Piraeus Financial Holdings(BPIRY) - 2023 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Piraeus Bank reported a net profit of €238 million for Q2 2023, marking the best quarterly performance ever and the seventh consecutive quarter of profitable growth [4][8] - The normalized earnings per share increased to €0.18, surpassing the full-year guidance of more than €0.65, up from the previous estimate of more than €0.55 [9][19] - The return on average tangible book value improved to 15%, with a cost-to-income ratio of 32%, down from 36% in Q1 [8][12] - The CET1 ratio stood at 12.3%, an increase of 80 basis points compared to the end of 2022 [8][16] Business Line Data and Key Metrics Changes - Net interest income grew by 9% quarter-over-quarter, with net fee income increasing by 16%, achieving a record high of €141 million in Q2 [8][11] - The NPE (Non-Performing Exposures) ratio decreased to 5.5%, with NPE coverage rising to 57% [8][12] - The bank achieved a net credit expansion of €800 million in Q2, with a target of an additional €1 billion for the second half of the year [14] Market Data and Key Metrics Changes - The Greek economy is projected to grow by 3.4% in 2023, with inflation decreasing and unemployment significantly reduced [6] - Residential real estate prices increased by 14.5% year-on-year in Q1 2023, indicating a solid trend in the real estate market [6] Company Strategy and Development Direction - The company aims to become a best-in-class European bank, focusing on sustainable and diversified revenue pools, cost efficiencies, and a solid balance sheet [4][7] - Piraeus Bank is committed to accelerating its NPE clean-up process, with plans to halve the remaining €2 billion NPE portfolio over the next 18 months through organic strategies [13][48] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in outperforming 2023 targets due to strong financial performance and supportive macroeconomic conditions [9][21] - The bank anticipates continued growth in corporate lending, supported by government programs and the Recovery & Resilience Fund, while retail mortgage demand remains weak [37][70] Other Important Information - Piraeus Bank has been recognized as the Best Bank in Greece for 2023 by Euromoney [5] - The bank's liquidity ratios are solid, with a liquidity coverage ratio of 233% and a loan-to-deposit ratio of 61% [15] Q&A Session Summary Question: Lending Expansion - The credit expansion was driven by multiple granular transactions, notably through the Hellenic Development Bank, which increased balances by €210 million [29][30] Question: Trends in the Second Half - Corporate lending is expected to grow, supported by the Recovery & Resilience Fund, while retail mortgage demand is anticipated to remain weak [37] Question: Net Interest Income Improvement - The strong NII performance was attributed to a smaller-than-expected increase in deposit beta and higher loan pass-through rates [41] Question: NPEs and Corporate Cases - One significant corporate case contributed to NPE inflows, but there are currently no other major cases on the watch list [43] Question: Securities Income - The securities book has increased in returns, with a notable rise in income from derivatives used to hedge positions [47] Question: Cost of Risk Outlook - The cost of risk guidance has been adjusted to 100 basis points, reflecting current trends and performance [49] Question: Cash in Minimum Reserve Requirements - The minimum reserve at the ECB is €600 million, impacting NII by approximately €6 million for 2023 [54] Question: NPE Reduction Rationale - The acceleration of the NPE reduction process is aimed at reaching asset quality targets sooner, with a focus on organic reduction moving forward [48]