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Euroxx / NBG:Resilient Results in Line with Our Call at Core PPI level ; Trading Gains Absorb Impairments for Covid-19 and VES costs

NBG reported profits after tax from continuing operations of €409m in Q1’20 vs. profit of €18m in Q4’19 reflecting broadly stable core PPI q-o-q and a strong trading line, absorbing the total anticipated loan impairments related to Covid-19. Should we account for LEPETE, minorities, VES & one-offs and discontinued operations NBG reported bottom-line profit of €304m vs. losses of €633m in Q4’19 ; Results in line with our call in PPI level while we missed bottom line due to higher than expected impairments

In a nutshell, Q1’20 NII dropped by 4% to €277m (Exx at €281m), negatively affected by the swap , the GGB sales and the NPE reduction leading to decreased NIM by 25bps q-o-q to 234bps. Fees decreased by 7% q-o-q at €66m bringing core banking income at €343m (-4% q-o-q). Total operating income reached €1,119m (Exx at €1,132m) vs €342m in previous quarter , incorporating trading & other income of €775m vs. €-17m in Q4’19 benefitting from large realized gains related to the GGB swap transaction in January (€515m) and the sale of GGBs in the HTCS securities portfolio in February (€264m).Operating expenses was lower by 7.0% q-o-q at €207m (Exx at €208m) reflecting part of the benefit of the VRS offering that expired in Feb’20, with c1,100 employees leaving the Bank (c800 FTEs in 2019 and an additional c300 employees in Q1’20). As a result, PPI settled at €912m (Exx at €924m) in Q1’20 vs €120m in Q4’19. Impairment losses on loans amounted to €486m (Exx at €300m) in Q1’20 from €105m in Q4’19 absorbing the total anticipated Covid19 impact, with the related charge coming in at €416m or 143bps over net loans (non-annualized) and underlying CoR at 96bps.Bottom line was also burdened by a provisional VES charge of €90m and LEPETE costs of €10m Q1’20

On the asset quality front, group NPE ratio decreased by 43bps q-o-q to 30.9% on group NPE coverage of 58.7% from 53.4% in Q4’19 with the stock of NPEs down by €0.2bn q-o-q, driven by organic means (€0.1bn), sale and write – offs. NPE inflows increased by 35m q-o-q, as the improvement in flows in the first two months of the year was partially offset in March due to Covid19 related uncertainty, while the gradual implementation of moratoria measures has a retroactive effect. Finally performing on–balance exposures is estimated at €12.6bn with less than 20% (c€2.3bn) to be highly affected by Covid19.

On the B/S side, gross loans and deposits amounted to €34.9bn (-0.2% q-o-q) and €45.4bn (+4.0% q-o-q driven by State deposits inflows), respectively, with group (net) L/D ratio at 63.7% (66.9% in Q4’19). Common equity decreased by 2.2% q-o-q to €5.14bn. Tangible equity amounted to €4.93bn (-2.6% q-o-q), with DTA at €4.9bn (of which eligible DTC at €4.6bn). CET1 ratio stands at 15.5%, absorbing the total anticipated Covid19 related loan impairments (113bps over RWAs), as well as IFRS9 FY20 transitional adjustments (41bps) with CAD at 17.1%. Both ratios are comfortably above SREP capital requirements for 2020. Eurosystem funding at €5.0bn currently from €2.3bn at end-4Q19, comprising of LTRO/TLTRO, with the ECB eligible unencumbered collateral at €4.3bn and the  funding cost below the 30bps mark…

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