Ladies and gentlemen, thank you for standing by. I am Yotek, your Chorus Call operator. Welcome and thank you for joining the Alpha Bank conference call and live webcast to present and discuss the full year 2020 financial results. All participants will be in a listen-only mode and the conference is being recorded. The presentation will be followed by a question-and-answer session. [Operator Instructions]. At this time, I would like to turn the conference over to Alpha Bank management. Gentlemen, you may now proceed.

Good afternoon everyone and good morning to those dialing in from the U.S. Welcome to Alpha Bank's full year 2020 earnings conference call. This is Vassilios Psaltis, Alpha Bank's CEO. And I am joined today by Lazaros Papagaryfallou, our Chief Financial Officer and Panagiotis Kapopoulos, our Chief Economist and Dimitrios Kostopoulos, Head of IR. Before starting with the full year 2020 results, a short personal note for a figure that has made Alpha Bank what it is today. March 9 marked the passing of the Yannis Costopoulos, our Honorary Chairman and grandson of the founder of our bank, arguably the greatest banker in Greece from the mid of 1970s onward. He was an exemplary and inspiring leader as well as a lifelong mentor for all of us who were blessed to know him and work with him. A true visionary, when conceiving ideas and during their implementation. An optimist by nature and a pioneer in constant improvement and change. Human and accessible to all of his associates. Yannis Costopoulos was a role model in the fullest sense. All of us at Alpha Bank will miss him dearly and will honor his legacy for a bank that will continue to evolve and play a leading role in Greece. Starting now with the results presentation. We should recall that this has been incredibly challenging year, full of uncertainties and unprecedented situations. However, our bank has swiftly adapted to this new reality and we have been able to support both our customers and employees, while remaining very focused on making significant progress on our strategic goals and in particular on the implementation of our Project Galaxy. Due to the pandemic and containment measures it has necessitated, the Greek economy experienced a historic recession driven by a negative spend on demand front, mainly because of the relatively high dependence on inbound tourism. This has been compensated by a fiscal policy stimulus of €27 billion so far. The policy measures taken by the government supported employment, disposable income and liquidity of businesses, offering much needed breathing space to firms. This is already reflected in the sizable increase of private sector deposits of €20 billion during 2020, compared to only €8.8 billion in 2019, which means that the Greek private sector has the ability to gradually restore and serve its obligations. 2021 is expected to be a challenging year. We expect GDP growth in Greece of around 4%, driven by firstly, the base effect in accommodation, food services and retail trade from the second quarter onwards subject to the speed and efficiency of the vaccinations, not just in Greece, but also in the countries of origin of inbound tourist flows. Secondly, the recovery and resilience facility which may prove a solid foundation for a strong upside as Greece is expected to receive around €5.5 billion from the Next Generation EU 2021, according to the government's budget whereby it is expected that the RRF will be activated in the second half page of this year. Turning to page four, we note the key highlights of our full year 2020 results. Despite the challenges, we managed to deliver significant milestones for Alpha Bank. The continued focus throughout 2020 on our efforts to deliver Project Galaxy has allowed us to enter into a definitive agreement with Davidson Kempner over our €10.8 billion securitization portfolio alongside the sale of an 80% stake in CEPAL. This will allow the bank to massively reduce its NPE and NPL ratios in Greece to 24% and 13% respectively. Transaction closing is targeted within the second quarter of this year. This transformational transaction alongside our coming hive-down process sets the scene for additional actions on the NPE resolution front while allowing redeployment of management focus and resources to continue rebuilding our banking franchise. In business development terms, 2020 was also an important year, as in December, we entered into a long-term bancassurance partnership with Generali, which will be a key enabler for the acceleration of our bancassurance ambitions going forward. In parallel, we capitalized on the pandemic to push ahead with our digital transformation, minimizing physical financial transactions and launching a series of innovative products, including a retail customer onboarding process. 2020 was also a record year in terms of new disbursements to our customers on the back of government sponsored programs and our commitment to support the Greek economy. Notwithstanding the pandemic performance, our financial performance was solid in 2020, with positive trends observed in loan and deposit volume growth, PPI generation and capital adequacy. We achieved a 3.4% year-on-year decrease in our corporate provision income generation while also recording trading gains of €690 million for the year which has allowed flexibility to increase impairments to account for further NPE initiatives. Total pre-provision income of €1.4 billion allowed us to constantly absorb impairments for loans of €1.3 billion, of which €283 million, which makes circa 22%, are COVID-related, while another €320 million related to our planned NPE transactions in 2021. As a result, Group NPE cash coverage increased to 50% pro forma post Galaxy from 45% last quarter whilst our total capital ratio stands strong at 18.4% at the end of December 2020 of 16.9% pro forma post Galaxy and the bank's successful Tier II issuance of €500 million in March this year. We are undoubtedly entering 2021, which is a stressful year with a very strong capital position which allow us to take a balanced approach on further NPE deleveraging through a series of transactions amounting to €3.3 billion in Greece and Cyprus. Our capital advantage, even after the delivery of Galaxy, provide us with additional flexibility on the NPE resolution front, whilst remaining within our stated management targets. Moving on to page five. Here, we are summarizing the key financial metrics of 2020 that show the strong financial performance as mentioned before. Despite the challenging environment, we reported an increase in operating income of 12% year-on-year reaching €2.6 billion in 2020 which was driven by strong operating trends but also by a positive trading line of €690 million. We will continue to deliver on our commitment to optimize operating expenses by reducing cost by 4% year-on-year reaching €1.042 billion, while also improving our cost to income ratio from 57% in 2019 to 55% in 2020. On capital adequacy, our total capital ratio stood at 18.4% in December 2020, which is 50 basis points higher than last year. Project Galaxy allowed us to report a significant improvement in the Group's NPE ratio, which is now down to 26% versus 45% last year. In parallel, we also reported a significant improvement in the Group's NPE coverage to 50% versus 44% in the year before. Let's now move to page six. And here, we draw your attention to our improved commercial performance within the year where we supported the economy by fueling liquidity through €5.6 billion of new disbursements, primarily to businesses, including government-sponsored programs of €1.4 billion which carry a higher return on allocated capital due to a lower risk weighted asset density. As a result, our performing loans, post-repayments and amortization, have increased in the year by €1.6 billion, contributing positively to our net banking income. On the deposit side, we recorded strong inflows of €3.5 billion deposits on a Group basis with a notable shift from term to core deposits. Our digital transformation has continued and was further accelerated due to the pandemic allowing for greater efficiency gains going forward. Currently, 92% of financial transactions are taking place through digital channels while mobile users and digital wallets reported very significant increase within the year. We have also loans that's simple and intuitive mobile-only retail customer onboarding process allowing new customers to open account, get a debit card and subscribe to e-banking in a matter of minutes through myAlpha bank mobile, the bank's mobile banking app, without requiring physical presence. Furthermore, in 2020, we forged a new long-term relationship with Generali whereby Alpha Bank will earn significant bancassurance fees over the next 20 years. Alpha Bank is targeting a significant increase in annual premiums and corresponding commissions in the lifetime of the new partnerships, also creating further value for performance earnouts that we give Generali. Now on page seven, let's have a quick recap on Project Galaxy, a long mile transaction for Alpha Bank, in terms of asset quality improvement and testament to the success of the Hellenic Asset Protection Scheme program which is now in the process of being expanded by another Є12 billion of guarantees. In February this year, we entered into definitive agreement with Davidson Kempner in respect of the Є10.8 billion Galaxy portfolio and the sale of 80% in CEPAL Holdings with the transaction expected to close in the second quarter. Davidson Kempner will acquire 51% of mezzanine and junior notes, whilst we will retain 49% of those before subsequently distributing 44% to our shareholders in the second half of 2021, subject to corporate and regulatory approvals. We have also entered into a long-term servicing agreement with New CEPAL with a 13 year term for the management of our existing retail and wholesale NPEs that will remain on our balance sheet after Galaxy closing as well as any future NPE flows. CEPAL is also supporting the bank in forming its post-Galaxy NPE strategy which will be submitted subsequently to the SSN. The CEPAL platform coupled with the hive-down we are currently concluding will provide us with an enlargement of flexibilities to allow for an even more effective business plan execution. Let's move on now to page nine and go over our NPE reduction in 2021, focusing on Greece. We expect to fully absorb any organic formation for the year on the back of moratoria defaults with planned NPE transaction of circa Є3 billion. As already discussed in our introduction, we have taken upfront more than 85% of the capital impact of these transactions, which comprise of both securitization under the Hellenic Asset Protection Scheme and portfolio sales, mainly Project Cosmos and Orbit. We have come a long way since 2017, having delivered nearly Є5.5 billion average NPE reduction per year or more than Є16 billion in total. Including our planned transaction for this year, we will have delivered 75% NPE decrease within four years, while also targeting the older vintages. This is another step forward towards our target of a single digit NPE percent increase. At the same time, we will retain our flexibility to potentially upsize the ambition for inorganic NPE reduction on the back of our superior capital position and continuously declining cost for the asset protection scheme. On the next page, page 10, let us go through the expected evolution of our capital position. Our full year 2020 total capital ratio stands at 18.4%, having already absorbed the greatest part of the cost of our planned 2021 NPE transactions. Pro forma for Galaxy and the Є500 million Tier II issuance in March this year, our total capital ratio stands at 16.9% and our Core Equity Tier 1 ratio at 14.3% respectively. We anticipate this year's organic capital generation mainly comprised of the pre-tax profit and a synthetic securitization transaction planned for the second quarter to fully offset the IFRS phasing and the RWA growth from business expansion. At the same time, we will absorb the residual cost of the NPE transactions, calculate at incrementally another 10 basis points and remain within the range of our stated management capital targets with an estimated year-end cap ratio of circa 16.8%. The total costs for our 2021 NPE transactions is expected to amount to 65 to 70 basis points overall, positive cap 20 basis points for every Є1 billion of leveraging. On page 11 now, a brief overview of the NPE transactions we are planning on executing this year. Project Cosmos is Є2 billion granular multi-asset HAPS securitization in Greece to be launched in the first half of this year. It is mainly secured with a strong mortgage presence. Project Orbit is a Є900 million consumer unsecured portfolio in Greece to be executed within this year as a straight unit tranche securitization sale. And then finally, Project sky is a Є400 million mix secured portfolio in Cyprus, equally represented by mortgages and SME exposures to be sold as a whole loan portfolio sale. Turning to page 12, you can see that Alpha Bank has had a consistent track record of negative NPE formation for the last three years, including 2020. However for 2021 and given that pressures stemming from a troublesome last year, we expect to see a positive net NPE formation of Є300 million in Greece, excluding the impact of the transactions. In Greek, new NPE inflows for this year are particularly driven by the expiration of moratoria that were in effect during 2020. We do however expect a significant part of this inflow to be offset by organic outflows, mainly driven by curings and repayments, but also solutions that will include debt forgiveness as we continue the restructuring effort on the remaining book. At the chart on the right hand side of page represent a breakdown for the performing moratoria of Є5.5 billion which we begun undertaking last year. We expect that by the end of 2021, circa 80% of these exposures will remain in performing status, partially supported by the Gefyra program as well as new step-up products offered to customers facing temporary difficulties. However, we expect nearly 20% of these exposures to ultimately default.

Let's now move on the financial performance analysis. This is Lazaros. Good afternoon. And let's start on page 15 with a summary of the key financial trends. We can see on the top part of the page that despite the challenges brought by the COVID-19 outbreak in 2020, our core operating profitability improved with core pre-provision income up by 3.4% year-on-year to Є859 million, driven by resilient core revenues and improved operational efficiencies. Reported pre-provision income in 2020 was up by 25% year-on-year and stood at Є1.434 billion supported by high trading gains. More specifically, within the last quarter of the year, Alpha Bank recorded a strong trading line of Є430 million driven by realized gains from the GGB portfolio and benefiting from a GGB swap with the Greek State completed in December 2020, which resulted in a gain of Є171 million. In 2020, total trading income reached Є690 million versus Є410 in 2019. Going forward, the closing of Galaxy within the second quarter of 2020 is expected to temporarily rebase bank's core pre-provision income towards the Є800 million level or a high single digit decrease versus 2020. Coming back to 2020 performance, let's see in more detail the drivers of the improved profitability during the fourth quarter. Net interest income stood at Є388 million, up by 1.6% quarter-on-quarter, mainly on the back of the following drivers. First, we had a higher contribution from the asset side by Є5.1 billion, driven by higher average balances on the back of increased business loan disbursements alongside improved lending spreads affected by the market rate movement. Second, we had Є3 million negative impact from the liability side as increased deposit balances and more negative market rates were only partially offset by lower deposit rates. And finally, we had a positive effect from bonds and other items of Є4.1 million. Looking at year-on-year trends, net interest income was resilient, almost flattish at Є1.542 billion. This was the result of improved funding costs, mainly stemming from the substitution of interbank repos with Eurosystem funding at lower rates, which fully counterbalanced loan NII erosion due to spread pressure. This is in line with our guidance given earlier in 2020 for a flattish NII in the year. Net commission and fees during the fourth quarter of 2020 stood at Є83.8 million, down by 1.2% compared to the third quarter, primarily as a result of weaker performance in the card business with lower transactions due to the lockdown. These were partially offset by higher loan commissions following increased disbursements and increased fee generation from asset management. Fees a yearly basis were down by 1.4% to Є355 million, primarily reflecting decreased fee generation from commercial banking activities due to lower volume of transactions amid the pandemic and partially offset by an enhanced contribution of asset management and bancassurance. These were an even better performance than the minus 2% we guided back in November 2019. We expect fees and commissions to significantly increase by high single digit number in 2021, reversing the 2020 trend as COVID-19 eases. The increase will be fueled by wealth management fees, bancassurance as well as card fee income from the revival of tourism. Going forward in 2021, we expect net banking income to trend lower by circa 5% to 6%, driven by lower NII and higher fees. In the net interest income line, we expect a high single digit reduction as a result of the Galaxy securitization to be recorded within the second quarter of the year. These will be partially counterbalanced by the positive contribution on the liability side stemming from the TLTRO benefit. Higher fees and other income are targeted to compensate circa 30% of the NII loss while recurring cost savings will also set an extra 15% of NII loss in the year. On the OpEx side in 2020 year, recurring operating expenses for the Group continued to decline, down by 3.6% year-on-year to Є1.042 billion, within our guidance and primarily because of lower staff costs due to headcount reduction and reduced general expenses. As a result, the corresponding cost to income ratio declined to 55% versus 57%. Last year, we have recorded improving operational efficiency. In Greece, recurring operating expenses declined by almost 4% to Є834 million, whereas excluding expenses related to CEPAL acquisition during the summer, operating expenses in Greece declined by 6%. In the last two years, we have focused on the optimization and reconfiguration of our platform. So our branches in Greece at the end of December 2020 declined by 107 units to 336 and our employees were reduced by 1,477 to 6,316 employees in Greece. 2021 was the first year of the new NPE servicing agreements with CEPAL and doValue in Cyprus following the NPL units swap outs in Greece and Cyprus. In 2021, we target further cost reduction of approximately 2%, bringing the Group cost base to approximately €1 billion. If we turn now to page 16, we see that our strong pre-provision income generation, including trading gains of Є690 million, stemming mainly from our GGB portfolio, allow for the absorption of increased yearly provisions of Є1.3 billion versus Є995 million in 2019. Impacted by impairments due to COVID-19 of Є283 million and impairments related to anticipated portfolio transactions of Є320 million, as we will see later on, resulting in a positive bottom line with profit after tax at Є104 million for the year. Apart from the profitability line, let us highlight here the year ended with higher coverage and capital levels as shown on the right-hand side, providing us with a the good head start to further NPE reduction initiatives in 2021 as described earlier. Now moving on to page 16 for the capital ratios. You can see that our Common Equity Tier 1 stood at Є7.8 billion as of December 2020, resulting in a Common Equity Tier 1 of 17.3%, up by 10 basis points quarter-on-quarter as the negative impact from quarterly profitability and the decrease of fair value for OCI reserves were more than offset by reduction in risk weighted assets and the implementation of ECB's proposed CRR quick-fix amendments. The Group's fully loaded Basel III Common Equity Tier 1 was up quarter-on-quarter by 18bps to 14.8%. Total capital ratio came to 18.4% at the end of 2020, providing a buffer of more than Є2 billion over our overall capital requirement of 14%. Total Capital ratio remains strong at 16.9%, following the bank's successful Tier II issuance completed in March 2021 and taking into account the Galaxy impact of 280 basis points. Our strong capital position provides flexibility to execute further NPE reduction initiatives while still maintaining profitable buffers as the balance sheet of the bank normalized. The Group's fully loaded BASEL III total capital ratio stood at 16% at the end of December. Lastly, let me note that our GGBs portfolio currently stands at €4.8 billion with the majority now being booked in amortized cost rather than fair value for OCI as used to be the case. The government bonds and realized gains came to €200 million, at the pre-tax level. You can also see at the bottom right part of the page that the yearly trading gains of €690 million are mostly comprised from gains from our GGB portfolio. Moving on to page 17, on liquidity and funding. As you can see on the top left chart, private sector deposits increased by €2.1 billion to €43.8 billion in the fourth quarter with core deposits from corporates accounting for the majority of inflows. The total deposit inflows for the year on a Group basis were €3.5 billion. It is worth adding, as depicted in the chart below, but following similar trends in previous quarters of 2020, we are rebalancing the mix of deposits from time to core deposits persisted in the fourth quarter as well. Our Eurosystem funding remained stable at €11.9 billion at the end of December 2020, reflecting full utilization of our TLTRO borrowing allowance. Currently, 17% of the balance was funded via the European Central Bank, resulting in a blended funding cost of minus 14 basis points for the entire balance sheet. As far as the liquidity ratios are concerned, a notable improvement has occurred in the past 12 months with our LCR standing on 151% as of December whilst the loan to deposit ratio decreased further to 90% for the Group. Moving on to page 18. Non-performing exposure balances in Greece reduced by €28 million during the fourth quarter of the year bringing the total stock down to €18.3 million at the end of 2020. Looking more specifically at gross formation in Greece, entries slightly increased in the fourth quarter to about €440 million due to imposed restrictions and moratoria offerings following EBA guidelines while exits stood at €470 million, mainly on the back of higher curings and repayments coming from the portfolio not included in the moratoria perimeter. As shown on the right hand side of the slide, gross formation in wholesale posted a positive evolution whereas retail continued to report a negative formation. Non-performing exposure formation in 2021 is expected to turn positive by €300 million on inflows for moratoria partly counterbalanced by curings and remedial management actions. Now, moving on to our last slide, page 19. We provide the evolution of cost of risk on a quarterly basis along the breakdown analysis of the COVID-related impairments for the period. In the fourth quarter, impairment losses on loans stood at €569 million, including €320 million impairments related to forthcoming NPE portfolio sales. This resulted to a significant increase of the Group coverage levels shown on the top right, with good cash coverage having an increase of 50% for NPEs and 85% for the NPLs, pro forma for Galaxy while total NPL coverage including collateral stood at 127%. In the lower part of the page, you will note the breakdown of our full year impairment losses between core and non-core loans. With non-core, we refer to our exposure sold or expected to be sold under securitization and portfolio transactions whereas core loans relate to both performing and nonperforming exposures, excluding the proposed transactions. You will note that the underlying cost of risk for the core portfolio is circa 100 basis points. COVID-related impairments further increased cost of risk by 70 basis points and the remaining provisions of 170 basis points for the year were allocated to portfolio sale perimeters, out of which almost half in the fourth quarter of the year. Now les open the floor for questions.

[Operator Instructions]. The first question comes from the line of Floriani Jonas with Axia Ventures. Please go ahead.

Hi team. Good evening everyone. Thanks for the presentation. And well done on the progress achieved in 2020. My first question is on capital and issuances going forward. As you show on slide 10, it looks like your capital position looks still very solid, even after the new announced securitization and already including the recent Tier II as well. There is not much mentioned to the AT1. So I am just wondering how are you planning to play that card? Would you be able to improve your total capital as well going forward? What is the strategy around the AT1 part? And also linked to the issuances, I was just wondering what is the plan on the MREL issuances, if you are planning anything for this year and if you have any projected impacts to NII now for the next one or two years, you also could share? Then my second question is on your trading gains you show on slide 16. I take that €300 million is the number you have in December. So I am just wondering if you have an up-to-date figure to share? I assume that you would have booked part of those gains already in Q1. So just confirming that's the case or not? And then finally on the new securitization, I think that the numbers you present kind of suggest that the cost of the equity and the capital from the new disposals, they are much lower, even on a relative basis compared to Galaxy or other Greek transactions we have seen so far. So I am just wondering if you could just talk a bit about the characteristics? I take that is a lot maybe to do with the mix of the portfolios given that the biggest one is a majority of mortgages, but also I suspect that it kind of reflects what you have been mentioning before that your portfolio and your exposures after Galaxy would have a much improved profile in terms of restructuring but also in terms of cost to clean, let's put it this way. So if there is any color you can shed on those future securitizations would be helpful. Thanks.

Hi Jonas. This is Lazaros. With regards to AT1, which was your question, indeed, the bank has room to issue up to €800 million of AT1 post-Galaxy. Currently, we have no plans to issue AT1. You can see from the capital evolution, particularly in 2021, that we can comfortably absorb the Galaxy impact as well as the impact of further transactions and still maintain a total capital adequacy ratio of 16.7% which is above the management buffers that we want to have over the capital requirement of 14%. So we have at the end of 2021 a buffer to the tune of 2.8% of our overall capital requirement. So there is no need really to consider any further capital issuance. Moreover, going forward, the plan provides for the maintenance of adequate capital buffers within internal capital generation means. So again, AT1 is not in the cards. Having said that, we could consider in the medium-term, in the future, a further optimization of the capital structure with a view to increase return on equity and with further leverage on the capital structure when the market conditions for us will more opportune for issuance of AT1 at much more reasonable cost that we could have these days. So currently, not in the cards. An option for the future, yes. Coming to MREL issuance. Indeed, we will be planning for senior preferred issuance in the coming years, starting in 2021. You should have in mind for 2021 that benchmark issue in similar sizes in the coming years. The guidance I have given for net interest income for the year includes both the Tier II, of course, that we have issued earlier year, as well as a further issuance of senior preferred, inaugural one. On your second question with regards to trading gains, mark-to-market of our portfolio and the fair value for OCI, currently stands lower than €200 million pretax around the €150 million level.

On your remarks in the securitization, indeed cost of the recent transaction comes in lower than Galaxy. The reason for that is twofold. Number one is that the HAPS fee currently, as you will know, which has been picking up from the market gives a more favorable fee structure which gets embedded into the respective cost. And secondly, it is also the mix of the portfolio as well as the increased experience that we are having with using this instrument. Now on a relative basis with our transactions, I would say that there is a rebasing towards the 20 basis points cost per €1 billion. We have seen announced transactions which are a bit lower than that. But we do believe that for the HAPS II, overall we would be converging around these levels. So this is what I think the market should be expecting seeing these cost for these type of transactions over the next 12 to 18 months.

Thank you.

The next question comes from the line of Sevim Mehmet with JPMorgan. Please go ahead.

Hi. Good evening. And thanks very much for the presentation. I will have a few questions, please. I will start with NPEs in 2021. So when I look at your guidance for net NPE formation, I see that is at around €300 million which. to me, sounds like a positive, quite a positive statement. And I see on slide 12 that this assumes €1.7 billion of gross inflows in 2021. And it's a pretty similar figure to what we saw in 2020, to be honest and despite all the moratoria, et cetera that we had last year. So if you could you maybe just talk a little bit more detail about the dynamics here of where you would see those inflows and basically, what part of it for moratoria and the underlying, that will be very helpful for me. And in terms of the remaining NPEs, now we have come a long way, obviously, since 2017 and also executed Galaxy without a delay and I totally understand that the quality of the remaining book will improve meaningfully post-Galaxy. But when we look at the balance, it's still $6 billion balance in Greece that you expect in 2021, which as a headline number looks higher than some of your other peers. So I was just trying to understand your thinking here in terms of upsizing the securitizations that you have using your very comfortable capital position? How is your thinking? And is there something that you are basing, let's say would you expect the 2020 environment to be better than now, et cetera? So if you could tell us any color, that will be very helpful, I think. Thanks very much.

Hi Mehmet. This is Lazaros. On your first question regarding our projections for a net organic formation, indeed the bank projects inflows to the tune of €1.7 billion, our of which we project €1 billion to come out of those loans that have received moratoria in 2020. And this default rate, approximately at 20% or slightly less than 20%, it's our current estimate for such defaults. You will note that additional remedial actions and strategies are applied for this perimeter, on page 21, on the right part of the page, that if we successfully applied this perimeter, they will result to lower than 10% defaults on loans under moratoria. And then we have an additional €0.7 billion of defaults the non-moratoria perimeter with default rates comparable to the numbers that we have seen in previous years. On the sizing and the comparison with the previous years, you have to note that we are talking about a deterioration mainly coming from both loans which have been under moratoria and are currently accounted for, to a large extent, under stage two. 67% of those loans in moratoria are already in stage two and inflows into the stage three, mainly will come almost by 90% or more than 90% of those loans that have been accounted for in stage two. And to the extent that our macro scenarios and risk stresses that we have applied already in 2020 booking, in 2020 cost of risk for COVID, are confirmed and it seems that the base case macro scenarios that we are facing here are better that ones we have in our fourth quarter accounts. Then these inflows will not have any material impact on the provision line in 2021 because we have already built buffers. Then, if you want to see how net formation will trend, you need to take into consideration the fact that we have a consistent trend of exits from NPEs on the back of restructuring activity and a large pool of forborne entries that we have in our portfolio. This large pool of forborne entries procure curings for loans that have been previously restructured. In this case, 2020 is going to be a particular year because we are going to face curings, not just from restructurings that have happened in 2021, but also from the restructurings that have happened in 2019, as in 2020 we have frozen curings to a good part of these loans. So some of these curings will take place in 2021. Also, we are continuing with CEPAL modifications and long term restructurings with haircut. So we expect a significant amount also to come from loan restructurings with haircut and at much more level, obviously, volume from liquidations. As we have currently suspension of auctions, so the numbers there are not sizeable. Whereas the €300 million net formation seems to be a positive number under the circumstances. On the other hand, it's a markable deterioration of the plans that we had in mind pre-COVID as we were expecting a much higher organic deleveraging out of our restructuring efforts for both 2020 and 2021.

As far as your second question is concerned, this is Vassilios, on the remaining NPEs. Our stated targets for NPE deleveraging in Greece continues to be to achieve single digit NPE ratio at the end of 2022, which means that from the envisaged level at the end of 2021, that will be incrementally a deleveraging of €2.5 billion. Now, in April, we are having submission for the next three years for the NPE plan to our regulator. That's why we are currently contemplating how we are going to be faring over and above 2021. But the point I want to make is that even if we decide to grow fully inorganically. this given our capital position and the costs estimate that as said currently are prevailing in the market, we are talking about an operation. Given that our capital allows for flexibility, both in terms of sizing and timing of inorganic NPE deleveraging.

That's very clear and very helpful. Thanks very much.

The next question comes from the line of Singh Vijay with Fiera Capital. Please go ahead.

Hi. Thanks for taking the questions. First question I had was, looking at Galaxy and the senior tranche size as you have described, it does seem like the junior tranche could come around €2.3 billion or so with a very large mezz. And what this would imply is that you are looking at probably getting rid of a tiny provision of those NPEs and the subsequent portfolio could be probably a lot better in quality. Is that a fair assumption? I mean what sort of a portfolio would remain, what kind of an NPE portfolio remain, post the Galaxy transaction versus what you get rid of in Galaxy?

I am not sure I got the full question. The latter part was about quality of the portfolio post-Galaxy, which is depicted on page nine of the presentation at €8.8 billion in Greece with a good part of representing forborne NPEs, namely below 90 days past due and the remaining almost 50% on NPLs. The transaction activity that we see for Cosmos and Orbit mainly comes out of the NPL space that stays back after Galaxy. This has been our focus so far on our deleveraging efforts. You will note that since December 2017, out of €16.6 billion of nonperforming loans above 90 days past due, we are ending up at €4.7 pro forma for Galaxy and then we are taking more €3 billion from the NPL space to drive the NPL ratio in Greece at around the 10% level.

Okay. And does the €3.5 billion NPE expectation for the December 2022 include the COVID overflows?

Yes, it does.

Okay. And then in regards to the agreement with Generali, I mean in a lot of cases banks do tend to get some advance fees with these agreements. And I am wondering is there a capacity or buffer available to cushion any expected capital hit for the future securitizations with advance fee payments from Generali. Is that something that is possible or something you have considered?

The Generali transaction is not a capital measure for the bank. It's a very important commercial agreement to penetrate the insurance market in Greece which is underpenetrated. There has not been an upfront consideration worth mentioning affecting our capital numbers. However, there have been arrangements for fees and as announced throughout the 20 years period, in order not just to align interest between the parties, but also to incentivize further sales and penetration. It's going to be an important income stream for the bank in the coming years and we have optionality and flexibility to use this stream to boost our financial position.

Okay. And then you could possibly be looking at any frontloaded payments at all? Or is it not a part of scope as you mentioned? You are not looking at it as a capital improvement measure?

Can you repeat the question? I didn't get it.

Sure. Could you be looking at any advance payments at all, any upfront payments? Is that something that you have considered, considering that you are going through a major cleanup exercise? Or you think it's probably not required, you are still comfortable with your capital buffers?

No advance payments.

Okay. And in terms of the NPE portfolio that remains of €3.5 billion, what would be the expected provision cover on these at the end of December 2022?

We have at the end of December 2020 at 50% cash coverage.

No. I am talking about post-securitizations. Can you get to your targeted levels? What would be the provision cover on those that remain?

We expect cash coverage to remain at these levels by the end of the reporting period, the plan period.

Okay. And in terms of the NPE reduction plan that you are planning to submit, are there any regulatory restrictions on a certain level of cover that you need to maintain? Is that a part of scope? Or you would have pretty much fulfilled the requirements of going below 10%?

There is no instructed cash coverage levels.

Okay. And I see a significant difference. I mean in terms of the NPE and NPL you are talking about the inclusion of senior notes, but these are state guaranteed, right. So I am just wondering what is causing the significant divergence between? Is it just the duration? Or is there something else at play?

I am not quite sure why you are referring to the difference between the NPEs and NPL that we are having to the thickness of the senior or to the duration of transaction. That we couldn't understand. Therefore, please rephrase your question.

Sure. For example, let me guess, I go back to your earlier slide, this is slide number, yes, you are talking about, for example, can't see the number here, but you are talking about an NPE increase of about 52%. And I mean this was 2017 and the NPE ratio was around 34%. And the explanations given is that the basis for ratio includes the senior notes of the securitization. But I am wondering if these are state guaranteed instruments, then why is there such a significant divergence between the NPE ratio versus the NPL?

The divergence between the NPE and NPL ratio has to do with the fact that NPEs include also restructured loans forborne nonperforming exposures below 90 days past due. And that's a pool from which we expect curings to happen because we are talking about paying customers who are in the corridor of getting cured. And that is the delta between NPEs and NPLs.

Okay. Perfect. One last question for me. In the context of what's going on in the sector, how do you see the current equity valuation of the bank? And I am just wondering, do you see any set of circumstances under which you raise equity capital in the next two years? And is it possible that we get non-preemptive kind of a capital base rather than a typical rights issue? Could you comment on that please?

Well, typically we do comment on valuation. The only comment that we could make is with reference to the market reaction following the signing of our Galaxy transaction where we see that actually the market is indeed appreciating the significant improvements in our portfolio and also the fact that we are fully implementing our plan. As we have said before, we are continuing on working on the plan as far as potentially further accelerating our NPE plan. And along with that, we have also our transformation program. So all that may be further things that we may want to communicate as soon as we have been ready.

Okay. Thank you. That's all for me.

[Operator Instructions].,The next question comes from the line of Boulougouris Alexandros with Wood & Co. Please go ahead.

Yes. Hello. Many thanks for the presentation. Just two very quick questions. Regarding the Є320 million that was set aside in Q4 for portfolio sales, so the Cosmos and Orbit are fully covered by this amount? That's my first question. And my second question is regarding the Cyprus business. I saw you announced an NPL sale of Є400 million. Is there a plan for the remaining NPE stock in 2022 for the target to reduce the NPE ratio to below 10% by end of 2023, implies for the Group as well, I assume? Thanks.

Alex, it's Vassilios. As far as your first question is concerned, we have put on page 10 the respective impact on our capital position. There you can see the Є320 million, i.e. 60 basis points that have been affecting our capital at the end of this year. And then another 10 basis points in 2021 capital impact in order to have the completed cost, as we said, of roughly 70 basis points in terms capital. That's point number one. Point number two, on the group target, this is something that we are still contemplating. And this is part and parcel of the exercise that we are currently moving. So on that front, yet we can't say more but conceivably this is the direction of travel that you have described.

Thank you.

The next question comes from the line of Nagel Alberto with Mediobanca. Please go ahead.

Yes. Thank you for taking my questions. The first one is on TLTRO. Are you planning to increase the amount of TLRO or if you have already done it? And can you repeat the guidance on NII. I just missed it. And if these includes also the positive contribution coming from the TLTRO taken in 2019? And then can you share with us the MREL requirement and if you need to be complied with by 2026? And then if you can give us a guidance also on the trading income for 2021 or you are booking some extra gains in the first quarter of 2021? And the last one is on restructuring cost. If you expect to book a further restructuring cost in 2021 to fund the cost cutting? Thank you so much.

As far as the TLTRO III is concerned, indeed we have space for maybe Є1 billion more. I am not sure we are going to use in full. The guidance I had given for a high single digit reduction of NII, assuming Galaxy to be consolidated towards May from our portfolios. It includes also the benefit that we are going to book in 2021 out of TLTRO and the benefit we are going to include in 2021 includes both a retroactive amount that corresponds to the second half of 2020, approximately €25 million plus an additional amount that corresponds to the entire 2021 year. So, in total, we are expecting only out of TLTRO a boost of our NII by approximately €100 million for 2021. And coming to MREL, we cannot disclose both the interim binding as the final targets. We are expecting to have the official communication from SRB in the coming weeks. You should expect to see that the phasing of our obligations to issue MREL goes up to 2026. And we are provided adequate time to tap the markets for benchmark issues. Of course, after many years of absence from the senior market, however we see opportunities to start tapping the market for senior preferred already in 2021. Now, with regards to trading income. There have been additional crystallization of gains in the first quarter of the year. I cannot give guidance for the entire year on trading gains but already in the first quarter we are doing more. As far as restructuring costs are concerned, indeed the bank is under transformation. We are implementing ambitious restructuring effort on both the Greek and international operations that require restructuring cost and we are making also investments in IT and technology. Plus, we have enveloped for voluntary exit schemes that have been used extensively in last few years. So you may see additional restructuring costs already employed in 2021 to facilitate our business plan.

Thank you so much.

Depending on whether we will proceed to further options on the Greek franchise, we may see additional restructuring costs to the tune of the levels we have recorded in 2020. But this is not something to give guidance. It really depends on whether and when will kick start further actions.

Yes. Thank you.

The next question comes from the line of Memisoglu Osman with Ambrosia Capital. Please go ahead.

Hello. Given your plans on the amended plans on the NPE reduction, is it possible for you to give us an update on the evolution of cost of risk and return on tangible book over the next couple of years? Thank you.

When we announced last year our business plan, it was November 2019, we had the trajectory of getting to at cost of risk lower than 1%. And this is still the target, following a very significant deleveraging of NPEs. Obviously, this is not for 2021, maybe not even for 2022. As far as 2021 is concerned, we will be guiding towards a cost of risk to the tune of 1.6% over net loans. And thereafter the trajectory, we go down 1% and lower than 1% in the coming couple of years.

Thank you.

We have a follow-up question from the line of Singh Vijay with Fiera Capital. Please go ahead.

Thanks and just one follow-up. In the last presentation, you did talk about an Є8.8 billion NPE had Є3 billion haircut. And I am just wondering, does it mean that the exit prices for these NPEs could be higher than in the past transaction? Are you seeing a better market overall? If you could just given any market color, please?

If I understood well your question, you are referring to the cost of doing more transactions, right?

Yes.

And there was a reference by Vassilios on the new transactions. Overall almost 70 basis points for the €3.3 billion that we are going to transact in 2021 or 20 bips for €1 billion of portfolio sales. You have to appreciate that securitization under the asset protection scheme is a more capital efficient way to dispose nonperforming exposure as against outright sales. And the cost of 70 BIPS that we have presented here for the three transaction would have been lower if it was just a HAPS transaction. But here, out of the three transactions, two are going to be outright sales.

Perfect. Understood. That's very helpful. Thank you. That's all.

Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to management for any closing comments. Thank you.

Thank you very much for taking the time to participate at our full year result presentation. We are looking forward to welcoming you on our first quarter results to be announced in May. Thank you very much.

Ladies and gentlemen, the conference is now concluded and you may disconnect your telephones. Thank you for calling and have a pleasant evening.