Piraeus Finl Hldgs Sa

Ladies and gentlemen, thank you for standing by. I'm Poppy, your course call operator. Welcome and thank you for joining the Piraeus Financial Holdings conference call and live webcast to present and discuss Piraeus full year 2023 financial results and business plan 2024-2026. All participants will be in a listen-only mode and the conference is being recorded. The presentation will be followed by a question and answer session. Should anyone need assistance during the conference call, you may signal an operator by pressing star and zero on your telephone. At this time, I would like to turn the conference over to Pireos Financial Holdings CEO, Mr. Christos Megalou. Mr. Megalou, you may now proceed.

Good afternoon, ladies and gentlemen, and welcome to today's conference call. Today, we will cover our full year 2023 financial results, as well as the revised three-year guidance vis-à-vis our financial outlook. This is Christos Megalou, Chief Executive Officer, and I'm joined today by our group CFO, Theo Nardelis, Chrysanthi Berbati, and Xenophon Gamalas. In Q4 and full year 2023, Pireus delivered the strongest set of financial results it has delivered to date. We maintained our focus on net revenue growth, cost containment, and operating excellence with an outcome we are all very proud of. Before going into more detail on the group's performance, I would like to comment briefly on the current Greek macroeconomic environment. In 2023, the Greek economy sustained its growth momentum with an estimated GDP increase of approximately 2.5%, significantly exceeding the Eurozone average. In the second half of 2023, the Greek sovereign was upgraded to the investment-grade status for the first time in more than a decade, signifying a major milestone for the country and the banking sector, while the potential upgrade of Greece to develop market status by MSCI will be another catalyst towards a more holistic convergence to our European Union counterparts. Let's start our presentation with slide 5. which depicts our performance in the fourth quarter and full year 2023. The group's profitability increased strongly, continuing the positive trends of previous quarters, supported by top-line outperformance, improved efficiency and normalization of loan loss provisions. Slide 6 points out the highlights of our 2023 performance. We generated normalized earnings of 80 cents per share which are record high for Pareus, while we run ahead of the full year 2023 guidance. We reported a return on average tangible book of 16.6%, again exceeding our target. We delivered 37% of net revenue growth versus the previous year, accompanied by solid loan pass-through, low deposit beta, and further growth in net fees. Operating expenses were reduced by 4% year on year. despite the inflationary environment, with G&A costs down 11% year-on-year on the back of our prudent approach of non-staff expenses. Our asset quality dynamics improved further with the NPE ratio halving to 3.5% in 2023 and NPE coverage standing at 62%, up 7 percentage points versus the previous year. We achieved euros 1.6 billion net credit expansion in 2023, in line with targets building on the strengths of our franchise and front office human capital across the country. Our pro forma CET1 ratio stands at a solid 13.3%, 170 basis points higher versus a year ago, while Emeril sits at 24.1%, surpassing the 24 target of 21.9%. Finally, in 2023, we increased our assets under management by 34% to 9.3 billion. As you can see from slide 7, we have outperformed most of our 2023 financial targets. Slide 8, covers our earnings results in further detail. As you can see, improved profitability resulted in tangible book value per share reaching EUR 5.08, up 13% year on year, enhancing further our capital distribution capacity for the years to come. Slides 9 to 11 present all the key drivers of our accelerated net interest income growth, with net interest margin expanding to 2.77% in Q4 2023, loan pass-through reaching 78%, and deposit beta standing at 13% in December 2023. Slides 12 and 13 outline the evolution of our net fee income, which increased by 14% year-on-year and reached euros 144 million in Q4. The group has been consistently increasing its net fee income over assets, now reaching 74 basis points, fueled by well-diversified sources. Paireus' widening outperforming This metric versus its Greek peers is a result of our focused strategy on expanding and diversifying our revenue sources and our market-leading footprint. Our pursuit of further operating efficiency bears fruit despite the inflationary headwinds. We have managed to reduce our operating expenses by 7% year-on-year in the fourth quarter, as shown on slide 14, while our G&A costs recorded a 25% drop year-on-year to €64 million, a record low for our group. The strong improvement of our operational efficiency resulted in best-in-class cost-to-core income ratio of 29% in the fourth quarter of 2023. Slide 15 provides a summary of our asset quality indicators. Our MPE ratio halved to 3.5% in 2023, exceeding our expectations, driven both by MPE cleanup initiatives and positive results from the organic effort. Meanwhile, Q4 organic cost of risk dropped to approximately 60 basis points. At the same time, MPE coverage increased to a prudent level of 62%. On slides 16 and 17, we present the dynamics of our performing loan book. Strong Q4 led to a solid net credit expansion of euros 1.6 billion in 2023, in line with our targets. The expansion has been supported by Pareus' strong take-up of the RRF, with euros 250 million of own financing disbursed in the year. Paereus has a superior liquidity profile, presented on slides 18 and 19. Our deposit base is granular, stable, and of high quality. Our liquidity ratios are all solid, as evidenced by the 241% liquidity coverage ratio and the 61% loan-to-deposit ratio, both in the top range of the European spectrum. Turning to our capital base on slide 20, a strong capital build-up of roughly 40 basis points in the fourth quarter, drove CET ratio to 13.3% and the total capital ratio to 18.2% in December 23, while accounting for a 10% dividend payout, which, as we have mentioned previously, is only the very first step of our distribution plan. On slide 21, you can see how our new wealth and asset management strategy continues to produce strong results with assets under management reaching euros 9.3 billion at the end of 2023, recording a 9% increase in Q4. Our strong 2023 results position the group well among the broader group of regional peers. To give you some context, on slides 23 to 32, we present the key metrics for Pireus versus domestic and regional peers. In all KPIs are comparables. As outlined on slide 23, our return on average tangible book remains among the strongest in the region. Capitalizing on our strong 2023 performance, Today, we announce our new financial targets for the 24-26 period. Slide 35 summarizes our macro and market assumptions, while slides 36 to 38 display the business plan highlights and the financial KPIs for the next three years. Slide 36 presents the core KPIs of our business plan. We expect net profit of approximately euros 1 billion per year, with loans expanding at over 5% per annum. Our MPE ratio is expected to fully converge towards European average levels, landing at approximately 2.5% at the end of 2026. CET1 ratio is anticipated to increase to circa 15% in 2026. Return to industry-level capital distribution is an important part of our strategy, and we are now aiming at returning around 50% of our profits to our shareholders out of the 2025 profits and onwards. All in, we opt. for tangible book value of approximately euros 8 billion by 2026, and we target to a sustainable, normalized return on tangible book value of around 12%, or 14% based on a CET1 ratio of 13%. Slides 39 to 46 present in detail the drivers and assumptions behind our 2024-2026 targets. Slide 47 provides a plan regarding our digital bank, Snappy. that is expected to be launched by mid-2024. Slides 48 to 52 depict our transformation program pillars and aspirations, while slide 53 summarizes our sustainability KPIs. The core of our strategy is to leverage Pareus's position as a leading driving source of growth and innovation for the Greek economy. We aim at continuing to support our customers and people as well as generating value for our shareholders. And with that, let's open the floor to your questions.

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