NBG Group FY22 Financial Results
FY22: Attributable PAT at €1.1b, up by 29% yoy
Accelerating core profitability of €0.7b far exceeds FY22 COP guidance of c€0.5b
o FY22 NII picks up sharply by +13% yoy, despite a significant reduction of NPE NII from our NPE clean up as well as lower TLTRO NII, reflecting positive loan volume effects complemented by base rate repricing in 2H22
o Solid fee income growth sustained at +21% yoy, reflecting robust growth from all business areas, driven by higher transaction demand
o Operating expenses remained contained (+3% yoy) despite high inflation in 2022 and increased depreciation charges reflecting our ongoing strategic IT investment plan; strong and sustainable core income recovery pushes C:CI down to 46.9% in FY22 from 52.3% in FY21, with the 4Q22 level down to a record low of 43.5%
o CoR conservatively remained in the 70bps area throughout 2022 and in line with FY22 guidance, despite consistently negative organic formation, leading to increased coverage levels
o Marked core income expansion (+15% yoy) coupled with contained costs and credit risk charges drove COP 57% higher yoy to €695m
o Attributable PAT reached €1,120m, up by 29% yoy, including trading gains and the gain from the EVO JV Strong performing loan expansion of +€2.5b yoy, driven by healthy corporate disbursements
o Factoring in very strong 4Q22 disbursements amounting to €2.7b, domestic performing loans reached €27.7b, up by a solid €1.2b qoq and €2.5b yoy
o FY22 loan disbursements reached €6.7b, up by nearly 40% yoy, driven by corporates (c83% of total), while retail new production also picked up sharply to €1.2b, up by almost 30% yoy
o NBG has c€0.3b in RRF loans contracted (29% market share), of which c1/3rd under the Green Pillar
Domestic NPE stock at €1.6b or just €0.2b net of provisions
o Consistently negative organic NPE flows of -€0.3b were aided by low rates of defaults and redefaults; including inorganic actions and write offs, NPE reduction reached -€0.5b yoy
o The NPE ratio dropped by c80bps qoq and c180bps yoy to 5.1% in Greece (5.2% at the Group level)
o Domestic NPE coverage kept rising on a FY22 CoR of 70bps to a high of c88% (Group Stage 3 coverage at 58%) CET1 FL at 15.7%, up by >80bps yoy, with total capital ratio FL at 16.8%
o CET1 FL settled >80bps higher yoy (+c50bps qoq) at 15.7% in FY22, with total capital ratio FL reaching 16.8% (+120bps yoy)
o Strong FY22 profitability (+190bps) comfortably covers the sharp RWA expansion (-100bps) Our Transformation Program is a competitive advantage, supporting rapid change and target achievement, most notably:
o Visible enhancement of our commercial effectiveness, increased migration to digital channels and continuing efforts on operational efficiency through streamlining and automation of processes and upgrading technology, including the ongoing replacement of our Core Banking System
o Widely recognized for our digital offering, ranking among the top 10% of digital champions in Deloitte’s Global Digital Banking Maturity Survey for 2022, out of a global sample of more than 300 incumbent and challenger banks; our rich offering continues to deliver impressive results, with digital subscribers and active users reaching 3.7m (+7% yoy) and 2.7m (+10% yoy) in 4Q22, while digital sales surged by 34% yoy to almost 1m units
o Environment and climate strategy within our broader ESG agenda leads the market in sustainable energy financing and aims to apply best practices in supporting our clients’ shift to environmentally responsible practices
o Upgrade of NBG’s credit ratings since YE21 by all rating agencies, reflecting the structural improvements in our asset quality, capital adequacy and core profitability; NBG maintains the highest credit rating in Greece, at ‘BB-’
NBG Group 1Q22 Financial Results
1Q22 COP up by 32% yoy, reflecting impressive fee income recovery, cost containment and normalizing CoR
o Following Frontier deconsolidation, lower NPE NII accruals partly offset by the sustained expansion of the PE book (+€1.5b yoy). Overall, NII just 3% lower yoy
o Reflecting our successful transformation initiatives, fee income surged by 25% yoy, supported by increasing retail and corporate loan origination, with card and intermediation fees driving the sharp upswing
o Operating expenses were further contained on the back of sustained personnel cost reduction (-3% yoy), absorbing accelerating inflationary pressures and the depreciation charges from the roll out of our strategic IT investment plan; C:CI improves further by 160bps yoy to 51.5% in 1Q22
o CoR remains on a gradual normalizing path, reaching 73bps in 1Q22, down by c40bps yoy
o Αttributable net profit reached €360m, including trading gains of €139m
Domestic NPE stock declined further to €2.0b or €0.4b net of provisions; domestic NPE ratio at 6.5%
o NPE reduction continues (-€127m qoq), with organic NPE flows remaining negative
o NPE ratio of 6.5% in Greece (6.7% at the Group level), down by c40bps qoq and c670bps yoy
o Domestic NPE coverage keeps rising, reaching 81.8% in 1Q22 (+c430bps qoq), despite CoR normalization
o Despite uncertainty and inflationary pressures, the payment performance of clients receiving State and Bank sponsored programs remains reassuring, with default rate in low single digits. Additionally, there is no sign of delinquencies from the recent surge in inflation
Domestic PE loan book expansion at €1.5b yoy
o Despite uncertainty, loan disbursements1 increased by c50% yoy on strong retail (+41% yoy) and corporate credit extension (+52% yoy), pushing domestic PEs higher yoy by €1.5b
o €0.8b of disbursements1 in 2Q22 to mid-May
CET1 FL and total capital ratio FL reach 15.1%2 and 16.2%2 respectively
o CET1 FL and total capital ratio FL increase by +c20bps and +c70bps qoq, supported by organic profitability and the closure of the Ethniki Insurance transaction, and stand at sector-high levels of 15,1%2 and 16,2%2 , respectively
o The closing of the agreement with EVO Payments, expected in 4Q22, will add c65bps to capital ratios
The successful Transformation Program creates strong momentum for change
o The Transformation Program continues to provide NBG with a competitive edge, as our mechanism to drive and sustain change; we are moving decisively towards a more agile business model, leveraging new technologies, data analytics and partnerships to enhance client experience
o The digital transformation continues to demonstrate impressive results, with digital subscribers reaching 3.5m (+11% yoy) and active users reaching 2.5m (+16% yoy); only 3% of transactions remain in branches, allowing us to capture efficiencies in our operating model
o On ESG we are implementing initiatives to lead the market in terms of sustainable energy financing and materially support the green transition of businesses and households; at the same time, we continue to invest in environmentally responsible practices at NBG and across Greece.
(1)Loan disbursements for the period/year, not considering rollover of working capital repaid and increase of unused credit limits / Including period PAT
“Against persistent geopolitical uncertainty fanning global inflationary pressures, Greece’s strong recovery prospects have moderated, but remain relatively benign, while NBG’s strong balance sheet, with a robust capital position and improving profitability provide reassurance regarding the Bank’s prospects. First quarter results confirm this positive outlook.
On the profitability front, we managed to increase Group core operating profit by 32% yoy to €125m, in line with FY22 core operating profit target of €490m, on the back of sustained improvement across core operating lines. Core income grew by 2% yoy, on the back of a strong recovery in fee income, up by 25% yoy, despite moderate NII headwinds (-3% yoy) due to the Frontier deconsolidation. PE interest income expands for a third consecutive quarter, supporting NII. Operating costs edged lower by 1% yoy, despite high inflation and increased depreciation charges due to the roll out of our strategic IT plan, which centers around the ongoing replacement of our core banking system. Including trading and other non recurring items, our Group attributable PAT reached €360m.
On the asset quality front, our stock of NPEs continued on a declining trend, reaching just €0.4b net of provisions, or €2.0b on a gross NPE basis, translating into a ratio of 6.5% in Greece, 40bps lower vs the previous quarter. Despite CoR continuing to normalize, to c70bps from c100bps in the previous year, coverage rose significantly, reaching 82%, up by c4ppts qoq. This development reflects continued prudence, despite negative underlying NPE formation trends, with no sign of a pick up in defaults from our clients previously under State or Bank sponsored support programs or early delinquencies due to higher inflation.
Our capital levels on a fully loaded basis increased further qoq, to 15.1% CET1 and 16.2% total capital, both organically, as well as due to the closing of the Ethniki Insurance transaction. The completion of the merchant acquiring JV will further boost them by c65bps, ahead of FY22 guidance.
Looking forward, the RRF induced investment growth, a very strong start for the tourism season combined with fiscal support measures especially in energy cost relief will support Greece’s recovery. In this environment, our successful transformation effort puts us in a position of strength towards supporting and advising our clients in achieving their future plans, with NBG as their partner: the bank of first choice.”
Pavlos Mylonas Chief Executive Officer, NBG
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NBG Group 2Q2021 Financial Results
o Group PAT from continuing operations reaches €622m in 1H21, up 34% yoy
o 1H21 NII increased by 7% yoy to €591m, driven by sustained time deposit repricing and ECB’s TLTRO III facility
o Fee recovery accelerated in 2Q21 (+4% qoq) in the absence of restrictive measures, driving 1H21 fees up by 10% yoy to €136m
o The sharp reduction in personnel expenses in Greece (-15% yoy) pushes costs down by a solid 8% in 1H21; domestic C:CI improves by 9ppts yoy to 51.0% in 1H21
o Trading and other income of €449m in 1H21 benefited from sizable gains related to debt securities transactions (mostly GGBs)
o Loan impairments amounted to €70m in 2Q21, bringing 1H21 impairments at €147m, equal to 109bps over net loans
o Core operating profit1 surged by 58% yoy to €208m, reflecting core income recovery and further cost optimization
Domestic NPE stock reaches the €4.0b mark
o Domestic NPEs down to €4.0b in 2Q21, or €1.4b net of provisions, of which c35% or €1.4b are FNPEs <30dpd
o NPE formation remained negative in 2Q21, adding up to a total organic NPE reduction of €0.2b in 1H21 in line with our 2021-2022 guidance for a reduction of c€0.8b
o NPE ratio of 12.8% in Greece (-c50bps qoq) and at 12.7%3 at the Group level; domestic NPE coverage at 66.4%, up c360bps ytd (66.8% at the Group level)
o Post moratoria performance remains far better than expected, with only c3% of performing moratoria beneficiaries in default as of July 2021; clients in early arrears (>30dpd) form just 1% of the ex-moratoria PE pool
o c60% of performing moratoria clients remain low risk and have not received any follow up payment assistance post moratoria expiry
CET1 ratio at 16.0%; total capital ratio at 17.0%
o CET1 at 16.0%4 , up c30bps ytd; CET1 FL at 13.8%4 (+c100bps ytd)
o Total capital ratio of 17.0%4 exceeds minimum regulatory levels by c600bps
o Upon completion, Frontier and Ethniki Insurance transactions will boost total capital ratio by c170bps to c18.8%
o NBG successfully completed the 2021 SSM stress test, with the 2023 CET1 FL ratio settling at 15.5% under the Baseline scenario (+c270bps over 2021-23), while under the Adverse scenario capital depletion stood at 6.4ppts. Pro forma for the 1H21 PAT and post the completion of the Frontier and Ethniki Insurance transactions, NBG’s Total Capital ratio ends up higher by nearly 300bps
Domestic loan disbursements at €2.0b in 1H21, up 9% yoy, driven by corporates
o Domestic PE loan portfolio momentum is maintained (+€1.2b yoy), largely driven by corporate PEs (+€1.5b yoy), while retail PEs deleveraging slows down
o Domestic deposits reach €49.6b in 1H21, up by €6.3b or 14.5% yoy, reflecting strong inflows from core deposits that now account for more than 80% of domestic deposits
o Eurosystem funding (TLTRO III) stands at €11.6b, providing support to NII and NIM
Active support towards our customers through the recovery
o On State subsidy programs (Gefyra I & II), NBG mortgage holders correspond to c€1.4b in loan balances (nearly 40% previously under moratoria until 31.12.2020), while SMEs & SBs clients onboarded correspond to c€1.3b in loan balances (c30% undertaken by ex-moratoria clients until 31.12.2020)
o Total loans onboarded to NBG step-up facilities amount to €0.3b, with 2/3rds being corporate clients
Our successful Transformation Program has been a driver of rapid and successful change
o NBG continues to leverage on its successful Transformation Program, completing its 3rd year, facilitating the shift towards a more cost-efficient and flexible operating model
o In the aftermath of Covid-19, bank transactions edge substantially higher (+17% yoy) and are mainly conducted via digital channels; 2Q21 e-banking transactions surged by 34% yoy, replacing branch transactions that have been reduced by 52% yoy
o NBG has registered a continuous improvement in its ESG ratings, governance and practices, setting clear priorities and delivering solid achievements across all ESG areas
“The tug-of-war between the delta variant and the vaccination programme is ongoing, with expectations that the latter will pull definitively ahead in autumn, as the vaccination rate reaches the critical 70% milestone. The economy understands that better days are coming and confidence is at high levels leading activity to accelerate by double digit growth rates in the final three quarters of the year.
In the first half of the year, and despite Covid-19 mobility restrictions in place for a good part of it, NBG managed to produce a strong PAT from continued operations of €622m, reflecting recovery across all our core P&L lines, as well as a strong trading result. Notably, the cost-to-core income ratio dropped to 51% in 2Q21 and fees increased by 10% yoy. More importantly, excluding trading gains and after provisions, 1H21 Group Core Operating Profit surged by 58% yoy to €208m, bringing us considerably closer to achieving recurring annual profitability of c€0.5b, equal to a cRoE of c9% next year.
On the asset quality front, our domestic NPE exposure dropped further to €4.0b, or 12.8%, with our cash coverage increasing further to 66.4%. NPE formation remained negative, adding up to a total organic NPE decline of €0.2b in 1H21, despite the expiry of all moratoria at end-2020. Indeed, payment performance of loans previously under moratoria remains very good, with just 3% of these accounts above 90dpd. Of equal importance is that just an additional 1% of the ex-moratoria clients are currently in early arrears (>30dpd), a far better outcome than even we expected. As a result, we have well founded expectations that we will manage to outperform our CoR guidance.
Regarding our capital adequacy, we have further enhanced our strong capital position since the beginning of the year, with CET1 and total capital ratios standing at 16.0% and 17.0%. Our capital position will improve further by c170bps upon completion of the Frontier and Ethniki insurance transactions.
Looking ahead, RRF funds combined with further structural reforms in the country will lead to an investment boom. Capitalizing on our much improved service and operating model arising from the successful Transformation Program, which has just completed its third year, NBG is very well positioned to support our clients in this environment of high and sustainable growth, thus achieving the goal of being the Bank of first choice. In this positive environment, we remain focused on delivering our ambitious targets for high profitability, NPE reduction, and capital adequacy, and providing added value to our clients and shareholders.”
Pavlos Mylonas Chief Executive Officer, NBG
NBG Group announces the completion of the sale of Banca Romaneasca
National Bank of Greece (“NBG”) announces the completion of the sale of its 99.28% stake in Banca Romaneasca (“BROM”) to Export-Import Bank of Romania (“EximBank”) (the “Transaction”), following receipt of the required regulatory and anti-trust approvals.
The successful completion of the Transaction increases NBG Group’s Q3.19 CET1 Ratio by c. 24bps. Credit Suisse International acted as exclusive financial advisor to NBG. Freshfields Bruckhaus Deringer acted as international legal counsel and Filip and Company as local legal counsel to NBG.
Q2.19 results of NBG Group
Q2.19 results highlights
Group PAT from continuing operations increases to €253m in H1.19 (€48m in H1.18)
– H1.19 NII up by 6% yoy to €598m, driven by securities interest income following the replacement of the Greek State IRS with GGBs in mid-February 2019; Q2.19 NII increases for a 2nd straight quarter, by €19m qoq to €309m (+6% qoq). NBG loan disbursements towards Greek corporates accelerate to €0.8bn in Q2.19 from €0.6bn in Q1.19
– Trading and other income recovers to €151m in H1.19 against losses of €19m in H1.18, incorporating one off gains relating to the Greek State swap arrangement booked in Q1.19(€59m) and Grand Hotel disposal in Q2.19 (€30m)
– H1.19 OpEx 7% lower yoy to €408m, driven by both staff (-6% yoy) and non-staff cost reduction (-7% yoy); as a result, C:I ratio declined to 47% in H1.19 from 66% a year ago (C:CI ratio at 57% from 64% in H1.18)
– Core PPI up for a 3rd quarter in a row to €165m (+14% qoq); H1.19 Core PPI at €310m (+26% yoy)
– Loan impairments at €204m in H1.19 imply a CoR of 136bps, slightly up from the H1.18 underlying CoR of 132bps
– H1.19 PAT from discontinued operations benefits from the capital gain associated with the sale of Pangaea
NPE reduction of €2.5bn ytd bodes well for the delivery of our ambitious 2019 NPE target
– NPE sales of secured SBLs and small SMEs (Project Symbol) and unsecured retail, SBLs and small SMEs in Greece (Project Mirror) already agreed; both transactions for a combined c€1.8bn GBV are capital accretive
– NPE reduction picks up in Q2.19 (-€1.4bn qoq), driven by Project Mirror (€1.0bn) and negative formation before write-offs (€0.4bn)
– Remaining effort to attain the €4.3bn FY.19 NPE reduction target settles at €1.8bn; this will be achieved via the sale of a secured corporate and SBL portfolio, sales of shipping and Cypriot and Romanian loan portfolios and further restructurings and liquidations
– NPE coverage of 56% combines with an NPE ratio of 37% in Greece, facilitating the ongoing shift towards closure actions (sales & liquidations) on a contained loss budget
– Strong liquidity profile
– Domestic deposits reach €41.6bn (+6% yoy), as the country is moving closer to the full lift of capital controls; c60% of the pre-capital control outflows have already been recovered
– LCR and NSFR at 171% and 113%, respectively, remain comfortably above regulatory requirements
– Eurosystem funding (TLTRO) at €2.25bn; interbank exposure cut by €2.7bn ytd to €0.9bn, reflecting further funding cost optimization
CET1 ratio at 16.0%
– NBG successfully issued in July 2019 a €400m Tier II bond at a yield of 8.25% enhancing its capital structure, providing room for capital accretive allocation of its large liquidity pool and taking the first step towards facilitating future MREL requirement
– Pro forma for the H1.19 PAT and the impact of agreed divestments, CET1 ratio stands at 16.0%, with Total Capital ratio at 17.0% (including the Tier II bond). Both ratios arecomfortably above SREP capital requirements for 2019 and 2020, absorbing the Q2.19 switch to STD approach, on the back of strong H1.19 PAT and bond valuation gains (FVTOCI)
– The upcoming divestment of Ethniki Insurance will enhance capital ratios further
The Q2.19 results build on the positive trend of Q1.19, rewarding the Bank’s persistent efforts to return to normalcy; to be a bank with strong profitability and ahealthy balance sheet. Indeed in H1.19, core operating profitability increased by c21% yoy (+51% qoq in Q2.19), supported by an expansion of NII and Fees (5% yoy),including through the continued recovery of loan disbursements, but also reflecting cuts in operating expenses (7% yoy). Strong trading gains supported total income fora 2nd quarter in a row, resulting in operating profit of c€260m in H1.19 (> 100% yoy).In addition, major steps were taken to strengthen the balance sheet. First, the second major NPE sale in 2019 has helped reduce NPEs by €2.5bn ytd. Moreover, it is veryencouraging that restructurings have accelerated markedly, boding well for an acceleration in the organic reduction of NPEs. Second, the total capital ratio has beenenhanced further, well above regulatory thresholds, following the Tier II bond issuance in July, to 17.0%. This will facilitate a faster than planned reduction in NPEs.With the new management team already creating a strong performance track record, a Business Plan validated by the investor community and Greek macroeconomicconditions rapidly improving, all the pieces are in place for its efficient execution.Activity, as well as loan demand, will be provided a further boost from the envisaged acceleration of reforms by the new Government, thus facilitating the implementationof the Business Plan.
Athens, August 29, 2019Paul MylonasChief Executive Officer, NBG
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