Which sectors does Piraeus Bank focus on for loans?

By Leonidas Stergiou

Piraeus Bank’s loan disbursements exceeded the annual target of 5.7 billion euros for 2021, reaching 6.5 billion euros, which in terms of net credit expansion corresponds to 1 billion euros.

According to the management of Piraeus Bank during the presentation of the results of 2021, the greater credit expansion, in combination with the increase of the quality, ie the serviced loans, offset the costs arising from the risks and the sales of the red loans.

As the CEO of Piraeus Bank Mr. Christos Megalou stated to the international analysts during the presentation of the results of the year 2021, there is a great demand for loans in all sectors of the economy, something that is expected to be strengthened with the first disbursements from the Recovery Fund .

Uncertainty

However, answering a question from analysts, geopolitical developments, inflation and high energy prices will have an impact on the economy, such as the consumer price index which is expected to move between 6-7% in 2022. This will be a burden on growth, the which is projected at 4-5% in 2022, ie well above the Eurozone average. Also, significant negative effects on tourism and the agricultural sector are not expected, while the corresponding ones in manufacturing, energy and trade are too early to identify.

The goals

Nevertheless, Piraeus Bank, in the new business plan for the period 2022-2025, which it will present on April 6, predicts a net credit expansion of 1.3 billion euros, ie about 30% higher than that of 2021. And if we rely that in terms of new loans in 2021 amounted to 6.5 billion euros, this trend is expected to strengthen due to the Recovery Fund and strong demand for loans to households, which recorded an annual increase of 25%.

The main branches

In terms of sectors, Piraeus, according to Mr. Megalou, will support a real economy by financing all sectors and households. However, it focuses mainly on sectors that have the best profit-to-risk ratio, such as the energy, tourism and manufacturing sectors. Emphasis will also be placed on retail loans.

Moreover, of the new loan disbursements in 2021, ie from the total of 6.5 billion euros, the largest amounts appear in the manufacturing sector (1 billion euros), transport (1 billion euros), trade (1 billion billion) in real estate, leasing and factoring (€ 1.2 billion).

Most loans to large and small enterprises were made by those active in manufacturing, transportation and trade, while in small enterprises most of the disbursements were to freelancers, trade, factoring and leasing.

Results

Thus, net interest income amounted to 1.4 billion euros from 1.5 billion euros, despite the completion of the securitization of Sunrise 2 and other sales and restructuring of loans of 5 billion euros. Net commission income rose to a record 394 million euros (from 317 million in 2020), while revenue from transactions and other sources rose to 150 million euros from 90 million euros.

Organic costs were reduced to 902 million euros, mainly due to reduced staff costs (from 937 million euros), while organic costs (forecasts, etc.) were reduced by almost half (3784 million euros). Thus, organic profits doubled to 665 million euros, but the cost of securitization burdened the results with 3.9 billion (non-recurring charges), and the result before taxes was -2.7 billion euros.

In red loans, in 2021 there was an organic decrease of 0.2 billion euros, compared to a forecast for deterioration of 0.2 billion euros. For the remaining stock of red loans, the securitization of Sunrise 3 (600 million euros) and two other transactions are underway (sale of a shipping portfolio of 0.4 million euros and sale of the card system). In fact, the completion of the sale of the card system will strengthen the bank’s funds by 0.3 billion euros.

Thus, the CET1 capital adequacy ratio will reach 9.8% and the overall index at 14.6%. In general, the bank’s strategy is moving in the direction of a CET1 index close to 10% and an overall index around 16%.

The reduction in red loans, combined with the increase in interest income margins and asset management and bank insurance commissions, support the goal of increasing profitability (ROE) by more than 10% in the next period. Effective cost reduction also contributes to this, increasing the efficiency of the network, human resources and digitization.

The new three-year strategic plan

According to information, the new business plan, which will be announced on April 6, will have more detailed individual targets and scenarios for the effects of the war, price increases and the risk of rising interest rates.

Also, the new business plan will set in detail the targets for capital support moves, such as the issuance of bonds amounting to 1 billion euros in 2022, however the time and manner will depend on market conditions.

Asked about the effects on the Bank of ECB interest rate hikes, calculations show that raising interest rates from -0.5% to 0% will have a positive impact on interest income by € 60 million and from 0% to 0%. , 5% additional 100 million. That is, an increase in interest rates from -0.5% to 0.5% means an increase in revenue of 160 million euros.

The new business plan will include the following pillars:

– Further development of the Group, revenues and profitability.

– Improving the quality of funds and continuing the fundraising program to strengthen MREL like other banks (these funds are not supervisory and must be covered in the long run).

– Supporting the economy and business.

Utilization of the Recovery Fund.

– Investments in digitization, innovation and more efficient use of networks.

This includes further strengthening the application of the ESG criteria, both in financing and investment. At the same time, a special action package will concern the utilization of the staff, which after two voluntary exit programs, was reduced in 2021 to 8,900 employees from 10,000 in 2020.