National Bank of Greece S.A

Ladies and gentlemen, thank you for standing by. I'm Konstantinos, your chorus call operator. Welcome and thank you for joining the National Bank of Greece conference call to present and discuss the full year 2021 financial results. At this time, I would like to turn the conference over to Mr. Pavlos Milonas, CEO of National Bank of Greece. Mr. Milonas, you may now proceed.

Good afternoon, everyone, and good morning to those of you joining from the U.S.,

Welcome to our fiscal year 21 financial results call. I'm joined by Christos Christodoulou, Group CFO, and Greg Pavarigouris, Group Head of IR. After my introductory remarks, Christos will go into more detail on our financial performance, and then we will turn to Q&A. I will begin with a brief overview of Greece's economy in view of the high uncertainty in the current global conjuncture. and their relevance for the future performance of NVG. Let me begin by saying that Greece's economy performed much better than expected in 2021, especially in the second half of the year, recovering strongly from the COVID-dead impact of 2020 in the first half of 2021. Indeed, the economy has already exceeded pre-COVID levels in Q4 2021, led by exports and fixed investment. and this despite tourism receipts in 2021 at 60% of their record 2019 level. Job creation was strong, with unemployment declining to 12.8%, the lowest level since over a decade ago. Private sector firms have strong balance sheets and profitability, reflecting years of crisis-hardened restructuring and their concomitant improved competitiveness. These developments are reflected in a fiscal outcome that is expected to be about 1.5 to 2 percentage points of GDP better than budgeted and a debt-to-GDP ratio that is estimated to have declined by about 14% of GDP in just one year, albeit remaining at high levels. The strong momentum of the economy and its solid fundamentals will prove very useful in the new challenge to absorb the commodity-induced spike in inflation, combining COVID-related supply chain disruptions with Russia's invasion of the Ukraine. The main transmission mechanism of this shock to the economy is a reduction in household disposable income and a rise in firms' input costs. As a result of this supply shock, GDP growth in 2022 should be negatively affected but soon recover with cumulative growth over the next two years not expected to deviate significantly from the previous forecast. Indeed, the ECB's new macro forecast suggests only a 0.2 percentage point reduction in annual average GDP growth over the three-year period 2022-2024. Greece's exposure to Russian energy supply is moderate, with only 15% of domestic energy consumption Russia sourced. specifically only one-third of imported natural gas from Russia the rest is sourced from Azerbaijan and through LNG contracts mainly with the USA and Algeria furthermore only one-fifth of crude oil imports are sourced from Russia and recall that over 30 percent of Greece's electricity consumption comes from domestic renewable sources including all the above internally we also project small deviations in activity in Greece for the three-year period 22-24 versus the pre-crisis one. Admittedly, these projections keep bouncing around in view of the high uncertainty toward events. Thus, in view of the economy's expected ability to broadly absorb the energy price shock, the likelihood of a new cycle of NPEs is low, especially in view of the recently announced government support programs for the most vulnerable households and firms estimated to be around 2% to 2.5% of GDP in total for 2022. According to NBG's exposure to Russia and Ukraine, let me say that it is immaterial, practically nonexistent. Neither sanctions nor the war should have any meaningful direct impact on our business. And with this, relatively longer than usual, but I believe necessary foray into the economic backdrop to our operations, which are almost uniquely Greek-based that has turned to banking and NBG. In 2021, NBG achieved decisive results arising from a multi-year transformation effort. Capitalizing on Greece's strong economic recovery, we have delivered one, strong organic profitability, two, an ambitious NP cleanup, and three, a growing and well-capitalized balance sheet. Underpinned by the rapid change towards a more flexible, and efficient operating model. Let us start from the balance sheet and specifically asset quality. In 2021, we reduced NPEs below the psychologically important 10% mark, specifically to 7% of the group and 6.9% domestically. This was achieved with a conclusion of the frontier transaction as well as continuous and solid negative organic formation despite the end of the moratorium and the government support programs. In nominal terms, the level of MPEs stand at 2.1 billion and only half a billion net of cash provisions. The frontier transaction in the health for sale portfolio is expected to complete before summer. Today, we are far cry from the 22 billion MPEs of 2015, 12 billion net of provisions. and this workout was achieved without the necessity to raise equity capital in any way or form. Turning to the other key components of the balance sheet, capital, NBG will soon be looking at a set one capital ratio that is above 18% and a total capital ratio near 19%. Specifically, at year end 2021, the set one ratio stood at 16.9%, and will be boosted by the closing of the ethnic key insurance transaction in the next few weeks as significant progress has been made on regulatory approvals. The critical DG Comp approval was granted on February 25th and without the need for any remedies. Additionally, the closure of the JV transaction of EVO payments expected in Q4 will provide a further 70 base point impetus to capital. That being said, the 5149 joint venture with EGO is not about raising capital. It is a first step in a strategy to form strategic partnerships with mostly digital and tech players, and thus to leverage on the concomitant synergies and advance our product and service offerings to match the increasingly exacting demands of our clients. As I believe doubts have been dispelled regarding the completion of NP cleanup and the adequacy of our capital, attention turns to the ability to accelerate the generation of sustainable organic profitability. In this area as well, NBG achieved significant progress in 2021. In fact, our core operating profit rose to $450 million, up 40% year-on-year, equivalent to circa 8% of tangible equity, delivering 70 base points of organic capital creation in 2021. after accounting for 50 base points from the committed RWA expansion arising from the growth of our performing loan book. Notable improvements occurred across all core P&L lines comprising core profitability. First, NII remained resilient despite competition-induced spread compression and the loss of $30 billion of NPE interest. This was achieved through loan expansion in the performing book of $1.4 billion once again the highest in domestic market, emanating from the 5 billion loan disbursements. Encouragingly, the corporate market, which has been buoyant for the past several years, is now also joined by a reviving retail market. Fees have had a remarkable strong year, up 10% with cross-selling efforts and digital banking reinforcing fees from increased loan penetration. This P&L line has significant room to continue to grow based on international benchmarks, especially in investment products, bank assurance, and investment banking services.

The hard work on OPEX continued, led by a double-digit decline in personnel costs.

Due to the emphasis we have placed not only on revamping, but also turning our IT and digital systems into a competitive advantage, depreciation charges have picked up. But I firmly believe that these investors will prove prescient in the years to come. In fact, they have already made NBG the bank with the best digital offering in Greece, as acknowledged by independent experts, but more importantly, by our clients. The numbers speak for themselves. Less than 5% of transactions are currently undertaken in branches. Our market share in mobile banking has climbed to 32%, with more than 2 million monthly active users, and the market share in internet banking is 25%. Moreover, digital usage, as measured by transactions per second, TPS, are 60% above our nearest competitors. Last but not least, the good work on the NP front is leading to a steady and sustainable reduction in the cost of risk to already below 100 base points in Q4, 68 base points to be exact.

Looking ahead into 2022 and beyond,

As I mentioned earlier, the prospects of the Greek economy are very positive, despite the inflation-related headwinds. The fundamentals of the economy are strong, and even with the current global environment, Greece should experience respectable positive output growth in 2022, higher than the year area as a whole, and much better outcomes in 2023 and 2024. Thus, NBG's performance targets remain ambitious, yet achievable. Specifically, we aspire to, one, quickly close the remaining distance to a circa 3% European level NP ratio by 2024. Two, continue to improve the pace of organic capital generation, both through further core income growth, as well as additional operating cost efficiencies and cost of risk normalization. The medium-term target is to achieve double-digit ROEs expected to start from 2024. A few words on the key drivers for P&L line. Capitalizing on Greece's growth cycle, loan expansion of $1.5 to $2 billion per annum is expected, and this will gradually fully offset NII headwinds from the residual NP cleanup, TLTRO withdrawal, and ember issuance. The income is expected to grow at about 10% per annum. arising from higher economic activity, increased cross-sell and penetration across products and segments, especially investment products, bank assurance, and capital markets. Success in this area will be based on leveraging improved data analytics. Cost reduction will continue with a target cost to core income of less than 47% despite continued strong IT spend, including the introduction of a new core banking system with cloud capabilities. This will occur through further operating efficiencies, including the shift to digital. Clearly, the motivation of our people through the continued revamping of our HR management is critical to achieving all our goals. A final cleanup of MPs will allow the cost of risk to normalize to less than 60 base points. A combination of the continuing improvement of our recurring profitability and our strong capital buffers a fully loaded SET1 ratio above 15% in 2024, provides the flexibility to commence and sustain a policy of prudent dividend distribution in the near term, even in 2023 subject to regulatory approval. Meeting these ambitious objectives requires significant further effort in a world experiencing rapid technological change and more exacting customer expectations. Our transformation program will continue to provide MBG with a competitive advantage in driving this necessary change. Our investment in technology and people are the critical components to successfully achieving our targets and be the bank of first choice in Greece. The results so far, and especially in 2021, affirm our capacity and dedication to deliver these goals. With that, I would like to pass the floor to Group CFO, Christos and who will provide us with additional insights on our financial performance before we turn to Q&A. Christos.

Thank you, Pablo. So let's go into the financial performance in a bit more detail. Starting with the profitability highlights on slide 13. Continued strength across all core P&L lines drove 2020-21 core operating profit 40% higher year-on-year to $450 million. constituting a decisive step towards achieving our group core operating profit target of circa 490 million for 2022. Our strong performance reflects a 4% year-on-year growth in core income, the reduction in our operating expenses by 6%, and sustained cost-of-risk normalization throughout the year, allowing the full year 21 cost-of-risk to top below the 100 basis points mark. Factoring in trading gains arising mostly from our GGVs portfolio, profit after tax from continuing operations amounted to $833 million up 41% year-on-year. Looking into asset quality and liquidity highlights as depicted on slide 14, domestic NP organic flows remain negative in Q4-21, bringing the organic reduction for the year to $0.7 billion on the back of strong curings. sustained organic NP reduction throughout the year, coupled with the solid progress on Frontier 2 securitization, which was transferred to help for sale in Q421, drove our domestic NP exposure down to 2.1 billion, or just 0.5 billion net of provisions. NP ratio in Greece dropped to 6.9%, down 7 percentage points year-on-year, bringing us just a notch above the 6% full-year 22 NP target one year ahead of schedule. Notably, our domestic cash coverage is boosted to 78% from 70% in Q3 2021 and 63% in Q4 2020, despite the gradual cost of risk normalization, reflecting favorable organic NP formation trends. At the same time, domestic performing loan additions in 2021 are maintained at sector high levels of plus 1.4 billion, driven by loan disbursements of nearly 5 billion over the same period. Finally, domestic deposit gathering remains strong, as we experienced inflows of 4.6 billion in 2021, mostly from the private sector, despite negative real rates spared by the strong economic rebound. Our best-in-class capital position keeps improving on the back of strong profitability, with our said one ratio increasing by 120 basis points in 2021, reaching 16.9% while total capital stands at 17.5%. The completion of the insurance sale and the merchant acquiring JV will further boost our capital buffers, rendering Z1 and total capital ratios of circa 18 and 19% respectively, well above our guidance for year end 2022 capital levels. Now let's go through the key drivers of our profitability on slide 15 to 21. Domestic NII increased by 3% year-on-year, supported by the solid net additions to our loan book, as well as lower funding costs. Encouragingly, interest income from performing loans remained resilient, driven by rising balances, while lending yield normalization is bottoming out. Most importantly, the unprovided non-cash NP interest portion remains very low, at only 4% of our total NII increase, highlighting the quality of our lending interest income while predisposing for manageable NAI headwinds ahead of realizing the last leg of our NP cleanup journey. Going into domestic loan evolution in more detail on slide 17, corporate disbursements picked up sharply in Q421 to $1.9 billion, driving annual loan disbursements to $5 billion. As a result, our performing loan book expansion accelerated to $1.4 billion year-on-year, with corporate performing exposures rising by $1.3 billion, or 9%, and the performing retail book exhibiting stabilizing trends following more than a decade of sustained deleveraging. The growth momentum of our performing book provides sustainable and long-term support to our NII, gradually offsetting the impact from the balance sheet risk. Moving on fee income on slide 20, domestic fees increased by 10% year-on-year, reflecting a sharp pickup in loan origination and economic activity manifested in card, intermediation, and digital fees. The latter reflects our successful digital transformation strategy, facilitating the bank's transition into a more flexible and cost-efficient operating model. Indeed, customers are increasingly shifting to digital functionalities with e-banking transactions searching by nearly 30% year-on-year, replacing branch transactions that have declined by 56% year-on-year, as shown in the lower left-hand side chart. Let me now turn to operating costs on slide 21. Personnel expense optimization continues, with stock costs down by 12% year-on-year, absorbing the increased depreciation charges driven by our far-reaching IT strategy. As a result, operating expenses decreased by a further 6% in 2021, with our cost-to-core income ratio improving by nearly 6 percentage points year-on-year to 52%. Remaining cost rationalization effort is anticipated to offset inflation headwinds and increase depreciation, allowing us to maintain a negative sign in operating expenses evolution going forward. Moving on to asset quality on slides 22 to 26. Negative organic flows of 0.7 billion in 2021, combined with inorganic actions, reduced domestic NPs by half, down to 2.1 billion. Nearly 40% of this residual stock are FNPs below 30 days past 2, with a good probability to cure in the next quarters. Domestic NP ratio came 5 percentage points lower quarter on quarter, at 6.9%, while coverage increased further to almost 80%. Notably, Organic reduction in 2021 was better than expected, reflecting both the contained inflow of new defaults as well as strong curings. Moreover, despite the gradual conclusion of supporting fiscal measures and programs, the payment performance of ex-moratoria clients remains far better than expected, with less than 4% of the moratoria perimeter being in default as of February 2022, as shown on slide 26. In addition, with regards to our clients on Yefira programs, the majority of which have exited the programs as of December 2021, payment performance is reassuring with just 2% of them in delayed payment status. This is a clear indication of much lower than initially anticipated COVID-19 impact in the credit quality of our loan portfolios. Turning to liquidity on slides 27 to 29, Domestic deposits increased by 10% of 4.6 billion year-on-year, accompanied by a sustained time-to-core deposit substitution effect on the back of strong inflows into savings accounts. Time deposit yields have edged lower by 15 basis points year-on-year to just 8 basis points. Eurosystem funding through TLTRO stands at 11.6 billion, while the bank fulfilled its interim binding target of 18% without additional conditions. Summing up, 2021 has been another year of key achievements and strong financial results for MBG. On the profitability front, we have managed to grow our core operating profit, reaching $450 million, just a notch away from our 2022 profitability target. With regards to asset quality, our remaining stock of NPs, translating into a ratio of 6.9%, goes well for outperforming our year-end 2022 NP ratio target of 6%. Last but not least, we have kept enhancing our superior capital buffers through our strong recurring profitability and capital accredited transactions, creating additional value for our shareholders. And on this note, I would like to open the floor to questions. Thank you.

The first question is from the line of Floriani. Join us with Axia Ventures. Please go ahead.

good evening guys thanks for the presentation and well done on the progress achieved in 2021 I have a few questions on capital so now that your capital position is you know it's looking very strong even if you look at the performer numbers it strengthens even more I'm just wondering if you have any guidance similar to peers in terms of possible payout ratios going forward and also link to that the figure that you give for fully loaded capital level of 15% plus in 2024 does that account for the distribution that number and then the other question is on your assumption for the normalized equity level in 2024 as well and then finally it's a question on disbursements I see a very strong figure in the fourth quarter of 2021 just wondering what kind of disbursements those were if they were more like short short-term working capital or you saw some demand for long-term investment kind of loans. Thanks.

Okay, let me take a stab at them and Christos will add. Payout the dividend depends first of all on regulatory approval. So far we have a ban and it's been a ban that's been around for 10 years. So we need to walk before we run. So we'll start with a request for a relatively small payout of the order of 20, and then we'll go from there. So let's be careful and not ask the regulator to be too ambitious. On the 15%, yes, it does include the dividend payout in 2024. The end 2021 disbursements were corporate and included project finance long-term. I don't think it had significant short-term working capital facilities. Did I miss?

The assumption for normalized equity in 2024, do you have that to share?

The next question is from the line of Savin Mehmet with J.P. Morgan. Please go ahead.

good afternoon thanks very much for the presentation I'm just one follow-up on capital return please I appreciate you aim ordinary dividend payments from 2022 onwards but this will obviously come from the ordinary earnings generation and given that you're clearly operating on visible excess and I do appreciate you know you will speak with the regulators etc but what would you see your optimal capital levels given also you're quite conservative in your approach and how are you thinking about excess capital distribution if at all let's say come 2022 you know in form of a buyback or would you like to deploy your capital somewhere else if you had any color on that that would be helpful again we have been a high NP bank and therefore the regular has been quite strict with capital I presume

but I cannot speak to the regulator that the capital requirements on the SHREP will come down. But I cannot foretell what the regulator will do. So again, just similar to the dividend, let us walk before we run. Let's get out some dividends before we start thinking of far too ambitious things and get ahead of ourselves.

Okay, and if you don't assume any change, let's say, in your capital requirements today, then would the 15-16% fully loaded set on your comfortable level, or do you think there is room for that to come down a bit?

Based on our high ANPs of two years ago and our capital charges have not been changed by the regulator, and you add a buffer of 100 base points, then then yes, they are comfortable. We don't have that much excess capital.

Now, that should come down. Yeah, okay, I understand. Thanks very much. And then maybe for this year's guidance, I mean, thanks very much for providing 2024 figures, but is it fair to assume that you may achieve some of these targets prior to 2024 given the run rate and momentum is quite strong? And maybe looking at 2022, how are you thinking about your 490 million core operating target for this year, given, again, 2021 was very strong, but also there are some ongoing uncertainties. So any color near term would be very helpful.

We all appreciate near-term the uncertainty is quite high. We've had some good news today. Let's see if it sticks. So there is uncertainty about 2022 GDP, so I think it's safe to say we should stick with our 2022 guidance. Looking forward, I think that there are certain factors that could bring upside risks. and the main one being is the path of interest rates. What has happened in the past months, first with the supply chain impact on inflation and then with the Russian invasion, we've had higher inflation, and it looks like we'll have tighter monetary policy. So that yet to be played out again, but... S.A. S.A.

Hello, many thanks for the presentation and your time. Just on the asset quality, you're keeping your 6% NPE ratio 300 or 0.3 billion.

or so decline. Given your recent trends, is this cautious or is the geopolitics making this maybe less cautious? You've done a phenomenal job, so I'm wondering if there is a downside risk to your MP ratio. That's the first one. And then on loan growth, you do mention $1.5 to $2 billion is it safe to assume given the volatility in the world 1.5 or maybe below any color how after another very impressive quarter how is your long growth trending so far any color there and then final one if you could give us any info on your issuance plans particularly from an MREL angle thank you let me start in inverse order MREL

it would be one or two issues depending on market conditions. We had originally planned for two, but it looks like we only have half a year or less to two issues, so probably one. But again, it depends on market conditions. Long growth, I think, could go the other way. Higher inflation, higher normal GDP, higher demand for for working capital to cover higher input costs. You're going to see much less bond issuance by the corporates that crowded out the bank lending in 2021.

A lot of bank lending in 2021.

So I think there are factors there that could go in either direction. NP ambition again due to the uncertainty we'll stick with the target for now and we'll be glad to outperform it if possible and any color on cost of risk for this year you have a very high coverage or coverage outlook so Jonas as per our previous guidance we ended up the year where we

expected to, around 96 basis points on a full year basis. And the expectation is to go down starting from Q1 for 2022. So we see ourselves with a cost of risk in the area of 60 to 70 basis points. And moving on to years 2023 and onwards, we expect that to normalize even more. In terms of coverage, you know, provision coverage also is affected by the actual level of MPA, so we don't see it going down in the immediate term.

Got it. And one final thing on the merchant acquiring carve-out timing. I'm not sure if I heard this correctly. Is it Q4 22, the expected completion time?

That's correct. And that's due to the regulatory approvals.

Got it.

perfect thank you the next question is from the line of court that alberto with bank of america please go ahead hi good afternoon congratulations for the good result my question is about sensitivity to raise you do have a lot of funding a lot of deposits so normally your sensitivity should be pretty high but we are from other banks that there could be some initial softening of sensitivity due to the floor on loss for the first 50 bps. So I don't know if you can elaborate how much more an eye would you get for the initial rise of 50 bps in rates and any subsequent rise. Thank you.

Well, more or less the same story applies to us. I think we are in a good position because of the high level of our co-deposits. S.A. S.A. S.A. S.A. So that's more or less our sensitivity based on today's facts.

I think we're similar to the other banks for the first 60 base points. As you pointed out, due to the large share of relatively insensitive core deposits, after that we'll be having more of an upside.

Thanks at all. Thank you.

The next question is from the line of David Daniel with Autonomous Research. Please go ahead.

Hi. Good afternoon, and thanks for the call and taking my questions. I just have a follow-up on issuance and noting your comments on the number of chip trips to market. Should we take that that you wouldn't look to capital markets if you're focused on MRAL? So I guess I'm asking, could you put MRAL and capital instrument this year? And then secondly, just on your government bond portfolio, just wondering if you can provide some details on the amount of GGBs held, the amount that's held at amortized cost, and then any guidance you can give for what you're seeing in terms of the impact early this year would be good. Thanks.

So, David, our view on MNL, as Pablo said, is that we are looking to one or two transactions this year subject to market conditions, so we'll wait and see. As you know, we've made our MNL targets for 2021. There's nothing binding for the end of 2022, so we'll see how things evolve. In terms of our debt securities portfolio, the vast majority of our securities are classified as health to collect, amortized cost, so we don't have any volatility in our equity on that front. With regards to the health to collect themselves, Actually, up to today, we don't see much volatility. The level of holding is just about a billion, most of them being deep built, so we feel very confident with regards to the volatility that we would face. And to add to that, we're highly hedged in terms of the positions that we have in the head-to-collect and sell portfolio. The level of GGBs in our head-to-collect portfolio is in the area of $7 billion.

Thanks. Maybe if I could just follow up just on capital issuance, just given the conversations on restarting dividends. Isn't AT1 in your capital stack part of the long-term planning with regard to kind of where you see CT1 and capital more generally to allow dividend payments?

Well, it's something that we do consider.

It's not something that the make decisions, obviously. In the overall MREL issuance plan that we have up until the end of 2025, it forms part of our planning, but until that time comes, we'll see what's the optimum strategy and what kind of issuances will be made.

Understood. Thanks a lot.

The next question is from the line of Booktoff Mikhail with Goldman Sachs. Please go ahead.

Good day. Thank you very much for the presentation. I have a couple of questions. First, on the NPE coverage ratios, indeed there is a strong buildup on this figure. I would like to ask what maybe management target do you have there and at which point you may consider to start releasing maybe some of the reserves and provisions for NPEs? Another question is maybe you could disclose some sensitivity of your GGB's portfolio to the recent build-up of bond yields. And also the question on operating expenses. I think you had some guidance for the cost reduction shared previously. Are there any changes to these targets in the light of somewhat accelerating inflation? Thank you very much.

Okay, on MP coverage, you need to separate out S3 coverage from total provisions. Now with such a low level of MPs, most provisions are S1, S2. So if you add all provisions, the coverage looks high. But if you look at S3 provisions, stage 3 provisions, it is a more logical number. So that's, I think, often confusion on total provisions over NPEs and stage 3 provisions over NPEs. I think on the bond yields was answered and the help to collect and sell, we have zero impact on capital to date. And then operating costs targets, no, the guidance remains the same.

All right. Thank you very much.

The next question is from the line of Gerardo Lewis with Bank of America. Please go ahead.

Yes, thank you very much for the call. I have two questions, please. The first on tech quality, can you give us some indication of which industries you see may be more affected by the geopolitical stress or the second-order impacts like inflation. What are you seeing on the ground? Are you worried about an increase in defaults in some Greek industries from your conversations with your clients? Just a framework for us to understand where the tensions might be. And then secondly, on MREL, What do you think the direction of travel is for the Greek banking sector as a whole? Do you think we're heading in the next few years to a more constraining regime where you have subordinated MRO requirements? Or do you think recent developments might lead the regulator to relax these, in fact, and maybe push back the final MRO deadline? Thank you very much.

Okay, on the impact of the energy and agricultural commodity price inflation, I think, as I tried to say in my introduction, there is going to be an impact on disposable income of households and on input costs of especially agricultural and and certain energy-consuming industries. Now, the government is announcing a relatively generous plan to cover the more vulnerable households, about 2% of GDP in 2022. GDP in general is still expected to be north of 3%, so despite the shock, lower than original original projections but still not a GDP growth rate that creates NPs now certain energy producing firms they will be passing on some of their costs which will be covered by the government so all in all I'm starting to feel more and more comfortable that we will not see any significant increase in NPs in 2022 coming out of this. And then on the MREL.

On the MREL, look, we have a plan up until 2025. We meet with SRP on an annual basis. To the extent that is required, we fine-tune the plan. So we cannot preempt at this point in time if anything would change and how SRP approach the situation.

We stick to the cause and the plan. Thank you.

The next question is from the line of Boulogouris Alexandros with Wooden Co. Please go ahead.

Hello, a quick question on the NII. If you could walk us through a bit on 2022 and what should we expect regarding the NII from NPE? It was 194, I think, in 2021. So this figure, I assume, will go down drastically in 2022 with Frontier. And the impact from TLTRO, how much was the positive impact in 2021 and what should we expect in 2022? These are the negative factors. Of course, there are some positive factors as well, but I guess we should assume a high single-digit decline. Is that something reasonable? That's my first question. And my second, sorry, because I did not catch what you said earlier from a question from my colleague. regarding the NII sensitivity on interest rate. You said $70 million on the first 50 bps and $150 million on the 100 bps. Sorry if you could repeat this. Thank you.

Okay. So let's start from the second one. Indeed, what we said on the first 50 basis points was a $70 million upside. And then if we have 200 basis points of increase, then that translates into $350 million of increasing income. With regard to the guidance on the NII for 2022, I think you picked up the two biggest headwinds that we would face. First of all, in terms of NP interest, indeed, the NP interest for 2021 was in the area of 190 million. If we assume that Frontier accounts for about 100 million of that, and we will not have it in 2022, plus some other actions that we have. You should assume that NII interest from NPs will be going down in the area of 80 to 90 million. But having said that, you should be aware that the normalization of cost of risk on the other side will not have the same effect on bottom line profitability. On TLTRO, the annual upside that we had this year because of the program was in the area of 90 million. and we expect to keep half of it for 2022. Other upsides that we have in 2022 is the increased interest from our performing exposure loan book and some additional but not that significant repricing in our time deposit. So all in all, the number that you quoted is quite right. You should expect a high single-digit reduction in our NII for the year.

I'm sorry. Thank you for this. And one follow-up regarding fees. You mentioned in your plan a growth of around 10% per annum. Wouldn't 2022 be affected by the sale of the merchant acquiring business? So would you have a similar growth in 2022?

Yes. The figures that we've shared account for that. So you should expect this growth S.A. S.A. S.A. S.A. So it's just north of 300 million for the 100%. So we're disposing of 51%. So half of it is the gain that we have recognized because of the sale.

Thank you. The next question is from the line of Negro Alberto with Mediobanca. Please go ahead.

Yes. Thanks for taking my question. The first one is on quality. If I remember well, the Frontier 2 project should have a neutral impact to capital, but can you give us an idea of the impact to provisions for 2022? The second one is on capital. If you can go through the quarter-on-quarter increase in the fully loaded CT1 ratio, and the last one is on cost if you expect any restructuring cost to be booked to reach the 2024 target. Thank you.

Okay, so on Frontier, the transaction was actually capital accredited, over 100 basis points actually. If we combine the provision reversals and the risk-weighted asset recognition, we were in the area of 150 basis points. With regard to the toll that this would have on cost of risk in 2022, as we said, we see our cost of risk normalizing down from 100 basis points in 2021 to around 60 to 70 basis points in 2022. I didn't catch the other questions that you made. Can you repeat them, please?

Yes, sorry. Also, on the first one, I was referring to the NPs that you put at available for sale this quarter. If the additional $1 billion security station you are planning to do will have an impact to provisions. And the second one was on capital. If you can go through the quarter-on-quarter increase, it's I think 90 basis points from risk with asset relief if you can complete that and the third one is on cost if you expect any restructuring cost to reach the 2024 target.

Okay so the question on the increase of the capital ratio, the fully loaded or the transition is the same from Q3 to Q4, is down to the recognition of the risk-weighted assets from Frontier 1. The other question you had was the cost of Frontier 2. The cost of Frontier 2, as we said also from the previous call, there's not going to have any loss budget or any material effect on capital. We think that we fair-valued it correctly. and going forward on the structuring costs, well, we'll have a strategy of optimizing further our cost basis, but costs down the road would not be as material as the ones that we have recognized so far, and to the extent that we need it, we'll see how it goes depending on the actual plans.

Thank you. Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to Mr. Milonas for any closing comments. Thank you.

Thank you all for joining us for the full year results call. We'll be available to answer questions. We hope to be able to see your person soon, and we hope that we have soon peace in the region. So thank you very much.