NBGRY - National Bank of Greece S.A. (NBGIF) Q1 2023 Earnings Call Transcript
2023-05-24 22:00:20 ET
National Bank of Greece S.A. (NBGIF)
Q1 2023 Earnings Conference Call
May 23, 2023, 11:00 AM ET
Company Participants
Pavlos Mylonas - CEO
Christos Christodoulou - Group CFO
Greg Papagrigoris - Group Head of IR
Conference Call Participants
Mikhail Butkov - Goldman Sachs
Alevizos Alevizakos - Axia Ventures
Benjie Creelan-Sandford - Jefferies
Osman Memisoglu - Ambrosia Capital
Simon Nellis - Citibank
Daniel David - Autonomous Research
Presentation
Operator
Ladies and gentlemen, thank you for standing by. I'm Costantino, your Chorus Call operator. Welcome, and thank you for joining the National Bank of Greece Conference Call to Present and Discuss the First Quarter 2023 Financial Results.
At this time, I would like to turn the conference over to Mr. Pavlos Mylonas, CEO of National Bank of Greece. Mr. Mylonas, you may now proceed.
Pavlos Mylonas
Good afternoon, everyone, and good morning to those of you joining from the U.S. Welcome to our first quarter financial results call. I'm joined by Christos Christodoulou, Group CFO; Greg Papagrigoris, Group Head of IR. After my introductory remarks, Christos will go to more detail on our financial performance, and then we will turn to Q&A.
I think it would be useful, if I begin with a brief overview of Greece's economic performance, before I turn to financial performance for the first quarter of '23. Let us begin. Greece ended the year with strong momentum from a very dynamic 2022. Recall that fourth quarter GDP increased by 5.2% year-on-year and 1.4% quarter-on-quarter seasonally adjusted. Furthermore, economic developments continue to be very positive in the first months of the year despite the slowdown in the euro area and the sharp tightening of monetary policy.
Employment creation remains strong with the unemployment rate fast approaching a psychological barrier of 10%, while expectations for tourism revenues are high on the back of a sharp pickup in bookings and airport traffic. Tourism revenue should exceed the record for 2022 by a solid margin.
On the fiscal side, Greece recorded a small primary surplus in 2022, over-performing strongly against the budget target for our primary deficit of 1.6% of GDP. The over performance continued in the fourth quarter of 2023 over the first four months of 2023, I should say, with a primary surplus of 1.1% of GDP in the same budget compared with a target of a deficit of 0.3% of GDP.
On the inflation front, pressures are easing in a faster than expected pace with a harmonized index down to 4.5% year-on-year in April, on the back of falling energy and flattening food prices. Adding to the positive outlook, fixed capital formation should be strong due to the large pipeline of private sector investments and the increasing use of RRF funds.
In fact, fixed investments are expected to rise at a double-digit pace for a third year in a row, driven by high capacity utilization rates, strong corporate profitability and positive demand prospects. Overall, GDP estimates are continuously being revised upward and output is now expected to increase in the 2.5% to 3% range in 2023, with the potential for further upward revisions.
With macro developments being increasingly supportive and government policies assisting more vulnerable, the country is unlikely to experience, a new wave of NPEs nor a notable slowdown in credit demand, especially from the more dynamic corporate sector with many projects in advanced stages.
Indeed, nearly halfway through 2023, it is comforting that in the case of NBG, early delinquencies remain controlled, while there - has not been a meaningful increase in NPEs. An additional factor - has been the banking sector's initiatives to absorb part of the rate increase. These comprise support to vulnerable borrowers in the form of interest rate subsidies and rate caps regarding further increases in variable rate mortgages.
Additionally, in the case of NBG, as regards overall loan pricing, we have already absorbed about 30% of the base rate increases since the beginning of the rate cycle last year. Moreover, we also introduced the market a series of flexible to fixed mortgage refinancing products.
Regarding loan demand, corporate credit remained strong in the first quarter of '23. Specifically, NBG's domestic corporate - performing loans were up 16% year-on-year despite repayments of working capital facilities and corporates with excess cash. We expect demand to be significantly stronger in the second half of the year.
Now to turn to the P&L results, combining the positive economic backdrop with the results of our multiyear transformation and the competitive advantage of our solid balance sheet, we have continued delivering strong profitability in the first quarter of 2023.
Our NII continued to grow, up by 18% quarter-on-quarter to €0.5 billion. Fee growth continued at a double-digit pace after adjusting for the impact of the deconsolidation of the merchant acquiring business. And finally, operating as well as credit costs were contained despite the inflationary environment.
As a result of the strong core income growth and relatively inelastic operating costs, we have reduced our cost of core income to just 34% in the first quarter. This is an all-time low which compares favorably across banks in Europe. Please recall that the level of this KPI was 70% on the previous quarter.
As a result, we have delivered a core PAT of €230 million in the first quarter '23, which translates into a core return on tangible equity of nearly 15%. This exceeds our cost of equity for the first time in many years.
Among the key components of our success remains our strong capital and liquidity positions, on the liquidity front, NBG's traditional deposit base, comprising mainly of the core deposits of many - small depositors provide an important and relatively scarce advantage in a period of much tighter liquidity conditions.
Indeed, our deposit mix has not changed significantly despite the higher rates with savings and size deposits accounting for more than 80% of our total deposits. As regards to capital on the back of the strong recurring profitability, we have added a solid 90 basis points of core capital in just the first quarter of 2023, driving our fully loaded CET1 ratio to 16.5%, a high level by European standards.
Now let me turn to dividend distribution. In view of the high economic uncertainty, the regulator considers a distribution in 2023 out of '22 profits to be premature for the Greek banks. On the positive side, based on our ongoing regulatory dialogue, prospects are very good for our dividend distribution next year out of 2023 earnings.
This will be of the order of 20% to 30% payout ratio, significantly higher than what we would have envisaged for our payout ratio this year. And I remind you that this year's dividend hasn't occurred would have had as its main objective to signal the end of the dividend banned [ph]. Please note that - we will be building reserves for this higher amount over the year.
One final point, our results indicate a significant over-performance in the first quarter versus guidance. In view of the stronger than expected economic backdrop, combined with our solid fundamentals, we plan to review guidance and provide an update at a time later in the year, which will allow us to look at the key profitability drivers and allow to see them stabilize. Clearly the guidance will be significantly more for us.
And now with that, I would like to pass the floor to our group CFO, Christos, who will provide additional insights to our financial performance before we turn to Q&A.
Christos Christodoulou
Thank you, Pavlos.
Starting with profitability on Slide 15, our attributable profit after tax in Q1 '23 climbed to €260 million. Core profit after tax reached €228 million, 16% higher quarter-on-quarter and nearly three times higher year-on-year, translating into a core return on tangible equity of 15%, well above our full year '23 guidance of circa 11%. The drivers behind this strong performance derived mostly from our solid core income, which is up by 14% quarter-on-quarter.
This sharp improvement in core revenue generation is a tale of two parts. Firstly, performing loan growth of €2.1 billion year-on-year, factoring in an exceptionally strong last quarter in 2022 with corporate disbursements coupled by ECB base rate effects drove NII up by 18% quarter-on-quarter, far offsetting higher deposit and MREL-related funding costs.
Secondly, double-digit growth across our retail and corporate fee businesses, drove fee income 11% higher year-on-year on a like-for-like basis, excluding merchant acquiring, showcasing our efforts to close and enhance the bank's fee generating capacity. At the same time, our costs remained relatively contained with depreciation charges driven by our ongoing strategic IT investment plan and with the increase in personnel and G&A expenses year-on-year managed in the low single-digits in line with guidance.
The accelerating growth of our core income, combined with relatively and elastic [ph] costs, led our group cost-to-core income ratio lower by more than 17 percentage points year-on-year to an all-time low of 34%. Cost of risk remained at 70 basis points in Q1 reflecting zero [indiscernible] information below the full year '23 guidance of circa 80 basis points.
Moving to the balance sheet and asset quality on Slide 16, disbursements amounted to €1.2 billion in Q1 '23 up by 15% year-on-year driven by corporates. Domestic performing loans, up by 8% year-on-year, stood at €27.6 billion, flat against year-end '22 levels on the back of higher repayments of working capital facilities from cash credits corporates.
Domestic deposits eased by €0.4 billion or 0.7% quarter-on-quarter, reflecting seasonality as well as some corporate balance sheet optimization, as mentioned above. On a year-on-year basis, deposits were up by 3%.
NPEs remained flat quarter-on-quarter at €1.6 billion, just €0.2 billion net of provisions, reflecting zero organic NPE flows with no signs of appreciable pickup in earlier years. Domestic NPE ratio stood at 5.1% compared to 6.5% a year ago, combined with the best-in-class cash coverage of 89%, slightly higher quarter-on-quarter.
Moving to capital on Slide 17, in Q1, we maintained high capital generation, a strong profitability drove our fully loaded CET1 and total capital ratios 90 basis points higher quarter-on-quarter to 16.5% and 17.6%, respectively. As disclosed on the graph, organic capital generation, including DTC amortization, reached 80 basis points for the quarter.
On Slide 19, you may see the high-quality traction of our balance sheet, which is coming into place supporting profitability. On the asset side, almost 90% of our loans are floaters, while our securities portfolio is hedged effectively recovery floating as well.
On the liability side, deposits comprise circa 98% of the total funding, net of TTL [ph] balances of which 81% in core and highly pricing elastic with an average balance of less than €4,000 per customer, necessitating a marginal rate pass-through.
The substitution of core deposits by time is not significant and derived mostly from corporate balance sheet optimization. Overall, our deposit base provides an important advantage - in a period of much tighter liquidity conditions.
Our superior liquidity profile is also manifested by our net cash position of circa €6 billion post full TLTRO repayment, which supports NII and NIM going forward as well as by our liquidity coverage ratio of 270%, which is the highest in Greece and among the highest in the world [ph].
Now let me provide some further insight to the key drivers of our profitability. Starting with domestic NII on Slide 20, the strong recovery in interest income from performing balances was sustained by 18% quarter-on-quarter benefiting from higher volumes and higher ECB rates that drove loans yield to 5% in Q1, up by circa 70 basis points quarter-on-quarter, implying a 70% rate pass-through since the second quarter 2022.
Additionally, interest income from securities reached €90 million in Q1, up by 15% quarter-on-quarter. Time deposit spreads have picked up by 47 basis points quarter-on-quarter in Q1 with new production yields coming in at approximately 120 bps in Q2, implying EBITDA at circa 40%. As a result, NIM was up by nearly 50 basis points quarter-on-quarter to 260 basis points in Q1.
Moving on to fee income on Slide 25, adjusting for the deconsolidation of the merchant acquiring business, domestic fees expanded by 13% year-on-year further supporting the bank's sustainable core revenue stream as retail and corporate fee businesses were up by 18% and 10%, respectively.
With growth spearheaded by cars, deposit product bundles and trade finance-related fees. At the same time, transaction volumes picked up year-on-year across channels with the most notable movement witnessed in e-banking transactions up by 16% year-on-year testament to the quality of our digital offering, also acknowledged by third-party service and awards.
Operating expenses are presented on Slide 26. Personnel and G&A expenses were up by 3% year-on-year, in line with guidance reflecting increased union agreed wages and inflationary pressures exceeding 6% during the first quarter of the year, while the 10.9% year-on-year increase in depreciation charges, reflects the trade CapEx for IT investments which includes the ongoing replacement of our core banking system. All in all, operating expenses were up by 4.7% year-on-year with further optimization of actual stripping costs under control going forward.
Turning to asset quality on Slides 27 to 29, we have not experienced notable deterioration in Q1 as domestic NPEs were flat quarter-on-quarter and net of bank NPE flows stood at zero levels. Defaults and redefaults, remain low, while curings normalized back to 2022 average levels, excluding an exceptionally strong Q4 '22 that have benefited from a few large cures within our corporate portfolio.
For core NPEs, less than 30 days past due comprised 30% of our NPEs purely in future cures. Notably, the sector initiatives to support vulnerable borrowers and to cap further increases in variable rate mortgages combined with government policies to protect household incomes from the increase in energy prices should also shift asset quality going forward. Finally, in terms of provision coverages, we maintained sector-leading levels across all stages, as shown on Slide 29.
On Slides 31 and 32 will provide our key ESG priorities. We are pushing forward with our environment and climate strategy within our broader ESG agenda, leading the market in sustainable energy financing, materially supporting the clean transition of businesses and households.
Our ESG achievements are widely recognized with NBG included in the most sustainable companies in Greece for 2023 by QualityNet as well as in the platinum category of Forbes' ESG Transparency Index for 2023. NBG has delivered yet another quarter of strong results. We have demonstrated sustained strength across our business.
Home profitability is sharply higher, translating into a core return on tangible equity of 15%, while the quality of our balance sheet and our robust capital buffers remain resilient to tightening monetary conditions. Our Q1 performance is testament to our capacity to deliver class-leading results and returns to our shareholders staying committed to NBG being the bank of first choice in Greece.
And with that, please now open the floor to questions.
Question-and-Answer Session
Operator
The first question is from the line of Butkov Mikhail with Goldman Sachs. Please go ahead.
Mikhail Butkov
Good day, thank you very much for the presentation. I have a couple of questions. Firstly, on the net interest margin in the light of higher interest rate environment and the number of hikes since your guidance and also the caps on the interest rate hikes for the mortgage loans. What level of pass-through do you expect from the remaining rate hikes on the performing loan yields? And what outlook on the net interest margin could you share for this year? That's the first question.
Christos Christodoulou
Okay. Let me answer the question there. So as we said already that we will provide update on guidance later in the year when the profitability drivers will stabilize or be, more clearer. We have inflation. We have ECB rates expectation for further increases. Deposit betas moving volume growth MREL issuance. So it's not that easy to guide you now on the revision on our NIM, but certainly, there are significant upside risk there.
Now with regards to pass-through on loans, we have seen so far a pass-through of about 70% if we measure that since the beginning of the increase in the rates in the second half of 2022. What we have said in previous calls and we continue to see happening is that about a third of the increase in the rates will be passed through the customers.
So, we aspire that we'll remain at these levels in terms of pass-through rates. With regards to the cancel mortgages, the effect that we have is effectively a forgone income, it is not material. It's in the area of less than €10 million. So, we are comfortable with that.
Mikhail Butkov
Okay, then another question. May I ask to clarify a bit on the dividend. So - as you guided previously, you plan the dividend payment for - from the profits of 2022 was the approval from the regulator received with this regard. And also give you accrue the portion for the dividend for this year, for the year 2023 already in your capital?
Christos Christodoulou
Okay. So as the CEO said in his remarks, the regulator given the economic uncertainty considers that distribution this year out of 2022 profits is premature for all Greek banks. So if you remember, last year, we had already provided about 20 basis points for dividend. Our intention, given the expectation that we would be paying dividend next year out of 2023 profits in a more substantial manner, we will be accruing during the year the amount required to reach a payout ratio in the area between 20% and 30%.
Mikhail Butkov
And as long as you already accrued 20 basis points, you will add another 20 basis points on the top of that or...?
Christos Christodoulou
Yes, so we will accrue whatever it takes even the expectation of profitability for the year to achieve a payout ratio in the area of 20% to 30%, yes.
Mikhail Butkov
Okay. And finally, the question is what implications do you see from the possible investment-grade upgrade on operational on NBG that through on the securities portfolio or any other considerations which you could share? Thank you.
Christos Christodoulou
So with regards to the long-awaited investment grade, I think that we will see some upside has to do with the supply and the pricing with regards to the liability side or MREL issuances. In terms of our securities portfolio, given the fact that the bonds are fixed rate, we don't expect to receive any upside on our NII from the securities will have some benefit on trading, because of the hedging and the fact that the bonds will receive a better rate.
Mikhail Butkov
Okay, okay thank you very much for these answers very helpful.
Operator
The next question is from the line of Alevizakos Alevizos with Axia Ventures. Please go ahead.
Alevizos Alevizakos
Hi thank you very much for the presentation and thank you very much for taking my questions and well done for the set of results. I wanted to follow-up a bit on the previous question regarding the dividend. It seems to me like perhaps some of the same conversations were a bit, let's say, conservative this year. And at the same time, I understand that you are very profitable right now and you generate a lot of capital per year?
So I was wondering whether the - perhaps the regulator would be - it could be easier for the regulators to kind of allow you to use your excess capital in other ways. And I wanted to ask you how you are considering to, use this excess capital perhaps apart from doing the obvious which is lending?
And then the second question, which is related to that, is I can see a very strong investment securities growth during the quarter. I think it's more than 10%. What made you actually invest so much during this quarter? You think right now that you can get a lot of better yields compared to, let's say, this quarter that it was a bit weak in terms of lending disbursements due to seasonality? Thank you.
Christos Christodoulou
So on the first question with regards to capital. Obviously, the level of capital that we have gives us optionalities. Obviously, being a bank that operates in Greece, our main priority is to help the economic grow and lend Greek businesses and households. Having said that, given the level of capital illiquidity, we have we're exploring opportunities of assets that would so far [ph] generate value, given the level of target return rate - or the return on equity we have outside the Greek jurisdiction as well.
Obviously, going forward, any way of remunerating our shareholders is something that we will consider, but all that is subject to the collaborating [ph] dialogue as we already said. With regards to the investment in our securities portfolio, we don't have a point that we want to reach. We said many times that we are comfortable with the level of securities we have.
In the first quarter [indiscernible] we participated in acquiring about €0.5 billion of Greek [ph] covenant bonds as well as treasury bills, which is a good option for us now given the level of the rates that are available at the moment. So that was it. It's not a change of our strategy overall, and we are comfortable with the position of GDPs we have for the last three years.
Alevizos Alevizakos
Yes, thank you for that. And if I may follow on the - investment securities was the higher than expected trading income in the quarter a result of something that was one-off related to the investment securities? Thank you.
Christos Christodoulou
We did materialize some profitability in the trading income from disposal of securities, yes.
Alevizos Alevizakos
All right, thank you very much and well done for the set of results.
Operator
The next question is from the line of Creelan-Sandford Benjie with Jefferies. Please go ahead.
Benjie Creelan-Sandford
Yes, hi good afternoon it's Benjie here at Jefferies. Thank you for taking the question. My first question - sorry, it's another follow-up on the dividend. I guess I was just wondering in the context of the discussion with the regulator. I know you flagged - sort of the economic uncertainty. I'm just wondering if there's any other sort of factors being taken into account by the regulator when thinking about dividend approval in particular, whether the size of deferred tax credit portfolio is a discussion factor with the regulator when considering payout approvals?
The second question was just on asset quality. The NPE ratio was flat quarter-on-quarter. I guess you can argue that there was a modest sort of tick up in the gross inflows in the quarter, but nothing material. I'm just wondering whether you're seeing any kind of red flags on the asset quality front at this point, any particular sectors that you're concerned about? And obviously, you're undershooting the cost of risk guidance for the full year, any reason to update that at this point? Thank you.
Christos Christodoulou
So on your first question, Benjie, we discussed the dividend - I cannot put myself in the shoes of the regulator, but I understand that given that this is a country that has had a dividend banned for a period of over 10 years. And given the level of our asset quality as a sector now, they want to be extra careful before opening the door. I think that's more or less it. With regards to asset quality and the question that you have there, indeed, we had a better than expected first quarter with a flat NPE formation.
In the second quarter, we do expect to have some formation. But the good thing for us in that is much better than expected originally. So if you remember, we had about €350 million of formation budgeted for this year. We don't see that happening so far. But Q2 is going to be based on what we expect something with as more formation.
Benjie Creelan-Sandford
Okay, thank you very much.
Operator
The next question is from the line of Memisoglu Osman with Ambrosia Capital. Please go ahead.
Osman Memisoglu
Hi many thanks for your time and the presentation. Just wondering on the NII dynamics, how you see it, where do you see peeking with the current trends you've been observing in Q2 with the deposit mix shift that if anything is changing on that front, for example? That's my first question?
And related to this, loan growth, for obvious reasons have been relatively muted for the sector negative. How do you see that evolving in Q2 and beyond as we get closer to the end of election uncertainty? And just a technical one, your tax expenses picked up. How should we model that for the next few quarters and maybe beyond as much color as you can give? Thank you.
Pavlos Mylonas
Okay. Christos is going to take the tax. I'll take the other two. The NII will peak in line with the peak in the increase - in interest rates by the ECB. One more - two more - second quarter, third quarter, okay. One quarter or two quarters after that is the peak for the NII given [indiscernible]. Second question was on disbursements. I think in the second quarter, we are seeing a slightly better result Q-on-Q than we did in Q1. But most of the strength and our guidance for about 1.5 net expansion will come in the second half of the year. Christos, on the tax?
Christos Christodoulou
On the tax question, so our effective tax rate is at around 27%. So this is driven by the corporate tax rates of the banks in Greece, at 29%. Let me remind you that other companies in Greece, including our domestic subsidiaries had a corporate tax rate of 22%. And our foreign operations in North Macedonia up 15% saw effectively.
The 27% is a mix of all these factors and the different that as we compared to last year to take it a step further has to do with the change in mix in our profits and the contribution of the bank versus the other elements in our profitability. And last year, we also took some different tax assets on exemplary profits that we had in the year. But we should be expecting this effective rate going forward as well.
Osman Memisoglu
Thank you. And maybe if I can squeeze one last one on TLTRO, just from an asset size perspective, what's the outlook for that balance? Will it go to zero by the end of the year or early or later, any color?
Christos Christodoulou
And so as you saw, starting from the €11.6 billion back in Q3, 2022, we're now down to €5 billion. We then repaid €3.1 billion in Q1, and we have a normal repayment at the end of June of another €3.1 billion. So that would take us down to €1.8 billion so that [indiscernible] matures in 2024. So we'll explore whether we would repay this year or at the beginning of next year. But in any case, the amount is not meaningful.
Osman Memisoglu
Right, thank you.
Operator
The next question is from the line of Nellis Simon with Citibank. Please go ahead.
Simon Nellis
Hi, thanks very much for the opportunity. Yes, my first question, I'm just still struggling a bit on the capital walk. I see that your core Tier 1 - actually, your total capital went up €365 million over the quarter, but you only made €260 million of profit. Can you walk us through what the other drivers of the capital build was? And then I also confused on the dividend accrual. So you're saying that you will aim to pay 20% to 30% payout out of this year's earnings. But when will you start accruing and have you started accruing? That will be my other question on capital?
Christos Christodoulou
Okay. So let's talk about the capital bit first. So about 100 basis points is from profits, we have like four - 10 basis points drag from risk-weighted assets. And then we have a DTC amortization of 110 basis points and about 10 basis points upside from the here to collect and sell fair value portfolio. So that makes up for the 90 basis points upside [ph] that you see in capital.
With regards to my comment on dividends and dividend accrual, what we said we will build up the reserves required for a dividend of about 20% to 30% out of this year's profit next year. And given the fact that - we have already provided about 20 basis points last year in our capital stack, we will build the remaining required so that we capture that target payout ratio, we'll do that every quarter, bit-by-bit.
Simon Nellis
Okay. So this quarter, you didn't add any further?
Christos Christodoulou
No, it is not because we effectively have the reserves that we build last year.
Simon Nellis
Understood, understood. Okay. And then just maybe on costs, particularly on any restructuring costs actually, the €18 million of - below the line negative €18 million. What was that? And how much of restructuring costs do you expect this year and next year, if you could remind me?
Christos Christodoulou
That the ones that you see below the line are restructuring costs that have to do with relate to debt. It's a provision that we take for ex-employees. And with regards to plans for additional restructuring during the year, we have some - so we are currently assessing the plan that we have. It's going to be a small one. It's not going to be like the ones that we had the years before.
Simon Nellis
Okay. LEPETE is €9 million, right, per quarter so?
Christos Christodoulou
It's a bit less. Yes.
Simon Nellis
A bit less so what's the - I mean, I guess it's small, but what's the remaining €10 million?
Christos Christodoulou
We'll have to continue with this impairment for another eight years.
Simon Nellis
Yes. But I think there was a €18 million negative one-off. So if less than €9 million was LEPETE, what's the rest?
Christos Christodoulou
The rest have to do with other impairments that have to do the held-for-sale portfolios.
Simon Nellis
Okay that's all from me. Thank you.
Christos Christodoulou
Not ones - each ones that's why we have them below the line.
Operator
The next question is from the line of David Daniel with Autonomous Research. Please go ahead.
Daniel David
Good afternoon, thanks for taking my questions. I've just got two. The first one is just on deposits. So Slide 23, I can see there's been a shift into time deposits. I'm just interested to have this migration stacks up against your plans for the year? And also on the deposit beta, I can see you've got 7% down there?
How does that look against your plan for 2023? And then moving to MREL, could you just remind us what your MREL requirement is for Jan '26? And also maybe touch upon your issuance plans for the year in terms of senior and also potentially Tier 2? Thanks.
Christos Christodoulou
Okay. So let's start with the deposits. You've seen that our deposit mix has changed marginally, not very much. We haven't experienced significant further change in the mix quarter-to-date. With regards to the EBITDA, so you see that we are at the end of the quarter EBITDA of 7% over our total deposits. Our forecast will be used in the business plan was also a pass-through of 80% in time deposits and 20% in core deposits.
So, we're far away from what we used at the business plan. And there is significant upside risk there. With regards to your second question on our MREL plans. Now our final target at the end of 2025 is in the area of 27%. We are currently at 21.8% and the target for the end of the year is at 22.7%.
So, we have about 90 basis points of catching up to do, which given the level of capital we are able to raise makes us feel very comfortable. But in any case, we want to approach the gap to the 27% in a linear manner year-per-year. And we'll be exploring the opportunities given by the market to proceed with some issuances in the next year, probably one this year. So we'll wait and see.
Daniel David
And that's senior? And are you kind of thinking of Tier 2 separately or just thinking about senior for now?
Christos Christodoulou
Given that we don't have any high constraints, we'll optimize depending on the relative pricing between instruments.
Daniel David
Understood, thanks.
Operator
The next question is a follow-up question from the line of Memisoglu Osman with Ambrosia Capital. Please go ahead.
Osman Memisoglu
Just following up on the potential guidance change, where do you see the upside? Obviously, it's NII, but any other color you can give? Is it cost of risk? Is it somewhere else or fees? Any color would be appreciated? Thank you.
Christos Christodoulou
Thanks for the questions Osman. And effectively, you said it yourself NII is the big driver for the change in the numbers and the revision in the guidance. I would say that although it's premature and given the formation that we see, potentially, asset quality-wise, effectively cost of risk could be better. We target for 80 basis points. You've seen us accrue for 70 basis points this quarter. So there is potential on that line as well. So apart from those two lines, I think there is more or less there.
Osman Memisoglu
And maybe just on that, it's a bit of a technicality probably. Greece provisions were actually lower Q-on-Q. There was a bit of a relative spike in international. I know it's a small bit, but I'm guessing all the asset quality events there are stable as well?
Christos Christodoulou
It's stable as well it has to do with optimization of coverages and the changes in the mix of the portfolio.
Osman Memisoglu
Okay, thank you.
Operator
Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to Mr. Mylonas for any closing comments. Thank you.
Pavlos Mylonas
Thank you all for joining us for the first quarter results call. We're available for any follow-up questions you may have. And thank you all for attending.
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National Bank of Greece S.A. (NBGIF) Q1 2023 Earnings Call Transcript