In Q4’19 Piraeus reported profits of €191m from €48m in Q3’19.On a recurring level (excl.€351mn gain from the NPE servicing platform carve out adjusted for tax) net income was negative at -€62m vs €64m profit in Q3’19 mainly on higher impairments and OpEx offsetting higher Core banking income.
Remember that Piraeus on 3Feb’19 had released its 2020 Strategy Update as well as key preliminary data of its FY’19 performance (excluding the figures bellow PPI). Results were broadly in line with their guidance and our call on Recurring PPI level but Recurring profit was below our call (Exx at €22m)
In more detail, NII was higher by 2.7% q-o-q to €363m (Exx at €352m), on the back new disbursements and lower funding costs. NIM was slightly decreased by 3bps q-o-q to 236bps vs 239bps in Q3’19. Fees rose by c13.0% q-o-q to €91m , as the Bank capitalised on the increasing loan demand, transaction banking positive trends, payments, as well as investment banking & asset management recovering business.
As a result, core banking income increased by 13% q-o-q to €454m (Exx at €434m).
Accounting for non-core income of €359m (includes €351mn gain from the NPE servicing platform carve out) in Q4’19 vs €33m in Q3’19, total operating income settled at €813m, 74% higher q-o-q. Recurring OpEx increased by c13.6% q-o-q to €269m in Q4’19 (Exx at €233m), attributed partially to higher administrative expense, driving C:I (recurring) to c58.2% (+750bps q-o-q). Recurring pre-provision income decreased by 16.1% to €193m, lower than our call of €229m because of higher than expected recurring expenses. Q4’19 loan provisions increased 40% q-o-q to €221m, implying a CoR of 229bps over net loans vs. 165bps in Q3’19. Recurring net income settled at a loss of -€62m (Exx at €22m) vs. €64m profit in previous quarter.
NPE ratio shaped at 48.8% (at 51.6% in Q3’19) on NPE coverage of c44.9% (vs. 46.0% in Q3’19). The scheduled NPE securitisations work of c.€7bn is on track (c.€5bn “Vega”, c.€2bn “Phoenix”) to be placed with the H-APS, further facilitating Piraeus’ de-risking effort
Turning to the B/S side, gross loans increased by 0.8% q-o-q to €50.1bn, while deposits rose by 4.8% q-o-q to €47.3bn. As a result, (net) L/D ratio (excluding OPEKEPE loans) landed at 82.7% in Q4’19 from 84.0% in Q3’19. Common equity (excluding CoCos) settled at €5.6bn (+0.3% q-o-q), with tangible equity at €5.3bn. DTA decreased q-o-q at €6.48bn. The Q4’19 pro-forma CET 1 ratio (adjusted for the RWA relief of the sale of NPE loan portfolios and for Τier 2 issued in Feb.2020 ) settled at 14.8% vs. 14.1% in Q3’19,while CAD ratio shaped at 16.8% versus an overall capital requirement of 11.75% for 2020 from 14.25% ,post supervisory statements as at 20Mar’20 (€2.3bn capital buffer). Eurosystem funding dropped at €0.4bn in Q4’19 (ELA eliminated as of mid-July’18) from €0.8bn in Q3’19.
Conference Call Highlights: Management stated that the magnitude of Covid-19’s impact on the economy, business and society will depend on its duration while commenting on the measures taken by the government, Piraeus management stressed that they were particularly important and most importantly they were taken early .Measures have also been taken at the monetary level by the ECB, which gives banks both flexibility in their capital ratios and loan provisioning. Furthermore in an effort to quantify the impact of COVID-19 the management said that € 8.8bn (19% of bank loans) loan portfolio has been significantly affected by the crisis of which €5bn are business loans and €3.8bn households. Concerning the DTC law and the payment of the Cocos coupon Mr. Megalou said that it’s too early to talk about it.