What did the analysts ask the CEO of Piraeus Bank

By Leonidas Stergiou

The first quarter of the year started with new loans of 1.7 billion euros corresponding to a net credit expansion of 300 million euros and is moving towards achieving the annual goal of net financing of 1.2 billion euros, the CEO of the Bank replied. Piraeus, Mr. Christos Megalou, when asked about the effects of the war and the energy crisis.

In fact, he added that March was a particularly good month, as was April. Given that in the first quarter there are more repayments and in the last year the largest disbursements, the goal of net credit expansion of 1.2 billion euros this year is entirely achievable. And this goal is achievable taking into account the sale of Sunrise 3 and Solar loans, through Hercules, amounting to 1 billion euros. At this point, Mr. Megalou reminded that the synthetic securitization of shipping loans is going to release funds of 400 million euros, while two more such transactions are expected to take place in 2022.

Impact of inflation and war

In terms of the effects of inflation, rising interest rates, declining borrowers’ disposable income, etc., Piraeus Bank’s baseline scenario envisages zero increase in red loans year-on-year. The unfavorable scenario, which includes an increase in interest rates by the ECB, a reduction in borrowers’ disposable income of more than 20% and effects that will affect the manufacturing sector, envisages an increase in red loans of 100-150 million euros from individuals and as many companies. However, as the Piraeus administration underlined in the questions of the analysts, there are no indications for such a scenario. In fact, in the first quarter and the data to date show an organic reduction of red loans. Based on the business plan of Piraeus and with the development until today, at the end of the year an index of non-performing loans below 9% will have been achieved.

Rising interest rates

Reporting on interest rates, raising the ECB’s deposit rate to 0% in 2022, to 0.5% in 2023 and to 1.25% in 2024 will boost interest income by € 190 million in 2024. If there is an increase in interest rates at 1.25% by 2023, this will bring in an additional € 100 million in the same year.

In terms of deposits and borrowing costs, when the 3-month Euribor moves above the 50 basis points (currently negative), about 25 points goes to the deposit rate and another 25 points to the borrowing cost.

Capital

Special mention was made of the increase of capital adequacy, in addition to the improvement of the quality of capital (red loans). 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 pro-forma level (adjusted for the expected easing of risk-weighted assets due to the derecognition of securities and portfolios leasing NPEs) the index stood at 10.0%. The total capital ratio stood at 16%, higher than the total capital requirements.

Profitability

The pre-tax result in the 1st quarter of 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 a loss of 404 million . a year ago.

The increase in interest rates was contributed by the increase in interest income and income from commissions from loans, capital transfers, cards and bank insurance products. The share of commission income will be further increased through the development plan of the real estate portfolio and investment banking.

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