FY20 key achievements
o Held-for-sale (HFS) transfer of the Frontier portfolio pushes Group NPE ratio down to 13.6%1 from 29.3% in 3Q20, with CET1 ratio maintained at 15.7%, despite absorbing Frontier provisions, with capital upside of c110bps upon completion from RWA relief
o Agreement to sell a 90% stake in Ethniki Insurance is reflected in FY20 financial results; the transaction is expected to have a further positive impact of c60bps on capital ratios upon completion
o Ensuring the health and safety of our employees, customers and stakeholders has remained our top priority throughout the year; c50% of our staff are working remotely, but efficiently and cyber-securely
o Covid-19 restrictions have sped up the Bank’s digital transformation; the number of transactions reaches pre Covid-19 levels, with e-banking transactions boosted by nearly 50%, replacing branch transactions that have been gradually reduced by c2/3rds vs pre Covid-19 levels
o Solid operating performance despite Covid-19 headwinds, underpinned by resilience in core income and rigorous cost cutting
o Utilization of trading and other income of €1.1b fully covers non-recurring impairments from Covid-19 ECLs and the Frontier securitization, also absorbing the additional impairment following the agreement to sell our insurance subsidiary, avoiding going through a hive down
o Domestic loan disbursements reach €4.7b in FY20 (+40% yoy), aided by State schemes
o In line with our ESG strategy, we successfully placed the first green senior bond in Greece (€500m / 6yr tenor / 2.75% coupon)
Domestic NPEs reduced by nearly 2/3rds to €4.3b in 2020 from €10.8b in 2019
o Total domestic NPE reduction reaches €6.5b in FY20, with the transfer to HFS of Frontier in 4Q20 and a negative organic formation of €0.7b during the year
o NPE ratio of 13.8%1 in Greece (-16.2ppts qoq) combines with NPE coverage of 62.8% (+640bps qoq)
Active support towards clients impacted by the Covid-19 economic crisis
o Total NBG loans approved through the Entrepreneurship Fund II (TEPIX II) business program (completed) and State-guaranteed working capital facilities (in progress) amount to €1.8b, while €2.3b of mostly SME and SB loans benefited from an interest subsidy in 2020
o NBG clients eligible for the State subsidy program “Gefyra” correspond to c€1.4b in loan balances currently, of which nearly 40% under payment moratoria. NBG step-up solutions (i.e. Ethnogefyra) are provided to borrowers that continue to experience economic difficulties due to Covid-19, amounting to €107m in terms of loan balances in March 2021
o Payment moratoria of c€3.8b expired gradually until 31.12.20; first signs on payment status are encouraging, as few experience payment difficulties
Group PAT from continuing operations reaches €591m in FY20, up 26% yoy
o Positive NII momentum is maintained in 2H20 (+12.4% hoh) leaving NII marginally lower yoy, despite significant balance sheet derisking
o Against Covid-19 headwinds, fees grew by 5.3% qoq, remaining flat at €256m for FY20, on the back of strong card business and intermediation fees
o Solid reduction in both domestic personnel (-8.2% yoy) and G&A expenses (-11.8% yoy), driven by FTE reductions, branch network rationalization supported by the new digital model and G&A demand management
o Loan impairments of €1.1b or c400bps over net loans in FY20 incorporate the credit risk charges related to Covid-19 and the Frontier securitization; underlying CoR at 106bps in FY20 in line with management’s guidance
o Excluding one off provisions and trading gains, core operating profit reaches €328m in FY20, up 41.1% yoy; operating profit 37.9% higher yoy at €637m, as trading gains more than offset incremental provisions
CET1 ratio at 15.7%; total capital ratio at 16.7%
o 4Q20 CET1 at 15.7%, post Frontier securitization and Covid-19 provisions
o Total capital ratio of 16.7% exceeds minimum regulatory levels2 by more than 550bps
o Upon completion, the Frontier and Ethniki Insurance transactions will boost capital metrics by c170bps from FY20 levels
"2020 has been a year of significant challenges, but also transformatory developments for NBG. The Covid-19 economic shock surpassed any foreseeable stress test scenario, despite being cushioned by an unprecedented, in terms of magnitude and coordination, policy response launched by the European authorities and the Greek Government. NBG remained true to its historic role and was at the forefront of support extended towards corporate and household clients, via targeted payment moratoria of c€3.8b and interest payment subsidies corresponding to €2.3b of loans mostly towards SME and SB clients. Furthermore, new credit disbursed to corporates and households reached €4.7b, aided by Government State guaranteed support schemes, far exceeding disbursements of recent past.
Our top priority remains to ensure the health and safety of our employees, customers and stakeholders, while c50% of our staff work remotely, but efficiently and cyber-securely. Capitalizing on the new modus operandi prescribed by the restrictive measures, we also accelerated and enhanced the implementation of additional digital functionalities, adapting processes to better serve our customers remotely. As a result, while transactions gradually recovered to pre Covid-19 levels, digital is becoming by far the dominant channel.
We have made solid progress towards executing two key strategic transactions; the sale of our insurance subsidiary and the Frontier securitization. As regards the former, we reached an agreement for the sale of a 90% stake, which is capital accretive. As regards the latter, we have managed to absorb in the FY20 P&L the provisions required for the reclassification of the Frontier portfolio as HFS without the need for a hive down. We aim to complete the transaction in the next few months. Frontier, combined with negative organic NPE formation throughout FY20, drove our 4Q20 Group NPE ratio to 13.6% from 31.3% at YE19, on a cash coverage of 63.3%. Notably, our CET1 and total capital ratios at YE20 stand at 15.7% and 16.7% respectively, while upon completion of both transactions capital will be boosted by an additional c170bps.
Despite Covid-19 headwinds, our FY20 financial results were strong. At the operating level, before trading gains and non-recurring provisions related to Covid-19 and Frontier, Group core operating profit increased by 41% yoy reaching €328m, reflecting resilience in core income and stringent cost cutting yielding an annual cost saving of c€150m over the past two years. At the bottom line, PAT from continued operations reached €591m, up by 26% yoy, as trading and other income of c€1.1b fully absorbed non-recurring loan loss provisions for Covid-19 and Frontier of c€0.8b. The rapidly improving profitability demonstrates our high potential, emanating from our strong balance sheet and the commitment and focus of the NBG team, with all our people increasingly engaged in our transformation. It goes without saying, that the Board, top management and I personally thank everyone at NBG for their commitment, especially under the difficult conditions of the pandemic.
Looking forward into 2021, economic conditions will improve and we will continue to leverage on our successful Transformation Program, currently in its 3rd year, in order to move our NPE ratio near mid-single digits in 2022, permitting us to focus on core business expansion and opportunities. The ongoing migration to digital banking facilitates a more cost-efficient and flexible operating model. We remain committed to position NBG as the Bank of first choice in Greece, providing added value to our clients and supporting a sustainable economic recovery.
Athens, March 26 th, 2021
Pavlos Mylonas
Chief Executive Officer, NBG"
