Hellenic Bank "clears" its balance sheet despite losses of 2021

A loss of €11.7 million, mainly related to the forecasts of the Starlight project, was presented for 2021 by Hellenic Bank, which, however, made significant progress in reducing the risks to its balance sheet and is now within breathing distance of its medium-term target for reduction of non-performing loans (NPLs) to 3% of its loan portfolio.

The ratio of non-performing loans (NPLs), adjusted for the transaction of sale of loans with a gross value of €720 million and the acquisition of a portfolio of non-performing loans by RCB Bank fell to 3.6%, while with the inflow of the second tranche of loans from RCB, it will fall to 3.4% from 53% at the end of 2017.

Hellenic Bank is now turning its attention to the transformation plan, with the bank's CEO, Oliver Gatzke, highlighting the reduction of the high cost / return ratio as key. "We are focusing our efforts on both increasing interest income through new lending and generation of miscellaneous income, as well as containing all administrative expenses," he says.

He emphasises, however, that "the most effective way to reduce cost to income ratio is the overall reduction of the payroll cost through necessary headcount reductions and more rational salary increases in the future."

"And the plan for this year is basically to reduce the number of staff between 300 and 350 people and we plan to do it through redundancies," said Gatzke.

He noted that "we are doing our best, to agree on a mutually beneficial collective agreement for our staff and at the same time to maintain the Bank on a solid and sustainable path", expressing the hope that "the leadership of the Union will rise to the occasion and demonstrate a constructive stance, for the benefit of our employees."

Hellenic Bank entered into an agreement with Pimco for the "Starlight" project, which concerned the sale of a €0.72 billion NPL package and the APS Debt Servicer, with a positive impact of approximately 20 basis points on its capital. This transaction reduced non-performing loans to € 650 million, corresponding to 10.9% of total loans, while excluding loans covered by the Asset Protection Program and adjusted with the purchase of loans by RCB, the NPL ratio falls to 3,4%.

The bank's capital ratios at the end of 2021 were maintained at high levels, with the Capital Adequacy Ratio and the Class 1 Common Shares Ratio (CET 1) at 21.67% and 19.30% respectively, while the new borrowing for in 2021 amounted to €908 million compared to €1.04 bln in 2020. Moreover, the liquidity coverage ratio at the end of 2021 increased further to 499.5% compared to 477% at the end of 2020, with the liquidity surplus in 2021 to amount to €6.4 billion.

Net interest income for 2021 amounted to €256 million, reduced by 10% compared to €285.5 million for 2020, mainly reflecting the lower income from serviced loans (reduction of key lending rates) and lower revenues from Cypriot government bonds, reductions which were partially offset by continuing reductions in the average cost of deposits.

The Group's net interest margin for 2021 decreased to 1.52%, compared to 1.88% in 2020.

A small decrease, at a rate of 3%, was noted on an annual basis to the total non-interest income in 2021, which amounted to €103 million compared to €105.8 million in 2020, while the net income of fees and commissions for 2021 amounted to €58.2 million, increased by 1% compared to €57.6 million in 2020, an increase mainly due to increased banking rights and commissions in 2021, after the announcement of the revised List of Rights and Charges effective from February 2021, and the increase in electronic transactions.

Impairment losses in 2021 amounted to €108.4 million, which are related to the Starlight project.

According to the results, the group's expenses in 2021 remained unchanged, amounting to €263.5 million and compared to €264.0 million in 2020. Personnel expenses for 2021 amounted to €133.7 million and represented 51% of the total expenses of the Group (50% in 2020). Compared to €131.1 million in 2020, staff costs for 2021 increased by 2%.

The expense-to-income ratio for 2021 stood at 73%, compared to 67% for 2020, pushed upwards by the decrease in total net income.

At the end of 2021, the Group's total assets amounted to €18.8 billion, and increased by 19% compared to €15.9 billion on December 31, 2020, mainly due to the increase in cash and deposits with Central Banks, primarily as a result of the new lending to Targeted Long-Term Refinancing Operations (SPL / TLTROs) of the ECB.

Gross lending to customers as at 31 December 2021 amounted to €5,952 billion, down 12% compared to €6.8 billion at 31 December 2020, with the net lending ratio falling to 38.4% on 31 December 2021, compared to 43% at 31 December 2020.

Moreover, the bank's real estates at the end of 2021, which mostly resulted from the settlement of customer debts, amounted to € 69.4 million at 31 December 2021, compared to €208.4 million at the end of 2021. Additions amounted to €18.7 million and sales to €44.2 million, as reported.

Total investments in securities amounted to €4,463 million as at 31 December 2021 (31 December 2020: €5,024 million), down 11% and representing 24% of total assets (31 December 2020: 32%). The Cypriot Government Bonds and Bonds that the Group held on 31 December 2021 decreased to €1,485 million, showing a decrease of 39%, compared to €2,443 million on 31 December 2020.