Eurobank S.A. (EUROB) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. I am Gelli, your Chorus Call operator. Welcome, and thank you for joining Eurobank Ergasias conference call to present and discuss the full year 2019 results and business update 2020-2022. [Operator Instructions] And the conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Fokion Karavias, CEO. Mr. Karavias, you may now proceed.

Thank you. And ladies and gentlemen, good afternoon, and welcome to our call. Let me start with our agenda for today. Our Chief Financial Officer, Harris Kokologiannis, will give you an overview of the full year 2019 results. But first, I would like to update you about our targets in 2020 and the outlook for the next 3-year period. The coronavirus outbreak has materially changed the conditions during the past few days. But considering the completion of our transformation plan, we consciously decided to present you our next strategic directions and business outlook although any adverse effect has not yet been incorporated into it. Obviously, 2020 will be a highly volatile year. Let me start with the macroeconomic conditions. Before the recent developments, the macro outlook were as follows: Overall, our 3 core markets, Greece, Bulgaria and Cyprus has a relatively positive macro outlook for 2020. In Greece in particular, last year, GDP growth was 1.9% and was expected to reach a 2.4% in 2020, mainly on high investments. Trading agency updates and [ co-issuance ] by the sovereign banks and corporates confirmed the improving outlook and investment sentiment for the Greek economy. And further vote of confidence in the Greek economy was the recent decision by ECB to remove restrictions on banks' GDP holdings. The property market recovery accelerated as seen in the residential property's price index, which increased by 7.2% in 2019 from 1.8% in '18. Obviously, there exists serious concerns about the effect of the coronavirus. We can only stipulate on its impact. The baseline scenario remains at the depth of the economic impact would be material, mainly due to travel and tourism but should be temporary as the outbreak itself will eventually dissipate. The Greek economy is on a solid footing, and importantly, the banking system has become more robust during the last few years. Let me now move to the business update. 2019 was a milestone year for the bank as we have delivered on our accelerated NPE reduction plan. This gives me the opportunity to summarize our initiatives with respect to key legacies, namely: capital, asset quality and liquidity over the last few years. As you can see on Slide 4, we added more than 7% of [ capital ] through profitability, AFS gains, Tier 2 issuance and the merger with Grivalia. As a result, our capital ratios increased by 4 percentage points in the period 2016, 2019, with total CAD reaching 19.2% in the fourth quarter of 2019. The 710 basis points of capital enhancement allowed us to offset any negative impact on capital as shown on Slide 5 but also to finance our accelerated NPE reduction plan. Still on Slide 4. On asset quality, in the periods 2016, 2019, and including the Cairo securitization, we reduced the NPE ratio by 30 percentage points, while increasing coverage by 6.4 percentage points in the same period. Base reduction of NPEs by EUR 16.2 billion was achieved through organic means, but mostly through transactions including the last securitization of Pillar and Cairo. On liquidity, deposits increased by EUR 12.7 billion in the same period and our loan-to-deposit ratio reached a historic low of 83%. In November of 2018, we announced our transformation plan with 3 targets: first, enhance our capital through the merger with Grivalia and the sale of our loan servicer, FPS; second, accelerate the balance to cleanup from legacy NPEs ; and third, rebase our recurring profitability as a return on tangible book value [ low of ] 10%. We have already delivered on the first 2 targets and the plan is now almost complete as you can see on Slide 10. More specifically, we reached a binding agreement with doValue regarding FPS and part of mezzanine and junior tranches of the Cairo securitization. We received a credit rating for the senior tranche of Cairo and applied for the asset protection scheme. We received SRT approval from the SSM a few days ago this week. And finally, after the corporate hive down already approved by our AGM, we aim to distribute to shareholders the Cairo mezzanine and junior tranches in the second quarter. With the legacy issues behind us and the 2019 transformation plan already executed, our priority becomes to deliver on the third bank profitability. We will provide you the main highlights of our business plan for 2020 and the 3-year period up to the end of 2022. However, we repeat that the potential impact of the coronavirus outbreak has not again yet been incorporated in our assumptions as conditions remain highly volatile. 2020 does entail a higher risk factor but our medium-term targets should not diverge. As you can see on Slide 11, the plan is aiming recurring EPS of EUR 0.12 in 2020 from EUR 0.07 last year. This implies a return on tangible book value of 9%, doubled from 2019. On Slide 12, we present the main drivers of this year profitability in terms of core PPI and cost of risk. To become more specific, net interest income, we had a negative impact on core PPI mainly due to foregone income from the disposed NPEs. We expect NII to be reduced by a mid-single-digit percentage versus 2019. Fees on the other hand, will boost core PPI as all components will contribute positively, platform and lending fees, asset management and bancassurance and rental income from investment properties, existing and new. For instance, let me make a reference to our press release earlier today that we acquired investment property of EUR 120 million at a very attractive yield. Overall, fee and commission income will increase by high teen's percentage year-on-year. However, for 2020, the main profit driver would be a lower cost of risk ratio of around 90 basis points from 170 basis points in 2019 due to the substantial reduction of the NPE ratio. Now let's focus on the 3-year period 2022. The updated NPE reduction plan is shown on Page 14. Our NPE ratio will be 15.9% in the first quarter of 2020, reach single digits in '21 as per our initial guidance and further drop to 5% in '22. Coverage should remain above 55% throughout the 3-year period. On the right-hand side of the same slide, you can see that all drivers are contributing to the NPE reduction. On Slide 15, we provide an analysis of the capital evolution. The impact of Cairo and FPS will be booked in the first quarter of 2020. Total CAD is expected around 16.5% at the end of 2022. It is important to highlight that our total capital ratio will remain comfortably higher than the respective regulatory requirements throughout this period. Profitability and business growth in all our core markets become our key focus. As shown on Slide 16, the main growth drivers are: credit expansion by EUR 5.4 billion and lending fees increase in Greece and in our international businesses; higher fees across all nonlending businesses, including asset management and bancassurance, transaction and network fees and rental income. Cost initiatives mainly focused in Greece will create space for more than EUR 200 million IT and digital investment. Finally, as shown on Slide 19, our international operations are expected to show profit growth of more than 30%. And their share in total profits to be more than 35%. We highlight our operations in Bulgaria and Cyprus, which have strong capital positions, single-digit NPE ratios and return on utilized equity of around 20% by 2022. Our strategic goals are summarized on Slide 20. Let me highlight that throughout the 3-year period, we are targeting recurring transport value close to 10%. Cost-to-income ratio will gradually be reduced towards 45%, cost of risk will reach 75 basis points and the NPE ratio will decline at 5% at the end of 2022. Overall, we are pleased that we have been able to deliver on our 2019 transformation plan. Profitability and business growth are becoming our key focus for this year onwards. Although the ultimate depth and duration of the coronavirus economic impact are highly uncertain, we believe the shock should be temporary. After the outbreak will eventually dissipate, the economic activity in Greece should accelerate and remain robust in Bulgaria and Cyprus. Taking a perspective beyond the short-term volatility, the bank is in a strong position to enter the growth phase and create value for its shareholders and customers. At this point, I'll try to ask our CFO, Mr. Harris Kokologiannis to present our full year results before opening the Q&A session.

Thank you, Fokion. Let's see our financial results for the fourth quarter and full year 2019 as highlighted on Slide 22. Net profit for the year reached EUR 257 million, of which EUR 108 million in the fourth quarter. On a year-on-year basis, net profit increased by 27%. Core preprovision income decreased year-on-year by 2.7%, driven by net interest income and amounted to EUR 830 million. Commissions following a strong last quarter, increased by 13.6% year-on-year, mainly as a result of the merger with Grivalia but also due to higher fees related with bancassurance, assets under management, network activities and international. Operating expenses on a comparable basis were up by 0.7% for the group and lower by 1.7% in Greece, driven by lower staff cost. On asset quality, our stock of NPEs decreased by EUR 3.7 billion in full year 2019 and EUR 0.9 billion in the fourth quarter. The latter driven by the negative NPE formation of circa EUR 340 million, high liquidation [ arrivals ]. The NPE ratio improved by almost 8 percentage points year-on-year, dropping to 29%. In the same period, the coverage of NPEs by the accumulated provisions increased by 210 basis points to 55.3%. The fully loaded Basel III ratio at the end of last quarter reached 14.6%, improved by 50 basis points quarter-on-quarter, mainly due to the quarterly profit and gains in our Greek government bonds portfolio. Our total capital ratio stands at 19.2% and the CET1 ratio at 16.7%. [ ForEx ] strong activity on corporate lending in the last quarter, our performing loans booked increased by EUR 1 billion year-on-year on a comparable basis in Greece. Demand is stronger outside Greece, so our total increase in performing loans for the full year 2019 was EUR 1.7 billion on a comparable basis. Deposits increased last year by EUR 3.7 billion in Greece and a $5.8 billion for the group. And as a result, the group loan-to-deposit ratio reached 83%. Finally, international operations remained positive across all countries, with net profit reaching EUR 168 million from 2019, higher by 14% versus the previous year. The improvement is driven by the core preprovision income, which amounted to EUR 270 million, higher by 11% year-on-year. This completes our presentation, and we may now open the floor for your questions.

[Operator Instructions] The first question comes from the line of Abad José with Goldman Sachs.

I have 3 questions, if that's possible. I think the first question is, I know you mentioned -- you flagged the number of times during the presentation that you have not incorporated actually this -- the coronavirus on related market and economic impacts in your numbers, which is an important caveat, I guess. I mean I think the first question here is, with regard to the Cairo deal, is there anything -- given that the world, I think, has, I think, pretty much changed over the last month for the global economy and the euros and economy, in particular, and I believe also for the Greek economy, are there any execution risk to the materialization actually of this deal? And I'm sorry, because I joined a bit late. I don't know what you mentioned early here at the beginning, that's the first question. So should we expect actually this deal go ahead under the same terms that you guided originally? Or anything has changed? Now the second question is in your targets, you are assuming an 8% CAGR loan growth over the coming 3 years, which I think, probably is optically a bit too high, given that the macro dynamics and the macro context in which we are. So if you could actually help us how are your thoughts currently about how the loan book is good to evolve potentially actually per sector and thinking of sectors like tourism, shipping, how this year actually is going to evolve? And the third point is also obviously, you -- I mean, we've seen actually, there's an increase in the -- in your NPE target for 2020 for this year versus your previous plan, you are -- but there's an improvement actually later on, but the initial deterioration probably this year, if you could actually explain and whether actually -- I believe you could also help us understand how NPL and cost of risk could evolve in the current economic context, even though you may not quantify it but, actually, even though -- I mean, in a narrative way, actually got to be helpful to understand.

Let me start from the first one, execution risk with respect to Cairo and let me give you where we stand, what are the next steps until the completion of this transaction. In fact, some of the transactions is already completed. There are still some formal steps that we have to take. As we have announced, we have already received ratings for SPV 1 and SPV 2 of Cairo. Cairo is made by 3 separate SPVs and we expect over the next few weeks to receive the rating for the third SPV. We have already applied for the APS for the first 2 SPVs and we expect the approval, which is a formal process over the next couple of weeks. And as soon as we have the rating of SPV 3, we're going to apply also for the APS. In terms of the SSM approvals, as I mentioned during my introductory speech, we have already received the approval for the SRT of Cairo, hive down and new banking license is expected to be received by March 20. We have already discussed that with the SSM and this is more like a formal procedure. And as I also mentioned, the mezzanine and junior distribution, the mezzanine and junior notes distribution to shareholders should take place in the second quarter. In terms of accounting, we expect to put Cairo fees classified as held for sale in the third quarter of 2020 and fully deconsolidate in the second quarter of 2020. And also, the Cairo loss and the FPS gain will be booked in the first quarter of 2020. Now with -- let me come to our counterparty, doValue, we expect the closing of the transaction in April 30. This is what we have agreed from the beginning. Now any sort of execution and it's with doValue, if this is what we -- you mean and you know that we have signed a binding agreement with doValue on the 19th of December 2019. Since then, we're working very closely with them on all the processes and steps on a daily basis, including the required approvals, which are necessary for the closing to take place at the scheduled date, approvals and impact of this approval and competition authority approval from the side of doValue. We don't have any sort of concern about the closing of transaction as of that date. In the meantime, the FPS management has a very active dialogue with the management of doValue about further growing the business in terms of increasing assets under management. Yet, advisory mandates for other transactions, so that's taking place in Greece. And also, there is a plan to launch the Altamira real estate platform in Greece by the end of June. So this is an update on where we stand with respect to this transaction.

With regard to the P&L impact, could you give us a bit -- nothing has changed on that front versus actually the guidance that you provided before?

Actually, we have detailed information about the P&L impact on the presentation.

On Page 15.

This is on Page 15. And let me pass over to our CFO to give you some more details about the P&L impact. Harris?

If we go from Page 15 and you focus on the notes, here we provide a breakdown of the impact for Cairo. The impact is expected at EUR 1.59 billion including the APS cost. The FPS valuation will give us an upside of EUR 310 million and the transaction carve-out costs and tax are estimated at a cost of around EUR 135 million. Now if you translate that on the other left part of the chart in the regulatory impact, this translates to 350 basis points of capital. However, directly related with Cairo-FPS transaction is also the increase of IRB shortfall that is going to have an impact of 60 basis points. And here, we're not talking about the [ phasing ] ratio, this has no impact on the fully loaded ratio. The DTA threshold, the 10% DTA threshold due to Cairo loss of [ 130 ] basis points. And then the RWA impact, actually, minus the RWAs of the loans plus the RWAs of the senior that has been estimated with a weight, in fact, of 25% will give us -- giving us an upside of 70 basis points. Overall, this sums up to a regulatory impact of Cairo FPS transaction of 670 basis points. Not far away with the guidance that we have provided during our last call. If you allow me to continue with the second -- with your second question, regarding the growth of our balance sheet, if you go on Page 17, you may see that on the upper left part of the page that our performing loans will grow up by EUR 7.1 billion from EUR 31 billion to EUR 38 billion. This is broken down as follows: in Greece, we are going to have a growth of EUR 3.3 billion, that it is actually a growth of business lending by EUR 3.8 billion; household, EUR 1.5 billion minus EUR 2 billion that is -- it's going to be the amortization of mortgage loans. Furthermore, we have the senior notes that are accounting for underperforming assets plus 1.6%, plus international, another EUR 2.1 billion. Now regarding the assets, as we mentioned in the notes below, we expect a growth of 8% cumulative before the years 2020 to 2022. This translates to a growth of assets by approximately EUR 5 billion. We have at the end of the year, EUR 64.8 billion. We are going to land at approximately EUR 69.4 billion. The difference is not coming only from loans because our net loans in this period will grow by only EUR 2 billion because apart from the performing, we have the decrease of NPEs. The rest is going to come from the additional liquidity and the additional securities portfolio by EUR 33.5 billion. Regarding the securities portfolio growth, which actually is the use of the additional liquidity, we estimate to increase our Greek covenant bonds portfolio by approximately 1% to 1.5% of our assets, i.e., between EUR 701 million and EUR 1 billion additional, and the rest is going to be foreign sovereigns and corporates. So for this reason, as you may appreciate the yield on these assets will be lower underperforming loans. Overall, the impact on our net interest margin is shown on the mid -- right part of Page 17. We estimate a decrease of our net interest margin by 30 -- by approximately 30 basis points from 2.2% to 1.9%, of course, on the updated asset base as of the end of -- as in 2022.

And if I may, one second, in that -- in Slide 17, in this -- in the chart, in the upper left chart that you have in the breakdown. Given that -- I mean you haven't provided actually, obviously, the positive -- the coronavirus actually numbers or forecast. So -- but could you tell us actually which of these components is most at risk in the current companies? Are we talking about business loans? Or the household loans? Which segment you would say is most at risk of missing your own targets?

It's not easy to answer this question because the critical factor is the duration of this crisis. And you could not really say that it's going to be different, if we are talking about an event that is going to dissipate by June or something that will be with us almost for the full year 2020. The implication for the economy are going to be quite different. So it's not easy to quantify what are the effects. Let me -- with this opportunity of your question, let me try to give you an assessment of how we look at the current situation of the coronavirus outbreak and the effect in our portfolios. Again, this is more qualitative assessment because we are working on the quantitative effect as we speak. And day after day, the situation changes quite dramatically. So at the moment, we can only speculate about the magnitude of the impact. Our baseline scenario remains that the depth of the economic impact will be material, mainly due to travel and tourism for the Greek economy and as well as the effect on demand. But should be temporary and the outbreak itself will eventually dissipate. It is very difficult to put a number of the effect of the Greek GDP, the OECD a few days ago, as you know, provided an estimate about the effects on the world GDP and the eurozone GDP, but it was about 50 basis points down. For Greece, already some analysis that shows an effect, which ranges from 50 to 100 basis points for the full year. The main challenge of transmission is obviously, tourism, the consumer confidence, shipping to some extent and energy. And let me elaborate on these factors. The impact on tourist may be the most important one. Last year, the contribution of tourism to the Greek GDP was about 10%. Therefore, every 10% reduction in the tourism revenues results about 1% year-on-year effect on the GDP. Overall, the impact on tourism may be quite serious. However, having said that, we are far from the peak of the tourist season, about 75% of the yearly tourist revenues come in the period between June and September. Therefore, there is time for losses to be recovered in any bookings and to be counterbalanced by last-minute bookings in the third -- in the late second and in the third quarter. With respect to Eurobank's exposure to this segment, we have about EUR 1.8 billion of performing hotel and leisure loans. Out of that, 80% is with large hotels, which are more resilient to the crisis. So far, the main effect that we have seen is with city hotels in Athens and [ Thessaloniki ] but obviously, we cannot exclude but this will be -- expand also to resorts. Anyway, we monitor the situation very closely with our customers. In terms of the impact on consumer and investor confidence, we don't have any quantitative data, again post to the crisis, the last data was in February, during which the economic sentiment increased a further 113. This is almost 10 units above the EU average and also PMI increased to 56. Actually, this has been a record readings for both indicators since 2010, and we have details about them at Page 58 of the presentation. Shipping is another sector which is important for Greece. And obviously, shipping is very sensitive to global trade. And what happened to China at the beginning of the year, if we use the Baltic Dry Index as an indicator, increase is rough in the beginning of February and since then is recovering, which is important, I think, on an overall negative environment. With respect to our exposure to this segment, we have about EUR 2 billion. We are discussing the situation on a daily basis with our customers, and we have no demand so far for any sort of restructuring. Overall, we have historically a very strong portfolio in this segment. Finally, there is something positive that comes out of this turmoil, which is oil and energy prices for the Greek economy, the low level of oil price is something positive, contributing positively to the Greek GDP, all the Greek companies in the [ center of energy and ] downstream. And the price effect is not going to have any adverse impact apart from inventory revaluation. So this is a few things about some sensitive segments of the portfolio. Now you made a question about [ our NPE ] plan. And actually, it was not clear -- very clear to me what you said but on Page 14, we show that initial NPE ratio goes up and then goes down, maybe I was missing something. If you'd like to repeat...

No, I referred that the target that you had for the full year '20 in your previous presentation was actually lower -- actually, was lower than 13% than the current one, which is 13.5%. And it is true that it's lower later on but yes, if you could explain a bit what was going.

Yes, that's a good point. So on Page 14, indeed, we saw 15.9% in the first quarter of 2020. This is as soon as we book as available for sale the Cairo transaction, and we project a ratio of 13.5% by the end of the year, which you have correctly stated that this is higher by about 1%, if I remember correctly from the previous reading. The explanation of that is shown on Page 14, on the right part, which is the last row, the regulatory headwinds of about EUR 1 billion. This has to do with an estimate of the impact of applying the new definition of the default in our portfolio, the EUR 1 billion is made by about 2/3 in retail and 1/3 of corporate, and the new decision of the Board would be effective as we know, January 1, 2021, although it may [ be ] delayed following today's announcement by the ECB. We have to clarify that. And anyway, we were planning to book the major part of this impact in 2020 and 2021. So this explains the difference. Now let me also say a few things about the potential effect of the recent events on the NPL resolution. For the first quarter of 2020, where according to our plan -- actually January and February, were 2 good months in terms of performance. And despite the coronavirus outbreak over the last few weeks, we still expect a negative formation for the third quarter of 2020, slightly below the respective reading of the first quarter of 2019. So far, we have not seen any sort of change in the payment behavior because of the coronavirus but it is still early and definitely, this is a risk factor that we are monitoring very closely.

The next question is from the line of Floriani, Jonas with Axia Ventures.

I have a few questions, of course, at the focus now, as you can imagine, my colleague ask is on the impacts from the virus. But now changing a bit focus on the expected risk rate you show on Cairo on the presentation, is that your expectation for the risk rate? Or is it the final number you expect to hear in a few weeks? So that's the first question. Second, given the level of capital expected for 2022. Total capital around EUR 16.5 million. Have you been internally discussing or with shareholders any possibility of capital return to shareholders based on that level of capital when you reach it? So yes, I'll leave it here. And if I have anything else, I'll join the queue again.

Thank you for your question. Following the feedback that we received from SSM in the context of SRT approval, the Cairo single loans will be weighted at 25%. So that is about your first question. Regarding your second question, as you may appreciate, following also the latest developments, it is not something that it -- is in our agenda in the near term.

The next question is from the line of Sevim, Mehmet with JPMorgan.

Congratulations on the results. I'll have another question on the COVID-19 situation, please. I appreciate the situation is still developing but would you be able to provide us with some sensitivity on the line items that you may have some visibility on it, if there are any. And are we especially interested in cost of risk, given potential IFRS 9 remodeling, for example, based on the macro factors as well as capital, given the moves in the bond deals?

Okay. Let me start from the second part of your question, which is the effect that we may have in our capital from movements in the available for sale portfolio. Indeed, there is a very high volatility in -- with the GGBs as well with other govis in the eurozone. So far in the first quarter of 2020, we have an effect of about 60 basis points negative in the -- in our capital. But you would appreciate that this change is -- vary dramatically from one day to another. The good thing is that, as I mentioned before in our capital projections, we have had with buffers versus the regulatory minimum requirements. And today's announcement by the ECB provides even more room with respect to that. Now in terms of cost of risk, you pointed very correctly that this is maybe the most sensitive line of our income statement because of the recent developments. We have projected 90 basis points for the full year 2020. It's too early, obviously, to change our guidance. We remain with this guidance. But the fact that our starting point for cost of risk is 90 basis points, give us room to absorb any sort of negative impact from the coronavirus outbreak, if there is such. So the fact that we have been able to reduce during the course of 2019, the stock opened this quite dramatically, gave us room there to absorb the noise and the promotion that may come out of the recent events.

Okay. And my second question is on your fee income in the fourth quarter, which was especially strong, especially in asset management and bancassurance. I just wanted to ask if you could elaborate a bit more on this and tell us whether we can expect this to continue in these levels in asset management, especially what it does with the seasonal impact. How much of it was seasonal?

This is a very correct point. Following the stock order, our fees and commission increased by almost 14% year-on-year, which is not all the results of the investment operating income as a result of the merger with Grivalia but also the high fees related with bancassurance, assets under management and the network activities and international. Actually, this is going to be the main source of income driver. And together with increase in costs for the 3 coming years and especially on bancassurance and assets under management, where we should expect net loss by more than EUR 3.5 billion in the next 3 years and the assets under management fees increased by more than 100%, it's an area that Eurobank, a number of years now, which is a competitive advantage, especially in bancassurance in cooperation with Eurolife; and this combined with the negative base rates and some increasing trends in deposit rates, this is giving a perpetual -- a sustainable source of income for the coming years. Apart from the asset -- the investment property, the assets under management and bancassurance, the third driver of fee [ and commission ] income growth for next year is expected to be the network fees, especially focusing on management account fees, ATM access fees, debit card renewal fees and the subdecline of the positive basis. So this is going to be the picture on fees and commission for the next 3 years. We also demonstrate some KPIs on Page 18, where we show that our plan for the period until 2022 is fees over income to grow from 52 basis points to 80 basis points of our assets and a quite significant change of income mix, so fees over income increase is expected to grow from 19% to 30%.

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

A few questions on my side as well. Just to start from fees, given that, that was the last topic that we just discussed, the 80 bps that you target in 2022, when I look back into your historical numbers, you -- I mean my model goes all the way back to 2008, not before that. But still, I can see that in 2008, at the group level, you were at 76 basis points. And I would imagine that in today's environment, there is much more competition. And also, the rules have tightened with regards to sort of transaction fees, banking fees, et cetera, in the European Union, [ PSB2 ]. So isn't this overly bullish, this assumption of 80 basis points over assets? Then my second question on NII, based on the assets growth that you have given and the 1.9% NIM for 2022, I get to a number of around EUR 1.5 billion net interest income. Could you confirm this number for 2022? And if my calculations are correct, could you give us some color on what sort of Euribor have you assumed in the plan? What sort of -- what is the pace of the yield on the securities portfolio that you have assumed? And also, one last question with regards to the cost of risk and the impact from coronavirus. I do hear you that it's still early days but obviously, with the Greek banks, we have had in the past 10 years, really, a lot of instances where cost of risk was extraordinarily high. So in your view, do you expect that if -- let's assume that the cost of risk exceeds your target of 90 basis points. Do you think it could exceed even your cost of risk of 2019 of 170 basis points? Or is that some sort of an upper floor -- or sorry, upper ceiling, let's say, considering that you will have deconsolidated part of your NPE book?

Let me answer the first 2 of your questions, Angeliki. Thank you for your questions, first of all, and for the third, to pass to Fokion. So regarding the fees and commissions, maybe a differentiated factor than 2000 -- compared to 2008 is now that a big chunk of fees and commissions is going to come from investment property rental income. So we estimate that close to above 25% of our fees and commission as of 2022 will come from rental income. So this may be -- this may reconcile your analysis. Regarding your net interest income for 2022, actually, I cannot reproduce this figure. If we multiply the asset base of EUR 65 billion by 1.08%, that is the growth of estimates, multiplied by 1.9% it comes to a figure close to EUR 1.35 billion, which is a small decrease by 2.5% to 3% compared to the net interest income that we shared in 2019. So that's about it. And...

So Euribor -- is Euribor assumed [ in that sort of level ]?

Sorry, I forgot to answer this. Regarding Euribor, we expect a flat Euribor at the area of minus 65, minus 70 basis points throughout this period. So we don't expect improvement over the 3-year period. We don't expect the [ deterioration ].

All right. And if you could give me an indication also on the securities portfolio because you said this will increase by around EUR 3 billion, and I presume the yield is lower. Maybe -- and maybe you can give us some guidance as well more near-term with regards to the bond income for 2020. Is the Q4 level a sustainable level for a quarterly run rate for 2020?

I would expect some slight growth at the area of 5% to 10% over next year, but that's that.

And on the cost of risk?

Now on cost of risk, again, it's very difficult to quantify things at the moment. But let's look at some facts. During the course of 2019 and the first quarter of 2020, effectively would reduce the stock of [ RNPs ] by 2/3. And therefore, the main source that was creating the cost of risk in our bank has been reduced very substantially. At the same time, the companies, which are in our performing book and companies that have been able to remain performing during the [ 10-year ] crisis as we have experienced increase. So these are companies with really strong balance sheets. And if we focus more on the hotel and leisure segment, we have companies that obviously enjoyed very strong years during the last 3 or 4 years. But also, they were able to go through the crisis of 2011, that tourism was very weak and survived through it. So unless this crisis last for several quarters, that is not our base scenario [ internally ]. We cannot really see how the cost of risk will exceed the level that we had last year. But again, if -- at the current circumstance, it's very difficult to quantify this metric.

If I may just follow-up on that. Obviously, the situation is still evolving but even a bit earlier and over the past few days, we hear about governments in every state taking some measures in order to -- to offer forbearances, especially to the SME sector being affected by the crisis. Have you heard anything from the Greek government with regards to perhaps guarantees on SME loans, which could alleviate somewhat the cost of risk for you? That would be interesting to know whether you expect any sort of help from the European Union or the Greek government. And just one last thing, if I may, I'm really sorry, and just on the first question that was asked in the call with regards to the deal with doValue. Obviously, your cost of risk reduction is entirely dependent on that. So just to clarify one more time, is there any risk that if the value were, for some reason, willing or if they change their mind, is there any sort of legal agreement that forbids them from doing that at the moment? Would there be any penalty for them?

With respect to doValue, as I said, we have a binding agreement about the sale of FPS and Cairo, as binding as we can -- could become. So -- and again, we don't have any sort of indication that doValue is thinking otherwise. On the contrary, as I said, we are in daily communication with doValue about the closing of the transaction. And not only that, on how FPS can grow its business, even from the early days of 2020. Now about the governance measures and et cetera, we are in discussions with the Minister of Finance, about how the crisis could be addressed in a much more coordinated way. The government has not reached any decision here. But it is positive that it's in discussion with the banking sector. And I think it is important to wait until the decision of Euro Group, I think it is next Monday, the 16th, if I'm not wrong, to see what the decision may be at the European level. And following that, maybe the government will reach its decisions. As I said, it is very important that it is in close dialogue with the banking sector.

The next question is a follow-up question from Abad José with Goldman Sachs.

Sorry, 2 follow-up. The first one is a broader question is given that the changes in the current context that we are experiences. So the question for you is if you were to launch today -- let's assume that, actually, you have never closed actually the Cairo deal. If you were to launch the Cairo deal today, starting today, do you think there will be the same demand at the same prices that you managed actually to close the previous deal for those quantities? Or you think that going forward, actually, the appetite may be actually lower or different? And the second is clarification. You mentioned you were at -- you have minus 65 to minus 70 bps?

The second piece is, yes. It's hovering between 60 -- minus 65 to minus 70, 7-0, throughout the 3-year period. So no improvement.

Now your first question is very hypothetical and I'm afraid that there is no answer for such a hypothetical question. First of all, I don't think that anybody could seriously think of launching a transaction at an environment like the one that we experience today. Everybody would wait for things to settle down and then launch a transaction. But overall, out of this crisis for the servicing sector, business can only go up, not down. I mean -- therefore, I think FPS is still a very attractive entity to be considered by anybody. But again, this is a very hypothetical question. We have a binding agreement with doValue, and we're going to close with doValue.

[Operator Instructions] We have a follow-up question for Bairaktari, Angeliki with Autonomous Research.

I can see on your slide, Page 14, that you have EUR 1.7 billion of additional securitization, if I understand correctly, in your plan. Could you please give us some more details on, sort of, is there going to be mortgage versus corporate and in which year you're planning to launch the securitization?

Yes, Angeliki, actually this is a transaction that is expected to be launched in 2021, not this year. According to our plan, 70 -- close to 70% is going to be retained and another 30% corporate. The transaction economics are not expected to be materially different from the one of Cairo. And any impact has been included in the cost of this guidance we provide for both 2020 and 2021.

And what will be the senior tranche if you have an idea on this securitization?

Actually, it's quite early to provide some -- although we don't expect it to be materially different from the percentage of Cairo.

Okay. And are you planning to apply for the Hercules government scheme as well for this one or no?

Most probably, yes.

The next question is a follow-up question from Sevim, Mehmet with JPMorgan.

Just a quick follow-up from me as well. On Slide 16, you're talking about EUR 200 million of further IT investments. I just wanted to check whether you can provide more color on the nature of these investments, please, and the time period that these are planned for.

Yes, this is a figure for the period of the -- of our plans, so 2020 to 2022. And effectively, it is part of the effort to make the organization simpler, leaner and more digital. So to improve the customer experience and reduce cost for the bank.

And I'm assuming then these are obviously embedded in the targets and then the cost/income guidance.

That's correct. Yes, that's correct.

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

Yes, I would like to thank you all for participating in our call today. It is a very challenging time for the world economy, and your participation is really appreciated. We're going to be available for any sort of clarifications and further questions on what we discussed today over the next weeks. Thank you very much.

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