indicators of business activity, in the first semester of 2017, have been supportive of the resilience of the export-oriented business activity. Accordingly, in the first semester of 2017 manufacturing production increased by 4.2%, y-o-y, on the back of solid production growth in export oriented sectors (such as food, oil products, basic metals, chemicals and non-metallic mineral products), following an expansion of 4.2%, y-o-y, in FY:2016 — the largest since 2007 (Source: EL.STAT., Monthly evolution of the industrial production index (2010=100.0), Provisional Data, January 2017 - June 2017).

Residential construction declined further (-11.2%, y-o-y, in Q1:2017, following a decline of -12.6%, y-o-y, in FY:2016, according to the relevant national accounts data, (Source: EL.STAT., Quarterly Gross fixed capital formation by Asset, Chain-linked volumes, reference year 2010, 1st Quarter 2017), whereas the pace of adjustment in house prices slowed significantly during 2016, to -1.0%, y-o-y, in Q4:2016 from -5.2%, y-o-y, in Q4:2015, albeit recording a small acceleration to -1.8%, y-o-y, in Q1:2017, showing high sensitivity to tight liquidity conditions and prolonged negotiations for completing the second review of the Program. Prices of prime commercial spaces also tend to stabilize (0.1%, y-o-y, on average, in H2:2016, latest available data), with a marginal increase in rents in premium spaces recorded during this period (Source: Bank of Greece, Bulletin of Conjunctural Indicators, May-June 2017). Elevated tax pressure, liquidity factors and the still high supply overhang continue to impede the recovery process in the residential market.

The current account in the first five months of 2017 was 0.1% of GDP lower than in the same period in 2016, mainly due to higher services exports. This trend is expected to gain further traction in the following months as the support from tourism activity will come to the fore, given the increasing trend in tourist arrivals (10.5%, y-o-y, in the first semester of 2017 (Source: Bank of Greece, Press Releases, Balance of Payments, December 2015, December 2016 and May 2017and SETE, International Air Arrivals, January-June 2017 ).

The Greek labor market showed further improvement in the first five months of 2017, with employment expanding by +1.7%, y-o-y, following a solid +2.0% y-o-y, on average, in 2016. The unemployment rate declined a five year low of 21.7% in May 2017 from 23.4% in December 2016 (Source: EL.STAT., Labor Force Survey, Employment status and unemployment rate, January 2004 - May 2017).

Deflationary trends reversed course by end-2016, along with a reversal of negative base effects on energy prices in this period, with CPI inflation at +1.3% y-o-y the first semester of 2017 (Source: EL.STAT., Press Releases, Consumer Price Index, June 2017). Accordingly, core inflation averaged at -0.1%, y-o-y, in FY:2016 and increased by 0.2% y-o-y in Q2:2017 (Source: NBG estimates based on Bank of Greece methodology).

On the fiscal front, Greece has over performed in comparison with the Third Program target in 2016, for a second consecutive year, following the achievement of a primary surplus of 0.5% of GDP in General Government budget in 2015 compared to a targeted deficit of

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0.25%. More specifically, the General Government Primary Surplus excluding the net fiscal impact of banking system support reached €6.9 billion (3.9% of GDP in 2016) over performing strongly compared to the upwardly revised Government budget target of 1.1% of GDP. The primary surplus according to the Program definition reached 4.2% of GDP in 2016 compared with a Program target of 0.5% of GDP for the same year (Sources: Ministry of Finance, State Budget 2017, November 2016 and Medium Term Fiscal Strategy 2018-2021, May 2017).

State Budget implementation continues to over perform, compared with the upwardly revised target of Medium-term-fiscal strategy “MTFS” for 2018-2021, in the first six months of 2017, with the primary surplus exceeding target by €1.5 billion. More specifically, the primary surplus reached 1.1% of GDP, exceeding the respective target by 0.9% of GDP, mainly due to tighter-than-budgeted restraint in primary spending (0.7% of GDP below the six-month target). Tax revenue trends are also improving in the six months of 2017, exceeding the respective target by almost 0.3% of GDP, mainly due to an overperformance in indirect tax revenue (0.2% of GDP higher than the six-month target or +2.4%, y-o-y). The above developments increase the credibility of the adjustment effort for 2017, when the respective Third Program target of an annual primary surplus of General Government is 1.75% of GDP, (Sources: Ministry of Finance, State Budget Execution, Monthly Bulletin, June 2017 & European Commission, Supplementary Memorandum of Understanding, 16 June 2017). An ambitious post-program fiscal package, comprising income tax reform and a new round of interventions in the pension system, was legislated in May 2017 in the context of prior actions for completing the 2nd review. This package delivers net savings of 2% of GDP, which are planned to underpin the credibility of fiscal targets post-2018. The package also contains a set of contingent expansionary measures aiming to support economic efficiency, tax competitiveness and an enhancement of the social safety net, provided that the agreed medium-term targets are met.

The General government debt to GDP ratio reached 179.0 % in 2016 and is estimated to peak in the first semester of 2017 and begin to decline to 176.4% and follow a downward trend by end-2017 onwards according to Greek Government’s and European Commission’s forecasts (Sources: Ministry of Finance, Medium Term Fiscal Strategy 2018-2021, May 2017).

The Eurogroup of 5 December 2016 endorsed the implementation since early 2017 of a first set of short-term debt relief measures agreed in principle in the Eurogroup meetings of 9 May and 25 May 2016, when the Eurozone countries stated that they stand ready to consider, if necessary, “possible additional debt measures aiming at ensuring that Greece’s refinancing needs are kept at sustainable levels in the long run. The Eurogroup also agreed to establish a benchmark for assessing sustainability of the Greek debt, based on the Hellenic Republic’s annual gross financing needs “GFNs” related to the servicing costs of the Hellenic Republic’s total debt. The Eurogroup statement had foreseen a sequenced approach, whereby a package of debt measures could be phased in progressively, as necessary to meet the agreed benchmark on gross financing needs and subject to the pre-defined conditionality of the ESM program. In this context, the Eurogroup of 9 May 2016 outlined the following general guiding principles for a potential provision of additional relief in Greece’s public debt servicing burden: (a) facilitating market access; (b) smoothing the repayment profile; (c) incentivizing the country’s adjustment process even after the program ends; and (d) flexibility to accommodate uncertain GDP growth and interest rate developments in the future. The new debt measures have been planned to include, inter alia , a smoothening of payment profiles and design of other debt-management and re-profiling measures in the short, medium and long-run aiming at extending further the effective maturities, lower medium-to-longer-term debt servicing costs and effectively reduce the net present value of the outstanding Greek debt (Sources: Eurogroup Statement, 9 May 2016, 25 May 2016 and 5 December 2016).

According to ESM estimates, the prospective benefit from the implementation of the above short-term debt relief measures on Greece’s gross public debt is estimated at 20 percentage points of GDP by 2060, while contribute to a reduction of the longer-term financing needs of the Greek State closer to sustainability threshold - decided by the Eurogroup - of 15% of GDP during the post-program period until 2040 and the vicinity of 20% of GDP post 2040 under two of the four alternative scenarios of the EU Commission’s updated debt sustainability analysis “DSA” (Source: European Commission, Compliance Report of the third economic adjustment program for Greece, June 2017) .

The Eurogroup of 15 June 2017 repeated the assessment of debt sustainability on the basis of gross financing needs (“GFN”) and stated that it stands ready to implement a second set of debt measures to the extent needed to meet the GFN objectives. These measures will be implemented at the end of the Program in 2018, conditional upon its successful implementation and their “exact calibration will be confirmed at the end of the Program by the Eurogroup on the basis of an updated DSA” (Source: Eurogroup Statement, 15 June 2017).

These additional measures will permit, inter alia, the transfer of Agreement on Net Financial Assets (“ANFA”) and Securities Market Program (“SMP”) profits to Greece, liability management operations within the current ESM program, extension of the weighted average maturities and a further deferral of European Financial Stability Facility (“EFSF”) interest and amortization by up to 15 years. In order to take into account possible differences between GDP growth assumptions and actual growth developments over the post-program period, “the EFSF re-profiling could be recalibrated according to an operational growth-adjustment mechanism to be agreed”. This mechanism will be fully specified as part of the medium-term debt relief measures, following the successful implementation of the ESM program. According to the Eurogroup statement, these additional measures “shall not lead to additional costs for other beneficiary Member States”, while future liability management operations within the current ESM Program shall take “due account of the exceptionally high burden of some Member States”. For the long term, the Eurogroup recalled the May 2016 agreement that “in the case of an unexpectedly more adverse scenario, a contingency mechanism on debt could be activated. The activation of this mechanism would be considered, subject to a decision by the Eurogroup, and could entail measures such as a further EFSF re-profiling and capping and deferral of interest payments” (Source: Eurogroup Statement, 15 June 2017).

The Executive Board of the IMF approved in principle on 20 July 2017 a precautionary Stand-By Arrangement (“SBA”) for Greece amounting to 1.3 billion special drawing rights “SDR” (about €1.6 billion). According to the IMF, this arrangement “will become effective only after the Fund receives specific and credible assurances from Greece’s European partners to ensure debt sustainability, and provided

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that Greece’s economic program remains on track”. The IMF acknowledges that the newly-legislated measures for broadening the income-tax base and reforming pension spending are critical to rebalancing the budget toward more growth-friendly policies and that they will help achieve an ambitious primary surplus target of 3.5% of GDP. However, the IMF considers that this fiscal target should be reduced to a more sustainable level of 1.5% of GDP “as soon as possible, to create fiscal space” for promoting economic growth and social cohesion through efficiency increasing policies (Source: IMF, Press Release No. 17/294, 20 July 2017).

The IMF statement concludes that despite the significant progress on the structural front, Greece’s overarching challenge remains the liberalization of restrictions that impair its investment climate and that “even with full program implementation, Greece will not be able to restore debt sustainability and needs further debt relief from its European partners. A debt strategy anchored in more realistic assumptions needs to be agreed. Effectiveness of the new Stand-By Arrangement is contingent on this agreement on debt” (Source: IMF, Press Release No. 17/294, 20 July 2017).

The Greek banking system remained in deleveraging mode in the first six months of 2017 with the pace of deleveraging showing some first signs of deceleration since end-2016. Lending to private sector contracted by 1.3%, y-o-y in June 2017 from -1.5% y-o-y in December 2016, with loans to households declining by 2.5% in June 2017 versus 2.8%, y-o-y, in December 2016. Corporate credit has shown signs of stabilization (+0.4% y-o-y in May 2017 and 0.0%, y-o-y, in December 2016 compared with a contraction of -1.2%, y-o-y, in December 2015), albeit recording a small contraction of -0.3%, y-o-y, in June 2017. Private sector deposits increased by €4.2 billion, cumulatively in 2016, with household deposits increasing by €2.6 billion and corporate deposits by €1.6 billion, reflecting, inter alia , the improvement of the economic sentiment and concomitant decline in private sector’s holdings of euro notes from the historical highs of 2015. However, private sector deposits declined again by €1.0 billion in January-June 2017, due to a decline in household deposits, which continue to be adversely affected by the high fiscal pressure (Source: Bank of Greece, Monetary and Banking Statistics). Accordingly, the Greek banking system’s financing from the Eurosystem (including the Emergency Liquidity Assistance (“ELA”)) decreased to €54.3 billion in June 2017 and by €72.3 billion cumulatively since its peak in June 2015, with the ELA dependence contracting by €48.8 billion in this period (Source: Bank of Greece, Monthly Balance Sheet, June 2015 and June 2017), also assisted by a re-opening of the interbank market (an increase of €16.3 billion in net financing in May 2017) and further deleveraging, which contributed to a reduction of the banking system’s funding gap (Source: Bank of Greece, Overview of the Greek Financial System, July 2017, in Greek).

Greek sovereign bond valuations showed a notable improvement in Q2:2017 (a decline of 200 bps in 10-year Greek government bond yield “GGB” between end-March and end-June 2017 to 5.4% from 7.4% in March 2017 and 7.3% in December 2016), reflecting a positive market assessment of the fiscal over performance and progress on the completion of the 2nd review. The completion of the review and the provision by Eurogroup on 15 June 2017 of further detail on the medium and longer-term strategy for ensuring sovereign debt-servicing sustainability lowered further sovereign bond yield bringing the 10-year GGB yield at a 7 1/2 -year low and contributed to a notable decline of the yields at shorter maturities (Source: Bloomberg). On 25 July 2017, the Hellenic Republic successfully issued through syndication a new 5-year benchmark bond, alongside a tender to buy back an outstanding 5-year bond issued in 2014. This was the first attempt in 3 years to tap markets, and the total amount raised was €3.0 billion, with the coupon set at 4.375% and the implied yield at 4.625% (Source: Athex Exchange Group, Press Release “The Hellenic Republic announces the pricing of its new 2022 Notes”, 25 July 2017).

Against this backdrop, on 23 June 2017, Moody’s upgraded Greece’s sovereign bond rating to ‘Caa2’ and changed the outlook to positive, reflecting its view that the prospects for a successful conclusion of Greece’s Third Program have improved, a development that raises the likelihood of provisions of additional debt relief by the official lenders (Source: Moody’s press release on Greek Sovereign outlook —). On 18 August 2017 Fitch Global Ratings upgraded Greece’s sovereign rating by two notches to B- and revised outlook to positive.  S&P also revised its outlook to positive on 21 July 2017. The key drivers for the rating agencies decisions were declining uncertainty, recovering economic growth, improving fiscal credibility, alongside improving prospects for the provision of further official debt relief (S&P and Fitch - Source: S&P press releases on Greek Sovereign outlook). Greece’s sovereign debt rating has been already increased by Standard & Poor’s (“S&P”), by one notch to ‘B-’ on 22 January 2016 with a stable outlook, referring to the milder than expected recession and the progress made in fiscal and reform targets of the Third Program as the key determinants of its rating decision.

The Macroeconomic Environment and the Banking Services Sector in South Eastern Europe-5 (“SEE-5”, comprising Albania, Bulgaria, FYROM, Romania, and Serbia)(1)

There was a broad-based improvement in the performance and fundamentals of the economies and the banking sectors of SEE-5 in the first half of 2017. Indeed, economic activity gained momentum, fiscal consolidation continued and banking sector profitability strengthened, while the current account deficit stabilised and inflation accelerated.

Real GDP growth accelerated to a post-global crisis high of 4.6% in the first quarter of this year from 4.0% y-o-y in the same period a year earlier,(2) despite a tighter fiscal stance. Note that the fiscal deficit narrowed to 1.7% of GDP in the first quarter of this year from 1.9% in the same period a year earlier, on a 4-quarter rolling basis(3). The acceleration in economic activity was supported by private consumption and exports(2). Stronger real disposable income, mainly reflecting improving labour market conditions, combined with recovering credit activity, boosted private consumption. Buoyant external demand, mainly from the recovering economies of the European Union — SEE-5’s major trading partner — underpinned exports.

(1)  Source: Published data from the Central Banks and the National Statistical Agencies of the related countries and processed by NBG. The SEE-5 weighted averages are based on NBG estimates of nominal EUR GDP in each country

(2)  Source: Published data from the National Statistical Agencies of the related countries and processed by NBG

(3)  Source: Published data from the Ministries of Finance of the related countries and processed by NBG

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Looking ahead, economic activity is set to keep momentum during the rest of the year, with the drag on activity from net exports, reflecting higher imports, being offset by stronger domestic demand. The latter should be supported inter alia by a more accommodative policy mix, continued improvement in labour market conditions and sustained recovery in credit activity. We foresee the full-year GDP growth largely surpassing its long-term potential of c. 3.0%, standing at a 9-year high of 4.8% this year (4) against 4.2% in 2016(2).

On a negative note, headline inflation rose sharply, yet to a still moderate level of 1.5% y-o-y in June from -0.6% y-o-y in the same month a year earlier(2), due to unfavourable global oil prices (the average price of the Brent Barrel retreated by 4.8% y-o-y in June compared with a decline of 21.7% in the same month a year earlier in EUR terms) (5) and higher imported inflation.

Importantly, despite a very unfavourable energy bill (the average price of the Brent Barrel surged by 52.8% y-o-y in the first four months of this year compared with a sharp decline of 34.4% y-o-y in the same period a year earlier in EUR terms) (5) and stronger domestic demand, the current account deficit in April remained unchanged from the same month a year earlier, standing at the manageable level of 2.1% of GDP on a 12-month rolling basis,(6) underpinned by the rebound in external demand. Equally important, the quality of financing of the current account gap remained sound. Indeed, non-debt generating foreign direct investments continued to more than cover the current account deficit for the fourth year in a row (134.4% in April on a 12-month rolling basis).(6)

Amid a favorable operating environment, the fundamentals and the performance of the SEE-5 banking sector also improved in the first quarter of this year. Indeed, the bottom line rose to an estimated €2,541 million (annualised) in the first quarter of this year from €2,274 million (annualised) in the same quarter a year earlier and €1,953 million in full-year 2016 (6). This performance was underpinned by lower provisions for bad loans, in line with the moderation of the ratio of problematic loans to total gross loans (ranging between 6.4% in FYROM and 17.4% in Albania in the first quarter of this year and 10.9% in FYROM and 20.9% in Serbia a year earlier).(6) Moreover, the capital adequacy ratio improved further (ranging between 15.4% in FYROM and 22.7% in Bulgaria in the first quarter of this year and 15.8% in FYROM and 22.9% in Bulgaria a year ago).(6) The improved asset quality and solvency bode well for a strong rebound in lending activity in the near future, in view of the region’s low penetration rate (loan-to-GDP ratios ranged between 28.0% in Romania and 53.0% in Bulgaria in May), especially in the retail segment (retail lending-to-GDP ratios ranged between 11.4% in Albania and 21.9% in FYROM in May) (6) and adequate liquidity (the SEE-5 average loan-to-deposit ratio eased further to 84.8% in May from 90.8% in the same month a year earlier — well below its pre-global financial crisis high of 133.7%).(6)

There are, however, downside risks to the SEE-5 positive outlook, stemming from: i) tighter-than-expected global liquidity conditions, as further policy rate adjustment by the Fed might be on the agenda if growth and inflation pick up in response to the fiscal policies under Trump administration; ii) weaker-than-expected economic activity in the region’s main trading, investing and financing partner — the euro area — in the event of increased protectionism by the new U.S. administration; and iii) deteriorating investor confidence in the event of renewed domestic political uncertainty and subsequently policy slippage.

Anticipated developments (risk and uncertainties)

Looking forward in 2017, the growth rate of the global economy is expected to pick up pace to 3.5% year over year (according to IMF World Economic Outlook, July 2017) from 3.2% year over year in 2016. However, there are essential downside risks surrounding the outlook. A rising protectionism sentiment could hurt global trade and growth prospects, while political and geopolitical risks (North Korea, Middle East, Ukraine/Russian clash) could derail the global recovery. In that respect, European political uncertainty abated following the outcome of the French elections, but could re-surface due to “Brexit” negotiations as the UK triggered the Article 50 of the Treaty of the European Union in March 2017, starting a two-year countdown for its withdrawal. Moreover, the possibility of an anti-establishment, Eurosceptic Government in Italy following early general elections in 2017 or (by law) in 2018 is likely to add to political uncertainty.

In addition, noticeable stress in European banks amid unresolved legacy issues (e.g. non-performing exposures) and weak profitability could reignite the euro area sovereign cum banking crisis. Moreover, tighter global financial market conditions —possibly also triggered by a reassessment of the U.S. Federal Reserve interest rate tightening cycle - could result in rising risk premia across major asset classes leading to heightening financial market volatility.

Finally, in China, authorities’ efforts to address financial risks and curb excess credit could result to a sharper than expected slowdown of the Chinese economy that could bear negative repercussions in both emerging and advanced economies through confidence and currency channels, commodity prices, as well as global trade .

As regards Greece, the official projections for a solid economic recovery in 2017 and 2018 of 2.1% and 2.6% y-o-y respectively, on average (Sources: EU Commission Spring Forecast, April 2017 and IMF World Economic Outlook, April 2017) with the Greek Government’s forecasts included in the MTFS for 2018-2021 being somewhat more conservative (1.8% and 2.4%, y-o-y, in 2017 and 2018 respectively, as well as 2.4%, y-o-y, on average in 2019-2021), are expected to be primarily based on the improving conditions in specific segments of the business sector that survived the crisis, a sustainable increase in employment and a bottoming of hourly wages which will result into higher disposable income.

The recovery is expected to gain traction over the course of 2017 supported by: i) improving sentiment compared to the previous year; ii) positive tourism contribution — pick-up in tourism revenue (0.9% y-o-y in the first five months of 2017, Source: Bank Of Greece, Press Release, Balance of Payments, May 2017), as well as tourism arrivals growth (of 2.4%, y-o-y, in the first five months of 2017, Source: Bank

(4)  Source: NBG forecast

(5)  Source: Reuters and NBG calculations

(6)  Published data from the Central Banks of the related countries and processed by NBG

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of Greece, Press Release, Developments in the balance of travel services: May 2017) and improving goods’ export trends (+8.6%,y-o-y, excluding oil products, in the first five months of 2017, Source: Bank Of Greece, Press Release, Balance of Payments, May 2017), iii) accelerating business and public investment activity supported by inflows of program funding for arrears clearance and EU structural funds, iv) a further normalization in liquidity conditions (reflecting, inter alia , additional progress in the clearance of government arrears), which has already become evident in the improved pricing of large Greek corporates’ debt issuance in the first semester of 2017 and v) an expected further easing of capital controls.

Completed disposals of subsidiaries

Sale of NBG’s Bulgarian subsidiaries United Bulgarian Bank A.D. (“UBB”) and Interlease E.A.D.

On 30 December 2016 NBG entered into a definitive agreement with KBC for the divestment to KBC of its 99.91% stake in its Bulgarian subsidiary UBB and its 100% stake in Interlease E.A.D. The agreed consideration for the transaction amounted to €610 million.

With the successful completion of the transaction on 14 June 2017, Group’s Common Equity Tier 1 (“CET1”) ratio increased by 74 bps.

Agreed disposals of subsidiaries

Sale of South African Bank of Athens Ltd (“S.A.B.A.”) to AFGRI Holdings Proprietary Limited (“AFGRI”)

On 22 December  2016 the Group entered into a definitive agreement with AFGRI, a company incorporated in the Republic of South Africa for the divestment to AFGRI of its 99.81% stake in its South African subsidiary S.A.B.A. The agreed consideration for the sale of the subsidiary amounts to ZAR 279 million.

Closing of the transaction is subject to customary regulatory and other approvals, including from: (i) the South African Reserve Bank (ii) the South African Ministry of Finance and (iii) the South African Competition Commission and Competition Tribunal (already received) and is expected to close within the second semester of 2017.

Sale of the majority equity holding in Ethniki Hellenic General Insurance S.A. (“Ethniki Insurance”) to EXIN Financial Services Holding B.V. (“EXIN”)

On 2 7 June 2017, the NBG’s Board of Directors approved the divestiture of a 75.00% stake in Ethniki Insurance to EXIN and the establishment of an exclusive bancassurance agreement, which will govern the distribution of products of Ethniki Insurance via the NBG network. The agreed consideration for the Ethniki Insurance Transaction amounts to €718 million. NBG and EXIN also entered into a shareholders’ agreement, which will govern their respective ownership and control of Ethniki Insurance. The related agreement was signed on 29 June 2017.

NBG retains a 25.00% stake is in line with the spirit of partnership that will govern NBG’s relationship with EXIN going forward.

Closing of the Transaction is subject to the approval from the relevant Competition Authorities and the Bank of Greece and is expected to close by the end of 2017.

Sale of Banca Romaneasca (“BROM”) to OTP Bank Romania (“OTP”)

On 27 July 2017, the Group entered into a definitive agreement with OTP Bank Romania (“OTP”) for the divestment to OTP of its 99.28% stake in its Romanian subsidiary Banca Romaneasca (“BROM”) for an agreed consideration of €72 million and of a portfolio of Romanian-risk corporate loans (together the “BROM Transaction”). By taking into account the repayment of the intra-group debt, the BROM Transaction is expected to strengthen Bank’s liquidity position by c. €650 million.

Closing of the transaction is subject to approval from the National Bank of Hungary, the National Bank of Romania and anti-trust approvals.

Sale of Vojvodjanska Banka a.d. Novi Sad (“Vojvodjanska”), NBG Leasing d.o.o. Belgrade and NBG Services d.o.o. Belgrade to OTP Banka Srbija a.d. Novi Sad

On 4 August 2017, the Group entered into a definitive agreement with OTP Banka Srbija a.d. Novi Sad (“OTP Serbia”) for the divestment to OTP Serbia of its 100% stake in its Serbian subsidiaries Vojvodjanska Banka AD and NBG Leasing d.o.o. for an agreed consideration of €125 million and of a portfolio of Serbian-risk corporate loans (together the “Vojvodjanska Transaction”). By taking into account the repayment of the intra-group debt, the Vojvodjanska Transaction is expected to strengthen Bank’s liquidity position by c. €280 million.

Closing of the above transaction is subject to approval from the National Bank of Hungary, the National Bank of Serbia, the General Council of the Hellenic Financial Stability Fund and anti-trust approvals.

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The total impact on the Group’s CET1 ratio from the completion of the above transactions (S.A.B.A., BROM, Ethniki Insurance and Vojvodjanska) is estimated at positive c. 170 bps, of which negative 38 bps have already been incorporated in the first half of 2017 relating to impairment charges for BROM and Vojvodjanska.

NBG participation in the short term measures of Greek debt restructuring through a Bond Exchange program

As discussed above, on 5 December 2016, Eurogroup endorsed the implementation of the short-term debt relief measures beginning in early 2017 (see “ The Greek economy stabilized in 2016 despite the considerable fiscal headwinds and shows signs of recovery since early 2017 ”). These measures include, among others, a prospective bond exchange of the floating rate notes used for Greek banks’ recapitalization for fixed-rate notes with much longer maturities, with a view to stabilizing interest rates and smoothen the future debt repayments profile for the Greek State. This exchange is effected at the bonds’ carrying amount, therefore, it has no impact on the Bank’s income statement.

In this context, in 2017, from February and up to August, the Bank participated in the Bond Exchange Program with the nominal amounts of €5.7 billion. The outstanding nominal amount of notes eligible for this program is €2.3 billion. In January 2017, before the initiation of the Bond Exchange Program, the Bank disposed of EFSF bonds of nominal value €325 million.

Financial Results

Profitability

Greece :

H1.17 domestic core pre-provision income (“PPI”) reached €448 million from €375 million in H1.16, reflecting mainly an increase in net fee and commission income and a drop in Net Interest Income (“NII”) (-2.0% y-o-y) and in operating expenses (-8.8% y-o-y).

NII amounted to €764 million from €779 million in H1.16, due to deleveraging. The additional EFSF/ESM bond disposals under the ESM bond exchange scheme resulted in NIM improving by 30bps to 304bps in H1.17.

Net fee and commission income in H1.17 fees reached €107 million, up by 81% y-o-y. Net fee growth reflects significant improvements in the Bank’s liquidity profile, allowing for the elimination of Pillar funding costs, resulting into a fee expense saving of €39 million relative to H1.16.

In H1.17, operating expenses settled at €423 million from €464 million in H1.16 or 8.8% lower y-o-y. Cost-to-core income recovered to 48.5% in H1.17 from 55.3% in H1.16. Personnel expenses dropped by 12.6% y-o-y, incorporating the benefit from the December 2016 voluntary exit scheme (“VES”) that involved c10% of the domestic workforce.

H1.17 domestic losses for the period from continuing operations amounted to €73 million from €63 million in H1.16, reflecting mainly the increased loan impairments (+34% y-o-y to €431 million), partially offset by core income recovery (+19% y-o-y).

SE Europe(7) :

In SE Europe, the Group recorded profit for the period from continuing operations of €13 million in H1.17 from €21 million in H1.16, incorporating trading and other losses of €3 million in H1.17 against gains of €4 million a year ago.

Non-Performing Exposures (“NPEs”) stock declines for a 5 th  consecutive quarter

The stock of domestic NPEs contracted for a 5 th  consecutive quarter (-€2.4 billion y-o-y), reflecting slightly negative NPE formation despite uncertainly in Q2.17 and fully provided write-offs. The Bank has already reduced NPEs by €3.3 billion since end-Q4.15, overshooting the NPE operational target by €0.7 billion agreed with SSM. Notably, the gross NPE reduction before write offs stands at €1.5 billion. The NPE ratio in Greece stands at 45.2% in Q2.17 with coverage of 56.2%.

H1.17 domestic provisioning run rate increased to 276bps from 212bps in FY.16. 90dpd coverage stood at 75.4% in Greece (74.2% at the Group level).

In SE Europe, the 90dpd ratio settled at 34.7% (+268bps y-o-y) with coverage of 54.9% from 54.5% in H1.16.

Liquidity position

Group deposits amounted to €38.3 billion on 30 June 2017 (+1.4% y-o-y), due to  €0.6 billion y-o-y increase of domestic deposits. Notably, since the imposition of capital controls the Bank’s deposit base in Greece has increased by €0.9 billion. In SE Europe deposits decreased by 0.5% y-o-y to €2.1 billion.

(7)  SE Europe includes the Group’s businesses in Cyprus, Albania, the Former Yugoslav Republic of Macedonia and other countries

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Following the completion of the sale of UBB & Interlease in mid-June that generated liquidity of €0.8 billion, Eurosystem funding has declined significantly to €6.8 billion in August(8) from €12.3 billion at end-Q4.16, with ELA down by €3.0 billion over the same period to just €2.6 billion with ELA over assets (excluding EFSF & ESM bonds) standing at just 4%. The cash value of excess collateral amounts to €10.1 billion(8). Liquidity stands to improve further with the completion of the recently agreed transactions of NIC, BROM and Vojvodjanska to the tune of c €1.7 billion, reducing ELA exposure by the same amount. The execution of the remaining capital actions, as well as other initiatives, render the target of imminent ELA elimination well within reach.

With ELA exposure at €2.6 billion and Loan to Deposit ratio 85.0% in Greece and 85.5% at Group level, NBG maintains a unique funding advantage and is well positioned to tap domestic economic recovery potential.

Capital position

CET1 ratio stood at 16.5% and at 16. 3% on a CRD IV Fully Loaded basis, excluding the impact from the agreed sales of SABA, NIC, BROM and Vojvodjanska.

Excluding completed and agreed transactions, equity of remaining SEE assets to be divested stands at €0.5 billion on RWAs of €2.4 billion.

Going concern

Liquidity

Total Eurosystem funding was significantly reduced as of 30 June 2017 to €8.4 billion (31 December 2016: €12.3 billion), of which €4.6 billion from ECB (31 December 2016: €6.7 billion) and €3.8 billion from ELA (31 December 2016: €5.6 billion). Furthermore, as of 30 June 2017 the Bank had entered into secure interbank transactions with foreign financial institutions of €4.5 billion, while the Bank’s ELA liquidity buffer stood at €9.6 billion (cash value). As of 28 August 2017, Eurosystem funding was further decreased to €6.8 billion, while ELA reduced to €2.6 billion and the liquidity buffer amounted to €10.1 billion (cash value).

Capital adequacy

The Group’s Common Equity Tier 1 (“CET1”) ratio at 30 June 2017 was 16.5% (see Note 17).

Going concern conclusion

Management concluded that the Bank is a going concern after considering (a) its current access to the Eurosystem facilities, (b) the Bank’s and the Group’s CET1 ratio of 30 June 2017 and (c) the recent developments regarding the Greek economy and the latest estimates regarding macroeconomic indicators, as discussed above.

Implementation of the Bank Recovery and Resolution Directive

Greek Law 4335/2015, as in force implements in Greek law Directive 2014/59/EU of 15 May 2014, which provides for the establishment of an EU-wide framework for the recovery and resolution of credit institutions and investment firms (the “Bank Recovery and Resolution Directive” or “BRRD”). The BRRD is designed to provide authorities with a credible set of tools to intervene sufficiently early and quickly to avoid a significant adverse effect on the financial system, to prevent threats to market infrastructures, to protect depositors and investors and to minimize reliance on public financial support.

The BRRD contains a broad range of resolution tools and powers which may be used alone or in combination where the relevant resolution authority considers that certain required conditions are met, including, inter alia, that an institution is failing or likely to fail and no alternative private sector measure, or supervisory action, would prevent the failure of the institution within a reasonable timeframe. The resolution tools include the power to sell or transfer assets (or ownership thereof) to another institution and a general bail-in tool, which provides for the write-down or conversion of any obligations of the institution that meet relevant conditions. In cases of an exceptional systemic crisis, extraordinary public financial support may be provided in accordance with the EU state aid framework, as a last resort and subject to additional conditions.

In addition to the general bail-in tool, the BRRD provides for resolution authorities to have the power to permanently write-down or convert into equity capital instruments such as subordinated notes at the point of non-viability and before any other resolution action is taken (non-viability loss absorption). These measures could be applied to certain of the Group’s debt securities under certain conditions. Furthermore, in circumstances where capital instruments are converted into equity securities by application of the mandatory write-down tool, those equity securities may be subjected to the bail-in powers in resolution, resulting in their cancellation, significant dilution or transfer away from the investors therein. Furthermore, Greek Law 4335/2015 designated the Resolution Leg of Hellenic Deposit and Investment Guarantee Fund (“HDIGF”) as the new National Resolution Fund as far as credit institutions are concerned.

Lastly, it should be noted that Executive Committee Act 111/31.01.2017 of Bank of Greece provides interpretation of the different circumstances when an institution shall be considered as failing or likely to fail regarding the implementation of the obligation of the Board of Directors of the institution to notify the Bank of Greece.

(8)  Data as at 28 August 2017

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Restructuring Plan

The Group is subject to European Commission rules on EU state aid in light of the aid received from the HFSF and the Hellenic Republic. These rules are administered by the Directorate General for the Competition of the European Commission. Under these rules, the Bank’s operations are monitored and limited to the operations approved in the 2015 Revised Restructuring Plan, which aims to ensure the Bank’s return to long-term viability.

Revised Restructuring Plan approved by the Directorate General for Competition on 4 December 2015

On 4 December 2015, the European Commission approved the NBG’s Revised Restructuring Plan (2015 Restructuring Plan).

The 2015 Restructuring Plan includes a number of commitments to implement certain measures and actions that have to be completed during the period 2015-2018 (the “Commitments”). The Commitments relate both to domestic and foreign operations of the Group. Differentiations to the restructuring plan approved in July 2014 relate to the deepening of the bank’s operational restructuring, some amendments on commitment’s deadlines, as well as a commitment to further dispose of foreign assets.

For the domestic operations, the Commitments relate to constraining operating expenses, including the number of personnel and branches. Other Commitments relate to monitoring the cost of deposits in Greece, maintaining a level of loans-to-deposits ratio below a maximum ratio, adhering to an investment policy and the divestment from certain domestic non-banking activities.

In particular, the Commitments relate to the following:

·                   Number of branches in Greece : Restriction of the total number of branches in Greece to 540 at the end of 2017 (as of 30 June 2017: 486).

·                   Total Full time equivalent personnel (“FTEs”) in Greece : Restriction of the total number of FTEs in Greece to a maximum of 10,250 at the end of 2017 and 9,950 at the end of 2018. The Group has proceeded to a significant reduction of FTEs in Greece, including two voluntary exit schemes in 2013 and 2016, through which 3,661 employees left the Bank and certain Greek subsidiaries. As of 30 June 2017, the domestic FTEs were 9,841(9).

·                   Total operating costs in Greece : Restriction of total operating costs in Greece to €961 million for the year 2017. For the period ended 30 June 2017 such costs amounted to €423(1) million (for the year 2016: €931(1) million).

·                   Cost of deposits in Greece : NBG will have to follow its own projections with regards to the cost of domestic deposits, as this is depicted in the Revised Restructuring Plan, in order to regain its profitability in Greece. NBG has already achieved the reduction of its cost of deposits in Greece in line with forecasts in the Restructuring Plan.

·                   Loans/Deposits : Restriction of the Loan/Deposit ratio in Greece at a maximum of 115% at the end of 2018. As of 30 June 2017 the ratio was 85.0%.

·                   Sale of insurance activities : In June 2017, NBG entered into an agreement with EXIN Financial Services Holding B.V. (“EXIN”) to sell a 75.00% stake in NIC for a total consideration of €718.3 million. NBG will retain a 25.00% stake in NIC.

·                   Reduction of securities portfolio: NBG will reduce its investments in shares, subordinated debt and hybrid securities. More specifically, NBG has proceeded to a significant reduction of its securities portfolio, from €184 million as of 30 June 2013 to €27 million as of 30 June 2017.

·                   Disposal of Private Equity Funds (“Funds”) : The disposal was completed on 30 September 2016.

Regarding its international operations, NBG’s Commitments mainly refer to the below:

·                   Sale of Finansbank : On 15 June 2016, NBG completed the sale of 100% of its shareholding in Finansbank. Following the closing, on 15 December 2016, NBG proceeded with the full repayment of the Contingently Convertible Securities (“CoCos”).

·                   Divestment from international operations : NBG will reduce its international activities, by disposing certain subsidiaries and branches. In June 2017, the Bank completed the sale its 99.91% shareholding in UBB (Bulgaria)and its 100% shareholding in Interlease E.A.D. (Bulgaria) to KBC Bank (Belgium). Additionally, in December 2016, NBG entered into a Share Purchase Agreement (“SPA”) for the sale of its subsidiary South African Bank of Athens Ltd (“SABA”). Furthermore in July 2017 and August 2017, NBG entered into SPAs for the sale of 99.28% of its Romanian subsidiary Banca Romaneasca S.A. and its 100.00% Serbian subsidiaries Vojvodjanska Banka a.d. Novi Sad, NBG Leasing d.o.o. Belgrade and NBG Services d.o.o. Belgrade to OTP Bank Plc (Hungary). Closing of the above transactions is expected by the end of 2017, subject to customary regulatory and antitrust approvals.

Other Commitments refer to the following:

·                   Investment policy : NBG will not invest in non-investment grade securities, except for specific cases.

·                   Salary cap : Restriction of the total annual remuneration (including salary, pension contribution and bonus) of any of NBG’s employees to a certain amount.

(9)  Excluding Ethniki Hellenic General Insurance S.A.

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·                   Prolongation of Commitments: NBG will continue to implement the Commitments on Corporate Governance and Commercial Operations, as submitted by the Hellenic Republic on 20 November 2012, until the end of the Restructuring period.

The implementation of the commitments set out in the 2015 Restructuring Plan is monitored by the Monitoring Trustee.

Events after the reporting period

The events after the reporting period are disclosed in Notes 2.2 and 9.

Risk management

The Group operates in a fast growing and changing environment and acknowledges its exposure to banking risks as well as the need for effective risk management. Risk management and control forms an integral part of the Group’s commitment to providing continuously high returns to its shareholders.

Credit risk

Credit risk is the risk of financial loss relating to the failure of a borrower to honor its contractual obligations. It arises in lending activities as well as in various other activities where we are exposed to the risk of counterparty default, such as our trading, capital markets and settlement activities. Credit risk is the largest single risk we face. Our credit risk processes are conducted separately by the Bank and each of our subsidiaries. The credit risk processes established by the subsidiaries are coordinated by the Group Risk Control & Architecture Division (“GRCAD”).

The Group’s credit granting processes include:

·                   Credit-granting criteria based on the particular target market, the borrower or counterparty, as well as the purpose and structure of the credit and its source of repayment.

·                   Credit limits that aggregate in comparable and meaningful manner different types of exposures, at various levels.

·                   Clearly established procedures for approving new credits as well as the amendment, renewal and re-financing of existing credits.

The Group maintains on-going credit administration, measurement and monitoring processes, including in particular:

The Group’s internal controls that are implemented for the credit risk related processes include:

Active credit risk management is achieved through:

·                   The application of appropriate limits for exposures to a particular obligor, a group of associated obligors, obligors that belong in the same economic sector, etc.

·                   The use of credit risk mitigation techniques (such as collaterals and guarantees).

·                   The estimation of risk adjusted pricing for most products and services.

Since 2008, the Bank is following the Internal Ratings Approach (“IRB”) for the calculation of capital charges arising from credit risk in its corporate, SME Retail and mortgage portfolios which exceed 80% of its banking book loan exposures on a standalone basis.

Market risk

Market risk is the current or prospective risk to earnings and capital arising from adverse movements in interest rates, equity and commodity prices and exchange rates, and their levels of volatility. The Group engages in moderate trading activities in order to enhance profitability and service its clientele. These trading activities create market risk, which the Group seeks to identify, estimate, monitor and manage effectively through a framework of principles, measurement processes and a valid set of limits that apply to all of the Group’s transactions. The most significant types of market risk for the Group are interest rate, equity and foreign exchange risk.

Interest rate risk is the risk related to the potential loss on the Group’s portfolio due to adverse movements in interest rates. A principal source of interest rate risk exposure arises from the interest rate over-the-counter (“OTC”) and exchange traded derivative transactions, as well as from the trading and available-for-sale (“AFS”) bond portfolios.

The most significant contributor to market risk in the Group is the Bank. More specifically, the Bank is active in the interest rate and cross currency swap market and engages in vanilla and more sophisticated transactions for hedging and proprietary purposes and it maintains positions in bond and interest rate futures, mainly as a means of hedging and to a lesser extent for speculative purposes. Additionally, the

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Bank retains a portfolio of Greek T-Bills and government bonds and other EU sovereign debt, EFSF bonds, as well as moderate positions in Greek and international corporate bonds.

Equity risk is the risk related to the potential loss due to adverse movements in the prices of stocks and equity indices. The Group holds a limited portfolio of stocks, the majority of which are traded on the Athens Exchange (the “ATHEX”) and retains positions in stock and equity index derivatives traded on the ATHEX, as well as, on international exchanges. The cash portfolio comprises of trading (i.e. short-term) and available-for-sale (i.e. long-term) positions. The portfolio of equity derivatives is used for proprietary trading, as well as for the hedging of equity risk arising from the Group’s cash positions and equity-linked products offered to its clientele. In the same context and to a lesser extent, the Group enters into OTC equity derivative transactions for trading and hedging purposes.

Foreign exchange risk is the risk related to the potential loss due to adverse movements in foreign exchange rates. The Open Currency Position (“OCP”) of the Bank primarily arises from foreign exchange spot and forward transactions. The OCP is distinguished between Trading and Structural. The Structural OCP contains all of the Bank’s assets and liabilities in foreign currency (for example loans, deposits, etc.), along with the foreign exchange transactions performed by the Treasury Division. Apart from the Bank, the foreign exchange risk undertaken by the rest of the Group’s subsidiaries is insignificant.

The Bank, in order to ensure the efficient management of market risk, calculates the Value at Risk (“VaR”) of its Trading and AFS portfolios on a daily basis, along with the VaR per risk type. This has been implemented through RiskWatch by Algorithmics (currently IBM). The VaR estimates refer to a 1-day holding period and a 99% confidence interval. The most significant types of market risk to which the Bank is exposed are interest rate, equity and foreign exchange risk.

The Bank has established a framework of VaR limits in order to control and manage more efficiently the risks to which it is exposed. These limits have been determined based on the Risk Appetite framework of the Bank; they refer not only to specific types of market risk, such as interest rate, foreign exchange and equity risk, but also to the overall risk of the Bank’s Trading and AFS portfolios.

In order to verify the predictive power of the VaR model, which is used for the estimation of market risk, the Bank conducts back-testing on a daily basis. In accordance with the guidelines set out in the Capital Requirements Regulation 575/2013, the calculations only refer to the Bank’s trading portfolio and involve the comparison of the hypothetical and actual daily gains/losses of the portfolio with the respective estimates of the VaR model. Any excess of the hypothetical / actual losses over the VaR estimate is reported to the authorities within five business days.

The daily VaR estimations refer to “normal” market conditions. However, supplementary analysis is necessary for capturing the potential loss that might arise under extreme and unusual circumstances in the financial markets. Thus, the Bank conducts stress testing on a weekly basis, on both the Trading and Available for Sale portfolios, based on specific scenarios, depending on the risk factor category (interest rates, stock index prices, exchange rates) .

Liquidity Risk

Liquidity risk is defined as the current or prospective risk to earnings and capital arising from the institution’s inability to meet its liabilities when they come due without incurring unacceptable losses.

It reflects the potential mismatch between incoming and outgoing payments, taking into account unexpected delays in repayments (term liquidity risk) or unexpectedly high outflows (withdrawal/call risk). Liquidity risk involves both the risk of unexpected increases in the cost of funding of the portfolio of assets at appropriate maturities and rates, and the risk of being unable to liquidate a position in a timely manner and on reasonable terms.

The Bank’s executive and senior management has the responsibility to implement the liquidity risk strategy approved by the Board Risk Committee (“BRC”) and to develop the policies, methodologies and procedures for identifying, measuring, monitoring and controlling liquidity risk, consistent with the nature and complexity of the relevant activities. The Bank’s executive and senior management is informed about current liquidity risk exposures, on a daily basis, ensuring that the Group’s liquidity risk profile stays within the approved levels.

In addition, top management receives a liquidity report, on a daily basis, which presents a detailed analysis of the Group’s funding sources and counterbalancing capacity. Moreover, the Asset Liability Committee (“ALCO”) monitors the gap in maturities between assets and liabilities as well as the Bank’s funding requirements based on various assumptions, including conditions that might have an adverse impact on the Bank’s ability to liquidate investments and trading positions and its ability to access the capital markets. On a long term perspective, the Loans-to-Deposits ratio is monitored. This ratio stood at 85.0% and 85.5% as of 30 June 2017, on a domestic (Greece) and on a Group level, respectively.

Since liquidity risk management seeks to ensure that the respective risk of the Group is measured properly and is maintained within acceptable levels then, even under adverse conditions, the Group must have access to funds necessary to cover customer needs, maturing liabilities and other capital needs, while simultaneously maintaining the appropriate counterbalancing capacity to ensure the above. In addition to the Bank’s liquidity buffer, the rest of the Group’s subsidiaries maintain a liquidity buffer well above 10% of their total deposits, which ensures their funding self-sufficiency in case of a local crisis.

The Bank’s principal sources of liquidity are its deposit base, Eurosystem funding via the Main Refinancing Operations (“MROs”) and the Targeted Longer-term Refinancing Operations (“TLTROs”) with ECB, as well as through the ELA mechanism with the Bank of Greece, and repurchase agreements (repos) with major foreign Financial Institutions (“FIs”). ECB funding and repos with FIs are collateralized mainly

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by EFSF / ESM bonds, as well as by Greek government bonds and T-Bills and highly rated corporate loans. ELA funding is collateralized mainly by loans, as well as by covered bonds issued by the Bank.

During the first half of 2017, the Bank’s liquidity profile was improved, mainly driven by the Bank’s decreasing reliance on Eurosystem funding and in particular on ELA funding.

On 30 June 2017, Eurosystem funding stood at €8.4 billion, a decrease of €3.9 billion when compared to the respective figure as of 31 December 2016. Particularly, ECB funding was €4.6 billion, while ELA funding amounted to €3.8 billion, a decrease of €2.2 billion and €1.7 billion, respectively. The main drivers for these developments were the sale of €3.4 billion ESM bonds in the context of the short-term debt relief measures for Greece, as well as the divestment of UBB and Interlease E.A.D. for €0.7 billion. Additionally, the Bank’s balance of secured interbank transactions with foreign FIs remained at approximately the same level and amounted to €4.5 billion. Finally, the Bank’s customer deposits slightly decreased by €0.7 billion compared to 31 December 2016 and stood at €36.7 billion as of 30 June 2017.

Moreover, the Bank’s funding cost remained almost unchanged, when compared to the respective level as of 31 December 2016 and stood at 0.4 8% as of 30 June 2017. Finally, the Bank’s liquidity buffer during this period increased by €0.6 billion and stood at €10.3 billion on 30 June 2017, of which €0.1 billion was collateral eligible for funding with the ECB and €9.6 billion was collateral that could be posted in order to draw liquidity from ELA, while €0.1 billion was collateral that could be used for repos with FIs and the remaining €0.6 billion was either in the form of Cash or deposited in Nostro accounts.

Counterparty Risk

Counterparty risk for the Group is due to OTC derivative transactions and other interbank secured and unsecured funding transactions and it arises from the obligor’s failure to meet her contractual obligations. For the efficient management of counterparty risk, the Bank has established a framework of counterparty limits. The Group Market and Operational Risk Management Division (“GMORMD”) is responsible for setting these limits and monitoring the respective exposures.

Counterparty limits are based on the credit rating of the financial institutions as well as the product type. The credit ratings are provided by internationally recognized rating agencies, in particular by Moody’s and Standard & Poor’s. According to the Bank’s policy, if the agencies diverge on the creditworthiness of a financial institution, the lowest credit rating is considered.

Counterparty limits apply to all financial instruments in which the Treasury is active in the interbank market. The limits framework is annually revised according to the business needs of the Bank and the prevailing conditions in international and domestic financial markets. A similar limit structure for the management of counterparty risk applies across all of the Group’s subsidiaries.

The estimation of the exposure to each counterparty depends on the type of the financial product. In the case of money market placements, exposure is equal to the face amount of the transaction. In over the counter transactions, exposure is calculated based on Credit Equivalent Factors, according to the type of the transaction, its maturity, netting and collateralization.

The Group seeks to reduce counterparty risk by standardizing its transactions with counterparties through International Swaps and Derivatives Association (“ISDA”) and Global Master Repurchase Agreement (“GMRA”) contracts, which encompass all necessary netting and margining clauses. Additionally, for almost all active counterparties that are financial institutions, Credit Support Annexes (“CSAs”) have been signed, so that net current exposures are managed through margin accounts on a daily basis, by exchanging cash or debt securities as collateral, thus minimizing counterparty risk.

The Group avoids taking positions on derivative contracts where the values of the underlying assets are highly correlated with the credit quality of the counterparty (wrong way risk) .

Operational risk

Operational is defined as the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events.

The Group, acknowledging the importance of operational risk, has established and maintained a firm wide and effective, high quality framework for its management, since 2006. Starting in 2009, the management of operational risk throughout the Group is supported by Algorithmic’s (currently IBM) OpVar system. The specific software supports the overall operational risk management framework, which consists of the Loss Event Data Collection, the Risk and Controls Self-Assessment annual process, the definition and monitoring of Key Risk Indicators, the Structured Scenario Analysis process and the determination and monitoring of Action Plans.

The Bank has adopted the Standardized Approach for the calculation of operational risk regulatory capital requirements, both on a solo and on a consolidated basis .

Interest rate risk in the banking book

The Group systematically measures and manages the interest rate risk arising from its banking book items through:

·                   The analysis of re-pricing and liquidity gaps arising from its balance sheet structure.

·                   The measurement of economic value of equity and net interest income sensitivity under normal and exceptional changes in interest rates.

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Risk related to the recognition of the main part of deferred tax assets as regulatory capital or as an asset

The Group currently includes deferred tax assets (“DTAs”) in calculating the Group’s capital and capital adequacy ratios. As at 30 June 2017 and 31 December 2016, the Group DTAs, excluding the amount of the DTA that was classified as non-current assets held for sale, was €4.9 billion.

The Bank reviews the carrying amount of its DTAs at each reporting date, and such review may lead to a reduction in the value of the DTAs on the Bank’s statement of financial position, and therefore reduce the value of the DTAs as included in the Group’ s regulatory capital.

Regulation 575/2013 provides that DTAs recognized for IFRS purposes that rely on future profitability and arise from temporary differences of a credit institution and exceed certain thresholds must be deducted from its CET1 (Common Equity Tier 1) capital. This deduction is implemented gradually until 2019. However, as a measure to mitigate the effects of the deduction, article 27A of Greek Law 4172/2013, as amended by paragraph 1 of article 23 of Greek Law 4302/2014 and further amended by article 4 of Greek Law 4340/2015 (the “DTC Law”) allows, under certain conditions, credit institutions to convert DTAs arising from Private Sector Initiative (“PSI”) unamortized losses, as well as accumulated provisions and other losses due to credit risk recognized as at 30 June 2015, for IFRS purposes, (the “Eligible DTAs” or “DTCs”) to final and settled claims against the Hellenic Republic (the “Tax Credits”).

On 29 March 2017 the Law 4465/2017 was voted which further amended articles 27 and 27A of Law 4172/2013 as follows:

Amendments to article 27 introduce an amortization period of 20 years for losses due to loan write-offs as part of a settlement or restructuring and losses that crystallize as a result of a disposal of loans.

Amendments to article 27A: Extend the scope of article 27A to capture, in addition to PSI losses and provisions for loan losses, the following categories of time differences: (i) losses from the final write-off or the disposal of loans and (ii) accounting write-offs, which will ultimately lead to final write-offs and losses from disposals. It is further provided that Tax Credits cannot exceed the tax corresponding on accumulated provisions accounted up to 30 June 2015, less (a) any definitive and cleared tax credit, which arose in the case of accounting loss for a year according to the provisions of par.2 of article 27A, which relate to the above accumulated provisions, (b) the amount of tax corresponding to any subsequent specific tax provisions, which relate to the above accumulated provisions and (c) the amount of the tax corresponding to the annual amortization of the debit difference that corresponds to the above provisions and other losses in general arising due to credit risk.

On 18 May 2017 the Law 4472/2017 was passed, which requires banks to pay an annual fee of 1.5% on the excess amount guaranteed by the Greek State of deferred tax assets stemming from the difference between the tax rate applicable under Law 4336/2015 retrospectively from 1 January 2015 (29%) and the tax rate applicable on 30 June 2015 (26%). The law is applied retrospectively, on the DTA (eligible for DTC) recognized as of 31 December 2016. The charge recognised in Q2.17 is €1 3 million of which €9 million for 2016 and €4 million for the first half of 2017 and is presented within net other income / (expense).

As at 30 June 2017 Group’s eligible DTAs amounted to €4.8 billion (31 December 2016: €4.8 billion). The main condition for the creation of Tax Credits is the existence of an accounting loss for a respective year, starting from accounting year 2016 and onwards, for which Tax Credits can be created in the following year, i.e., from 2017. The Tax Credits will be calculated as a ratio of IFRS accounting losses to equity (excluding the year’s losses) and such ratio will be applied to the remaining Eligible DTAs in a given year to calculate the Tax Credit that will be converted in that year, in respect of the prior tax year. This new legislation allows credit institutions, including the Group, to treat such Eligible DTAs as not ‘‘relying on future profitability’’ according to CRD IV, and as a result such Eligible DTAs are not deducted from CET1, thereby improving an institution’s capital position.

If the regulations governing the use of DTCs as part of the Group’s regulatory capital should change, this may affect the Group’s capital base and consequently its capital ratios. As at 30 June 2017, 73.9% of the Group’s CET1 capital was comprised of DTC. Additionally, there can be no assurance that any final interpretation of the amendments described above and as a result Greek credit institutions will ultimately not be allowed to maintain certain DTCs as regulatory capital. If any of these risks materialize, this could have a material adverse effect on the Group’s ability to maintain sufficient regulatory capital, which may in turn require the Group to issue additional instruments qualifying as regulatory capital, to liquidate assets, to curtail business or to take any other actions, any of which may have a material adverse effect on the Group’s operating results and financial condition and prospects.

Related party transactions

Based on the existing regulatory framework, the Group must disclose any transaction between the Bank and all its related parties as defined in IAS 24, which took place during the fiscal year. Management’s total compensation, receivables and payables must be also disclosed separately. The following table presents the transactions between the Bank and its subsidiaries, while there are no significant transactions with its associates.

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For further details, see Note 16.

Athens, 31 August 2017

THE CHIEF EXECUTIVE OFFICER

LEONIDAS E. FRAGKIADAKIS

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Appendix for alternative performance measures

The definitions of NBG’s Group selected figures (rations/measures) are presented in the table below:

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The notes on pages 28 to 56 form an integral part of these financial statements

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The notes on pages 28 to 56 form an integral part of these financial statements

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