U.S. Markets closed

Edited Transcript of TPEIR.AT earnings conference call or presentation 22-Nov-19 4:00pm GMT

Q3 2019 Piraeus Bank SA Earnings Call

Athens Nov 27, 2019 (Thomson StreetEvents) -- Edited Transcript of Piraeus Bank SA earnings conference call or presentation Friday, November 22, 2019 at 4:00:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Christos Ioannis Megalou

Piraeus Bank S.A. - MD & Executive Director

* Theodore Gnardellis

Piraeus Bank S.A. - GM & Group CFO

================================================================================

Conference Call Participants

================================================================================

* Angeliki Bairaktari

Autonomous Research LLP - Analyst

* Iason Kepaptsoglou

HSBC, Research Division - Analyst

* Jonas Scorza Floriani

Axia Ventures Group Ltd, Research Division - Director

* José Maria Abad Hernandez

Goldman Sachs Group Inc., Research Division - Executive Director

* Maria Semikhatova

Citigroup Inc, Research Division - VP and Analyst

* Panagiotis Kladis

Eurobank Equities Investment Firm S.A., Research Division - Research Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Ladies and gentlemen, thank you for standing by. I'm Gail, your Chorus Call operator. Welcome, and thank you for joining the Piraeus Bank conference call to present and discuss the 9 months 2019 financial results. (Operator Instructions) The conference is being recorded. (Operator Instructions)

At this time, I would like to turn the conference over to Piraeus Bank's CEO, Mr. Christos Megalou. Mr. Megalou, you may now proceed.

--------------------------------------------------------------------------------

Christos Ioannis Megalou, Piraeus Bank S.A. - MD & Executive Director [2]

--------------------------------------------------------------------------------

Good afternoon, ladies and gentlemen, and good morning to those joining us from the U.S. I'm Christos Megalou, CEO of Piraeus Bank, and I'm here today with our senior management and IR team. Thank you for attending Piraeus Bank's 9 months 2019 results presentation.

During the call, we will be presenting our financial results and will focus on the key achievements of the last 9 months and the trend for the upcoming period.

I'm going directly to Slide 4 of the IR presentation where you can find our milestones in 2019 to date. Through our decisive actions during the last 2 years, we have laid the foundations for the bank's return to profitability. For the 9 months 2019, Piraeus Bank produced a 2% return on tangible equity. For Q3, it was 3.3% with favorable prospects as we continue to progress with the execution of our Agenda 2023 road map.

On Slide 5, we present the financial takeaways for the 9-month period. As you can see, progress is evident on all fronts, from profitability to capital and from NPE management to liquidity, especially for capital. The 16% level achieved through all our strategic actions in the past quarters is among the bank's key accomplishment for 2019. All in all, since May 2018, our total fully loaded ratio has increased by about 270 basis points.

Turning to Slide 6 and 7. We start with profitability, which continues to be restored at a healthy pace for the past 5 quarters. Pretax profit on a recurring basis stood at EUR 146 million in 9 months 2019 compared to EUR 98 million in 9 months of 2018. This was enabled by recurring core revenue generation while the focus on cost efficiency continues to deliver. Net interest and net fee income were higher by 2% and 6% year-on-year, respectively, while these 2 P&L lines combined contribute 95% of our net revenues in the 9 months period.

Operating expenses were down 6% year-on-year and 3% quarter-on-quarter on a recurring basis. And the current run rate indicates we will achieve our target of approximately 5% reduction for the whole year. On top of these efforts, we are aiming for further efficiencies through a number of initiatives coupled with the cost relief stemming from the NPE servicing agreement. Pre-provision income for the 9 months of 2019 was up 8% year-on-year on a like-for-like basis and cost-to-income improved to 52% versus a 56% level for the same period last year.

We are aiming to see our financial KPIs improving consistently quarter after quarter. And as the environment in which we operate improves, we expect our financial performance to strengthen further.

On Slide 8, we saw a proven quarterly track record on a number of KPIs during the past 5 quarters. Piraeus' solid performance in the 9 months 2019 was also facilitated by the EUR 3 billion new loans that we have disbursed with business lending driving the trends while retail lending is also posting a group recovery albeit from a low starting point. The group's net loan-to-deposit ratio further improved to 84% versus a 91% a year earlier, signifying that the bank is in a position to respond to accelerate in credit demand, enabling us at the same time to support our net interest margins.

Turning on asset quality. As you can see on Slide 10, Q3 '19 was the 16th consecutive quarter of NPE reduction for Piraeus Bank, while from the peak of September 2015, our NPE balances have shrunk by EUR 12 billion. On a quarterly basis, group NPE balance was down EUR 0.4 billion as seen on Slide 11. Organic NPE inflow in the third quarter 2019 continued its strong downward trend while curings, restructurings and collections remained robust. The quarterly decrease of NPEs came despite a EUR 675 million reclassification due to technical reasons. The reclassifications were a response to UTP performing loans that are serviced, not defaulted yet attached with an NPE flag for prudent reasons after the bank's assessment. The adjustment is attributed to a handful of accounts practically, too. The bank's objective is to ultimately maximize the benefit associated with these accounts as the bank's credit class exposure is assumed to be either repaid through the utilization of assets used as collateral or to be sold.

Overall, our expectation is that our planned actions will mitigate the impact, releasing the provisions earmarked. Importantly, the reclassification does not impair our 2020 or 2021 NPE target. NPE cash coverage starts at 46% impacted by the NPE reclassification and the classification of the highly covered Iris portfolio as held for sale. On the other hand, our NPE collateral coverage has increased quarter-on-quarter to 49%, helped by increasing collateral valuations, driving the bank's total coverage to a comfortable level of 95%. Cost of risk for the third quarter 2019 was within guidance at 165 basis points over net loans. It is important to note that the improving trends in new NPE flows are clearly depicted in the organic cost of risk development.

To illustrate this, we produced a breakdown of our cost of risk in organic and inorganic elements on Slide 12. The EUR 90 million organic credit charges in third quarter 2019 were impacted by the NPE adjustment mentioned earlier. Excluding this, the organic cost of risk is in negative territory and total cost of risk is close to breakeven, helped by increasing collateral valuations that contributed close to EUR 200 million in the third quarter. In addition, we booked EUR 67 million cost of risk for inorganic NPE activity.

Basing on the positive track record that we have achieved so far, we are working to execute our NPE plan in an accelerated manner, facilitated by the recent strategic partnership with Intrum. On this front, we are currently in the preparatory phase of EUR 8 billion NPE securitizations, also in anticipation of the launch of the Hellenic Asset Protection scheme, or Hercules, as it is widely known. The EUR 3 billion NPE securitizations, you can see on Slide 13, comprise a EUR 2 billion residential mortgage portfolio securitization, project Phoenix; the EUR 1 billion secured business loan securitization, project Bridge.

Regarding project Phoenix, for which execution is in an advanced phase, the bank has engaged 2 rating agencies and has applied to the SSM for significant risk transfer. Our baseline scenario is the project to have been concluded before the end of first half of 2020.

Overall, we consider that the successful implementation of HAPS or Hercules, coupled with favorable conditions in the markets for the issuance of nondilutive capital instruments, will facilitate the acceleration of the existing NPE reduction plan. In this context, we intend to provide further details in early 2020.

Moving on to Slide 14, Intrum Hellas. Together with our partner Intrum, we have exceeded expectations and concluded the project and all work streams related with the strategic partnership for the new servicer in just 4.5 months. The new servicer is up and running, and we expect to see efficiencies and enhancement of the recovery process in the forthcoming period. All decisive actions taken during the past few quarters along with a tier 2 issue last June have strengthened our capital position as presented on Slide 15.

It is worth noting that our phased-in total capital ratio now stands at 16%, enhanced by the completion of the NPE servicer transaction with a contribution to capital CET1 of 70 basis points. The respective fully loaded ratio stands at 13.3%. For 2020, our total capital requirement will be at 14.25% given the phasing of the systemic buffer for which we can report. The fully phased level will be 75 basis points in 2021 as per BoG 2019 assessment.

We have solid organic capital generation this quarter, which added 30 basis points to our capital position, and we remain vigilant to further enhance our capital via optimization initiatives and by further growing our profitability, as you can see on Slide 16.

Taking note of the bank's improved capital position and in line with our capital management strategy, Piraeus Bank Board of Directors have decided to pay the EUR 160 million coupon of the contingent convertible to the Hellenic Financial Stability Fund in cash. And this is going to be due on 2nd of December 2019. We remain comfortable with its fairly priced perpetual CET1 capital contributing instrument in our balance sheet.

On liquidity. Liquidity continues improving as you can see on Slide 18 with about EUR 1.4 billion deposit inflows from the private sector year-to-date, which came at a decrease in cost. Total deposit cost have fallen to 39 basis points during the third quarter 2019. At the same time, we're now able to utilize the interbank market at negative interest rate.

On Slide 20, in lieu of the completion of this year, we reiterate our targets for the full year. We expect new loans to be priced higher versus stock. On the funding cost side, deposit cost continued trending lower with renewed effort in Q4. Hence, we expect to have a broadly stable net interest income in 2019 at EUR 1.4 billion. We expect net fees to set at around EUR 320 million as they accelerate their trend in the last 2 quarters of the year. Operating expenses are targeted to drop below EUR 1 billion on a recurring basis.

In all, we target to move at the level of around EUR 150 million for pretax profitability for 2019. For the current quarter, I'm pleased to say that all KPIs are well on track from healthy business volume generation to deposit cost containment and to the positive trends in organic revenue and OpEx. We are setting up our actions and we are working hard in making Piraeus Bank better and stronger. The improving prospects of the Greek economy are expected to be reflected in our budget for 2020, for which you will receive more granular information along with our full year results disclosure early next year.

As the operating environment strengthens, we are confident that our financial performance will progress further. We aim to grow our pretax profitability in 2020 versus 2019. And this will rely on solid core revenue generation while we intend to continue our progress on cost efficiency.

From a bird's eye view, we expect net interest income to withstand the impact from NPE derisking and the increased cost for debt issuance supported by new disbursements along with curings and lower funding and deposit costs. We aim for a greater fee income contribution, mainly stemming from asset management, new loan generation and enhanced cross-selling. New credit demand is an important driver in our business situation and increase loan disbursements in 2020 versus 2019. This is in our plans, and we feel very comfortable and confident about it.

An indicative example is Ellinikon, the old bank in the airport project. Piraeus Bank will be leading the financing of the project by undertaking to underwrite and arrange as a mandated lead arranger up to 50% of the necessary funding for the first 5-year period of the project. The total budget of the project including equity stands at EUR 1.9 billion for this 5-year period.

Overall, we are proud of the bank's achievement so far. We have demonstrated a track record of tangible results in rebuilding our capital base, reducing our costs and managing our NPE exposures while taking decisive actions in building a better and profitable bank. We know there is more to do, but we now move on a clear path.

In closing, we remain focused on successfully executing our strategy, and we are planning for an even more productive 2020. Now we open the floor to questions.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) The first question is from the line of newer Floriani Jonas with Axia Ventures.

--------------------------------------------------------------------------------

Jonas Scorza Floriani, Axia Ventures Group Ltd, Research Division - Director [2]

--------------------------------------------------------------------------------

I'll start my question with Slide 11 and on that reclassification. Sorry to go back there but if you can please just go back to the reason why you have to do the reclassification. As far as I understand by looking at the extra impairment you took of EUR 67 million over the EUR 700 million exposure is something like 10%. So it feels like it's a stage 2 under IFRS 9. So there, if you could just make the clarification on why you moved that into what would be like a stage 3, right, as an NPE.

And then my second question is on slide -- is on the same slide, on Slide 11 again. On curings and collections and liquidation, do you feel that you are falling behind a bit on the pace of debt reduction? As far as I remember, the pace that you need there, it's a bit higher than the EUR 0.6 billion to EUR 0.7 billion. So I don't know if you are thinking about offsetting that with maybe higher write-offs or maybe a pickup in sales. So if you could clarify a bit of dynamics of your curing, collection and liquidations in Q3 but also going forward.

Then Slide 16 on your capital actions. Any hint on the timing for the EFG management actions to materialize? I think you've done very well on delivering so far in the 9 months, a lot more than the initial guidance for the year, which was at the high end was 200 basis points and you're now at 270. So well done for that. Just wondering now going forward the timing for the other measures to materialize.

And then finally just a quick question on the CoCos and the payment. Just wondering if how -- if you've had the discussions on the considerations between paying the coupon in cash or in-kind and why did you decide for one over the other.

--------------------------------------------------------------------------------

Theodore Gnardellis, Piraeus Bank S.A. - GM & Group CFO [3]

--------------------------------------------------------------------------------

Jonas, this is Theodore Gnardellis. Thanks a lot for your questions. First of all, on the reclassification of the NPEs, just to clarify, the EUR 600 million to EUR 700 million that you mentioned is not the expected loss that we recognize on this account. This is actually the inorganic result. The impairment on this account is actually included on the organic result of EUR 90 million. And as we have said, without the particular impairment, we would be in negative territory. The fact of the matter is that under a particular prudent and conservative scenario, these particular accounts have been assessed to potentially incur some expected losses and, hence, the reclassification as well as the relative charge. However, these accounts are UTP performing accounts. There's no delinquency, and we do remain focused on recovering these accounts and actually releasing those recognized expected losses over 2020.

To your question about the organic outflows of curing, collection, liquidation, the EUR 0.6 billion, there is an observed concern on the liquidations. The curings and collections remain quite strong and they're according to plan. On the liquidations, we have seen a slowdown versus the expectation. We have had much more scheduled auctions than we have had in the past, however, a higher level of cancellations due to the lack of bidders. This can be attributed, of course, to the particular year and also the occurrence of the elections last summer. That said, we are working with our servicer to market the liquidation and the foreclosures much more aggressively to relevant parties, and we expect also the increasing real estate prices to create a pull factor on these foreclosures.

When it comes to the capital actions on Page 16, we have definitely overperformed versus our previous guidance of 150 to 200 bps. We've done 270 bps versus the previous guidance. I will say that the rest of the activities are rather ongoing, and we will continue our efforts over time. The RWEs did fall by 4% as a result of that year-on-year.

--------------------------------------------------------------------------------

Christos Ioannis Megalou, Piraeus Bank S.A. - MD & Executive Director [4]

--------------------------------------------------------------------------------

On the CoCo coupon payment, Jonas, it's Christos Megalou. I was maintaining all along throughout my presentation to investors that we intend to pay the CoCo coupon in cash, and this is what we have delivered. So that was the option that management was focusing on and we are very focused in delivering it and we have delivered it for this year as well.

--------------------------------------------------------------------------------

Operator [5]

--------------------------------------------------------------------------------

The next question is from the line of Bairaktari Angeliki with Autonomous Research.

--------------------------------------------------------------------------------

Angeliki Bairaktari, Autonomous Research LLP - Analyst [6]

--------------------------------------------------------------------------------

On the UTP reclassification, do I understand correctly that this relates to 2 accounts only? And is it fair then to assume that these are corporate loan exposures? On the EUR 67 million for inorganic NPE project, is it fair to assume that this relates to the upcoming sales and securitization that you have on the pipeline, which you have disclosed today? Or does it relate to something else? And then I calculate that your performing loans have dropped quite a lot quarter-on-quarter by something like 2.4%. Is there anything seasonal in there or any one-off items related to that? Because it looks like quite a big drop's. Have there been any sort of big ticket repayment of any loans this quarter that could explain it?

And one last question on the cost of risk -- on the organic cost of risk. You say that it has been helped by collateral valuations by something like EUR 200 million. Does that mean that if you didn't -- so if we -- can we just then apply very simplistically the cost of risk that you posted this quarter of EUR 157 million? If we just take EUR 200 million out of that, is that what you're referring to as negative sort of organic formation, excluding this reclassification? So is that the right way to think about it?

--------------------------------------------------------------------------------

Theodore Gnardellis, Piraeus Bank S.A. - GM & Group CFO [7]

--------------------------------------------------------------------------------

Angeliki, thanks a lot for your questions. Indeed, the reclassification of EUR 670 million has to do with a handful of corporate accounts. So nothing major there, primarily focused on 2 accounts out of a very small number.

When it comes to the inorganic charge, this is actually mostly driven by the classification of held for sale of the Iris portfolio plus some corporate bilaterals that we've done there. So it is not about the future potential projects, but projects that were actually completed in the quarter.

Regarding the performing loans, this is actually the counter effect of the reclassification. These are performing accounts that were reclassified. As a result of performing, the book dropped, and the corresponding NPE book dropped. Other than that, the gross loans would be quarter-on-quarter flat, excluding the Iris and the write-offs that were performed.

As far as the -- your question on the organic cost of risk, indeed, the result that we have seen in Q2 and the performing -- the performance of the real estate assets as reported by the Bank of Greece have created a very big increase in the revision of our forecast for real estate going forward, which created that relief. And that is -- it is indeed embedded in the EUR 90 million organic result that we are -- showed by reporting.

--------------------------------------------------------------------------------

Angeliki Bairaktari, Autonomous Research LLP - Analyst [8]

--------------------------------------------------------------------------------

And if I may just follow up on fees, on the fee target for the full year. It used to be around EUR 340 million and now it's around EUR 300 million. Is that the correct read of that slide? Or is it just rounding effect? Effectively, my question is, should we expect it to be EUR 40 million lower versus the previously stated target?

--------------------------------------------------------------------------------

Theodore Gnardellis, Piraeus Bank S.A. - GM & Group CFO [9]

--------------------------------------------------------------------------------

Thanks, Angeliki. Actually, the guidance and the expectation for the fee result of this year is in the EUR 320 million area given the seasonality and the acceleration of fee income that we expect in the last quarter. That remains a very strong 6% increase on a year-on-year basis.

--------------------------------------------------------------------------------

Operator [10]

--------------------------------------------------------------------------------

The next question is from the line of Abad José with Goldman Sachs.

--------------------------------------------------------------------------------

José Maria Abad Hernandez, Goldman Sachs Group Inc., Research Division - Executive Director [11]

--------------------------------------------------------------------------------

I have 2 questions. The first question is the -- whether you still keep the same NPE targets for the coming years. Starting with 2019, you were targeting an NPL level of EUR 22.9 billion. You are quite far away from that level. So do you reiterate that or you are going to revise those targets?

The second question is if you could remind us whether your 17% total capital target by 2023 incorporates the CoCo -- doing the CoCo or you are planning to repay that at some point between now and 2023.

--------------------------------------------------------------------------------

Theodore Gnardellis, Piraeus Bank S.A. - GM & Group CFO [12]

--------------------------------------------------------------------------------

The NPE target of '19 will be impaired by the reclass that we just did until we actually resolve. However, we do confirm the targets of '20 and '21. We remain committed to those. These particular accounts, we expect to resolve within that time frame.

As far as your question on the long-term capital trajectory, this remains a -- this includes a payment of the CoCo coupon going forward, as we have previously communicated.

--------------------------------------------------------------------------------

José Maria Abad Hernandez, Goldman Sachs Group Inc., Research Division - Executive Director [13]

--------------------------------------------------------------------------------

Okay. So one comment, you mean that you -- so the payment of the CoCo you referred to, that you will repay the CoCo after '20 is actually the CoCo with traditional capital. So the amount of capital generation will be higher than the 100 bps, the 100 bps plus actually the 2 million CoCo, right?

--------------------------------------------------------------------------------

Christos Ioannis Megalou, Piraeus Bank S.A. - MD & Executive Director [14]

--------------------------------------------------------------------------------

So José, sorry, it's Christos Megalou. No, what we are saying is that the 17% of total capital incorporates the CoCo as an instrument. We are -- as we said, we are very happy with having this instrument into our capital stack. We think it's fairly priced and before or after tax level of almost like 5.5% is a cheap form of CET1 capital. So as we have been maintaining and as is included in our business planning and in our Agenda 2023 target, the numbers that we show include -- this 17% in 2023 includes the CoCo -- including the CoCo instrument.

--------------------------------------------------------------------------------

Operator [15]

--------------------------------------------------------------------------------

The next question is from the line of Kepaptsoglou Iason with HSBC.

--------------------------------------------------------------------------------

Iason Kepaptsoglou, HSBC, Research Division - Analyst [16]

--------------------------------------------------------------------------------

A couple of questions on my side, returning to something that we have already touched upon. On the reclassification to UTP, can you potentially give us some color on what has triggered this reclassification? Probably to appease any concerns that it might happen again with other parts of the portfolio. So what specifically was the trigger for these exposures to fall from performing to nonperforming?

Second question. The curings for this quarter were, according to slide -- I think, Slide 11, about EUR 400 million. I think that's one of the lowest levels that we've seen for quite some time. Is this because we're not really seeing less curings of restructuring efforts bear fruits? Or is it just, let's call it, seasonal impact and we should expect a pickup again going forward?

Third question on the real estate assumptions change. Can I just confirm that what you have changed is the current level of real estate prices rather than your projections about growth in real estate projects going forward or whether that's also changed in your models? So are we talking about realized real estate prices or future projections of real estate prices?

And then the final question, given that you have much more intense and close conversations with the HFSF about the divestment plan, could you potentially give us some color on when we should expect to hear from them and the Ministry of Finance on the publication of their divestment strategy?

--------------------------------------------------------------------------------

Theodore Gnardellis, Piraeus Bank S.A. - GM & Group CFO [17]

--------------------------------------------------------------------------------

Iason, thanks a lot for the question. The UTP reclassification that was done for these accounts -- for these handful of accounts, in particular the 2 ones. It has to do with evolution and assessment that we have done on the particular accounts. And taking a prudent approach, we recognize some expected losses on these accounts. But what is more important is that these accounts are to be midterm result, and we are working to actually recovering those expected losses going forward. So it is not something that in the midterm affects the capital position or the NPE plan of the bank. The collaterals that are in these accounts and the behavior of these accounts is quite strong. However, taking a prudent approach as part of the enhanced governance of the bank, we have done this assessment.

Regarding your question on the outflows. The -- we have -- the restructurings and the cash are in their totality, EUR 600 million and they're quite strong and they are as per plan. So our organic NPE reduction includes the particular amounts and follow the trajectory of the NPE book as it is currently shown.

In terms of your question on real estate, we are applying IFRS, and IFRS includes both index to date and forward-looking assumptions. So the assessment that you are seeing here includes both elements after the standard requirements.

--------------------------------------------------------------------------------

Christos Ioannis Megalou, Piraeus Bank S.A. - MD & Executive Director [18]

--------------------------------------------------------------------------------

And Iason, on your question about the HFSF divestment strategy, I guess, this is one question for HFSF. It's for them to decide on this issue. And we are not privy of any discussion or any information in relation to that in any respect.

--------------------------------------------------------------------------------

Operator [19]

--------------------------------------------------------------------------------

(Operator Instructions) We have a follow-up question from Mr. Floriani Jonas with Axia Ventures.

--------------------------------------------------------------------------------

Jonas Scorza Floriani, Axia Ventures Group Ltd, Research Division - Director [20]

--------------------------------------------------------------------------------

Just to follow up on one of my colleagues' questions on the capital and CoCo in 2023 on the 17% total capital ratio. So is that implying then that HFSF will not convert given that they have the option to convert the CoCo into shares on the seventh anniversary, right, of the instrument, which falls in 2022? So is that what we are -- is that what we have to bear in mind here?

--------------------------------------------------------------------------------

Christos Ioannis Megalou, Piraeus Bank S.A. - MD & Executive Director [21]

--------------------------------------------------------------------------------

Jonas, it's Christos Megalou. As you know, the CoCo is a perpetual instrument. And therefore, we treat it like that in our capital plan. There is this option, which is 2nd of December 2022. At that point in time, it's up to the HFSF to decide. We are working on that capital planning as a perpetual instrument, which is what you see here in our plan.

--------------------------------------------------------------------------------

Operator [22]

--------------------------------------------------------------------------------

(Operator Instructions) The next question is from the line of Kladis Panagiotis with Eurobank Equities.

--------------------------------------------------------------------------------

Panagiotis Kladis, Eurobank Equities Investment Firm S.A., Research Division - Research Analyst [23]

--------------------------------------------------------------------------------

Could you please give us some color about the cost of risk in 2020 given the positive trends in the real estate market and the rest of information that you may have, if it's not too early?

--------------------------------------------------------------------------------

Theodore Gnardellis, Piraeus Bank S.A. - GM & Group CFO [24]

--------------------------------------------------------------------------------

Panagiotis, we are guiding for EUR 200 million pretax profit including our expectation for cost of risk. On the organic front, we believe a sustainable assumption on a quarterly basis right now to be in the vicinity of EUR 100 million. Inorganic, as you can understand, depends a lot on how we'll be applying the Hercules scheme and what kind of inorganic activity we will actually do in over the coming year.

--------------------------------------------------------------------------------

Operator [25]

--------------------------------------------------------------------------------

The next question is from the line of Semikhatova Maria with Citibank.

--------------------------------------------------------------------------------

Maria Semikhatova, Citigroup Inc, Research Division - VP and Analyst [26]

--------------------------------------------------------------------------------

Two questions from me. First of all, one on EUR 3 billion of securitizations. Can you disclose if you plan to participate in the state guarantee scheme and how much of that will be covered by -- will be senior notes? And the second question, you mentioned that you don't see enough bidders for -- in the auctions. Can you just give us the latest numbers? How much of the participation is driven by the bank? How many assets is taken by the bank in those auctions? And is there any limitation on the future amount that you can take on your balance sheet?

--------------------------------------------------------------------------------

Theodore Gnardellis, Piraeus Bank S.A. - GM & Group CFO [27]

--------------------------------------------------------------------------------

Thanks a lot for the question. As I said before, the 2 securitization we currently have in place, both Phoenix and project Bridge will be using and leveraging the Hercules scheme in terms of the state guarantee, the senior note. I can give you the advancement point on the Phoenix transaction, which is more advanced than it is an attachment points on the vicinity of 45%, i.e., the senior note is expected to be on the EUR 900 million, depending, of course, on the evolution of the cost of the guarantee and the confirmation by the rating agencies.

When it comes to your question about liquidations and the lack of bidders, currently, we are following a repossession versus third party of 70% repossession, 30% third party, as it is shown in Page 47. The 70% used to be actually 85% in the year before. It is very important that proposals are marketed more aggressively to third parties, and we're working with our servicer to achieve that, as I said before. So -- and more of that will come in our plan of next year.

--------------------------------------------------------------------------------

Maria Semikhatova, Citigroup Inc, Research Division - VP and Analyst [28]

--------------------------------------------------------------------------------

And just maybe a follow-up. Is there a regulatory limit on how much of these assets can be taken on the balance sheet at any certain point in time?

--------------------------------------------------------------------------------

Theodore Gnardellis, Piraeus Bank S.A. - GM & Group CFO [29]

--------------------------------------------------------------------------------

There's no real limitation as to how much we can repossess. It is really a matter of strategy and making sure that the real strategy is, in fact, in delivering value to the capital. There's no other limitation as to how much we could buy if we wanted to.

--------------------------------------------------------------------------------

Operator [30]

--------------------------------------------------------------------------------

(Operator Instructions) Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to Mr. Megalou for any closing comments. Thank you.

--------------------------------------------------------------------------------

Christos Ioannis Megalou, Piraeus Bank S.A. - MD & Executive Director [31]

--------------------------------------------------------------------------------

Ladies and gentlemen, thank you all for participating in our 9-month results conference call. Looking forward to discuss further with you in our corporate outreach program in the following weeks. We will be in the U.S. the beginning of December, participating in the Capital Link conference, and we're happy to see you there for our colleagues in the U.S. and happy to meet and discuss any further issues and questions.

--------------------------------------------------------------------------------

Operator [32]

--------------------------------------------------------------------------------

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