28_5_15 Credit Agricole _ Grexit Scenario Review

28 May 2015

https://catalystresearch.ca-cib.com

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for disclosures please see final page

Grexit scenario review

Frederik Ducrozet Senior Eurozone Economist, +33 1 41 89 98 95

Mohit Kumar Global Head of Rates Strategy, +44 20 7214 6651

Valentin Marinov Head of G10 FX Research & Strategy, +44 20 7214 5289

Harpreet Parhar, CFA Head of Credit Strategy, +44 20 7214 5534

28 May 2015 Page 1

GDP: -0.2% QoQ (Q1); HICP inflation: -1.8% YoY (Apr); IP: +5.0% YoY (Mar) Unemployment rate: 25.4% (Feb) Strong budget execution (EUR2.4bn ahead of target in Jan-Apr) on expenditure

cuts, but the available cash deposits fell to EUR800m in March

Greece vital statistics Who owns the Greek debt?

Greece fundamentals Grexit Scenario Review

Greek debt maturity profile

Greek debt holders % domestic debt

Germany 56 4% France 42 2% Italy 37 2% Other EZ 34 IMF 32 Spain 25 2% ECB 20 Greek banks 11 Foreign banks 2.4 AM, insurers, HF, etc 48.8 Other loans 10.5 Bank of Greece 4.3 Source: Open Europe, IMF EFSF, Greek public debt mgmt office.

2013 2014 2015 2016GDP (%, yoy) -3,9 0,8 0,5 2,9

Inflation (%, yoy) -0,9 -1,4 -1,5 0,8

Unemployment (%) 27,5 26,5 25,6 23,2

Budget balance (% of GDP) -12,3 -3,5 -2,1 -2,2

Public debt (% of GDP) 175,0 177,1 180,2 173,5

European Commission Forecasts (May 2015)

Source: Bloomberg

Source: EC

28 May 2015 Page 2

A higher Grexit probability vs lower contagion risk (confirmed by CDS market see below)

CDS pricing anticipates a non-orderly default or restructuring. The current implied probability for 1Y CDS (6600bp) is as follows: 20% recovery rate -> 83% 30% recovery rate ->94% 40% recovery rate ->110%

Higher risks How is the risk of a Grexit evolving?

Market no longer perceives Greece as a threat to the financial sector (hybrid pricing, spreads tightening, etc) and it is right

Greece perceived as an isolated case in Europe Greek debt owned by sovereigns not FI Greek people still willing to stay in the Eurozone at any cost

Lower risks Greece vs other peripheral spreads

Greeces situation: what has changed since 2013?

Incentive to maintain Greece has reduced (Germany, ECB) on perception of limited risk for Eurozone amid stronger safety nets and QE

New Greek government + recent political decisions Greece increasingly perceived as an isolated case (market

becoming complacent about the default risk)

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4-Jan-10 4-Jan-11 4-Jan-12 4-Jan-13 4-Jan-14 4-Jan-15Average 5Y CDS (SP, It, Por) GRE5Y/Av(Sp, It, Por)- rhs

Grexit Scenario Review

Source: Crdit Agricole CIB

28 May 2015 Page 3

Potential scenario until year-end Grexit Scenario Review

Grexit

Contained Greece + Portugal The end of EUR

FX: Temporary weakness in EUR/USD on contagion risk followed by strengthening.

Credit: Widening still predominantly driven by risk aversion but with refinancing and fundamental risk becoming more important. Primary market closed for a short time but accessible only those issuers willing to pay up. Greater ECB liquidity, better clarity on Greece (by year-end) than Scenarios 1 & 2, contained contagion and the Fed likely to push back a rate hike could mean this is the most optimal end-2015 scenario for spreads

The weak get weaker impacting the core vs periphery at least temporarily.

12.5% probability 4.5% probability

0-5% probability

FX: Sharper deterioration of EUR/USD reflecting sharp confidence shock.

Credit: A Portugal exit from the euro is unlikely to be immediate and could take many months to build. The period of uncertainty could extend to least three months, which will keep spread levels elevated and all peripheral funding costs high. Bank underperformance significant as cross-border banking exposures back in the spotlight. Some large European banks exposed (>EUR5bn) to Portugal (Santander, Barclays)

Greece + Portugal = c.EUR560bn. Default would surpass size of reserve account. Political climate deteriorates as Eurozone policy seen as a failure.

FX: Splintering of the Eurozone into DM-bloc currencies and the rest.

Credit: Refinancing risk becomes a much greater issue here and market pricing is likely to become almost random, particularly for peripheral credits. Core/semi-core credits will also be under huge pressure due to uncertainty over redenomination risk, currency mismatches and balance sheet quality. Primary market likely to be closed for an extended period of time

Additional Exit looks unsustainable both fundamentally and politically. Political uncertainty rises across Europe.

3% probability

Status quo Orderly Restructuring

FX: Consistent with FX market expectations at present. Muted EUR/USD impact.

Credit: We only expect a limited spread rally to follow an agreement as an adverse scenario has not really been priced . Peripheral credits may rally a little but recent underperformance has been extremely limited. After an initial bounce spreads likely to struggle for traction due to new issue supply, the fact that Greece has not really been resolved, summer (il)liquidity and rising concerns of a Fed rate hike in September

Rates: Peripherals rally, testing the April lows (90-100bp spread to Bunds). Curves flatten on duration-extension trades.

60% probability 20% probability

FX: EUR/USD initially weaker on the back of heightened uncertainty, followed by recovery

Credit: Biggest spread driver likely to be risk aversion as we expect limited impact long term on primary market access, fundamentals and the banking sector. Spread reaction dependent upon ECB and political action but repricing in line with other markets, eg, rates. However this should be reversed out fairly quickly. Some spread premium to remain in peripheral credits.

Rates: Short-term volatility in peripheral spreads and rally in Bunds. Italian spreads could widen 75-100bp but come back over the medium term

Greek and ECB officials keep kicking the can down the road to the next repayment period. No referendum taking place nor ECB cutting the line.

No deal (and possibly a missed payment) leads to Greek referendum, which ultimately avoids a Grexit but leads to new debt restructuring. Capital controls possible in the transition.

Rates: Pressure on EZ sovereign ratings. Several downgrades expected even if not automatic according to RA.

Rates: Immediate selling on Spain expected before ECB steps in.

Rates: Bunds would outperform rest of Eurozone bonds and probably fall into negative territory (safe haven vs volatility).

No Grexit

28 May 2015 Page 4

Conclusions Grexit Scenario Review

Orderly restructuring Grexit contained Grexit

+ Portugal Comment

Macro Temporary increase in risk aversion + drag on the economy but ultimately reduced uncertainty at a moderate cost to creditors

Direct impact: Russia, Italy and Turkey Indirect impact: Confidence shock, political precedent

Direct impact: Portugal itself, then Spain, Italy Indirect impact: Broad-based confidence shock

The countries leaving would feel the biggest pain, and financial contagion would remain limited under the most benign scenarios. Political contagion would remain a threat over the longer term, however.

Rates (short-term impact)

Italy/Spain spreads: +100bp Bunds 10Y: -30bp Italy 5Y10Y curve steeper by 50bp

Italy/Spain spreads: +200bp Portugal : +400bp Bund 10Y: -60bp

Italy/Spain spreads: +400bp Bund 10Y: -100bp

Less of an impact than in the first round of the sovereign crisis in scenario 1. Second option comes back to situation already seen in 2009 for core / peripheral spreads.

FX (short-term impact)

EUR/USD at 1.04 (vs 1.11) EUR/USD: 1.00 (vs 1.11) EUR/USD: 0.96 (vs 1.11)

EZ without Greece seems stronger but its image is damaged for good. This would be seen as a long-term negative.

Credit (short-term impact)

After one-week iTraxx Europe: 100bp (vs 63bp) iTraxx Sr. Fins: 124bp (vs 76bp) iTraxx Crossover: 461bp (vs 285bp) iBoxx Non-Fin. EU: 86bp (vs 52bp) iBoxx Non-Fin. Periph: 151bp (vs 69bp) iBoxx Sr. Bank EU: 86bp (vs 41bp) iBoxx Sr. Bank Periph: 189bp (vs 73bp)

After one-week iTraxx Europe: 130bp iTraxx Sr. Fins: 154bp iTraxx Crossover: 602bp iBoxx Non-Fin. EU: 112bp iBoxx Non-Fin. Periph: 206bp iBoxx Sr. Bank EU: 119bp iBoxx Sr. Bank Periph: 254bp

After three-months iTraxx Europe: 164bp iTraxx Sr. Fins: 207bp iTraxx Crossover: 752bp iBoxx Non-Fin. EU: 148bp iBoxx Non-Fin. Periph: 277bp iBoxx Sr. Bank EU: 170bp iBoxx Sr. Bank Periph: 313bp

In an orderly restructuring and contained Grexit spreads will hit the wides in the week following the event. Here we expect an almost complete retracement in Eurozone minus periphery spreads by year-end but a premium to remain in peripheral spreads In a Grexit + Portexit scenario, a Portuguese exit will not be immediate so spreads would remain under pressure with the wides likely to come after three months.

28 May 2015

Macro Key points:

Large, depression-like impact on the economy of the countries leaving Limited direct impact on other countries but any exit would set a precedent, leading to structurally higher peripheral risk

premia Negative rating impact on EFSF / ESM (and political perception in the core)

28 May 2015 Page 6

Direct impact Economies with strongest trade exposure to Greece include Russia,

Turkey, Germany, Italy, Bulgaria. Greek debt exposure

Public debt largely in official sector hands (~EUR320bn total, of which EUR20bn in ECB holdings, EUR142bn in EFSF loans, EUR53bn in bilateral loans and only EUR30bn in private sector PSI bonds)

Target 2 balance at EUR110bn in March (potentially higher today), of which around 50% could translate into a loss without triggering ECB recapitalisation (buffers include EUR400bn in revaluation accounts)

Private debt exposure seen as manageable, but creating two-tier markets and legal issues as individual contracts have to be redefined

Rating impact mostly negative for EFSF/ESM and peripheral sovereigns although downgrades would not necessarily come mechanically based on agencies recent comments

Political risks may end up creating the biggest contagion in the short term, political instability on Eurozone policy failure in the longer term, as Greece sets a precedent key difference between base case and worst case (full break-up)

Indirect impact Major deflationary and confidence shock Natural response to rising re-denomination risks would be OMT,

although the ECB is likely to expand QE in duration and size; more negative deposit rates possible

Grexit fundamental analysis

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53

32

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35EFSF

Bilateral loans

IMF

Private sector PSIbonds

ECB (SMP)

Others

Breakdown of Greeces public debt


2010As of October

As of April 30, 2013

Second programme

First programme

Initial contribution key %

EFSF amended*

contribution key %

EFSF amended*contribution

key %

Amount

Amount disbursed for Greece under

EFSF

GLF amount disbursed to Greece

Autriche Austria 2.78 2.99 2.99 21.6 3.9 1.6Belgique Belgium 3.47 3.72 3.73 27.0 4.9 2.0Chypre Cyprus 0.2 0.21 0.00 0.0 0.3 0.1Estonie Estonia 0.26 0.27 0.28 2.0 0.4 0.1Finlande Finland 1.79 1.92 1.93 14.0 2.5 1.0France France 20.31 21.83 21.88 158.5 28.6 11.5Allemagne Germany 27.06 29.07 29.13 211.0 38.1 15.4Grce Greece 2.81 0 0.00 0.0 0.0 0.0Irlande Ireland 1.59 0 0.00 0.0 0.0 0.0Italie Italy 17.86 19.18 19.22 139.3 25.1 10.1Luxembourg Luxembourg 0.25 0.27 0.27 1.9 0.4 0.1Malte Malta 0.09 0.1 0.10 0.7 0.1 0.1Pays Bas Netherlands 5.7 6.12 6.14 44.4 8.0 3.2Portugal Portugal 2.5 0 0.00 0.0 0.0 0.0Slovaquie Slovakia 0.99 1.06 1.07 7.7 1.4 0.6Slovnie Slovenia 0.47 0.51 0.51 3.7 0.7 0.3Espagne Spain 11.87 12.75 12.77 92.5 16.7 6.7

Total 100 100 100 724.47 130.9 52.9

Source: EFSF * The amended contribution key takes into account the stepping out of Greece, Ireland, Portugal and Cyprus.

Amount of guaranteed loans

28 May 2015

Rates Greece default = limited impact on private investors (mostly PB sector) Impact absorbed / reserve account (European level) Sharp market reaction to be expected though Orderly structuring: Italy/Spain wider by 100bp, medium term little impact Scenario 1: Italy/Spain spreads up 200bp, Portugal up 400bp Scenario 2: further spread widening pending ECB actions

28 May 2015 Page 8

Current Greek debt structure largely in official sector Total debt: ~ EUR320bn Private sector PSI bonds: ~EUR30bn ECB holdings: ~EUR20bn

Total marketable Greek debt: EUR30bn

European long-term government securities (>1Y):

~EUR7trn

Greek marketable debt constitutes less than 0.5% of European long-term government securities

Total banking exposure to Greece (including loans, source BIS): ~ USD50bn

Greek debt vs Europe current status

Source: Treasury, IMF, ECB, Crdit Agricole CIB

Banks exposure to Greece (USDbn)



Breakdown of Greeces public debt (EURbn)

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32

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35EFSF

Bilateral loans

IMF

Private sector PSIbonds

ECB (SMP)

Others

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Germany UK US Swiss France N'lands Other EZ OtherRoW

EUR bn

28 May 2015 Page 9

EFSF EFSF funded by member states in proportion to capital keys Loss would eventually be borne by the respective member states Total loss of EFSF represents 0.0014% of European GDP

ECB losses can be absorbed by the reserve account (~EUR400bn) IMF

Senior by precedence not legally Expects to be paid in full

Bilateral loans Losses distributed as per the capital keys

Banking sector exposure: ~USD50bn Germany c.USD28bn (KfW c.USD17bn) UK c.USD13bn France

28 May 2015 Page 10

Market impact Widening of peripheral spreads Widening of credit spreads Rally in core and semi-core markets Fall in equities and other risky assets Potential increased liquidity via ECB intervention

Macro impact Contraction of SME lending Sustained increase in premium for peripheral

sovereign and corporate issuance Capital flight out of peripherals and out of Europe

Institutional impact

Loss for banks and insurance companies holding peripheral debt

Increased capital charges given rise in volatility and rating downgrades

Pension funds face double impact as assets fall (risky assets) and liabilities rise (core rates rally)

Greek debt default: Indirect impact

Holders of peripheral debt

Source: ECB, Crdit Agricole CIB


Resident Banks

NCB Other MFIOther

ResidentsNon-

Residents

Greece 320 3.0% 1.8% 2.0% 0.8% 92.5%

Italy 1,799 22.2% 5.6% 0.0% 34.3% 37.9%

Portugal 225 17.1% 0.7% 4.9% 7.2% 70.0%

Spain 996 34.0% 3.2% 6.4% 20.0% 36.4%

Percentage of HoldingsTotal

(EURbn)

28 May 2015 Page 11

Soft default possible over IMF/ECB debt Short term: 1 to 3 weeks, Medium term: 3 to 6 months

Eventual agreement reached with orderly restructuring of Greek debt

Heightened uncertainty and risk aversion over short term, little impact over medium term

Short term

Italy/Spain spreads widen by about 100bp Portugal by 200bp Bunds rally by ~30bp Italy 5Y10Y curve steeper by 50bp

Policy support to contain risks of contagion

Verbal intervention from ECB and governments Another LTRO, OMT feasible

Medium term little market impact

Expect peripheral spreads to come back to current levels

Greek debt default: orderly restructuring Grexit Scenario Review

28 May 2015 Page 12

2011 spreads widened (peak to trough) by Over 400bp for Italy, ~ 450bp for Spain, ~1250bp for Portugal

Assessing market impact Short term: 1 to 3 weeks, Medium term: 3 6 months

Short term Italy/Spain spreads widen by about 200bp Portugal by 400bp Bunds rally by ~60bp Italy 5Y10Y curve steeper by 100bp

Strong policy support to contain risk of contagion ECB steps in: unlimited liquidity operations, Another LTRO, OMT feasible Strong European support for weaker peripherals like Portugal Suspension of auctions till markets calm

Medium term ECB QE tilts supply/demand imbalance but peripherals will command higher risk premium Italy/Spain wider by 50-100bp Portugal wider by 100-200bp

Greek debt default: Scenario 1 Grexit contained Grexit Scenario Review

28 May 2015 Page 13

Short term Italy/Spain spreads widen by about 400bp Portugal nears potential restructuring and/or default Bunds rally by ~100bp Italy 5Y10Y curve steeper by 150bp

Strong policy support to contain risks of contagion, but policy measures insufficient to calm markets

Capital flight from peripherals leads to increase in Target 2 imbalances

Localised capital controls feasible

Bank failures and capital shortfalls on losses of peripheral debt holdings Differentiate between HTM, AFS and trading books Only 15-20% exposure needs to be marked to market unless potential write-downs Regulatory relief feasible

Negative feedback loop between bank failures, capital flight and sovereign losses

Not base case but cannot be ruled out

Greek debt default: Scenario 2 contagion spreads Grexit Scenario Review

28 May 2015

FX EUR/USD falling to 1.00 on Grexit scenario (contained)

Scenario 1: EUR/USD little changed Scenario 2: EUR/USD falling to 1.04 Scenario 3: EUR/USD falling to 1.00 Scenario 4: EUR/USD falling to 0.96

28 May 2015 Page 15

EUR/USD could hit 0.90 in the event of a Grexit: We use the ERM crisis from September 1992, which resulted in GBP leaving the ERM and wider fluctuation bands

for the remaining currencies, as a template. EUR/USD depreciated by c.25% during the ERM crisis. We back-calculate EUR/USD using the USD-crosses of the

EUR predecessor currencies. From current levels this could imply a correction in EUR/USD to 0.90 from 1.11 currently.

Most FX clients seem to think that 0.90-0.95 could be the bottom for EUR/USD in the event of a Grexit.

FX impact from Grexit (1) how deep a sell-off?

The ERM crisis pushed (back-calculated) EUR down by 25% between Sept 1992 and July1993

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242220181614121086420-2-4-6-8-10-12-14-16-18-20-22-24EURUSD 1990s (=100 in Sept 1992) EURUSD 2010s (=100 in May 2015)

GBP leavesERM

Months



28 May 2015 Page 16

An OLS regression model measuring EUR/USD historic sensitivity to moves in risk aversion and Bund/peripheral yields suggests that EUR/USD can drop by:

~ -11 big figures (EUR/USD to 1.00 from 1.11 currently ) in the event of orderly Grexit; ~ -15 big figures (EUR/USD to 0.96 from 1.11 current ) in the event of contagious Grexit.

FX impact from Grexit (2) how deep a sell-off?

Simulated EUR/USD changes under two Grexit scenarios

Scenario German US Bond 2Y yield

spread

10Y Peripheral spreads to Bunds

VIX Index EUR/USD

Grexit contained -30bp 260bp 40 vols ~ -11bf

Grexit contagious -40bp 500bp 55 vols ~ -15bf


Source: Credit Agricole CIB

28 May 2015 Page 17

The most important determinant of the duration of the sell-off is the evidence of contagion. A contained Grexit could see EUR rebounding after 3-6 months A contagious Grexit could see EUR rebounding only after a year

During the 1992 ERM crisis the predecessors of the EUR depreciated by 25% against USD between Sept 1992 and July 1993 (11 months).

Most clients seem to expect a relatively swift EUR-rebound post Grexit. The usual number is 3 months.

The speed of the EUR/USD rebound could be hastened by the introduction of: Capital controls for Greece Capital controls in other vulnerable Eurozone member states Adequate support for the Eurozone financial sector

FX impact from Grexit (3) how long until a rebound? Grexit Scenario Review

28 May 2015

Credit Key points

Risk aversion likely to be main spread driver in Scenarios 2 & 3

No major difference in the refinancing risk between the IG and HY markets

Core/semi-core credits only really impacted in Scenarios 4 & 5

Cross-border banking exposure does not start to become important until Scenario 4

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RC Banks 5-7

RC Banks core SEN RC Non-financial Non-Peripheral 5-7 RC Non-financial Peripheral 5-7 RC Sr. Bank Non-Peripheral 5-7 RC FinancialPeripheral


Grexit: The potential for contagion into credit markets

Page 19

Credit spreads will widen but by how much will depend upon the following four risk factors 1. Risk aversion: Volatility in credit markets will be a function of volatility in

other European markets (particularly rates), and this in turn will be dependent upon how the ECB and political players react to a Greek default and euro exit

2. Refinancing risk: The primary market could seize up for a period of time, or become punitively expensive. Peripheral credits are most exposed to this risk but the risk also increases materially for core/semi-core credits in Scenarios 4 and 5 where the future of the euro currency starts becoming more questionable. Helping to mitigate this risk we have banks enjoying better funding profiles, holding more liquidity and having better defined access to ECB liquidity. For non-financials, many have extended their maturity profiles and hold more cash both peripheral and other Eurozone. In IG, refinancing needs are lower this year with EUR27bn of maturities having already been prefunded at the start of 2015. In HY, of the EUR33.6bn funding needed this year, EUR20bn is callable and therefore refinancing can be delayed.

3. Fundamental risk: GDP at the European level will probably decline across all our scenarios bar the first one (Status Quo), it is just a question of magnitude. From Scenarios 2 through to 4 most of the deterioration will come from the periphery although there will obviously be a negative impact for core/semi-core Europe. Some of this weakness might be offset by a depreciating euro. In Scenario 5, core/semi-core Europe is likely to be hit hard too. Declining growth, or an outright recession, will lead to a deterioration in corporate fundamentals and balance sheets.

4. Downgrade risk: The effect would be most pronounced for Greek corporates but other peripheral credits could eventually get caught in the crossfire (Scenarios 3-5). It will not become a real risk for core/semi-core credits until scenario 5, but by this time the market has bigger things to worry about. Downgrades will arise (1) due to direct effects from the deterioration in credit metrics; and (2) indirectly due to rating methodologies linked to sovereign ratings.

Why would spreads widen? (Up to one month from event)

Liquidity profile of Eurostoxx 600 non-financials (EURbn)

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Europe Periphery (rhs)


Scenario 1 Scenario 2 Scenario 3 Scenario 4 Scenario 5

Status QuoOrderly

RestructuringContained

GrexitGreece +

Portugal exitThe end of the

euroRisk aversion - 75% 60% 45% 40%Refinancing risk - 12% 20% 25% 35%Fundamental risk - 10% 15% 20% 23%Downgrade risk - 3% 5% 10% 2%

European HY: 2015 refinancing European IG: Historical maturities

Source (all charts): Bloomberg, Credit Agricole CIB

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28 May 2015

Spread forecasts under our five scenarios Grexit Scenario Review

Grexit

Contained Greece + Portugal The end of the

euro

12.5% 4.5% 3.0%

Status quo Orderly restructuring

60% 20%

No Grexit

Current


iTraxx spreads Europe 63 Senior Financials 76 Crossover 285

iBoxx Senior Non-Financials (IG) European 52 Peripheral 69iBoxx Senior Banks (IG) European 41 Peripheral 73

+1w +1m +3m End-2015100 79 70 72124 94 77 69461 358 319 326

86 74 60 62151 124 80 83

86 70 52 55189 145 85 88

+1w +1m +3m End-2015130 121 95 66154 139 110 77602 555 429 301

112 105 84 58206 195 149 88

119 111 87 53254 243 199 101

+1w +1m +3m End-2015130 121 164 150154 139 207 189602 555 752 679

112 105 148 139206 195 277 261

119 111 170 161254 243 333 313

+1w +1m +3m End-2015130 121 189 N/A154 139 227 N/A602 555 900 N/A

112 105 177 N/A206 195 410 N/A

119 111 213 N/A254 243 575 N/A

+1w +1m +3m End-201569 57 65 6782 65 72 73

315 259 297 305

54 49 57 6073 64 73 76

45 39 48 5179 62 73 76

Spread forecasts: historical context

Page 21

Eurozone (minus periphery) non-financial senior spreads


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HistoricScenario 2Scenario 3Scenario 4Scenario 5

Periphery non-financial senior spreads

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Eurozone (minus periphery) bank senior spreads

Periphery bank senior spreads

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We would envisage a reasonably quick recovery in spreads in Scenarios 2 & 3 Most of the spread widening is linked to risk aversion,

which should abate once markets can see the strong policy response and that contagion risk is being limited

Perversely, we could see spreads in Scenario 3 outperform Scenarios 1 & 2 by year-end As long as the contagion has not spread then a Grexit

may be viewed in isolation. This also potentially provides better clarity on Greece by year-end than the first two scenarios. There is also likely to be more ECB liquidity in Scenario 3 and additionally the Fed would be less willing to raise rates in 2015 here than in the first two scenarios

We view a euro exit by a country other than Greece (Scenarios 4 & 5) as coming with a lag as it is likely to be a political decision and possibly centred around elections. This means following a small spread recovery after one month, spreads will start to widen again. If this risk is seen as limited only to Portugal spreads should start to recover in Q415.

In Scenario 5 we can have no idea where spreads will be by year-end as there will be no common currency spread risk will eventually be denominated in the new local currencies and this is likely to be quite random at first

Source (all charts): Credit Agricole CIB

28 May 2015 Page 22

Potential impact on single-name credits Direct exposure

Page 22

Greece is a small player within the corporate bond market Since the sovereign crisis non-financial issuance has been sporadic with

the market only really re-opening in 2014. Financial issuance distorted by banks using bonds as collateral at the ECB

Due to rating constraints there are no Greek bonds in the IG index and only EDP from Portugal is represented

Portuguese exposure in HY indices has increased in absolute terms but, due to high growth in the market as a whole, on a proportional basis, ie, as a % of total market, exposure has decreased

Rating methodologies to trigger automatic downgrades Best rated Greek company is Titan with a BB rating (CCC+ for Greece) Corporate ratings often linked to the rating of its related sovereign

S&P considers Banks, Utilities and Infrastructure as highly sensitive to country risk (max 2 notch differential)

Telcos and most corporate sectors are classified as moderately sensitive (max 4 notch differential)

However OTE (BB-) is considered as highly senstitive

Some Greek corporates could default Debt is euro-denominated vs most cash-flows likely to be

redenominated into drachma In a stress test scenario, non-Greek activities will still have value but this would likely be below the level of net debt

Alternative scenarios Nationalisation process of strategic activities Some potential support from shareholders

Largest Greek bond issuers (EURbn)

What if? the OTE example

Gross debt

Cash

EV of Albania

EV of 54% RomTel+70% Cosmote Rom.

Pension + Leavers

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Liabilities Assets

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Composition of European HY index

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Worldwide

Other EU

Portugal

Italy

Ireland

Greece

Spain

TotalOutstanding

Source: Bloomberg, Credit Agricole CIB

Source: Markit, Credit Agricole CIB

Source: OTE

Potential impact on single name credits (continued)

Page 23

Few corporates exposed to the Greek economy Some players doing business in Greece, very few issuing debt at

subsidiary level Initial agreement to privatise c.EUR3.0bn worth of assets in 2015

(Ports, Airports, Electricity networks, ) Telecoms: Deutsche Telekom via OTE and Vodafone Infrastructure: Fraport recently acquired regional airports (EUR1.2bn

deal yet to be closed) Cement: Lafarge (local plants representing 1.7% of LafargeHolcims

cement capacity, exporting to the rest of Europe)

Banks exposure to Greece cut massively Sovereign debt holdings reduced massively, notably following PSI back

in 2012 with an average haircut in net present value of 75% and a global reduction indebt outstanding of EUR100bn

Banks with a local franchise have exited. CASA had EUR25bn retail loans in Greece and EUR9.9bn intra-group funding at height of crisis

Remaining exposure now mostly on large corporates, generally in CIB divisions and to shipping companies with mortgages on ships and USD

No gains expected from deposit flight to quality because of low amounts of domestic and very likely capital control measures

but all European corporates to be exposed to Eurozone impacts Macro slowdown: (-) Industrials & Banks / (+) Utilities and Telecoms EUR/USD: (+) Aerospace & Autos Rates: (-) Utilities & Telecoms / (+) Bank retail / Pension provisions

Source all charts: Credit Agricole CIB

Indirect exposure Cross-border M&A deals with Greek assets

European bank exposure to Greece and Portugal (EURm)

Sensitivity of European sectors to GDP, EUR/USD and rates

Deal Type Date Target Bidder Seller Value (EURm)M&A Dec-13 Hellenic Duty Free Dufry Float 450 Investment Feb-14 Athens Water Supply Paulson Piraeus Banks 120 M&A Nov-13 Pangaea REIC Invel Real National Bank of Greece 885 M&A Jun-14 Oceanbulk shipping Stark Bulk Carriers Private investors 610

M&A Pending Regional airports Fraport Privatization 1,200 M&A Pending Piraeus Port Cosco Privatization 500 M&A Pending Electricity netw ork Terna, Elia, SGCC, PSP Privatization 1,000 M&A Pending Gas netw ork SOCAR Privatization 400

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Greece Portugal

86698504


Sensitivity to: Autos Retail/Cons. Cap. Goods Infra. Aerospace Industrials Utilities Telecoms BanksNeutral Neutral Neutral Neutral Neutral Neutral Neutral Neutral Neutral

0.5% of E car market Fraport OTE, DT, Vodafone noneStrong Ret.: Strong Strong Medium Medium Strong Low Low Strong

Peugeot, Faurecia Cons.: Medium Alstom Saint-Gobain Veolia, Suez TIM, TEF, VOD EZ retail bksStrong Ret.: Low Strong Low Strong Strong Medium Low Medium

BMW, DAI, VW, FCA Cons.: Strong Airbus DT, Vivendi CIBs Strong Medium Medium Medium Medium Medium Strong Medium Strong

BMW, DAI, VW, RNO EDF, Enel

GDP (Eurozone)

EUR/USD

Rates

GDP (Greece)

28 May 2015 Page 24

Disclosure/Disclaimer

Recommendation System: Rating target Fundamental credit assessment: We evaluate the fundamental credit quality trend of an issuer for the next 12 months. Crdit Agricole CIB Credit Research evaluates the potential changes of an issuer for the next 12 months and assigns a one-year forward rating based on S&Ps scale. This rating is to be compared with the average long-term rating assigned by S&P and Moodys. Internal credit rating: We assign a rating to a company which reflects the assessment of the credit quality by the credit analyst. The timeframe for the rating is one year. As a rating scale we use a scale similar to that of S&P and Fitch, however, we substitute the rating agencies plus or minus by high and low, ie, the Crdit Agricole CIB scale uses High-AA, Mid-AA, Low-AA, etc.

For disclosures go to: https://catalystresearch.ca-cib.com/web/guest/displaywebdisclosures Please click to follow the link. On the web page input the name of the relevant company to provide you with its relevant disclosure where applicable. Where a relevant disclosure appears, the letter of the disclosure applies to the specific disclosure on that company as noted in the table on that web page.

5Y CDS recommendation Performance of credit instruments: We express our expectation of how the 5Y CDS is going to perform vis--vis its sector over a one month timeframe. When the analyst changes a recommendation he/she should indicate in the analysis when the last recommendation was made. SELL: CDS spreads should outperform the sector performance. NEUTRAL:CDS spreads should perform in line with the sector performance. BUY:CDS spreads should underperform the sector performance.

Cash recommendation (per issuer on a six-month horizon) BUY: Overweight exposure to all the issuers bonds. It corresponds to a strong positive conviction about the issuer in terms of both credit metrics and relative valuation aspects. ADD: Overweight exposure to some specific bonds of the issuer. Fundamental opinion is positive on the credits underlying. Relative value analysis can lead to overweight or maintain the position on some specific bonds. NEUTRAL: Maintain position based on stable credit fundamentals. Relative value analysis can lead to overweight/underweight or maintain the position on some bonds of the issuer. REDUCE: Underweight exposure to some specific bonds of the issuer. Fundamental opinion is negative on the credits underlying. Relative value analysis can lead to underweight or maintain the position on some specific bonds. SELL: Underweight exposure to all the issuers bonds. It corresponds to a strong negative conviction about the issuer in terms of both credit metrics and relative valuation aspects.

Certification The views expressed in this report accurately reflect the personal views of the undersigned analyst(s). In addition, the undersigned analyst(s) has not and will not receive any compensation for providing a specific recommendation or view in this report. The undersigned analyst(s) or a member of his immediate family does not hold a relevant financial interest in the securities, about which research is being published. Frederik Ducrozet, Mohit Kumar, Valentin Marinov, Harpreet Parhar Disclaimer 2015, CRDIT AGRICOLE CORPORATE AND INVESTMENT BANK All rights reserved. This research report or summary has been prepared by Crdit Agricole Corporate and Investment Bank or one of its affiliates (collectively Crdit Agricole CIB) from information believed to be reliable. Such information has not been independently verified and no guarantee, representation or warranty, express or implied, is made as to its accuracy, completeness or correctness. This report is a commercial communication as defined in article 6 of the Directive 2000/31/CE of 8 June 2000. For the avoidance of doubt, it is not a communication caractre promotionnel within the meaning of the Rglement General AMF. It is provided for information purposes only. Nothing in this report should be considered to constitute investment, legal, accounting or taxation advice and you are advised to contact independent advisors in order to evaluate this report. It is not intended, and should not be considered, as an offer, invitation, solicitation or personal recommendation to buy, subscribe for or sell any of the financial instruments described herein, nor is it intended to form the basis for any credit, advice, personal recommendation or other evaluation with respect to such financial instruments and is intended for use only by those professional investors to whom it is made available by Crdit Agricole CIB. Crdit Agricole CIB does not act in a fiduciary capacity to you in respect of this report. Crdit Agricole CIB may at any time stop producing or updating this report. Not all strategies are appropriate at all times. Past performance is not necessarily a guide to future performance. The price, value of and income from any of the financial instruments mentioned in this report can fall as well as rise and you may make losses if you invest in them. Independent advice should be sought. In any case, investors are invited to make their own independent decision as to whether a financial instrument or whether investment in the financial instruments described herein is proper, suitable or appropriate based on their own judgement and upon the advice of any relevant advisors they have consulted. Crdit Agricole CIB has not taken any steps to ensure that any financial instruments referred to in this report are suitable for any investor. Crdit Agricole CIB will not treat recipients of this report as its customers by virtue of their receiving this report. Crdit Agricole CIB, its directors, officers and employees may effect transactions (whether long or short) in the financial instruments described herein for their own accounts or for the account of others, may have positions relating to other financial instruments of the issuer thereof, or any of its affiliates, or may perform or seek to perform securities, investment banking or other services for such issuer or its affiliates. Crdit Agricole CIB may have issued, and may in the future issue, other reports that are inconsistent with, and reach different conclusions from, the information presented in this report. Crdit Agricole CIB is under no obligation to ensure that such other reports are brought to the attention of any recipient of this report. Crdit Agricole CIB has established a Policy for Managing Conflicts of Interest in relation to Investment Research which is available upon request. A summary of this Policy is published on the Crdit Agricole CIB website: http://www.ca-cib.com/sitegenic/medias/DOC/91928/2011-politique-gestion-conflits-interets-ca-cib-va.pdf. This Policy applies to its investment research activity. None of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party without the prior express written permission of Crdit Agricole CIB. To the extent permitted by applicable securities laws and regulations, Crdit Agricole CIB accepts no liability whatsoever for any direct or consequential loss arising from the use of this document or its contents. France: Crdit Agricole Corporate and Investment Bank is authorised by the Autorit de Contrle Prudentiel et de Rsolution (ACPR) and supervised by the ACPR and the Autorit des Marchs Financiers (AMF). United Kingdom: Approved and/or distributed by Crdit Agricole Corporate and Investment Bank, London branch. Crdit Agricole Corporate and Investment Bank is authorised by the ACPR and supervised by the ACPR and the AMF in France and subject to limited regulation by the Financial Conduct Authority and the Prudential Regulation Authority. Details about the extent of our regulation by the Financial Conduct Authority and the Prudential Regulation Authority are available from us on request. United States of America: This research report is distributed solely to persons who qualify as Major U.S. Institutional Investors as defined in Rule 15a-6 under the Securities and Exchange Act of 1934 and who deal with Crdit Agricole Corporate and Investment Bank. Recipients of this research in the United States wishing to effect a transaction in any security mentioned herein should do so by contacting Crdit Agricole Securities (USA), Inc. (a broker-dealer registered with the Securities and Exchange Commission). The delivery of this research report to any person in the United States shall not be deemed a recommendation of Crdit Agricole Securities (USA), Inc. to effect any transactions in the securities discussed herein or an endorsement of any opinion expressed herein. Italy: This research report can only be distributed to, and circulated among, professional investors (operatori qualificati), as defined by the relevant Italian securities legislation. Spain: Distributed by Crdit Agricole Corporate and Investment Bank, Madrid branch and may only be distributed to institutional investors (as defined in article 7.1 of Royal Decree 291/1992 on Issues and Public Offers of Securities) and cannot be distributed to other investors that do not fall within the category of institutional investors. Hong Kong: Distributed by Crdit Agricole Corporate and Investment Bank, Hong Kong branch. This research report can only be distributed to professional investors within the meaning of the Securities and Futures Ordinance (Cap.571) and any rule made there under. Japan: Distributed by Crdit Agricole Securities Asia B.V. which is registered for securities business in Japan pursuant to the Law Concerning Foreign Securities Firms (Law n5 of 1971, as amended), and is not intended, and should not be considered, as an offer, invitation, solicitation or recommendation to buy or sell any of the financial instruments described herein. This report is not intended, and should not be considered, as advice on investments in securities which is subject to the Securities Investment Advisory Business Law (Law n74 of 1986, as amended). Luxembourg: Distributed by Crdit Agricole Corporate and Investment Bank, Luxembourg branch. It is only intended for circulation and/or distribution to institutional investors and investments mentioned in this report will not be available to the public but only to institutional investors. Singapore: Distributed by Crdit Agricole Corporate and Investment Bank, Singapore branch. It is not intended for distribution to any persons other than accredited investors, as defined in the Securities and Futures Act (Chapter 289 of Singapore), and persons whose business involves the acquisition or disposal of, or the holding of capital markets products (as defined in the Securities and Futures Act (Chapter 289 of Singapore)). Switzerland: Distributed by Crdit Agricole (Suisse) S.A. This report is not subject to the SBA Directive of January 24, 2003 as they are produced by a non-Swiss entity. Germany: Distributed by Crdit Agricole Corporate and Investment Bank, Frankfurt branch and may only be distributed to institutional investors. Australia: Distributed to wholesale investors only. This research, and any access to it, is intended only for wholesale clients within the meaning of the Australian Corporations Act. THE DISTRIBUTION OF THIS DOCUMENT IN OTHER JURISDICTIONS MAY BE RESTRICTED BY LAW, AND PERSONS INTO WHOSE POSSESSION THIS DOCUMENT COMES SHOULD INFORM THEMSELVES ABOUT, AND OBSERVE, ANY SUCH RESTRICTIONS. BY ACCEPTING THIS REPORT YOU AGREE TO BE BOUND BY THE FOREGOING. 10/02/15

(as at 1 May 2015)Count Percent Count Percent (of all covered companies)

Sell 31 31% 15 48%Neutral 41 41% 22 54%Buy 27 27% 12 44%

All covered companies Companies where Crdit Agricole CIB provided Investment Banking Services in past 12 months

(as at 1 May 2015)Count Percent Count Percent (of all covered companies)

Buy 7 6% 5 71%Add 36 31% 17 47%Neutral 39 33% 20 51%Reduce 33 28% 17 52%Sell 2 2% 2 100%

All covered companies Companies where Crdit Agricole CIB provided Investment Banking Services in past 12 months

Grexit scenario reviewGreece fundamentalsGreeces situation: what has changed since 2013?Potential scenario until year-endConclusionsMacro Grexit fundamental analysis RatesGreek debt vs Europe current statusGreek debt default: Investor impactGreek debt default: Indirect impactGreek debt default: orderly restructuringGreek debt default: Scenario 1 Grexit containedGreek debt default: Scenario 2 contagion spreadsFXFX impact from Grexit (1) how deep a sell-off?FX impact from Grexit (2) how deep a sell-off?FX impact from Grexit (3) how long until a rebound?CreditGrexit: The potential for contagion into credit marketsSpread forecasts under our five scenariosSpread forecasts: historical contextPotential impact on single-name credits Potential impact on single name credits (continued)Disclosure/Disclaimer

28_5_15 Credit Agricole _ Grexit Scenario Review

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