National Bank of Greece S.A. (ETE) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. I am Yota, your Chorus Call operator. Welcome, and thank you for joining the National Bank of Greece conference call to present and discuss the full year 2020 financial results. [Operator Instructions] And the conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Pavlos Mylonas, CEO of National Bank of Greece. Mr. Mylonas, you may now proceed.

Good afternoon, everyone, and good morning to those of you joining from the United States. Welcome to our full year '20 financial results call. I'm joined by Christos Christodoulou, Group CFO; and Greg Papagrigoris, Head of IR. After my introductory remarks, Christos will go into more detail on our financial performance, and then we will turn to Q&A. So let's begin. A few words on the economic backdrop. There's clearly a sense of optimism due to the knowledge that vaccines will soon permit a return to normalcy, albeit a new normalcy. The imminent receipt of funds from next-generation EU of the order of 3% of GDP in 2021 and 2.5% of GDP in 2022 reinforces this optimism, as does the better-than-expected performance of the Greek labor market, with total compensation in 2020 remaining broadly unchanged compared to 2019 and unemployment actually declining. This positive development is a direct result of the large and targeted fiscal support, which amounted to 9.5 percentage points of GDP in 2020. Clearly, this frustration society due to the successive waves of the pandemic and the resulting lockdowns and impatience with the rollout of the vaccination programs. But there is light at the end of the tunnel. And in my view, it is quite strong, especially in the case of Greece. Let me explain why. First, there is a continued fiscal response, which will provide additional fiscal stimulus to the economy in 2021 of about 6 percentage points of GDP, over and above the aforementioned 9.5 percentage points in 2020. Second, latent household and corporate demand should be unleashed in 2021. Household savings reached a 10-year high in 2020, also reflected in the record high EUR 10 billion increase in household bank deposits. The release of these savings should provide a strong boost to consumption as confidence returns. On the corporate side, the loans provided for liquidity support in 2020, including those with government guarantee, should recirculate in the economy as fixed investment spending. Note that corporate deposits have also increased by about EUR 10 billion in 2020. Third, tourism will certainly increase from 2020 levels. The question is by how much. Even if tourism receipts only reach 50% of 2019 levels versus 23% in 2020, the contribution to GDP will be 2 percentage points. And the potential for an upside scenario, in my view, is high with the contribution to GDP potentially reaching 4 percentage points as vaccination programs pick up in Greece as well as in its main tourism source markets. Early bookings appear to confirm a more optimistic scenario. All in all, in-house projections for GDP growth are for nearly 5% in 2021, averaging 10% year-on-year in the final 3 quarters of the year. That was a longer-than-usual description of the macro, but at this turning point in the economy, I believe it was useful. So let's turn to NBG now. 2020 has been a year of challenges but also a year of opportunities. We remain at the forefront of support extended towards our household and corporate clients, implementing targeted payment moratoria schemes and interest payment subsidies, mostly to SME and SP loans for a total of more than 85,000 clients. Furthermore, aided by state support schemes, we disbursed $4.7 billion of new credits, an increase of about 40% versus disbursements in pre-COVID 2019. Our top priority throughout the pandemic remained the health and safety of our employees and customers. We ensured that our employees could work remotely, efficiently cyber securely. A silver lining benefit from this disruption is that it will form the foundation of our new work-from-home model. At the same time, we accelerated the migration of customers to digital channels, enhancing digital functionalities in order to better serve them remotely. Just 2 examples, both first for the Greek market: one, the introduction of digital onboarding for individuals; and two, instant consumer credit from your mobile in a few minutes for up to 2,000. The digital transformation has been impressive with digital monthly active users reaching 1.7 million in 2020, up by an impressive 50% year-on-year. This shift in behavior will form the basis of our new branch service model. Despite COVID headwinds, we made significant progress towards completing 2 key strategic transactions, the sale of our insurance subsidiary and the Frontier securitization. As regard to Gefyra, I'm pleased to announce that today, we agreed to sell a 90% stake to CVC Capital. The transaction includes a 15-year bancassurance agreement, which will be mutually beneficial and result in strong fee growth going forward. The transaction is meaningfully capital-accretive and fulfills an important commitment from our restructuring plan. As regards Frontier, in view of the progress made on the transaction, the rating of the senior tranche, the application for the guarantee of the senior bond from [ Hana ] Republic and the entry into the final stage of the process, we have classified the portfolio perimeter as held for sale, and importantly, took the implied EUR 400 million of provisions for the transaction in Q4, a year ahead of schedule. The transaction will be capital-neutral upon completion when the RWA reduction of about EUR 3 billion occurs. Frontier, combined with negative organic NPE formation, led to an NPE ratio of 13.6% at end 2020, just about EUR 4 billion in terms of gross NPEs. The asset quality of the remaining NPEs has improved compared with the previous stock. Specifically, nearly 1/2 comprised of restructured loans which are performing or less than 30 days past due, with a good chance to cure. Moreover, the LTV of the mortgages in this remaining NPE portfolio, comprising about half of the EUR 4 billion, is now close to 100% post-Frontier. A final point is that the provision coverage of the remaining NPEs increased to over 63% at end year 2020, implying net NPEs of just EUR 1.6 billion. As important as a significant NPE reduction is the fact that it did not absorb capital. Group CET1 capital ratio at end year '20 stands at 15.7%, and it will increase by an additional 170 basis points, of which 110 basis points attributed to Frontier RWA deconsolidation, following the completion of the Frontier and Ethniki transactions during the next few months. On a pro forma basis, CET1 capital is above 17% and total capital above 18%. Turning to the full year financial performance. Our results have been strong despite a COVID-induced background in which GDP declined by 8%. Group core operating profit, i.e., recurring profitability, excluding trading gains and one-off provisions for COVID and Frontier, increased by 41%, reaching EUR 328 million. This performance reflects the following: first, the resilience in our core income despite the strong headwinds to NII from the EUR 5 billion reduction in NPEs in 2019. This was achieved through the expansion of performing loans, funding cost improvements and the strong growth in retail fee generation. Second, the aggressive cost cuts, which yielded an 8% year-on-year reduction in personnel costs and a 12% year-on-year reduction in G&As. The good 2020 OpEx results follow on from those in 2019. Indeed, cost savings has amounted to EUR 150 million in fiscal year 2020 compared with fiscal year '18 and comprise inter alia a reduction of about 2,000 FTEs and about 100 branches. Looking at the bottom line. Full year PAT from continued operations reached EUR 591 million as trading gains of EUR 1.1 billion fully absorbed provisions of more than EUR 800 million related to COVID-19 and Frontier. Most of this PAT was used for once-off restructuring costs, most importantly, the VES, voluntary equity as well as for the additional impairments for Ethniki Insurance. With the momentum achieved in 2020 and the expected strong economic recovery, I feel confident we will continue to deliver on the 3 key goals of our strategy in 2021 and 2022, complete the asset quality cleanup and have the current high level of capital and achieve high returns for our shareholders. Starting with NPE developments going forward, and you can follow-on Page 14 of the presentation. The key question concerns the impact from the pandemic on asset quality. We have already said that this would comprise mostly a step set of the loans that received moratoria. EUR 3 billion performing loans in the case of NBG, all of which expired at end December 2020. The good news is that approximately 50% in value terms have not asked for further support and have returned to normal pre-COVID installment levels. The remainder received step-up solutions or government support schemes, the so-called Gefyra or bridge schemes. Importantly, very few of these EUR 3 billion have shown early signs of payment difficulties, specifically, less than 4% are over 30 days past due, nearly 3 months after the expiration of the moratoria. This is much better than expected. And even though it's too early to claim victory, we cannot see more than 15% to 20% of the EUR 3 billion initially in moratoria defaulted. Outside this moratoria perimeter, NPE formation will be more than offset by curing. Finally, on the inorganic front, we envisage one additional transaction of EUR 1 billion to EUR 1.5 billion as well as several individual loan sales of bulkier and more complex corporates. Overall, we expect NPEs in 2022 to reach EUR 1.8 billion, equivalent to an NPE ratio of about 6%. Moving on to capital, Slide 15. From a solid starting point of a CET1 ratio of 15.7% at end 2020 increased by about 170 basis points of capital upon completion of the Frontier and insurance transactions, as I mentioned previously, attributable profits are expected to generate another 250 basis points of capital during the 2 years to end 2022. These 2 positive factors will fully absorb 200 basis points of IFRS 9 transitional adjustments. Remember that there will be no further adjustments from 2023 onwards, 80 basis points of DTC amortization and the RWA impact from our anticipated credit expansion. Thus, CET1 will increase by about 50 basis points to 16.2% at the end of 2022. This is a very solid 15.2% on a fully loaded basis. This strong capital position will provide NBG with significant strategic flexibility and permit us to think seriously of finally distributing capital to shareholders. Moving on to profitability on Slide 16. We lay out a path to a core ROE of circa 9% in 2022. Starting from a core operating profit of EUR 328 million in fiscal year '20, the 3 main drivers are the following: first, core income will be negatively affected from the hit to NII of about EUR 125 million from the NPE cleanup, which is expected to be almost fully offset by NII from new loan expansion as well as double-digit comparable annual growth rates and fees. Second, cost to core income is envisaged to improve by about 400 basis points despite slightly lower core income over the period. This mainly arises from annual cost savings of EUR 70 million on the back of further FTE reduction in branch and network rationalization following the switch of transactional banking to digital channels, strip G&A demand management and the leveraging of the work-from-home model. Third, our cost of risk is expected to improve by another 40 basis points compared with the underlying level of full year '20 and reach 60 basis points in 2022. This reduction reflects high coverage levels already above 63%, which are expected to increase further as we clean up the balance sheet. Factoring all of the above, our core operating profit is projected to reach nearly EUR 500 million in 2022, translating into the core ROE of 9%. A positive trend in profitability will continue in 2023 and onwards. A large part of our achievements, past and future, are due to our successful transformation program, currently in its third year. It has helped focus and prioritize a rapid and effective change of our operating model, including the 2 key constituents: our IT systems, core, peripheral and digital, and HR management. Leaving our legacy problems behind us, our focus will henceforth be on our core banking business. We remain committed to position NBG as the bank of first choice in Greece, providing added value to our clients and shareholders in supporting sustainable and environmentally friendly economic growth. With that, I would like to pass the floor to our group CFO, Christos, who will provide additional insights to our financial performance before we turn to Q&A.

Thank you, Pavlos. Starting with the P&L highlights on Slide 18. COVID after tax from continuing operations in 2020 increased by 26% year-on-year to EUR 591 million, utilizing our trading gains for job loan impairments of EUR 1.1 billion or 403 basis points over net loans following our strategy of incurring COVID and Frontier-related provisions of EUR 800 million in the course of the year, implying an underlying cost of risk of 106 basis points, in line with our guidance. At the same time, our core operating profit before nonrecurring provisions registered a sharp improvement of 41%, reaching EUR 328 million, reflecting the resilience in core revenues despite COVID headwinds as well as the significant reduction in domestic personnel and G&A. The bank retained its very strong capital position post the absorption of Frontier and COVID charge offs. As illustrated on Slide 20, our year-end CET1 ratio reached 15.7% with a total capital ratio at 16.7%, nearly 6 percentage points above minimum regulatory levels. The positive impact on our capital ratios upon the deconsolidation of the risk-weighted assets related to Frontier completion is estimated at 110 basis points and is expected to be realized mid-year 2021, fully offsetting the negative capital impact booked in Q4, thus rendering the transaction capital-neutral. Upon completion of both Frontier and Ethniki Insurance transactions, capital in 2021 would be boosted by approximately 170 basis points compared to year-end 2020. Going into the profitability drivers detailed on Slides 21 to 27. Domestic NII continued to recover in Q4 '20, rising by 2% quarter-on-quarter to EUR 296 million, driven by the expansion of lending NII and funding cost reduction that more than offset the normalization of lending yields, which remain at healthy levels despite the ongoing low interest rate environment. Following a sharp rebound in the second half of the year by 12% half-on-half, full year '20 NII ended marginally lower year-on-year despite the rabid NPE cleanup over the last 2 years. Excluding the impact of NPE and NII, core pre-provision income settled 25% higher year-on-year. The resilience in our NII in 2020 reflects funding cost savings stemming from our increased TLTRO exposure and the sustained repricing of time deposits as well as the expansion of our performing loan book following the strong pickup in new loan disbursements. 2020 domestic loan disbursements, including repayments of working capital facilities over the period, increased by 40% year-on-year to EUR 4.7 billion, aided by the extension of state support groups. Performing corporate balances were up by EUR 1.8 billion or 14% over the same period, offsetting mortgage leverage. The expansion of our performing book will provide longer-term support to the net interest income partially offsetting the negative NII impact arising from the balance sheet derisking in the next 2 years. Despite headwinds from restrictive measures due to COVID, domestic fees kept recovering in Q4 '20 at plus 5% quarter-on-quarter, driving the full year 2020 slightly higher year-on-year on the back of solid retail fees, especially due to strong growth in the card business and intermediation fees. Fees from our digital business remained broadly flat, negatively affected by the sharp reduction in fees from international cardholders as a result of COVID-induced travel restrictions during the year. Adjusting for this impact, fees from digital channels were up by 25% year-on-year, reflecting our efforts to engage clients in our digital offering. COVID restrictions inevitably accelerated the bank's digital transformation with digital becoming the preferable channel for transactions. As shown on Slide 27, the total number of transactions is nearing pre-COVID levels, with e-banking transactions up by nearly 50% in Q4 '20, replacing branch transactions that have been gradually reduced by 2/3 versus pre-COVID levels over the same period. The ongoing migration of our customers to digital channels facilitates a more cost-efficient and flexible operating model as we are steadily transforming into a more dynamic and agile bank. Our cost-cutting efforts have yet again produced impressive results with domestic personnel and G&As registering solid reductions of 8% and 12% year-on-year, respectively. Cost containment reflects a reduction in the number of employees, the rationalization of our branch network supported by the swift migration to lower cost digital channels as well as optimization of spend to our demand management framework. The VES program launched last November with participation exceeding 550 FTEs by end of the year, complemented by the ongoing branch network optimization and other cost-cutting measures, will produce additional cost savings going forward. Moving on to asset quality on Slides 29 to 31, following the transfer of Frontier portfolio under assets here for sale, there is significant improvement in our asset quality position. Frontier, combined with negative organic NPE formation of EUR 0.7 billion during the year, pushed our year-end group NPE ratio down to 13.6% from 31.3% at year-end '19, with cash coverage of 63% compared to 54% a year ago. It's worth highlighting that despite COVID provisions and avoiding going through a high count, we have managed to fully accommodate in the past full year '20 P&L EUR 0.4 billion incremental provisions required for the Frontier portfolio, outperforming our earlier guidance as regards Frontier provisions spilling over into 2021. Domestic NPEs reached EUR 4.3 billion in Q4 '20 or only EUR 1.6 billion net of provisions. As shown on Slide 29, our FNPs below 30 days past due comprised of circa 40% or EUR 1.7 billion of residual NPEs, demonstrating the quality there. Adding to this, post-Frontier, the LTV for mortgage NPEs dropped significantly to 108% compared to over 120% pre-transaction. Organic flows remained negative with accounting rates at near 0 in the quarter. New defaults remained low as the drawing economic activity has been cushioned by the fiscal support, while curings have remained fairly stable to the average of the past few quarters. Out of the EUR 3 billion performing loans under moratoria for NBG, all have expired at the end of 2020. More than half have returned to normal payments, while at the same time, we are actively providing step-up solutions to customers that continue to experience temporary financial difficulties due to COVID. These measures are complemented by the state subsidy programs Gefyra. As the CEO said, although it's still early days, nearly 3 months post moratoria expiry are very encouraging with our accounts in every areas currently below 4%. Turning to liquidity on Slide 33 and 34. Domestic deposits increased by EUR 4.7 billion year-on-year, mostly to private deposit inflows, reflecting the fiscal support from the government due to the pandemic. At the same time, the repricing of time deposits has provided support to the net interest income and net interest margin. Time deposit yields edged lower by 41 basis points year-on-year to 23 basis points in Q4 '20, with current production coming in even lower at 16 basis points. Eurosystem funding remained at EUR 10.5 billion, an exposure that we still providing NII push on in 2021 when the full impact will be realized. The TLTRO subsidy, coupled with the policy pricing, has led to bank's blended funding cost to the level of 7 basis points in Q4 '20 compared to 41 basis points in Q4 '19. 2020, despite the pandemic, has been a year of many achievements and success for our bank. Against COVID headwinds, we reported a solid operating performance with core operating profitability up by 41% year-on-year on the back of resilient core income and rigorous cost cutting. The strong headline more than offset both COVID and Frontier one-off provisions, yielding apart from continuing operations of nearly EUR 600 million. At the same time, driven by Frontier securitization, our NPE ratio went down to 13.6% from over 30% a year ago while impressively and despite the aggressive NPE deleverage, the CET1 ratio was maintained at 15.7% post the absorption of the EUR 0.8 billion of nonrecurring provisions. As already mentioned, further capital enhancement upon completion of Frontier and Ethniki transactions with increased capital adequacy by an additional 170 basis points. 2020 is now behind us, and we look forward to the challenges ahead of us in 2021. And on this note, I would like to open the floor to questions. Thank you.

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

My first question is on Slide 15 on capital. I was just wondering, given your comments during the call, what will be the trigger of the dividend discussion? I mean, are you going to wait for the full IFRS 9 phasing to be in? Or is it more linked to an asset quality level, let's say, NPE below 10% or so? And linked to this capital position, is there any level of trading -- unrealized trading gains you have at the moment to share with us? My second question is on NPEs and on your new NPE plan on Slide 14. I was just wondering how we can think about the sales securitizations split between 2021 and 2022? I mean, are you still willing to do something this year? Or it's more like a 2022 subject? And then finally, a question on lending going forward. It would be interesting to hear from you what is your view on your capacity and new disbursements from 2021 onwards and also in relation to the mix of the new disbursements and also an outlook on rates. I take the fact that recently, a lot of the recent disbursements have been channeled to corporates. And as you show in your slides, the corporate rates are coming down. So I'm just wondering how this will -- how should we think about this mix and the rate outlook going forward?

Okay. I'll take some and leave the rest for Christos. Very good question on the dividend trigger. Clearly, it's something we need to discuss with the regulator. It will clearly involve making a lot of progress on the IFRS 9 phase-in. Two, definitely NPEs will have to be near the 5% level. And at that point, I think, a meaningful discussion can be undertaken with the regulator. So we're looking at on the outer edge of the period that we have here on the slide. Now on the securitization. We'll try to do it as early as possible. Given that we also have Frontier, I think it's on the knife edge between 2021 and 2022. Lending, I think that we're going to see a very strong pickup in lending as the economy goes forward. The economic growth will be strong. We're going to have the EU recovery funds coming in. There hasn't been investment for a few years. So I think all combined, there will be strong loan demand, mostly in the corporate. I think the savings from the households will be adapting on loan growth for them initially. But down the road, retail and household borrowings will pick up from the extremely low levels that we're seeing them now. If you look at mortgage, consumer and small business lending as a percentage of GDP, they're extremely, extremely low, as is all loans as -- in terms of financial intermediation increase. It's far below what it should be. Rates. On rates, yes, there will be a continuing narrowing of corporates. Somewhere -- the 2020 new rates are biased by the government programs, which had gotten guarantees. But if you try to correct for that, you're going to see something like a 10, 15 basis points reduction in corporate rates in 2021 compared to 2020. On the retail, I think, if anything, you'll probably see an improvement in rates. Did I miss anything?

No. I think you've covered everything.

Covered everything? On the trading gain...

Just -- sorry, go ahead.

To take up that question. So as of the year-end, with regard to the AFS portfolio, we have an unrealized reserve in the area of EUR 350 million, more or less. What I can say is that in the early days of the year, in January, we completed the swap with the state that resulted in EUR 230 million of profits. This is public information already. And obviously, we do have the largest chunk of our exposure in debt securities is under the portfolio of here to collect amortized cost. So there is some unrealized gains there, but I wouldn't want to share at this point the level of the unrealized gains in the portfolio.

Got it. Just a follow-up, Mr. Mylonas, on the lending volume. Is it -- will it be fair to assume that your new disbursement should be, I don't know, between EUR 3.5 billion to EUR 4.5 billion? Or is it a bit on the high side? Because I think that the 2020 figure that you show of, what, EUR 4.7 billion, it's also a bit skewed by the dynamics with the COVID situation, right? So I suspect that this should normalize at lower levels, if it's fair to assume.

I'd say somewhere around EUR 3.5 billion, excluding any new programs that the state would introduce.

[Operator Instructions] next question comes from the line of Boulougouris, Alexandros with Wood & Co.

A quick question on your cost and the reduction in OpEx of EUR 70 million over the next 2 years. Have you -- this is -- could you say how much is driven by a reduction of personnel costs and if the cost for the VRS plan has already been taken or should we assume another VRS plan, let's say, later in 2021 in order to achieve this EUR 70 million target? That would be my first question. And my second question would be regarding cost of risk, which we assume 60 bps in 2022. In 2021, what should we be looking at? I mean I assume that this run rate you are at the moment, close to 100 bps is the rate that we should assume also for 2021.

Thank you for the question, Alexander (sic) [ Alexandros ]. So with regards to the first question on costs, yes, the biggest chunk of the EUR 70 million saving would be resulting from the reduction in NPEs. We have provided for the VES that has taken place, and we expect to use some more provisions that we have in the year-end for exits in 2021. Just to give you an idea of the numbers, the VES that was completed at the end of the year will be about EUR 35 million to EUR 40 million of upside in 2021. Any other reduction in staff going forward would be targeted. So there won't be something major in terms of VES as we had in the last 2 years. With regards to the cost of risk, yes, our outlook for 2022 is at 60 basis points based on the explanation that we've issued in the opening remarks. Now you should expect that the cost of risk for NBG in 2021 would -- will be more or less at the same levels as in 2020, so around 100 bps.

And this includes also potential, this EUR 1 billion transaction or...

This is underlying, excluding any lost budget for transactions.

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

Congrats on the results. I'll have just a few questions, please. And firstly, on dividends, if I may. Thank you for your comments earlier. My question would be, given the very strong capital position that you'll reach hopefully in a few years on a fully loaded basis even, do you have any views on whether the BTCs and the capitals that could potentially play a role in the longer-term potential and the discussions that you will have with the regulator? And secondly, on the loan growth that we saw in the fourth quarter, I think it's quite interesting that you saw that pickup in corporate loan growth. Was this mainly due to the government support programs in the fourth quarter? Or are you seeing actually the first green shoots of recovery in lending? And just one technical question on the effective tax rate, if I may. How should we think about it in the coming years, given the amount of unused tax losses that you had on your balance sheet? Is there any more left? And what -- how should we think about it going forward beyond that? And maybe just finally on the Frontier provisions that you've taken, the EUR 400 million level, which is, I think, quite interesting because I think -- I mean the expectation was obviously that it will be a low level given the mortgage focus of it. But I think it's even lower than anyone has expected, I would say, based on my previous discussion so -- which I do believe is very positive. But if you could give us any more details and dynamics here, I think that would be very helpful.

Okay. We're debating dividends, which, as I said, our 2023 issue, but it's fine. I do think DTC is an issue, and will be an issue for the regulator. Clearly, dividends would have to be a fraction of the profits and cannot at all go into the capital. So as long as it's part of the profitability, then I think the regulator would not have an issue. But clearly, it would be adapted. Let me take that question, and let me also take the question on Frontier and the quality of the mortgages. I think we've always been proud of the quality of our mortgages in terms of the value of the collateral. And I also think that one needs to put into the equation of the value we received due to our very good restructuring record with the split and freeze product, which has been extremely successful in leading secures. So I think that track record as well has played a very important role in the outcome. And then Christos has the loan growth and the tax rate.

So in terms of the loan growth in Q4, actually, we did indeed have -- part of it was due to the state current risking disbursements. But I would say that more than half were purely corporate loan disbursements outside the perimeter of the state currency themes. With regard to tax, well, it's related to the DTC as well. As long we have the DTC and amortized risk credit going forward, there will be no payment of taxes going forward. So the 2 issues, I guess, are interrelated.

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

Just going back, during the presentation, you mentioned of the EUR 1.5 billion sale and securitizations, I couldn't hear it clearly. Was it EUR 1 billion for securitization? And then do you provide any guidance for the potential capital impact of these transactions? That's my first question. And then regarding the NPE reduction, you mentioned EUR 126 million impact on NII for 2 years. I was wondering what kind of impact we should expect for 2021.

Okay. Let me take that question. So with regards to the portfolio under the securitization perimeter and the sales, what we see out of the EUR 1.5 billion that we say we will deleverage is more or less EUR 1 billion of corporates in SMEs and SBLs, and the remaining will be retailers with mostly marketed. So at this point in time, we are still defining the perimeter. But we would expect that the loss budget for the perimeter would be in the -- up to 30 basis points.

30? 3-0?

Yes. The sales and the securitization are planned to take place over a period of 2 years, so we're not sure yet as to whether something would materialize in 2021. Now -- and obviously, we will be considering the new [ hubs ] program, Hercules 2, to optimize in going through that channel to get transactions. The second question was -- can you remind me, please?

Sure. The NPI reduction, you kindly shared with us for 2 years, '21 and '22, I believe, is EUR 126 million. What kind of figure for '21? I mean, I guess it's only Frontier impact, right?

Yes. The impact in interest from Frontier will be in the area of EUR 75 million for a full year -- the full year effect. So in 2021, given that we expect the transaction to close sometime end of June, early July, you should expect around EUR 38 million of impact in NII.

[Operator Instructions] The next question comes from the line of David, Daniel with Autonomous.

Just 2 quick ones. I know in the presentation, you flagged Tier 2 and AT1 headroom. Is this being considered? Should we think potential Tier 2 is coming in the coming years? And then secondly, just relating to that, could you just maybe talk a bit about your MREL targets, have they been set and what dates they become binding? And also whether we should expect you to continue to print in senior markets?

Okay. So with regards to the MREL targets, the formation with SREP is being concluded in the coming weeks. But the binding target that we have to meet by first of January 2022 has already been met. Now going forward, our plan is to have about EUR 0.5 billion of issuances up until the end of the program. So yes, we do have some issuances planned for the next couple of years. But at this point in time, we are trying to consider whether we will proceed with them for not. AT1 is in the table as well as 1/Tier 2 issuance and some other senior bond issuance.

The next question comes from the line of Manolopoulos, Konstantinos with Optima Bank.

Congratulations on the results. I have a very quick one on capital, please. You guided for 170 bps positive impact following the conclusion of the Frontier securitization plus the -- another 60 bps from the sale of Ethniki. And my question is on that. Actually, how should we look at the numerator and denominator? Is it mostly of an impact of lower RWAs from the sale? Is it a small increase on capital as well? Can you guide us, please?

So this number, the 170 basis points, is based on the year-end '20 risk-weighted assets. And obviously, it has to do with the deconsolidation of the risk-weighted assets related to the loans in the Frontier perimeter and the risk-weighted assets from insurance.

So there is no significant impact on the numerator on capital that is after the sale of insurance?

No. No, the [indiscernible] has been taken already in the P&L of 2020.

[Operator Instructions] The next question comes from the line of Nigro, Alberto with Mediobanca.

Well done for the results. Just one clarification. Can you share with us if the CET1 ratio evolution until 2022, you are taking to consideration also any potential loss coming from the future? And my second question is on NII, if you expect to achieve the benchmark to receive the 50 basis point TLTRO bonus also in the second half of the year.

Okay. On your first question, with regards to -- sorry. The first question was with regards to what? I was thinking to answer the second part of the question.

No. Sorry. The first one is on the Slide 20, where you show the capital work. If you -- if that includes also the losses -- the potential losses coming from the securitization?

It does. It does. So in the plan, we do have a potential loss of up to 30 basis points for the portfolios under the sale perimeter. And with regards to the TLTRO, yes, in this bid, we do have the extra 50 basis points following the extension of the TLTRO programs.

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

On March 30, we will celebrate our 180th anniversary. We are very proud of our history, following closely in the full steps of the nation, which itself celebrated 200 years on March 25, yesterday. I believe today's results are a nice birthday present from NBG to its shareholders. Thank you.

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