The bank also reiterated its complete adherence to sanctions issued by the US, EU and UK
Hellenic Bank CEO Oliver Gatzke addressed shareholders, employees and other participants at the bank’s annual general meeting on Wednesday, discussing the current economic environment, the bank’s financial performance, key events, and market perception, as well as the bank’s medium-term objectives.
Regarding the prevailing economic environment and recent financial performance, the Hellenic Bank CEO noted that “2022 was an unprecedented year in terms of geopolitical and economic volatility”.
“With the pandemic shock receding, the war in Ukraine, the geopolitical tensions between major powers and the continued uncertainty over supply chains led to lower expectations of growth and exacerbated the very high inflation rates,” he added.
Despite these external shocks, Gatzke continued, “the Cyprus economy showed resilience, with GDP growing by 5.6 per cent during 2022”, while growth is expected to slow down to around 2.5 per cent in 2023, which is still higher than most EU economies.
Moreover, he referenced the ECB’s decision to increase interest rates for the first time in 11 years, which was followed by faster-than-expected interest rate increases since that first hike, in order to suppress inflation.
“Despite operating in an environment where external shocks were unprecedented, our bank’s results for 2022 prove that our business model is resilient, that our strategy is delivering, and that we are very well positioned to support the growth of the economy and the prosperity of our customers,” he stated.
In addition, he noted that the bank delivered a good set of financial results in 2022, with a profit of €24 million, compared to losses of €12 million for 2021, reflecting the progress in the bank’s transformation toward a client-centric and technology-driven bank.
Additionally, adjusted for the extraordinary cost of the Voluntary Early Exit Scheme (VEES), the bank managed to achieve a profit of €95 million.
In light of the latest EU sanction packages and the recent inclusion of Cypriot legal entities and physical persons in the US and UK sanctions lists, Gatzke reiterated the bank’s full adherence to the sanctions issued by the European Union, the UN, the United States, as well as the UK, stressing that there is “a zero-tolerance policy, through rigorous and strict controls and measures” in place.
“The bank has limited direct exposure and an insignificant impact from sanctions and other regulatory decisions arising from the crisis,” he added.
Gatzke also highlighted several key achievements and developments since the last annual general meeting.
These include the bank’s successful implementation of the aforementioned Voluntary Early Exit Scheme, leading to the departure of around 450 employees (16 per cent of total employees) and resulting in significant cost savings.
The reduction in headcount, including temporary staff, amounted to approximately 600 people, making the organisation leaner and more agile.
Another milestone was the resumption of coupon payments for the Contingent Capital Securities (CCS 1 and CCS 2) after a 10-year period with no payments. This move improved stakeholder confidence and reflected the bank’s enhanced financial position.
In terms of funding, the bank issued €200 million Tier 2 Subordinated Notes under its EMTN Programme, which attracted substantial interest from international investors and demonstrated confidence in the bank’s creditworthiness. The oversubscribed order book exceeded €875 million, indicating a strong market appetite.
Furthermore, a significant achievement was the completion of Project Starlight, involving the sale of approximately €0.7 billion of Non-Performing Exposures (NPEs) and the APS Debt Servicer.
This project significantly reduced the bank’s NPE ratio, contributing to a healthier balance sheet and a decreased NPE burden for the entire banking sector in Cyprus.
“I must stress here that despite the shift of the NPEs outside the banking sector, the level of NPEs in Cyprus remains one of the highest in Europe,” the CEO said.
“Therefore, we consider it imperative that the country has a stable and functional foreclosure framework to address the issue of strategic defaulters and for Cyprus to continue attracting foreign direct investments,” he added.
What is more, the bank’s transformation plan is progressing as intended, Gatzke explained, with a focus on enhancing customer experience, increasing revenues, and driving efficiency.
The closure of 24 branches in 2022 resulted in a leaner network, while new lending targets exceeded expectations.
The introduction of the phygital branch concept, combining modern banking services within a multi-purpose space, has been well-received.
The bank has also prioritised environmental, social, and governance (ESG) initiatives. To this end, a new ESG strategy was approved, setting clear targets and emphasising the bank’s commitment to sustainability.
Risk management frameworks were adjusted, and green lending products, such as “Green Home” and “Green Car” loans, were introduced.
The bank’s 2022 ESG Impact Report highlights achievements and long-term ambitions in sustainability and corporate responsibility.
Gatzke noted that market perception and recognition are considered to be of paramount importance for a financial institution like Hellenic Bank.
“I would like to highlight our satisfaction that our efforts and achievements both quantitatively and qualitatively are recognised by the major credit rating agencies and are reflected in the markets,” he said.
He reminded the audience that the bank’s credit ratings were upgraded both by Fitch in December 2022 and by Moody’s in May 2023, based on the continued strengthening of the bank’s financial fundamentals, enhanced credit profile and improved outlook.
“On the equity side, the valuation of the bank’s share as indicated by the price/book ratio has improved significantly and compares well with European peer banks,” he said.
“The bank’s recent debt issue in the international markets is performing well with the yield to call tightening significantly since issuance,” he added.
Regarding medium targets, the Hellenic Bank CEO said that the encouraging first quarter of 2023 provides assurance that the bank is on the right track.
“We believe that the evolving interest rate environment will continue to support our financial performance in the coming years, and we expect the profit before tax for 2023 to be higher than €200 million, mainly driven by changes in interest rates, improved miscellaneous income,” Gatzke stated.
“Considering the bank’s expected financial performance and following the Project Starlight completion, the bank will request approval from regulators for commencing dividend payments for the financial year 2023 onwards,” he concluded.
