Accelerating core income growth and contained costs and credit risk charges drive up 9M22 COP by 41% yoy
o PEs drive up NII by +5% yoy in 9M22, despite the significant reduction in NPE NII by €78m yoy and the lower TLTRO benefit by €28m yoy in 9M22; 3Q22 NII surged by 11% qoq
o Impressive fee income growth sustained at +22% yoy, driven by cards, payments and trade finance, as well as by a pick-up in fees from investment products
o Operating expenses are contained (+2% yoy) on the back of demand management, process automation and centralization, despite mounting inflation pressures and higher depreciation charges arising from the roll out of the Bank’s ambitious IT investment plan; core income growth pushes C:CI down further to 45.2% in 3Q22
o CoR remains low, at 69bps in 9M22, in line with FY22 guidance
o As a result, 9M22 COP of €464m already nears the levels guided for the FY22 of c€490m
o Including non-core and non-recurring items, attributable net profit reached €680m
Healthy PE expansion of €1.3b ytd is driven by domestic disbursements1 of €4.0b in 9M22 (+45% yoy)
o Domestic PE expansion stood at €1.3b ytd, despite high 3Q22 repayments and adverse seasonality
o With a strong 4Q22 corporate pipeline, YE22 domestic PEs are expected near €27b, up by >€1.5b yoy, in line with our guidance
“Economic activity remained resilient to the energy-induced headwinds, with GDP growth remaining among the highest in the euro area. Tourism provides a decisive impulse to economic growth with revenues on track for a new all-time high, while private sector profitability, robust labor market conditions and fiscal support of c€13bn, in gross value terms, cushion the inflationary induced shock to the real economy. The strong carryover effects from the momentum gained in 9M22, a relative defensive position in the business and credit cycle, with Greek corporates hardened by multiyear restructurings, inter alia, having low leverage, and increasing investment-led support from the Recovery and Resilience Facility (RRF), render Greece relatively resilient to mounting economic risks.
Against the backdrop of persistent inflation and geopolitical uncertainty, we delivered a strong financial performance, comprising improving core profitability and a stronger balance sheet, including increasingly robust capital ratios.
With regards to profitability, 9M22 Group core operating profit increased by a strong 41% yoy to €464m, already near the full year profitability guidance of c€490m, while our attributable PAT reached €680m. Key contributors to profitability improvement were accelerating core income (+8% yoy), whereby healthy expansion of our PE NII offset NPE and TLTRO NII headwinds. Further support has come from the impressive, volume led increase in fee income line (+22% yoy), while operating expenses have been contained in a highly inflationary environment. Credit risk charges remained near 70bps in the absence of any signs of a pick-up in NPE formation or early delinquencies.
Regarding asset quality, our domestic NPE exposure keeps shrinking, amounting to €1.8b or just €0.3b net of provisions, translating into an NPE ratio of 5.9%, already below our FY22 guidance. At the same time, our domestic cash coverage kept rising, remaining well above sector highs, at 83%. Most importantly, organic NPE formation remains negative.
With the implementation of ECB’s tighter policies, including the tightening of TLTRO conditions, our strong and stable core deposit base and excess liquidity once again become a strong comparative advantage.
Our robust capital buffers keep increasing on the back of strong profitability, with CET1 and total capital ratios on a fully loaded basis standing at 15.2% and 16.3%, respectively, 20bps higher qoq. The completion of the merchant acquiring JV by YE22 will push CET1 FL and CAD FL ratios to 15.8% and 16.9%, respectively.
The solid 9M22 results and the strong momentum demonstrates the high potential of the franchise in the period ahead, emanating from our successful Transformation Program. Even though the balance of near term risks has been deteriorating, the Greek economy is set to maintain a positive growth trajectory, continuing to exceed the Euro Area average in 2023, and a re-energized NBG is well positioned to play its key role in supporting the economy to successfully overcome these challenges."
Pavlos Mylonas, Chief Executive Officer, NBG
