National Bank of Greece S.A

Ladies and gentlemen, thank you for standing by. I am Jota, your chorus call operator. Welcome and thank you for joining the National Bank of Greece conference call to present and discuss the third quarter 2023 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 morning, everyone. Welcome to our third quarter financial results call.

I'm joined by Christos Christodoulou, the Group CFO, Greg Paparigouris, Group Head of IR. After my introductory remarks, Christos, we'll 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 positive economic environment, which has been facilitating our robust financial performance. Then I will turn to our third quarter results. So let's begin. Economic recovery in Greece remains on a solid footing despite international headwinds, rising interest rates, and the recent floods. Greek GDP has accelerated to 2.7% in the second quarter of 2023 and has been consistently outperforming the euro area for nine consecutive quarters and by a sizable margin recently. Additionally, leading indicators confirm Greece's continued growth momentum with a full-year GDP projected at 2.5% despite the weaker outlook for the euro area. This overperformance is driven by the strong labor market conditions with supportive increases in real wages and employment, solid corporate profitability at an 11-year high, a recovery in the real estate sector, with prices in the residential sector up by 15% year-on-year. Very positive economic sentiment and a stable reform-oriented political background setting the stage for substantial pickup in investment both domestic and foreign. Only a small impact on output from the floods in the plains of Thessaly, about half a percentage point of GDP in 2023 with a full payback in 2024. The recent upgrade of the Greek economy by S&P to investment-grade status is a testament to the remarkable fiscal rebalancing of the country, as well as the hard-won gains in competitiveness achieved over a multi-year reform effort. In this positive economic environment, combined with our ongoing four-year transformation project and our inherent comparative advantages, the bank's performance has excelled. We have demonstrated notable P&L strength for yet another quarter, capitalizing on our solid balance sheet. A few key points regarding the balance sheet and the P&L. Let me start with the balance sheet. In particular, our asset quality. In the third quarter, we experienced near zero net NPA inflows, which had been slowing since April. In fact, since the beginning of the year, The cumulative net NPE formation is about 150 million, comprising around one-third of our initial full-year expectations. This positive development reflects a solid economic backdrop combined with the defensive nature of our loan book, including an old vintage mortgage book. With reference to our legacy NPE exposure, developments have been equally positive. We pushed forward faster, undertaking another transaction. This has led our domestic NP ratio down to 3.6% in September, close to the NP ratio target we had set for 2025, putting ourselves two years ahead of schedule. Our gross NP exposure has been reduced to about $1 billion, nearly all of which is covered by cash provisions. The other critical component of our balance sheet is our liquidity position. It comprises a large and stable demand deposit base, which provides a critical structural competitive advantage in the current industry environment, especially when combined with our mostly floating rate assets. Moreover, it comprises a large net cash position of 7.4 billion net of TLCRO repayments, which shows further in the third quarter. Moving on to our profitability performance, our nine month results core path is $0.9 billion, and it nearly fulfills our full-year core target for the billion. This development reflects strong core income growth, up 60% year-on-year in the nine months, tightly controlled costs, up 3% year-on-year, despite the inflationary environment and the implementation of our ambitious IT and digital transformation, which has already been paying large dividends to MDG in the form of improvements in efficiency, as well as customer service. Near zero net formation that has allowed a normalization of the cost of risk to 65 base points. Our NII momentum has been benefiting from the ECB base rate repricing to deliver the highest NII in the domestic market. Importantly, the impacts of rates has been complemented by accelerating corporate disbursements. driving our domestic P.E. loans up by $0.6 billion quarter on quarter. These developments allow us to confirm our P.E. expansion guidance of $1 to $1.5 billion for this year. And finally, fee activity was also robust, up 15% on a like-for-like basis with promising results in the wealth management business, which has been an area of focus, of management focus. A good result in all key lines of the P&L has led our core return on tangible equity higher to nearly 18% in the nine-month period on an annual basis and 20.8% just in the third quarter. Considerably higher than our guidance for over 15% for the full year 2023. Impressive profitability results have sustained core capital generation at very high levels. In the nine months, we have generated 220 base points of core capital, pushing our set one ratio to nearly 18% and the total capital ratio to over 20%. In view of our overperformance versus guidance, we will provide new guidance at the time of the full year results in early 2024. These will factor in the better than expected achievements and the improved outlook for NII, among other things, including ECB,