Piraeus Bank S.A. (TPEIR) 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 Piraeus Financial Holdings Conference Call to present and discuss Piraeus Group's 2022-2025 Business Plan. [Operator Instructions] And the conference is being recorded. [Operator Instructions] The presentation will be followed by a question-and-answer session where management will receive questions from the venue participants only. At this time, we connect with the London venue and the Piraeus Financial Holdings management. Thank you.

Thank you very much for all of you being here today. And also, thanks for the about 120 participants, I understand, we have on the phone listening to us -- 200. Okay. It's already higher in about 5 minutes. I'm really happy that we are presenting here in London the business plan for '22-'25 today. And I'm very happy that you are here and also that you are listening to us. And we're happy to go through the presentation and, of course, have analytical Q&A session if you so wish. And the plan and what we are going to present is we're going to give you the highlights, we'll articulate our ambition and how we intend to capture business opportunities for this period and for the years to come. And then I'll close it with my final remarks. And going into the highlights and the agenda, we will be presenting so that we all remember the Sunrise plan, which was a very complicated and versatile plan that we are extremely proud that we managed to execute to perfection, so that we all remember what we did in 2021. We'll talk about the '22-'25 plan and our business targets. And finally, we'll focus on new business opportunities that will assist the bank in diversifying and enhancing the returns and capturing results. We are the leading bank in Greece, the market leader in the Greek banking sector, having the largest market share in loans and deposits with a nationwide commercial network, which is the biggest than anyone in the country; 5.7 million clients, which is 60% of the bankable population in Greece. 65 clients are rating us quite very high in our satisfaction surveys. And we are in the top 33 among the EU banks in the TRI*M survey. In e-banking where we ventured significantly, we have a 35% market share in all e-banking transactions. And we are the pioneer in the ESG agenda in Greece, something which is recognized not only in Greece, but in the international fora and even the United Nations. What have we achieved in 2021? EUR 3 billion of capital enhancement actions; an NPE ratio, which is 13% from what was 45% as you -- as we all remember; the net credit expansion in Greece in a tricky year of EUR 1 billion; the OpEx reduction which wasn't an easy thing to do given all the transactions that we are handling at the same time, and the extreme complexity on the asset and liability side of the execution of the Sunrise plan. We issued our first Greek bond, EUR 500 million. We increased our asset management and the mutual fund flow, and this is going to be a key pillar of our growth for the next few years by 40% in 1 year last year. NII, we kept it on budget, which was another challenge that we are extremely proud of. We increased our net fees where again are going to be a pillar of our growth by 25% in 1 year, a remarkable achievement. We got recognition by the regulators and our Pillar 2 requirement from the 1st of March is 25 basis points lower. And we are in our target of Scope 2 emissions on budget. We are net zero in Scope 2. That's 2021 in a nutshell. And I said from the beginning, we are extremely proud about what we have achieved. And to give you an idea of the numbers, which, again, are expecting for themselves. In a very tricky year as 2021, we delivered and executed very well on preprovision income on organic cost of risk and finally on pretax profit for the year. On the NPEs, again, it was as much as we wanted to do and we're very happy with the rate that we are right now and given that the budget, it was lower, so we executed a bit less out of our own willingness. But our budget -- the cost of executing was lower, which is in line with what we have projected. We delivered 100 basis points more in total capital. And all the other actions on the liability side that were pretty difficult to execute, but we are very happy that we managed to execute to the best possible degree. And now where do we want to go? From EUR 27.5 billion performing loans, we want and we will be in a position to achieve EUR 35 billion on performing exposures with our very, very targeted loan expansion that I will talk to you and we'll talk about how we're going to achieve this. For fees, we wanted -- from the EUR 400 million, which is already a big number given the biggest ever number that this bank has achieved over the years, we want to take it to EUR 530 million and with a very diversified mix, which we'll tell you how we are planning to achieve that and what are the pillars of this. Assets under management, in total, we are planning to increase them by about EUR 10 billion. And that includes the conversion from deposits into asset management product where we focus -- we will focus, and it's going to be a big pillar of our growth for the years to come and for the growth of our fees. On operating expenses, we came up with a budget which is measured, taking into account the inflationary pressures that exist right now because the of crisis situation in Ukraine. And we are coming up with numbers that are challenging but achievable. So -- and this is going to boost significantly our bottom line and efficiently. And five, we have 5 million active individual clients. And we long have been thinking about ourselves how we are going to capture this almost untapped potential. And we are coming today with an innovative proposition, which we'll talk about it in the pages to come. We're introducing an innovative BankTech platform, which will take account of a number of our clients, more than 1 million, which are millennials, are digital savvy. There are clients that they don't use the branches that much, light use, I would say, which we want to actually use them by using this innovative BankTech platform that we will talk to you in detail in the pages to come. We think it's a proposition that it's a very interesting one. And you will see in later in the presentation how we intend to capture that potential. How are we going to do all of this? We are going to diversify our revenue pool. And asset management is going to be a very important part of our delivery for the next 5 -- 3, 4 years. Bancassurance is going to be a part, together with asset management, of our offering and will be enhancing the fees. The loan mix, we'll be very careful. And everything we'll do is going to be based on RaRoC. We'll talk to you about it. Risk-adjusted return on capital is going to be the metric. The investment property, we already introduced at the beginning of the year, a transaction that you all know. We'll explain to you how we're going to use it to the benefit of the bank and the numbers to come. And finally, the digital offering that I talked to you before is going to be part of our opportunity for the future. We're going to simplify our cost base. We are already working on it. We had a lot of things to do up until right now. Now is the time to focus be big time on costs and making sure we deliver a best-in-class cost metrics, not only vis-a-vis the Greek banks, but also in Europe. We're going to simplify and simplify our decision-making model, and that's happening. We are spending money on technology. And we'll continue to upgrade our product, simplifying our processes to take more quick and savvy decisions and focus on our controls as we always did. At the beginning of this journey, this bank was a different bank than it is now because of all the checks and balances and controls and risk metrics that we introduced. And we are very happy that, as evidenced by our numbers and our progress, that they are delivering. And finally, we know that we want to be able to deliver for our shareholders. It's up there, #1, because we know that the last few years with all the turbulences, all the challenges that we have to address, sometimes we have been a bit a disappointment for the shareholders and we acknowledge that. And all these efforts happened in order to be able to deliver at last. And the next few years are going to be the years of this delivery for our shareholders, for our clients that they give us the opportunity to deliver what we are promising to deliver here, for our employees who have been quite resilient for all this time like our shareholders in actually being there with the bank. And we want to make sure that we reward them in the best possible way, but also delivering for the local communities and for the society through our ESG agenda, which is a very important one for us as a bank and for the Greek society in total. Let's talk a little bit about the macro. And I know there are tailwinds and headwinds and a lot of uncertainty right now. But we delivered -- Greece delivered in 2021 an 8.3% GDP growth. I think it was the second biggest ratio of growth in Europe with extremely strong fundamentals. We entered the first 2 months of the year with extremely strong numbers. And actually, we saw it in our books as well and also in our cost of risk. And as we downgraded our forecast for '22 for what was something like 5.5% to what is now 3% to 4%, IMF came out a couple of days ago, and they said 3.5% GDP growth very firmly for Greece and inflation around 4.5%. So we are here quite conservative looking at an inflation, which on average could be 7%. And this is factored into the 3% to 4% GDP growth forecast, which is at the center of all our projections. Unemployment is decreasing and will continue to decrease, thank god, with all the structural work that has been happening. This is starting to deliver even for Greece, where chronic unemployment is at least 10%, 11%. Imagine this 11% forecast is almost like a status of full employment for Greece over the years. Inflation, as I said, we are more conservative than IMF in this number and the effects that will have in GDP. But the average rate is we see it be escalating down to 2% in the years to come. Very good readings for residential, real estate. Whichever way you look at it, residential real estate was a big positive surprise for '20 and '21. And then in years for Greece, real estate prices were going the very right direction, which is very solid for these numbers here, projected by our economics team, and nonresidential prices as well. We all remember that Greece has been battered significantly through the years of the crisis in real estate, and that's a reflection of what has happened then. Now this is what we are aspiring to achieve. This is the plan. The actual for '21 is a run rate of 3%. The '22 projection, and we have upgraded our '22 guidance, is 6% instead of 5%. As we already said, we feel comfortable with this number. That's why we're coming forward upgrading our guidance. And then '23, we aim to achieve 8% return on tangible book value; '24, 10%; and go to '25 with a 12% number, which we'll explain how these numbers are being put together. Now the NPE ratio, our aspiration is from this 13% that we ended up in the year to go to 9% next '22, 5% to '23 and end up with a very expectable European average of 3% in '24 and '25. These are numbers that we control in a way. We are very focused to achieve them because that was always our big aim. We managed to go from 45% to 13% in '21. We will go to 9%, 5% and 3% in the years to come. Our fully loaded CET1, we estimate 10% from -- for '22, 11% for '23 and then 12% and 13%. This bank, from '22, it will be creating organic profitability, organic -- it will be adding capital organically every quarter. And we are very confident that this is going to happen, and we will be delivering this on the capital side as well. Just, again, summarizing the numbers of the plan. From EUR 600 million preprovision income, we aim to be at EUR 1.2 billion. Our operating costs, we'll take them down to EUR 700 million. Our performing loans will go to EUR 35 billion. Our assets under management, and this is an area where I place a lot of emphasis and the effort is going to be to focus even more so, will double from EUR 6 billion to EUR 12 billion. Our headcount in Greece, we'll aim to have it down by 3,000 to 6,000 from 9,000 as we are currently. We are at a 59% cost of income as we speak. We aim to be below 40%. And this is achievable if the numbers that we are talking here are speaking for themselves. And from what is 59% now, which for Europe, it is what it is. We aim to be below 40%, and we will be there. And our eligible green asset ratio, we're aiming to increase from 22% to 32% because this is an area where we are focused to deliver. And finally, we are introducing the dividend where we believe that's subject to the work, the delivery of the numbers, the regulatory discussion and the capital trajectory. We will be in a position to pay dividends with the approval from our regulators. And we are aiming to be able to do that sooner than later, we hope at the back of '23. But this is, again, up for grabs, but we are very focused to deliver. Now on sustainability. We are a leader in Greece. And we have been delivering significantly on that front ahead of everyone else. On the right-hand side, just EUR 9 billion is the envelope for new production in '22 to '25. In terms of ESG loans, in terms of inflows to our mutual funds, we are the first financial institution in Greece to introduce ESG mutual funds, and we plan to increase it even further. And we will continue our ESG bond issuance, EUR 9 billion total envelope on the ESG agenda. I want to ask Theodore Gnardellis, our CFO, to come here and talk to us about our ambition and articulating our numbers, and we will be interchanging between us in the presentation. Thank you.

Okay. So what we have here today in terms of the targets is really a refinement of the plan that we have shown also last year. It's a very detailed bottom-up exercise that is based on what we think are educated assumptions and this is what we have to discuss. There are 3 particular pillars that are driving our effort for the promise of returns, right? This returns-based plan. It's not a cleanup plan that has been done in 2021. It's over. We're here to discuss how we're going to be achieving returns. Number one is the cost hunt, what we call internally what we have been calling over the last 9 months the cost hunt. It goes through both staff and G&A, an exercise that is -- that the whole bank is engaged with and lots of changes. Governance has also changed. The focus -- the internal focus within the bank has also shifted. About 1/3 of the staff base is going to be sort of exiting the bank over the coming years. So the bank is going to rationalize its staff base. But then again, also increase its cost per FTE. We're going to talk through it a bit later. G&A is also a very big part of the story and a very healthy kind of injection to the returns base at the bottom. Number two, we talked about that also in the Q4 result, it's how we're going to diversify the revenue pools. It's not lending, lending, lending. It's not the credit expansion and all of the stories that have been said. It's also that, but it's a lot more about fees and about kind of the healthier mix. And we're going to be showing a lot of detail as to how this is going to be achieved. There are 3 particular initiatives that we're going to cover around asset management, around the rental income through the recent acquisition of Trastor and around the new digital independent platform we talked about and we're going to talk about much more. Finally, as we said, it's all about returns, so it's about return on capital. It's not about the nominal credit expansion. It's about the RaRoC behind it. We have done a lot of work figuring out what is the actual opportunity. What are the sectors, what are the segments that can deliver this, and we're going to be focusing on them. So we're not here to tell you that we're going to be the #1 super expansive sort of aspiration in the balance sheet. It's not about the balance sheet boost. There's a very healthy balance sheet expansion that we're aspiring to, but always on the back and always keeping our eye on to that are our figure. To set the starting point, there has been a huge balance sheet earthquake, very positive earthquake that we induced in '21 within Piraeus Bank. So what does the run rate of the P&L look like now? Just look at what we did right from the EUR 3 billion reported losses. If you take out the derisking, you take out all the one-offs that happened, you also eliminate the NPE income that is no longer going to be with us as of going forward. What is Piraeus Bank making right now? Around EUR 100 million a year. It's a 3% returning back right now right? So this is -- and we're going to -- as we go through the presentation, this normalization of the P&L is always our starting base, right? Always not looking at the reported figures, but what is the actual run rate? What are we working towards improving? Now that 3% is destined to become 12% in 4 years' time. And this is happening throughout a mix of drivers. The NII is 3% of that. So how much is credit expansion and BNI important to this 3% to 12%? It's 3%. It's a very important 3% part of the growth. But an equally important 3% is the fee promise, right? So how asset management is actually developing, bancassurance and all the other elements we're going to talk about. Cost is another 3%, and that's actually being accelerated, right? We're disclosing share and we're talking today about much more aggressive and front-loaded cost reduction targets than what we have been talking about in the past. Organic impairment and generally cost of risk has been rationalized already, right? So the run rate that we're seeing right now is we're already kind of there, right? In the previous version of the power that's kind of a more gradual accumulation of the cost of risk, not the case. We saw the Q3. We wanted to make sure we hit again another quarter, Q4 same. Q1, very healthy. Of course, we have the headwinds that we're going to talk about, and I'm sure there are going to be a lot of questions around that. But still, it's a much healthier kind of cost of risk approach. So that value has already been captured. And so it's really a mix of 3% NII, 3% fees, 3% cost. This is kind of the story from the 3% to 12%. Now let's start with NII. Reported number, EUR 1.4 billion. You take out TLTRO extras, you take out NPE income, it's really EUR 1 billion right now that we did on a run rate basis. That is to become EUR 1.2 billion. Now lots of elements, right? Credit expansion, around EUR 230 million. We have baked into our plan a very kind of conservative Euribor hike that leads to a neutral Euribor around 0% within the next 4 years. Now we can all have perspectives on that. It's still more or less the hike or maybe there's not -- and we're going to talk about the sensitivities to this. And obviously, it's a big part of the story as to whether this EUR 70 million that the plan is budgeting that will come from the Euribor hike is too low or not. The bond book is also going to be delivering NII. We are primarily a historic cost-based bond investor. So we are buying bonds for kind of the longer-term NII purposes. NPE income, as NPEs go, and they go from the, whatever, 12% that we are right now to the 3%, there is going to be further decumulation, and the NPE will partly disappear. MREL issuance is going to be a headwind, though. And there is an assumption there for the MREL plan as it has been standing up until now, which basically calculates all of that, together that EUR 200 million NII expansion that is happening quite gradually. I got to say in the plan, we're going to go through it also in the final P&L in the end. You're going to see in the first years, the mix is not 1/3, 1/3, 1/3. It's less NII, kind of more cost and then eventually NII also comes up -- catches up. Now net rate expansion. As we said, a healthy aspiration for around EUR 7 billion expansion over the next 4 years, starting with EUR 1.2 billion, very similar to the performance of 2021 this year. It's a mix, of course, of about EUR 6 billion to EUR 7 billion of disposals that are happening every year. The important part here of the story is the assumption is that retail is going to start becoming expansive. The retail debt in Greece has been accumulating for a number of years because of the very heavy mortgage vintages that we have seen in '07, '08. The assumption is that this is going to pick up, but then explode. We're not going to see -- the assumption is not going to see 2008 again. But it is going to start contributing to the credit story of Greece gradually growing by about EUR 200 million per annum. This is the assumption. In terms of yields, it's a static story, more or less, right? Euribor kind of increases, but then spreads kind of compressed to continue landing to the 3.5% mark that we are in right now. That's basically the driver that calculates the EUR 300 million extra interest income that we saw before. Fees, probably the most important commercial target of this plan. We are already replenishing and we're already sort of running at EUR 100 million per quarter right now. So from the normalized EUR 390 million that we had kind of last year, this is pretty much the run rate that we're in right now despite the fact that we closed merchant acquiring, which took away EUR 40 million of that revenue of last year. We have replenished that with a better run rate on asset management as well as extra rental income. That kind of also continues to grow to the EUR 530 million target for '25, driven by about 1/3 of that is asset management bancassurance and also rental income contributes a great deal. We're going to see how we're going to capture that kind of in the next page. So real estate, what's the strategy in real estate? We're currently having about EUR 3 billion of real estate assets. This is what sits on the balance sheet right now. Most of it -- 1/3 of that is kind of what we call investment properties. So they really rented our properties, so they're yielding rental income today for the bank. The approach is that we're going to be running that down, that EUR 3 billion, substantially to the EUR 1.6 billion mark. So something less than half of that is going to be sold, and it's going to go primarily from the inventory assets, the REOs, right? This is what's going to -- this is how we're going to accumulate the real estate position. But on the other hand, we are going to be investing and expanding on the Trastor book, right? The Trastor book is a real estate investment company that we recently took over. We were minority shareholders. And we are currently holding something less than 100% of that. Trastor currently holds around EUR 300 million of assets. The target is to double that. It's a very healthy rental yield of around 6% right now. So this is kind of a major kind of leapfrog of rental income that's going to be contributing into the bank. We're not going to do a real estate play per se as Piraeus Bank, but we have the right vehicle to get it done, right? Professionals that they know how to yield income, how to invest in properties, how to pick out the properties, and this is how we're going to be capturing the real estate opportunity of Greece, right, using that vehicle as our means. Headcount, it's a EUR 380 million staff cost base to run down to around EUR 300 million, it's an EUR 80 million drop. That's a mix of reducing the number of FTEs and a little bit increase in the average cost per FTE for various reasons. The reduction, around 3,000 employees. So from the 8,900 where today, we're going to drop to around 6,000 employees. And that's going to be happening across both network as well as sort of support functions and operations. The plan has been set. Actually, this rationalization is going to be happening largely within the next 2 years. So it's not kind of a linear approach. It's really front loaded for '22 and '23. Performance-based remuneration is going to be enhanced also, which is going to be increasing a little bit the cost per FTE below this commercial target that have to be delivered. Motivating our employees, a very big part of the story. G&A. Now really, there is no kind of mega solution to G&A. It's really about discipline and understanding each and every line of cost and how it's generating and driven, right? The database that we use to cost control, right now G&A has more than 1,000 lines of cost drivers that we look at every day thinking about does that euro deliver 4% to our shareholders? And if it doesn't pass the mark, it doesn't -- then it's cut, and that's hard. That's the way that we're addressing and we've been addressing over the last year kind of G&A. And it's what will drive a very healthy drop of the general admin cost already as of 2022. Eventually, the aspirations will drop to the EUR 250 million area. And as I said, the speed with which this will happen is crucial. We are aspiring for faster than what we're selling right now. So we're having kind of internal targets, hopefully, to be able to front load that accumulation of the G&A. And the projects that are running right now should be delivering a good part of that reduction over the next 2 years. Cost of risk and NPEs, let's start with NPEs. We currently have an NPE base of around EUR 4.9 billion. That's at 12.5% that we have also reported in the Q4 result. The NPE plan has been kind of completed and also kind of both within the plan and submitted to the authorities to drop to the EUR 1 billion area in 2024. The 2 key elements of the question is the net formation of 2022. So that minus EUR 200 million, what does that assume? That assumes around somewhere between EUR 500 million and EUR 600 million of inflows this year. Right now, how that will evolve given what we see, we also have [indiscernible] talk about, but it's a big part of that target, right, making sure that the inflows are contained to the budgeted numbers. Outflows, pretty much with such a contained book. Given the history, it's a very contained book that we understand now pretty well to the low level, I'd say. We know where the outlets are going to come from. Managing the inflows and new NPL generation is the target and is kind of the challenge for this year, given the environment that we're in. We are going to be doing about EUR 1 billion of sales. These are 2 trades, Sunrise fee, around EUR 600 million, and Solar, which is kind of the joint bank, the joint [ co-bank ] sort of initiative on SME NPEs. Both of these are going to be recognized this year for about EUR 1 billion drop. Defending the EUR 200 million net organic outflow is kind of the story to achieve a single-digit ratio sometime within the year. And then continue with a very kind of aggressive net flow of EUR 1.1 billion next year to get to the 5% mark, right? Not so sensitive to the cost of risk, I'd say, because this is a book that has been kind of provided for what it needs. But from an NPE nominal perspective, important that we achieve the organic performance for '22 and '23 to get to that kind of mid-single-digit NPE ratio by '23. Cost of risk. The assumption is that we're going to be hovering around -- we're currently running at 70 basis points. 74 was the actual result of '21 as we saw before. This is pretty much some mark for the coming years. We are assuming 1% cost of risk sale for '22, which is kind of be a spike versus what the run rate is delivering. Even Q1 is kind of lower than this. But we have take into account the environment that we're in and what this could bring as a headwind, what we're seeing it to be a temporary headwind within '22. But eventually, cost of risk would say -- tick, and that's why, if you remember at the beginning, in the ROE waterfall, a small contribution in terms of the profit increase expectation. Understanding a little bit the EUR 4.9 billion. So what is it, right? Why is it provided the way that it is? How is that going to be providing the outflows that we talked about? And a little bit probably focused on the right part of the page. We -- EUR 4.9 billion -- well, EUR 0.9 billion of that, around EUR 1 billion is going to go away with the 2 deals that we talked about before. The other EUR 4 billion, EUR 400 million of that is government-guaranteed loans that the government is going to be paying back in cash when all the due processes is kind of completed. We have 2 large corporate tickets that we monitor kind of and we have -- that we monitor very intensively. And they're probably going to be worked out sometime in '23. So they are part of the outflow challenges that we're talking about before. The announced loans, some of that is going to be executed over the coming years, some of them not. But it's something that we're comfortable with given that with the current real estate prices, we're already kind of fully covered on that given the collateral advises we've got. And a very big part, EUR 1.9 billion of UTPs, of which EUR 1.3 billion is actually fully paying. So it's about lifting that EBA classification of Stage 3 and achieving the cures in '23 that will deliver the outflow I talked about before. So these are loans that would never sell, right? These are loans that actually are going to be creating a net NPEs -- a net PE inflow and will allow us to achieve that EUR 35 billion, EUR 36 billion of PEs over the next 4 years. Capital. As we've said, 16% is kind of the mark that we're going to be running at and especially as we navigate through the last part of the IFRS 9 phasing on the 1st of January 2023. The fully loaded dose CET1 is going to be increasing. So 10% is kind of the mark for this year. We're already at 10% right now. So between organic capital generation, synthetic securitization are coming our way, minus the derisking charge and other restructuring costs that we're going to be taking, we're going to stay somewhere above the 10% mark for this year. And then a point per year is approximately EUR 300 million organic capital generation at the coming years are going to be showing. And then MREL, of course, the assumption in the plan and in NII is that the issuances that the plan needs to deliver against the kind of linear conversion to the MREL target are done as planned. The assumption is that P2R is going to stay steady at 3% throughout. And despite the derisking and the improvement in the profitability profile of the bank, there's still the assumption that we're there and we could see a further accumulation of the P2R over the coming years as the risk being complete. We saw 25 points in 2021. We'll see what happens in '22 and '23. Dividends. As it has been said, as of '24, subject to achieving the performance measurement that we talked about. Both returns and capital positions being, in fact, should lead to a dividend distribution in '24. Overall P&L, we went through all the numbers. No need, I think, to go through them all again. In the end, it's EUR 700 million profit story, gradually growing from the EUR 200 million that we're at today, 6% return this year; 12%, '25. So from 6% to 8% to 10% to 12%, a 2% point growth of the return promise with the kind of health and mix between NII, fees and costs that we talked about before. Now sensitivities. We have run some sensitivities to and we've tried to simulate a little bit what's going to happen. And number one, I'd say, is kind of the most difficult one for one to estimate. We have looked at our retail broadband, try to think about what will inflation create and what will it cost to the disposable income, what will be the second order effect on the NPEs. Looking at the profile of the borrowers, assuming they're to shave off 20% of the disposable income, would they still be able to service their loans? Assumption is right now, it's a model-based approach, that we could have an extra inflow of around EUR 150 million of NPEs if that were to happen, right? That's kind of the model base that we can disclose there. Of course, nobody has a crystal ball. It really depends also on the structure of inflation, where will it come from. How will -- what will be the response and what will be the support, the government measures that will come to counter that to which parts of the society and so on. But we are kind of monitoring this and trying to model out because both in terms of cost of risk, but more importantly, in terms of NPEs, it's a very important part of the story, as we said before, controlling the NPE inflows of the year. Euribor. Well, we have said that the hike that we have assumed is EUR 70 million. So naturally, if that hike were not to happen, so not to go from the minus 50-something basis points that were accumulated this year or if we were to stay at where we are today, that's a EUR 70 million drop, right? So last year, we mean EUR 70 million reduction from the return promise that we had before. More importantly, though, from that flat line, how does one build up expectation and assumption? We also said it in the Q4 result, 50 points, EUR 60 million; 100 points is EUR 160 million. And then one can make assumptions about what would a bigger hike due to the cost of liabilities and the cost of risk. You start to get into that area where it's no longer just about the upside, but some of that could be shaven off by liability cost and cost of risk. Right now, that's not what we're seeing. 100 basis point is kind of comfortable kind of area that people are navigating within. This is what our sensitivity looks like. And in terms of sovereign yields, as I said, we are investors in the amortized cost book. But our OCI book is very, very limited. We're running a [indiscernible] that's in the EUR 300,000 range. So 100 bps, plus or minus, is a EUR 25 million impact over the full year period. The assumption is that the bond levels stay where they are right now. So the bigger part of our book is with government bonds, you understand. So what's the assumption? The assumption is that we're going to stay at the levels that we're right now, around 250 bps on a 10 year. I think today was 260-something. The forecasts are talking for that level despite an investment-grade achievement that the republic will achieve over the next sort of quarters. The assumption is that this is going to stay. And then this is -- it is what it is going forward. I'd pass it back to Christos for business opportunity and then we're going to talk about also ESG.

I want to go into a bit more detail into how are we going to capture the business opportunity between now and 2025. And our focus is going to be to build on our key strengths and our leadership position, and I will talk a little bit about our leadership position. It's the first time that we show as Piraeus Bank these numbers, so that all of you understand where we're coming from both in corporate as well as retail. How are we going to diversify further our product offering, and we are talking about the asset management, the real estate. We're talking about the digital. It's going to be an important part of how we're going to capture market dynamics and how are we going to commit to sustainability in a tangible manner with results and KPIs, which is what matters. And I'm going to show you for the first time what we call as the commercial banking leadership of Piraeus so that is understood because it's significant. At the top of the pyramid, we serve about 2,000 large corporate clients that include shipping, EUR 13 billion of gross loans, average loan per client with a 15% RaRoC. It's a very good number, which is recurring, and on the basis of the '21 clean book that we expect to continue in '22, '23 and beyond. And given how we underwrite now from now on credit risk, we expect that this number, this RaRoC will increase. The SME, a significant part of our offering and a very strong one, 9,000 clients, EUR 5 billion of balances and a 22% return -- risk-adjusted return on capital. So a very good number, which, again, we will be disciplined and focused to increase further. And the SB segment, which is about 500,000 small businesses all around Greece is again with a RaRoC which is 15%, which we will be aiming to achieve. But at least, it's a good start for the years to come. Now this is what we call the commercial leadership in commercial banking in Greece because these are impressive numbers, which gives us the opportunity to build the backbone of the growth to come. And where is this growth going to come from? We're going to be focusing and we're going to be disciplined, as I said, to get the returns that we want. But I give you here what happened in 2021. The 3 best sectors in our book, industry is manufacturing, hospitality and energy with the respective RaRoC, which you see there. And the total RaRoC for CIB, which is corporate and investment banking, which is 17%. We are quite focused in new loan production. And we give numbers for RRF and other schemes, again, for the first time and also the priority sectors and the other sectors. And we're going to be focused because every underwriting that we do, every credit underwriting, we'll be abiding by those rules that we set ourselves. And looking ahead and looking forward, we expect that this average number of RaRoC for the whole book will increase, given also the focus in the 3 main areas that we will be focusing: hospitality, which is big in Greece, and it's going to become even bigger; manufacturing, which was the positive surprise and continues to be so even as we speak; and energy, where Greece traditionally, because of renewables, has been strong, but will show -- will grow even further given the various things that are happening around the world and in Europe on the energy side and in the renewable space. So pretty solid numbers that give us very big confidence that we will be in a position to achieve for the whole plan. Now let's see the retail. I have been saying many times that I do believe and I say it having been CEO in 2 Greek banks for the last few years that the retail branch network of Piraeus Bank is very efficient, very focused in delivering results, retail network. And this has been proven by the numbers that we saw here. We have 150,000 clients, the affluent clients with EUR 16.5 billion of deposits and about 130,000 deposits per client that they produce right now a RaRoC more than 40%. This is going to be the big part that we will be focusing on for our asset management expansion, for synergies that will come up with all the work that we are doing there, taking advantage also between off-line and private banking of the new offerings that will be unfolding in the next few years, which we described in this book. The agri population, 700,000 clients, individual clients, traditional stronghold of the bank, not many balances, but still an impressive 25% RaRoC for agri. And the mass retail, where we see the numbers, I talked to you about how we're going to be actually lowering our cost to serve in the mass through also our digital offering in order to be able to deliver the right numbers there and deliver on the results overall, increasing the overall RaRoC of the whole retail significantly. And now let me talk about the big opportunity that I see in Greece for the next few years, which is the asset management business. We have some data here about the mutual fund market, lower assets under management as a percent of GDP than Central and Southeastern Europe. And we're talking about Italy, Portugal and Spain, comparing to Greece. And I don't even include the U.K. or other Europe where the numbers are even much higher. So there is a gap there, which has been there for years. And there is an opportunity, I believe, which is significant. This is being captured by the effort that we did ourselves and our systemic peers in a way in 2021 to increase our assets under management for the whole sector. And you saw from EUR 8 billion, it went up to EUR 11 million. EUR 1 billion plus of this EUR 11 billion was from Piraeus Bank. And we managed to increase our assets under management, on the right-hand side, significantly. And our aim just for the mutual fund business, is to go from EUR 3.4 billion in 2021 to more than double that in EUR 9 billion in 2025, taking advantage of the affluent segment, the private banking segment and the retail segment that I was talking to you before, converting retail deposits into asset management. Net fee income, we are able to increase it significantly, double that in a 1.5 years, 2 years. And we intend to even double it further from EUR 21 million as we speak to EUR 55 million. And of course, we are aiming to achieve a market share. We are now at about 19% with our EUR 6 billion assets under management. We're aiming to go from 19% to 25% with all the effort that we will be increasing in -- doing in increasing our numbers. And this asset management effort is going to be a key pillar of our fees and commissions numbers as they will come from '22 to '25. Now we are announcing today the creation of a new asset management division under me, which will include the mutual funds, the brokerage operation which is a very successful #1 broker in Greece with 20% market share and EUR 17 million, EUR 18 million of fees and the private banking. We'll put it together for the first time. And we expect to have significant synergies coming out of this combination in order to increase our assets under management significantly. On top of our EUR 6 billion, we announced yesterday the acquisition of Iolcus Investment, an alternative investment and asset management platform, which is basically wealth based, and adds about EUR 1 billion in our numbers. So we kick off with about EUR 7 billion as we speak. And we aim to be where we aim to be for the numbers, the 25% market share that I talked to you before. I feel very strong about this opportunity in Greece, given the market dynamics and given the underpenetration of the asset management product, but also the good work that we have done up to now in capturing this opportunity. And we are targeting to double our assets by 2025 under management with the respective fee impact. Now together with asset management, big focus on bancassurance. It has been a success story for us. Some of our esteemed colleagues in Europe are telling us that our model has been one of the most successful model, not only just in Greece, but in Europe. As you know, we are working together with partners on ERGO and Munich Re on the PMC and then on the life. And we have been able to achieve premier net commissions and actually income for the bancassurance, which are significant. Right now, we're running at about EUR 40 million a year plus from this segment from both P&C and then it's another underpenetrated segment for Greece generally, which I expect it to grow significantly and we want to capture as much as we can out of this growth that is about to come. So from EUR 44 million commissions that we actually receive right now. We aim to be at EUR 53 million, and hopefully, higher if the numbers work for us, which is supported by a bancassurance penetration from 16% of the market. We are one of the leaders, if not the leader, to 23% in the years to come. And that's where, again, we see another big area of focus and opportunity. I'll go through quickly, Theo, the real estate. You talked about it very elaborately. But again, the new real estate opportunity for us is that the Trastor acquisition and the talent and management capacity that Trastor introduced into the bank is going to give us a much, much more efficient and better way to manage our real estate. We are doing there the various rejiggings that you all know and we have announced, so we will be reducing the REOs. We'll be deleveraging through the Terra project. The entity, the Trastor entity, we intend to have it grow. And therefore, we end up with real estate assets that are increasing -- increase by 50% or more in terms of our fee offering. And we're going to be introducing a lot more savings in our real estate platform through the Attika headquarter campus that we have announced that we intend to use and relocate by end of '25. So again, asset management, real estate, these are 2 of the pillars and efficient use of real estate and capturing fees out of this and return on net asset value as the 2 of the 3 pillars of the growth to come and capturing the business opportunities. And now we are looking and we have been working on for some time now on a new digital bank, a BankTech, we call it to, as I said before, address retail clients, actually use the millennial segment, the younger generation, people that are savvy in technology, but they don't use -- and they don't use the branches that much. In order to use a new Piraeus Bank offering, a new offering which is going to be based on consumer, is going to be using buy now pay later as a product, is going to be using banking-as-a-service where we have seen some very successful institutions, 1 or 2 here -- 1 here in the U.K. as well using it very successfully in creating fees and capturing the opportunity. We'll be focusing on consumer financial products in terms of planning, expense monitoring and credit users. We'll improve the cost to serve, and that is also for the bank itself. But this offering, when in its full capacity, we'll be having the opportunity to have also those Piraeus Bank clients instead of paying EUR 40, EUR 50 per pop in order to get advertising monies in order to get clients into the platform and capturing the biggest -- the business opportunity will come not only for Piraeus Bank itself through reduction of cost and lowering the cost to serve in that segment, but also through the platform that we are talking about, the new digital bank. So we estimate, and these numbers are not included in our plan, but we have been working on quite vigorously for the last few months on this. We estimate that there will be a relief from our current branch client load, which could look at something like 25% of the cost. We estimate that we could build -- bring EUR 50 million of extra revenues just from those 2 products, BNPL and banking-as-a-service by 2025. And the total investment needed, which is going to be in phases and is very reasonable, we estimate EUR 40 million. And it's not going to happen day 1, but over time over the next 2 years. And what are we aiming to do? So we are announcing a strategic joint venture with Natech. Natech is a very experienced and innovative digital provider. It's Greek based. It came out of the Greek technology ecosystem, 2 universities that are extremely successful, Patras and Ioannina, is based in Ioannina but with European presence and have been selling their product in markets and banks in Greece as well as in Europe. So we'll enter into this joint venture with Natech. They will provide the technology angle. We will provide the banking. Athanasios Navrozoglou, the CEO of Natech, is here with us. Athanasios, welcome to the Piraeus family. And of course, you can see him over lunch and you can talk to him if you have any questions. We're talking about a system that is cloud based, operates on the Microsoft Azure system. And it's a digital provider to many institutions, which we will be -- actually doing it together in order to be catering for our customer base. B2B, B2C and multiproduct is going to be the product offering, digital onboarding, the banking-as-a-service, the buy now pay later, consumer finance products that we'll be focusing on the millennials and generation Z population in Greece. And we expect that this will have a significant impact, as I said, on reducing the cost to serve in this mass segment, which we have been stratifying. We know that it needs improvement. And this is what why we're launching this initiative because we believe we will receive also in the bank significant improvements also from this initiative as well. That's why we are planning to contribute 1 million customers. We're planning to actually, as I said, create backbone for this operation to be successful. And I must say we don't have Greek ambitions. Here, we have European ambitions. This is an exportable model. It has happened before. Other things have -- other people have done it. We believe we can do it better and we can do it efficiently. We're going to start with Greece, and then Europe is going to be our area of focus. I feel very strong about this initiative. And I'm very happy to have Natech as a partner in this exercise. And I'm looking forward to deliver. And I'm very focused to deliver this in what we said it's going to be, hopefully, 12, maybe a little bit more in terms of actual months to be up and running and have a product delivered. This outfit will get a license from the Bank of Greece, that's the plan, independent license, and is going to be majority-owned by Piraeus Bank. Now ESG. I wanted to ask Chryssanthi Berbati, who's managing our ESG team, to go through the pages. And then I close and then we open for Q&A.

I will just be very brief. In the past couple of quarters, we stepped up significantly the ESG disclosure. This is not only because this is a norm now for European banks, but it is because we feel very confident about the work we have done in the past 2, 3 years. For us, even though it's very trendy and everybody discusses ESG, it's been the work we have done since 2010, '11, especially in the E part of ESG. And at the same time, it's a very important business opportunity given that the vast majority of our clients will have to do the green transition in the years to come. The first area of focus for us has to do with our own footprint. And in the past 2, 3 quarterly disclosures, we have given the market our Scope 1 and 2 and 3 emissions with targets. We are very happy to report that the first target we introduced last year has been met, CEO discussed in the introduction, was Scope 2, to be net zero. We had this target for '21 and we achieved. So all the electricity consumption is now covered by renewable energy sources. And this is the target also for the years to come. The second target that we have discussed in public has to do with Scope 1. We want to reduce this by 50% by 2030. So this is now the road we are following to fulfill this target as well. This commitment and this passion we have for ESG is, I would say, confirmed by the number of initiatives and organizations for agreements we have pledged to follow and we are entering, hopefully, as of this year. So this year, we will go for entry to SBTI, science-based target initiative. We have chosen 9 asset classes to commit to by 2030. Along with Q1 results in May, we will be providing all this information to the market and we will be hopefully the first Greek bank and maybe the fourth Greek company to enter SBTI this year. And then for carbon-intensive sectors, we will be pledging to CCCA, Collective Commitment to Climate Action, also this year. And then for next year, we want to upscale from CCCA to Net-Zero Banking Alliance. Quite a tough target, but the team and with CEO sponsorship, the whole Executive Committee are very focused and we will pursue this target as well. This slide has in brief an illustration of the way we are now measuring, I would say, the elephant in the room for any bank right now in terms of ESG, the financed emissions. So the emissions our borrowers are produced for the system. This is Scope 3 Category 15. We are now doing work to map everything that has to do with our corporate portfolio, first, given that in the SME space, this is a bit tougher and we need to do work based on models instead of taking customer by customer all the data. In this slide, we discussed EUR 6.5 billion of borrowers, business loans. This is practically the 20, 22 most carbon-intensive sectors. And out of this, we have taken the 15 top counterparties. And in this space, we have measured based on average intensity of CO2, their financed emission. This is the 5.1% you see, for instance, in water transport, multiplying exposure by intensity. All this leads to 10.611 megatons of CO2. To give you a sense, this is something like 15% to 20% of the financed emission of the Greek economy right now through Piraeus Bank and its business banking clientele. So we will be discussing more and more about its efforts in every quarterly disclosure, and we will give you the steps of our journey of our road map. Last but not least, the work we have been doing with regards to society, diversity and inclusion and the culture in the bank has been very strong, very powerful in the past, I would say, 2, 3 years. I can give you numerous examples, but I won't. We have put with the team all the just for reference, as example. I will only discuss an example and maybe you are familiar with. We had last summer very devastating wildfires in Greece, and the bank was among the institutions that are actively supporting in a sustainable manner, I mean, for instance, supporting university students or pupils in continuing their study. And apart from this effort, a very big pillar of our world, all that has to do with gender equality in the marketplace and in the workplace. Very recently, we launched a very successful envelope of actions for women to get back to work, to be empowered, to be upskilled. Last but not least, you see here in the third pillar, we discussed for the first time our target about percentage of women in upper management position. And along with the business plan targets, we will be giving you more and more ESG KPIs so that we can track our progress quarter-after-quarter. Now we discussed increase of women in top management positions to 35% from the current 32%. And then lowering the gender pay gap by 1 percentage point by '25. All these, along with the key ESG target that CEO mentioned in the introduction, the EUR 9 billion envelope, that is practically our whole social impact, meaning financing, debt issuance and asset management envelope, will be the KPIs that you will see from Piraeus. And quarter-after-quarter, you will be able to see our progress. So back to CEO.

Thank you, Chryssanthi. Now finishing off the 6 key areas that we will be focused, that will help us deliver what we promised in our results. Targeted growth, we explained how we intend to grow and how we're going to be using the necessary metrics and tools to achieve this profitable growth, profitable credit expansion, but also lead in the recovery and resilience fund absorption. We aim to be a cost champion and converge not only with the Greek best-in-class, but also in Europe in achieving our full-time employees and G&A numbers and increasing our profitability. We aim to increase our client experience. And we're going to be leaner, faster in client service, in innovating for our clients and then delivering results. We aim to return money to shareholders. We want to reward our shareholders with returns above cost of capital. We have a clear path that leads us there. And we really are focused and commitment for all this work that we have done in this bank. Now is the time to deliver. We have been working very hard the last 5 years to restructure this bank and be able in a position to say that we are really elevating this as our #1 priority, being able to reward shareholders for their patience and for being there with us for so many years. We want to reward our people, the talent that we have in the bank, and we have a lot. And we'll try to do it in the best possible way as things are normalizing in Greece, and hopefully, we'll be able to take also that performance-related remuneration into a mainstream tool for a bank in Greece. And we want to do all of this, being agile, focusing on risks and actually using a business model that delivers on results. And what the results are going to be? We will be delivering return on tangible book value 12% by 2025. And we will be focused to achieve that. We will be delivering NPEs at 3% by 2025. And again, we have all the tools and the ability to deliver. We are aiming to be around 16% and 17% with capital. Organic capital generation will kick in, in this bank. And this is going to be very important and we are aspiring to be able also to pay dividends in this bank by 2024. And with that, I'd like to open up the floor for the Q&A. And I'm very happy that we're able to go through this and very happy to answer any questions. Thank you.

I'm Mehmet Sevim from JPMorgan. I will have one question on the current geopolitical fallout and how this impacted your assumptions. I do understand you assume lower growth in terms of GDP and higher inflation. Is the only transmission channel the higher cost of risk in your guidance for this year? Or have you changed anything else?

I'll talk about the general picture, and then Theo will talk about the numbers. Now we have been, of course, like everyone else, trying to assess the current situation. And we have tried to be as conservative as possible, taking into account the situation where Greece is, which is a little bit favorable in terms of some of the metrics. So there's no big exposure in Russia and Ukraine coming out of these countries for Greece generally. Even the tourism sector, which plays a very important role in actually delivering this growth number that we are projecting, even the upgraded number, we understand and we have done very analytical work with a lot of our clients, which are capturing 90% of the hospitality sector in Greece is not going to be affected. And this is a key metric in us being confident to say that the GDP growth is still going to be there for Greece. IMF came with a 3.5%, which I thought it was, given always IMF's conservative estimates, was a good number, taking into account all these things. And generally, we don't see that for Greece, in particular, unless this is going to be prolonged for a very long time and, of course, something that you cannot think about right now is not going to have more effect than what we have been able to observe in our portfolio in the way this will affect the disposable income of our client base or generally big moves. The biggest effect comes from energy and oil and gas prices. If you see the differential between those numbers and steady -- the other inflation is extremely steady as we speak. So you would expect that when things normalize, things will be a lot more manageable. The 7% inflation, which is baked in into our model, we think it's conservative enough. And all the effects that come out of that is conservative enough to capture this trend. Theo?

So loan growth, one assumption, I would say, the least important one of the story because this is primarily driven by our RaRoC-focused approach, right? So if you think about the priority sectors that we talked about, that we wanted to be 50% of the story, last year, we're at 35% of the story. So it's really a shift towards focusing on particular sectors. There is a little bit of conservatives I must say, when it comes to kind of GDP and loan growth. But that's not -- I would say that's the last effect that we're thinking about. Definitely, cost of risk, you saw that kind of the 30 bp hike that we're assuming for '22, various things that could affect it. But the extra inflows are part of that. I would say the one number that is not and cannot be educated 100% given the current situation is the NPE inflows that I talked about before, right? And that's not there, right? The cost of risk is, NPEs, no. We have baked in a EUR 10 million headwind on G&A from inflation, which we have then gone back and thought about how to still mid-target and still mid-guidance and budget for this year. So inflation on the cost base is there. And then, of course, we have and we are doing in the whole capital trajectory the prudential deduction for the entire net position in our Ukraine subsidiary, right? So it's cost, it's the first order effect assumption throughout the period, like a full induction of the net position, a tad on the loan growth and a bump on the cost of risk.

EUR 20 million, we discussed, plus EUR 10 million real estate assets, EUR 10 million interbank.

Yes. So we have a EUR 30 million exposure in the subsidiary as equity and money market lenders. And there's another EUR 10 million real estate assets that are held separately to other vehicles in Ukraine. That whole net exposure is going to deduct from capital potentially. The accounting treatments can stand as a separate story.

Great. And my second question is on your guidance. When I look at the numbers, obviously, you're presenting some very ambitious targets. And you've delivered remarkably in areas that you self-control. But when we look at, for example, the NII, it does look a bit softer than what you were expecting last year. So EUR 1.1 billion for 2024. I think the number was EUR 1.3 billion. What is driving that difference? And would you say this is now the level that you feel sustainably comfortable with? And related to this, you presented some figures for RRF and resource. You mentioned that's the first time. I think it was Slide 33. The disbursement schedule looks a bit, again, I think, softer than the narrative in the market about RRF. And if you were to take the same numbers for the whole sector, it would look a bit lower than I think what many people assume. Can you please give some views on that?

On the NII, it is really a driver of the expansion of how that goes up, right? So it's -- the important thing on the NII is to think about there's no assumption there on a substantial Euribor hike, right, which a lot of people are baking in, right? So we don't have the 1% and the 70 basis points or any of that in there. But that does not explain the delta to our previous assumption. The delta to our previous assumption has to do with particularly the repayment profile, the liquidity sort of status of the market. And then -- and just by observing kind of 2021, we kind of figured out that the return promise mix needs to shift, and we need to accelerate on other parts of the P&L that are much more kind of in our control, right? If it's a stronger expense, for example, comes in retail, great, right? We're there to capture it. But our returns promise will no longer depend on stuff we can't control, right? If the liquidity profile of the market stays where it is today and the repayments are as strong as what they are today, therefore, containing the expansion opportunity, we did not have to make and we don't want to make a mega promise of nominal numbers in NII, right? We want to -- we're sustaining the [ mega ] promise on returns from areas that we have more control and where we like, right? So we're kind of refining our focus to our asset management bancassurance and rental income, which are kind of fee drivers of the story and accelerating the cost reduction to get to a cost base below EUR 700 million, which in our previous guidance was actually EUR 800 million, right? So we're shaving off an extra EUR 100 million of cost. We're there to capture RaRoC-focused expansion where from a commercial perspective, we're covering all the segments. If it comes, it comes. If it doesn't come, the return from store holds. On RRF?

RRF, you have to -- the number that we have here is our own numbers. So you have to multiply that by 3 to come up with the envelope, the total investment number. Because it's, let's call it, 40% bank, 40% RRF money, 20% capital. So that's EUR 1 billion of, let's say, in our first -- where is the other, yes, it's EUR 1 billion, let's say, of a project -- for us in 2022 and then multiplied by the numbers. So -- but these are right now our best estimates, and we feel more comfortable, of course, about the '22. But the way we see this developing is these numbers. We may be more positively surprised on the other schemes because these have not been actually launched yet. We did a big presentation yesterday in Athens, which we had about 1,000 clients digitally participating. And we talked about the other schemes that are available for investment projects and working capital. But these include only the part of the RRF, which is our own, let's say, lending against all the RRF money and the capital of -- injection of the owner.

And the money only that the bank is financing, this part misses, I think, 26 also. So in total, it's approximately close to EUR 2 billion out of the EUR 6 billion that has been earmarked for banks to finance the part of your discussion. So you remember, RRF, EUR 31 billion. EUR 12 billion through financing of which some party earmarked through supernationals and the rest for banks about EUR 6 billion. So this corresponds to the EUR 6 billion financing.

The banks, not only the systemic banks, but also some smaller banks that exist in the Greek market, the cooperative banks and others. So the numbers tie in, in terms of the total envelope. A large part of the RRF and has already been launched, okay, already EUR 2 billion related to projects that the government itself is actually doing, especially in digitalization of the notary public, the digitalization of the judicial system and so on and so forth. So there's a lot of work there, which doesn't go through the banking channel.

Jonas Floriani from Axia. And I would like to start with the most subjective question. Chrys has mentioned in the -- during the presentation that this business plan is challenging but achievable. I was just wondering if you can go through areas that you feel that are more challenging from your perspective or less under your control and other areas that you feel that you're more comfortable about? I suspect that until recently asset quality and capital probably have dominated the discussion. But then as the bank is now shifting gears, how this has also changed from your perspective? Then my second question is on lending. And I think that -- I'm just wondering if the figures you show for repayments going forward until 2025 are on the conservative side. You're keeping that level around EUR 5 billion. So just wondering why is that? And what is the dynamic on the repayments given that the disbursements have been increasing quite well? And if the answer is that, yes, you are conservative about it, what would be a number that we would consider to be reasonable or normal in that environment? And then finally, just on your profitability targets. I think that the return on tangible numbers you gave, they are on a pretax basis, right? So how should we think about, even from a modeling point of view, about your tax rate and tax charges into the business plan period?

Thank you, Jonas, and thank you for being here with us. Look, obviously, I mean, one has to acknowledge that right now it's not a normal situation with all this is happening in Europe with the Russian invasion in Ukraine. And that, of course, influences not only your thinking but as well as your narrative and the way you should be looking at the future. Of course, the elements of this plan are -- we have been working on for this plan and the key pillars, the asset management, the real estate digital for quite some time. And thank god, these are areas where we think that are not going to be impacted by the headwinds. But the NII could possibly be, I mean, depending on impact, we estimate a lot will depend for Greece from the hospitality sector this year. If things go as per the impression that we have talked to all the main big operators, which could be as good a year as 2019, then we will be having a significant boost that will entertain the GDP growth numbers that we talk about and the IMF talks about. If that doesn't happen for whatever reason and the summer is still ahead of us, but I tell you, the very latest info is that months of June, July and August are almost fully booked to 2019 levels. Now the big operations are running at 60% bookings and so on. So that gives us confidence that, hopefully, this is not going to be a year wasted for Greece because the impact of hospitality, not only in the numbers but also in the sentiment, is very big. The net fee income, I feel more comfortable about. I think we put together -- we knew that we had to depart from our merchant-acquiring business and that's a good EUR 35 million worth of fees that we had to replace. That's why we moved quickly with the real estate and actually replaced a large chunk of it with the rental income that we will be showing from now on. But also, we had the positive wins from the asset management business, which I expect to continue. So the fee income, I would say, we are -- I'm cautiously optimistic that we can do better there than where we are. We try to be as conservative as possible for the trading and other income. And these numbers are within our reach given the portfolio that we have and the exposures, et cetera. The operating expenses, again, we're actually coming -- initially, we were thinking to be a bit more aggressive there given the trajectories. But we are cautious because of the headwinds coming from inflation, oil and gas prices, the effect that this will have in our electricity bill or in all the other bills that are coming through. So that's an area where we took some cautious rethinking of our numbers. But -- and hopefully, we're not going to be surprised negatively there. But this, again, is a challenge. And the impairment, I think we covered it quickly. We now -- we covered it well. We now have a very good grasp of our flows. And after so much work that we have done in the last years and also having a large part of our NPE portfolio not with us anymore, a very good grasp of our flows in terms of NPEs. And we wanted to be conservative by actually coming up with the biggest cost of risk number to actually cater for exactly that result. If we were to look at Q3, Q4 and, thank god, the first quarter of this year, we're looking good. But there are uncertainties coming from the well-known situation with Russia and Ukraine and the effect in the European landscape. So we believe it's a measured plan, took into account what we know up to now. Obviously, we do not -- we cannot foresee the future. We don't have a crystal ball. We feel we are conservative enough. But we are at numbers that I can stand out in front of you and say that we are in a position to deliver.

And tax repayments, we're plugging in for the next 4 years what we're seeing, right? We have seen a very liquid market, lots of access to liquidity, especially by kind of larger companies. We saw that in 2020, we saw kind of the end of it, then we started again in '21. Our kind of standard amortization on the book is between EUR 3.5 billion, EUR 3.7 billion, right? So that's kind of a do nothing, kind of everybody kind of sitting on their loans kind of thing, EUR 3.5 billion, EUR 3.7 billion. Are we going to be seeing the 5s for the next 4 years? Depends on the status of the economy, right? But we don't want to depend on the assumption that we won't, right? So we have to be as conservative, prudent or all the other words that we're using, I don't know. But what I know is that we can deliver 12% whether this happens or not, right? So that's that. Tax, we're converging to kind of the 29% tax rate. So you can -- by the way, these returns are after tax. So yes, yes. So what you saw in the P&L is actually tax reduction and the calculation happens on the net result basis, right? Yes, yes, so -- but the assumption is going forward that it's around EUR 200 million tax charge, right? The tax books are amortized at those levels, around EUR 200 million. It's what you're going to be seeing kind of a steady tax charge year-on-year.

It's Alex from Wood & Company. A clarification, if I may, on the dividend. I think you meant in the presentation, I saw it's 35% in 2025. That's your base case assumption you assume in the targets. Because is that from 2024 earnings or 2025 earnings? And I think, Christos, you mentioned also maybe you could target earlier as well. If you could clarify that. The second -- my second question is regarding interest rate hikes. Just a clarification again. I think you mentioned and that you assume in the targets a small increase. What is that exactly, the minus 50 becoming 0? Or if you could quantify this a bit? My third question is regarding the cost and the -- what assumption is regarding the cost for a VRS potentially in your business plan? And what is the years you are expecting these costs to endure? And maybe what you have already provisioned because you may have already taken some provision for that? And the fourth question, if I may. Regarding a bit the splits and how you envision the fees in 2025 and the split between real estate, asset management and commercial banking. How would you look that in 2024, '25 compared to what it is today as you expect, I guess, far more growth in asset management and real estate?

We're starting -- Alex, thanks for the question and for being here with us. Starting from the first question, whatever we say on dividends, of course, has to take into account the capital trajectory as it develops our numbers as they're going to be looking by the end of 2023. Most importantly, the dialogue with our regulators have been in a position to get approval on that one and from that dialogue. But our intention right now and the way we see the numbers and, of course, subject to what I just said and the capital trajectory and the ability to generate organic capital as we believe we will be and look at it as a number is very important. We are talking about dividends through '24 out of the full year '23 financial statements, which, of course, at that time is not going to be 35%, but it's going to be something like 20% or thereabout. The 35%, we are aiming to be able to do in 2025 at the back of '24 financials. And given that this is, as I said, subject to this capital trajectory being able to achieve that. We are now in a position to say that. We were not in a position to say that before. And of course, we will be in constant dialogue with our regulators in that regard.

Euribor, the simplest one, I guess, is the hike that you're seeing there from the minus 50 at the bottom line, minus 57 points to the 5 points in 2025. So it's a gradual kind of conversion. And as you see, the hike is more or less compensated by the reduction of spread. So the average yield stays the same, right? So we're not seeing -- we're not assuming a full bake-in of the hike into the yield. Actually, the spread goes down, the Euribor goes a little bit up. And as a result, we're staying at the 3.5, 3.6 level throughout. That's the assumption and then we talked about also the sensitivities before. On VES, the assumption is that the 89% of the EFT release is going to be happening over '22 and '23. The plan assumes around EUR 250 million of restructuring costs. This is baked into the capital projection of the bank. And as a result, as a result of the front-loading of this, most of this charge is going to be happening in '22 and '23. The plan has approximately EUR 100 million for '22 and then an equal amount for '22 (sic) [ '23 ]. There are the programs that we now have, have closed and there are no reserves on the balance sheet. So all those charges are going to be happening throughout the P&L of this year and the next. And I think there was a question on the mix of fees. Maybe Chryssanthi, you want to take that.

Yes. The mix of fees we have presented, you see that, I would say, the biggest contributor will be asset management. That is why we discussed all this strategy in the presentation. You see that it is almost double the 2021 contribution. By asset management within the whole pillar our CEO discussed so asset management, equity brokerage plus private banking. And then for rental, you see that we discussed something like EUR 60 million down the road from EUR 35 million coming from Piraeus only without a store that has been consolidated since early March this year. It's part of the group. Before, it was an associate. I would say that both of these areas, also I think Christos, our CEO, have discussed before, have sizable room for upside. But for this business plan now, we have given this indication. And to tell you also, I think, an important disclaimer, if you agree that all this plan is totally bottom up. So all the numbers from RRF figures to fees and from, I would say, a cost-cutting per area of business down to, I would say, a DNA that has to do with maintenance, all these have been plugged into the trajectories, bottom up through all the business units for the bank up until early March this year.

Just a very quick follow-up, if I may, sorry, on yield compression because I see in your business plan, you assume 3.5%, the yield on the base stock in 2022. So you think we have reached the floor in terms of spread compression overall in the Greek market in loans on the performing book?

Actually, no. I mean we're going to be -- it's the opposite, right? So we're dropping the average yield from 3.7%, 3.5% this year, right, despite the assumed kind of 10-point hike of the Euribor, right? That's -- actually, the biggest spread compression that we're assuming is for '22, then we think that it's still going to continue compressing, but we think with lower levels. It's the mix between Euribor and spread.

I have a couple and, frankly, maybe a bit more on the macro side. We saw you're focusing on the 3 segments: manufacturing, hospitality and energy. You did touch upon hospitality. But I'm more, frankly, more curious on manufacturing side, which we saw quite a bit of investments in '21 versus '20. If you could comment on that and give us maybe a bit more color on what drives your optimism? Is it just pent-up demand after all the years from the crisis or some structural things? That's my first one.

I would say the positive surprise for Greece over the last 2 years of 2021, not only as a contribution to the GDP but transactions that have been taking place and actually investments that have been happening. So we had significant investment in pharma transactions. We had, as we know, Partners Group are paying a significant amount of money, acquiring a pharma manufacturer, which is doing very well. It's an indication of the sentiment. We had also strategic buyers like Mondelez buying in Greek food manufacturing like Chipita. These guys are now refinancing their original financing and will play a role in this refinancing. We have the good old pipes sector, steel pipes, which has been doing quite well with especially exports in the U.S. And that was also part of our CapEx plans with Viohalco and some other similar kind of clients. We have the oil and gas business, which was doing well. So it is actually -- we were very happy when we saw the numbers even after when we are analyzing our numbers that manufacturing came on top in a country like Greece, which was not really kind of a thing for its manufacturing. Even in terms of our underwriting and lending, let's say, return that we were able to get this RaRoC at 24%. Hospitality. I did say energy is also a big part of Greece. And the energy transition to no matter what happens with oil and gas and coal, et cetera, it is a focused area for the Greek government to achieve the energy transition into renewables, solar and all wind, let's say, kind of energy model. And there, again, we have some very good returns. That's why we come up with these 3 areas as our focus for the year. But as I said, the manufacturing was a positive surprise. But it's underpinned not only about the CapEx projects that have happened, which we financed, but also about the transactions that have taken place before.

And on the second part, if we go back a bit to repayments. Are you -- I mean what made you change those assumptions? Was there something structural happening? And are you seeing maybe it slowing down given the volatility in the capital markets and potentially lower bond issuances from corporates?

The -- let's say, the logical thing to assume is exactly that. '21 was a bit of an aberration, I would say, because we had very benign capital markets. A lot of the big corporates were able to issue not only in the Greek bond market, but also internationally. This is now becoming tighter. However, we still see this happening in our book. So we wanted to be a touch more conservative. That's why we rejig their numbers, which are the same principles in a way, but having the wisdom of what has happened in '21. And that's what we try to do there in order to feel more secure, going back into Jonas' question, where are the areas where you feel that there may be a headwind. So the repayments, my view is that we haven't kind of got it yet in the sense we assume that it has to happen as you said, i.e., there shouldn't be more capital raising in the markets by bonds, et cetera. And therefore, we will have less repayment. But we want to see it before we capture it in our numbers. So we try to be conservative here.

And finally, on the asset quality front, maybe I missed it, the EUR 0.2 billion outflows, that does not include geopolitics impact. Is that correct?

That's correct. I mean the -- it's a net effect of about EUR 500 million to EUR 600 million inflows versus around EUR 800 million outflows. The outflows are kind of given and with or without kind of geopolitical concerns, we expect this to happen. The inflows is what -- let's not take this into account primarily on the retail side is maybe we're going to have some headwinds there on the back of disposable income effect. And as I said before, the 3 factors kind of the assumption that one is to make is this going to be a sustainable disposable income effect? Most likely, yes. How big that's going to be and what is going to be mitigated by government support is kind of the question that takes that in.

And that EUR 100 million to EUR 150 million presented under sensitivity, is that your guess at this point? Or is it just a sensitivity for you?

It's a sensitivity figure on the back of disposable income of [indiscernible] on the retail front, right? And it has whatever value model-based assumption this kind of curving point -- in this curve point one can have.

It's Dan from Autonomous. I just wondering if you could flip back that slide on NPEs. I just want to ask on that. So the EUR 500 million that you mentioned, if you could give some guidance on what you've seen so far this year of inflows? And then the 2023 is quite a big 1.1 assumed. Could you just talk a bit about that and what you kind of need to do to achieve that? And then finally, just on capital. I think for credit investors, there's a big focus on where your capital ratios will be at the end of 2022 and 2023 versus SREP. I'm just interested to hear what's in plan in terms of headroom to SREP? And why I guess I'm asking is how much of, I guess, wiggle room you have if capital takes a hit and AT1 coupons are at risk. So isn't the AT1 coupons a priority to avoid is my question.

AT1 coupons get, absolutely not. I don't know where you got that, but -- well, I assume where you got that. Let's talk about NPEs. So the -- your question was about Q1, how that model was towards the '22 results. Q1 is very, very solid. It very much looks like Q4 right now where we have something under EUR 100 million inflows, right? I mean we're still running the number of [indiscernible] but we're not seeing kind of the pickup. But of course, inflation yet has to kick into the disposable income, right? So this is kind of a headache probably for half 2 of this year. So Q1, no alert, only qualitative kind of worrying noises right now. '23, it's 2 things. Inflows are assumed to be static, more or less, maybe a little bit lower than the EUR 500 million that I assumed, EUR 550 million that are assumed for this year, a little bit south. But substantial outflows are assumed there on the back of the approximately EUR 2 billion of NPEs. I discussed between those 2 large corporate figures, have got their EUR 1.3 billion of zero [ DPV ] UTP, right? So the curings and the workout of these cases are the ones that are expected to provide the wave of outflows in '23 and deliver that minus 1.1. A lot of it under our control, I got to say, a tad Dependent to the macro performance of '22, especially in the touristic segment, right? Because we got kind of hotels -- in that 1.3, we got hotel operators that have been under moratoria and they're now taking a bit longer to kind of exit. So a strong summer for them in '22, we'll enable curing in '23. So as we said before, the insight that we're getting from the touristic activity of this year helps us support with confidence this perspective. In terms of capital, we've got -- it's a 16% year-end and around 15.5% the year after that, right? That 1st of January 2023 is really kind of the low point, right? This is where you take the last part of the IFRS phase-in. You're probably going to lap somewhere below 15%. SREP levels, 14.25%, with the current P2R. So at any point in time, you are kind of around something under 200, around 150 points above SREP. At the low point of 1st of January '23 is where you're, I think, around 60 points, 65 points, that's your 1st of January number. You're probably never going to print that because by the end of March, you're building around 20, 25 points of organic capital, which is the run rate that we're seeing anyway. So I guess the question is, and that's why this is returns-based plan, is how our organic return's kind of building up. So it's on the back of organic profitability that one kind of needs to bake in on the capital question. And those of AT1 proof points are being assessed by the bank on its own FDA assessment every December and June. As we paid in December, we're going to pay in June, we're going to pay next year. The other thing to also keep into account that this plan and these capital buffers bakes in stuff that we want to be doing, right? So we've got EUR 100 million of restructuring costs, for example, that we're putting into the P&L and capital this year. Why? Because we want to front load kind of the cost reduction and accelerate our returns promise. If it ever became a capital question, there's always room to kind of wiggle that around, both in the MP cleanup, less so, let's say, in the MV cleanup, but definitely on the investments that one is making on the cost side.

That is the biggest, let's say, thing to say here, that we have the ability to control and the intention to pay. Are there any...

It's Simon Nellis from Citibank. I'm surprised I have a question actually. So these targets are kind of normalized recurring, right? So you still have some one-offs, I guess, the EUR 250 million of employee restructuring costs and then some NPE. Can you just run through over the next 2 years, what kind of loss budget you have for further NPE cleanup and any other one-offs that kind of aren't shown here? That'd be useful.

I mean we've got, for this year, was around EUR 250 million, if I remember correctly, of cleanup charges approximately on NPEs and EUR 100 million of restructuring costs on VES and then another EUR 100 million in '22. I don't think we have any runups on the NPE.

[indiscernible] acquiring in this year to be booked in Q1. This is it.

Yes. It's also a year -- so that's correct. That EUR 300 million was both kind of mid-March, you're going to see it in the results of Q1. It's going to settle out kind of a nominal return. And also this year benefits from some trading gains that we also included in the financial statements that we're also going to be seeing printed in Q1, something under EUR 300 million.

It's Osman from Ambrosia again. Just on the government loans, you mentioned the EUR 0.4 billion. Is there a set timing for that when you would receive it or?

It's not one thing. It's a mix of multiple vintages in various parts, right, and it depends a lot also on the judicial process. So there is kind of a bureaucracy that one has to go through for this, right? But it's also a part that drives down kind of the overall cash coverage that's why we have it out there signify that, that kind of 21% as well as the 36% of the large corporate ticket more than enough to work them out is kind of what drives the overall coverage, but no particular time.

Are there any other questions?

[indiscernible] density for the performing [indiscernible] generation is at 55%. As far as I recall, energy is broadly at 50%, so slightly below average. This is the metric. The DSG financing is mainly focusing on energy, renewable energy resources that are the EUR 4 billion we discussed.

If there are no other questions, I want to thank you. It was probably the most lengthy, let's say, presentation and investor discussion we had in the last few years. I want to thank you all for being patient and for being here with us, not only people here in this room, but also through the wires. One thing I want to close with is this bank in the last few years and this management team has been able to deliver under very adverse market and other conditions. And it was a very complex, very difficult plan, but we are very proud in being able to deliver. We think that this is what will happen with this plan as well. We are pretty much aware of the challenges ahead, but also the opportunities. And we sat down and strategically thought. And this is, I would say, at plan that caters for the next few years in capturing the growth that will come from the Greek market in a very profitable way from a bank that has been able to deliver on its promises. Thank you very much all. Thank you.

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