Piraeus Bank: At € 665 million pre-tax profits on a recurring basis

Piraeus Bank announced an increase of pre-tax profits and provisions on a recurring annual basis by + 10%, to € 1,052 million for 2021, with pre-tax profits on a recurring basis amounting to € 665 million, more than double compared to 2020 .

The losses from the reduction of NPE, which led to the consolidation of the balance sheet, amounted to the net result of – € 3.0 billion, according to the capital plan, as announced by the bank.

In detail, in the main developments of 2021, the bank notes the following:
• Implementation of 95% of the actions of the Sunrise project in the last twelve months, according to the initial planning

• Reduction of NPE index to 12.5% ​​compared to 45% a year ago, on track to reach 8% index by the end of 2022

• Overperformance by € 0.5 billion of NPE organic flow in 2021 (€ 1.2 billion against expectations of € 1.7 billion due to Covid)

• Overall capital adequacy ratio at 15.9%

• Disbursements of new loans amounting to € 6.5 billion higher than the target of € 5.7 billion. Net credit expansion (disbursements less repayments) € 1.0 billion in 2021

• Significant increase in clients’ managed funds. Deposits stood at € 55.4 billion, + € 5.8 billion year-on-year, and mutual funds at record levels of € 3.4 billion, + € 0.9 billion year-on-year

In the Financial Developments notes the following:

• Strong production of net income from commissions at € 394 million, + 25% per year, with strong trends in all products and services, making the 4th quarter 2021 the best in history for Piraeus (€ 116 million)

• Reduction of operating expenses, on a recurring annual basis, by -4% to € 902 million.

• Increase of profits before taxes and provisions on a recurring annual basis by + 10%, to € 1,052 million.

• Improvement of cost-to-income ratio on a recurring basis to 46%, compared to 50% in 2020

• Significant reduction of organic loan provisions at 53 p.m. in the 4th quarter of 2021, as a consequence of the drastic reduction of NPE

• Profits before taxes on a recurring basis at € 665 million, more than double compared to 2020

• The losses from the reduction of NPE, which led to the consolidation of the balance sheet, amounted to – € 3.0 billion, according to the capital plan

Chr. Big: Year of full recovery in 2021

“For the Piraeus Group, 2021 was a year of complete recovery, through the implementation of its strategic business plan, which led to the NPE index of approximately 12.5% ​​at the end of 2021, from 45% a year ago, and aspires to single-digit “NPE index within 2022, while maintaining a strong capital position, creating the conditions for sustainable profitability both in the short and medium term”, says in a statement the CEO, Christos Megalou and adds:

“Our course in 2021 demonstrated the commercial dynamics of our banking activities. We continued to actively support our customers, providing new financing of € 6.5 billion, exceeding the target of disbursing new loans of € 5.7 billion for 2021 , while advising our corporate clients to raise approximately € 3.0 billion in debt and equity markets.In the same period, customer deposits and managed mutual funds increased by € 6.8 billion, a record for the Group.

The financial performance of the Piraeus Group showed a tangible improvement in 2021 in all sectors. Recurring pre-tax earnings amounted to € 665 million, due to strong net interest income despite the drastic reduction in NPEs, record net commission income, continued operating cost savings and a significant reduction in loan provision.

In 2021, the Greek economy recorded a strong recovery, with GDP growing by 8%, and laid the foundations for sustainable growth from 2022 and for several years to come. The launch of projects under the National Recovery and Sustainability Plan and the implementation of related structural reforms are expected to secure the prospects for economic growth, even in the midst of the uncertainty that develops after the Russian invasion of Ukraine.

Geopolitical developments pose risks, affecting – inter alia – the prices of energy and agricultural products, and result in increased inflationary pressures both in intensity and duration, which exceed the initial estimates. Side effects may have a negative impact on consumption and business. As the situation continues to evolve, it is too early to assess the long-term impact on the Greek economy and society. However, once the conditions for achieving sustainable growth in the Greek economy have been set, the effects may be reduced by measures commensurate with the pandemic expected to be taken at European level.

For Piraeus, the robust implementation of our business plan to date and the realistic assumptions on which it is based, allow us to be optimistic about achieving our goals, enabling us to support the Greek economy and offer attractive returns to our shareholders . At the same time, we continue to contribute to a cohesive and inclusive society, a goal that is more important than ever. ”

Main Results Points

The net interest income amounted to € 1,410 million in 2021, down 5% year on year, mainly due to the loss of interest on arrears (NPE). Net interest income in the 4th quarter of 2021 amounted to € 318 million, -16% per year. The negative impact is related to the drastic reduction of NPEs. Net interest income, excluding lost income from NPEs and one-off benefit from TLTRO III, amounted to € 907 million in 2021, recording an annual increase of 5.2%. Low financing costs have made the revenue line more resilient, offsetting the mild pressure on interest rates. The increase in the serviced loans from the utilization of the resources of the Recovery and Resilience Fund that is expected to start in the coming months, will generate additional interest income from loans.

The net commission income in 2021 amounted to € 394 million, + 25% per year. Regarding the 4th quarter 2021, the net commission income amounted to € 116 million, + 35% per year, marking a new record performance for the third consecutive quarter. The main contributors to the above-mentioned increase were the income from mutual funds, capital movements, credit cards and income from bank insurance products, investment banking, but also new loan disbursements. Commission income as a percentage of assets amounted to 0.59% in the 4th quarter 2021, + 10m.b. on an annual basis, with the transformation plan further contributing to their production.

The recurring operating expenses in 2021 amounted to € 902 million, -4% per year. Respectively, staff costs were reduced by 10% per year to € 380 million, as they reflect the savings from the restructuring of human resources. General and administrative expenses increased in 2021 by 5% on an annual basis to € 418 million, due to the higher costs for projects related to the corporate transformation and the reduction of NPE. The cost-to-income ratio on a recurring basis improved to 46% in 2021 compared to 50% in 2020, mainly due to lower staff costs and increased bank revenue.

Further improvement is expected, as the transformation plan and the ongoing digitization of the Bank’s activities are in progress. In 2021, the Group launched a new voluntary retirement program for targeted groups of employees in central units and stores, in accordance with its strategic goals and transformation priorities. As of December 31, 2021, the Group’s staff amounted to 9,270 employees in ongoing operations, of which 8,904 were employed in Greece. The number of employees in Greece in 2021 decreased by 1,104, mainly due to the aforementioned voluntary retirement program, under which 899 employees resigned during the year. The cost of personnel restructuring recorded in the results for the year 2021 amounted to € 25 million, while an additional € 7 million of non-recurring general and administrative expenses were recorded during the year.

The earnings before provisions (interest income and commissions minus recurring operating expenses) amounted to € 902 million in 2021, 4% higher on an annual basis. The Bank’s dynamics are reflected in all areas and pave the way for the achievement of our strategic goals, in line with the smoothing of loan impairment.

In the 4th quarter of 2021 the organic loan forecasts amounted to € 47 million from € 48 million in the previous 3 months due to the large reduction of NPEs in 2021, as well as the significant improvement of new NPEs flows. In addition, credit risk charges of € 21 million were recorded. Impairments of € 126 million in the 4th quarter of 2021 are related to losses from the sale of a shipping portfolio of NPEs, € 0.4 billion of gross book value, as well as provisions for the sale scenario of the portfolio of NPE Sunrise 3. Net income decreased at 53 p.m. during the 4th quarter of 2021, from 148m.b. a year ago.

The pre-tax result in the 4th quarter of 2021 amounted to profits of € 250 million, while the pre-tax result on a recurring basis amounted to a profit of € 176 million. net result of shareholders of the Group amounted to a profit of € 78 million in the 4th quarter of 2021, from a loss of € 511 million a year ago.

Basic Balance Sheet Elements

The customer deposits amounted to € 55.4 billion at the end of December 2021, increased by 12% on an annual basis, marking a record high for the Group. The cost of deposits continued to decrease and stood at 6 p.m. against 7 p.m. in the 3rd quarter of 2021 and 13 p.m. in the 4th quarter of 2020.

THE Eurosystem funding amounted to € 14.5 billion at the end of December 2021, from € 13.5 billion at the end of September 2021, after the participation of € 1 billion in the December auction. The liquidity coverage ratio (LCR) of the Piraeus Group amounted to an extremely satisfactory level of 204%. The Group’s strong liquidity profile is reflected in the loan-to-deposit ratio, which stood at 63% at the end of December 2021.

The loans before impairments and adjustments decreased to € 38.5 billion compared to € 49.5 billion at the end of December 2020, due to the significant reduction of NPEs that took place in 2021. During the 4th quarter of 2021, the portfolio of shipping NPEs was categorized as held for sale. Loans after forecasts of the Group amounted to € 35.0 billion on December 31, 2021, excluding the seasonal loan OPEKEPE, amounting to € 1.5 billion. Disbursements of new loans amounted to € 6.5 billion in 2021, reflecting credit demand mainly from enterprises (large, medium and small enterprises). It is noted that the amount of loans before impairments and adjustments for December 2021 includes € 6.3 billion of high repayment bonds related to the NPE securitizations that have been completed so far, namely the Phoenix, Vega, Sunrise 1 and Sunrise 2 transactions. .

The stock of NPEs decreased to € 4.9 billion at the end of December 2021 compared to € 22.5 billion at the end of 2020. The NPE index decreased significantly to 12.6% compared to 45.3% on December 31, 2021, mainly due to NPE securitizations with inclusion in the “Hercules” program (HAPS) and NPE transactions outside HAPS totaling € 16.8 billion, as well as the reduction of NPEs by € 0.8 billion through organic management.

THE Common Equity Tier 1 (CET1) of the Group at the end of December 2021 stood at 11.2%, while the total capital ratio stood at 15.9%, higher than the total capital requirements. The ratios are calculated pro-forma for the expected easing of risk-weighted assets that will follow the derecognition of the securitization of the shipping NPE portfolio, for which the losses have already been fully accounted for in the 4th quarter 2021.

See the full announcement in the “Related Files” column on the right