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“Following two years of stabilization, the Greek economy returned to growth in 2017. Real GDP increased by 1.4%, the unemployment rate came down to 21.5% and the economic sentiment indicator climbed to the highest level since 2014. Looking forward to the near future, we expect real GDP to expand by circa 2% in 2018 and beyond. The deciding factor underpinning Greece’s transition to a new era will be the successful completion of the third Economic Adjustment Programme in August and the focus on implementation of the agreed upon reforms. These will pave the way for gradual return to normality and can be the starting point for recurring growth in the country.
Piraeus Bank has undergone substantial and positive change over the past 12 months, as new management team continues to progress at pace with the execution of the Bank’s strategic plan. We remain on course to achieve our medium-term business and operational targets. Piraeus Bank is committed to playing a critical role in the continued resurgence of the Greek economy and assisting in the strengthening of private entrepreneurship, a critical driver of sustainable, long-term growth.”
George Handjinicolaou, Chairman of the Board of Directors
In 2017, Piraeus Bank took significant strides forward in using its strong capital base to accelerate its balance sheet clean-up. The combination of increased provisioning and IFRS9 First Time Adoption (FTA) significantly increased NPE & NPL cash coverage, overhauls balance sheet de-risking, and cost of risk de-escalation going forward.
Piraeus Bank’s asset quality performance in the second half of 2017 has been strong. The NPE and NPL stock in Dec.17 was at the lowest level since the Sep.15 peak, down by €3.0bn and €3.7bn yoy to €32.9bn and €20.7bn respectively, outperforming the targets set for year-end 2017, for both NPE and NPL. In Q4.17, domestic NPL formation declined by -€0.7bn (122bps over gross loans).
Furthermore, as we intensify and frontload our efforts to deal with legacy issues, we doubled our loan provision expenses to €2.0bn in 2017 versus €1.0bn in 2016, resulting in a breakeven bottom line result for continuing operations in FY.17. Following these actions, 1st Jan. 2018 NPE and NPL cash coverage pro-forma for IFRS9 FTA rises to 52% and 83% respectively.
Piraeus Bank is progressing in all its actions to execute its NPE operational targets via restructurings, collections, liquidations and sales. For the latter, the Bank has 2 projects under way: (a) €2.0bn (legal claim) secured commercial portfolio and (b) €2.3bn (legal claim) unsecured denounced consumer portfolio. Both transactions are expected to result in increase of CET-1 ratio by approximately 20bps. At 1st Jan. 2018, the Group’s IFRS9 pro-forma CET-1 ratio stood at 15.4% for divestments under way.
Piraeus Bank’s deposit restoration path remains strong and stable. The Greek banking system received inflows of approximately €7.0bn in the second half of 2017, of which Piraeus Bank gathered 38% (€2.7bn). The Loan to Deposit Ratio at the end of 2017 stood at 98%, below the 115% Restructuring Plan target for 2018. ELA reliance has been reduced significantly; at €5.7bn in Dec.17 from €12bn in Dec.16 and currently below €2.0bn. Piraeus Bank target’s to go down to zero use by Q3.18.
An integral objective of the new management team of Piraeus Bank is to create a profitable and sustainable business model for the Group. Our accelerated cost efficiency actions have driven cost-to-income ratio in Greece for 2017 to 52% from 55% in 2016, empowering us to intensify our cost optimization efforts towards a new more aggressive target of ~40% C/I in 2020. To further facilitate this goal, the Bank plans more than €200mn cost savings for the period 2018-2020. For 2018, we are committed to the conclusion of our Restructuring Plan, the accomplishment of our NPE goals, the full elimination of ELA and providing financing of more than €3.0bn to our clients in Greece.”
Christos Megalou, Chief Executive Officer