BPIRF - Piraeus Financial Holdings S.A. (BPIRY) Q2 2023 Earnings Call Transcript
2023-07-31 14:12:05 ET
Piraeus Financial Holdings S.A. (BPIRY)
Q2 2023 Earnings Conference Call
July 31, 2023 10:30 AM ET
Company Participants
Christos Megalou - Chief Executive Officer
Theo Gnardellis - Chief Financial Officer
Chryssanthi Berbati - Head of Business Planning, IR & ESG
Xenofon Damalas - Investor Relations Officer
Conference Call Participants
Alevizos Alevizakos - AXIA Ventures
Mehmet Sevim - JPMorgan
Mikhail Butkov - Goldman Sachs
Osman Memisoglu - Ambrosia Capital
Simon Nellis - Citigroup
Luis Garrido - Bank of America
Sharat Dua - Amundi
Iuliana Golub - Goldman Sachs
Maximilian Gerstenkorn - Jefferies
Presentation
Operator
Ladies and gentlemen, thank you for standing by. I'm Geli your Chorus Call operator. Welcome and thank you for joining the Piraeus Financial Holdings Conference Call and Live Webcast to present and discuss Piraeus First Half 2023 Financial Results. All participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a question-and-answer session. [Operator Instructions]
At this time, I would like to turn the conference over to Piraeus Financial Holdings CEO, Mr. Christos Megalou. Mr. Megalou, you may now proceed.
Christos Megalou
Good afternoon, ladies and gentlemen, and welcome to today's conference call on our first half 2023 financial results. This is Christos Megalou, Chief Executive Officer; and I'm joined today by our CFO, Theo Gnardellis; Chryssanthi Berbati; and Xenofon Damalas.
Piraeus Bank strong operating performance in the first half of 2023 demonstrates how well we are progressing towards our vision to become a best-in-class European bank. We have delivered our seventh consecutive quarter of profitable growth and our best quarterly performance ever with €238 million net profit excluding one-offs.
As a result, I would like to thank all the employees of Piraeus Bank that continue to deliver, as well as our clients for their continued support. We are proud that the performance of Piraeus Group and the bank's leading role in the Greek market, have been recognized by the prestigious international magazine Euromoney, awarding Piraeus the title of the Best Bank in Greece for 2023.
Slide 4 shows our leading position across several market segments.
Before elaborating on the bank's performance, I would like to comment on the macroeconomic environment. In 2023, the Greek economy remains on a growth trajectory with first quarter real GDP increasing by 2.1% year-on-year. Despite the uncertain global sentiment, the Greek economy remains on a path of economic expansion for 2023 and beyond, reflecting the different phase that it finds itself in the current cycle. Our estimate for Greek GDP is for 3.4% growth this year with inflation decreasing and unemployment being significantly reduced. At the same time, real estate prices are showing a solid trend with residential prices increasing by 14.5% in the first quarter of 2023 annually.
Let's start our presentation with Slide 5, which displays our remarkable performance in the first half of the year. Profitability, efficiency, asset quality, capital adequacy, all presented improvement, almost reaching the yearly targets we have communicated. The business model we are pursuing is characterized by sustainable and diversified revenue pools, cost efficiencies, and a solid balance sheet.
Slide 6 illustrate the highlights of our Q2 performance. We generated normalized earnings per share of €0.18, running ahead of full year 2023 guidance provided in May. We produced a return on average tangible book of 15%. We delivered 15% net revenue growth versus the previous quarter on the back of a 9% net interest increase and a 16% net fee income growth. Our net fees for Q2 have been the highest ever for Piraeus Bank. We recorded best-in-class cost-to-income ratio of 32% from 36% in Q1, despite the inflationary environment. We lowered further our NPE ratio to 5.5%, frontloading our clean-up plan with two transactions in a quarter. We increased our NPE coverage to 57%. We achieved a €800 million net credit expansion. Our CET1 ratio stands at a solid 12.3%, 80 basis points higher compared to the end of 2022. We increased our assets under management by 9% in the quarter.
Slide 7 sets out our earnings results in detail. Our solid financial performance and the supportive macro environment position us to outperform our 2023 targets. Thus, today, we are upgrading our 2023 normalized earnings per share guidance to more than €0.65 from more than €0.55 previously estimated in May, and our 2023 normalized return over tangible book value guidance to approximately 14% from approximately 12% previously. I will return to this in a while.
Slides 8 to 10 present all the update and information driving our strong net interest income performance. Slide 8, net interest margin expanded further in Q2 to 2.6%; Slide 9. Loan pass-throughs were stable at 77%; while Slide 10, our deposit beta stood at 12% at the end of June.
Slide 11 presents the quarterly evolution of our net fee income. We achieved a record high of €141 million fees in Q2, corresponding to 75 basis points over asset, almost at par with European average. Furthermore, our cost containment efforts continue unabated, despite the inflationary headwinds.
The strength of our operational efficiency is shown in the best-in-class 32% cost-to-income ratio as shown on Slide 12. Our G&A costs recorded a 6% quarterly drop in Q2 to €78 million, also a record low for our Bank.
Slide 13 provides a summary of our asset quality indicators. Our NPE ratio dropped to 5.5%, already meeting our year-end NPE target. NPE coverage is now at 57%, up 110 basis points versus the previous quarter.
NPEs dropped by €400 million versus the previous quarter, as our clean-up plan was accelerated with two transactions in Q2 presented on Slide 14 and 15. One transaction was concluded in late June, comprising retail loans project Senna, while a second one project Delta, has been classified as held-for-sale. The two NPE transactions minimize the legacy retail portfolio of Piraeus Bank offloading more than €350 million retail and small business NPEs.
The remaining NPE portfolio of €2 billion as shown on Slide 16 has a clear path to almost halve in the next 18 months under a combination of organic strategies.
On Slide 17, we present the movement of our performing loans. Q2 was a strong quarter with €800 million net credit expansion, helped by development programs and the Recovery & Resilience Fund, as well as the pipeline of our corporate lending.
For the second half of the year, we reconfirm our target for an additional €1 billion net credit expansion.
Piraeus has a strong liquidity profile presented on Slides 18 and 19. Our deposit base is granular, stable, and of high quality. Our liquidity ratios are all solid as evidenced by the 233% liquidity coverage ratio, and the 61% loan-to-deposit ratio, both at the top percentile of the European space.
Turning to our capital base on Slides 20 and 21. Q2 capital position is on track to full year 2023 target, absorbing the NPE clean-up costs, accruals for 10% dividend payout, and the accelerated DTC amortization. At the end of June, Piraeus Bank had a 17.1% total capital ratio, comfortably above requirements and supervisory guidance.
Lastly, on Slide 22, on wealth and asset management, our new strategy continues to bring results with assets under management reaching €8.2 billion at the end of June, recording a 9% increase in Q2.
Moving now to our new forecasts for the year. We are pleased to provide you with a new set of estimates, upgrading our targeted KPIs for the second time, as shown of Slide 23.
For 2023, we now target a 14% return on tangible book versus 12% previously or more than €0.65 earnings per share versus €0.55 previously. Net interest margin is expected to be at approximately 2.5% this year, while we target a cost-to-core income ratio below 38%. We are also confident that our NPE ratio for the year will end up below 5%. Furthermore, we expect to achieve a CET1 ratio of 13% at the end of 2023. It is noted that our new set of targets are based on an assumed 4% deposit facility rate for the end of the year.
Slide 24 presents the expected evolution of our CET1 ratio during the second half of the year. For '24 and '25, we remain committed to our previous targets as per our March 2023 business plan. Especially for '24, we expect a 14% return over average tangible book value, assuming a 2.5% deposit facility rate.
The results of the 2023 supervisory stress test are presented on Slide 26. The result evidence Piraeus Bank improvement of fundamentals, placing the bank at the 13th position among 70 EBA banks participating in the exercise. Piraeus' consistent and strong operating results in the previous quarters have supported our Group's investment case, while the increasing trends in our performance continue to create significant shareholder value.
Slide 28 summarizes the competitive advantages of Piraeus Bank across all areas. The commercial positioning and the financial strength of the bank indicate why its valuation remains attractive compared with its local and European peers.
From Slide 29 to Slide 37, we present the drivers behind this performance and where we stand against our domestic and European peers. On Slide 29, we demonstrate the sustainability of our return profile, which ranks in line with peers, same goes for net interest margin as presented on Slide 30.
Our net fee margin is consistently above peer average, as presented on Slide 31, while we also outperform in terms of cost-to-income as illustrated on Slide 32. Slide 33 displays the radical reduction of our NPE ratio after many years of dealing with the legacy stock.
The massive clean-up we have undertaken has brought us to lowers versus peer average NPE ratio.
Slides 34 and 35 present our capital position, which is now at par with our domestic peers, while our strong operating results have grown and are expected to continue to grow our capital buffers further.
Slide 36 illustrates the P/E multiples for Piraeus versus peer average based on expected earnings as per public guidance, while Slide 37 presents our current price to tangible book versus profitable EU banking comparisons marketable as expected -- as estimated for year-end 2023.
Finally, before opening the floor to questions, a few words on the recent wildfires in Greece. Although our customers haven't experienced significant damages, we are in close contact with the local communities to identify the truly impactful ways through which Piraeus Bank can support businesses and households.
And with that, let's open the floor to take any questions you may have.
Question-And-Answer Session
Operator
[Operator Instructions] The first 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 congratulations on the set of results. I've got a couple of questions, if I may. First one is, I can see your lending expansion.
Operator
Mr. Alevizakos, I'm sorry to interrupt you. This is the operator. Can you please speak a little closer to the microphone, so the management can hear you?
Alevizos Alevizakos
Yes. Apologies. I hope now it's better. So congratulations on the set of results, and thanks very much for the presentation. My first question is on the lending expansion. Looking at the numbers coming from the Bank of Greece, your figure looks outstanding. So I was wondering, what causes you to outperform so much in the industry? Was there a single transaction that may have skewed the numbers towards that direction?
And then second part of that question is, I can still see the pass-through rates on lending continue to be very high. Do you expect this to continue or you assume some kind of spread contraction in the upcoming months? And the second part is, I can see now that the target for the RoTE has gone up to the 14%, which clearly -- that’s accordingly to the DFR going to the 4%. So is this more coming from the asset side i.e, you expect that you will be able to reprice more the loans or do you assume now a lower deposit beta? Thank you very much.
Christos Megalou
Thank you, Alevizos, and thanks very much for the questions. Let me take the first one, and then pass it on to our CFO, Theo Gnardellis for the rest of your questions. So our credit expansion for the first half anchored on our efforts on the Q2. It was not related to one specific transaction. There are a number of granular transactions that have taken place and gave us this result. The most important one was through the Hellenic Development Bank, which has increased our balances by €210 million. And that's mostly small businesses and SMEs, which for that particular action gave us a 42% market share. And that explains also the metrics that you had in mind.
At the same time, we had another €130 million coming through the RRF which again was a significant market share as of June, another 40%. And the rest is mostly corporate exposures mainly account on energy transition and other corporate transactions that increased our balances. So with this €800 million credit expansion, we are in line to achieve the promised credit expansion for the year, which requires an additional €1 billion, which comes -- and will come through a very healthy pipeline, but mostly our corporate book enjoys.
Theo Gnardellis
And Alevizos your question about pass-throughs. I mean we are currently enjoying a higher-than-expected pass-through in the loans of 77% as we disclosed. We are budgeting some spread contraction going forward to close out a 70% pass-through. So it's not a steady as it goes guidance when it comes to the asset side. It is going to be lower than today but higher than previously budgeted. So there is a bit of an uplift from the half one performance. There is some carryover effect for the full year. So that obviously helps. But it's not the main point of NII. The main point is clearly the deposit beta. We are going much lower in terms of the beta increase. We closed June at 12% even. If we reach the 19% of December, the full year average is going to be at 13%. So much lower than originally expected and guided for.
And let's remember also cost of risk. We always had a prudent guidance baked into the forecast for 120 basis points. We're now adjusting that to a 100 basis points. And a lot of other small things, including a better fee performance, a better admin cost performance, all of that bakes in guides for a steady normalized 14% return.
Operator
The next question is from the line of Sevim Mehmet with JPMorgan.
Mehmet Sevim
If I may follow up on the growth question. How do you see the trends in the second half, particularly taking also into account the higher ECB rates now? So how do you see both corporate demand, but also maybe can you talk about the retail demand? I heard there is now obviously a support program by the government for mortgages, et cetera. So putting everything together, if you could please tell us about your expectations for growth in the second half of the year? That will be very helpful.
And then maybe just on the 2024 for 2025 guidance. If I look at your NII over assets guidance, which is now 2.2% for 2025, I see that's come up from 2% previously, although the underlying DFR assumption is the same. So could you tell us what's changed here? Is it simply your expectations for still lower deposit betas through the cycle? Or is there anything else that has moved there.
Christos Megalou
Hi, Mehmet, and thank you for the question. On the growth on the remaining two quarters towards the end of the year, what we have -- what we are experiencing is a granular dialogue with the market on across industries, mostly supported from the RRF, and we expect also to be further supported by the further programs of the Hellenic Development Bank in SME and SB exposures. These are the driving forces, especially the RRF trend for growth for corporate balances for the remaining of the year. There are some specific big trades as well. For example, the Attica Ring Road will be awarded and further exposures may come out of that transaction. But overall is pretty much a corporate book case for the rest of '23.
On the retail, we are a big player and a big participant in the My Home program that you have referred to, which indeed is a very successful one. The first €500 million have been allocated, and there is a second €500 million that are coming through. However, the actual impact on disbursements for the next two quarters, we don't expect to be significant. So that will change the trend on retail mortgages. Retail mortgages demand remains weak and we expect this to continue in the next two quarters, and we have to wait until first, second quarter of 2024 to possibly see some reversal in that trend. So, mostly and primarily, corporate, coming out of large corporate, infrastructure financing SMEs and SBs supported by Recovery & Resilience Fund, and in the cases of SME and small business by the Hellenic Development Bank products.
Theo Gnardellis
To your question on the '24-'25 guidance Mehmet, now we're introducing a new 2023 revised guidance. The '24 is an extra column we're bringing in just for clarity for everybody, and simply to demonstrate the sustainability of the 14% return between '23 and '24. Because naturally the question that most of you guys have is, okay about '23, but what about '24? So, focus on what our current business plan described for '24. Nothing changes for '25. The return is still 12%, as it was. The capital accretion is still 12%. So just assume that the guidance stays the same.
Operator
The next question comes from the line of Butkov Mikhail from Goldman Sachs. Please go ahead.
Mikhail Butkov
Good day. Thank you very much for the presentation and congratulations. My first question is on net interest income. We could see some improvement, good improvement in the second quarter, which is -- what's surprising to some extent is that, it is even bigger than in the first quarter on a quarter-by-quarter basis. So what contributed to the stronger quarterly performance? And when do you expect NII to peak this year or maybe next year? All right, then the second question is on the fee income. We can see some also solid improvement in the second quarter. What has supported that? And finally, on the NPEs. It is said that one big corporate case translated into more than half of NPE build-up in the second quarter. So the question is, are there any other big single corporate cases which are, let's say, on watch or on the radar, and which can be potentially at risk of hedging up to the NPEs balances? Thank you very much.
Theo Gnardellis
Okay. Thanks, Mikhail. Indeed, the NII of Q2 was spectacularly high. We can see on Page 8, the drivers have contributed to the -- to this result. I have to say, it was a much smaller hike of the deposit beta than we expected and a slightly higher pass-through on the loans. That together with higher DFR that helped the cash part. Remember that even after TLTRO, the Bank remains strongly cash positive with more than €5 billion residual cash. So that creates a tailwind on the NII as well. That created this result. The speed by which the deposit beta will continue to hike will determine when we reach the peak. We expect that this peak on a quarterly basis will happen this year, probably in Q3, given our current forecast. But the performance every quarter surprises. So we just remain focused operationally to provide alternative opportunities to our customers, and not to contaminate the deposit base with higher betas.
The fees, it was a record quarter for the Bank, for a total of 141. Definitely, the loan part and the strong expansion that the Bank showed with some sequences in there when it comes to the agri part and some other fees that we collected RRF related, et cetera. That created kind of a perfect positive storm for fees on the loan side. But I got to say all the fee lines kind of contribute. So we have very strong card quarter, funds transfer. So overall, a very good performance that also helps us increase the guidance on the fees per asset per basis.
Look on the NPEs, we had just one case. Of course, we can't say names, but it was a big part of our inflows, the majority. Are there any more such cases? No. I would say right now there is no big watch list that we expect, and we kind of understand as to whether we're going to trigger a stage 3 reclassification, no such case exists. But there's no room for complacency here. We understand when the interest -- where the interest rates have gone. We are seeing very high pass-throughs, so that causes extra caution for diligence and attention to the clients. The most important thing for us to make sure we support clients rather than first stage classification. Whatever comes our way, we will deal with it.
Operator
The next question is from the line of Memisoglu Osman with Ambrosia Capital.
Osman Memisoglu
Many thanks for the presentation. Just a few things that are left, I guess. One on the securities income. It looks like your volumes were up a bit, but the income is lower Q-on-Q. So just wondering if there are any one-offs either this quarter or last quarter, any color guidance on outlook? That's the first one.
And then the second one, you touched upon a bit on asset quality. But just wondering if you can elaborate on the rationale for accelerating the NPE reduction process? And just to confirm, the remaining €2 billion you plan to work that through organically. Did I hear that correctly? Thank you.
Theo Gnardellis
Thank you, Osman. So, overall, the securities book has actually increased in returns. I guess, you're looking only at the securities part of the line. If you include the money that the bank makes from derivatives that are used to hedge those positions, it's actually an increase from €93 million in Q1 to €107 million. That's on Page 8. So all-in-all, it was a -- it's a position that's continuing to enhance the NII of the bank. The increase happened primarily through risk-free T-bills. So that's also why you would not see a bigger hike than what you would expect. It was really a deployment of cash under some rather risk-free paper.
On the NPEs, listen, I mean, the bank is making some very, very solid money right now. And as we've said last time, our plan is to deploy the extra capital that we're making above expectations to accelerate the clean-up of the bank and reach our asset quality target sooner. We had -- we knew that we were on a very strong trend for organic profitability. We decided to invest the money and accelerate the plan, bring those two transactions forward by about six to 12 months, and therefore, create a clear path to European average NPE ratio now. From now on, the plan is focused purely on organic reduction. We do have a stock left of about €2 billion, €1 billion of that we expect to treat over the next 12 to 18 months on an organic basis, which would -- allowing for the current inflow rate get us to where we want to be in terms of NPE ratio and bank -- all the organic profit to enhance capital buffers of the bank. That's the plan definitely for the next six months.
Osman Memisoglu
And maybe just following-up on the cost of risk outlook, I mean, is that a conservative assumption per se given what you're seeing on the ground now for '24?
Theo Gnardellis
Well, it is in line with what we actually had in half one. We are continuing at that rate. We had said 120 basis points. We're now adjusting that to a 100 basis points, which is aligned to the actual half one results, also given the charges that we had to take on the inflows of the first semester. Is it conservative? It's definitely not aggressive. I would say it's based on what we're seeing right now.
Osman Memisoglu
I meant -- sorry, I meant for '24, the 80 bps. Is that…?
Theo Gnardellis
Well, I mean, reaching our NPE ratio target for 2023, yes, I would say there is some room there. But guide for '24 and '25, we'll come back with a renewed guidance after we examine all the elements most possibly with the Q3 results. Right now, there's a lot of elements in the '24 and '25 guidance that need to be reeducated, starting with net interest margin. The only point of the '24 guidance as I said before is to illustrate that the bank is right now a 14% returning bank. Whether now that can become 15% or 15.5%, it’s I think a defensive point.
Operator
The next question is from the line of Nellis Simon with Citibank.
Simon Nellis
One technical question, which is, can you tell us how much cash you have in minimum reserve requirements sitting at the ECB? That would be my first question.
And second, could you just refresh us on the loss budgets in terms of restructuring charges? I think you had only €5 million in the first half. What's the likely one-off cost that you expect for the full year? And then just the same in terms of the loss budget for inorganic NPEs after the large activity in the second quarter? Those would be my questions.
Theo Gnardellis
Hi, Simon. Yes, I guess after the latest ECB announcements, it's a fair question. The minimum reserve is €600 million. So, the next question is the impact on the NII. On an annualized base that's around €20 million versus previous plan. That's yet to be updated with -- along with everything else for the '24 guidance. For 2023, we've measured the impact to be €6 million that's baked into the revised guidance, just for the avoidance of doubt.
For the clean-up, look, it's a higher clean-up charge than we had in the budget for the year, primarily because we basically frontloaded the 2024 transaction into 2023. We don't have major clean-up charges left. The clean-up process has completed. The bank is at the 5.5% NPE ratio, and we're headed to a lower than 5% ratio from organic flows.
Simon Nellis
Got it. And in terms of the one-off costs?
Theo Gnardellis
Well, we have got some restructuring costs, a very low number booked into Q1 and Q2. For the full year guidance for the capital, we are including a €60 million charge. We will see how that gets deployed with between '23 and '24. We haven't announced any programs yet, but the guidance does budget for a substantial FTE reduction between late '23 and early '24.
Simon Nellis
Understood. Thank you. Thank you very much.
Operator
The next question is from the line of Garrido Luis with Bank of America Merrill Lynch. Please go ahead.
Luis Garrido
Yes. Hello, and thank you for taking my questions. I have two, please. The first part on the NPE flows this quarter, that single corporate, which drove the majority of the increase. Can you tell us which industry it was from? And can you give us an indication of the share of the top 20 corporate exposures in your books, just as a proportion of total corporate loans? And then the second question for me just on the issuance guidance. If you could give us an update on where you stand for the rest of the year? Thank you.
Theo Gnardellis
Well, I think we are basically now searching for a name here. No, I mean, let's stick to what we have said. It was a substantial corporate exposure. It is rather public. It has affected the entire sector to some extent. The reason why there is no point mentioning industries here is not to avoid the question is really that, the case is so idiosyncratic and has some history behind it, that is not really a predictor of any industry performance per se. So that's why let's stick to our words. You had the second part of questions. Sorry, can you repeat?
Luis Garrido
Yes. If you could give us some indication of -- if you look at let's say your top 20 corporate exposures, what's the proportion of the total corporate book that they represent?
Theo Gnardellis
Sorry. We are looking that up. It's not the majority I would say, so there is not -- of the total lending book. So there is no particular concentration risk right now. We are constrained also by EBA rules in terms of CET1 concentration as well. But we can come back to that with some disclosure later on.
Luis Garrido
Okay. Thank you. And then on the issuance update?
Theo Gnardellis
Yes. We are currently at -- for MREL, you're saying, right? For bonds. Yes. We are currently at 21.6% MREL versus for 21.8% target. We are basically there in terms of this year's requirement, and we don't plan to issue anything more. The capital accrual for the year is now at 70 basis points as per guidance. So that in itself will take us about 22%, so comfortably meeting the guided target for the year.
Luis Garrido
Okay, great. Thank you very much.
Operator
The next question is from the line of Dua Sharat with Amundi.
Sharat Dua
Just a question on the one item of guidance, which is still revised. But on the cost-to-income ratio, you've obviously done much better than the guided level in the first half at 34%, and you're saying below 38% for the full year. Is there any reason that you can tell us why we should expect costs to increase significantly in the second half from that run rate?
Theo Gnardellis
No, not particularly. So right now, we did peak in NPE. We had a very good performance in admin costs. We're simply looking at the full year budget right now. We say less than 38%, because let's just say that our model in our forecast have a significantly lower number, we're working for the best result possible. But we thought it's right to upgrade our guidance versus the previous number. We're headed for a very good cost income performance for the year.
Operator
The next question is from the line of Golub Iuliana with Goldman Sachs.
Iuliana Golub
Congratulations on the results, and thank you for the opportunity. I wanted to ask, I can see you revised the outlook on residential real estate prices for 2023 quite materially up, and I think more than 2 percentage points for 2024. I was just wondering if you could please comment on what you are seeing on the ground in terms of real estate and also in light of your comments on the call of weaker mortgage demand from -- on retail?
And the second question, would you be able to give us a flavor of the conversations you're having with the rating agencies? You are obviously on positive outlook from both Fitch and S&P, and we already saw two rounds of upgrades from S&P and Moody's. So I was just wondering if you can comment on any discussions you're having also in light of possible upgrade of the sovereign later this year? Thank you.
Christos Megalou
Thank you, Iuliana. Let me take your retail real estate question. And we have on Page 73, our projections for the next -- for '23 and the next few years, '24 and '25. Well, what we are experiencing in the Greek market, especially for residential estate is an uptick in prices, which is even higher than run rate of our estimates. But having said that, these are mostly transactions that are taking place with own funds. And it doesn't seem to be requiring any mortgage financing. This explains the odd result of having real estate prices going up, but not an increase in volume of mortgages.
The main reason is that there's a lot of demand from outside of Greece. We see a lot of demand coming from the Middle East, from Egypt, from Lebanon, from other jurisdictions. And these have been allocated mostly on the Athens Riviera, but generally in Athens. Some of them taking advantage of the expiry of the Golden Visa rule or the upgrade, which is about to come on 500,000 per real estate. So there's an acceleration of demand from this particular source that we expect to continue. But -- so a lot of cash transactions which explains why despite the uptick in prices, there is no mortgage demand as we are experiencing.
And on the ratings -- and the rating discussion, Iuliana, look, I think Piraeus is on a safe path to an investment grade status. Some raters are obviously easier than others. But we assess from the discussions that we've had that this is a second semester of 2023 question. Some raters do expect to see some KPIs being met. They do expect to see the growth of the year, also projections for '24. Some others are more comfortable with the sustainability and are on a clearer path.
For banks, the investment grade status will take some time. When it comes to Piraeus Bank, we know the idiosyncratic KPIs that have to do with asset quality, with capital quality. Overall, I would say balance sheet health and sustainable profitability that the raters are looking for. The NPE ratio is clearly a major metric in their assessment. Our acceleration of NPE clean-up was also driven by raters at this stage.
Operator
The next question is from the line of Gerstenkorn Maximilian with Jefferies.
Maximilian Gerstenkorn
One from me on your impairments on other assets. I believe they came in a little bit higher than the usual run rate this quarter again. I was just wondering if you could give a little bit of color what those relate to? Are those real estate related? And perhaps if you could give us an idea, what we should be expecting there in terms of where your run rate going forward?
Theo Gnardellis
Thanks, Max. It's actually a technical effect from the consolidation of MIG. It's an impairment of its goodwill. You'll see that countered by an abnormally high number in the trading and other income that's basically coming from the fair valuation of the MIG investment. So, it's actually within the operating profit, it's actually countered. And there's nothing budgeted for the second semester and it was not real estate related.
Operator
Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to Mr. Megalou for any closing comments. Thank you.
Christos Megalou
Thank you all for participating in our first half 2023 results conference call. We look forward to discussing with you all physically or virtually during our investor outreach program commencing as of early September. In the meantime, please have -- all of you have a relaxing summer break.
Operator
Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for calling, and have a good afternoon.
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Piraeus Financial Holdings S.A. (BPIRY) Q2 2023 Earnings Call Transcript