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Hellenic Bank: Profits of 69.7 million in the first quarter of 2023

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1Q Net Interest Income 108.1M, up 74% YoY, primarily reflecting higher interest rates

Ελληνικor Τρπεζα : Κερδη 69.7 εκατ. στο πρoτο τρiμηνο 2023

Hellenic Bank recorded a profit of 69.7 million euros for the 1st quarter of 2023, compared to a profit of 24.1 million euros for the 1st quarter of 2022. At the same time, the return on tangible equity (ROTE) (annualized) was 24.9% for 1Q2023 compared to 9.0% for 1Q22.

Net interest income for the 1st quarter of 2023 reached 108.1 million, up 74% year-on-year, mainly reflecting the increase in interest rates. The year-on-year increase was mainly due to the increase in net interest income from deposits with Central Banks and other banks and securities following the continued rate hikes announced by the ECB. In addition, interest income from the loan portfolio is higher due to the increase/repricing of prime lending rates and mainly reflecting the impact in 1Q2023 of the acquisition of part of the performing loan portfolio (Tranche A and Tranche B) from RCB Bank by during 2022.

The Group's net interest margin (on an annualized basis) for the 1st quarter of 2023 was 2.22% compared to 1.35 for the 1st quarter of 2022 (2022: 1.60%). Net interest margin (on an annualized basis) was positively impacted by an increase in net interest income due to changes in the interest rate environment as explained above, despite an increase in average interest-bearing assets. The increase in average interest-bearing assets is mainly due to the increase in cash and deposits with Central Banks as a result mainly of the increase in customer deposits during 2022.

Total non-interest income for the 1st quarter of 2023 was €26.7 million, up 8% compared to €24.8 million for the 1st quarter of 2022. Total non-interest income for the 1st quarter of 2023 quarter of 2023 consists of the net income from rights and commissions amounting to €18.3 million, the net profit from disposal and revaluation of foreign currency and financial instruments amounting to €2.3 million, the net income from insurance operations amounting to €3.6 million and the other income of €2.6 million. The decrease was mainly due to the increase in the net income from rights and commissions.

The funds

The Group's Common Equity Tier 129 (CET 1) ratio, without the transitional provisions of IFRS 9, has increased by 121 bp. during the quarter ended March 31, 2023, while the Group's total capital ratio29 increased by 470 bp.

For the Group, the Capital Adequacy Ratios, Common Equity Tier 1 (CET 1) and Tier 1 Capital on 31 March 2022, with transitional provisions of IFRS 9, excluding the unaudited profits of the 1st quarter of 2023 , were 23.84%, 18.06% and 20.35%, respectively. For the Bank, respectively, the Capital Adequacy Ratios, Common Equity Tier 1 (CET 1) and Tier 1 Capital of the Group on March 31, 2023, without the transitional provisions of IFRS 9, amounted to 23.74% , 17.97% and 20.25%, respectively.

New lending and NPLs

Gross loans at 31 March 2023 amounted to €6,266 million compared to €6,963 million at 31 December 202219, a decrease of 10%, mainly as a result of the completion of Project Starlight. The performing loan portfolio increased by 1% while the non-performing loan portfolio decreased by 56%, compared to December 31, 2022. The decrease in NPLs in the 1st quarter of 2023 is mainly due to the completion of Project Starlight.

The Bank's loan market share at 31 March 2023 was 25.8% (31 December 2022: 27.7%) and consists of 33.1% for loans to Households (31 December 2022: 34.7%).

Total new lending in Q1 2023 amounted to €315 million, compared to €269 million in Q1 2022 (Q4 2022: €367 million), an increase of of 17% on an annual basis. The Bank continued to provide loans to creditworthy businesses and households, while at the same time focusing on the management of early arrears and avoiding new NPLs.

NPLs as defined by the European Banking Authority (EBA) amounted to €586 million on 31 March 2023 and decreased by 56% compared to €1,335 million on 31 December 2022 (NPLs excluding NPLs covered by the PPS amounted to €0.2 billion on March 31, 2023 and €0.1 billion on December 31, 2022). The decrease in Q1 2023 is mainly due to the completion of Project Starlight.

The NDE ratio on March 31, 2023 was 9.3% compared to 19.2% on December 31, 2022. The NDE ratio excluding NDEs covered by the PPS, on March 31, 2023 was 3.4% (December 31, 2022 : 13.5%). The decrease in the 1st quarter of 2023 is mainly due to the completion of Project Starlight. Adjusted for held-for-sale portfolios, the NPL ratio fell to 9.8% as of December 31, 2022, while the NPL ratio excluding PPS-covered NPLs was 3.6% as of December 31, 2022.

Expenses and cost to income

Total expenses for the 1st quarter of 2023 amounted to €64.2 million and compared to €73.4 million for the 1st quarter of 2022 they marked a decrease 12%, mainly due to a decrease in staff costs partially offset by higher administrative and other expenses.

Personnel expenses for the 1st quarter of 2023 amounted to €30.4 million and compared to €39.9 million in the 1st quarter of 2022, they marked a decrease of 24% and represented 47% of the Group's total expenses (1st quarter 2022: 54%).

The expense-to-income ratio for Q1 2023 was 48%, compared to 84% for Q1 2022, primarily reflecting the increase in total net income.

The adjusted cost-to-income ratio, readjusting for the Special Tax on Credit Institutions the contribution to the SEK, and the Transformation costs16 for the 1st quarter of 2023 and the 1st quarter of 2022 decreased to 40% and 72% respectively. On an annual basis, the decrease is mainly due to the increase in total income.

Deposits

At 31 March 2023, customer deposits amounted to €15.8 billion (31 December 2021: €15.9 billion) and were down 1% from year-end 2022. They consisted of Euro deposits of €14, 6 billion (31 December 2022: €14.7 billion) and deposits in foreign currencies amounting to €1.2 billion (31 December 2022: €1.2 billion) mainly in US Dollars. The Group mainly holds deposits from households and approximately 68% of total customer deposits are protected by the Deposit Guarantee Scheme

The Bank's market share of deposits on 31 March 2023 was 30.6% compared to 30.7% on 31 December 2022. The market share of deposits on 31 March 2023 consists of 38.2% deposits from households (31 December 2022: 38.4%) 21.0% deposits from non-financial corporations (31 December 2022: 21.1%) and 13.8% for other financial intermediaries (31 December 2022: 12.9%).

< p>The net loan-to-deposit ratio was 38.5% at March 31, 2023 compared to 39.1% at December 31, 2022. Adjusted for portfolios held for sale, the net loan-to-deposit ratio falls to 37.9% on December 31, 2022.

The Group's Liquidity Coverage Ratio as at 31 March 2023 stood at 454% compared to 444% as at 31 December 2022, which is above the minimum supervisory threshold of the DPR of 100%. As at 31 March 2023 DKR's liquidity surplus stood at €7.1 billion compared to €6.8 billion at 31 December 2022. As at 31 March 2023 the Group's liquidity ratio stood at 188% compared to 184% at 31 December 2022, which is more than 100% of the minimum binding CRR introduced, and applies from June 2021 according to the Capital Requirements Regulation II (CRR II18). As of March 31, 2023, the liquidity surplus of the DCS amounted to €8.1 billion and increased compared to €7.8 billion as of December 31, 2022.

Statement of Chief Executive Officer Mr. Oliver Gatzke

Commenting on the Group's results for the quarter ended 31 March 2023, Mr. Oliver Gatzke, Chief Executive Officer of the Group, stated:

2023 started strongly for Hellenic Bank recording a strong first quarter with profits of €69.7 million, mainly due to higher revenues and cost rationalization. The results demonstrate the resilience of our business model and our commitment to enhancing the value of the Bank, supporting our customers and consequently the growth of the economy.

The first quarter of 2023 was marked by turmoil in the financial markets in both the US and Europe. Hellenic Bank remained unaffected by these developments, mainly due to its strong capital position (Capital Adequacy Ratio 25.1%) and its excess liquidity (Liquidity Coverage Ratio 454%). Our strong financial position enables us to continue to support our retail and business customers by providing competitive and personalized financial products and services.

New lending during the first quarter of 2023 reached €315m (up 17% year-on-year), boosting our market share to 35% by April 2023 (from 28% in 2022). Net interest income amounted to €108.1 million, showing an increase of 74% compared to the first quarter of 2022, which was mainly due to the international environment of higher interest rates. The adjusted cost-to-income ratio stands at 40%, in line with the Bank's medium-term goals, which remains committed to its cost management initiatives by offsetting the continuous increase in labor costs, e.g. ATA and automatic salary increases.

Other 2023 highlights include

• On 8 March 2023, we successfully issued a new €200m Tier 2 Subordinated bond under the EMTN Programme. The total bid book was oversubscribed almost 4.5 times. The large participation of investors confirmed the confidence in the Bank and the positive assessment of the capital markets in terms of the Bank's creditworthiness.

• On March 30, 2023, we announced the completion of “Project Starlight”, significantly reducing the risk on the Bank's balance sheet and the adjusted NPL Index to 3.4% (excluding NPLs covered by the PPS).

Following the recent inclusion of Cypriot legal and natural persons on the US and UK sanctions lists I would like to reiterate the Bank's full compliance with the sanctions issued by the European Union, the United States and the United Kingdom, implementing a policy zero tolerance through strict and thorough controls and measures.

In conclusion, the first quarter results and our strong commitment gives us confidence that we are on the right track to achieve pre-tax profits in excess of € 200 million. I am very grateful and proud that our staff remains committed to serving our customers, implementing our challenging transformation plan and continuously creating value for our shareholders.

Source: www.kathimerini.com.cy

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