Piraeus Bank S.A. (TPEIR) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. I am Mina, your Chorus Call operator. Welcome, and thank you for joining the Piraeus Financial Holdings conference call and live webcast to present and discuss Piraeus Group's Full Year 2022 Financial Results. At this time, I would like to turn the conference over to Piraeus Financial Holdings' CEO, Mr. Christos Megalou. Mr. Megalou, you may now proceed.

Good afternoon, ladies and gentlemen, and welcome to today's conference call on our 2022 financial results. This is Christos Megalou, Chief Executive Officer, and I'm joined today by CFO, Theo Gnardellis; Chryss Berbati; and Xenofon Damalas. 2022 was another milestone year for Piraeus Bank. The bank holds the leading position in a number of areas in the Greek market, as shown on Slide 4, while also enjoying high client experience ratings. Over 2022, our group delivered strong financial results, beating targets and even most recent expectations. Guidance was revised twice within 2022, and the final KPIs outperformed estimates across all financial indicators. On Slide 5, we report the highlights of our 2022 performance. Piraeus generated normalized EPS of EUR 0.42, strengthened its capital position by 300 basis points, beating guidance and reaching 11.5% fully loaded CET ratio, produced return on tangible book value of 10% on a normalized basis, also exceeding guidance, recorded reduced operating costs by 5% on a recurring basis with G&As down 11%. In the following slides, we present the progress recorded in fundamentals. Starting from our capital base on Slides 8 and 9. Organic capital buildup picks up pace with 50 basis points increase in Q4 for sustainable business. At the end of 2022, Piraeus was at 16.4% fully loaded total capital ratio, comfortably above requirements, which stands at 14.25% and supervisory guidance. The group's performing loan book, as presented on Slide 10, exhibited dynamic growth trends increasing by EUR 2.7 billion in 2022. I need to highlight our efforts in RRF financing with EUR 900 million allocated to RRF projects across various sectors of the economy. Piraeus has successfully absorbed the first 2 tranches of RRF amounting to EUR 400 million, while the third tranche amounting to EUR 300 million is expected to be approved in the forthcoming period. Slides 12 to 15 download all the information regarding net interest income intrinsics from yields to pass-throughs and granularity of deposit accounts so as to understand the potential shifts among product categories. Furthermore, our cost containment efforts continued and abated in 2022 despite the inflationary challenges and resulted in yet another 5% year-on-year reduction in total operating expenses down to EUR 828 million as shown on Slide 16. Our NPE ratio dropped to 6.8% from 13% a year ago, driven by sustained negative formation. Slide 17 provides a summary of our asset quality indicators. Piraeus possesses a superior liquidity profile and this has been evidenced by the EUR 9 billion TLTRO repayment in December while keeping liquidity coverage ratio at above 200%. Slide 19 presents our 2023 guidance as already communicated to the market in late January. The bank is energized and focused to deliver on all areas of the business, and we believe that the current year would be another milestone for Piraeus. Finally, we feel proud to have been upgraded this month to A level rating in the MSCI ESG index driven by improvements in all angles of our ESG agenda. Additionally, Piraeus is the first bank in Greece to have its 2030 targets validated by the science-based targets initiative for the reduction of both operational and financed CO2 emissions. At the same time, we have been included in the Bloomberg Gender Equality Index for the second consecutive year. Both MSCI and Bloomberg distinctions come with top score for the Greek market. And with that, let's open the floor to take any questions you may have.

The first question is from the line of Iqbal Nida with Morgan Stanley.

I have 2 questions. So firstly, on NII, it grew strongly in the first quarter, and we saw about 60 bps in NIM expansion [indiscernible] feel like that the 2023 guidance is a bit conservative. So just wanted to get a sense of what are your expectations for the NIM expansion from the fourth quarter level? In terms of deposits, of course, there's not been a material shift towards term deposits increase yet. So what are your expectations on that as well? And mainly on the margin side, what are the risks that could materialize in terms of the margin expansion from here? My second question is on the asset quality side. It's clearly been very resilient so far, but we are in a higher rate environment. So which segments, i.e., corporate or households are you worried about, if at all?

Nida, I'll ask Theo Gnardellis, our CFO, to cover both of your questions.

So Nida, on your NII question, we had discussed how Q4 will be an NII peak quarter. We are monitoring closely 3 key numbers. One is the time deposit mix to the overall deposit book, the loan pass-through and the deposit pass-through. We're still seeing a lower deposit pass-through than what the guidance is based on. However, we expect this to pick up and some early signs for this are already in the market. The higher Euribor expectation than our guidance, I remind everyone that our guidance was based on a 2.5% DFR. Everything else static, mix static loan pass-through and deposit pass-through static, the sensitivity is about 20 basis points higher NIM for every 100 basis points higher DFR on an annualized basis. That said, we are looking again at the expected pass-throughs because higher Euribor levels would potentially mean also different pass-through expectations. For the time being, we are standing behind our guidance for net interest margin above 2%. And we would come back, I would say, later in the market, potentially also after some observations as to whether this will materially change. For the time being, above 2% NIM remains to be our guidance. In terms of asset quality, the budget and the guidance for the returns for this year has an increased cost of risk versus what we are now observing. We are now trending at about 80 basis points, and we are guiding for returns incorporating 120 basis points. That is indeed on the higher side. It is based on expected increased inflows. Nothing is being observed today. However, there are segments that are to be monitored. For sure, the mortgage book that also enjoys a very high pass-through is an area, and we're looking at actions there that would allow to defend potential inflows as well as, I would say, the more unsecured part of the book, not because of a pass-through because there things are quite static, but because of the overall inflation environment. So I would say it's mostly unsecured exposures, primarily within retail as well as the mortgage book that needs some attention.

The next question is from the line of Butkov Mikhail with Goldman Sachs.

I have a couple of questions first to relate to funding and liquidity and the last one on loan yields. So you have a relatively comfortable loan-to-deposit ratio of 62% in the fourth quarter, which screens below the average for the industry. Do you leverage this in your pricing strategy of term deposits? Or in other words, do you see a comfortable loan-to-deposit ratio as an incremental opportunity for lower pass-through on term deposit rates compared to industry? The other question is on TLTRO. So TLTRO funds are getting repaid across the industry. And do you think this can be a risk for the increased competition for funding on the industry level? And finally, on the loans, loan yields, do you see any episodes such that corporate reach out to you and ask for the potential downward renegotiation of loan yields? Do you see any such trends so far? And yes, that is it from my side.

Mikhail, of course, Piraeus Bank has a superior liquidity position, I would say, versus peers and overall in the market, not only because of the LDR of 62%, but because of the fact that it enjoys a very large and granular first demand deposit book. Almost 80% of our deposits are in first demand, and we have 50% in very granular kind of mass retail accounts. That in itself is a strategic advantage. Of course, we're seeing pass-throughs that are lower than expected still. And we're seeing a mix that is not moving, also not moving versus what we were expecting. It will move, but that is an opportunity. We are using also asset management propositions to promote yield looking depositors that are looking for the higher kind of returns. So overall, I would say the liquidity profile of the bank is certainly a strategic advantage. So we have the luxury, I would say, to balance between kind of overall book pollution versus satisfying the needs of particular customers. In terms of TLTRO repayment, definitely not for Piraeus Bank. And overall, I would say no. Even post full TLTRO repayment, the bank is substantially cash positive. So there's not going to be any funding competition, at least not driven from us. In terms of loan yields, it's an active management story, right. So the pass-through as we're disclosing is at 65%, there is a spread contraction going on. There is a proactive and reactive negotiation with larger and smaller corporate exposures. Overall, we were expecting that. We're expecting the moment we crossed into the 1-plus percent Euribor area. It's a healthy process that's going on. So far, the past-troughs, however, are exactly what we are expecting and in some segments better.

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

My first question is a follow-up question on the previous one, and that is on deposit beta and deposit costs. On Slide 13, you show the time deposit costs now at 92 basis points for the stock, and I think that's as of last week. And I think that looks quite high, maybe not from a deposit beta perspective, but more so from the perspective of us being quite early in the cycle. And also I think taking into account your very strong funding and deposit franchise. So could you please provide more color on where you're seeing the pressure from in particular? And how your repricing strategy looks like? Because it feels like you're already giving away quite a lot and whether this is in line with your initial expectations?

Mehmet, what you're seeing there, first of all, is the pass-through, as we're saying, is 34% for an overall end game of -- that includes it in the guidance of 50%. However, since you're looking at the nominal number and rightfully so, and this is a mix effect of euro and FX TDs. The FX TDs are now the dollar time deposit we've got of about EUR 2 billion are above 3% level. The actual euro rate of everything else is at below 0.6%, is at 0.56%. So you will see as the euro TD conversion that this delta will be going down because the FX rates are, I would say, have kind of plateaued. So this is very much in line to what we're expecting. We announced some new products and repricing last week. But what we are particularly focused on, I would say, is the mix rather than the nominal rate. Another thing to note is that the renewals that you're seeing there on that particular day and what has been going on in the past days are longer duration lockups. So the renewals that are happening, that are pushing up the TD yield within expectation are being locked for longer durations. So therefore, this will benefit, as you understand, as the Euribor increases, these TDs will have been locked at today's market level. So that's an additional benefit in the overall effort to maximize the NIM of the year.

And Mehmet, this is in line with our strategy from the beginning of the year, which also includes offering to the market asset management products as well. For example, we are right now in the market with a target maturity fund, which we see it has a very good take-up and absorbs a lot of pressure that may come from depositors for higher yields. So it's a multilateral strategy that so far is executed as per our initial strategic thinking.

That's very helpful. And my second question will be on your capital and your NPE cleanup from here. Your capital progression is very strong, of course, now 11.5% CET1. And I think if we take the trends into account, it wouldn't be surprising to see you beat your guidance again this year and maybe would be CET1, let's say, 13% by year end. In that case, would you consider being a little more aggressive in NPE cleanup from here and maybe do another NPE transaction to finally bring down the NPE ratio to, say, 3% and then fully close the gap with the European banks? Or maybe just in general, how do you balance the decision at the moment taking into account the CET1 progression and the NPEs from here?

Okay. Fair question. Indeed, depending on the evolution, I would say, of the net interest margin and the cost of risk, we could be looking at higher returns and eventually also looking at higher capital. As we said, the guidance stands for now, but I understand kind of your insinuation in the numbers make sense. The NPE cleanup was #1, I would say, priority so that we can normalize the cost of risk and land it to where we wanted to be to be able to promise sustainable results. We are at that level now. What matters primarily is shareholder value. So if we have -- we would not be burning capital to be accelerating by a few quarters, I would say, some NPE ratio numbers. Our #1 priority are returns, organic capital accretion and sustained indicators across all the lines. That said, we are now in the context of doing our revised business plan for '23, '25, including a new NPE plan. We are looking, I would say, at marginal pockets of NPE that we could get rid of kind of sooner balancing though at all times the organic capital generation and the profitability of the bank.

The next question is from the line of Boulougouris Alexandros with Wood & Co.

Congratulations on the numbers. A quick question on your loan yields. The PE yield you had mentioned in your recent presentation with a guidance and overage of 5% for 2023, it was already at 4.7% in the fourth quarter with the average Euribor at 1.8%, could that be a bit conservative given where we stand at the moment? And I understand the lending pressure that you mentioned earlier. That's my first question. And the second, a bit on cost of risk, you mentioned that as well before in a previous question. But I saw that you increased the GDP growth forecast to around 3.5% in 2023. Would you say that the 120 bps is the worst case scenario on your estimates?

Alex, whenever I hear a comment about the worst-case scenario, I do have a small smile, but -- sorry. So the PE yield, look, indeed, you're right, right. The 5%, remember, was based on a loan pass-through of 60% to 70% on the DFR that we had guided for with the same pass-through that we are looking at right now and the revised expectations of euro rate evolution, yes, it could be higher. However, again, what matters is net interest margin, the balanced effect between loan pass-through, TD mix and TD pass-through, so as to come to an end net interest margin. This is what will matter in the end, everything blended in for the NII. Guidance for above 2%, do nothing on the pass-throughs and the mix expectation, 20 basis points extra on the NIM for 100 basis points of Euribor. This is what I would say to stay with you guys. In terms of the cost of risk, I would say not only because of the GDP, which we were always guiding I think for this number. But also from the breakdown of the book and what we're seeing in the market right now after, I would say, the first steps in the Euribor evolution, there is upside to that number for sure. But we would not be reassessing it until we can see a couple of quarters. So we would come back, I would say, later in the year if we see an evolution. And after we do our H2 after Q2 results.

One follow-up as well on retail lending, disbursement, still agri payments, I would expect a similar trend in 2023, given the higher rate environment. Is that correct? When should we expect this cut to close? Would it be '24 maybe or?

It is correct, Alex. I mean our estimate for '23 is going to be same as of '22. We would expect an improvement in '24 for retail.

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

Congrats for the great detail of disclosure and the effort you guys put into that. I really appreciate that. Having said that, of course, everybody has questions. And on coming back to the NIM, maybe focusing a bit more on loan yields on a quarter-on-quarter bit. Given all the lags you go through for different segments, would it be fair to say we will see a slower yield expansion quarter-on-quarter? Or the way things are going in January and February, could we potentially see a similar expansion in yields? That's my first question.

Osman, even with the recent observations, the pass-through is still at 65%. So just take the Euribor evolution as it has been happening throughout the past 2 months. And if you apply 65% of the delta, you will kind of get to the numbers that we are. So 65% still stands even after the first months of Q1.

Understood. Okay. And then moving on to the cost side. The G&A performance, particularly, I thought was quite impressive. We did not see the seasonal pickup. Could you give us -- I mean, what drove that non-seasonal flattish performance?

It was a major effort on the admin cost that happened throughout 2022, with new practices and governance structure, I would say, within the bank. Also, what we did is we reviewed quite carefully the accrual methodologies in some of the cost lines. So as to be able to give a stable, I would say, evolution of the G&A, this is now, I would say, a thing that is fixed and is expected to continue. The G&A output was a result of multiple initiatives. It's not one thing. It's many small things that generate this result. And what makes for an even better is that articulation of the result is the fact that it encapsulates a quite heavy inflationary headwind. So this is net of that. This effort will continue. This stability in terms of the disclosure and the accrual is kind of the norm now for Piraeus. So you can expect a more steady disclosure of the admin cost.

Perfect. And then the final bit on my side, tangible equity seems to have increased Q-on-Q more than bottom line to the tune of EUR 50 million or so. Any color you can give us there? What drove that?

There was some evolution on the reserves other than the bottom line. So it's part of the OCI reserves evolution, fair value through OCI of some of the equity positions in particular, that created this delta.

The next question is from the line of David Daniel with Autonomous Research.

Just staying with cost and particularly on the staff costs, I think there's another -- there's more kind of one-offs coming through. Just interested if you can give a bit more background on what you're seeing in staff costs and whether we should think that there's more one-offs to come through with potentially inflationary pressures in 2023? The second one was a bit more broadly on loan growth. I think the numbers might have slowed in Q4. And I'm just interested to hear your views on how RRF is going and whether loan growth might slow down potentially next year or this year, I should say? And then finally, just a bit of information about what's happening with the Stage 2 balance would be good. I think it's dropped quarter-on-quarter. If you could just maybe comment on that, that would great.

David, let me cover the RRF question. Now we were -- from the very beginning, we were always a big proponent and a big player in the RRF product and a big supporter of that. And we have been in a position to close our first 2 tranches and working vigorously on the third one and then quickly in line for the fourth and fifth, we see pipeline across the sectors that are being financed by the RRF, renewables, digital and energy efficiency and so on. We are absolutely certain that this is going to be a major driver of loan growth for 2023. So the flow and the book is looking healthy. And this is going to be helping us in actually achieving the EUR 1.7 billion credit growth that we are guiding the market.

So to the question about costs and staff costs, we are on a steady pace of rightsizing the bank. So there will be restructuring costs. They're also included in the capital projection and the guidance that we gave late January. So there will be restructuring costs also in 2023. As far as recurring costs go, I would say that any headwinds in terms of adjustments that need to happen kind of union contracts, et cetera, are countered by this rightsizing effort that's going on. So overall, we're looking, I would say, at a steady staff cost profile going forward, which allows the cost to income to continue reducing on the back of an increasing denominator. To the Stage 2 evolution, yes, I mean the Stage 2 levels have been quite static and potentially improving in the future -- so far. In the future, it might be that we do see some Stage 2 inflation, which we will be doing as we are coming out with products and efforts to support borrowers that are facing difficulty with interest payments or inflationary effect. We don't expect this to create any credit losses, any provisions because the ECL coverage of Stage 2 is actually quite low given the models. But still, what matters most is the protection of the -- and the support of the borrowers over the coming year throughout this Euribor cycle.

So I see the Stage 2 dropped from like EUR 4.5 billion to EUR 3.8 billion in Q4. Was that part of the transaction? Or is there anything to be said for that movement?

Nothing particular, nothing one-off or inorganic. This was a pure organic evolution of the book.

Okay. And then sorry, finally, on the loan growth in Q4, the FX impact, is that a dollar exposure that's going to cause that to be negative, so I think it's EUR 200 million.

Yes. So overall, it had to do with the evolution of the euro-dollar rate primarily that dropped the euro balance, the euro IFRS balance of the exposures. It was the opposite effect from what we had seen in previous quarters, where it was actually increasing the euro balance.

The next question is from the line of Nellis Simon with Citibank.

Most of my questions have been asked, although have a few technical ones, mostly on cost of risk. So just on the 120 basis point risk cost guidance, that's for organic cost of risk, right? So the basis is the -- was it 78 basis points you booked in the fourth quarter, is that right?

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

And do you have any sense that excludes kind of the NPE inorganic? Did you have any line of sight on how much that might be this year?

Overall, between credit protection and service fees, the cost that is included in the 120 is about 40 basis points. So out of the 120, 40 basis points are kind of service and credit protection fees and the rest, I would say, is what we call underlying cost of risk that has to do with the actual loan book.

Yes. But I mean the -- so this quarter, you booked how much EUR 33 million, right, of cleanup and other adjustments, that's excluded from your kind of organic risk cost guidance. I'm just wondering if you have any visibility on that line item going forward.

So the inorganic you mean cost of risk kind of cleanup costs, that's happening in '23. So yes, we do have some tails of cleanup efforts that were done in previous years have to do with costs and kind of final payments that have to happen as the transactions we've already kind of signed and held for sale complete. These are included in the capital projections. It's in the vicinity of 30 to 50 basis points depending on how we complete those transactions.

Understood. And I see other impairment was quite high in the third and fourth quarter. Can you kind of unpack that? I think it was EUR 70 million for the full year? And what's the outlook for other impairment?

This is a line that always is a sum of multiple things. Again, guidance is kind of including what we would normally expect. This particular year, for example, we had some impairments on the real book, where we took a few tens of millions of P&L hit in terms of the assessment of the inventory book. On the other hand, the investment book was actually revalued at a different line higher. So there's multiple plus or minuses. There's no particular one-off here worth mentioning. It's kind of a situation that will be also evolving in 2023, part of the P&L guidance and the capital guidance.

I'm sorry, what were the nature of those provisions? I didn't quite catch that.

Well, we've got an inventory real estate book of something over EUR 1 billion. That's one part of the story, and there's multiple other smaller ones that every year, we do kind of a revaluation as per IFRS, the properties that show a gain in inventory book, you do not book, but the properties are so a loss, you have to actually mark down. As a result, there is a markdown in that number because of the IFRS classification.

Understood. And then just on the losses from the borrower support measures that you've agreed with the government, is that showing -- will that show up through the provision line? Or is that going to tell up somewhere else in costs? I think you pay the government, right? So is it kind of like where is that going to piece it in?

There is a EUR 3 million levy that we have booked in Q4. You will see it in the admin costs in the other category where you see an increase quarter-on-quarter by EUR 6 million. EUR 3 million of that is that interest levy.

Okay. So that's prefunded basically.

Yes. It's already booked in the...

Whole year.

Yes.

Okay. And my last one, do you expect any further gains from selling kind of renewable energy assets or are there similar transactions like we saw in the fourth quarter through the associates line?

I would say that in terms of overall the migration has been completed in terms of our kind of equity stakes in these lines. The book is quite rich. I would say we're now looking at how we can gain value from the stakes that we have in kind of gaining, I would say, economic value, not necessarily book or capital value within the year. We are primarily focused on that. There is nothing of one-off nature in the guidance and the returns expectation of 2023.

Okay. Actually, one last one because I saw your assets came down, I guess, that was expected because you're repaying LTRO. Do you expect further reduction in assets going forward? I think you have some further repayments? Or will assets kind of stay steady or even grow from here from this level?

It's kind of a static picture and a marginal growth as the TLTRO repayment of 2023 is going to be over balanced by credit and bond book expansion. So overall, we're looking at a static growing asset base. The major reduction happened with the major TLTRO repayment of this quarter.

The next question is from the line of Baraboi Violeta with Societe Generale.

It's going to be a quick one actually. It's going to be on funding. I'd love to understand a bit whether you're going to revisit the market in wholesale funding this year? And where, within the capital structure, are you thinking of issuing, if any?

Violeta, look, in terms of the capital structure, we have filled all the buffers and the one that we are looking possibly to be funding later in the year, let's say, Q3, Q4 is the single preferred line just to make sure we are in line with our MREL obligations. So we are talking about possibly a benchmark transaction of EUR 500 million or thereabout. With that, we will be okay in covering our obligations, but we will be monitoring market conditions and decide on size and timing as we go towards through the year. We are not in a hurry.

Understood. So I guess that would be in euro.

It's going to be in euro, yes.

And then sorry, second one, as I look at your bonds, just trying to understand a bit what's your position on Q2 call? How -- obviously, you cannot maybe comment a lot on it, and you have a Q2 upcoming for call in 2024. Maybe it's a bit too early to ask the question, but how do you think about following the bond or refinancing the bond? What's your position on that?

Violeta, obviously, it's too early to be asking or answering that question. It has to do with interest rate evolutions, market -- kind of market sentiment at the time, availability, et cetera, post June '24, the Tier 2 reprices and depending on the market appetite for Tier 2 at the time, the secondary market and the interest rate environment, we will make a decision later, I would say as to whether we're going to be calling the bond or not.

We have a follow-up question from the line of Memisoglu Osman with Ambrosia Capital.

Just 2 technical stuff on my side as well. On TLTRO, I remember there was a positive catch-up. Could you remind us just for on a Q-on-Q basis into Q1, what should we keep in mind that won't be there this time around? And also, tax expense, is this Q4 the trend we should expect through '23?

So on TLTRO, there was a catch-up of about EUR 19 million, if I remember correctly, which happened in Q4. This was netted off by the actual TLTRO cost after November 22. So overall, that's why you're seeing a kind of breakeven or 0 or close to 0 TLTRO cost in Q4, while actually given the interest rates, you should see a cost there using 0 because of this netting of the catch-up. There's nothing from now on to expect the TLTRO balances will be paying DFR as normal. The tax expense, well, the tax plans will eventually convert to 29% of IFRS pretax, so you might see it a little bit higher in the coming years. But overall, we are approximating the normalized levels. Let's all remember that the tax plans were taken through massive quakes because of the cleanup and the abrupt recognition of the tax losses of the NPE cleanup. So we're seeing some kind of disturbances between '21 and '22. But from now on, I think we are now in calmer waters. We will be able to be projecting and guiding for a more normalized tax situation.

Okay. So '23 will be closer to 29%.

Closely, yes.

The next question is a follow-up question from the line of Sevim Mehmet with JPMorgan.

I'm sorry if I missed this earlier. But looking at the breakdown of cost of risk, it seems you're reporting a significant decline in underlying cost of risk this quarter, but at the same time, a visible pickup in servicing costs. What was the reason behind this, please?

So there are, I would say, semi joined servicing costs were increased this quarter because of substantial cleanups and some the recognitions that happened from the portfolio as well as exceptional cures. All these efforts, this outflow efforts allowed us also to be releasing some of the provisions from the particular exposures as they were being cured or collected, thus coming to a lower underlying cost of risk for the quarter overall. What matters for us as we're projecting are the 80 basis points on an organic basis cumulatively, which compares to the EUR 120 million that we are including in our guidance.

The next question is from the line of Golub Iuliana with Goldman Sachs.

I was just wondering, given your issuance plans for EUR 400 million more this year, I'm just looking at your final MREL requirement, which would be, I think, 27.3% given the combined buffer requirement. That would leave you with about EUR 2 billion more in funding to do. So I was just wondering if you'd use any market strength this year to do more than one benchmark deal because it would leave you with quite a lot to do for 2024?

It will depend on market conditions, of course, there is a possibility also that this year, Hellenic Republic may be getting the investment grade and that will assist funding in the market for the banks as well. So we play it by year, Iuliana, and we see whether we will be kind of doing more. But that's the way we look at this part of the funding schedule right now. Theo?

So and let's also remember that the convergence to the final target for Greek banks goes throughout 2025 as well. So we have up until the end of '25 to be meeting the final target. And also the enhanced profitability and the CET1 accretion also contributes to meeting kind of interim guidance. So for the 2023 guidance, the one benchmark deal that our CEO mentioned is absolutely sufficient. But then, of course, we could be anticipating the convergence under the right conditions.

The next question is from the line of Nigro Alberto with Mediobanca.

Can you hear me now?

Yes, of course, you can go ahead.

Sorry, I was on mute. Just a few technical ones. On the takeover of MIG and Attica Group, can you tell us which will be the impact on P&L and which is the strategy behind this? And then on the bond portfolio, can you please give us an indication of the size that you can reach in future years beyond 2023?

Alberto, again, look, I mean, Piraeus Bank, as you all know, has been long involved directly and indirectly with Attica Holdings with MIG and is looking at these particular assets with a value creation opportunity in mind. We have been essentially given the potential upside of Attica and also in conjunction with the anticipated merger with ANEK decided to defend our position with MIG. This resulted in the mandatory tender offer that is in place right now. And we estimate that when this mandatory tender offer is completed and when everything will be finalized, the total cost for us for that particular chapter will be a few basis points in capital. And of course, we do all of this because we expect significant upside for the Attica, ANEK merger, the position that Attica has in the ferry market in Greece, which is 100% almost dependent on each year on the tourist decision. So that's why we are doing all of this and that's what we expect from this to happen. And Alberto, on the bond book, we are active buyers of bonds. We're looking at opportunities, obviously, very attractive rates from time to time. We're not talking about a massive expansion. It's an expansion budgeted of about EUR 1 billion throughout the year. We are looking at opportunities beyond, I would say, the local sovereign. But I would say the EUR 12 billion bond book that we have been able to accumulate now generates a healthy NII given our cost of funding, and we are holders to maturity of this.

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

Ladies and gentlemen, thank you all for participating in our 2022 results conference call. We were extremely pleased that we were in a position this year to come very early, informing the market of our year. And as a result, we will be kicking off an investor outreach program over the next few weeks. So we look forward to see you either in London or in New York or in Boston over the next few weeks. And looking forward to continue discussing with you our bank and the opportunity for the future. Have all a nice weekend. In Greece actually it is a festive long weekend. So please enjoy. Thank you all.