NBGRY - National Bank of Greece S.A. (NBGIF) Q4 2022 Earnings Call Transcript
2023-03-15 12:15:19 ET
National Bank of Greece S.A. (NBGIF)
Q4 2022 Results Conference Call
March 14, 2023 12:00 PM ET
Company Participants
Pavlos Mylonas - Chief Executive Officer
Christos Christodoulou - Group Chief Financial Officer
Greg Papagrigoris - Group Head of IR
Conference Call Participants
Alevizos Alevizakos - Axia Ventures
Benjie Creelan-Sandford - Jefferies
Sevim Mehmet - JPMorgan
David Daniel - Autonomous
Mikhail Butkov - Goldman Sachs
Alexandros Boulougouris - Wood & Company
Presentation
Operator
Ladies and gentlemen, thank you for standing by. I'm Poppy, your Chorus Call operator. Welcome, and thank you for joining the National Bank of Greece conference call to present and discuss the full year 2022 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 fourth quarter 2022 financial results call. I'm joined by Christos Christodoulou, Group CFO; and Greg Papagrigoris, Group Head of IR. After my introductory remarks, Christos will go into more detail on our financial performance, and then we will turn to Q&A.
Before we start, on behalf of NBG, I would like to express to everyone our deepest condolences to the families of the victims of the devastating train crash.
Now to begin, I'll describe briefly increases economic performance and prospects, then turn to our financial performance and end by providing some guidance as regards expectations for this year 2023 and beyond to 2025. On the first point, economic growth in Greece has remained robust throughout 2022, despite the energy crisis and the concomitant inflationary pressures. Indeed, Greek GDP growth exceeded 6% in 2022 and was among the highest in the developed world. Key drivers of growth were a bouyant tourist season, targeted government support programs and the general good health and competitors of the Greek enterprises, which also helped attract record foreign direct investment inflows of approximately 3% of GDP. As a result, Greece experienced employment growth of 5% for 2022 and high corporate profitability. In fact, the highest in over decades, which absorbed increased production costs. It is noteworthy that fixed investment increased by 12% in 2022, reaching a 10-year high of 15% of GDP, evidencing the attractiveness and competitiveness of the Greek economy.
Turning to 2023. [indiscernible] so far is encouraging. External conditions are improving as it seems to have activity in the year [indiscernible] and the U.S. will be better than expected, while energy and other commodity prices also are lower than expected. Moreover, leading indicators included from the important tourist sector of pointing to another robust year. Fixed investments should remain strong with many projects in the pipeline, and RRF loans are just beginning to support activity. 2% of GDP inflows in 2022, which will hit the economy in 2023. All in all, combined with the positive momentum coming into the year and solid fundamentals, is expected to outperform once again the rest of Europe in 2023, with GDP exceeding 2.5% despite a significant monetary policy timing, and inflation is expected to end the year near 3%.
With a relatively defined macroeconomic scenario emerging at the baseline, I feel increasingly confident that asset quality will not be a major concern in 2023. While credit demand, especially from the corporate sector, will continue to be strong. Indeed, so far in 2023, early delinquencies have not exhibited any signs of deterioration. Part of explanation for this [Goldilocks] performance is a very low credit penetration with performing loans at about 55% of GDP, in fact, which mutes the impact of higher interest rates.
Let me now turn to profitability. Our full year core operating profit came in at about €700 million, up nearly 60% year-on-year and more than €200 million above our guidance. It is equivalent to our core after-tax return on tangible equity of around 10%. And this outcome meets the previous 2024 business plan target, a full 2 years ahead of schedule.
The driver behind the superior performance derives mostly from our solid core income trends, with NII up 13% year-on-year compared with initial guidance of a decline of 9%. And fees were up by 21% year-on-year, 8 percentage points higher relative to our initial guidance. Our costs will contain to low single digits despite high inflation and currently, the biggest component of our costs, personnel expenses were approximately 2% lower year-on-year on a like-for-like basis as our CFO, Christos explained. A strong recovery in our fiscal -- in our full year 2022 core income, up by 15% year-on-year, combining [indiscernible] contained costs, reduced group cost to core income by more than 5 percentage points to below 47%. Our domestic NPE exposure declined to 5%, a 4 percentage point lower than our guidance for an NPE ratio of 6%, reflecting sustained negative formation throughout the year.
The strong profitability added nearly 200 basis points of capital in 2022, while organic capital generation reached nearly 100 basis points despite a strong but backloaded the year expansion of our domestic loan book by €2.5 billion, a result of which far exceeds our annual target of €1.5 billion. In sum, our fully loaded CET1 ratio increased to 15.7% by far the highest increase. I would like to emphasize that our high-quality balance sheet positions to NBG well in the current choppy financial environment.
Looking forward, we are revising up our guidance for fiscal year 2023 to reflect the significant outperformance we've achieved in 2022 as well as the continued effort of our transformation program to improve the efficiency and productivity of the bank. For 2023, we expect solid double-digit growth in our core profit after tax, translating into a core return on tangible equity of 11%. This will be achieved through a continued strong NII performance, reflecting a higher level of benchmark interest rates and the continued strong growth in corporate loan volumes and inviting retail volumes. These will grow at a high single-digit growth rate, while costs are expected to evolve similarly to 2022, supported by the successful VES of 460 FTEs achieved at the very end of 2022, which will offset wage and inflation costs. As our efficiency ratio will improve further to the cost to core income ratio expected to drop to 42%. We do not foresee any meaningful increase in the credit risk in 2023, consistent with our gross NPE expectations for an unchanged ratio of 5%, dropping to 3% by 2025.
As regards guidance beyond 2023, we target a sharp and consistent improvement in our core profit after tax and return on tangible equity. Specifically, our core return on tangible equity for 2025 is expected to exceed 12%, up by more than 250 basis points versus 22%, while earnings per share accretion will exceed 50% over the same period. Organic capital generation will increase our CET1 ratio by more than 350 basis points over the 3 years. This level of capital permits us to return value to our shareholders on top of exploring growth options. Indeed, we expect NBG to consistently return value to shareholders over the next years through dividend distribution and potentially complemented by share buybacks. The question on our 2023 distribution to the 2022 profit will be vetted by the regulator in the coming months.
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 the Q&A. Christos?
Christos Christodoulou
Thank you, Pavlos. Starting with the profitability highlights on Slide 15. For the full year 2022, we reported an attributable profit after tax of €1.1 billion driven by strong core profitability of €0.7 billion, more than €200 million ahead of guidance and up by nearly 60% year-on-year. Key driver of this performance was the accelerating recovery in our NII throughout the year on the back of positive volume effects complemented by base rate driven repricing in the second half of the year. It's important to note that this result was achieved despite the significant reduction of NPE NII by over €100 million from the last leg of our NPE clean up, as well as considerably lower TLTRO interest compared to the previous year.
Fee income also witnessed an equally impressive performance, increasing by 21% year-on-year driven by increased transaction demand and [cost energy], further diversifying the bank's core revenue stream. Costs were contained despite high inflation and our ongoing strategy in IT investment plan with our full year '22 cost-to-core income ratio down by more than 5 percentage points year-on-year, breaking the 47% mark, demonstrating the sharp improvement in our operating efficiency. Finally, cost of risk in line with guidance remained in the 70 basis points area throughout 2022, reflecting our conservative approach to post-model overlays despite consistently negative organic formation leading to further increases in coverage levels.
Turning to balance sheet and asset quality highlights on Slide 16. In 2022, we accelerated our loan expansion to €2.5 billion year-on-year against the target of €1.5 billion, factoring in a very strong fourth quarter where domestic performing loans surged by €1.2 billion quarter-on-quarter, reaching circa €28 billion. At the same time, the quality of our portfolio keeps improving with domestic NPEs further down to €1.6 billion for just €0.2 billion net of provisions. NPE ratio increase stood at 5.1% compared to 6.9% a year ago, beating our target for 6%, while our cash coverage rose to 88% by far the highest in the sector. The reduction in our NPE exposure reflects consistently negative organic NPE flows with no signs of pickup in earlier years to this date.
Moving to capital on Slide 17. We strengthened further our first-in-class capital ratios throughout 2022, on the back of strong profitability of nearly 200 basis points, comfortably absorbing sharp credit risk-weighted asset expansion. All in all, fully loaded CET1 ratio rose to 15.7%, which fully loaded total capital ratio reaching 16.8%, up by 130 basis points year-on-year. After our 2023-2025 business plan, going forward, net organic capital generation remained strong and were in excess of 1% per annum, enhancing our optionality towards capturing growth opportunities as well as returning value to our shareholders.
On Slide 19, represent the high quality structure of our balance sheet. NBG is a key beneficiary of this environment as almost 90% of our loans are closures, while our securities portfolio is hedged effectively becoming floating as well. Notably, both loans and securities are funded by deposits with circa 85% in demand deposits with an average balance of less than €4,000 per account, allowing for the marginal cost. Most importantly, even assuming full TLTRO repayment, we retained a net cash position of about €7 billion, supporting NII and NIM going forward as depicted in the left-hand side chart.
On Slides 20 to 26, we provide some more insight to the key drivers of our profitability. Starting with domestic NII on Slides 20 and 21, we have seen accelerated growth in the interest income from performing loans in Q4, increasing by 22% quarter-on-quarter as [indiscernible] repricing gained traction with performing loans yield reaching 4.1% in the fourth quarter, up by circa 80 basis points quarter-on-quarter, implying approximately a 65% rate base.
As we show on Slide 23, time deposit yields have also started to pick up with faster rates currently at approximately 45%, with no significant change in mix as depicted on Slide 24.
Moving on to fee income on Slide 25. Domestic fee growth was sustained at 23% year-on-year, with strong weakness across all business lines driven by cards, payments, trade finance, loan origination as well as fees from our investment projects. Moreover, the regional customers to digital channels continues with e-banking transactions up by 11% year-on-year in Q4 and total transactions 6% higher year-on-year, underlying the high quality of our digital offering, also acknowledged by third-party service.
Operating expenses, as presented on Slide 26, remained contained despite high inflationary pressures and incremental depreciation from our ambitious strategy on IT infrastructure upgrade, including the ongoing replacement of our core banking system. The strong recovery in core income, combined with relatively [elastic] costs, led our full year '22 cost-to-core income ratio below 47% from 52% a year ago, with a Q4 metric down to a record low 43.5%. Going forward, we will continue keeping operating expenses under control through further optimization actions, including tight demand management.
On slides 27 to 29, we present our improving asset quality profile. Domestic NPEs dropped by €0.5 billion year-on-year to €1.6 billion with circa 1/3 of our closing fees comprised of NPEs less than 30 days past due, purely in future curing. Net organic flows amounted to minus €0.3 billion for the year as curings comfortably absorbed due [indiscernible] defaults with [indiscernible] range remaining at high levels in mortgages. Moreover, the mix of our loan exposure kept changing favorably as continued Stage 1 loan growth far offset the reduction as depicted on Slide 29.
Our robust liquidity position is shown on slides 30 and 31. Domestic deposits kept increasing in 2022, up by €1.8 billion year-on-year to €53.4 billion, indicating the resilience of household disposable income and corporate expense ratio. Our superior liquidity profile is also evidenced by our TLTRO balance payments, which exceeded €5.5 billion from November 2022 today. This brought our TLTRO position down to €6 billion currently from €11.6 billion in Q3 2022 with our LCR and NSFR ratios well above regulatory thresholds. Finally, as regards MREL, following senior payer insurances of circa €0.9 billion in Q4 2022 and strong recurring capital generation, we are well above our interim nonbinding target for January 2023 of 20.4% by a comfortable margin of 150 basis points. We hope to continue addressing the market in a recurrent manner, subject to market conditions and anticipating the upgrade of the 3 economies traditional [indiscernible].
On slides 33 to 36, we provide the key achievements and priorities of our ESG agenda. We are pushing forward with our environment and climate strategy, leading the market in sustainable energy financing through record corporate renewable energy projects in 2022, up by 45% year-on-year. In parallel, we accelerated the transition to sustain our economy to over €300 million in RRF loans of which approximately 1/3 under the green pillar and more than €100 million in green business and green housing loans. Finally, we monitor closely our clients' carbon footprint and continuously improve environmentally responsible practices.
Summing up, in 2022, we continue demonstrating solid progress, delivering best-in-class results in our balance sheet cleanup as well as adding up further to our already high levels of capital. At the same time, we improved markedly our profitability well above initial guidance. Our full year '22 results demonstrate the high potential of NBG. We are well on track to boost our core return on tangible equity further to over 12% on the back of an increase in core income base, capitalizing on our robust balance sheet and improving operating model efficiency. Value creation and the return of value to our shareholders is one of our top priorities.
And with that, let's now open the floor to questions.
Question-and-Answer Session
Operator
[Operator Instructions] The first question comes from the line of Alevizos Alevizakos with Axia Ventures.
Alevizos Alevizakos
Well done for this great set of results. I've got a couple of questions, if I may. The first question is regarding the organic capital generation. You stated 350 bps which I'm assuming it does not include a payout. Also, you haven't mentioned anything about the payout for this year. So am I right to assume that this would mean 19% plus CET1 ratio. And what does that mean for the future? Does it mean that you're open for M&A? Or is it going to be just dividends and buybacks just back loaded?
And then the second question is your budget is with the deposit facility rate of 2.5%. I was wondering what is the sensitivity if the DFR grows to, let's say, plus 100 bps? What does it mean for the NII?
Christos Christodoulou
Thank you, Alevizos. Let me start from the second question. You rightly say that our budget is based on a DFR of 2.5% for the next 3 years. Now our sensitivity to an increase in the rates by about 100 basis points is in the area of €100 million to €120 million over and above of what the business plan assumes. We discussed last year, and it still is the case, that from the first 300 basis points of interest increase from the base rates. We expected about €240 million of increase in our annualized NII. So the €120 million from the next 100 basis points of increase is not incorporated in our business plan.
Going to your first question on the organic capital generation, yes, the 350 basis points of increase does not incorporate any dividend, any shareholder retail. So that's point number one. I have to say though that we do have accrued in the numbers that you see for 2022, an amount of dividend. And on your question on possible usage of capital for whatever reason, M&A is included, the CEO will address.
Pavlos Mylonas
Okay. Clearly, capital excess capital provides us with optionality. We will look at whatever growth we do in Greece, including from the assets coming from the services. We will look at portfolios outside Greece. We will look at, clearly, remuneration of shareholders. You know my preferred acquisition is of having JVs with technologically more sophisticated partners. I think those are the first on my list of what we will do with the excess capital consideration over the next 3 years.
Alevizos Alevizakos
That's great. I've got a follow-up on what the CFO said, if I may. What's the level of the accrued dividend for this year?
Christos Christodoulou
Yes. The accrual is in the area of 20 basis points for 2022.
Operator
The next question comes from the line of Creelan-Sandford, Benjie with Jefferies.
Benjie Creelan-Sandford
It's Benjie here at Jefferies. Two questions from my side, please. The first one was just on the asset quality outlook. I mean you mentioned that you don't see any major concern for 2023, but you are guiding to a slight increase in the cost of risk in the 2023 guidance despite the coverage levels looking very conservative. So I just wondered whether you were assuming that you build your coverage levels further from here? Or are you expecting a slightly meaningful pickup in NPL formation this year? And then perhaps more broadly, year-to-date, are you seeing any signs of deterioration across particular segments?
My second question was just on the loan growth target for 2025 to 7% CAGR. That is running above, I guess, nominal GDP growth. I was just wondering whether you were targeting -- or whether that target assumed market share gains? And if so, are there any particular segments in which you see opportunities for higher growth going forward?
Pavlos Mylonas
Okay. On the asset quality, I think the answer is that we are conservative. The business plan was done in November, December. The outlook for 2023 was significantly worse then compared to now. So I think that you should look at this as a number that has a bit of buffer in it. Now on the loan growth, don't forget -- and as I mentioned in my introductory remarks that there has been significant disintermediation in Greece. I mean loans to GDP of 55%. That's got to build up to more normal levels for our country with Greece is for capital income, which should be close to double. So that's why you're looking at -- even if we get our fair share of loans at the loan growth that exceeds the normal GDP. So even that number should -- is, I think -- be seen as conservative.
Operator
The next question comes from the line of Sevim, Mehmet with JPMorgan.
Mehmet Sevim
One question on your net interest margin, please. I see that you're targeting a 40 basis point expansion for this year, but then it stays flat afterwards what would be the moving parts after this year that would keep the margins flat given we would normally assume that deposit repricing but also the mix shift would happen over time. So could you please be more specific there? And also, on the back of the global developments in the last few days, would you expect to see higher deposit [indiscernible] in Greece as well? Or do you think the market dynamics are supportive for the existing guidance?
Christos Christodoulou
I'll take the first question, and I'll pass the floor to Pavlos for the deposits. So we had a very strong quarter in Q4 with regards to having also incorporated in our NII, the start of the repricing due to the base rate increases. Now going forward, we do see that this increase will benefit also 2023. But you should be conscious that as the months passed, we have some headwinds in our NII as well. I mentioned a few. We have MREL issuances that will break them our NII. We assume that there will be a change in the mix of our deposit base. So currently, as I said, with about 85% of our deposits in core, deposits versus time, and we expect that this mix will change more or less to the area of 65% to 55% in the following months. We do have the issue of the pass through rates, which have not yet materialized in full. So we expect that will also burden our NIM going forward after the initial pickup that we will see materializing in 2023. So I think those are the driving factors that more or less explained for the flattish NII that we will experience post 2023, probably after the first half of 2024.
Now your question on deposits. So the question was whether we are concerned with regards to the change in the pricing of deposits or the mix. (technical difficulty) Since you are not clarifying, I understood the question that had to do with the pass-throughs. What I can say is that we expect that the pass-throughs for the time deposits will pick up. We're currently in the area of 45%. We expect time deposits to move to the area of 75% to 80%, that's what we assumed in our plan. Now with regards to core deposits, we have assumed something in the area of 20% in our business plan. It might be less than that, I can see an outside risk in that assumption. I hope that answers your question.
Mehmet Sevim
Okay. And apologies, I was on mute earlier.
Operator
The next question comes from the line of David, Daniel with Autonomous Research.
David Daniel
I've just got a couple. Just on MREL, you just mentioned there's a headwind in NII. Can you just guide us talk to what you're thinking issuance-wise this year in MREL just volumes and when you might be looking at the market given I understand that market is a bit off at the moment. And I also just wondered if you look at the [AT1] market if things are organic, and cognizant of what your peers have done. And then just on your securities portfolio, I can say that €10.4 billion has helped to collect. Can you provide a guide on the fair value of that portfolio at the moment would be helpful.
Christos Christodoulou
Thanks for the questions. So with regards to MREL, I mentioned that we have a healthy buffer compared to the interim target that we have for January 2023. So that gives us optionalities. I think the base case is that will go for an issuance towards the second half of the year, most probably at year 2. And now having said that, you mentioned AT1, that’s also part of our internal exercises so that we have the optionality to tap that instrument probably later in the time horizon of our end plan. But as I said, the base case is a Tier 2 this year.
Now with regards to our hard-to-collect portfolio, yes, we have about €10.5 billion of hard-to-collect. We have this falls to maturity. The fair value of this portfolio, which is not marked to equity is not that significant. I think losses are in the area of a few hundred million. But to be honest, I think the important thing with regards to this portfolio is the sheer generation of income that it provide. Please note that this portfolio generates more than €300 million of NII per annum. So I think we are well where we stand with the hard to collect portfolio in our outlook.
Operator
[Operator Instructions] The next question comes from the line of Butkov, Mikhail with Goldman Sachs.
Mikhail Butkov
One question on your capital -- potential capital distributions -- capital allocation strategy. Could you consider as a part of that, any buybacks from the core shareholder or -- and -- yes -- where is -- is that anywhere on the priority list?
Christos Christodoulou
The HFSF has published their divestment guidelines, and buybacks are one of the options. So I think the answer is it’s possible. But clearly, this is something that needs to be discussed with the shareholders. So we need to wait on this. But it’s possible.
Operator
[Operator Instructions]
We have a follow-up question from the line of Sevim, Mehmet with JPMorgan.
Sevim Mehmet
So I just had a follow-up on the very last question. And first of all, in terms of capital allocation, what do you think your normalized dividend payouts could be from 2023 earnings and onwards given the strength of the capital? And secondly, if a buyback from the core shareholder is a possible option, do you think the regulator would be okay with it if we consider, for example, an option where you buy a significant amount of share, so it goes into excess capital rather than paying out from ordinary earnings.
Pavlos Mylonas
Okay. On the – what we’d like to see a normal payout ratio, I think something between 20% and 30% would be something we would suggest. Now in terms of deep buybacks dipping into capital. I’m not sure what the regulator would say. And I guess it would depend on when we ask. If we ask as soon as the now where we’re fighting for a small dividend, I think the answer would be probably negative. If we ask in a year or 2 when we are in a much better position, I think the odds would be better. But I’ve expressed my view on dividends and buybacks. Let’s walk first and take things in small strides rather than do anything – as such things which are too big and make things more difficult.
Operator
The next question comes from the line of [indiscernible] Securities.
Unidentified Analyst
I think you may have mentioned that, but what is the level of Euribor that you assume 3 months Euribor going forward for your guidance? And if Euribor was to rise by 100 basis points more, what effect that would have on your NII? And if you could discuss the pass-throughs. You’ve already discussed the pass-throughs, and there is information in your presentation about the deposit rate pass-through. But how about the low yield pass-through. There is some info in Page 20. But I also wanted to hear your comments going forward on that front.
On the Euribor question, the assumption that we have adopted in our business plan. Is that the 3 month Euribor would peak somewhere in 2023, 2024 to 2.9%. And then it will come down a bit in 2025. So that’s the base case. You’ve asked how our NII would be affected by an increase of about 100 basis points in the – up in the Euribor. I think the answer that I gave before with regards to the dividend therefore applies here as well above 100 basis points increase. On the Euribor, will increase, other things being equal, our NII by about €120 million.
Now on the pass-throughs for loans, we said and we had in the presentation, that we are experiencing with a time lag with regards to repricing, about 65% pass-through rates in loans. Effectively, what we expect and what we have tried to capture in the business plan is that out of the increase in the base rate, we expect about 2/3 of that to materialize in our profits. And the other 1/3, let’s say, to be returned to the – to our customers to spread [compression]. But that remains to be seen. It’s an estimate that we are making where we stand now.
Operator
The next question comes from the line of Boulougouris, Alexandros with Wood & Co.
Alexandros Boulougouris
Congratulation on the numbers. Quick question on loan growth. Could you comment a bit on what loan growth you're assuming for 2023? Is the 7% CAG more or less similar every year? Or would you expect a slowdown opening in 2023 and then an acceleration? And maybe a comment on when you would expect retail lending to start picking up in Greece as is still in negative territory. That's my first question.
And the second regarding an clarification on what you mentioned on the approach more dividend for 2022 in the area of 20 bps of RWA, if I could [indiscernible] down correctly. When should we expect more information on this from the regulator? That would be before the AGM, it is correct to assume?
Christos Christodoulou
Okay. Thanks for your questions. So let’s start on loan growth. So yes, we assume that at the beginning of our business plan horizon, 2023, the growth will be more modest, even the more, let’s say, subdued environment that we expected will interrupt the balance sheet – the business plan, and we expect that to pick up in the later years of the business than horizon. We discussed about the sectors that we expect the growth. It’s mainly in renewables, energy, infrastructure. Generally, the growth will come from larger tickets in the early years of the business plan. And then SMEs and the retail will come in place.
With regards to retail, we see 2023 another year of slight contraction in the balances, and we expect that in 2024, we would start accruing increased balances in our retail business as well. So that’s the expectation on the loan growth. The second question was with regards to the accrual of dividends. We said that the accrual is about 20 basis points. That’s an accrual. We have not yet decided on amount or if it would be allowed to pay out the dividend out of 2022 profits in 2023. We mentioned that in previous calls, we will have to sit down with the supervisor after the year-end results and the publication of our financial statements. I think the [indiscernible] is important to making such decisions. Obviously, if we are about to pay dividend in 2023, it will happen, and we’ll know it before the AGM of July, yes.
Operator
The next question comes from the line of [indiscernible] with Alpha Finance Investment.
Unidentified Analyst
Two questions, if I may. One, on your deposit evolution during the quarter where we see a decline [indiscernible]. So if you have any comment on that? And second, on asset quality, if you could share your assumption for the expected organic flows for this year? And what you have seen so far in the year on that front?
Christos Christodoulou
Well, the first question on deposits. There was some slight reduction. It had to do with seasonality. And the other element of the decrease had to do with some side accounts of corporates or large corporates with high liquidity but optimized with regards to the working capital facilities given the increase in the interest rate. So that was expected and fine at the end of the day.
With regards to our expectations for 2023, as the CEO said just a while ago, when we drafted the balance sheet, the outlook for the economy for 2023 was a bit more subdued. What we have assumed going forward is about just over €330 million of formation -- positive formation of NPEs. And let me just say that we are coming from a year where we had outflows of €0.3 billion. So we took a conservative view. And to answer the last point of your question, we have not seen any pickup in earlier years so far in the year. So I think the signs are good, but let's wait and see how this develops further in the year.
Operator
The next question is a follow-up question from the line of Creelan-Sandford Benjie with Jefferies.
Benjie Creelan-Sandford
I just had a question on cost. I mean there were some upward pressure on personnel costs this quarter. I think that included some element of front-loading of variable remuneration for 2023. I just wondered if you could quantify that and also just repeat your sort of expectations for absolute cost growth going forward. I didn't quite catch that earlier. And maybe if I can squeeze in another quick one. Just going back to the NPL outlook. I mean the curing this quarter were very strong. I'm just wondering, as the NPL ratio continues to come down, do you still see a reasonable pipeline of potential curings going through this year? Or is that something that we should expect to decline going forward?
Christos Christodoulou
Okay. Let's start with costs. Indeed, in Q4, we frontloaded on our course for variable remuneration for our staff for 2023. That's in the area of €16 million, €17 million and it was a one-off in the last quarter of the year. Now going forward with regards to costs, we expect that 2023 would be a year with all in all a low single-digit increase in our costs. So the same pattern that we experienced in 2023. We do have the tailwind from [indiscernible] that we executed at the end of the year with 450, 460 people leaving the organization. So that would absorb the salary increases, that as a result of the sectoral agreement that we signed in 2022. With regards to other lines of our OpEx base.
In G&A, again, we expect some pressure in 2023 because of inflation, but we have mechanisms in place to try and minimize the increases and the other line of our depreciation we've discussed about our ambitious plan of upgrading our IT infrastructure. So that's effectively frontload depreciation expenses. But all in all, I would expect a low single-digit increase in our OpEx.
Now with regards to NPL, yes, we said that the formation that we have estimated for the next year [2023] is about €300 million plus. The curings that we experienced in Q4 had some large corporate tickets that have hurt the numbers, but across the business plan horizon, we expect more or less this level of curings with a slight decline in 2023, given the overall expectations at the time when we interrupted the business plan. So I would expect 2023 with above 100 or maybe a bit more curings less than the numbers that you show in 2022.
Operator
[Operator Instructions] 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
Okay. Thank you all for joining us for the call. I’m sure we’ll have a chance to have more questions with you. The team CFO; and Greg, IR heading out to London tomorrow for the Morgan Stanley, and we’ll probably be on a road show, including myself, at the end of the month or early next month.
So with that, I want to thank you all, and hope to see you all in person soon. Thank you.
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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National Bank of Greece S.A. (NBGIF) Q4 2022 Earnings Call Transcript