Piraeus Bank: Net profit of € 520 million in the first quarter

Piraeus Bank completed the first quarter with positive trends in all key lines, during which it saw its profitability reach 520 million euros while the CET1 capital adequacy ratio rose to 10%.

Main developments of the 1st quarter of 2022

– Basic operating profit € 93 million as a result of the drastic improvement in net commission income, operating expenses and forecast expenses

– Restoration of the fully loaded CET1 index to 10%, incorporating a large part of the cost of investing NPE for 2022

– Strong new production of loans amounting to € 1.7 billion in the 1st quarter, which led to an expansion of serviced loans by € 0.3 billion, with acceleration of lending in the 2nd quarter

– Historically low forecast organic output at 50bps, a result of the historically low inflow of new NPEs (€ 115 million) on a quarterly basis? NPE index at 12.6% on track to reach a single-digit index within the year

– Managed funds and bancassurance premiums remain on an upward trajectory, 37% and 26% higher on an annual basis in March 2022

– Piraeus Bank, utilizing the dynamics of its ESG fundamentals and the consistent implementation of its relevant design, was included in the top 400 “Europe’s Climate Leaders” by the Financial Times for 2022, for the second consecutive year, as the only Greek company with it the distinction

Financial developments for the first quarter of 2022

– Net interest income, excluding income from NPEs, amounted to € 246 million, + 11% per annum

– Strong production of net commission income at € 114 million (including rental income), + 37% per year, with trends of improvement in most products and services

– The completion of the separation of the activity of card acceptance services in the 1st quarter, led to the acquisition of € 0.3 billion net profit for the Group

– Recurring operating expenses at € 199 million, -6% per year, with the benefit of streamlining staff costs and optimizing overhead and administrative costs

– Cost-to-income ratio at 50%, approximately stable on an annual basis, despite the significant reduction in interest rates by NPEs

– Revenue before provisions at € 502 million, excluding the price of the separation of the activity of card acceptance services, with almost doubling on an annual basis

– In the 1st quarter, impairments were recorded due to the upcoming divestment of NPEs amounting to € 152 million, related to sale scenarios for the securitization of NPE Sunrise 3 & Solar portfolios, as well as other relevant adjustments.

– Strong profitability, with a net result of € 520 million, second consecutive positive quarter

Chr. Large: Tangible improvement in all areas

Commenting on the performance of the bank, the CEO of Piraeus Christos Megalou stated:

“In 2021, the Greek economy recorded strong growth, with GDP growing by 8.3%, while laying the foundations for sustainable recovery. Utilizing European resources, implementing reforms under the National Recovery and Sustainability Plan and Improving trends in the tourism sector in our country after the pandemic, are expected to ensure the prospects for economic expansion, even in the midst of uncertainty formed due to the war between Russia and Ukraine.

The current crisis has exacerbated economic uncertainty and significantly increased prices for energy, food and commodities. At this stage, the secondary effects of the crisis are having a negative impact on consumption and business. However, it is still too early to fully assess the long-term relative impact on the Greek economy and society. We will constantly monitor the relevant developments over the coming months.

The financial performance of the Piraeus Group in the first quarter of 2022 showed a tangible improvement in all areas of activity. Piraeus Bank achieved a 6% return on its tangible equity, in line with its annual target for 2022. Its capital position is strong, with a capital adequacy ratio of CET1 fully loaded at 10%, incorporating more than 2/3 of its Impact of NPE disinvestment for 2022, while the organic forecast output recorded historically low levels, as a result of the consolidation of the balance sheet. Net interest income, excluding NPE-related income, showed resilience. In addition, net commission income exceeded the limit of € 100 million for the fourth consecutive quarter and, together with the continuing reduction of operating costs, contributed to the revenue before provisions to reach € 502 million.

The evolution of the balance sheet is supported by the strong liquidity position with the strengthening of deposits, the expansion of the portfolio of non-performing loans with new loans of € 1.7 billion in the first quarter and the upward trajectory of managed funds and bank insurance activities, which increased by 37% and 26% per year respectively.

“For the Piraeus Group, the realistic assumptions on which our business plan is based, allow us to be firmly optimistic about achieving our goals, enabling us to support the Greek economy and offer attractive returns to our shareholders.”

Main Results Points

Net interest income amounted to € 286 million in the first quarter of 2022, reduced by 22% annually and by 10% quarterly, mainly due to the loss of interest income on NPE loans. Net interest income, excluding lost income from NPEs, amounted to € 246 million in the first quarter of 2022, recording an annual increase of 11%, contributing to the expansion of the loan portfolio and the higher fixed income portfolio, while the low deposit offset the higher service costs.

Net income from commissions and rents in the first quarter of 2022 amounted to € 114 million, + 37% per year, although it declined by 12% on a quarterly basis, due to seasonality. The main drivers of the annual growth were the new loan disbursements, the income from mutual funds, from the movement of funds and credit cards, but also the income from rents, which are expected to expand further. Commission income as a percentage of assets amounted to 0.51% in the 1st quarter 2022, + 8m.b. on an annual basis, with the transformation plan further contributing to their production.

Recurring operating expenses in the 1st quarter of 2022 amounted to € 199 million, reduced by 6% per year and -11% quarterly. Respectively, staff costs decreased by 6% per year to € 91 million, as they reflect the savings from the restructuring of human resources. As of March 31, 2022, the Group’s staff amounted to 9,252 employees in ongoing activities, of which 8,880 were employed in Greece, reduced by 986 per year. In addition, overhead and administrative expenses decreased in the first quarter of 2022 by 7% per year to € 82 million, incorporating inflationary pressures through higher electricity and maintenance prices. The cost-to-income ratio on a recurring basis remained almost constant at 50% in the first quarter of 2022 compared to 47% a year ago, mainly due to the decline in revenue from NPEs. Further improvement is expected, as the transformation plan and the ongoing digitization of the Bank’s activities are in progress.

Earnings before provisions (interest income excluding interest on overdue loans and commissions less recurring operating expenses) amounted to € 161 million in the first quarter of 2022, 72% 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 first quarter of 2022, the organic loan forecasts amounted to € 44 million, at the same level as in the previous quarter, due to the large reduction of NPEs in 2021, as well as the significant improvement of new inflows in NPEs. Impairments of € 152 million in the 1st quarter of 2022 are related to the forecasts regarding the sale scenario of the Sunrise 3 NPE portfolio, as well as to the provisions related to the Solar project and other adjustments. Organic risk cost on net loans remained at the historically low level of the previous quarter, at 50bps. during the 1st quarter of 2022, from 110m.b. a year ago.

The pre-tax result in the 1st quarter 2022 amounted to profits of € 542 million, while the pre-tax result on a recurring basis amounted to a profit of € 416 million. The net result of the Group shareholders amounted to a profit of € 521 million in the 1st quarter 2022, from loss of € 404 million a year ago.

Basic Balance Sheet Elements

Customer deposits remained high at € 54.9 billion at the end of March 2022, up 9% year-on-year, although they fell 1% on a quarterly basis due to seasonality. The cost of deposits continued to decrease annually and stood at 6 p.m. against 10 p.m. in the 1st quarter of 2021, remaining at the same level in the 4th quarter of 2020.

Eurosystem financing remained at € 14.5 billion at the end of March 2022, unchanged from the end of December 2021. The liquidity coverage ratio (LCR) of the Piraeus Group reached an extremely satisfactory level of 211%. The Group’s strong liquidity profile is reflected in the loan-to-deposit ratio, which stood at 64% at the end of March 2022.

Loans before impairment and adjustments decreased to € 37.1 billion compared to € 47.9 billion at the end of March 2022, due to the significant decrease in NPEs realized in 2021. Loans after forecasts of the Group amounted to € 35.0 billion on March 31, 2022, while the disbursements of new loans amounted to € 1.7 billion in the first quarter of 2022, reflecting the credit demand mainly from companies (large, medium and small companies). It is noted that the amount of loans before impairments and adjustments for March 2022 includes € 6.2 billion of high repayment bonds related to the securitization of NPE portfolios that have been completed so far, namely the Phoenix, Vega, Sunrise 1 and Sunrise transactions. 2.

The stock of NPEs decreased to € 4.7 billion at the end of March 2022, – € 0.2 billion on a quarterly basis, due to an organic decrease, while it was significantly lower than a year ago (€ 22.1 billion) . The NPE index remained at the level of the previous quarter (12.6%), significantly lower than 46.2% in March 2021, mainly due to NPE securities under the “Hercules” program (HAPS) and NPE transactions outside HAPS total amount of € 16.8 billion

The Group’s fully loaded Common Equity Tier 1 (CET1) capital adequacy ratio at the end of March 2022 stood at 9.8%, while at a proforma level (adjusted for the expected easing of risk-weighted assets due to the derecognition of securitization portfolios and ) the index stood at 10.0%. The total capital ratio stood at 16%, higher than the total capital requirements.

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