Hello everyone, welcome to Alpha Bank's 2023 Investor Day. I'm Vassilios Psaltis, CEO of Alpha Bank, I will be sharing with you the vision, the strategy, and our business plan for the coming years. Alpha Bank has a great history and record achievements, I hope that by the end of today's session, you will have a good understanding of our strengths and competitive advantages, our latest achievements, the macro environment in which we operate in, but most importantly, our priorities and the drivers of value creation going forward. My executive team is joining me for our deep dive. Before we begin, a brief word on housekeeping. We will start by looking at the overall strategy and the key enablers of our business plan. The heads of our four main business units will deep dive into the plans of each respective business.
Our CFO will then talk about the financial targets, and we will close with a 45-minute Q&A session. The event is expected to last about three hours, and we'll have short breaks in between the four pillars. Creating superior value for our shareholders and empowering our customers for growth is our foremost mission, and we have a solid track record on this. We are the market leader in Wholesale Banking, and we are the bank of choice for the affluent customers. Trust is our most valuable currency, and we enjoy strong customer relationships and partnerships that fuel our growth. We are fortunate to operate in a favorable macroeconomic context, especially considering the current political and economic dynamics for Greece.
We have an ambitious plan for the next three years, aiming to grow our earnings at an annual pace of 20%, delivering a return on tangible equity above 12% by 2025, while generating nearly EUR 2.3 billion of capital throughout the period. Let us now explain how we plan to get there, starting with an overview of our franchise, who we are today, and what is our way forward. We are the relationship bank of Greece. This is our DNA, and in the eyes of our customers, we are reliable, resilient, and humane, differentiating ourselves from our peers.
A leading bank for trusted advice, expertise, and professionalism, which is reflected in our market positioning as we are the number 1 in wholesale lending, in mutual funds, in credit cards, where we operate the longest standing and most popular loyalty program, and we have the best private banking offering in the country. The trust that our customers have in our bank is also reflected in the customer satisfaction scores and is evidenced by the tenure of our client relationships. We are proud of our unique heritage, built on nearly 140 years of history as the oldest privately owned bank in Greece, with a mindset to deliver shareholder value. We are the only company listed on the Athens Stock Exchange to consistently distribute dividends to shareholders for nearly 60 years, until the onset of the Greek crisis.
Even during the years of the crisis, our entrepreneurial mentality led us to minimize any support from the state. We repaid fully the state preference shares through our own means, setting the benchmark for the sector's investability by attracting EUR billions of international investments on numerous occasions. We work as one team. The culture and quality of our brand are reflected in our people. We are an inclusive company whose employee relationships are based on mutual respect. This has led over the years to high level of employee engagement, and especially in recent years, the ability to attract and retain talent on the back of a fully revamped HR proposition. We serve over 4 million customers. Wholesale is our biggest profit-generating engine, followed by our wealth and retail business and our international operations in Romania, Cyprus, and the U.K.
We have close to 8,500 employees, 6,000 based in Greece, operating a balance sheet of over EUR 70 billion, with EUR 39 billion in loans and EUR 50 billion in deposits, posting a profit after tax of nearly EUR 400 million in 2022. In the last four years, we have cemented our positioning in the market, reflecting our identity and our strength. We have laid the foundation of robust profitability by delivering over 15% return on our performing operations in Greece. We have reached a nearly 26% market share in lending to large corporates and SMEs, and a 30% market share in AUM.
We continue to make our retail network, the first network in terms of productivity in Greece, even more efficient, while maintaining our market share in core segments and mass products, building on our digital capabilities. In the international arena, we have reignited our engine in Romania and are experiencing strong growth, in line with or even ahead the prevailing market trends. With our bold transformation, we targeted profitable growth in key segments and achieved tangible results. We met the bulk of our targets, achieving returns of over 7.5% on tangible equity after years of crisis, and positioned the bank to remain on track to deliver on the rest. This is the result of a targeted and intense management effort over the past four years. We launched a large-scale transformation for the bank across four priorities.
We set as our first priority to restore our balance sheet. We succeeded in reducing our NPE stock by nearly EUR 23 billion and our NPE ratio by nearly 40 percentage points. This was not simple. We achieved this by executing some of Europe's and Greece's most notable transaction in partnership with well-known international investors, but also through our efforts on organic NPE reduction. Our second pillar was to revamp our commercial engine, fueled by the share capital increase we completed in 2021, securing EUR 800 million. This was used to fund our expansion. We have focused on profitable sectors in Wholesale Banking and delivered an all-time record growth in 2022. We did not stop there. We completed strategic business development initiatives and partnerships in the payments with Nexi, in insurance with Generali, also in real estate.
As a third priority, we adopted a leaner and more digital operating model, enabled by bold actions such as the carve-out and simultaneous outsourcing of the servicing of our non-performing exposures. We optimized our network while maintaining our market share in critical product areas. We enhanced our digital capabilities by nearly EUR 80 million per annum of IT and digital investments over the last three years to stay up to speed with evolving user demands. The last pillar is very important for me. It reflects the desire of our people, our customers, and stakeholders to modernize further our culture, solidifying our strengths for a better future. The transformation program we launched in 2020 was one of the main levers that helped us Change the Bank.
Let me now pass the floor to another member of our executive team, Anastasia Sakellariou, Alpha Bank's Chief Transformation Officer, to tell us a few words on the status and the outlook for the transformation program.
Thank you, Vassilis. First and foremost, I want to express my heartfelt gratitude to everyone who has contributed to the tremendous success we've seen in our transformation efforts over the past three years. Together, we've achieved remarkable results, thanks to the dedication and talent of our team members. With a team of over 200 people working across seven key areas, our transformation program has been instrumental in driving our bank's strategic goals forward. The executive team's active sponsorship of respective work streams was key to driving this change. The transformation program has not only delivered significant cost efficiencies and increased commercial performance, but perhaps most importantly, it has changed the way the bank works and delivers change, enabling us to deliver tangible commercial impact, reinforce customer centricity, and significantly improve operational efficiency. We've stretched our delivery capacity, increasing our velocity of change and collectively raising our ambition level.
By pursuing multiple transformational initiatives in parallel and in an accelerated manner, we ensure ruthless prioritization of resources, aligning our performance scorecards with our goals, and removing legacy silos. By mastering cross-functional collaboration, reducing delivery cost, and maximizing speed, our people experience real and sustainable change in their day-to-day lives. We've embraced innovative approaches to deliver tangible and material change in the way we serve our customers. In retail, a big part of transactional activities has migrated to digital and self-service channels. We've built digital underwriting capabilities so that half of our consumer finance credit decisioning now happens instantly without human intervention. In Wholesale Banking, we have revamped our digital service offering, launching new digital services and products, whilst training and migrating customers to digital solutions. Our relationship managers now have digital tools, allowing them to spend less time on administrative tasks and more time increase interacting with clients.
With freed up capacity from the branch network, increased efficiency in our central operations by 20% through system integrations, automations, and process simplifications. We've radically improved the bank's cost efficiency and reduced non-personnel costs by more than EUR 35 million. Consolidating activities, streamlining operations, and having uniform architecture for key processes across the bank has enabled us to capture cost efficiencies, reduce waste, and increase delivery speed. Our modern IT operating model has transformed how our IT works, and our customers now benefit from our faster and more efficient delivery. Our transformation program has laid the foundations to modernize the bank and pave the way for even greater achievements over the coming years. Looking ahead, the transformation program will continue to be the key vehicle through which we deliver our strategy.
Our agenda is aligned to the updated strategic priorities of the bank and will accelerate selected initiatives across different functions of the bank. Our CEO and the rest of our team will give you more details on this. I will now pass the floor back to our CEO, Vassilis.
Thank you, Anastasia. Let's now take a look at the wider context in which we operate. The Greek economy has demonstrated remarkable resilience in the last three years, overcoming 2 crisis and transforming rapidly on the back of a program of structural reforms. The ongoing transformation is accelerated by the large inflow of EU funds that provide a unique opportunity for revitalizing the Greek economy and transforming its productive model towards investment-led growth. The country has robust public finances. Greece reduced its debt to GDP ratio by almost 18 percentage points since 2019, the largest decline in Europe, and it holds one of the most sustainable debt profiles in Europe. Investors and businesses have regained confidence in the Greek economy.
Greece gained 16th position in business environment ranking, the largest jump among 81 countries, and the spread against the German 10-year bond has compressed by nearly 50%. This was all accompanied by one of the most significant banking transformations in recent history. The combination of favorable debt dynamics, gains in confidence, a sound banking system, and political stability has put Greece on track to return to investment grade in 2023. Even before the return to investment grade, we see strong fundamentals that drive banking demand in the market. Employment and individual's disposable income have been improving at a steady pace, driving an increase of savings that manifested in household deposit balance growth, whilst the real estate market has proven to be resilient. Digital awareness in Greece is increasing on the back of the acceleration imposed by COVID, supporting the digitization of banking services.
Foreign direct investments have been growing at about 17% per annum since 2019, and we expect investment to continue growing. The Greek economy has been posting convincing signs of competitiveness improvement in the global trade scene, with exports growing significantly faster than the GDP. All the above set the scene for sustained, robust macroeconomic growth in Greece. Real GDP is expected to grow at nearly 3% per year, a faster pace than the EU average. Labor market is expected to continue improving, with the unemployment rate dropping to approximately 10% in 2025. Median disposable income and house prices are expected to continue their steady growth between 3% and 4% per year. Our international subsidiaries equally operate in positive macro environments.
In particular, Romania stands out as one of the fastest growing economies in Europe and one of the most attractive and profitable banking markets to be in. We are confident in the outlook for the Greek, Romanian, and Cypriot economy. The growth in these countries is driven by structural trends that affect profoundly the demand for banking services. This is more pronounced in segments where we are traditionally strong, such as business and individual investments. We believe we are uniquely positioned to capture these trends, and we have structured our strategic priorities accordingly. By now, you have a better understanding of our identity, of our achievements over the last four years, and the environments we operate in. This is time to look ahead towards our purpose and strategy. We share with our customers the desire for a better future, a more sustainable world in which businesses and individuals can thrive.
I am proud to disclose to you today our new purpose, the basis for the new Alpha Bank and the North Star in the way we operate. At Alpha Bank, our role is to stand with our customers, recognize and trust their abilities and goals, and connect them to new opportunities and partnerships to help them realize their ambition. Alpha Bank's purpose is to enable progress in life and business for a better tomorrow. All our priorities going forward will be delivered from this purpose. Designing experiences, not just banking products, for our customers, is based on a deep understanding of their real needs, and we can deliver them based on our trusted partnership with them. Being there in the most important moments of their lives with relevant products and offering them expert advice, helps them to seamlessly integrate finance in their lives.
This is the way we are enabling our customers to grow with us. With that in mind, let us move to our strategic plan, allow me to give you some perspective on how our priorities have evolved over time. The beginning of my tenure as CEO was marked by a period of heavy restructuring. The focus was on restoring the balance sheet and fixing the fundamentals of our operating model, deleveraging problematic assets, and exiting non-core businesses. Shrinking our balance sheet has drastically impacted our revenues. Hence, our attention shifted to top-line growth, which was supported by a favorable macro environment. Cost rationalization and the normalization of the cost of risk, resulting from the first phase of our work, allowed us to reap the benefits and contributed to increased recurring profitability.
By the end of this year, we will have achieved our target of 10% return on tangible equity, and we will be looking forward for even higher financial performance and increased sustainable returns to our shareholder. The whole management team is focused on swiftly improving the structural profitability of our business units. To that effect, we will continue to invest in our people and our digital capabilities. Increased profitability and capital discipline is expected to lead to significant capital creation, which will be used to support expansion of our balance sheet and to distribute value to our shareholders, subject to regulatory approval.... In terms of financial targets, we aim to deliver a return on tangible equity above 12% by 2025.
Earnings will be on upward trajectory, with EPS growth of more than 20% on an annualized basis for the period 2022 to 2025. We plan to generate EUR 2.3 billion of regulatory capital throughout this period, thanks to a faster than the market earnings growth and conversion of our DTA stock. All this will allow us to gradually resume dividend payments starting from 2023 profits, following a relevant dialogue with our regulators. Let's now talk about our profitability outlook. In 2022, we closed the year with a return on tangible equity of 7.6%. This year, we are targeting 10% on the back of a solid first quarter and ongoing tailwinds in the operating environment.
For 2025, we expect a further increase of our return to tangible equity to more than 12% on a tangible equity of more than EUR 6 billion as a function of higher profitability across all of our core business units and better capital allocation as we convert DTAs that are currently not part of our regulatory capital into profits. We will discuss business drivers in more depth later, while Lazaros, our CFO, will speak more about capital allocation and efficiency in his presentation. The improvement in profitability and over 20% annual growth in earnings will allow us to generate just under EUR 2 billion of net profits in the period. Alongside the conversion of Deferred Tax Asset, this will allow us to generate EUR 2.3 billion of regulatory capital throughout the plan.
Part of that, circa EUR 900 million, will be deployed to fund growth during the period. However, the vast majority, about EUR 1.4 billion, will sell above the minimum levels of capital that the management considers as necessary to operate the bank. Our financial projections currently include some accruals for shareholder remuneration, with annual dividend distribution at circa 30 basis points per annum, having been put as a placeholder in our business plan, subject to regulatory approval. Following the appropriate discussions with regulators and shareholders, we have every intention to increase the amount of capital to be returned to our shareholders. To achieve our ambition, we have identified six distinct strategic priorities that leverage our strengths and work on areas where we want to improve our performance. This plan will be enabled by our investments in people and digital.
Let's start with retail, where we plan to more than double our profitability. Isidoros will share some detail later. We will fully digitize everyday banking needs, which should free up time of our people for them to allocate more time on commercial matters. This means upgrading the servicing for nearly half a million of affluent and emerging affluent clients, for instance, by extending wealth advisory services. In practical terms, focusing more on commercial activities means growing the unit sales per employee by circa 40%. In wealth, we aim at double-digit annual growth rates for asset balances and revenues, driving profitability. The key goal is to address a wider customer base, scaling our wealth engine and customizing our investment propositions to all segments, such as the introduction of light discretionary services for first-time investors. We are aiming to increase investment penetration in affluent segment by nearly 19 percentage points.
George will articulate further in his section. For wholesale, our plan is straightforward: to leverage our leadership position to capture the potential of the Greek market while maintaining our robust profitability. Yannis will walk you through his strategy, which will allow us to continue supporting our customers with approximately EUR 14 billion of cumulative disbursements. At the same time, we plan on growing our service business and reaching our product palette and launching targeted commercial campaigns. On our international business, which Sergiu will describe more in detail later, the objective is to improve the return on deployed capital. We will focus on Romania, where the opportunity is greatest, and will play to our strengths and leverage the newly launched platforms to grow our top line. We aim to maintain the resilience of our balance sheet, acting mainly along two vectors.
On lending, we continue to focus on growing our book profitably by being disciplined in pricing it in a risk-adjusted way. At the same time, we will take our NPE ratio down to circa 4%, mainly through organic levers, allowance, allowing us to increase coverage to approximately 60% without impacting our cost of risk. Secondly, we maintain strong levels of liquidity by expanding our diversified, granular, and sticky deposit base at circa 3% per year. Finally, allow me to say a few words on sustainability. We will leverage sustainability as a value creation lever. We have started a journey in 2019 to progressively integrate ESG in our business strategy and operating model.
For 2023, we aim to become the first Greek bank to join Net-Zero Banking Alliance, completing the full measurement of financed emissions and defining science-based targets for our operations and portfolio. We defined some preliminary targets that we aim to articulate further later this year. Firstly, we commit to supporting an environmentally sustained economy, allocating EUR 3 billion over the business plan period to green lending, of which EUR 1 billion for renewable energy investments. Secondly, we want to be leaders in supporting diversity and inclusion, both internally and in the society. To this end, we commit to maintain our leading gender, 40% representation in the board of directors and the management. Thirdly, we will continue to guarantee a robust and transparent corporate governance, maintaining the independence of our board of directors and incorporating ESG criteria in the remuneration and risk management framework.
Our strategy is closely linked to the UN sustainability development. We set goals which we are proud to support as long-time members of the United Nations Environment Programme Finance Initiative. The plan hinges on two critical enablers, people and digital. We have a clear strategy for each of them. Now I would like to pass the floor to another member of our executive team, Fragiski Melissa, Alpha Bank's Chief Human Resources Officer, to tell us a few words on our HR strategy.
Our HR strategy is a condition precedent for the success of our business plan. We are approximately 6,000 employees in Greece and 2,500 outside Greece. We have a diverse workforce, and we take pride in the focus we place on our people and the open and collaborative culture we foster. In the last four years, we have made significant progress in the transformation of our HR function. We have a clear vision to continue enabling business transformation and supporting the delivery of our business plan. Our HR strategy is built around three pillars: enabling business transformation, maximizing employee potential, and building a strong employee value proposition. The first pillar is enabling business transformation. It was, and still is, our number one priority. Starting in 2019, we have now completed the first phase of our HR transformation.
More specifically, we have redefined the roles and capabilities of our unit, and we have introduced fundamental new roles, like HR business partners. We have refreshed our talent, for instance, by hiring approximately 200 people in key areas like digital and IT. We have launched landmark initiatives, like the Ithacans community, which helped us repatriate more than 50 new talents, and we have fully revamped our performance management and compensation systems. For the upcoming business plan, we will continue along the same path. We will continue investing in our skills and capabilities, automating processes, and strengthening HR practices in the international network. We will accelerate talent acquisition in areas that are critical for our business plan, such as sales and digital, moving towards a more comprehensive compensation system, and we will improve our target setting, monitoring, and feedback loop to strengthen execution, discipline, and culture.
The second pillar focuses on maximizing the potential of our talent through three levers: a strong focus on learning, well-defined career and growth paths, and ample opportunities for internal mobility. This pillar is critical as we operate in an increasingly competitive market for talent. We have completely redesigned our learning ecosystem by launching four new academies, targeting key topics that are central to the identity of Alpha Bank, such as customer experience, retail and retail academies, and leadership academy. We have started the modernization of our internal career and mobility system. Specifically, we are the first Greek bank to introduce a dual career path framework, allowing significant advances for our employees' development, which is not contingent to the traditional managerial path, but allows them to progress based on their unique expertise. We have introduced new job families to boost cross-skilling and mobility. Going forward, we will advance on two fronts.
First, we will create dedicated learning paths and establish four new learning academies, focusing on some high priority themes of the business plan, such as digital, IT, ESG, and financial literacy. Second, we will move towards skills-based roles with transferable capabilities to further enhance the creation of flexible and multi-skilled employees through short-term assignments and other developmental programs. The third pillar relates to the employee value proposition. We started our journey by adopting a more inclusive employee value proposition, guided by a redefined purpose and our newly revamped values. We have launched a new diversity strategy, focusing on female empowerment programs and introduced employee communities of change. Going forward, we will focus mainly on implementing three elements. First, we are kicking off initiatives for the operationalization of our purpose and values by appointing employees as champions to help us accelerate cultural change.
Second, we are implementing our diversity, equity, and inclusion strategy, focusing on 5 pillars: gender diversity, generational diversity, health equity, financial and LGBT inclusion. Third, we will continue expanding our network of employee communities of change. Since the onset of the bank's transformation journey, we have been working with passion and dedication in close alignment with the business. Our way forward will be no different and will allow us to actively support the 2nd phase of the transformation program, embarking on new journeys, and elevating the role of HR even more. I would now like to pass the floor to Michalis Tsarbopoulos, our Chief Digital Officer, to talk about the other key enabler of our business plan, which is digital.
As Fragiski said, I'm going to talk about where we stand in our digital journey and how our digital strategy will enhance the efforts of our people to deliver our business plan. My presentation is not about digital excellence or technological innovation. It is about how we are using digital as a means to simplify the daily lives of our clients and of our people, and this is real-life innovation. Over the past three years, we have made significant progress in advancing our digital offering. We have invested approximately EUR 240 million in IT and digital to improve our platform and to build a robust foundation for future growth. We have expanded our product and service portfolio across channels. We have built a full stack, advanced analytics capability, serving the needs of retail banking.
Lastly, we have achieved a massive migration of transactions away from branches to digital channels and ATMs. As of today, we have 1.5 million active users, while more than 70% of our priority customers are active in our digital channels. Looking ahead, we are following a front-loaded three-year plan. During the first two years, our top priorities are to accelerate the digitization of daily banking services, to enrich our digital product suite, and to inaugurate our hybrid remote collaboration servicing model for our priority clients. At the same time, we will be preparing the ground to launch a set of new generation digital applications in 2025. We aim to deliver this winning digital offering to support the bank's business targets through three key pillars. The first pillar is to add functionalities and products to our mobile and web applications.
This will allow us to cover 100% of our clients' everyday banking needs and to migrate 30% of our sales to digital channels, supporting the execution of our retail banking strategy. As of today, we cover roughly two-thirds of everyday banking needs. We will work to improve the client onboarding process, to create a special onboarding journey for payroll clients, and to add more products such as simple investment propositions, bancassurance products, and new types of loans. By the end of this year, we expect to have digitized 80% of the daily banking services, and this number should reach 100% by 2025. We will also focus on developing partnerships with leading e-commerce players to distribute our products through embedded finance mechanisms. We are already on working on embedding our e-loan offering in the online checkout process of two major retailers.
The second pillar is to elevate customer experience with an aim to reach a net promoter score of above 40 for our digital channels by 2025. We will be redesigning our web and mobile banking applications with a view to keep delivering the best customer experience, combined with the highest security standards. We will establish partnerships and API connections with select providers to create a richer and more cohesive digital experience for our customers. We will also continue building true omni-channel user experiences by designing customer journeys that combine human and digital interactions. One example of this is the remote collaboration platform that we are launching in the third quarter of this year. The platform will allow relationship managers to serve clients remotely by leveraging technologies such as online document sharing, e-signatures, and video conferencing.
The third and final pillar is to scale up and accelerate our delivery capabilities. We have already built a strong in-house team that is the core of our delivery mechanism. We have an agile digital factory comprising 150 professionals. We have set up two centers of excellence in advanced analytics and in user experience, with over 30 senior experts leading user flow redesign, data management, machine learning, modeling, and complex data visualization reporting. We have a digital sales orchestration organization consisting of 40 professionals deployed in digital sales squads, focusing on performance marketing, target setting, and digital sales funnel management. As you heard from Fragiski, we will continue investing in people. We will continue growing the team, both in terms of size, but mostly in terms of expertise.
At the same time, we will also be sharpening our analytics insights by expanding the perimeter to digital behavior data and to unstructured data. As I said in the beginning, our digital strategy has been designed to help our people deliver the business plan and to help our clients simplify their everyday lives. With that, I will pass the floor now back to Vassilis.
Thank you, Michalis. Before wrapping up this section, let me summarize what I think you should keep as Alpha Bank's differentiating proposition. Our starting point is based on our identity, our execution track record, the quality of our platform, and the positive outlook for Greece, Romania, and Cyprus. We have ambitious targets to reach at least 12% return on tangible equity by 2025, a performance that is even more impressive if one considers the unutilized DTA we still carry on our balance sheet. We expect to generate more than EUR 2.3 billion of capital to fund our plans and create value for our shareholders. Finally, we have set ourselves very transparent strategic priorities, enabled by robust investments in a solid plan for people and digital to deliver superior value for our shareholders.
This latter point will become evident when you listen to Isidoros, George, Yannis, and Sergiu on each of their respective areas. Thank you very much for your attention. We will now take a short break before the next speaker. I look forward to answering any questions you may have later in the Q&A session.
I am Isidoros Passas, General Manager for Alpha Bank's Retail Banking Unit in Greece. We are here to look at our plan for the coming years, a plan that will allow us to increase our core revenues at an annual pace of 7% and improve our efficiency, reducing our cost to income ratio by 16 percentage points. When taken together, allow us to more than double our profitability and accrue tangible value to the group. Our retail business generated EUR 570 million of revenue last year, one third of the group's total. We serve more than 3.5 million customers, who hold EUR 30 billion of deposits and EUR 9 billion of loans with us. About half a million of customers are either affluent individuals or small businesses with significant value for Alpha Bank. Before delving in our strategy, let's take stock of the relevant macro backdrop.
Greece is rebounding. This will lead to the reemergence of the middle class and the creation of new wealth after a lost decade. Following a sharp decline, disposable incomes are growing faster than the European average as we play catch up, and they are expected to approach their pre-crisis levels by 2025. We also stand to benefit from further tailwinds, digitization, where Greece has been lagging its European counterparts, but is already swiftly catching up as this enables shifting more customer interactions to digital channels and state stimuli, such as the pension fund reform, the Recovery and Resilience fund, and energy efficiency initiatives. All the above will inevitably lead to increased demand for banking products. As a result, we expect robust growth for the following years across retail business lines.
Deposit growth will partially affect wealth creation as a significant portion of new wealth is expected to flow into investment and long-term saving products. Disbursement of mortgages and consumer loans are expected to grow by more than 40% on the back of a strong residential real estate market and increased consumption. Small businesses will follow along, benefiting from increased economic activity and state stimuli. Despite this envisaged robust growth, activity will still be far from the pre-crisis peak. This explains why net credit expansions will take time to resurface due to the disproportionate repayments from the existing back book, but it also shows the potential room for further growth. Alpha Bank is best positioned to capitalize on these opportunities. First and foremost, we take pride and benefit from being the relationship bank of Greece.
This is our first competitive advantage, and it is all the more important in this era where transactions and simple services are migrated to non-human channels, while high value interactions require skilled relationship managers able to provide tailored solutions to complex needs. Our claim to be the relationship bank of Greece is supported by our numbers. We have loyal clients. For example, the median tenure of our affluent client relationship is above 25 years. Nearly 30% of all Greek affluent customer and small businesses use Alpha Bank as their primary bank, and our relationship managers are recognized as best in market with top-notch net promoter scores.
I started working in Alpha Bank as a first-year university student. Since then, it's been almost 30 years. I guess that gives away my age. 30 years and more than eight branches. Alpha Bank is the relationship Bank of Greece. This is what we are known for. This is what we cultivate, especially with our focus segments such as affluent and small businesses. The reason we have strong relationships with our clients is not only the quality of our service and staff, but also the fact that we have believed in their dreams and made them come true, whether that was expanding the business or growing their assets.
We have almost completed our branch network optimization, and we are building the future with a clean slate. This is our second competitive advantage. In the last five years, we have reduced our branch network by 43% and our network employees by close to 40%. At the same time, 95% of transactions have been migrated outside the branches. Our branch network is currently the leanest among Greek systemic banks, as well as importantly, the most productive, with EUR 28 million of deposits plus loans per branch employee, a figure that is 18% better than the peer average. Even so, thanks to our relationship focus and strong human capital, we have succeeded in retaining a disproportionate market share in key business lines.
We have a circa 30% market share in wealth products and 38% in credit cards, despite only having 18% of the country's branch FTEs. We will leverage technology to enhance and complement our strong relationships. Four interrelated pillars form our strategy. First pillar, we'll continue to invest in operational efficiency and digitization in order to enhance our productivity. The primary benefit will be the resource release, while also enhancing customer experience. Second pillar, we will accelerate the plan to migrate our core offering to digital, so that all customers can fulfill all their daily banking needs through digital and hybrid journeys. This will lead to further resource release and also increase our reach. Third pillar, we will further tailor our value propositions in order to increase conversion rates and propensity to buy. This will increase revenues.
Fourth pillar, we will sharpen our focus and allocate the release time to high-value customers and interactions, increasing revenues and improving customer experience. I would like to highlight a few key initiatives underpinning these four pillars that we deem as the most important for the coming three years. The investment in technology, not only for digital channels, but also for our human channels, providing better targeting capabilities and new ways to collaborate remotely with customers. The emergence of subscription-based daily banking bundles. These bundles can act as a revenue enhancer for customers with basic banking needs. The banking-as-a-service offering to our retailers, integrating our financing and other functionalities into their e-commerce platforms. The simplification and standardization of the offering to relevant segments, such as managed investment bundles for first-time investors and digital advisory tools for small businesses. Last, but probably most important, the focus on high-value segments.
We are already expanding our relationship management model to almost 500,000 emerging affluent clients and mid-value small businesses. We believe that this is where the emerging opportunity is, and where the rebound of the Greek economy will manifest itself, and we want to reinforce our strong relationships with these segments.
We were one of the first branches to deploy the relationship managers model to the upper mass segment. Given my long experience in a multinational bank, both as a relationship manager for affluent customers as well as a branch manager, I must confess that this model introduced by Alpha Bank is something new to the Greek market. These customers were taken by surprise when we contacted them. They didn't expect that a bank will approach them proactively. They felt important, and now they are much more open to hearing from us.
We have set ambitious, but achievable, operational targets. We aim to double the proportion of relationship managers in every branch by eliminating low-value human interactions, with 30% of our sales completed through digital and hybrid journeys, and 25% of active clients to use subscription bundles by the end of 2025. Alongside spending more time with our customers on high-value activities, we want to do more with them, with a target to increase sales items per relationship manager by 40% within three years. Our initiatives create a virtuous circle. We invest in digital for operational efficiency and extended reach. This frees up time by moving simple and low-value activities to non-human channels. This allows human interactions to focus on high-value segments, and this generates extra revenue that can be reinvested to further improve productivity and further extend our digital reach.
Our retail virtuous circle ultimately increases the return on our key asset, human capital, and so we will be able to double our profitability and accrue tangible value to the group.
Hi, I'm Yannis Emiris, General Manager for Alpha Bank's Wholesale Banking Unit. Today, I'll walk you through our strategy for the next three years, highlighting how we will leverage our leadership position to capture the potential of the Greek market while maintaining our profitability with a return on capital employed of circa 18%. We start from a privileged position. Wholesale contributes 30% to the group's annual income and over half of the recurring profits for the performing part of the group. We serve over 5,000 large corporates and SMEs across all industries, with a performing loan book of over EUR 17 billion. Over the past four years, we have achieved profitable net credit expansion of circa EUR 6 billion with a return on capital employed at nearly 18%, maintaining our natural position as the market leader in Wholesale lending. Four factors contributed to our success.
We anticipated the expansion of investments in the country and focused on high-potential sectors. We were disciplined in our pricing and maintained healthy margins. We excelled in the structuring of milestone transactions, growing our respective practice by 150%. Importantly, we stayed close to our clients and made decisions fast, preserving our heritage as the corporate bank of Greece. Our franchise gives us a strong platform to build upon. We have active funding relationships with circa 80% of large companies and 65% of SMEs. 60% of our clients have been with us well over 20 years, building a relationship of trust as we are standing by them through the economic cycles. We have proven capabilities in complex transactions with Greek and international counterparties. We have led the number of landmark deals in the recent years.
such as the acquisition of the Hellenic Electricity Distribution Network operated by Macquarie, and the privatization of the Egnatia Motorway. Our loan book covers all relevant industries in Greece, maintaining a balanced risk and maturity profile. Viohalco is a Belgium-based holding company. Viohalco companies have production facilities in eight countries and a strong commercial network in 21 countries. As a result, we generate a turnover of EUR 7 billion in more than 100 countries worldwide. For the last 10 years, Viohalco companies have invested more than EUR 4 billion on maintaining state-of-the-art equipment and high productivity. As Viohalco, we have been in close cooperation with Alpha Bank for more than 30 years. This cooperation has been beneficial for us over the years, as in addition to the credit facilities, the bank offers an extended range of products and services.
The bank supports all of our activities, being among the top housing banks of Viohalco companies. The collaboration extends throughout all sectors of Viohalco. The bank maintained a leading role in all important transactions of Viohalco companies. Viohalco companies, mainly served by the specialized corporate banking team of Alpha Bank. The team has the necessary extensive know-how and experience to manage the entire range of services and products offered by Alpha Bank Group. In conclusion, Alpha Bank has a deep understanding of Viohalco's international manufacturing business. The outlook for the market makes us confident for the future. Compensating for a decade of underinvestment, Greek companies are expected to accelerate CapEx to fill the investment gap, where indirect investments are at an all-time high and are expected to continue growing. Certain macro trends will further underpin this growth. First, the decarbonization and digitization of the economy.
Second, the reform and the investment program under the Recovery and Resilience Fund. Third, the increasing extroversion of the Greek economy, with strong growth in exports over the last two years and positive momentum going forward. Fourth, the consolidation drive aimed at increasing scale and reach. The Greek economy will need financing for this growth. We estimate that circa 100 billion EUR of capital expenditure will be needed until 2025, still covering just a quarter of the investment gap created in the last decade. Investments will be driven by key sectors: infrastructure, trade, and manufacturing. Clients will seek deep sectoral and structuring expertise. Our client needs will extend beyond financing support, from investment banking advisory to helping them manage their relationships with foreign trade partners or support them in their energy transition plans.
Melissa Kikizas is one of the largest manufacturing food companies in Greece, owned and managed by the third generation of Kikizas family. As fast growth company, we lead the Greek pasta sector, while we export to the U.S., Europe, and Asia, 45% of our turnover. Alpha Bank has recently financed our extended investment plans, through which we've doubled our meal and pasta plant capacity, exceeding 100,000 tons of pasta on a yearly basis, placing us within the top 10 pasta factories in Europe. In addition, Alpha Bank financed our entrance in the extra virgin olive oil production through the acquisition of Terra Creta, a vertically integrated company.
Alpha Bank has stood by our side for more than 40 years, showing steady trust, a real business partner with whom we have a holistic partnership covering a full spectrum of business operations like commercial, payroll, letter of credits, deposits, et cetera. What sets Alpha Bank apart is its ability to provide a comprehensive range of products and services that cater to all of our customer needs. Alpha Bank is a reliable advisor, both for financing and for M&A issues. We are truly grateful for Alpha Bank's trust and support during all these years.
Within this context, we want to further empower our customers in their growth plans. Our strategy operates in three parallel vectors. First, we will reinforce our leadership position in the lending market through close to EUR 14 billion of disbursements, while ensuring adequate returns for the capital employed. To accomplish this, we will increase our lending penetration to our customer base through focused commercial coverage. We will continue investing in industry knowledge in key sectors with an emphasis on ESG. Last but not least, we will make the lending journey for our customers easier and faster. The second vector relates to growing our service business in order to increase our fee revenues. To do that, we will calibrate our portfolio segmentation and pricing. We will add new products to our digital palette and digitize key modules, and we will launch targeted commercial campaigns to increase fee penetration.
Finally, for the third vector, we will refine our operating model to boost our productivity, increasing revenues per relationship manager by circa 10%. To do this, we will strengthen our talent pool through hirings, training, and performance management. We will continue upgrading our internal tools to gain productivity and free up time for our bankers. We will fine-tune our target setting process and incentive systems to further stimulate cross-selling. Our strategy will deliver growth while maintaining high levels of profitability. We are aiming for a EUR 5 billion growth of our loan book from 2022 to 2025, in line with the levels we have experienced in the last four years, and a 13% increase in total revenues, and an almost 25% growth in fee income over the same period.
Summing up, we will keep delivering a high level of robust profitability with an expected return on capital employed of circa 18% and a superior banking experience for the corporate world of this country.
I am George Michalopoulos, General Manager for Alpha Bank's Wealth Management and Treasury functions. We are here to delve into our plans for the coming years, highlighting the main elements of our strategy that will enable us to deliver double-digit annual growth rates for asset balances and profitability. We have a long-standing and strong foothold on both wealth management and treasury. Two units sharing the financial markets backbone with synergies between them. The wealth management side manages EUR 11 billion of customer assets, representing a sizable fee revenue pool for the group. It supports all customer segments with investment products and services, and includes a private banking arm serving its customers directly. The treasury area, managing, for most, a securities portfolio of EUR 13 billion, is a notable contributor to the bank's profitability.
It operates within the context of the wider market strategies endorsed at the asset and liability management level. We will zoom particularly into the wealth stream, which complements and enriches our commercial banking services portfolio in Greece. This is a capital-light business that provides strong linkages to our retail and corporate franchises, enhancing customer loyalty, service and profitability, and fits well with our focus on relationships and high value-added services. Let us first take stock of the current state of the Greek asset management sector. Greek assets under management, or AUM in short, have grown at an annual pace of 10% in the last three years, significantly outperforming the European average growth rate over the same period. The Greek market remains massively underpenetrated, with AUM as a share of total financial wealth at just 11% in 2021.
Regional peers enjoy much higher levels, with the market in Portugal at 2x this level, Spain at 3x, and the European Union average at 4x this level. Evidently, great potential lies ahead. Additionally, some noteworthy macroeconomic developments underpin growth dynamics of this market. First, households' disposable income grows steadily, and we expect this to continue at an annual rate of 4%, increasing the demand for financial and wealth services. Second, the welfare reform impetus is on its way, mobilizing a significant institutional bid for financial work services and deepening the capital markets function, mainly through the long missing link of occupational funds. Third, Greece is at the cusp of gaining the investment grade status, thereby amplifying confidence, eating into the risk premium of our operations, and handing us the passport to draw upon Greek wealth sitting outside the borders and estimated to be over EUR 40 billion.
Concurrently, there are a few noticeable cultural and structural trends. Democratization of wealth services allows us to gradually downstream our wealth offering to underpenetrated client segments, posting lucrative fee collections. Financial literacy is improving, with all generations becoming more astute to holding the right financial services basket for their profile. Digitization augments our capacity to expand our business into low-touch and self-service clients, and to enhance the servicing of our upper segments by releasing and empowering human resources even further. Last but not least, the product proliferation push, enabling us to populate our portfolio offering with more sophisticated, more tailored, and modern products such as ESG, thematic, and profound investment structures. We expect the aggregate effect of these tailwinds to yield an AUM growth rate above 15% for the next three years, with AUM penetration rate doubling to just shy of 20% of deposits.
Alpha Bank is today on pole position and is best equipped to capitalize on this fast-evolving, transformative, and attractive environment. Over the last 30 years, we have crafted a robust wealth management DNA comprising of a top-quality investment proposition, partnering with reputable investment houses globally, a competitive product palette, coupled with a talented relationship managers force, and a focused service model on advisory and discretionary mandates. Altogether, aligns to appeal to over 200,000 clients belonging to our affluent and high-net-worth segments. The strength of our franchise is evidenced by our accolades. Clients grant Alpha Bank an impeccable net promoter score, reaching 51 in 2022, more than double that of 2019, and significantly above the European average. International institutions and analysts repeatedly rank Alpha Bank first bank in Greece for its private banking franchise.
Commanding a 30% market share in mutual funds distribution in Greece, Alpha Bank is the market leader.
My team's mission has been to provide quality investment advice to clients. By being in constant contact with our clients, dynamically informing them of market conditions, providing them guidance on how to position their portfolios and execute their strategy, we have become their trusted advisor. Finally, having the privilege to meet clients in person, participating in more than 1,000 meetings per year, we ultimately gain direct insight into clients' needs, concerns, goals, which we then subsequently feed back internally to be taken into account when devising financial solutions by which we, in essence, remain true to having our clients at the cornerstone of our business.
Indeed, over the last three years, we have delivered a noteworthy financial performance. Our AUM portfolio has reached EUR 11 billion at the end of 2022, growing at an annual pace of 10% since 2019, and we have improved the productivity of our book, increasing return on assets by 13 basis points in the same period. As a result, our revenues in 2022 amounted to EUR 86 million, exhibiting a 16% annual growth rate since 2019. Looking ahead, we will continue to leverage our leading position while further enhancing our model. Our first objective deals with our wealth engine.
We will scale up and refine the core capabilities embedded in our distribution model, with an aim to capture the entire spectrum of the addressable wealth customer base, straddling from the more sophisticated clusters over and above private banking to the emerging affluent segments at the other end. Hence, our engine-related initiatives entail reinforcing our advisory services to deliver, inter alia, a consolidated portfolio construction, market positioning, investment profiling, upgrading our product suite to accommodate new trends and non-commoditized products, expanding our commercial playbook, and extending training to cover the front end of our sales force, introducing a new referral scheme to foster cross-selling and capture synergies, especially with wholesale. Last but not least, paving the way to approach offshore wealth that could drive business into a new era.
The key here is productivity in the form of AUM by relationship manager, which we set at a level of 25% higher than current. Our second objective deals with a segment-specific investment proposition. Our initiatives will clearly cater for the right profile and structures pertaining to the client characteristics. Namely, for our private banking clients, it means deepening our offer with sophisticated, bespoke, and total wealth solutions. For our affluent and core clients, it incorporates light discretionary management services with product bundling characteristics and step-by-step investment patterns designed for first-time investors and aligning our firepower with retail. For our international clients, it involves the gradual rollout of wealth management services to them, combining local distribution with our central powerhouse. The bar here points at a 20 percentage point increase in the penetration of investment products within the client wallet. Lastly, our third objective deals with technology.
We will digitize and realign our service delivery, promoting the optimal route for its customer journey at a different degree of digital to human interaction, depending on segment and product mix. Our focus will be on a unified digital platform, connecting the investment and advisory hub to all channels for all segments. This is the internal part. An end-to-end digital customer journey where appropriate, this is the external part, and an individualized service model to strike the right balance between customer idiosyncrasies and value added. This is the wrapper. Our trust is to have 30% of our clientele interacting with us digitally. Putting it all together, we are confident our actions will strengthen our competence, extend our reach, and steer performance. This way, we will solidify our leadership position in the wealth business in Greece while serving our vision to create, enhance, and sustain wealth for our clients.
When it comes to financials, we subscribe to the following overarching targets: a 13% annual growth in AUM balances, with a target of reaching nearly EUR 16 billion of AUM at the end of 2025, and a commensurate annual growth in revenues to reach EUR 126 billion by the same year. Effectively, our strategy will deliver sustainable results, accreting a 6 percentage points increase in return on capital for the segment of wealth management and treasury.
I'm Sergiu Oprescu, General Manager for Alpha Bank's international network, and I'm here to share with you our plans for the coming years. Our strategy will enable us to increase significantly the profitability of our international network. In this presentation, I will mainly focus on Romania, as it comprises the bulk of our operations, it is an extremely attractive market to play in, and we have a robust positioning. Our international network covers Romania, Cyprus, the United Kingdom, and Luxembourg. With EUR 7.6 billion in assets, we contribute 10% to the group's assets and 12% to revenues, generating an 11% return at the end of last year. Over the past decade, we have seen three distinct phases. During the first phase, and as a consequence of the Greek crisis, we had to reduce our international presence while limiting growth even in our core markets.
We then focused on improving asset quality, thus prioritizing balance sheet cleanup over expansion. Starting from 2021, we have shifted towards an open for business approach, focusing on new business generation and profitability improvement. Our new approach has already yielded promising results in 2022, with disbursements in Romania increasing by 28% year- on- year, and deposits growing by 10%. Our operations in Cyprus also saw 10% growth in new business. We are committed to continue on this growth trajectory, assisted by our digitalization strategy with over EUR 45 million of ongoing investments in this area. We are confident that our new accelerated growth strategy will deliver results. We plan to grow the loan book by 37% to over EUR 6 billion by 2025.
With our existing capital resources, enhanced scale, alongside digital transformation, will allow us to reduce our cost-to-income ratio by 19 percentage points, and thus support the group's profitability. All of our subsidiaries will contribute to this final goal, as we have clear strategic plans for each and every one of them. Allow me today to focus on our largest international market and the key driver of our international ambitions, on Romania. Romania is one of the fastest-growing economies in the European Union. It has consistently outpaced the region by over 1.5 percentage points in annual real GDP growth. Romania can further capitalize on a series of rather unique factors.
It has a strong agricultural global trade position, the potential to become a regional energy hub, whilst it will also be the recipient of sizable EU funds, as over EUR 100 billion are expected to be drawn until 2027. A few words about the Romanian banking sector. Banking in Romania is a very appealing investment destination. The banking book has consistently yielded double-digit returns of over 10% since 2015, higher than other European countries. The low starting point for credit penetration underpins the growth prospects for both business and individual banking in Romania. Retail banking will benefit from growing demand on the back of favorable macro conditions and rising disposable incomes, with mortgages representing a key opportunity.
Wholesale banking will be supported by infrastructural investments, as well as by the fact that Romanian companies are under-levered and are overly reliant on supplier credit instead of bank financing. Now let's focus on how Alpha Bank Romania fits into this picture. Before the European sovereign debt crisis, we were among the four largest banks in the country. A series of crises and an externally imposed deleverage plan meant that we had to play defense to preserve value, making us the only Greek bank that was able to retain its presence in Romania.
After stabilizing our business model and improving the balance sheet profile from both an asset quality as well as a funding perspective, we have changed gear towards growth over the past five years, with 2022 marking a 20% year-on-year increase, leading to an 8% growth of the mortgage book, outpacing the rest of the market. Meanwhile, in wholesale, newly originated volumes in 2022 were almost three times higher than the average of preceding three years up to 2020, following our strategic decisions to return to the syndication and structured finance markets. In addition, we have capitalized on Romania's fast modernization of payments, growing our POS market share to 3.7%, back to levels not seen since 2015.
Alpha Bank Romania has a significant contribution to revolutionizing the local financial services landscape, positioning ourselves as pioneers of the industry. We have designed a one-stop POS solution by integrating all four major schemes in one device: Visa, Mastercard, American Express, and UnionPay. The successful launch of the first tap-to-phone solution transformed business vendors' daily operations, having a significant impact both locally and across Europe. Our solution streamlined operations of major courier companies and national railway transport companies. More recently, we have introduced an innovative tokenization solution for merchant, setting up standards for simplified and secure transactions. All our initiatives and achievements have positioned us among market leaders on fast-growing payment market, allowing us to deliver strong annual increases in turnover. Furthermore, our achievements demonstrate our strong commitment to deliver best-in-class services to our clients and never stop pushing boundaries, reshaping the industry, and remaining at the forefront of innovation.
A remarkable chapter in the growth story of Romania's recent economic expansion has been the accelerating momentum of the affluent customer segment with the savings and capital markets. With rising incomes in Romania, premium banking diversifies in scope and value. Gold Personal Banking continues its evolution of targeting new and emerging revenue streams in synchronicity with the bank's other segments. Five years ago, the Gold Personal Banking business line was launched in Alpha Bank Romania to give our position in this fast-growing segment a structured, multi-pillared value proposition. The personal banker, broad palette of banking and financial products and services, and access to local and international financial markets. Alpha Bank Romania has an overweight market share in the 100,000-plus customer category segment, which is a result of a dynamic synergy between retail, SME, and wholesale business banking relationships.
Gold Personal Banking is one of the growth engines of funding for the bank, as its fast-growing, emerging economy creates wealth and capital accumulation. In the first half of 2023, the Gold office geography will increase by 50%, with a presence in more than 25% of the network and reaching more than 90% of all affluent customers. The growth of wealth among high-net-worth individuals in Romania confirms the global patterns of accelerating rates, exceeding 27% of private individual savings in Romania, up from 19% in only 2017. During periods of market volatility, the bank's affluent customers find in our product offering a wide range of savings and investment solutions to meet their needs and objectives. At the heart of Gold's value proposition is a personal banker. At the end of the day, our customers place the most value on one principle: trust.
Trust in our people, trust in our products and services. In essence, trust in the Alpha Bank Group brand.
We have also proven our ability to secure stable funding for our operations to finance this growth. After years of careful management of our deposit base, we raised close to EUR 300 million of deposits last year, giving us confidence in our deposit growth targets for the years to come. We have all the ingredients to deliver on our plan, capturing growth and capitalizing on upcoming opportunities. We have the operational platform to sustain and deliver growth in key areas. Our pre-crisis market share stood at 6.5% in terms of assets. We have locally a solid capital position, allowing us to scale the business without recourse to external capital. The vision is to scale our Romanian business by 2025 and establish a solid foundation that will allow us to reach our full potential thereafter.
We aim to increase our loan book by EUR 700 million, equating to an approximately 25% growth. Profitability is expected to reach over 20% by 2025, consolidating our position as the leading Tier 2 bank, while converging with Tier 1 banks' profitability levels. The new strategy has been designed to deliver growth across all business lines and is already showing tangible results. First, we aim to gain further scale in retail by playing to our strengths. Our mortgage and small business banking originations will grow, leveraging on our new digital platforms. Deposits will rise, accelerated by digital acquisitions, with an aim to add over EUR 600 million. Fee income will increase, leveraging on our strong position in payments and on improved affluent and private offering in synergy with group wealth. Second, we will reposition the bank as a reliable partner for business investments.
We will be bringing to the local market the group's expertise on structured finance projects. We will target specific segments and products such as energy, manufacturing, online retailers, to name just a few, taking advantage of our existing access to customers. We will also accelerate on selected products for SMEs such as factoring. Lastly, we will transform our operations by digitizing low value-added customer operations, by automating critical credit processes, aiming for over 30% digital retail sales, and by increasing the productivity and sales effectiveness of our people. We are envisaging to grow in a profitable manner, aiming to double profits and deliver returns that Tier 1 banks generate within the local market, achieving profitability levels of over 20% through our initiatives across units. Our focus is on the three-year business plan execution, but our longer-term ambitions do not stop here.
We remain confident of the long-term growth and profitability potential of the Romanian market.
Hello, everyone, and welcome back to our Investor Day. I'm Lazaros Papagaryfallou, Alpha Bank's CFO. Hopefully, by now, you should have a much better idea of who we are, what makes us different, and how we plan to accelerate our performance. As you would expect, we will now delve into the financial targets for the next few years. Let's start with where we stand and how we got here. We've had three main priorities over the past few years, we have achieved notable results. First, we cleaned up our balance sheet, reducing problematic exposures by over EUR 20 billion through a combination of transactions, but also through continuous organic efforts.
Second, we restored our capital buffers through organic capital generation, balance sheet optimization, disposals, partnerships, and issuance, reaching a 12.5% fully loaded Common Equity Tier 1 ratio in 2022, and 12.8% as of the first quarter of this year. Finally, we have returned to being profitable with a continuous focus on operational efficiency due to a lower cost of risk, but also on the back of growing our franchise. As a result, we've gone from breaking even to sustainable levels of profitability. Going forward, we will continue on this trajectory of generating profitable growth and accelerating value for our shareholders. We expect to deliver earnings per share growth in excess of 20% per annum. Profitability above 12%, leading to a sizable EUR 1.4 billion of capital in excess of our management target.
We intend to restart dividend distribution from 2023 profits onwards, subject to regulatory approval. Let me be clear, we have no intention of simply amassing capital that is surplus to our requirements. We have three guiding priorities in our plan. We will improve our profitability, driven by the initiatives across all business units and stringent cost discipline. We will improve the resilience of our balance sheet, not compromising on our prudent risk management, while fully normalizing our exposure to problematic assets. Importantly, we will ensure that the high levels of capital generation are deployed to further improve our capital ratios, fund sustainable, profitable growth, where we see demand, and remunerate our shareholders. Importantly, we expect our plan to deliver results in both the short term and the medium term.
As time goes by, we will start enjoying the cumulative impact of all the actions we're putting in place. Proof of our trajectory will be evident this year. Revenues will grow despite the loss of last year's excess trading gains and the deconsolidation of our merchant acquiring business, in part due to the favorable rate tailwinds, but notably also due to profitable volume growth and margin management. Earnings per share growth will exceed 30% this year. We aim to generate over half a billion of regulatory capital and reinitiate dividend payments, profitability will climb to double digits in 2023. 2023 will be the springboard to reach even higher levels by 2025. This uplift in profitability will come from two sources.
First, through a structural improvement in the profitability of our business units, and second, through the further reallocation of capital from dealing with the problematic assets of the past to funding future growth. Allow me to recap what you have already heard on the financial strategy for each segment. Retail will double its return on regulatory capital whilst maintaining similar levels of capital allocation. Clearly, it will be helped by the normalization of the rates environment, but it will also benefit from increasing its focus on fees and commissions, particularly in investment products for the affluent segment and through continuous cost management. The already announced securitization of a mortgage portfolio will offset any capital needs to fund growth. Wholesale will continue to support lending growth whilst maintaining its already high lucrative levels of profitability.
Wealth will add fees by growing its capital, like Assets Under Management, while treasury will significantly increase its top line contribution, taking advantage of current market opportunities. Our international business will continue its journey of rebuilding the franchise back towards its natural size, self-funded in terms of deposits and deploying its own capital, delivering a return that is aligned with the group's other profitable units. This emphasis on profitable business growth will translate into a return on regulatory capital of above 16% at a group level in 2025, based on our 13% target Common Equity Tier 1 ratio. Group returns on the regulatory capital that we need to carry are reduced by the regulatory treatment of our Deferred Tax Assets and, to a lesser extent, by the amount of excess capital that we will likely still have by the end of our planning horizon.
During the business plan horizon, we will recover about a fifth of our Deferred Tax Assets in the regulatory capital position, boosting our ability to reward shareholders, and that is a process that will continue after 2025. We are targeting earnings per share growth at an annual pace of 20%, with a resulting uplift in profitability, primarily driven by revenue growth. This should not overshadow the relative importance of the expected cost reduction, especially given the inflationary environment that we operate in, as well as the fact that we have already made significant inroads in improving our operational efficiency over the past few years. Starting with revenues, we expect an annual growth rate of circa 5% a year, largely driven by net interest income, which is expected to grow at an annual pace of 9%.
Fees and commissions are forecasted to grow at an annual rate of 7%. Taken altogether, they will more than offset the normalization of trading and other income. Let's now zoom in on net interest income, given its high relative weight on revenues. From a curve perspective, we have increased our estimate for the three-month Euribor in 2023 by circa 30 basis points, clearly leading to a higher estimate for the top line in 2023. Note that our projection is based off an average Euribor rate this year of 3.1%, lower than the circa 3.4% level envisioned by the market. The same is true for 2024, and by 2025, our projections are quite close to current market projections.
Our assumptions for the cost of time deposits have not changed materially, albeit we do now expect a slightly better overall deposit beta in 2023 due to a mildly slower shift towards time deposits. For the outer years, we do expect a significant pickup in the overall cost of deposits for the system, with the main impact being seen during 2024, when we expect the deposit beta to reach circa 30%. Higher than the 2023 level, it will not be that much different from the exit rate for 2023. We do, however, expect to continue to see a further contraction in loan spreads. There are a number of factors here, not least a changing mix towards longer tenures in wholesale and more consumer credit in retail. The overall message is twofold.
Yes, on the one side, we do expect a further normalization in spreads, the majority of which will come during 2023. At the same time, we are absolutely clear that we will prioritize profitability over growth, something that has already been evident in the evolution of our spreads vis-à-vis the market in the past year or so. This approach is aligned with our clear intent to stand by our customers across business cycles. On that front, let us not forget the impact from volumes. First, loan volumes are expected to grow at an annual pace of about 7% between 2023 and 2025. Second, we will increase our securities portfolios to reach approximately 25% of total assets and bring significant top-line benefits. We are investing mainly in level 1, high quality liquid assets that support our liquidity ratios and interest income.
Finally, of course, we have been very active in the debt markets recently, and we intend to remain active participants as we replenish our wholesale funding and build our MREL stack with envisaged cost of the required issuance embedded in our forecasts. Turning now to fees, all components are expected to have a positive contribution, resulting in the increase of fees contribution to total revenue by 3 percentage points, as well as improving our fee margin as a percentage of gross loans by circa 20 basis points. The delta, however, will be dominated by two components of our strategy that have been clearly articulated this afternoon. Number one, the expansion of asset management reach and scope, leading to higher balances and margins, and thus a stronger contribution.
Number 2, the enhancement of our servicing capabilities, allowing us to improve our penetration on both the individual as well as the business front. The growth in revenues will be the biggest enhancer of operating leverage in the business, but further cost efficiencies will lead to additional improvements. Although trends will be markedly different, we expect both our Greek and our international operations to have very strong positive jaws, with a gap between revenue growth and cost growth at 10 percentage points. By enhancing revenues and reducing costs, we will be able to improve our cost income ratio by circa 14 percentage points, bringing it down to circa 40% at a group level by 2025, with Greece at circa 35%. There are a number of factors driving this expected cost reduction. Firstly, reduced contributions to the resolution fund.
Secondly, there are a number of transactions where the cost benefits have not yet been fully reflected in our cost base. We will also generate further savings from our bank-wide transformation program, further reducing our footprint, unifying, simplifying, and automating our processes, and transitioning towards digital servicing. In parallel, we will change the way our central functions work, optimizing the utilization of our physical spaces and reducing our space usage, while also launching new energy saving initiatives. Finally, the renegotiation of a large number of contracts will attain financial savings and process efficiencies. This will more than compensate for higher investment spending as we ramp up the pace of our IT investments and an inflation-driven increase for the relevant subsegment of our cost base, as well as higher costs to support business growth. The second pillar of our strategic plan focuses on balance sheet resilience.
Over the years, we have maintained prudent lending practices and have developed a diversified loan portfolio. Our wholesale book is characterized by wide industry coverage that provides diversification against sector-specific volatility and limited exposure to commercial real estate, with less than 5% of our lending stock exposed to this asset class. Over 80% of our retail loan book has a residential asset as a collateral, and when things go wrong, we have a proven track record in being able to handle problematic assets, be it organically or inorganically. Focusing on asset quality, our objective is to reduce our gross NPE stock, landing at circa EUR 2 billion in 2025. Our loan book has a large percentage of loans with paying customers, with non-performing exposures under 90 days past due, making up close to half of the total.
Within that book, 92% is forborne exposures, a portfolio that is dominated by exposures with residential assets as collateral and good prospects for reperformance. The coverage in this part of the NPE book is reflecting the particular features of the underlying exposures, which naturally have a higher curing potential. For the weaker part of the portfolio, our non-performing loans above 90 days past due, our 55% coverage exceeds the European Union average. We have already executed the vast majority of the cleanup effort. What we have in front of us is what you might think of as the last mile. We intend to bring NPLs down to around 4% of loans by 2025, while maintaining cost of risk at similar levels to our peers, which will drive coverage ratios towards the 60% area in 2025.
Flows will remain on an improving trajectory, driven by two key factors, a robust curing performance linked to our large stock of forborne non-performing assets, and lower inflow rates as we expect the default rate to trend below 2%. Debt forgiveness and liquidations will also contribute equally to the reduction of the stock. Taking a step back and looking at our balance sheet resilience through a wider lens, our portfolio is characterized by high levels of liquidity. We have robust liquidity ratios. For example, our loan-to-deposit ratio is below 80%, whilst 70% of our deposits are insured. We have a granular retail deposit base with sticky, non-maturing deposits.
We maintain high coverage of our deposit base through liquid assets, as indicated by our liquidity coverage ratio, also given the fact that we have circa 25% of our total deposits in cash or cash equivalents, while circa 85% of our securities portfolio is in high quality liquid assets. We target LCR and NSFR ratios above 160 and 120%, respectively, throughout the planning period. The last pillar of our strategy is capital generation and distribution. We start in 2022 with tangible equity of EUR 5.8 billion. Of this, regulatory capital is around 70%, with the balance being deductible items, mainly excess deferred tax assets. As we progress towards 2025, we expect to build significantly our tangible equity towards EUR 7.6 billion before deducting dividend payments for the period.
Of this amount, EUR 6.2 billion, the sum of regulatory capital and deferred tax assets, is the tangible equity required to run our business. Our regulatory capital will amount to 80% of this. This EUR 6.2 billion will be earning a 12% return, whilst the remaining EUR 1.4 billion will remain as excess, clearly facilitating dividend distribution, restarting from 2023 profits onwards, subject, of course, to regulatory approval. To repeat, we have no intention of simply amassing capital that is surplus to our requirements. As Vassilis showed you before, profitability is the engine that creates this capital. EUR 1.9 billion of profit after tax is expected to be generated by our business.
The profit generation will allow us to recover EUR 0.4 billion of deferred tax assets. As a result, we will generate a total of EUR 2.3 billion over the period. Alongside this EUR 2.3 billion of regulatory capital generation, we expect to release an additional EUR 0.2 billion through the reduction of problematic assets, as well as the synthetic securitizations that are planned for 2023. The total will be deployed for further expanding our balance sheet and enabling future growth of our performing business with EUR 0.9 billion of capital deployed for organic growth, meeting our management target for regulatory capital with a deployment of EUR 0.2 billion, and shareholder remuneration with annual dividend distribution on 30 basis points over average risk-weighted assets in the period, having been put as a placeholder in our business plan, subject to regulatory approval.
Importantly, this will leave over EUR 1 billion of surplus capital above the management target, providing capacity for additional distributions. As a consequence, our capital ratios will naturally increase significantly during the period. More specifically, in 2023, we will reach a Common Equity Tier 1 ratio of around 13.5%, surpassing our management target of 13%, and thus unlocking the potential for dividend distribution for the first time since 2008. In 2025, assuming a similar payout throughout the period, we would reach a Common Equity Tier 1 ratio of around 16%, exceeding our 13% management target by a considerable amount, while our capital ratios would be even higher without the above-mentioned assumed dividend payout.
Our sensitivity analysis shows that even assuming dividends twice or three times the level embedded in our projections, our 2025 capital ratios would still exceed management targets. Allow me to summarize our main financial targets, including an update to our 2023 guidance. Looking out to 2025. Annual revenues will grow by circa EUR 0.3 billion, primarily driven by Net Interest Income expansion. Our cost to income ratio will decrease by around 14 percentage points, reaching a level of circa 40%, and our cost of risk will decrease to less than 70 basis points following the reduction of the NPE stock. The actions implemented to boost profitability and reduce costs will result in a return on tangible equity of more than 12%.
As a result, our earnings per share will demonstrate strong growth, with a CAGR higher than 20%, reaching more than EUR 0.3 per share by 2025. By 2025, our tangible equity is projected to exceed EUR 7 billion. Finally, this will result in dividend distribution starting from 2023, subject to regulatory approvals, and a higher Common Equity Tier 1 ratio that exceeds management targets, providing more flexibility for payouts. For the current year, we are also upgrading our targets. Reflecting the better rate environment, we now expect a return on tangible equity of circa 10%, with higher revenues generating a lower cost to income ratio, and we now expect earnings per share of over EUR 0.25 from EUR 0.23 previously. We will now have a short five-minute break, and we will be back to answer your questions. Thank you very much.
Hello, everyone. I'm Iason Kepaptsoglou. I'm the Head of Investor Relations at Alpha Bank. Welcome back to our Investor Day. We're now moving on to our Q&A session. It is going to last approximately 45 minutes. While we wait for the queue to form on the questions over the phone, allow me to start with a few questions that we have gathered online throughout the sessions. Let's start with you, Vassilis. We have spoken about Alpha Bank's franchise extensively. What advantages does that give you, and when you think about profitability, growth and returns?
Well, thank you, Iason. Indeed, a good part of my presentation was actually to ensure that the relevant strengths of our franchise have been laid in front of you. Having said that, and particularly if one thinks in relative terms, there are a few areas where I think we need really to deep dive more. The first is that not all of the Greek systemic banks actually have the same starting point as we tried to deleverage our balance sheet. If you think about it, we did not have the same quantum of NPEs, we did not have the same mix.
On top of that, there has been differences in the way that capital endowments have been put forward and utilized, as well as the DTAs that we were carrying. That means that certain banks have indeed been able to finish up their deleveraging faster, and thus the profitability improvement has started earlier. That is something which in the case of Alpha Bank, was not really the case, we have been rather towards the end of the queue. That brings me to, probably to my second point, which is that this, since it is not a structural impediment that takes you away from catching up, since there are only timing asynchronous to that.
In addition to that, there are indeed areas of our franchise where we have shown that we can do that catch-up. I think what we have in front of us makes us really confident that we're gonna be able to deliver more than 20% EPS growth over the planning horizon, and also improve our returns of more than 450 basis points. Allow me, Iason, now to add another point, and this has to do with the way at least that we, our management team, understands our risk profile. If you think about that, we, unlike some of our peers, we are only exercising banking. I mean, there are no auxiliary activities in what we're doing.
On top of that, the whole management team's mentality is to deliver sustainable returns to our shareholders, and we're shying away from picks and troughs that, you know, may circumstantially boost our revenues. That, that is another area which I think takes us apart, and at the end of the day, is a good reason why we are currently the most profitable Greek franchise in the market. Having said that, it's not that, you know, 2025 is the end of the journey. Actually, it is a staging point, is no more than that. Our ambition actually goes beyond 2025 to continue delivering. You know, if I may say also that another upside risk that we have, even at that stage, we will continue to have some NPEs. We'll chop away something like 2 percentage points of profitability. There are even more things to do beyond the 2025 horizon.
Thank you, Vassilis. Moving on, maybe to you, Yiannis. This is a question that's come from UBS as well. You've mentioned in your speech, we're seeing spread erosion in Greece for corporate lending. You also try to manage the market share that you have. How do you expect that process to continue going forward, both in terms of spread and volume growth?
Well, thank you, Iason. Up to now, we have experienced some spread compression in Greece. In the last few quarters we have managed, I would say, very satisfactorily. In the previous five quarters, we have experienced approximately 52 basis points of decline in our spreads. This is a decline that has been considerably lower than the decline that has been experienced by competitors. On top of that, we have managed to maintain the margins at very satisfactory levels, still ahead of competition. This is something that we expect to continue.
We do expect that in the next few quarters, we may have some additional spread compression, and we have included in our plan a projection for approximately 50 basis points compression up to 2025. This is something that is front-loaded. We think that the market up to now is discounting the fact to a certain extent, that Greece is going to gain the investment grade. This is something that has been embedded in the pricing of the market right now. Let me stress that the margins in Greece are currently structured and at a level that is very competitive vis-à-vis international international transactions of similar risk weighting. We believe that with what we have in our projections, we will manage wonderfully.
This is in tandem with the expected expansion in our book of exactly 5 billion EUR in up to 2025. Now, if you're asking me whether we have a preference of volumes vis-à-vis profitability, we clearly have a preference for profitability. At the same vein, of course, we would like to maintain the value of our franchise because this is something that we have been building along the years with effort and with considerable relationship with our clients. We believe that profitability is the key for us.
Thank you very much, Yannis. Moving on to Isidoros. Your peers are delivering higher fees overall on an absolute basis, but also as a percent of assets. Why do you think that is, and what is the plan going forward?
Well, with regard to retail fees, there are four lines, basically. It's wealth, which are, we are number 1. Cards issuing, after the depart of acquiring businesses, just issuing, we are number 1 as well. Bancassurance, we are number 2, and payments and transfers. The mere fact is that our peers has been a little more proactive in this area, the payments and transfers, thus creating ample room for us to grow. Basically, this is good news, because this is a little faster in implementation versus building relationships, strong relationships, in order to enhance wealth and bancassurance revenues.
Thank you, Isidoros. Maybe to close this round with you, Lazaros. Quite a lot of questions on capital, as you can imagine. You say you expect to have EUR 1.4 billion of excess capital over the 13% management target, and you're measuring your returns on that 13% number. How do you get to 13%? How confident are you that regulators will allow you to be at 13%, and when might this happen? Maybe if I can add to that, from Jefferies, a question on the dividends and what have we included in our projections for the business plan.
All right. Thank you, Iason. As far as capital is concerned, we have set clear targets across the regulatory spectrum, incorporating buffers against the minimum requirements. We have set management targets at 13% for Common Equity one, and over 17% for total capital adequacy ratio that fully take into account regulatory expectations. As you have seen, our business plan provides for significant internal capital generation with more than 300 basis points of capital accretion above the Common Equity one target of the management at 13%. Our focus is really on delivering this profitability, internal capital generation, and capital creation to the benefit of our shareholders. We have also incorporated in the capital stack the full optimization using AT1.
We feel that this will further align our targets with supervisory expectation towards the outer years in the plan. We have fully incorporated coupon payments for the entire AT1 stack in our profitability projections and the returns that you have seen in our plan. Also, from 2023 onwards, we have started accruing dividend in our capital ratio at 25 to 30 basis points already in 2023. Every quarter, our capital ratios incorporate a dividend accrual. Obviously, the decision by the supervisor will be taken in 2024 on the back of 2023 profits, but we are prudent in already calculating dividend in our projections. We have also taken into account a token 30 basis points over risk-weighted assets of dividend throughout the planning horizon.
However, as you have seen in our presentation, we increase our capital position, creating substantial buffers above our Common Equity Tier 1, thus enabling higher payouts, subject, of course, to regulatory approval. Our intention is not simply to hold capital. We intend to restart dividend payments, hopefully, on the back of 2023 profits.
Thank you, Lazaros. With that, maybe operator, if we can take the first question from the phone.
Thank you, Mr. Kepaptsoglou. Ladies and gentlemen, this is the operator speaking. The first question is from the line of Alevizakos. Alevizakos with AXIA Ventures, please go ahead.
Hi. Thanks very much, everybody, and congratulations for the comprehensive presentation. I've got a couple of questions from my side, if I can. The first one is, I wanted to clarify, apart from the dividend, there is an extra EUR 1 billion of capital that, can we assume that it will be used for M&A? Also perhaps leading the answer, is Romania one of the key areas where you have the ambition to actually grow your market sharing organically? That's question number one. My second question is, what do you believe is the key upside risk of your estimates?
I recognize the arrival three months that you're using for 2023 to be on the conservative side, but equally, what could be the main area of concern where you see that you've got lower margin of error in the longer term? Thank you.
Thank you, Al. Maybe the first question for Vassilis on the extra capital and M&A in Romania, and the second question on key upside risk, Lazaros, hopefully you can take that one.
Well, indeed, we are estimated to create EUR 1.4 billion above our management targets in terms of capital creation. Let's face it, I think it was evident throughout the presentation that the management team is very much focused in delivering that to our shareholders. We have been through a very long period, actually, the longest in the history of the bank, where we were not allowed to distribute dividend. As you heard, we have a very long dividend history. Our focus is to grow profitably, to create that capital, and then, you know, give it back to our shareholders. That's our prime focus.
After resuming a proper level of dividend out, it's only at that very later stage that we could think at something else. You know, for the planning horizon that we have in front of us, this is the absolute priority for us. That is also for Romania. I mean, in Romania, as Sergiu alluded in his presentation, 2022 was a milestone year. We have changed tack. Romania is growing now faster than the market, our focus there is to organically grow our business. Yes, there may be on the, you know, on the operating front, something nibble that we may do an add-on, you know, the key thrust is the organic growth in that market.
On the second question, Alevizakos, as far as upside risks are concerned, I can name a few. The start is a lower deposit beta, compared to our projections and higher rates. You may have seen that we are trending lower in terms of rates compared to what the curve currently is, so that could be an upside risk for our NII. I would also argue that a lower deposit beta overall, with a smaller shift in time deposits as portrayed in our plan. That is an upside risk.
I would name as upside risk, a macro extortionist factor, which is investment grade, that can help us achieve lower funding costs than the ones embedded in the plan, plus additional fees generation as the markets are expected to trend higher, market-related fees are expected to trend higher. On the downside risk, I would name persistent inflationary pressures that put additional pressure on disposable income and potentially lower demand for loans.
Thank you very much, Lazaros. Moving on, back to the questions we've received online from Mediobanca, this is for you, Michalis. Technology is a key pillar of this plan to enable growth and better profitability. Can you quantify the amount of investments needed during the plan? There's a second leg to that question that relates to the cost that will arise from these investments, and maybe, Lazaros, you can take that. If I can add to the question, and how do we measure the return on that investment as well? Because I think it's important.
Okay, thank you for the question. The numbers I gave in my presentation are that we have put aside more than EUR 280 million in total IT investments, including the digitalization of products and services for the next three years. This is an upsized annual run rate of a little bit more than EUR 90 million versus the EUR 80 approximately that we had over the last three years. A good part of that, about two-thirds, goes into what we call Change the Bank, and about a third goes to what we call Run the Bank. A significant portion of Change the Bank initiatives have to do with cost reductions, but I guess Lazaros will talk more about this.
In terms of quantifying the return on investment of such investments, as you can appreciate, it's very hard to quantify the full benefit of the total IT investments of any one institution, this is simply for two reasons. Number one, because the totality of the investments relates to the totality of the business plan. Number two, because a part of the investments has to do with the modernization of technology, which we have to do anyway for strategic reasons, and which has a long-term value that cannot be directly related to P&L elements in the short term. That being said, there are cases where we do quantify the return on investments we make, and let me share with you one very specific and significant example.
We've set one of the key objectives we've set ourselves is to reach 30% in digital sales by 2025 in units sold. This volume of sales corresponds to a revenue figure of approximately EUR 25 million in new production for 2025. The same sales volume, if it were to be processed by humans, it would have meant 170 full-time equivalence in human capacity. This human capacity that will not be used in that direction is a very powerful lever that we can use to our advantage to either drive costs down or to turn it to higher revenue-yielding tasks. The associated investment to deliver this 30% digital sales target is in the area of approximately EUR 25 million. In this particular case, yes, we have measured the benefit. It's clear, and it's quite sizable.
Thank you very much. Lazaros, I don't know if you want to add on the actual impact of IT investments over the planned horizon?
We have been investing in IT in a more profound way since 2017, at an accelerating pace. This, as you have seen in our profit and loss account, has flowed in the P&L through incremental depreciation of intangibles. We are implementing at a faster pace our second wave of transformation and digitization initiatives towards the EUR 90 million annual CapEx level. Overall, throughout the planning horizon, at approximately the EUR 270 million level. During the same time period, we will also see the maturity of the useful life of some prior investments, so that will net out in the profit and loss account. This is definitely one of the drivers that bring the cost base higher.
On the back of these important investments, we are implementing other initiatives on the cost base to manage costs so that throughout the planning horizon, we manage to reduce OpEx and significantly improve efficiency, as manifested by the cost-income ratio, which trends towards the 40% level by 2025.
Thank you, Lazaros. If we move on to Anastasia, we have spoken a lot about the achievements of the past for the transformation program, but what are the areas of focus going forward?
The transformation, as we said, acts as the enabler. It will continue to do so in the future, supporting the areas of strategic importance and our priorities. What does that mean? I think you've heard my colleagues covering the respective areas. If I start with retail, we will continue accelerating change, supporting the migration of our core offering to digital and the automation of selected branch processes. In our wealth management business, we will enhance our platform, we will also help the launching of our offshore business. In wholesale banking, we will continue accelerate the pace at which our relationship managers can see clients, freeing up time spent on administrative tasks. We will also work on increasing the penetration of non-lending products.
Of course, a big part of transformation to date has been on the modernization of our central operations. It will continue. Our efforts will continue with structural changes, leading to further synergies by eliminating overlaps and further centralizing and optimizing processes.
Thank you very much. With that, operator, if we can take the next question over the phone, please.
Thank you, Mr. Kepaptsoglou . The next question is from the line of Butkov Mikhail with Goldman Sachs. Please go ahead.
Good day. Thank you very much for the presentation today. I have a couple of questions. The first one is on the Recovery and Resilience Facility. So what contribution to growth you had so far from these funds, and what additional support do you expect for your lending and deposit growth there? And the second question is on your medium-term target and peak coverage ratio of over 60% with a normalized cost of risk of 70 basis points. What actually the long-term NPE coverage level do you see as comfortable for yourselves, and what level might allow for further reduction in the cost of risk beyond 2025? Thank you very much.
Thank you for your question. Let's start with Lazaros on coverage, and then we can have Yannis on the contribution of the RRF in our loan growth projections.
Good afternoon, Mikhail. Thank you for the question. When it comes to CAS coverage, we have explained our starting point in terms of stage 3 loans, and how that is comprised of forborne NPLs below 90-day, a segment that commands a lower CAS coverage. What is attributed to non-performing loans above 90 days past due, the coverage of approximately 55%, which is commensurate to what we see in other places. That is the starting point, and we should have in mind. Second point is that we do not back solve for a specific level of CAS coverage. This is a function of the evolution of NPEs, and the strategies we implement in order to bring our non-performing exposures at a level lower than EUR 2 billion, as you have seen in the presentation.
During the period, we reduced non-performing exposures from EUR 3.1 billion to lower than EUR 2 billion. That is a function of curings from forborne NPEs below 90 days past due, a cohort which naturally commands more curings. We are going to see certain inflows at a decreasing default rate, though below 2%, that we have incorporated in our business plan assumptions, and we are already moving in that pace. Net-net, you will see organic outflows throughout the planning horizon. That is the first important point to make with a view to see how we end up at a lower point. Our existing stock of loan loss provisions of approximately EUR 1.1 billion is staying at the same levels approximately until 2025.
A decreasing stock of NPEs towards the EUR 2 billion level or lower than that, and loan loss provisions at circa EUR 1.1 billion, drive CAS coverage towards the 60% level. Now, in that loan loss provision line, we will see a lot of movement. To start with, we have incorporated forecasts for cost of risk, starting from 85 basis points down to 70 basis points. You should keep in mind that approximately 25% of that cost of risk goes to securitization costs and servicing fees, and the remaining 75% goes to increase the allowance accounts.
This 75% that is used to increase our allowance account is also used to fuel the strategies that we also presented the presentation, namely curings through restructurings, liquidations, discounted payoffs that drive a big portion of our NPE reduction throughout the year. We're using this CAS coverage in order to fuel these strategies. To sum it up, we have NPEs going down to lower than EUR 2 billion. We have a low loss provision stock at around EUR 1.1 billion, thus, driving CAS coverage at the 60% area, with a cost of risk that trends from 85-70 basis points. That is high of EUR 1 billion, a quite substantial amount for the entire period.
Thank you very much, Lazaros. If we can move to Yannis, so he can talk to us about RRF and the contribution to loan growth going forward.
Okay, thank you for that. Currently, we have in the platform 48 applications that correspond to approximately EUR 1.7 billion in total investment. Out of that, the portion that is financed by Alpha Bank is approximately EUR 380 million. That is going to be disbursed in 2023 and the following years. Approximately half of that is in 2023, and the rest is in 2024, with a very small portion in 2025. Having said that, we have an equally important number of transactions that are matured. They are to be included in the contract, in the platform and contracted. The previous one is obviously contracted up to now.
This is going to be to supply us with an equally important number of transactions and approximately over 300 million of disbursements, as far as Alpha Bank is concerned, in 2023 to 2025. I must say that as far as RRF is concerned, we have tried consciously to make RRF accessible to a very large number of our customers. We have focused considerably in the SME perimeter. Thus, we have managed up to now to have the higher number of application vis-à-vis any bank in Greece.
Thank you very much. Moving back to the questions we've received online, probably we need to have a rapid-fire session with Lazaros, because there's a lot of questions that are for you. From Research Greece, making sure that the 12% return in 2025 is incorporating AT1 coupon payments and is based on the EUR 6 billion tangible book value. That is correct. If we're also lowering deposit betas assumptions for 2023 compared to the previous guidance. Are we lowering our deposit cost betas for 2023?
No, we don't. This is, as I said before, an upside risk, if we see a lower transition to time deposits, as well as higher rates. We have incorporated for the year an average deposit beta of 17%, which trends towards the 30% level in the outer years of the plan. In our mind may also be an upside risk to our projections.
Okay, maybe a question for Fragiski. We have some pretty demanding goals in terms of cost reduction. Have we embedded any headcount reduction in the targets? If so, do we expect to conduct another voluntary separation scheme? Maybe for Lazaros, if we have any extraordinary costs factored into the plan for any such action.
Thank you, Iason. I don't think we expect any significant changes in our HR cost base over the next three years. Actually, we are going to see two opposite trends. The first one is that we are planning to see savings due to operational efficiency improvements in our servicing models, but also in our middle and back office operations, that will end up to headcount reduction. On the other hand, we expect the employment cost to increase the next years because we have a lot of things to do. We have to hire and retain high potential individuals, and we also have to take into consideration the inflationary pressures that Lazaros mentioned before in wages.
All in all, the two actually opposite trends will counterbalance among each other, we do not expect, as I mentioned before, any substantial change in our cost base in over the next three years.
Thank you. Lazaros, I don't know if you want to comment on extraordinary costs?
In 2023, the main extraordinary expense relates to the successful completion of our voluntary separation scheme. That has been accrued already in our accounts. In 2024, we have some additional extraordinary expenses in the range of EUR 20 million. It's not a significant amount, but we should be providing for events of operational risk or other contingencies that potentially flow in the P&L.
Okay, maybe one more question from online before we move to the phone. Again, for you, Lazaros, what are our MREL issuance plans? This comes from Brevan Howard.
You may have seen that, at the end of 2022, have been quite active in front-loading issuance and creating buffers for our 2023 targets. These buffers have also been enhanced by the issuance of AT1 early 2023, plus additional organic activities like the synthetic securitizations we're doing, and of course, our organic profitability for 2023. We feel quite comfortable in operating with good buffers above our targets in 2023. Having said that, we want to actively participate in the market. We've said before and given guidance for one sub-benchmark issuance in 2023. If we see good market conditions, we may want to push the button and prefund maybe 2024 requirements.
For the planning horizon until 2025, we have a net issuance activity in MREL of EUR 1.3 billion. I'm saying net because we also need to refinance a 3NC 2 that we have issued in the last couple of years. Of course, you will appreciate that internal capital generation, plus potential AT1 issuance towards the end of the planning horizon, further enhances our MREL buffers and contributes towards the same target.
Thank you very much, Lazaros. With that, operator, if we can take the next question over the phone.
Yes, thank you, Mr. Kepaptsoglou. The next question is from the line of Mehmet Sevim with J.P. Morgan. Please go ahead.
Good afternoon, and thank you very much for a very interesting presentation. One question on retail banking, please. You gave us some very significant growth targets for new disbursements in retail, both in mortgages and consumer loans. Can I please ask how much net growth you project to see in the book as a result? Or, should amortizations offset most of the net disbursements going forward? Secondly, connected to this, as the economy now returns to sustainable growth, what will it take, really, for us to see visibly better growth numbers in the retail book? Do you think that banks have enough appetite actually to grow in retail, in this point in the cycle? Thank you very much.
Isidoros, if you want to take the question on retail growth?
Yep. Actually, 2023, early 2024, will be the inflection point of starting to have net credit expansion. You very well know that this is due to the huge repayments on mortgages, basically, over big back book building that has built back in early 2000. Going forward, we do see a positive, as I said before, net credit expansion through the period till the end of 2025, somewhere between half and EUR 1 billion, driven mostly from small business loans and consumer loans, which will, as you understand, will have a further positive effect on the spread due to the product mix.
I think that this is just the start, because going back prior to the Greek crisis, the amounts of mortgages that the banks were disbursing were multiple times higher versus the current business we do have. Hopefully, as the real estate, especially the residential real estate increase remains strong, that will create further opportunities for the mortgage book to rebound as well.
Thank you very much, Isidoros. We have a question. Sorry, Mehmet, I don't know if you have a follow-up question?
On the other side, if I may just squeeze one question on the Wholesale Banking segment. If you could please explain the ROTCE dynamics in the Wholesale Banking division, given the projected ROTCE staying flat at about 18%, despite a very good level of projected revenue growth. Is this a function of equity generation, or what is actually driving this flat ROTCE in this division? Thanks very much.
Thank you, Mehmet. I think Isidoros wants to add something first to his previous answer, then we can move to Yannis to answer the question on returns on wholesale.
Yeah, I think I missed the last bit on Mehmet's question about the appetite. Definitely, we do have the appetite at the right spread to grow the business in all major retail loan types. That is mortgages, small business loans, and consumer loans.
Yannis?
Okay, as far as wholesale is concerned, we expect, and we are planning to have disbursements of EUR 5 billion, as we said, over the planning horizon, up to 2025. These are going to be generated with a, 18% return on capital. Now, this translates to approximately 30% of, net disbursements over the planning period. At the same time, we are going to have a very material increase in the profit after tax that is expected to be around 30%, 27% to be exact, up to 2025.
Now, what leads to the rather flattish return on equity is the fact that we are expecting, along with the increase in our disbursements, to have a shrinkage, a decrease, as I pointed out before, in the margins that we execute business. This is going to impact the back book, because loans with higher margins that come from the past, especially from crisis years, are going to be repaid, but also new generation that is coming at relatively lower rates. I must say, though, and maybe I'm repeating myself here, that up to now, we have managed rather, I would say, successfully, to fend off competitive pressure in the book. Therefore, we have managed to have a very contained spread erosion that is considerably less than what happens with competition.
In order to counterbalance this spread erosion, along with the increase in volumes, we are going to have in the coming years, a material increase in the ancillary fees and obviously the lending fees that we have from this business. We are expecting that we're going to have an approximately 25% increase in the fees and commissions that come out of the business over the planning horizon. Overall, we are staying at around 18%. A final point, this is without taking into account any potential securitizations that we may have in the wholesale book in the coming years. Should we effect any securitizations, we believe that the return on equity on our business can be even more enhanced. Thank you.
Lazaros, I don't know if you want to add something to that?
Yeah. From a, from a capital allocation point of view, obviously, we allocate capital where demand is. As we have discussed through the business plans of our units, we do expect significant new disbursements in wholesale lending. There is merit in allocating capital to support this growth for the most profitable unit in our operation in terms of absolute levels of bottom line. Absolute levels of bottom line are important because they help also the CFO to recover faster the deferred tax assets and shift those deferred tax assets into our regulatory capital position. Don't forget that at the end of the day, an 18% return on normal Common Equity Tier 1 is capital accretive and is accretive to our ROTE calculations that you have seen in the business plan.
Thank you, Lazaros. Going back to the questions we received.
Thanks very much.
Going back to the questions we've received online, Sergiu, this one is for you, and maybe Vassilis, you might want to add to that. You've stated that you want to lead the Tier 2 pack in Romania, yet you expect to have level, Tier 1 levels of profitability. How do we reconcile the two, and what is the end game for the Romanian operations?
Thank you, Iason. Indeed, I mean, we stated that we are leading the Tier 2 banks in the Romanian market. We the intention, it's a clear strategy plan in order to arrive at the profitability level of the Tier 1 banks, which is almost double than the profitability level of Tier 1 or Tier 2 banks. I think we can get there because we do have, at this moment, the platform, we do have the customer franchise as the customer relationships, and we do have at this moment also the investment plan that we have put in place in order to increase our digitalization process in Romania.
I think we are executing for this growth strategy over the next three years. We have been, historically speaking, Alpha Bank Romania has been a member of the Tier 1 banks. We had to play defense, as I was saying in my speech earlier, we had to play defense following the Greek crisis of 2015. As a result of that, we had to deleverage from our position, but we have never deleveraged from our customer relationships. Therefore, for us, it's going to be a faster, uphill growth strategy as we as we speak.
I think I should start with picking up on the point that Sergiu made that we decided to keep the optionality. I mean, we have gone through a very difficult phase when DG Comp has imposed on us an asset cap back in 2012, and practically, we had to lay on ice our operations in Romania. From a shareholder's point of view, I think we did the right thing in keeping our franchise there, in keeping our people there, in keeping the client contacts there. Keeping that intact allowed us, after having graduating the restructuring plan from 2008 to 2019 onwards, to start making inroads in the market. I think we have made no secret that we like the country.
We do believe in the growth prospects. We have been there for quite some time. We're very comfortable with the risks that we underwrite there, and, you know, we do firmly believe that from where we are right now, the convergence process of Romania will get accelerated. The sheer fact that our operations have turned the corner right now makes us really confident about, you know, the delivering on the ambitious plan that we have set ourselves. From a capital allocation point of view, obviously, our approach for Romania is pretty much the same that we're doing outside the borders, and this is that we put a certain hurdle.
We're very much, you know, closely monitoring the development on that. Only on that basis, we do allocate further capital. As you would expect, in the international part, we do expect to see a faster convergence with our Greek franchise, which, as I said before, it is the leading franchise in Greece. This is the way that we're operating, and hopefully, we are standing in front of a virtual cycle.
Thank you very much, Vassilis. We can take a question for George now. It looks from the numbers that you expect to grow, assets under management by less than what you expect the market to grow. Why is that, given that you have a leadership position?
Well, I see why people get puzzled, normally with these definitions, let's say, of AUM. Actually, in the market, there are two different definitions of AUM. One, widely used and disclosed upon by asset managers, and there, the dominant product is mutual funds. In that camp, we expect the market in the following years to accelerate by a pace of 15%-20%, whereas we're outpacing that by moving higher by 20%-25%. That means if we look into that specific segment of products, Alpha Bank will maintain its leading position, its top position in mutual funds distribution in the country.
If we enlarge the scope of AUM and look at it from the scope of banks, whereby other asset classes, they join the investment basket, then Alpha Bank will also continue selling few equities, bonds, structures, alternative investments, and therefore, the combined growth of all these baskets will give us a 13% growth, again, leaving us in the leading position in the bank cluster camp, if you want, for the total wealth products.
Thank you very much, George. Let's have a couple of questions for Lazaros now, as we're actually past our 45 minutes. But just to get them out of the way, can you please comment briefly on the RWA evolution over the period? Additional to that, from Mediobanca, if we have any synthetic securitizations within the plan. Then a separate question, again, from Mediobanca, on net interest income, when is the increase in securities coming, in our assumptions, is the majority in 2023 or in latter years?
Starting with the risk-weighted assets question, we do show that our internal capital generation gives us proper ammunition in order to fund, in a self-sustainable way, RWA growth. We're using EUR 0.9 billion of internal capital generation with a view to fund RWA growth. Actually, out of this EUR 0.9 billion, EUR 170 million is used in 2023 in order to reach the management targets for Common Equity Tier 1, and the rest is used in order to fund RWA growth north of EUR 5 billion. In this EUR 5 billion, you have the growth in performing loans that we have aspired in the business plan. You have some reduction from non-performing exposures, which get lower than EUR 2 billion.
You have the positive impact from securitizations. Mainly in 2023, we're completing securitizations. We have some additional charges for market and operational risk as we grow our top line, so this is fully aligned with that target.
Okay. Thank you very much. We have no time for further questions. The Investor Relations department is here for anyone who has any further questions. You can either email us or phone in. Thank you very much, and we hope to see you soon on the road.