Ladies and gentlemen, thank you for standing by. I am Mina, your Chorus Call operator. Welcome. Thank you for joining the Alpha Services and Holdings conference call to present and discuss the first quarter 2023 financial results. All participants will be in a listen-only mode. The conference is being recorded. The presentation will be followed by a question and answer session. Should anyone need assistance during the conference call, you may signal an operator by pressing star 0 on your telephone. At this time, I would like to turn the conference over to Alpha Services and Holdings management. Gentlemen, you may now proceed.
Welcome everyone to Alpha Bank's results call for the first quarter of 2023. I am Vassilios Psaltis, Alpha Bank CEO. I am joined today by Lazaros Papagaryfallou, our CFO, and Iason Kepaptsoglou, our head of IR. Let's start with a brief update on the macro on slide 4, please. The strong economic growth recorded in the past couple of years paved the way for a better than expected performance of public finances in 2022, despite the sizable policy interventions adopted by the Greek government to support disposable income. As depicted in the left-hand side graph, the general government primary balance returned to positive territory, exceeding earlier estimates. The better than initially expected performance of public finances in 2022 is mainly attributed to the overperformance of tax revenues, combined with a strong economic activity.
Greece is expected to remain committed to fiscal discipline, with a planned increase of primary surplus in 2023 and a further de-escalation of the debt to GDP ratio. Debt to GDP should continue on a downward trend in the medium term, underpinned by factors that lead to a combined decrease in the numerator and an increase in the denominator. More specifically, the achievement of primary surpluses from 2023 onwards, combined with relatively low interest rate debt payments, are expected to lower the numerator. On the other hand, strong economic growth, together with persistent inflationary pressures, albeit to a minor extent, are expected to further increase nominal GDP. Although real GDP growth is expected to moderate, several factors spark optimism for a better than earlier foreseen growth performance in 2023. The main factors are, firstly, the continuous improvement in the labor market conditions.
Secondly, the economic sentiment indicator that exceed the respective Euro area average since May 23rd. Thirdly, the ongoing improvement of exports of services on the back of strong tourism performance. Finally, the strengthening investment dynamics in the last 3 years, which are expected to be maintained in 2023. Indeed, the output expansion in the coming years is expected to be investment driven, as Greece is one of the largest beneficiaries of the RRF program. In a similar vein, foreign direct investment, depicted in the right-hand side graph, remains on a steep upward trajectory, as it recorded in 2022 the highest performance over the last 2 decades. These developments, combined with an accumulated cash buffer of the government, are expected to lead to the regaining of the investment grade rating.
Ratings upgrade would also likely hinge on the next government maintaining the pace of structural reforms, thereby boosting Greek economic competitiveness. Let us turn to slide 5 to look at the financial performance for the year. In the first quarter, we have made further improvement towards strengthening our standing, continuing to make substantial progress towards our key objectives. The starting point for any bank is a strong balance sheet. On key metrics of strength, capital ratios, and non-performing exposures, the first quarter of 2023 showed significant progress against the prior year. The quarter also saw further expansion in net interest margin and net interest income, while our cost to income ratio was sharply down on the corresponding period last year. This has all been achieved with a cost of risk that is currently tracking below the level we gathered at the start of the year.
It is important to recognize that this isn't an accident or just luck. As a result, our profitability levels, our earnings were up, and we continuously increase the value we create for our shareholders. Keeping with the same theme and turning now to slide 6. With the first quarter results, we are reporting a return on tangible equity of 7.6% or 11.1%, excluding one-offs related to the last leg of our balance sheet cleanup, as well as the successful completion of a voluntary separation scheme. Both items within our full year guidance. We are benefiting from the current interest rate dynamics, we retain our focus in enhancing profitability through our own actions, both in terms of commercial policies as well as by continuing our effort to streamline the business.
Balances have this quarter been affected by seasonality, with corporates additionally displaying an expected reaction to higher rates and our affluent clientele increasing their affinity to capital accumulation products. In the current context, we should make a note of the strength of our liquidity position as evidenced by the EUR 4 billion repayments of the ECB's facilities, while improving our liquidity stands and ratios. On capital, this quarter we have added close to 120 basis points to our total regulatory capital through the inaugural issuance of AT1, allowing the group to fully benefit from future balance sheet growth while proactively supporting our engagement with the regulator in delivering our plans towards our shareholders. The latter is, of course, also supported by our strong organic capital generation that reached 50 basis points in the quarter, post the accrual of dividends on a 20% payout assumption.
Let me zoom into loan growth on slide 7. 2022 was a fantastic year for us, and the preparatory effort we had put in over the last few years culminated in the materialization of a strong pipeline of large deals in the early part of the year. Towards the end of the year, the slowdown in GDP growth, higher rates, the electoral calendar and meaningful repayments from corporates weighed on loan growth. This was expected to continue in the early part of 2023. This thesis has indeed materialized, amplified at the turn of the year by the customer seasonality. The headwinds should dissipate as we progress through the year. The strong macro underpinnings should re-emerge and reinvigorate loan growth. We are already seeing that reflected in our pipeline.
Throughout this period, we have consciously ensured that our loan book is built with defensive characteristics underpinning sustainable levels of profitability. Our leadership position has been regained while ensuring that disbursements are above our thresholds for risk-adjusted returns, retaining our discipline when it comes to pricing. Let me stress that our priority is and will continue to be on profitability. Turning now to deposits on slide 8, and if you allow me to start with the conclusion. The evolution and cost of our deposit base remains well behaved. As of the first quarter, the total stock of deposits had a beta of 8%, at par, if not slightly better than the sector average. The changing mix of our deposits and the rate of pass-through to time deposits are progressing within expectations.
We are near the endpoint of pass-through to time deposits in business accounts, while for individuals in April, the pass-through rate for time deposits reached around 30%. As a reminder, at the start of the year we guided to pass-through rates on time deposits above 50%, with time deposits making up circa 45% of our total deposits, compared to 20% at the end of March. In terms of loans, there is a multiplicity of forces behind the moves we have seen on deposits. To begin with, the first quarter tends to see a seasonal reduction in balances, especially for corporates, that has, to a degree, been accentuated this time around by loan repayments. At the same time, corporate customers are more active in cash management, which will translate in a step up of their time deposit balances. Households, on the other side, have been less active.
Our affluent clientele has opted for capital accumulation products, trusting us with the management of their savings, which is fee earning. Given the events in the U.S. regional banking sector over the last couple of months, there is today an even greater focus on deposit franchises. Our deposit base is the bedrock of our solid liquidity profile. As you can see on slide 9, close to 70% of our deposit base is within the insurance threshold with a diversified and sticky deposit base. Our deposit base is very granular, with an average ticket size of EUR 5.8 thousand and no particular concentration in terms of client segments, industries or corporates.
Our loan-to-deposit ratio stands at just 76%, with our liquidity coverage ratio above 164% and our net stable funding ratio above 124%, at par or better than our European peers. The sum of our cash and cash equivalent, a unencumbered high quality liquid assets, stands at more than a quarter of our deposit base. As mentioned earlier, despite the repayment of EUR 4 billion TLTRO, our liquidity profile has improved in the quarter and our commercial surplus, i.e. the difference between deposits and loans, has increased. On slide 10 now, allow me to touch upon our segmental performance. In Greece, wholesale continues to be the main engine of growth and profits, delivering EUR 98 million to group normalized profits.
Our retail business has seen a meaningful uptick in profitability as higher rates, cost control and a benign asset quality environment have led to improving returns. Last but not least, our wealth management and treasury unit has delivered EUR 36 million of profit while consuming just 12% of group risk-weighted assets. Overall, our segments in Greece have delivered a return on tangible equity of 22%, while taking up close to three quarters of the risk-weighted assets. Our international business continues to see solid level of growth, especially Romania. Revenues were up 44% year-over-year compared to 4% growth in expenses. This positive growth should continue to lead to an improvement in operating efficiency with return of tangible equity reaching 17% this quarter. Lastly, we continue to experience a drag from the stock of non-performing assets. However, that stock continues to fall.
In our upcoming investor day on the seventh of June, we will update you on our strategic direction and delve deeper into our business in the value segments, as well as provide you with our financial projections for the coming years. With that, Lazar, the floor is now yours to shed more light to our quarterly financial performance.
Good afternoon, everyone. This is Lazaros Papagaryfallou, Alpha Bank CFO. Let's now take a closer look at this quarter's numbers. Turning to slide 12. This quarter, we are reporting a positive bottom line of EUR 111 million versus EUR 63 million for the previous quarter. There are two notes of light in this quarter. First, we've taken EUR 38 million of extraordinary costs, almost entirely related to the cost of the voluntary separation scheme completed in our Greek operations in February. Second, this quarter we have had a EUR 23 million post-tax impact from transactions mainly related to Sky, taking up most of the EUR 30 million guidance. Excluding the impact from transactions or the various one-offs, profits on a normalized basis stood at EUR 162 million, up 54% quarter-on-quarter.
Corporate provision income was up by 16% versus the fourth quarter on the back of a stronger top line, which continued to rise, albeit at a slower pace than in the previous quarter, as well as continued efficiency gains. Pre-provision income increased by 11% less than corporate provision income and despite higher trading gains due to the one-off voluntary separation scheme cost. On the next slide, you can see that Eurosystem funding was reduced to EUR 9 billion as the bank has opted to smoothen its TLTRO payment profile through the prepayment of EUR 2 billion in February and a further EUR 2 billion in March, reducing the cash balance it held with the Target account, thus commensurately deflating our asset base. These repayments are enabled by our strong cash surplus. Deposits have also declined in the quarter by EUR 0.5 billion.
As Vasilis said, that is commensurate to the reduction we have witnessed in our loan book, meaning that our commercial surplus and liquidity profile has actually improved. Our NPE ratio has fallen by 20 basis points in this quarter to 7.6%, reflecting lower organic formation, while the group's NPE coverage stood at 40% at the end of the first quarter, with a quarterly move affected by lower inflows and write-offs related to management actions on the stock. Our tangible book value continued its upward trajectory, up by 4.4% year-over-year to EUR 5.9 billion. On capital adequacy, our fully loaded CET1 stood at the end of the period at 12.8%, accounting for the pending risk-weighted assets relief from transactions. Turning to slide 14 to look at the underlying PNL trends.
Net interest income continued to grow in the quarter, up by 6% on the back of higher rates. On a yearly basis, NII grew by 51%, that was driven by a 24% increase in lower quality accruals from non-performing exposures, meaning that our core recurring net interest income was actually up by 54%. Currently, 10% of net interest income is attributed to non-performing exposures. As we have said, this is anticipated to trend towards 5% in the coming quarters post the consolidation of sale portfolios. Fees and commissions subsided to EUR 88 million, with a yearly progression related to the loss of merchant acquiring business and high comms as significant fees were earned last year from large deals related to structured financing.
Recurring operating expenses, excluding the sale of the merchant acquiring, were down by 5% year-on-year despite the inflationary pressures, demonstrating the improvement in efficiency. Finally, the cost of risk came in at 75 basis points, excluding transactions in line with last year's runway and within our guidance. Performing loans on the next slide have dropped in the quarter with negative net credit expansion. On an annual basis, the performing book was up by 5% lower than the growth levels in 2022, with business loans in Greece being the driving force and a meaningful uptick in the contribution of our international business. The first quarter continued to witness high level of repayments from businesses with entire market losing ground.
Disbursement have also deflated at EUR 1.7 billion in the quarter, given the pre-electoral slowdown, whereas repayments have remained persistently high as cash-rich corporates closed certain facilities, given improving sentiment on the outlook and higher rates. The downwards adjustment in energy prices has led to repayments of working capital facilities for this segment. All in, performing loans landed at EUR 31.1 billion. I would like to note that the first quarter slowdown is in line with our expectations and earlier guidance. We do expect to see a more meaningful pickup of net credit expansion towards the second half of the year, on the back of the continuing investment drive that the country is experiencing and reflected in the strong pipeline that we have on disbursements. Turning now to deposit gathering on slide 16.
The group's deposit base increased by EUR 3.4 billion year-on-year, or 7% to EUR 50.2 billion. In the first quarter, group deposits were down by EUR 0.5 billion, in line with system-wide outflows on both households and on businesses, reflecting seasonality as well as a sustained level of loan repayments witnessed in the first quarter. Moreover, as you can see in the bottom left, individuals have seen a commensurate increase of EUR 0.4 billion in mutual funds with an increase in newly introduced mutual fund products echoing the outflow from individuals. It is important to note that assets under custody grew further, exemplifying the strong relationships we possess with affluent customers.
We also continue to witness a change in our mix of deposits, with time deposits trending up by 6% at points in the quarter, as depicted on the right-hand chart, now representing 20% of the domestic base. This upward trend in mix is anticipated to continue in the coming quarters. Recall that our current guidance assumed an end state by year end of more than 45%, with a growth year to date somewhat slower than our initial expectations. With that, let's look at the drivers of our NII performance during the first quarter in more detail on the next slide. Net interest income continued to debase in the first quarter, albeit at a lower pace, reaching EUR 424 million, up by 6.4% versus the fourth quarter. The quarter is seasonally weaker as there is two less calendar days.
On a recurring basis, NII increased by 9%. More specifically, interest income from performing loans increased by EUR 70 million and on non-performing exposures by EUR 5 million due to higher interest rates, whereas high rates and bond balances had a positive impact of EUR 13 million in the first quarter. On the other hand, deposit repricing along with lower volumes, had a negative impact of EUR 17 million, while funding costs increased interest expense following the change in ECB modalities and MREL issuances. On an annual basis, NII increased by 51%, driven by higher rates and increased income from securities, partly offsetting higher deposit and funding costs. On slide 18, you can see a breakdown of our NII in some more detail on the left. Performing loans NII has seen an impressive movement on the back of volumes and our high sensitivity to higher rates.
On the right-hand side, we show the evolution of loan yields and deposit costs. Given that our loan book is predominantly floating rate, we have been enjoying a meaningful pickup in yields. Note that as we have highlighted before, there is a circa 3-month lag in repricing. As we have anticipated, spreads are experiencing a soft landing. This is evolving according to plan, and pricing dynamics for our book are fully aligned with our policy to exceed certain risk-adjusted thresholds in order to ensure sustainable levels of profitability. As a result of our commercial policy and despite the pressure, we have been able to outperform market trends. On the deposit side, the pickup in costs, which began in late fourth quarter, continued in the first quarter. Although we have not been leading the race and is evolving quite well. Time deposits have shifted to 20% this quarter.
The cost of EUR time deposits has gone up 36 basis points in the quarter, reflecting the slow pace of repricing of the book. For the total book of deposits, the overall beta stands at 8%. Moving on to fees on slide 19. This quarter's headline net fee and commission income was down by 9.6% to EUR 87.9 million. Excluding the impact from the deconsolidation of the merchant acquiring business, fees decreased by 5.7%, driven by lower business credit related fees alongside the lower contribution from asset management, which was positively affected by a performance fee in the fourth quarter. On a yearly basis, the headline number was down by 16.9%, while excluding the deconsolidation of merchant acquiring business and other one-offs. Fees were down by 9.5% on lower contribution from loan fees.
As in the first quarter of 2022, we earned significant fees from large deals related to structural financing, as depicted on the bar chart on the right. On to costs now. Slide 20. Our recurring operating expenses were down this quarter by 9.7% or EUR 25 million due to lower general expenses, which had witnessed a seasonal uptick in the previous quarter as a result of higher marketing, IT, and third party expenses. However, our total OpEx base were just 1.1% down in the quarter, affected by the cost of the VSS program we completed this February. On a yearly basis, continued focus on cost efficiency resulted in a 4.5% reduction in recurring costs despite inflationary pressures, partly benefiting from the deconsolidation of the merchant acquiring business or an 1.5% reduction adjusting for the aforementioned impact.
Our headline cost-income ratio stood at 44.7% in the quarter and 37% for the domestic business. This quarter, we have also concluded a volunteer separation scheme leading to the departure of circa 500 employees, predominantly from the network that will result in a EUR 20 million benefit for the group or a 2.7 year payback. We expect to see circa 60% of that in 2023, with the full impact reflected in 2024 numbers. Our best-in-class productivity metrics per FTE and per branch in the Greek market are now further improved with an FTE release corresponding to a further 8% of our Greek headcount. Moving on to asset quality on slide 21. On the right-hand side of the slide, you can see further information on our cost of risk evolution.
The underlying cost of risk came in at 56 basis points in the first quarter, with 14 basis points for servicing fees and 5 basis points for securitization expenses. That brings the overall cost of risk, excluding transactions, to 75 basis points for the quarter versus 93 basis points in the previous quarter and 76 basis points for 2022. I should also note that in line with our guidance for the year, we have taken in the first quarter incremental provisions related to our NPE transactions associated mainly with Project Sky, which is expected to close in May. Our NPE ratio was down 20 basis points in the quarter to 7.6%, while our coverage ratio stands at 40%. With regards to asset quality trends, NPE formation in Greece was negative in the quarter.
Targeted campaigns launched during 2022 to contain inflows alongside intensified collection efforts and new modification products bear fruits during 2023, not least in a strong pipeline of deals. We expect to see a further organic NPE reduction in 2023. With that, we can move to the next slide. On slide 22, following the quantum leap of the previous years, our NPE ratio has fallen further by 20 basis points to 7.6% on account of negative organic formation. While our NPL ratio for loans above 90 days past due stands at 3.9%. Let's now briefly look at the quarterly evolution of our fully loaded capital position on slide 23.
As you can see on the top graph, we've made further progress towards our regulatory capital targets as our fully loaded Common Equity Tier 1 has increased by 35 basis points in the quarter. As before, it is probably best to look at the movements in capital in 3 separate buckets. Our organic capital generation was strong at 50 basis points, allowing us to build our capital base. We continue to fund growth through internal capital means whilst our capital generation capacity is sufficient to offset the linear reduction of deferred tax credits as per the unchanged regulatory expectations. Our capital ratios are also proving resilient as there was effective no impact from Fair Value Through Other Comprehensive Income this quarter due to the low sensitivity of our book to shifts in the yield curve while there was a 16 basis point positive impact from other capital elements.
Lastly, on NPE transactions and our voluntary separation scheme, there was a negative impact this quarter of 21 basis points. Our reported fully loaded common equity one stood at 12.4% at the end of the first quarter or 12.3% post dividend accrual. Whilst pro forma for the anticipated RWA relief from transactions, our fully loaded common equity tier one ratio stands at 12.8%, 33 basis points versus the comparable fourth quarter number.
It is important to note that we expect to add circa 60 basis points to our capital ratios following the conclusion of two performing loan securitizations. We note that during the first quarter, we have started accruing dividends in our regulatory capital ratio at a 20% payout or 7 basis points in common equity in terms for the quarter, consistent with our capital planning submitted to the ECB. As previously communicated, we aspire to reinstate dividend payments out of 2023 profits, and we will put early 2020 payment, and will be finally assessed by the regulator during this period. The next slide, you can see that our capital ratios are well ahead of regulatory requirements. The EUR 400 million AT1 issuance that was completed earlier this year enhanced the strength of our balance sheet, further aligning us with our better rated European peers.
Lastly, on slide 21st. At the start of this year, we set out detailed guidance while most of our expectations and guidance provided for 2023, the rate environment has obviously seen more aggressive rate hikes that we have budgeted for. We will be updating our guidance in June, clearly the short term NII momentum is supportive. Clearly, we have had a strong first quarter, which is a good down payment on our full year commitments. As I said, we will provide a full update of our 2023 guidance at our investor date on the 7th of June. With that, let's now open the floor for questions.
Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their telephone. If you wish to remove yourself from the question queue, you may press star and two. Please use your handset when asking your question for better quality. Anyone who has a question may press star and one at this time. One moment for the first question, please. The first question is from the line of Nida Iqbal with Morgan Stanley. Please go ahead.
Hi, thank you very much for the presentation, congratulations on the good set of results. My first question is on the NIMs. Clearly NIMs continue to expand. As you mentioned, the rate environment is stronger than what was based into the guidance. It would be great to get a better understanding of what your expectations are for the coming quarters, both in terms of how you expect the loan spreads to evolve as well as deposit betas. My second question is on asset quality, linked to that. While this environment is great for NIMs and asset quality is resilient so far, do you believe there is a risk to asset quality in the coming quarters because of the increasing interest rates? Thank you.
Hello. Good afternoon again. Indeed, we have posted a strong NII performance in the first quarter with a widening of net interest margin on the back of higher rates and a slower shift of our deposit to time deposits, plus a slower overall deposit beta, which has strengthened at 8% for the quarter. We have guided the market for an increasing participation of time deposits in the overall mix towards the end of the year, reaching 45%, and an increasing pass through. That is baked in our previous guidance, which however enjoys the tailwinds of higher rates and an overall slower pace compared to what we have guided for the market.
We also have high contribution from securities with the run rate in the first quarter at EUR 70 million, trending towards EUR 85 million towards the end of the quarter, of the year. If you bake in all that, you know, you come up with a net interest income in the first quarter, which is most probably the highest in the series that we're going to witness throughout the year towards our targets for 2023. We will be providing a new guidance for NII on the 7th of June. As I said, there are certainly tailwinds compared to the guidance we have given early March.
As far as asset quality is concerned, we do witness quarter by quarter lower inflows, especially on the retail segment. That is the outcome of proactive actions that we have been taking since last year, and a more efficient operation at the level of our servicer in terms of early delinquencies and restructuring products. That is very positive, and I can say that we continue to see those trends in the second quarter of the year. Quarter view in which the second one, we do expect a good performance as well. Yes, on the back of inflation and higher rates, we do see pressure on disposable income of our customers.
On the other hand, we also see better employment trends in the market, support schemes, including the ones offered by the banks, putting a cap on mortgage variable rate loans at the level of the rate borrowed in March minus 20 base points for one year, plus another program introduced by the government on mortgages that provides a subsidy on monthly installments for vulnerable borrowers. And we are heading towards the summer season, which is generally better for our retail clients. So I'm optimistic that, you know, the guidance we've given for the year is going to be met with similarly improving trends over the coming quarters.
Thank you very much. The next question is from the line of Alevizos Alevizakos with AXIA Ventures. Please go ahead.
Hi, thank you very much for the presentation, and well done for this good set of results. I've got a couple of questions and a follow-up, if I may. Knowing that the investor day is just around the corner, I'll try and keep it very topically for Q1. The first question is about the costs. They are already trending down nicely, and knowing that Sky and Skyline would also fall off at some point later this year and that the VSS would start to help, could you give, like, some guidance on how we should think about the rest of the year? Pretty sure that you will be able to offset the inflation, but I would like to have your input here.
Secondly, as a follow-up of the previous question about the asset quality, I recall that on the full year results, you said about the NPE reduction being in the tune of about EUR 400 million, but we already saw, like, the Q1 being at around EUR 200 million. Is there a possibility that this number could be revised upwards as the year goes by and there is limited new NPE inflow? Thank you.
Good afternoon. On costs, as you correctly pointed out, there is a driver in our P&L, which has to do with transactions and with the consolidation of sold portfolios and businesses. That nicely flows into the OpEx space, reducing total costs for the group. The Sky portfolio, as I said, is expected to close in the second quarter of the year by the end of May. Hermes portfolio, we announced a few days ago the closing of this transaction, the signing of this transaction, closing to follow in the coming days.
When it comes to REO portfolios, both in Greece and in Cyprus, including the Skyline, Sky portfolios, we do expect a similar positive contribution towards the reduction of the OpEx space. In other respects, we do face inflationary pressures. We do adjust salaries where needed to attract and retain talent, both in Greece and outside Greece. The voluntary separation scheme with the EUR 20 million benefit that it brings in the PNL helps us significantly counterbalance those inflationary pressures. we continue to see widening operating jaws with cost income trending towards our year-end targets. On asset quality, we have given a target for organic reduction up to EUR 400 million.
The run rate is faster in the first quarter than is suggested by this target. Yes, you may see a revision of this target on the seventh of June.
That's great. If I may add a follow-up question. On the capital slide, you had a small block that was called other capital elements of 20 basis points. What were they?
Hi, Alev. This is Iason. There's actually 2 things in there. The 1 is, the amortization of intangible assets on the negative side. On the positive side is there is the DTA element, we put in capital not necessarily considered organic.
Great. Thank you very much, and well done again.
The next question is from the line of Mikhail Butkov with Goldman Sachs. Please go ahead.
Good day. Thank you very much for the presentation, and congratulations on the results. One question from me. Considering the improving trajectory on the capital ratios, do you consider any alternative capital allocation strategies in addition to dividends, in particular, any new geographies or bolt-on acquisitions in the local market? More broadly, what outlook could you share on your growth and aspirations in the international geographies? Thank you very much.
Well, in terms of capital, indeed, we're witnessing this positive trends. As we're clearly articulating, we are gonna go step by step to ensure that we enter the discussion in terms of dividend distribution with our regulator, with the best possible cards in our hands.
This is the number one focus for us. In terms of the geographies that we're operating into, the one area of focus is Romania or where we have highlighted that we do have excess capital enough to support growth in the country, which as you have seen already from the from last year, it has turned the corner, but also in this first quarter of the year, it has been able to continue on that path. I think, at the moment, discipline is the name of the game, and we are very focused in achieving that.
There has been also another question about alternative capital strategies. I guess you're referring to share buybacks. We are accruing dividend in 2023 at a 20% payout. This is our focus for 2023, a cash dividend to our shareholders. Having said that, share buybacks are a means to give returns to the shareholders, we cannot rule out that this tool may be employed throughout the planning horizon as well.
Okay. Just to summarize, dividends is the top priority, shareholder returns is the priority, any potential acquisitions and mergers is on the second plan right now, secondary.
Yes.
Okay. Thank you very much.
As a reminder, if you would like to ask a question, please press star and one on your telephone. The next question is from the line of Mehmet Sevim with JP Morgan. Please go ahead.
Good afternoon. Thanks very much for the presentation, and congratulations on the results. I have one question on the loan growth, please, if I may. Could you please provide more detail on the deceleration this quarter? I do understand this is in line with your expectations and your previous commentary, but how do you see the momentum from here? How is the momentum maybe so far in this quarter, and what would be the biggest risks to loan growth from here? For example, would you see any risks from, let's say, an extended election period increase or from higher rates and anything else that you can provide would be helpful. Thank you very much.
Well, in terms of loan growth, already in the full year results, we have highlighted what the trend was. We said that we consider that broadly as a one-off phenomenon, which would continue in the first quarter. As you have seen, in fact, this is actually was the case. We were proven right in our expectation. What we can tell you at the moment is that none of our customers, none of our clients has pulled the plug in any of the relevant investment ideas and investment plans that they're working on. Admittedly, as we are now just a few weeks away from an election period, decision-making in certain cases is slowing down a bit, and this may indeed get reflected in the way that loan growth will evolve.
The pipeline of projects that is underway is such that more or less confirms our expectations for a mid-single digit growth for this year. The risks you highlighted, I mean, a protracted period without forming a government indeed is something that would lead to a procrastination of decision-making, not necessarily of altering decision-making. That may be one of the points. I don't think that rate hikes may develop different towards what the expectations now have been vested in the various participants. I think on that one, there is broadly a consensus in the market, which you can see that various economic indicators actually reflect those expectations in a rather positive way.
I think from that end, we are sure that, all in all, I think where we are right now, the downside risks are not necessarily material in order to continue on the growth trajectory that the country is having in order to close some of the investment gap that it experiences.
That's very helpful. Thank you very much. Maybe just as a follow-up, and I'm sorry if I missed that earlier. What was the amount of capital, what was the amount of dividend that you're accruing, in line with your projections for 2023 dividend payments in your capital?
We are accruing dividends on a 20% payout ratio assumption, and that's 7 basis points this quarter.
Perfect. Super helpful. Thanks very much.
The next question is from the line of David Daniel with Autonomous Research. Please go ahead.
Hi. Good afternoon. Congratulations and thanks for taking my question. Just a quick one on MREL. You just maybe talk about your aspirations in primary markets, and when we might see any forthcoming deals, whether that's maybe later in the year or in the coming months. Thanks.
Um…
We have front-loaded our issuance efforts, late 2022 and early 2023 to such an extent that it gives us comfort to wait until finding the right window in 2023. Remind you that beyond 2 issuances of senior preferred at the end of 2022, and the repayment of the 2 non-call 1 early 2023, we have also issued an AT1, which counts against the MREL targets. We are building nicely our capital buffers through organic capital generation, and that includes also performing securitizations. That capital build up contributes towards MREL targets at the end of year-end 2023. Having said that, we want to tap the markets, assuming that they will find the right opportunity towards the second half of the year for a benchmark issue.
In our guidance, we have assumed current yields for issuance costs when it comes to such additional issuance of senior preferred.
Thank you.
The next question is from the line of Alex Demetriou with Jefferies. Please go ahead.
Hi, yes, good afternoon. Thank you for taking my questions. One quick one on your securitization notes on your balance sheet. It would appear that the pace of amortization has accelerated this quarter. I was just wondering if we could be expecting that pace to continue or whether that pace of amortization should be slowing down again. You picked up or you know you touched on the synthetic securitizations. I was wondering if you are still seeing good appetite out there, whether you might still be looking at a few more of those going forward in the future. Thank you.
On synthetics, the first transaction that we have launched and expect to complete in the second quarter of the year is the shipping securitization, for which there is strong appetite. We feel that by completing this transaction, we're going to fully meet our aspirations for this project in the second quarter. We have also in the pipeline a second securitization, which will start immediately after we complete the shipping portfolio transaction.
Hi, Alex, this is Iason. Just to make sure, you're talking about the progress that we're seeing on our balance sheets on the senior notes, correct?
Yes, it does.
It hasn't changed that much. Obviously, there's a certain business plan that the securitization vehicles are following, and the evolution we're seeing is in line with that business plan. There was about EUR 80 million reduction, if I remember correctly, in Q4. There's about EUR 100 million in this quarter, and we should expect a similar pace going forward, if I'm not mistaken, but allow me to confirm and revert.
All right. Excellent. Thank you.
Once again, to register for a question, please press star and one on your telephone. Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to management for any closing comments. Thank you.
Well, thank you very much for attending, our first quarter call. We're very much looking forward to welcoming you on our investor day on the seventh of June, to discuss, a whole host of issues related to our three-year, planning horizon. Thank you very much.
Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for calling, and have a pleasant evening.