Alpha Bank S.A. (ALPHA) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. I am Gaily, your Chorus Call operator. Welcome, and thank you for joining the Alpha Bank Conference Call to Present and Discuss the Full Year 2019 Financial Results. [Operator Instructions] At this time, I would like to turn the conference over to Alpha Bank management. Gentlemen, you may now proceed.

Good afternoon, ladies and gentlemen, and welcome to Alpha Bank's conference call for its 2019 results presentation. This is Vassilios Psaltis, CEO. And with me is Lazaros Papagaryfallou, CFO; and Panagiotis Kapopoulos, our Chief Economist. Since the announcement of our strategy plan in November 2019, the Greek economy has transitioned from a clear recovery path with real GDP growing by 1.9% in 2019, the same pace as in the year before to a new macro trajectory. This, however, at this point, looks like a distant past, as following the outbreak of the COVID-19 pandemic in the Northern Hemisphere at the end of February 2020 created uncertainties around the global economic outlook. In addition, the correct decision by various governments to act decisively and front-load measures that would prevent the accelerated spread of the virus are bringing the economies to a standstill, which will have a heavy toll on the short-term economic outlook of the Greek economy, raising temporarily serious obstacles on its path to normality. At the current juncture, we anticipate that the impact of the virus outbreak on the growth of the domestic economy is going to be determined mostly by the intensity and duration of the phenomenon. But overall, we expected to take the form of a V-shaped effect. More specifically, the effects expected within the period March to April, May, are mainly stemming from an external demand shock, domestic uncertainty as well as a supply-side shock due to the lockdowns in several sectors of the economy. As a result, the growth rate of the Greek economy is expected to slow down considerably, with the 2020 GDP growth now expected to be in negative territory versus the original projection of plus 2.4%. However, there are some elements that make us cautiously optimistic for the period after the lockdown is going to end. Firstly, the reaction of the Greek government was fast and introduced decisive measures that brought it ahead of the curve to address the phenomenon. Secondly, the Greek government introduced a package of measures that should give tangible relief to the economy and are thought to arrive at a circa 10% of the GDP. And finally, because of the low connection of the country to the global supply chain, we should be able to react fairly fast. I would like to emphasize that the unprecedented coordinated monetary, fiscal and regulatory support from European authorities should benefit Greece and its banks as well. Our Chief Economist will talk about specific measures announced by the Greek government to strengthen the public health care system and support the sectors of the economy, corporates and employees. But before that, let's see how regulators have responded by announcing a range of prudential measures to support the banks and where does Alpha Bank stand amongst them. Moving on to Page 5. The European monetary regulatory authorities have acted fast and in a coordinated and forceful way. The idea was to shield the banks as much as possible so that they can focus on delivering their social responsibility to support their customers and not to allow the transmission mechanism to break down. Therefore, the measures are now targeted to flex the requirements relating to capital and liquidity but also on providing support to customers. Starting with the introduced flexibility on capital matters, all relevant regulatory buffers are temporarily disregarded. This means that the capital conservation requirement of 2.5% is now 0%, bringing our OCR requirement at 11.5% versus our reported total capital ratio at 17.9% at the end of December '19, which gets further increased to 19%, following our banks successful Tier 2 bond issuance of EUR 500 million in February. Therefore, our pro forma 19% CAD ratio buffer against the relaxed OCR is at 750 basis points, which translates into EUR 3.5 billion. Furthermore, the bank can potentially benefit by 125 basis points in core equity Tier 1 as a result of ECB's earlier replication of the CRD IV rules, referring to the inclusion of AT1 and Tier 2 to Pillar II requirements, which allow for a change in the mix of total CAD once market conditions normalize. Therefore, summing it all up, it means that the bank is required to have an 11.5% total capital ratio versus the 19% it currently enjoys. Shifting on to the liquidity front. We note that the ECB has waived 100% LCR limit adherence so as to allow the deployment of readily available liquidity during this period of market stress. Then the updated TLTRO terms are more accommodative, and the June 2020 subscription has now been bridged with weekly tenders of LTRO facilities. On top of its regular QE program expansion by EUR 120 billion until year-end, the ECB has launched an additional stimulus package, the Pandemic Emergency Purchase Programme, or so-called PEPP, which entails a net asset purchasing of EUR 700 billion (sic) [ EUR 750 billion ] until year-end. Extremely important for Greece, the ECB has waived the eligibility criteria for securities issued by the Greek government, allowing up to EUR 12 billion of GGB purchases with our capital key [ under set ]. A few points on our key liability metrics now. Deposits at EUR 41.5 billion with our latest figures. These are higher by EUR 1.1 billion since the end of 2019 with a loan-to-deposit ratio of 95%. Our current draw from TLTRO II stands at EUR 3.1 billion, with a potential for higher participation in TLTRO III in the coming auctions. And finally, our cash balances have further increased by EUR 1.1 billion in Q1, reaching the EUR 3.1 billion figure. All in all, the bank has shored up additional liquidity in the run-up to the virus and to the turmoil. And along with the flexibility provided by our regulator, we are in a position to address the current turbulence with a comfortable cushion. Let's now turn to Page 6 where we lay down response from our regulators in order to address the upcoming initiatives that the banking sector is taking, both on its own means and for the potential distribution of governmental support in order to help businesses and households, which are impacted by the virus outbreak. All these initiatives, based upon the acknowledgment, that banks need to be strong and have flexibility in providing liquidity in this unprecedented situation. Firstly, we have the EBA guidelines with the following key points. Number one, on classification of forbearance, no automatic reclassification under the definition of forbearance is needed when general measures or general moratoria are being offered. Furthermore, EBA states clearly that public and private moratoria as a response to the virus do not have to be automatically classified as forbearance measures to the extent they are not more power-specific but rather address the broad ranges of customers. Second point on prudential identification of default, defaults do not have to happen until 90 days past due. And lastly, EBA has also coordinated with ESMA on IFRS 9 on provisioning from credit risk. Public or private moratoria should not be considered as an automatic trigger to significant increase in credit risk. Institutions would be expected to distinguish between borrowers for which the credit standing would not be significantly affected by the current situation in the long term from those that would be unlikely to restore the credit worthiness. This discrimination will help institutions to mitigate any potential cliff effect from transfers between stages. The response now from the ECB was also of importance as it confirmed that it will be fully flexible when discussing agreed NPE reduction targets, and then it encourages financial institutions to opt for the IFRS 9 transitional rules and to avoid procyclical assumptions in models to determine provisions. ECB will actually provide central macroeconomic scenarios, pretty much like we're doing in the stress test, to support banks in applying IFRS 9 provisioning policies, while banks should give a greater weight to long-term outlook when estimating expected credit losses. All the above are indicative of the capacity being provided to the banking system to proceed with all the necessary actions in order to help borrowers, without being impacted on the staging of loans and with additional cost of risk. Also the Greek government has put out a bouquet of measures. Allow me to put them into context. Practically, the government caters for a good number of the operating expenses base of the Greek economy. If one looks at the OpEx base of a business entity, it comprises of 4 elements. Element #1 is a tax-related cost. And here, the government offers tax and social security contribution deferrals on businesses and self-employed professionals affected by the situation. The second pocket is the staff cost. And here, the government procures income subsidies for affected workers directly through their pockets. Cost element #3 are the general and administrative expenses. Also here, the government is endorsing rental repayment adjustment for March and April by 40%. Moving now to the next page, Page 7. We want to highlight how the bank remains close to its customers and is ready to support them to get by this difficult period. Our support is effected in 2 ways: by providing temporary relief and by extending credit. Temporary relief measures are important because they waive the fourth element of the cost in the business, its fiscal costs. Here, the government will contribute by subsidizing the interest payment for SMEs for 2 to 3 months. However, this is the area where we banks have most to offer. For our performing customers that were hit by the virus-induced crisis, we will be deferring principal payments for businesses at least until the end of September 19, and we will capitalize installments for individuals for 3 months. To that effect, we are reaching out to our customers. So far, we have reached out to 3,100 wholesale customers, i.e., corporates and SMEs, and about 15,000 small businesses via our relationship managers task force and our Gold Business platform. Customers are informed of the relief measures and further financing options offered by the bank in order to support them and also on the advanced alternative transaction channels we are providing to them. In the area of financing, the bank is continuing to utilize its own means by extending credit lines, and indeed, we have already started doing so this month by providing approximately EUR 0.5 billion to our businesses through their lines. This is going to increase in the coming months as also government support in the form of guarantees will come into play. In the government package announced, there is a provision of roughly EUR 5.8 billion of guarantees, and we are already discussing with the government on that. Let me now move to Page 8 to discuss Alpha Bank's operational readiness and the mitigating measures taken by the bank to ensure employee and customer safety as well as safeguard to its business continuity. The health and well-being of employees and customers are a top priority for us. And as a result, our bank has taken a number of preventive and protection measures in response to the outbreak. First and foremost, we identified the most vulnerable employees, including those who have to take care of minors and allowed them to either work remotely or stay at home under the special purpose leave. In addition, a robust communication plan for employees and customers has been designed with guidelines to guarantee the protection of their health. As part of the measures, business trips and nonessential travel were early on restricted. Additionally, the bank has undertaken all necessary actions to ensure the adequate supply of protective equipment and medical supplies across the group. At the same time, in light of the Greek government measures, we continuously adjust our procedures to ensure that a solid operational plan is in place to guarantee business continuity, contributing to the fortification of the national economy. To this effect, already from a very initial stage of the outbreak, we had all necessary actions to provide with remote access on most all of our central units employees. As a result, and in order to maintain the flow of operation, circa 90% of our staff in the headquarters is currently working with remote access, while the divisions of critical importance are very early on operating according to the business continuity plan. In fact, allowing for leaves of absence as of today, less than 1/3 of our total staff works on-site at the bank's premises, and that takes into account also the branches, which are so far working with their full strength. In addition, digital and other structures have been reinforced, while all necessary measures have been taken to provide uninterrupted flow of operations to our customers through alternative networks. Moreover, the bank is in close contact with its suppliers to ensure continuity of business. Lastly, action plans have been drawn up in order to keep the bank's branch network active and deliver interrupted services to our customers. Switching now to the next page, Page 9. In November 2019, we announced a strategic plan for 2022 whereby one of the key pillars is the derisking of our balance sheet, putting capital to work, with a view to improve asset quality and normalized cost of risk. To this effect, we have planned a front loading of our efforts through a large securitization transaction of circa EUR 12 billion, code named Project Galaxy, making use of the Hellenic Asset Protection Scheme for the retained senior tranche. The securitization transaction is coupled with the sale of our servicing platform, which is expected to manage a total of EUR 33 billion of nonperforming exposures from Alpha Bank as well as third parties, including an exclusivity agreement with our bank to manage its remaining NPEs. As you can see on the next page, there has been significant market dislocation due to the pandemic, which has disrupted nearly all transactional activity across Europe. With this unprecedented and evolving situation, we considered it necessary, and indeed our duty, to allow investors sufficient time and bandwidth to absorb the recent events. We anticipate that visibility will be gradually restored by the beginning of the second half of 2020, leading to the continuation of our planned transactions, including the Neptune transaction, which is in a more mature phase. With regard to Galaxy, we have made considerable progress toward this goal. In January 2020, we launched the transaction, and we saw prominent international investors participating in the first phase and accessing the VDR. Our recent communication with them confirms a strong interest in the transaction on the back of an attractive servicing business proposition and an opportunity to invest in a diversified portfolio of Greek exposures. We have engagement also with rating agencies and are currently progressing the senior notes rating work streams. It is now evident that the senior notes will be assigned a 0% risk weight. It is also important to mention that the Greek CBS that experienced volatility during March have now landed to more normalized levels, improving the feasibility of securitization transaction backed by the Hellenic Protection Scheme. From a capital point of view, we now have even more space to absorb the impact of the transaction following the lowering of the minimum capital requirements by ECB. We need also to mention that the new SERVPAL target operating model design has been completed and is now in the implementation phase. Finally, significant preparatory work has been done for the issuance of the notes and the commencement of the hive down. We anticipate that as soon as market conditions normalize, and we have reasons to believe this will come sooner rather than later, we will run the transaction at an even faster pace. And with that, I want to pass the floor to Panagiotis Kapopoulos, our Chief Economist.

Thank you. Good afternoon, ladies and gentlemen. The growth rate in Greece in 2019 was well above the Euro Area average as depicted in the left-hand side, upper part of the graph at Slide 12. In its winter economic forecast released on 13th of February 2020, the European Commission projected that GDP growth will continue to run faster in Greece than the Euro Area average, growing at a pace of 2.4% versus 1.2% in Euro Area. Given the very limited data available at that time, this forecast incorporated a small temporary result based on the assumption that the pandemic could be limited to China with minimal global spillover effects. However, 1 month after its publication, a substantial negative economic impact on the Greek economy began to materialize as containment measures were introduced at relatively early stages compared to other countries. The graph visualizes the latest downward forecast revision by the Bank of Greece in the previous week to 0% from 2.4% previously estimated in December 2019 as well as the recent estimates by the Minister of Finance ranging from minus 1% to minus 3%. Although real GDP growth in 2020 might fall to well below 0%, the shock is estimated to take the form of a V-shaped effect, as our CEO already mentioned, affecting mostly the second quarter of 2020. The negative impact can be described as follows. Firstly, a demand-side shock affecting Greek exports of goods and services, mainly transport, shipping and tourism, given also that the EU is the most important export market for Greece, with the biggest export sales going to Germany, the U.K. and Italy. It's worth saying a few words on the anticipated pressure of the Greek tourism industry in the second quarter. The sector is confronted with a considerable reduction in international arrivals as we expect massive cancelations and a drop in bookings from, for example, American, Japanese, Chinese and South Korean travelers. It will also be hit by the slowdown of intra-EU travel, notably due to the growing reluctance of EU citizens to travel and the national preventive measures. The second shock comes from the supply side. Although Greece is less connected to the global supply chain than other countries, Italy or France, the severity and the duration of the lockdowns will affect the production of several sectors of the economy. Thirdly, domestic uncertainty is expected to weigh on consumer confidence and business sentiment. Fourth, the turbulence in international financial markets will also hit the real economy through an increase in funding costs amid global oil pricing or risk leading to tighter financial conditions from bank, businesses and households as well as for the Greek states as depicted in the right-hand side, upper part of the graph. The challenge Greek economy is facing that is in no way similar to the previous crisis. This is a symmetric exogenous shock. Given the recessionary environment, monetary and fiscal policy has been activated. Following the announcement by the ECB of the EUR 750 billion Pandemic Emergency Purchase Programme, which granted a waiver on the eligibility requirements for Greek government securities, Greek government bond yields dropped and the Athens Stock Exchange recovered as depicted to the right-hand side graph. Turning now to the availability of fiscal policy tools. The Eurogroup approved the package of policy actions to address the negative consequences of the COVID-19 pandemic on economic activity at the European level, announcing fiscal measures of at least about 1% of GDP on average for 2020. Moreover, the Eurogroup has offered full flexibility to all European countries within the EU budget rules in cutting the negative social and economic impact by the COVID-19 outbreak. In particular, for Greece, the 3.5% primary surplus target will not be in effect in 2020, while expenditures to contain the spread of the pandemic and to support economic activity as well as those related to the refugee crisis in our borders will be excluded from the budgetary outturn. In the graph at the bottom, we can easily see that Greece outperformed these targets for 3 consecutive years, having in parallel accumulated a significant cash buffer. In this context, the lockdowns and other restrictions in the effort to contain COVID-19 pandemic are presented in the time line in the graph of the next slide. The Greek government announced a series of fiscal measures designed to counter the impact of the pandemic by enhancing liquidity, supporting those firms and employees negatively impacted by the virus and protecting jobs. The first set of measures including -- included supporting the public health care system, the suspension of tax and social security contribution payments for businesses whose operation were discontinued following state orders and interventions regarding labor matters, for example, they are working from home, special purpose leaves, et cetera. The second set of measures, the government has let EUR 2 billion worth of measures as part of the total EUR 3.8 billion package. That includes EUR 1.8 billion in European Union funds that comprise, among others, one, financing in the form of refundable advance for all businesses severely affected by COVID-19 totaling EUR 1 billion; financial benefit of EUR 800 to employees that are left out of the job as a result of the lockdown, the state will also cover their social security and health insurance cost in full; and three, support for self-employed professionals and freelancers who will be relieved of tax obligations for a period of time while also receiving the financial benefit of EUR 800 for the period ending on April 15. Additional liquidity actions to support business, including guarantees supported by EU funds and the EIB, as our CEO said, of about EUR 5.8 billion were also announced by the government. Finally, on March 19, the Prime Minister announced the third set of measures amounting to EUR 3 billion from 2020 budget that will be revised accordingly under the budget, which will be used to stimulate the economy. In addition, a similar amount will be sourced from EU structural funds and this -- the latter package includes provisions for the unemployed as well as for the medical staff battling the coronavirus. The total impact of the supportive measures on the budget fiscal cost at this stage comes to approximately EUR 4.7 billion, corresponding to 2.5% of GDP. As a final point, I would say that the monetary and fiscal responses announced so far are expected to moderate the economic heat in the third quarter and provide the foundations for a steeper rebound during the outward phase of domestic loan activity in the fourth quarter of the year and in 2021. Let me now pass the floor to Mr. Papagaryfallou for the rest of our presentation.

Hello, everyone. This is Lazaros. Let's now move to Page 15 of the results presentation, and let me walk you through the key highlights of our 2019 financial results where we can see that in 2019, we continue to derisk our balance sheet by further reducing the level of nonperforming exposures, our loan-to-deposit ratio has gone into balance, our capital position was further strengthened following our landmark Tier 2 issuance and we delivered a profitable year. Starting with capital. Our phased-in common equity Tier 1 and total capital adequacy ratio remained stable in the fourth quarter at 17.9% and a fully loaded core equity Tier 1 ratio at 14.9%. In February 2020, Alpha Bank successfully completed the landmark Tier 2 bond issuance of EUR 500 million at a yield of 4.25%, optimizing its capital structure and diversifying the capital sources, the bank's capital sources. This transaction adds 104 bps to our total capital adequacy ratio, reaching 19% on a pro forma basis. Moving to liquidity. The loan-to-deposit ratio for the group dropped further to 97% versus 104% a year ago. At the end of December 2019, our reliance on Eurosystem funding stood at EUR 3.1 billion solely in the form of TLTRO funding from ECB, while our open market funding reached EUR 6.3 billion. On asset quality, in 2019, organic NPE formation was negative across all quarters, reaching EUR 1.2 billion, mainly due to decreased redefaults and increasing dues stemming mainly from more intensive initiatives on the retail segment and consistent performance in wholesale portfolios. The group NPE ratio at the end of December 2019 stood at 44.8%, with NPE coverage at 44%. Our performing loan book continued to expand as new loan disbursements reached EUR 1 billion in the quarter and EUR 3.5 billion within the year, mainly to businesses. Deposit gathering continued its strong performance as our deposit base in Greece expanded by EUR 1.8 billion in 2019, with EUR 0.8 billion of inflows in the fourth quarter, driven by customer inflows both for businesses and households. Let me now touch briefly upon the main areas of our financial performance. In 2019, net interest income stood at EUR 1.547 billion, down by 11.9% year-on-year on the back of a lower contribution from loans as a result of the deleveraging linked with NPE reduction. Fees and commission income continued to grow, up by 2.7% year-on-year to EUR 340.1 million on the back of higher revenues from asset management and bancassurance, new loan originations and a higher contribution from investment banking activity. Recurring operating expenses for the group decreased year-on-year by 2% driven by head count reduction resulting from the Voluntary Separation Scheme effected in 2018, whereas in Greece, recurring operating expenses declined by 4% year-on-year to EUR 895 million. Following the successful completion of an additional Voluntary Separation Scheme in September 2019 in Greece, a gradual departure of approximately 830 employees will result in an annualized benefit of EUR 35 million to be fully phased in 2020. An incremental cost of EUR 50 million was booked in the fourth quarter of last year to finance this program. Overall, in 2019, our core preprovision income showed a decline versus last year, mainly as a result of lower net interest income. Impairments on loans, including modification losses, came to EUR 994.8 million versus EUR 1.723 billion in 2018, a significant reduction driven by the deescalation of nonperforming exposures. This translates to a cost of risk over gross loans of 2%, which compares with 3.2% for 2018. All in, the bank delivered another profitable quarter, reaching a profit after-tax for the full year of 2019 of EUR 97 million versus EUR 53 million last year. In the following pages, there is more analysis about the fourth quarter '19 results, which we can use as reference material for the Q&A. Let me just give a more detailed analysis on capital, asset quality and cost of risk. Let's move on to Page 17 to discuss our capital position. On the top chart of the page, you can see the evolution of common equity Tier 1 capital standing at EUR 8.5 billion, with core equity Tier 1 at 17.9% at the end of December 2019. This came lower by 14 bps Q-on-Q, negatively affected by a lower fair value for OCI reserve on our GGB portfolio and negative impact from the regulatory treatment of the 10% DTA threshold, as that was partly counterbalanced by a decrease in risk-weighted assets, mainly from credit risk. The bank's total adequacy ratio stood at 17.9% at the end of 2019, while pro forma for the Tier 1 issuance, our total capital adequacy ratio stands at 19%. As Vassilios discussed earlier, in view of the COVID-19 pandemic, ECB announced amongst other, the lowering of minimum capital requirements, allowing banks to operate temporarily below the level of capital defined by the Pillar 2 guidance and the capital conservation buffer. This means that Alpha Bank now operates with a capital buffer of EUR 3.5 billion against minimum requirements, such buffer providing a significant cushion against headwinds in the capital position. In the bottom center chart, you can see the quarterly movement of the unrealized gains of our GGB portfolio, which as of December 2019 stood at EUR 653 million, down by EUR 116 million from the previous quarter as a result of the crystallization of gains from our investment securities portfolio which resulted, as I mentioned earlier, in a lower fair value for OCI reserve. At this point, it's worth making reference to certain risk-mitigating measures we have undertaken well before the current turmoil by increasing our amortized cost portfolio while decreasing our fair value through other comprehensive income portfolio by EUR 0.6 billion of GGBs. This move is in line with our decision to reduce volatility in our capital. As of mid-March, more than 1/3 of our GGBs portfolio of EUR 1.9 billion sits in the amortized cost where GGBs at deferred value for OCI stand at EUR 3.2 billion. Moving now to asset quality on Page 23. Our NPE stock in Greece stood at EUR 18.8 billion as of the end of 2019, reduced by EUR 8.9 billion since 2016 and EUR 3.1 billion in 2019 as a result of both organic efforts and loan savings. Looking at the gross quarterly formation, there is an improving trend with regards to both entries and exits. More specifically, total entries in the fourth quarter amounted to EUR 0.49 billion, down from EUR 0.60 billion in the third quarter, mostly as a result of lower defaults, while exits amounted to EUR 1 billion, allowing for an organic reduction of EUR 0.5 billion. This performance reflects the positive outcome of the new product suite offered as part of our retail transformation plan, which has allowed for an increase in successful restructurings and, as a result, increased dues. Continuing with our last page on our asset quality, Page 26, we can have a look at the quarterly evolution of our cost of risk, as shown in the chart on the left-hand side of the page. In the fourth quarter, impairment losses on loans combined with the modification losses stood at EUR 250.9 million, slightly lower Q-on-Q, implying a cost of risk of 2% of our gross loans. This was mainly attributable to impairments of the retail segment and to a few individually assessed loans we had in the wholesale. And now let's open the floor to questions.

[Operator Instructions] The first question is from the line of Jonas Floriani with Axia Ventures.

I hope everybody is well and healthy. My first question is on capital. I welcome the removal, temporary removal of the capital conservation buffer, which gives us some -- give you some flexibility. Now I'm just trying to understand how your strategy now in light of your developments will play along the capital. The buffer that you mentioned, the EUR 3.5 billion that you mentioned, also has to take into account the impact from Galaxy. So I'm wondering if there is going to be revision on the 350 basis points from Galaxy or the EUR 2 billion hits to equity, which will leave you, out of the EUR 3.5 billion, with another EUR 1.5 billion buffer. And then what kind of impact in terms of cost of risk of P&L we could expect if you have any visibility on that? I know it's early days but also trying to understand how much the measures taken by the government and the ECB could attenuate hits to the P&L and therefore, to the capital. So this is the first one. And the second, I'm wondering if you guys have already been engaged in any conversation in regards to the DTC law. Pretty much kind of -- that would allow Greek banks to post the losses without triggering the dilution and if it's something that is on the table. And then finally, I'll leave it here and then I may join the queue later, if you have seen any kind of early developments in terms of corporates drawing credit lines and what kind of volume have you seen so far and what kind of expectation for new lending, also including the government support, you expect for the full year.

Well, Jonas, thank you for your questions and also for caring. I think I should start by reiterating 2 points, which in my mind are important. The first is the framework within which the flexibilities that are introduced by our regulator, by DG Comp, they all want to see us being able to support our customers during this very difficult period and getting them in one piece to the other side when the whole measures that we have discussed will start to kick in. And for doing so, the banks need flexibility on the 2 fronts that we have stated in our presentations: number one, in terms of the regulatory restrictions that relate to their capital and their liquidity; and number two, to giving them the relevant flexibility in order not to incur costs as we're going to be helping out our customers. So that means that the role that is ascribed to banks to play is very clear: we are here mostly as a vehicle to provide that incremental liquidity either through our own means or through the government support for that to happen. And that's why you see in a number of occasions, government official stating that no viable company should be left back in this crisis. This is what is asked from us to do. This is what we are given the flexibility to do. This is what we are tuned in to actually execute on. The second point relates to the framework that governments that want to provide support are actually engaging into. In this lockdown of the system, practically, your top line -- the top line of corporates moves away. This is what happens. Therefore, all the support has to go and look into the operating expenses. And that's why we diligently listed how the Greek government, in our case, is looking at each and every of the 4 components to provide support. It provides support by waiving taxes; it provides support by catering directly for a part -- a good part of the staff cost; it provides for a good part of waiving of the G&As; and, that is the role mostly of the banks, waiving also the financial cost. So if you put those 2 things together, you will see, frankly, what is the framework within which we are called to operate. And in my mind, this is coordinated in an unprecedented way. This is for all European environment, and this is how we are here from Greece perceiving that. Now in terms of our transaction, it is very clear what we want to do. We're not distressed sellers. We're very committed to this transaction that is focal point and we want a very fair process both for us and for our investors that, given also the presence of the sale of the carve-outs, they're going be partnering with us through the exclusive contract. So we are doing further prep work on our end until the moment where we're going to be ready to properly relaunch the transaction, and be rest assured that at that point, our additional preparation will allow us to move even faster towards closing that transaction. Now what sort of environment that is going to be, I think, our Chief Economist presented the numbers, both for our baseline and for adverse scenario, and so we will see where we were going to be at that stage. Now in the impact of the cost of risk, it is indeed very difficult to pinpoint at this juncture where exactly this is going to be heading to as there are numerous counterweighting factors that will come into play. Directionally, however, what we can say is that we shouldn't be expecting any significant increase towards that direction for the reasons that we explained. Your third point was on DTC. Clearly, DTC is an element of importance and always we look at that from the banks. Having said that, we mentioned that DG Comp has put up a very comprehensive framework, which they've been calling temporary framework, for providing state aid to banks where they go even as that far of waiving practically the triggers for the BRRD. So that means that DG Comp is there at the moment to think extremely constructively on a number of situations across Europe. Within that framework, we would expect that also some discussion at some point in time will be undertaken as far as DTC is concerned. Finally, on your point of corporates. Corporates indeed are starting to draw on their committed lines. However, because as you appreciate, this is something that we have seen in the past decades already twice in Greece as we have being confronted with almost tail events, this time around corporates are much more relaxed about the Greek banks. They're not rushing to do that. They take a very measured approach, on the one hand, because their balance sheet is in better shape; and secondly, because they know too well that also our balance sheet is in a much better shape. Therefore, there is a dialogue with our corporate and what we experience is what you normally expect to see in those situations.

Next question is from the line of Mehmet Sevim with JPMorgan.

Can I please ask about the coronavirus situation and specifically, what's kind of operational impact you are seeing on the business so far? So you obviously mentioned that you're reaching out to individual customers as well as corporate customers. What is the reaction that you're getting from there? And are you seeing any early signs of disruption both in terms of asset quality as well as new business volumes? And that will be my first question.

Let me take up that. The impact of the virus currently in Greece is focusing in uneven way so far in the various sectors. There are sectors that are mostly hit, us for example, in the case of tourism. There are other areas which are actually flourishing, the area of supermarket or the area of pharmaceuticals. And then you find a broad distribution of businesses in between. The situation admittedly has changed from the lockdown where effectively the government imposes a closing down of a number of companies in a number of industries. The fact, however, that the Greek government has been really perceived by the domestic audience of being ahead of the curve in issues that relate to public health, that has been extended also to their understanding as being ahead of the curve in terms of announcing the measures. Currently, the whole economic team of the Greek government is daily communicating not just the initial announcement of the bouquet of measures that they put forward, which you have heard also in our presentation, but they are reiterating the messages just to reinforce the message that a good part of the cost base of their corporate is going to be catered for. To that, Greek banks and Alpha Bank, in particular, we have -- the moment we had the measures in place after agreeing them and sanitize them with our regulator, we have reached out to the customers, and the numbers that we told you, they are roughly 2/3 of our corporate clientele and half of our SB clientele. So we are talking about big numbers. And mind you, and this speaks for the operational readiness that we have been able, over a period of 2.5 weeks, to instigate get here at Alpha Bank, all this happens from remote office. Our people, as I said before, 90% of the headquarter staff is working remotely. However, they are fully equipped, having the ability to videoconference and also to access their office remotely. So it's a fully functional teleworking environment that they are experiencing. And on top of that, as of Monday, we have been able even to having our captive call center working remotely, still with the ability to record conversations. So we appreciate that we are very well equipped, and we are very determined that we're helping all of our customers making it through this crisis.

And my second question will be on the debt moratoria that you will be offering to affected customers. What is the accounting treatment of such moratoria, especially when it comes to NII? Can we assume that the NII will continue to be accrued as normal during the period of the payment holidays?

Yes, confirmed. Interest will accrue during this period.

The next question comes from the line of Angeliki Bairaktari with Autonomous Research.

I also send you my best wishes and to everybody out there. With regards to the questions, first of all, on the moratoria, could you please give us some more details on what percentage of your corporate and what percentage of your retail loan book you expect to request the freeze on loan repayments for the next few months? Based on the data that you have at the moment, I understand this could change next week and so on. And also, is this going to be applicable to consumer loans as well? And is there any sort of risk of front loading of provisions just in particular for consumer loans? That's my first question. My second question, we have seen in the press, and you mentioned as well in your presentation, the discussion about credit guarantees. Now there are a few different numbers flying around, I have read EUR 3.5 billion, you mentioned EUR 5.8 billion. Could you please clarify what do you think at the moment could be the maximum amount of the guarantees? And to what amount of lending for the whole banking sector in Greece would this translate? And third question, with regards to the measures for corporates, the guarantees, but also the direct sort of the advanced payment of up to EUR 1 billion from the state, is this -- can these measures be applied relatively quickly? Or is it going to take a few weeks and so corporates could really struggle in the meantime? We have heard from a number of commentators that, obviously, there is some bureaucracy involved in putting through all of these applications as so many corporates face the same issues of liquidity at the same time. So I guess the question is how quickly can the banks and the government respond just to make sure that the corporates are going to be safeguarded against the crisis? And one last question, please, on cost of risk. I understand that for the moment, based on what the EBA has said and what the ECB has said, you are going to adopt a wait-and-see approach because, obviously, at the moment, at the end of Q1, it's quite difficult to assess which corporates are going to be viable and which are not. So could you give us a bit of color as to how you think at the moment provisions could evolve? Is it fair to assume we see no big impact in the first quarter? And then the second quarter could be a little bit more insightful as you will have seen the impact on the economy?

Well, thank you, Angeliki. These are 4 questions. The first and the third, I would answer them in tandem because I find them quite similar. And obviously, the flip side of that answer is going to be your fourth question. So I'll try and put that in a systematic way but not necessarily in the way that you have asked that. Firstly, allow me to remind what we said also during our presentation, what is the current proposition by the Greek banks? And I'm saying by the Greek banks because the key thrust, both for businesses and for individuals, is something that we have as Greek banks association, we have extensively discussed that with our NCA, hence we have reported that in public announcements. What we are currently having as a core offering to businesses is that we are having a capital holiday for a period of at least until the end of September and then obviously it's up to any individual bank to do given what the specific situation they're confronted with more than that. I would assume, for example, that in the case of tourism, that would go even further in terms of those standstills. In addition, the perimeter relates to those sectors that are in need and those sectors that had been initially defined by the Ministry of Finance. However, their definition, you appreciate, is dynamic. It changes by the day. So if you start from the nucleus, and by being constantly updated, obviously, it increases. Coming back to the other flagship program that we are having now for individuals, that practically is a capitalization of their installments for the next 3 months without extending the tenor. That mostly relates to areas that are either employed or relate, because they're all self-employed, with those sectors in need. Now how that big is going to be, at current stage as, we are conducting the dialogue with our customers and as the list of the Ministry of Finance getting updated, is very difficult to pinpoint. If we are talking about something like 20%, which was the initial list that it came out or if this number, and if you ask me, this number will definitely increase, but I'm currently not in a position yet to come up with a statement of how large it's going to be, the audience that will get into that. Looking at the area of cost of risk, I think in order to appreciate what the cost of risk is going to be is if actually viable customers are going to be offered the right products so that they get over the crisis, then practically, there's not going to be any cost of risk for those customers in the meantime. So cost of risk would be for the NPE part of the book, but not for them. For them, the key challenge is going to be after this standstill period ends, and presumably the measures coming out from the governments will come into play. So our current thesis is, at that stage, we would already witness a restart of the economy. Obviously, how quickly that restart will take place, will have its toll also on the health of those, before the crisis, totally viable corporates. That, Angeliki, is something that we want to ensure that we're going to be maxing out, however it is very difficult to look through the crystal ball exactly how this cascade will take place. Coming now to your question on the guarantees. The numbers that we have referred to about the EUR 5.8 billion, this was, as I said, in the bouquet of measures that initially the Ministry of Finance said. That is not going to be obviously just one, it may be more than an initiative. Currently, and I'm saying currently, as we speak, we have been approached by the Ministry of Finance for one initiative that has all the characteristics, we understand, to qualify for passing through the temporary framework of DG Comp and also is being thought, with the current level of understanding that we're having in our dialogue with the public sector, that it will be implemented fairly quickly as it latches upon other programs that we have been very successfully implementing in the past. So where the government is working very intense, they acknowledge fully that time is of the essence, and we believe that we will be able to get a credible vehicle in hand in order to complement our efforts to provide liquidity to the customers.

That's very useful. I do appreciate that it's very difficult to assess the exact impact, but those are the questions that all of us are asking. So apologies if my questions were a bit cumbersome. And just one follow-up, please. Could you give us the quarter-to-date impacts from the swings in the GGB yields on your OCI portfolio?

Yes, Angeliki, this is Lazaros. Indeed, there has been a reduction on the mark-to-market of approximately EUR 100 million. And on top of that, I have to say that we have posted significant trading gains in the first quarter of the year.

The next question is from the line of José Abad with Goldman Sachs.

I also have 2 questions. The first one, apologies, is again on the cost of risk. I think given that most of the support -- government support that we -- that you've been discussing so far is focused on the corporate segment, so I think would be a good -- the question is whether it would be a good reference actually to start working, for us analysts, with the stress test run in '18 but looking at other exposures ex corporates. So by that, meaning the retail exposures, consumer and mortgages, which are not directly part of the perimeter of the policy, the ones that you were discussing before, would that be a good reference to start with given that potential decline in GDP that you were mentioning before is broadly in line with the one in the stress test? But even ourselves, now we are forecasting a decline in the GDP this year of 9%, which is much larger than what you are forecasting and that what the stress test implies. The second question has to do with if you could provide us with the amount of undrawn credit lines as of Q4 '19 or as of February, so any data would be very useful.

Well, I mean I'm not quite sure I got your first questions, but I'll do my best to approach that. You spoke about -- I mean I appreciate that everyone is focused on cost of risk, we as well. But I think in order to answer that, one needs to be really able to understand what we are trying to put forward to you, i.e., what is the mechanism that is currently in place, both for businesses and for individuals and how we banks have agreed to approach that. So that is point number one. Point number two, you said that mortgages are not at the perimeter. Well, that is not true because we're not looking at prudence when we're doing that. We're looking at customers. Therefore, if we have to deal with a customer that is affected by the crisis, then that customer gets this 3-month capitalization of his installments on all his products across the board. That is the de minimis that we have agreed to offer also to individuals. Now I heard you saying that your GDP is coming down by 9%, then I would advise that you study a bit better the measures that have been announced because it looks like that you're looking only at the one end which is the severity of the current crisis, but you are not taking at all into account that the fiscal measures that are currently being taken and also the support that the banks are going to be providing that they're not going to be having any adverse effect to that. Or potentially, you're taking all the effect into next year. I mean I don't know, perhaps you could take that off-line with our Chief Economist in order to compare notes on that one. Then on your final point, you said what is currently the undrawn committed facilities. And that, in our case, is a bit north of EUR 1 billion.

[Operator Instructions] We have a follow-up question from the line of Angeliki Bairaktari with Autonomous Research.

I'm going to take this opportunity to ask you a few more detailed questions on the credit guarantees, if you're willing to answer them, if you have any color. Is it fair to assume that the guarantee will be 80% by the state, and then the remaining 20% will be taken by the bank? That's first question. Then the EUR 5.8 billion, is that the amount of the guarantees or the amount of the loans, meaning it's for 100% or for 80% that it refers to, that would be useful for us to understand exactly the amount. And then third question -- no, these are just the 2 questions that I have. Yes. A bit more color on the guarantees, please.

Okay. Angeliki, I'll start with the first, which is a structural question around guarantees now, without wanting to reveal sort of detailed information that currently we're discussing with the public sector. I would refer, however, to the temporary framework that DG Comp approved and announced on the 19th of March. There, it says very clearly, which are the 2 eligible way of procuring state aid through banks to its customers. The one is what we are discussing right now, which is through guarantees in order to take up for its losses and, secondly, through a subsidy on interest payments. On those guarantees, which is the first case, that is public -- that is state aid eligible, there, it states very clearly that it has to have 2 important features. Number one, it has to give up to the maximum amount of guarantee per loan, and this is up to 90% that it could go up to. However, it has a second key where it says that on a portfolio basis, i.e., for the total portfolio that you would be bringing to get the state wrapper, you will have to enjoy up to 35% of coverage. So that means that whilst on any single loan, you could go up to 90% of getting the state guarantee, on a portfolio basis, you could go up to 35%. So practically, you can play with those numbers, but you cannot exceed the 35% of the 90%. Now as far as your second question is concerned, we understand that the EUR 5.8 billion is actually for the amount of liquidity that it could mobilize. It's not for the guarantee itself. So for example, if one were to max out what the temporary framework allows, that means for every EUR 1 billion of guarantee, you can have a leverage factor of 3. You can grant EUR 3 billion of loans.

That's very helpful. I remembered my -- the third leg of my question, sorry, for before. Are there -- do you expect these credit guarantees to be effectively the rollover for corporates? Do you expect this to be the rollover of existing lines? So for example, I have 100 at the end of '19, and I'm going to roll this forward to a 100 today with a state guarantee. And so the loan growth for Alpha Bank is 0? Or do you expect large part of these credit guarantees to be effectively an increase in lending for the borrowers?

Again, I'm going to be referring to the temporary framework of DG Comp, very clearly says that it's only for new disbursements.

Okay. So refinance -- to refinancing of an existing loan does not account for new disbursement?

It does not account for new disbursement.

The next question is from the line of Osman Memisoglu from Ambrosia Capital.

I just wanted to ask you with the ECB and SSM having a more accommodating stance, are there any other benefits you're expecting from the ECB, for example, maybe the inclusion of GGBs in TLTRO and hence some funding benefit for you? And if so, could you roughly quantify that?

Well, the step that we have seen by the ECB, giving the waiver in order to include the Greek government bonds in PEPP is indeed unprecedented because we're not part of that program. So that has been a very important step. There is indeed little clarity as we speak if GGBs would be eligible also for the repo perimeter and thus also potentially as a collateral under the TLTRO. That is something that for the system could influence a quantum of around EUR 10 billion or perhaps a bit more. This, however, are currently GGBs that are repo-ed with international counterpart, and as far as we as Alpha Bank are concerned, so far, we have seen a very normal operation in that one, rolling over with all -- with practically all our international counterparts.

[Operator Instructions] Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to management for any closing comments. Thank you.

Well, we really want to thank you that in this very awkward situation that we're all entering into, you took the time to listen to our conference call for our full year results. We're really appreciate that, in particular, as we have a 3-digit number attending this call. And we want also, on our side, to ask you to stay calm and to stay safe in this very difficult juncture. Thank you so much, and we're looking forward to speaking to you again at the call for our first quarter results sometime in May. Thank you.

Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for calling and have a pleasant evening.