ALBKF - Alpha Services and Holdings S.A. (ALBKY) Q1 2023 Earnings Call Transcript
2023-05-08 16:52:08 ET
Alpha Services and Holdings S.A. (ALBKY)
Q1 2023 Earnings Conference Call
May 8, 2023 10:45 ET
Company Participants
Lazaros Papagaryfallou - Chief Financial Officer
Iason Kepaptsoglou - Investor Relations
Vassilios Psaltis - Investor Relations
Conference Call Participants
Iqbal Nida - Morgan Stanley
Alevizos Alevizakos - Axia Ventures
Sevim Mehmet - JPMorgan
David Daniel - Autonomous Research
Presentation
Operator
Ladies and gentlemen, thank you for standing by. I am Mina, your Chorus Call operator. Welcome and thank you for joining the Alpha Services and Holdings Conference Call to present and discuss the First Quarter 2023 Financial Results. [Operator Instructions] At this time, I would like to turn the conference over to Alpha Services and Holdings management. Gentlemen, you may now proceed.
Vassilios Psaltis
Welcome everyone to Alpha Bank’s results call for the first quarter of 2023. I am Vassilios Psaltis, Alpha Bank’s CEO. And I am joined today by Lazaros Papagaryfallou, our CFO; and Iason Kepaptsoglou, our Head of IR.
Let’s start with a brief update on the macro on Slide 4 please. The strong economic growth recorded in the past couple of years paves the way for a better than expected performance of public finances in 2022 despite the sizable policy interventions adopted by the Greek government to support disposable income. As depicted in the left hand side graph, the General Government primary balance returned to positive territory exceeding earlier estimates. The better than initially expected performance of public finances in 2022 is mainly attributed to the overall performance of tax revenues, combined with a strong economic activity.
Greece is expected to remain committed to fiscal discipline, with a flat increase of primary surplus in 2023 and a further de-escalation of the debt to GDP ratio. Debt to GDP should continue on a downward trend in the medium-term underpinned by factors that lead to a combined decrease in the numerator and an increase in the denominator. More specifically, the achievement of primary surpluses from 2023 onwards, combined with relatively low interest rate debt payments, are expected to lower the numerator.
On the other hand, strong economic growth, together with persistent inflationary pressures, are linked to a market extent, are expected to further increase nominal GDP. Also, real GDP growth is expected to moderate several factors, but optimism for a better than early forcing growth performance in 2023. The main factors are: firstly, the continuous improvement in the labor market conditions; secondly, the economic sentiment indicator that exceeds the respective euro area average since May ‘22; thirdly, the ongoing improvement of exports of services on the back of strong tourism performance; and finally, the strengthening investment dynamics in the last few years, which are expected to be maintained in 2023.
Indeed, the output expansion in the coming years is expected to be investment driven as Greece is one of the largest beneficiaries of the RRF program. In a similar vein, foreign direct investment depicted in the right hand side graph remains on a steep upward trajectory as it recorded in 2022, the highest performance over the last two decades. These developments, combined with an accumulated cost buffer of the government, are expected to lead to the regaining of investment grade rating. Ratings upgrade would also likely hinge on the next government maintaining the pace of structural reforms thereby boosting Greek economic competitiveness.
Now, let us turn to Slide 5 to look at the financial performance for the year. In the first quarter, we have made further improvement towards strengthening our spending, continuing to make substantial progress towards our key objectives. The starting point for any bank is a strong balance sheet and on key metrics of strength, capital ratios and non-performing exposures, the first quarter of 2023 showed significant progress against the prior year. The quarter also saw further expansion in net interest margin and net interest income, while our cost to income ratio was sharply down on the corresponding period last year. This has all been achieved with a cost of risk that is currently tracking below the level we gathered at the start of the year. It is important to recognize that this isn’t an accident or just luck, it reflects the deliberate decision we have taken as a management team when it comes to risk underwriting over recent years. Our franchise continues to deliver with steady deposit growth, while the slowdown in loan growth impact driven by continued elevated levels of repayment reflects industry trends. As a result, our profitability levels continue to improve. Our earnings were up and we continue to swiftly increase the value we create for our shareholders.
Keeping with the same theme, and turning now to Slide six, with the first quarter results we are reporting a return on tangible equity of 7.6% or 11.1%, excluding one-offs related to the last leg of our balance sheet cleanup as well as the successful completion of a voluntary separation scheme both items within our full year guidance. We are benefiting from the current interest rate dynamics, but we retain our focus in enhancing profitability through our own actions, both in terms of commercial policies as well as by continuing our effort to streamline the business. Balances have this quarter been affected by seasonality with corporate additionally displaying an expected reaction to higher rates and our affluent clientele increasing their affinity to capital accumulation products.
In the current context, we should make a note of the strength of our liquidity position as evidenced by the €4 billion repayment to the ECB’s facilities whilst improving our liquidity stance and ratios. On capital, this quarter, we have added close to 120 basis points to our total regulatory capital through the inaugural issuance of 81 allowing the group to fully benefit from future balance sheet growth whilst proactively supporting our engagement with the regulator in delivering our plans towards our shareholders. The latter is of course also supported by our strong organic capital generation that reached 50 basis points in the quarter post the accrual of dividends on a 20% payout assumption.
Let’s now zoom into loan growth on Slide 7. 2022 was a fantastic year for us. And the preparatory effort we have put in over the last few years culminated in the materialization of a strong pipeline of large deals in the early part of the year. Towards the end of the year, the slowdown in GDP growth, higher rates, the electronic calendar and meaningful repayments from cash rates, corporates weighed on loan growth. This was expected to continue in the early part of 2023. And this thesis has indeed materialized, amplified at the turn of the year by the customer seasonality.
The headwinds should dissipate as we progress through the year and the strong macro underpinnings to reemerge and reinvigorate loan growth. We are already seeing that reflected in our pipeline. Throughout this period, we have consciously ensured that our loan book is built with defensive characteristics underpinning sustainable levels of profitability. Our leadership position has been regained, whilst ensuring that disbursements are above our thresholds for risk adjusted returns, retaining our discipline when it comes to pricing. Let me stress that our priority is and will continue to be on profitability.
Turning now to deposits on Slide 8, and if you allow me to start with a conclusion. The evolution and cost of our deposit base remains well behaved. As of the first quarter the total stock of deposits at the beta of 8% are par if not slightly better than the sector average. The change in mix of our deposits and the rate of pass-through to time deposits are progressing within expectations. We are near the endpoint of pass-through to time deposits in business accounts, whilst for individuals in April, the pass-through rate for time deposits reached around 30%. As a reminder, at the start of the year, we guided pass-through rates on time deposits above 50%, with bank deposits making up circa 45% of our total deposits compared to 20% at the end of March.
In terms of lows, there is a multiplicity of forces behind the moves we have seen on deposits. To begin with, the first quarter tends to see a seasonal reduction in balances especially for corporates, but has to a degree been accentuated this time around by loan repayments. At the same time, corporate customers are more active in cash management, which is translated in a step up over time deposit balances. Households on the other side have been less active. Our affluent clientele has opted for capital accumulation product, trusting us with the management of their savings, which is fee-earning.
Given the events in the U.S. regional banking sector, over the last couple of months, there is today an even greater focus on deposit franchisors. Our deposit base is the bedrock of our solid liquidity profile. As you can see on Slide 9, close to 70% of our deposit base is within the insurance threshold with a diversified and sticky deposit phase. Our deposit base is very granular, with an average ticket size of €5.8000 and no particular concentration in terms of client segments, industries or cohorts.
Our loan-to-deposit ratio stands at just 76% with our liquidity coverage ratio above 164% and our net stable funding ratio above 124% at par, or better than our European peers. The sum of our cash and cash equivalent, a unencumbered high-quality liquid assets stands at more than a quarter of our deposit base. And as mentioned earlier, despite the repayment of €4 billion of TLTRO, our liquidity profile has improved in the quarter and our commercial surplus [indiscernible] the difference between deposits and loans has increased.
On Slide 10, now allow me to touch upon our segmental performance. In Greece, wholesale continues to be the main engine of growth and profits, delivering €98 million to group normalize profits. Our rental business has seen a meaningful uptick in profitability. As higher rates, cost control and a benign asset quality environment have led to improving returns. And last but not least, our wealth management and treasury unit as delivered €36 million of profit was consuming just 12% of group risk weighted assets.
Overall, our segments in Greece have delivered the return on tangible equity of 22%, while taking up close to three quarters of the risk weighted assets of the group. Our international business continues to see solid level of growth, especially Romania. Revenues were up 44% year-on-year compared to focus on growth in expenses. And this positive jaws should continue to lead to an improvement in operating efficiency with return of tangible equity reaching 17% this quarter.
Lastly, we continue to experience a drag from the stock of non-performing assets. However, that stock continues to fall. In our upcoming Investor Day on the 7 th of June, we will update you on our strategic direction and delve deeper into our business in the various segments as well as provide you with our financial projections for the coming years.
And with that Lazaros, the floor is now yours to shed more light to our quarterly financial performance.
Lazaros Papagaryfallou
Good afternoon, everyone. This is Lazaros Papagaryfallou, Alpha Bank’s CFO. Let us now take a closer look at this quarter’s numbers.
Getting to Slide 12. This quarter were reporting a positive bottom line of €111 million –€63 million for the previous quarter. There are two note of light and this quarter. First, we have taken €38 million of extraordinary costs almost entirely related to the cost of the voluntary separation scheme completed in our Greek operations in February. Second, this quarter, we have had a €23 million post-tax impact from transactions mainly related to “Sky” taking up most of the €30 million guidance excluding the impact from transactions and the various one-offs, profits on a normalized basis stood at €162 million, up 54% quarter-on-quarter. Core pre-provision income was up by 16% versus the fourth quarter, on the back of a stronger top line, which continued to rise and beat at a slower pace than the previous quarter, as well as convenient efficiency gains. Pre-provision income increased by 11% less than core pre-provision income and despite higher trading gains due to the one-off voluntary separation scheme cost.
On the next slide, you can see that euro system funding was reduced to €9 billion as the bank has opted to smooth and its TLTRO payment profile through the pre-payment of €2 billion in February and a further €2 billion in March reducing the cash balance held with a target account that is commensurately deflating our asset base. Payments are enabled by our strong cash buffers. Deposits have also declined in the quarter by €0.5 billion. But as my senior said, that is commensurate to the reduction we have witnessed in our loan book, meaning that our commercial surplus and liquidity profile has actually improved. Our ratio has fallen by 20 basis points in this quarter to 7.6% reflecting lower organic formation, while the group’s NP coverage to the 40% at the end of the first quarter, with a quarterly move, affected by lower inflows and write-offs related to management actions on the stock. Our tangible book value continued its upward trajectory, up by 4.4% year-on-year to €5.9 billion, while on capital adequacy or Fully Loaded CET 1 stood at the end of a period at 12.8% accounting for the pending risk weighted asset relief from transactions.
Now turning to Slide 14, to look at the underlying P&L rents. Net interest income continue to grow in the quarter up by 6%, On the back of higher rates, on a yearly basis, NII grew by 51%, but that was driven by 24% increase in lower quality accruals from non-performing exposures, meaning that our core recurring not interesting was actually up by 54%. Currently 10% of net interest income is attributed to non-performing exposures. But as we have said, this is a dissipated to trend towards 5% in the coming quarters, post the consolidation of sale portfolio. Fees and commissions subsided to €88 million, with a yearly progression related to the loss of merchant acquiring business and high-comps, as significant fees were earned last year, from large deals related to structured financing. Recurring operating expenses, excluding the sale of the merchant acquiring were down by 5% year-on-year, despite the inflationary pressures, demonstrating the improvement in efficiency. And finally, the cost of risk came in at 75 basis points, excluding transactions in line with last year’s run rate and within our guidance.
Performing loans on the next slide have dropped in the quarter with negative net credit expansion. On an annual basis, the performing book was up by 5%, lower than the growth levels in 2022 with business loans in Greece being the driving force, and a meaningful uptick in the contribution of our international business, the first quarter convenient to witness high-level of repayments from businesses with entire market losing ground. Disbursements have also deflated at €1.7 billion in the quarter, given the 3-electoral slowdown, whereas the repayments have remained persistently high as cash rich corporates closed certain facilities given improving sentiment on the outlook and high-rates, which the downwards adjustment in energy prices has led to repayments of working capital facilities for this segment. So, all in performing loans landed at €31.1 billion. I would like to note that the first quarter slowed down is in line with our expectations and earlier guidance while, we do expect to see, a more meaningful pick-up of net credit expansion towards the second half of the year. From the back of the continuing investment drive that the country is experiencing and reflected in the stroke pipeline that we have on disbursements.
Turning now to deposit gathering on Slide 16. The group’s deposit base increased by €3.4 billion year-on-year, or 7% to €50.2 billion. In the first quarter, group deposits were down by €0.5 billion in line with system wide outflows on both households and on businesses, reflecting seasonality as well as the sustained level of loan repayments witnessed in the first quarter. Moreover, as you can see, in the bottom left, individuals have seen a commensurate increase of €0.4 billion in mutual funds, with increase in newly introduced mutual fund projects echoing the outlook outflows from individuals. It is important to note, that assets under custody grew further exemplifying the strong relationship we possess with affluent customers. We also continue to witness a change in our mix of deposits with time deposits trending up by 6 percentage points in the quarter, as depicted on the right-hand chart, now representing 20% of the most domestic base. This upward trend in next is anticipated to continue in the coming quarters. We call that our current guidance assumed an end state by year-end of more than 45% with a growth year-to-date, somewhat slower than our initial expectations. And with that, let's look at the drivers of our NII performance during the first quarter in more detail on the next slide.
Net interest income continued to rebase in the first quarter, albeit at a lower pace, reaching €424 million up by 6.4% versus the fourth quarter. The quarter is seasonally weaker, as those two less calendar days that is on a recurring base, NII increased by 9%. More specifically, interest income from performing loans increased by €70 million and on non-performing exposures by €5 million due to higher interest rates, whereas high rates and bond balances had the positive impact of €13 million in the first quarter.
On the other hand, deposit repricing along with lower volumes had a negative impact of €17 million, while funding costs increase interest expense following the chains initiative mortalities and MREL issuances. On an annual base, NII increased by 51%, driven by higher rates and increased income from securities. Partly offsetting higher deposit and funding costs.
On Slide 18, you can see a breakdown of our NII in some more detail on the left. Performing loans NII has seen an impressive movement of the back of volumes and our high sensitivity to higher rates. On the right hand side, we show the evolution of loan yields and deposit costs. Given that our loan book is predominantly floating rate, we have been enjoying a meaningful pickup in yields. Note that as we have highlighted before, there is a circa of three-month lagging in repricing. As we have not dissipated, spreads are experiencing a soft landing. This is evolving according to plan and pricing dynamics for our book are fully aligned with our policy to exceed certain risk-adjusted thresholds in order to ensure sustainable levels of profitability.
As a result of our commercial policy, and despite the pressure, we have been able to outperform market trends. On the deposit side, the pickup in costs, which began late fourth quarter, continued in the first quarter. Although we have not been leading the race and is evolving quite well, time deposits have shifted to 20% this quarter. The cost of Euro time deposits has gone up 36 basis points in the quarter, reflecting the slow pace of repricing of the book. For the total book of deposits, the overall beta starts at 8%.
Moving on to fees on Slide 19. This quarter’s headline net fee and commission income was down by 9.6% to €87.9 million, excluding the impact from the consolidation of the merchant acquiring business, fees decreased by 5.7%, driven by lower business credit related fees alongside the lower contribution from asset management, which was positively affected by performance fee in the fourth quarter. On a yearly basis, the headline number was down by 16.9%, while excluding the deconsolidation of merchant acquiring business, and other one-offs, fees were down by 9.5% on lower contribution from loan fees. As in the first quarter of 2022, we add significant fees from large deals related to structural financing, as depicted on the bar chart on the right
On to costs now, Slide 20. Our recurring operating expenses were down this quarter by 9.7% or €25 million due to lower general expenses, which had witnessed a seasonal uptick in the previous quarter as a result of higher marketing IT and third party expenses. However, our total OpEx base were just 1.1% down in the quarter affected by the cost of the VSS program, we completed this February. On a yearly basis, continued focus on cost efficiency resulted in a 4.5% reduction in the recurring costs, despite inflationary pressures, partly benefiting from the consolidation of the merchant acquiring business or in 1.5% reduction adjusting for the aforementioned impact. Our headline cost income ratios to that 44.7% in the quarter, and 37% for the domestic business. This quarter, we have also concluded the Voluntary Separation Scheme, leading to the departure of circa 500 employees, predominantly from the Network that will result in a €20 million benefits for the group or a 2.7 years payback. We expect to see circa 60% of that in 2023, with the full impact reflected in 2024 numbers. Our best in class of activity metrics per FTE and per branch in the Greek market are now further improved, with an FTE release corresponding to a further 8% of our Greek headcount.
Moving on to asset quality on Slide 21. On the right-hand side of the slide, you can see further information on our cost of risk of collusion. The underlying cause of risk came in at 56 basis points in the first quarter, with 14 basis points for servicing fees, and 5 basis points for securitization expenses. That brings the overall cost of risk, excluding transactions 275 basis points for the quarter versus 93 basis points in the previous quarter, and 76 basis points for 2022. I should also note that in line with our guidance for the year, we have taken in the first quarter incremental provisions related to our NP transactions associated mainly with Project Sky, which is expected to close in May.
Our NPE ratio was down 20 basis points in the quarter to 7.6%, while our coverage ratio stands at 40% with regards to asset quality trends, NPE formation in Greece was negative in the quarter. Targeted campaigns launched during 2022 to contain inflows alongside intensified collection efforts and new modification projects bear fruits during 2023, not least in a strong pipeline of fuels, and we expect to see a further organic NP reduction in 2023.
And with that, we can move to the next slide. On Slide 22, following the quantum leap of the previous years, Our NPE ratio has fallen further by 20 basis points to 7.6%, on account of negative organic formation. While our NPL ratio for launch above 90 days past you, stands at 3.9%. Let us now briefly look at the corporate level evolution of our fully loaded capital position on Slide 23.
As you can see on the top of graph, we have made further progress towards our regulatory capital targets as our Fully Loaded Common Equity Tier 1 has increased by 35 basis points in the quarter. As before, it is probably best to look at the movements in capital efficient buckets. Our organic capital generation was strong at 50 basis points, allowing us to beat our capital base. We continue to fund growth through internal capital means Wild star capital generation capacity is sufficient to offset the linear reduction of deferred tax credit after the unchanged regulatory expectation.
Our capital ratios are also proven resilient; as there was effective, no impact from fair value through other comprehensive income this quarter, due to the low sensitivity of our book to shifts in the yield curve, while there was a 16 basis point, positive impact from other capital elements. And then, lastly, on NP transactions and our Voluntary Separation Scheme, there was a negative impact this quarter of 21 basis points. Our reported Fully Loaded Common Equity Tier 1 to the poll point focus and at the end of the first quarter, or 12.3% post dividend accrual, while pro forma for the anticipated RWA relief from transactions. Our fully loaded common equity Tier 1 ratio stands at 12.8%, 33 basis points versus the comparable fourth quarter number. It is important to note that we expect what circa 60 basis points to our capital ratios following the conclusion of the performing loan securitizations. We note that during the first quarter, we have started a growing dividends in our regulatory capital ratio at a 20% payout, or 74 – 7 basis points in common equity Tier 1 stands for the quarter. Consistent with our capital planning submitted to the ECB. As previously communicated, we aspire to reinstate dividend payments out of 2023 profits. And we will pursue to secure regulatory approval early 2024 dividend payment and each one do will be finally assessed by the regulator during this period.
On the next Slide, you can see that our capital ratios are well ahead of regulatory requirements, while the €400 million AT1 issuance that was completed earlier this year, and has the strength of our balance sheet further aligning us with a better rated European peer.
And then lastly, on Slide 25, please. At the start of this year, we set out detailed guidance for 2023. While most lines are developing in-line with our expectations and guidance provided for 2023 the rate environment has obviously seen more aggressive rate hikes that we have budgeted for. We will be updating our guidance in June. But clearly the short-term NII momentum is supportive. Clearly, we have had a strong first quarter, which is a good down payment on our full year commitments. But as I said, we will provide a full update of our 2023 guidance at our investor day on the 7th of June.
And with that, let's now open the floor for questions.
Question-and-Answer Session
Operator
[Operator Instructions] The first question is from the line of Iqbal Nida with Morgan Stanley. Please go ahead.
Iqbal Nida
Hi, thank you very much for the presentation and congratulations, and a good set of results. My first question is on the NIMs. Clearly NIMs continue to expand. And as you mentioned, the rate environment is strong within what would be be baked into the guidance. It would be great to get a better understanding of what your expectations are for the coming quarters both in terms of how you expect the loan spreads through [indiscernible] as well as deposit beta. And my second question is on asset quality linked to that while this environment is great for NIMs and asset quality is resilient so far, do you believe there is a risk to asset quality in the coming quarters because of the increasing interest rate? Thank you.
Vassilios Psaltis
Hello, good afternoon, again. Indeed, we have posted a strong NII performance in first quarter with a widening of the net interest margin on the back of higher rates and a slower shift of our deposit to time deposits plus as slower overall deposit beta which has trended at 8% for the quarter. Now, we have guided the market for any increasing participation of time deposits in the overall mix towards the end of the year reaching 45% and an increasing pass through. So that is baked in our previous guidance which however, enjoys the tailwinds of higher rates and an overall slower pace compared to what we have guided for the market. We also have high contribution from securities with the run rate in the first quarter at €70 million trending towards the €85 million those, the end of quarter – of the year. So, if you bake in all that, with – you come up with a net interest income in the first quarter, which is most probably the highest in the series that we're going to witness throughout the year towards our targets for 2023. We will be providing a new guidance for NII on the 7th of June. But as I said, there are certainly tail winds compared to the guidance we have given early March.
Now, as far as asset quality is concerned, we do witness quarter by quarter lower inflows, especially on the retail segment that is the outcome of proactive actions that we have been taken since last year and more efficient operation of the level of our service in terms of early delinquencies and restructuring products. So that is very positive. And I can say that we continue to see those trends in the second quarter of the year. Quarter during, which the second one, we do expect a good performance as well. So yes, on the back of inflation and higher rates, we do see pressure on disposable income for our customers. But on the other hand, we also see better employment trends in the market support schemes, including the ones offered by the banks putting a cap on mortgage variable rate loans. At the level of the [indiscernible] in March minus 20 base points for 1 year. Last another program introduced by the government on mortgages that provides a subsidy on monthly instalments for vulnerable borrowers. And we are heading towards the summer season, which is generally better for our retail clients.
So I'm optimistic that the guidance we've given for the year is going to be met with similarly improving trends over the coming quarters.
Iqbal Nida
Thank you very much.
Operator
The next question is from the line of Alevizos Alevizakos with Axia Ventures. Please go ahead.
Alevizos Alevizakos
Hi, thank you very much for the presentation and well done for this good set of results. I've got a couple of questions and a follow-up if I may. Knowing that the Investor Day is just around the corner, I'll try and keep it very topically for Q1. So the first question is about the costs. Were already trending down nicely. And knowing that Sky and Skyline would also fall off at some point in late this year, and that the VSS would start to help. Could you give like some guidance on how we should think about the rest of the year? Pretty sure that you will be able to offset the inflation but I would like to have your input here. And then secondly, as a follow-up of the previous question about the asset quality. I recall that on the full year results, you said about the NPE reduction being in the tune of about €400 million, but we already saw like the Q1 being at around €200 million. So is there a possibility that this number could be revised upwards as the year goes by and there is limited new MP inflow. Thank you.
Lazaros Papagaryfallou
Good afternoon. On costs, as you correctly pointed out, there is a driver in our P&L, which has to do with transactions and the consolidation of soul portfolio and businesses that nicely flows into the OpEx base reducing total costs for the group. The Skype portfolio, as I said is expected to close in the second quarter of the year by the end of May. [indiscernible] portfolio we announced a few days ago the closing of this transaction, the same shortly the signing of this transaction closing to follow in the coming days. And when it comes to REOs portfolios both in Greece and in Cyprus, including the Skyline and Sky portfolios, we do expect a similar positive contribution towards that reduction of the OpEx space. In other respects, we do face inflationary pressures, we do adjust, salaries were needed to attract and retain talent both in Greece and outside Greece. So the Voluntary Separation Scheme with a €20 million benefit that it brings in the P&L helps us significantly counterbalance those inflationary pressures. So we continue to see widening operating [indiscernible] with cost income trending towards our year end targets. On asset quality, we have given a target for organic reduction up to €400 million, the run rate is faster in the first quarter [indiscernible] adjusted by this target. So yes, you may see a revision of this target on the 7th of June.
Alevizos Alevizakos
That's great. And if I may have a follow-up question on the capital slide, you had a small block that was called other capital elements of 20 bips what were they?
Iason Kepaptsoglou
Hi, Alev, this is Iason. There's actually two things in there. The one is the amortization of intangible assets on the negative side, and then on the positive side is various [indiscernible] elements that we put into that profit that are not [indiscernible] considered organic.
Alevizos Alevizakos
Great, thank you very much, and well done again.
Operator
The next question is from the line of [indiscernible] Michael, with Goldman Sachs. Please go ahead.
Unidentified Analyst
Good day. Thank you very much for the presentation, and congratulations on the results. One question for me considering the improving trajectory on the capital ratios. Do you consider any alternative capital allocation strategies in addition to dividends, in particular, in new geographies, or both on acquisitions in the local market? And more broadly, what's your what outlook could you share on your growth and aspirations in the international geographies? Thank you very much.
Vassilios Psaltis
Well, in terms of capital, indeed, we're witnessing these positive trends. And as we're clearly articulating, we are going to go step by step to ensure that we enter the discussion in terms of dividend distribution. With our regulator with the best possible cards in our hand. This is the number one focus for us. In terms of the geographies that we're operating into, the one area of focus is Romania, where we have highlighted that we do have access capital, enough to support growth in the country, which as you have seen, already from the – from last year, it has turned the corner but also in this first quarter of the year, it has been able to continue on that path. So I think at the moment, discipline is the name of the game. And we are very focused in achieving that.
Lazaros Papagaryfallou
There has been also another question about alternative capital strategies, I guess you're referring to share buybacks. We are accruing dividend in 2023 at a 20% payout. So this is our focus for 2023 a cash dividend to our shareholders. Having said that share buybacks are a means to give returns to the shareholders. So we cannot rule out that these tool may be employed throughout the planning horizon as well.
Unidentified Analyst
Okay, so just to summarize dividends is the top priority shareholder returns – is the priority and mergers and potential – any potential acquisitions and mergers is on the second plan right now. Secondary.
Lazaros Papagaryfallou
Yes.
Unidentified Analyst
Okay, thank you very much.
Operator
[Operator Instructions] The next question is from the line of Sevim Mehmet with JPMorgan. Please go ahead.
Sevim Mehmet
Good afternoon. Thanks very much for the presentation and congratulations on the results. I have one question on the longer, please, if I may. So could you please provide more detail on the deceleration this quarter? I do understand this is in-line with your expectations and your previous commentary and – but how do you see the momentum from here? And how's the momentum maybe so far in this quarter? And what would be the biggest risks to loan growth from here? For example, would you see any risks from, let's say, an extended election period in Greece, or from higher rates, and any anything else that you can provide would be helpful, thank you very much.
Vassilios Psaltis
Well, in terms of loan growth already, in the full year results, we have highlighted what the trend was. And we said that we consider that broadly as a one-off phenomenon, which would continue in the first quarter. As we have seen like this is actually was the case we were proven right in our expectation. What we can tell you at the moment is that none of our customers, none of our clients just pull the plug in any of the relevant investment, ideas and investment plans that they're working on. But admittedly, as we are now just a few weeks away from an election period, decision making in certain cases is slowing down a bit. And this may indeed get reflected in the way that loan growth will evolve.
The pipeline of projects that is under way is such that more or less confirms our expectations for – I mean second digit growth for this year, the risks you highlighted, I mean, a protracted period without having – without forming a government, indeed, is something that would lead to a procrastination, of decision making, not necessarily of altering decision making. So that may be one of the points. I don't think that rate hikes may develop different towards what the expectations now have been invested in the various disciplines. I think in that one, there is broadly a consensus in the market, which you can see that various economic indicators actually reflect those expectations in a rather positive way. So I think, from that, and we are sure that. All in all, I think where we are right now, the downside risks are not necessarily material in order to continue on the growth trajectory that the country is having in order to close some of the investment gap that it experiences.
Sevim Mehmet
That's very helpful. Thanks very much. And maybe just as a follow-up, and I'm sorry, if I missed that earlier, what was the amount of capital? What was the amount of dividends that you're accruing in-line with your projections for 2023 dividend payments? In your capital…
Vassilios Psaltis
We are accruing dividends on a 20% payout ratio assumption that 7 basis points this quarter.
Sevim Mehmet
Perfect, super helpful. Thanks very much.
Operator
Our next question is from the line of David Daniel with Autonomous Research. Please go ahead.
David Daniel
Hi, good afternoon. Congratulations, and thanks for taking my question. Just a quick one on MREL. Can you just maybe talk about your aspirations in primary markets and when we might see any forthcoming deals whether that's maybe later in the year or any coming months? Thanks.
Lazaros Papagaryfallou
We have front loaded our issuance efforts, late 2022 and early 2023. To such an extent that it gives us comfort to wait until finding the right window in 2023. Remind you that beyond two issuances of senior preferred event of 2022 and the payment of two non-[indiscernible] early 2023. We have also issued an 81, which counts against the MREL targets. We're building nicely our capital buffers through organic capital generation and that includes also performing securitizations, that capital build up contributes towards MREL targets event of yearend 2023. Having said that, we want to tap the markets assuming that we find the right opportunity towards the second half of the year for a benchmark issue. And in our guidance, we have strong current yields for each one costs when it comes to such additional issuance of senior of preferred.
David Daniel
Thank you.
Operator
The next question is from the line of Garrison Cor Maximilian with Jeffries. Please go ahead.
Unidentified Analyst
Hi, yes, good afternoon. Thank you for taking my questions. One quick one on your securitization notes on your balance sheet, and so it would appear that the pace of amortization has accelerated this quarter. So I was just wondering if we should be expecting that pace to continue or whether that pace of amortization should be slowing down again. And then you picked up on all you touched on the synthetic equalization. So I was wondering if you are still seeing good appetite out there, whether you might still be looking at a few more of those going forward in the future? Thank you.
Lazaros Papagaryfallou
On synthetics, the first transaction that we are – we have launched and expect to complete in the second quarter of the year is the shipping securitization, for which there is strong appetite. And we feel that by completing this transaction, we're going to fully meet our aspirations for this project in the second quarter. We have also in the pipeline, a second securitization, which will start immediately after we complete the shipping portfolio transaction.
Iason Kepaptsoglou
Hi, [indiscernible] this is Iason. Just make sure you're talking about the progress that we're seeing on our balance sheets on the senior notes, correct?
Unidentified Analyst
Yes. Thos.
Iason Kepaptsoglou
You haven't seen that much. Obviously, there's a certain business plan that the securitization vehicles are following. And the evolution we're seeing is the one with that business plan. So there was about €80 million reduction, if I remember correctly in Q4, there's about €100 million in this quarter. And we should expect a similar pace going forward, if I'm not mistaken, but allow me to confirm and revert.
Unidentified Analyst
Alright, excellent. Thank you.
Operator
[Operator Instructions] Ladies and gentleman, there are no further questions at this time. I will now turn the conference over to management for any closing comments. Thank you.
Vassilios Psaltis
Well, thank you very much for attending our first quarter call, we're very much looking forward to welcoming you on our Investor Don the 7th of June to discuss a whole host of issues related to our 3-year planning horizon. Thank you very much.
Operator
Ladies and gentlemen, the conference is now concluded and you may disconnect your telephone. Thank you for calling and have a pleasant evening.
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Alpha Services and Holdings S.A. (ALBKY) Q1 2023 Earnings Call Transcript