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Article Excerpt
OPERATOR: Good afternoon and welcome to the announcement of Full Year 2008 Results call, hosted by Mr. Paul Mylonas. My name is Liz and I'll be your coordinator for today's conference.
(Operator Instructions)
I will now hand it over to Paul to begin today's conference.
PAUL MYLONAS, CHIEF ECONOMIST, NATIONAL BANK OF GREECE: Hello. Good afternoon and good morning to all of you. Thanks for joining us for the results call for the fourth quarter. As usual, we'll start off with the CFO and CEO, Anthimos Thomopoulos presenting the results briefly and then we'll go to Q&A. Anthimos, over to you.
ANTHIMOS THOMOPOULOS, CFO AND CEO, NATIONAL BANK OF GREECE: Thanks, Paul. Good morning and good afternoon to you all. Thank you for joining us. And let's head straight to the presentation which I guess you have received. I would like to begin with some high-level comments on strategy and tactical position in view of the global downturn.
First point I'd like to make is that the long-standing strategic commitment to Greece, of course Turkey, Southeastern Europe, remains firm and intact. We are keen believers that when all this is over, growth will come back to the region and potential will materialize for those economies. Tactically though, over the last year we have positioned ourselves to manage the business through the cycle and, as you can tell in page three of the presentation, along four main pillars.
First, sustain our earnings power. Second, safeguard asset quality through vigilant risk management. Three, maintain a very high, very liquid balance sheet. And four, preserve, even augment these very strong capital positions of the Bank.
Taking a closer look at what we have achieved along these lines, starting from earnings quality and earnings capacity, attributable profit for the year, that is EUR2.5 billion. The fourth quarter contributed EUR332 million.
Of note, in spite of the really turbulent market environment --, the most turbulent market environment in recent times, pre-provision earnings for the year hit the EUR2.6 billion mark registering a growth of 20% year-on-year.
Interestingly, NII was up 17% year-on-year. It was up even in the very difficult fourth quarter, reaching EUR3.6 billion for the year, and that obviously underscored our natural funding advantage.
On the OpEx side, we have kept a tight rein on expense growth. Expenses grew 2% year-on-year, while setting the groundwork in place through timely initiatives throughout the year and in the last quarter through our latest VRS program for further cost vigilance in 2009.
In a quarter characterized by extreme conditions that have put the whole industry to the test, we have been able to demonstrate the ability of the franchise to continue delivering results, positive earnings despite prudent charge-offs.
Which takes me to the actions that we have taken to shield the book from credit losses. We've been keeping a very watchful on eye on asset quality, assistant account monitoring, cost assistance in loan origination, that has been adopted earlier in 2008, has helped us limit NPLs to 3.3% at the end of the year, which sticks to the well diversified make up of our book.
In anticipation of tougher times, we have further tightened our impairment assumptions, raising as a result, the level of collected provisions across all books, across all countries. In particular, we have imposed higher haircuts for collateral values, assumed longer period of collateral liquidation, adjusted the historical loss rates, and obviously increased the discount rates aggressively in order to compute present values for estimated future recoveries.
As a result, fourth quarter charge-offs increased twofold quarter-on-quarter, to close to EUR230 million, which translates to 142 basis worth of cost of risk on an annualized-basis. That helped us push the coverage levels before collaterals at an industry high of 75%. In addition, as things were deteriorating [some] in the commodity markets, we took a precautionary hit writing off certain non-core holdings in a ferrous nickel producer in Greece. That has been another non-core equity participation's cut, that saved another EUR45 million worth of earnings.
Moving to liquidity, the liquidity effort was to maintain one of the best liquidity pools among our European peer universe. Customer deposits, as you know, account for three quarters of the total liquidity pool. Loans to depos maintained at 95%, unchanging from Q3. Therefore, a key pillar of our strategy, maintaining ample liquidity to navigate through the current straits, has been checked off.
It is worth mentioning here that we continue to emphasize on balanced growth on both loans and deposits, across the Group. As a result, and despite brutal competition in Q4, we managed to achieve record domestic market share in core deposits. We kept core deposits up, a record high of 34% of the total market without compromising on pricing.
Moreover, we have kept up [powder dry with] over EUR12 billion worth of unutilized liquidity pool, which I will talk about later in the presentation.
As regard the tenant of capital preservation, capital base remained strong, one of the highest in Europe. And as a recap of our present initiatives to shore up capital in 2008, let me highlight our preemptive EUR625 million dispositions in June '08 and the reinvestment of the '07 dividend which added EUR475 million worth of core equity in our capital base.
As a result of those initiatives and of course the continuing internal capital generation, upper Tier I starts at a comfortable 9.9%, pretty close to 10%. It ramps up to 10.4% after the EUR350 million state prefs.
Although not relevant to capital deposits, I shall note that given the fact that we wrote off half of the acquisition goodwill of Finansbank back in 2007, we see no risk of goodwill impairment charges on that acquisition.
Turning to page four, pre-provision earnings, again for the third quarter, robust, across all three regions, five times the level of cost of risk, supported by top-line growth and cost containment. NIM clocked in at 426 basis, and the last quarter unchanged. Cost of income down to a record 47% as our cost containment initiatives taken earlier in the year and in prior years are bearing fruit.
On page five, our loan book is current EUR66 billion, up 18% year-on-year. Customer deposits went up 12%. During Q4 in Greece, we grew deposits by 4%, fully matching the 4% growth in loans. Likewise, in Turkey, we achieved balance growth in loans and deposits at 3% in dry terms.
In SEE however, loan book was up by a modest 2%. Our deposits though shrank 4% in line with the contraction in the market as a whole. Interestingly, our market share in SEE did not budge even though we intentionally refrained from chasing expensive euros in the region.
Turning to page six, our preemptive strike on costs earlier, as said, in the cycle have helped us contain Group OpEx growth at just 2% year-on-year, below the target we set last year of 5%. Initiatives in head count management throughout 2007 and 2008 have helped us keep the personnel costs flat. In Q4, we take a preemptive action and introduced VRS programs in the Group which have helped generate head count reductions to the tune of 600 employees, for which we took a EUR50 million charge in the fourth quarter.
Turning to specific geographies, I think it is of note that OpEx increase was down 4%, personnel costs were down 5% year-on-year. With advanced expansion programs in SEE and Turkey practically stopped, we expect this to provide extra support to our cost [controls in] 2008. Notably, cost to income is now below the 50%, markedly below 50% in all countries, Greece, Turkey -- in all regions, Greece, Turkey and SEE.
Moving on to the issue of asset quality, we did see our NPL ratio tick up by 14 basis in Q4. It now starts...
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