Zero on your telephone. At this time, I would like to turn the conference over to Alpha Services and Holdings management. Gentlemen, you may now proceed.
Welcome everyone to Alpha Bank's fourth quarter results call for 2022. This is Vassilios Psaltis, Alpha Bank CEO, and I'm joined today by Lazaros Papagaryfallou, our CFO, and Iason Kepaptsoglou, our Head of IR, to update you on our fourth quarter results. Let's turn to slide four, please, to start with a brief update on the macro. Greece has recorded strong economic growth in 2022 of 4.9%, even for inflationary pressures weigh on economic activity and uncertainty was elevated. As you can depict in the left-hand slide on the top end, the solid growth performance was underpinned in part by growth in private consumption 7.8% on the back of continued employment gains and the fiscal measures adopted to shield households against rising energy costs, but also due to sizable growth in investments, which grew by 11.7%.
This was on the back of revival of Foreign Direct Investments, which in 2022 amounted to EUR 7.2 billion, that made 3.5% of our GDP. The outlook for 2023 remains quite positive, while risks appear more balanced compared to last autumn. However, headwinds remain and uncertainty continues to be elevated. Going forward, growth dynamics are expected to moderate in 2023, with the energy crisis taking its toll on domestic economic activity and especially consumption. As soaring energy and food prices erode the household's purchasing power. As seen in the left-hand side slide, real GDP growth is expected to remain relatively resilient, a bit higher than 2%, supported mainly by investment.
The increased contribution of investment on the future growth mix is expected to be supported by the strong upward dynamics in FDIs, by the implementation of the RRF and the public investment program, and by the approach towards investment grade after the marked improvement in debt sustainability and sovereign risk compression. Underpinned by the continued employment gains and the expected overperformance of tourism, private consumption and exports of services are expected to continue supporting economic growth in 2023, for to a lesser extent compared to previous years, as domestic and external demand is expected to weaken on the back of the adverse effect of the energy crisis on the household's disposable income.
Labor market conditions continued to improve in 2022, with the unemployment rate falling to 12.4% on average, while headline inflation has already passed its peak, standing at 9.3% in 2022, as depicted in the right-hand side graph. Although energy prices gradually eased within the last quarter of 2022, core inflation remains high due to the pass-through of higher energy costs to other products and services. Food price inflation is expected to prove more persistent given the lagged pass-through of high energy costs on food, on food production. The combination of the resilient labor markets with rising core inflation provides degrees of freedom for a further tightening of the monetary policy in the short run, with policy rates peaking later in the year at a slightly higher level than previously expected.
The cumulative impact of past monetary tightening is starting to weigh also on lending activity. The further tightening of monetary policy and increasing borrowing costs are not expected to weigh substantially on public debt dynamics in the short term, taking into account the favorable debt profile marked by constant and low interest rates and high average maturities. Let's turn to slide five to look at the financial performance for the year. In 2022, we have made substantial progress towards the key objectives of our plan. Our balance sheet has been restored, with NPEs dropping to a single-digit ratio level, and as a result, cost of risk rebasing to healthier levels. On the top line, our franchise strength and policy decisions have allowed us to offset the headwinds from NPE disposals, with net interest income turning a corner already in the 2nd quarter of the year.
While our balance sheet positioning and commercial decisions have allowed us to benefit meaningfully from higher rates in the second half of the year. We continue to make progress on the cost front, where our transformation program and the streamlining of our platform have allowed us to reduce our cost base despite increasing inflationary pressures. Our regulatory capital has increased steadily throughout the year, allowing us to deliver on the guidance that we gave you a year earlier despite market headwinds and getting us closer to our management targets that we expect to reach during 2023. Last but not least, we have delivered EUR 400 million of profits and grown recurring earnings by close to 30%, delivering earnings per share of EUR 0.18 and growing our tangible book value by 4%. Both are testament to our commitment to value creation for our shareholders.
On slide six, allow me to draw your attention to some highlights from our segmental performance. Note that we have changed the reporting of our segments to better align disclosure with the actual organization operational structure resulting from the implementation of our transformation program. Starting with Greece, wholesale has been front and center in terms of growth, contributing EUR 361 million to Group normalized profits. On the back of sustainable and profitable growth of its loan book. Our retail business continues on its repositioning journey, with profits up meaningfully year-over-year, despite the persistent lack of demand for loans. Last but not least, our wealth management unit has had a challenging year, with market turbulence stalling growth in assets under management, but still meaningful growth in recurring profits for the year on the back of the balance sheet management.
Overall, our segments in Greece have delivered on return on tangible equity of 17%, while taking up close to three quarters of the risk-weighted assets of the group. Our international business has seen an inflection point and is now growing into its growth grades, especially in Romania, that has seen double-digit growth in loans and deposits with a step up in new originations of wholesale, mortgage, and small business loans. We expect returns for these segments to continue in 2023 and progress towards aligning with the group's ambition. We continue to have a negative impact from the stock of non-performing loans and assets, but as Lazaros will explain later, a falling stock should translate into a smaller drag on group profitability.
Lastly, in the new reporting, we have tried to allocate the vast majority of capital and P&L items to the various segments, leaving a relatively small corporate center behind. Turning now to the next slide, you can see a summary of our guidance for 2023. Lazaros will walk you through this in some more detail later, but I would like to draw your attention on a couple of points. First and foremost, we are seeing a notable acceleration in our earnings capacity. Profits on a recurring basis grew by 30% in 2022, and we expect a further 25% growth in 2023.
Above and beyond the exogenous benefit of higher rates, this is also the result of the hard work that we have done investing in the transformation of our business, ensuring that we allocate capital to maximize value and repositioning our operating model for the years ahead. Secondly, we are conscious of the challenges that lie ahead. Whilst we are constructive on the outlook, our commercial policies ensure that we position our balance sheet in a sustainable manner. That is embedded, among other things, in our pass-through assumption for interest rates, our loan growth estimates, and our conservative stance on provisioning, and it translates into the guidance that we are providing. Last but not least, and I want to be absolutely clear on this, we are currently focused on maximizing the value that we add to all of our shareholders.
Financial projections might not paint the whole picture, but the continuous improvement in profitability and growth in our tangible book value are testament to that. With that, before I pass the floor on to Lazaros, I would like to inform you that in the second quarter of this year, we intend to host an investor day to update you on the progress on our strategy, the direction of our business and the value segments, as well as provide you with our financial projections for the coming years. We will share more detail with you closer to that date. Lazaros, the floor is yours.
Good afternoon, everyone. This is Lazaros Papagaryfallou, Alpha Bank's CFO. Let's now take a closer look at this quarter's numbers. Turning to slide nine, this year we have returned to profits following the clean up of 2021, and have reported a positive bottom line of circa EUR 400 million and EUR 63 million for the last quarter. Excluding the impact from transactions and the various one-offs, profits were up 29% year-on-year on a normalized basis. Core pre-provision income was up by 6% in the year on the back of efficiency gains, while pre-provision income increased by 36%, helped by higher trading gains and other income.
On the next slide, our NPL ratio has fallen by 530 basis points in the year and 20 basis points in the last quarter to 7.8%, with transactions early in the year but also meaningful organic reduction. The group's NPE coverage stood at 41% at year-end, with annual move affected by transactions. Our tangible book value is on an upward trajectory, up by 4% in 2022 to EUR 5.8 billion, while on capital adequacy, our fully loaded Common Equity Tier 1 increased by 8%, allowing us reach a ratio of 12.5% at the end of 2022, accounting for the pending Risk-Weighted Asset relief from transactions. Turning to slide 11 to look at the underlying profit and loss trends.
Net interest income was flat year-on-year at EUR 1.3 billion. That was driven by a 60% reduction in lower quality accruals from non-performing exposures, meaning that our core recurring net interest income was actually up by 15%. Fees and commissions proved quite resilient, flat year-on-year at EUR 396 million, as 9% growth in the continuing business offset the impact on the sale of the merchant acquiring business. Recurring operating expenses continued to trend lower, down 3% year-on-year, demonstrating the improvement in efficiency. The cost of risk came in at 176 basis points, excluding transactions, reflecting benign asset quality flows and a cleaner balance sheet. Performing loans on the next slide grew by 10% in the year, with business loans Being the driving force and a meaningful uptick in the contribution of our international business.
Our loan book is built with defensive characteristics, capturing the investment drive in the country, taking advantage of available tools such as the RRF and the Development Law in projects of choice within infrastructure, utilities, hospitality, green transition, and digital transformation, as an example. Originating fees are the advisory partner of choice for our corporate customers, ensuring that we have proper conservative structuring and ultimately producing returns above our 15% threshold for returns on risk-adjusted capital. The last quarter of the year saw a marked slowdown in net credit expansion, as well as a notable negative FX effect on our dollar shipping book. Disbursements reached EUR 2.3 billion in the quarter, were offset by meaningful repayments as cash-rich corporates opted to close certain facilities given improving sentiment on the outlook. The downward adjustment in energy prices resulted in retainments of working capital facilities for this segment.
Echoing the comments made earlier by Vassilios, I would note that the slowdown in GDP growth, high rates, the electorate calendar, and the aforementioned repayments are likely going to continue to weigh on low growth in the near term, and this is reflected in our guidance for 2023. However, the underpinning of loan growth remains solid for the medium term, given the continuing investment drive in the country, and this is reflected in the strong pipeline that we have on disbursements. Turning now to deposit gathering on slide 13. The group's deposit base increased by EUR 3.3 billion year-over-year, or 7% to EUR 50.2 billion. In Q4, group deposits were through the office as inflows from households and international deposits were mostly offset by outflows from businesses, reflecting the significant increase in loan repayments witnessed in the fourth quarter.
In the last quarter of 2022, we also started to witness a change in our mix of deposits, with time deposits trending up by 1 percentage point in the quarter, as depicted on the right-hand chart, representing 14% of the domestic base. This trend is in line with sector trends and is anticipated to continue in the coming quarters, with time deposits expected to reach more than 40% of the deposit base by year-end. With that, let's look at the evolution of net interest income in more detail on the next slide. Net interest income continued to rebase in the fourth quarter, reaching EUR 398 million, up by 17.4% versus the third quarter, driven by higher rates and income from bonds.
More specifically, higher interest rates increased interest income from performing loans by EUR 68 million and on non-performing exposures by EUR 4 million, whereas high rates and bond balances had a positive impact of EUR 11 million in the fourth quarter. On the other hand, deposit repricing had a negative impact of EUR 13 million, while funding costs increased interest expense by EUR 10 million, mainly on the back of MREL issuances. On a yearly basis, net interest income reached EUR 1.3 billion, down by 3.8% year-on-year, reflecting the EUR 200 million impact from the reduction of non-performing assets. On the next slide, you can see a breakdown of our net interest income in some more detail on the left. Following the reduction in non-performing exposures, the respective interest income now accounts for less than 10% of our top line.
The contribution of performing loans and bonds has been on an upward trajectory throughout the year. Given our cash and TLTRO position, the net benefit from the ECB has not changed materially from the previous quarter. Following the change in the TLTRO modalities, we do not expect to have a positive contribution going forward. Last month, we proceeded with a EUR 2 billion repayment and expect to use the March window for a similar amount, leaving circa EUR 4 billion for later this year. These repayments are enabled by our strong cash buffers. On the right-hand side, we show the evolution of loan yields and deposit costs. Given that our loan book is predominantly floating rate, we have been enjoying a meaningful pickup in yields.
Note that as we have highlighted before, there is a circa EUR 4 million for month lag in repricing. On the deposit side, the pickup in costs began in late fourth quarter. We have not been leading the race and is evolving quite well. We have begun to see a conversion of deposits to term accounts. Roughly half of new production is for one year term deposits, while 30% of new production is placed with products under six months.
Our deposit base is predominantly composed by a sticky affluent retail, we have been diligent in ensuring that we remunerate longer maturities and higher balances, while incentivizing the use of our asset management business for capital accumulation. On the back of high inflation and high rates, we should expect very different behavioral patterns amongst the different deposit cohorts, as the more affluent base has more flexibility to adjust the cost of living without diluting their saving rates.
What we actually observe so far is that there is appetite from those savers in capitalizing on longer term mutual funds that offer higher returns to time deposits. Having said that, we do expect the cost of deposits to increase significantly during the year as the stock rolls into more current pricing and more deposits convert to time. The process has accelerated in the early part of 2023 as the system is converging with the EU average. Eventually this year, we expect close to 45% of the stock to be in time deposits with a pass-through above 50%. Moving on to fees on slide 16. This quarter's headline net fee and commission income was up by 5.4% to EUR 97.9 million.
Excluding the impact from the deconsolidation of the merchant acquiring business, fees increased by 4%, driven by business credit related and asset management fees. On a yearly basis, the headline number was flat, while excluding the deconsolidation of merchant acquiring business and other one-offs, fees were actually up by 9.1%, with growth in all categories, bar asset management that saw a lower performance fee given subdued market trends in 2022. The EUR 374 million base we show here is the clean number from which we expect to grow going forward. On to costs now, slide 17. Our recurring operating expenses were up this quarter by 11% due to seasonally higher marketing, IT expenses, employee retention plans, as well as higher depreciation of technology intangibles, since in certain cases we have shortened their useful life.
On a yearly basis, continued focus on cost efficiency resulted in a 3% reduction in recurring costs despite inflationary pressures, partly benefiting from the deconsolidation of the merchant acquiring business or a 2% reduction adjusted for the aforementioned impact. Our total OpEx base declined by 18% year- on- year, driven by lower non-recurring expenses versus 2021. Our headline cost-income ratio stood at 50% in the quarter and 46% for the domestic business. Let's now turn to asset quality on slide 18. On the right-hand side of the slide, you can see further information on our cost of risk evolution. The underlying cost of risk came in at 71 basis points in the fourth quarter, with 16 basis points for servicing fees and 6 basis points for securitization expenses.
That brings the overall cost of risk to 93 basis points for the quarter and 76 basis points for the full year. Note that as of the end of the year, we had EUR 155 million of management overlays in order to account for the uncertainty in the current macroeconomic environment. Our coverage ratio improved slightly in the quarter to 41%. NPE formation increase was close to zero, with a reduction in inflows and flat outflows. We are yet to witness any signs of deterioration in the portfolio. Targeted campaigns launched during 2022 to contain inflows alongside intensified collection efforts and new modification products should bear fruits during 2023, not least in a strong pipeline of cures. We expect to see a further organic NPE reduction in 2023. With that, let's move on to the next slide.
The idiographic structure of our NPE book and outcome of our NPE reduction strategy is what will drive the reduction of non-performing exposures going forward, and concurrently underpins the outlook for cost of risk. Our book has a large percentage of loans with paying customers with non-performing exposures under 90 days past due, making up 47% of the total. We are confident on the circa EUR 0.9 billion pipeline of cures that should mature in 2023, driving an organic reduction in problematic exposures. At the same time, repayments and liquidations from the other non-performing exposures have a good recovery potential given the large stock of mortgages within that book. On slide 20, following the quantum leap of the previous quarter, our NP ratio has fallen further by 20 basis points to 7.8% on account of growth in our loan book.
By year-end, we expect the NP ratio to fall below 7%. Let's now briefly look at the evolution of our fully loaded capital position on the next page. As before, it is probably best to look at the movements in capital in three separate buckets. Our organic capital generation was strong as profitability has recovered, allowing us to build our capital base more than offsetting the recurring impact from DTC amortization. We continue to fund growth through internal means. Our capital ratios are also proving resilient as there was effectively no impact from fair value through other comprehensive income this quarter due to the low sensitivity of our book to shifts in the yield curve, while on an annual basis, the negative impact came in at just 16 basis points.
Lastly, on transactions, there was effectively no impact this quarter and just 11 basis points for the year as we have been able to fund the cost of non-performing exposure disposals through internal resources. Our reported fully loaded Common Equity Tier 1 stood at 11.9% at the end of the quarter, up by 15 basis points versus Q3. Pro forma for the anticipated RWA relief from transactions, our fully loaded Common Equity Tier 1 stands at 12.5% and is up 33 basis points versus the comparable Q3 number. On the next slide, you can see that our capital ratios are well ahead of regulatory requirements, whilst the EUR 400 million AT1 issuance that was completed earlier this year enhances the strength of our balance sheet, further aligning us with our better rated European peers.
It provides additional capacity to be deployed in an accretive way for stakeholders, allowing the group to fully benefit from future balance sheet growth while proactively supporting our engagement with the regulator in delivering our plans towards our shareholders. Slide 23 please. During 2022, we have upsized our guidance twice, mainly on the back of the changing macro environment and the resulting monetary policy response. I'm happy to report that we have been able to navigate the challenging environment, delivering on our main promises whilst ensuring that we create the right springboard for a further improvement in our ability to generate value for our shareholders. With that, let's move to page 24 to talk about the future. We will unfold our plans for the next three years in the upcoming investor day. For today, we will limit ourselves to the outlook for 2023.
Obviously, the dominant theme in discussions is the outlook for net interest income, where we expect mid-single digit growth from 2022 levels. I have mentioned the main components during the presentation, allow me to summarize. It is important to remember that we carry some luggage from 2022. As you can see from the presentation, we made close to EUR 80 million from our net position at the ECB, the quarterly run rate in 2023 is zero following the change in ECB modalities. We have also been very active on the wholesale markets, raising MREL, especially the quarter, the last quarter of the year, this will create a drag on net interest income. Lastly, we have been managing our portfolio of non-performing exposures down and expect to consolidate the sale for sale portfolios during 2023. That will lead to lower accruals from non-performing exposures.
On the positive side, we continue to grow our asset base, and this will be accretive to our top line. As we illustrate on the slide here, the impact from higher rates will be the highest driver of our top line for 2023. Our guidance is based on the assumption that three-month Euribor averages 2.8% during the year. Given repricing lags for our loans, the average Euribor in our books will be closer to 2.2%. We expect the stock of time deposits to account for 45% of the total by the end of 2023. Pass-through on time deposits is expected to reach just north of 50%. We do expect some spread erosion on loans, probably north of 20 basis points. On cost income, we are aiming for below 49%.
Once you have put all the numbers in your models, you will figure out that this translates into a reduction in costs year-on-year. Here, we should note that on top of the guidance on recurring costs, we do expect to crystallize a few one-offs, mainly as a result of the voluntary separation scheme that we launched earlier this year. The benefit that will crystallize in 2023 And full in 2024 will be just north of EUR 20 million, while the payback stands at just over 2.7 years. On cost of risk, our guidance of circa 85 basis points is based on conservative assumptions for inflows given the inherent macroeconomic uncertainties as well as the cost of management actions for the year.
Taken altogether, this should translate in a 25% growth in normalized earnings per share and a return above 9%, leading our tangible book value per share to EUR 2.6, up 6% year-over-year. Last, but most certainly not least, slide 25 on capital projections. Firstly, as we have highlighted before, we expect to add circa 60 basis points inorganically through two synthetic securitizations in the first half of the year. Secondly, our sustainable organic profitability is expected to at more than 170 basis points, including the combined impact of DTAs and DTCs. Thirdly, growth in our loan portfolio is expected to consume 90 basis points of capital in the form of RWAs.
The improvement in the quality of our balance sheet, increasing levels of sustainable profitability and increasing capital levels that are above our targets underpin our unaltered intention to pay a dividend in 2024 out of 2023 profits, subject to meeting, of course, our financial targets and of course, securing regulatory approval. For the avoidance of any doubt, our strategy is to run with prudent capital buffers over and above our minimum capital requirements, and we aim to operate at all times with a Common Equity Tier 1 ratio above 13% and total capital above 17%. This implies a buffer of circa 330 basis points versus our endpoint Common Equity Tier 1 requirement as we aim to fully optimize our capital structure in due course to support our business strategy. In 2023, we will end up above those target levels.
This is a result of our expectations for capital generation, improved capital policy until we are able to optimize our capital structure as well as realistic assumptions on the restart of dividend payments. With that, let's now open the floor to questions.
Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their telephone. If you wish to remove yourself from the question queue, then you may press star and two. Please use your handset when asking your question for better quality. Anyone who has a question may press star and one at this time. One moment for the first question, please. The first question comes from the line of Benjie Creelan-Sandford with Jefferies. Please go ahead.
Yes, good morning, or good afternoon, everyone. Thanks for taking the question. It's Benjie here at Jefferies. Two questions from me, please. The first one was just on the guidance for 2023 in terms of cost of risk and the NPE ratio. I was just wondering in the context of the 85 basis points cost of risk guide, does that envisage that coverage levels will increase through this year, or do you feel sort of comfortable with the current levels of coverage? I guess on top of the 85 basis points cost of risk, should we expect anything further below the line in terms of charges on further NPA disposals, et cetera? The second question was on fee income. I mean, the momentum this quarter was quite strong.
There are good trends coming through in asset management and in credit fees. I was wondering if you could just maybe discuss a little bit more about the expected trend for fee income in 2023, particularly around the credit fees, just in light of the guidance for a slowdown in lending volumes this year versus 2022. Thank you very much.
Hello, this is Lazaros. Indeed, the cost of risk guidance of 85 basis points is another conservative assumption on the back of the guidance we have given for NPE inflows, for which we do expect a further organic deleveraging by approximately EUR 400 million to drive the NPE ratio below 7% in the year. This is a function of lower inflows that we have witnessed Q on Q during the last period, a trend which continues in the first quarter of 2023.
Similarly, we do implement strategies on the stock of NPEs, having introduced new products since early 2022, especially on the non-performing loan stock, and I have referred to that on previous occasions, DPOs and restructurings, driving loan to values at lower levels with a view to manage conclusively the stock down to the desired levels. The cash coverage at 41%, which is the starting point that was reported as of year-end 2022, is a function of the composition of our Stage 3 loans. Especially if you take into account that a very good part of that is below 90 days past due for loan, and a good part of that, the bulk relates to mortgage loans, where we expect significant volume of curings.
We have given also guidance about the level of curings expected in 2023 at EUR 0.9 billion, a function of the restructurings that have happened so far. Taking all that into account, the cash coverage levels are expected to increase in 2023, in line with our strategies we implement for Stage 3 loans. There was another question about a potential pay coming from NPA transactions. You have witnessed in 2022 a significant reduction of those below the line impairment charges for transactions. In 2023, we do expect a much smaller amount to the tune of EUR 30 million or so for NPA transactions. As far as fee income is concerned, we have explained how the consolidation of merchant acquiring business has contributed towards a reduction of fees and commissions.
Taking everything else into account, 2022 was positive by 9% in other respects. That was driven predominantly by business credit related fees on the back of significant net credit growth in wholesale. We have witnessed a good increase in bancassurance and card payments fees. The year was quite strong in these business lines. On the other hand, we have witnessed a drop in asset management fees for 2022, as there has been turbulence in the markets, especially in the first two quarters of the year, and this has impacted our performance in wealth management fees. Going forward, we do expect an increase of the fee base out of a starting point of EUR 374 million, which should be your starting point in the absence of the merchant acquiring business.
This will be predominantly driven by asset management, where we have introduced new products, and we do expect to see a growth in AUMs, bancassurance, as well as in cards and payments. In loan, in business credit related fees, since we expect some smaller expansion, especially in certain segments which have procured in 2022 significant fees, for example, project finance, we do expect a reduction. Overall, it's going to be a positive number, an increase on the EUR 374 million base to contribute towards our bottom line targets communicated earlier.
That's great. Thank you very much.
The next question is from the line, from Alevizos Alevizakos with AXIA Ventures. Please go ahead.
Hi, thank you very much for the presentation. Well done for the set of results. I've got a couple of questions. The first question is regarding the costs for 2023. I would like to know what would be the key moving parts for the cost base going into this year, and how it will move, if you can give perhaps an absolute number or a year-on-year increase. That's question number one. Question number two, I could see like the profitability of the Greek operations, and it's superb, like at 17%, whereas you can see internationally and specifically Romania appears to be lagging somewhat. At the same time, when you look at the headcount, I realize that it is increasing.
I was wondering, what are your longer term aspirations for Romania, and how much do you think you can grow the portfolio there, above the EUR 3 billion currently? Thank you.
Thank you. Al, I will take the first question, and Vassilios the second. When it comes to costs, in 2022, we have guided for a reduction of the costs now down to EUR 960. We ended up with a recurring cost base of EUR 975, managing to reduce recurring OpEx despite inflationary pressures that have showed up intensively, especially during the second half of the year. I think on the delivery of 2022, a reduction in recurring OpEx despite those inflationary pressures, and a relatively small miss compared to the initial guidance by 1% is positively taken, given also the cost income driven down to 54% on a group basis.
Now, for 2023, the first item to note is the successful completion of our new voluntary separation scheme, releasing 500 colleagues from the Greek operations, an initiative that will bring EUR 20 million of benefits, cost benefits in 2023 and 2024. I remind you that this further release of employees comes for a platform which is the lightest in the Greek market, given the initiatives that were taken in the last few years. In terms of other drivers in 2023, beyond the voluntary separation scheme, we do expect to see the full phase-in of the merchant acquiring business, phasing into our OpEx.
We do expect to see the positive impact from the completion of the non-core sales in Cyprus, Project Sky, as well as in Greece Project Skyline, which is the largest NPE trade in the Greek market. If you look at the components of OpEx, staff costs are expected to slightly increase by circa 1% as the reduction of staff costs in Greece because of the voluntary separation scheme that we have already implemented, will be counterbalanced by some inflationary driven salary increases in Greece and SEE. However, as I said, the Project Sky transaction is expected to create savings of approximately EUR 6.4 million due to the voluntary separation scheme implemented in our Cypriot operations and the carve-out of our NPE unit to the servicer.
General expenses are expected to decrease considerably by almost 10%, driven by transactions from the fields, that is the Project Skyline trade in Greece and Project Sky in Cyprus. Depreciation is expected to rise in 2023 slightly to reflect higher investments in transformation projects as well as the increase of mainframe capacity. Taking all that into consideration, we do expect to see the cost-income ratio below 49% on a group basis or, you know, even lower if you take into account the Single Resolution Fund costs. That would bring the cost-income ratio on a pro forma basis at mid-forties level. If you bake that into your models, you will come up with a somewhat lower OpEx absolute number for 2023 versus 2022.
Lazaros, this is Vassilios. I'll take up your question on Romania. Perhaps as a matter of introduction for those which may not be that familiar with our presence in Romania, Alpha Bank was the first foreign bank to set foot back in 1993, and we have been in the third position in the market, when the Greek crisis erupted. From that point onwards, and when we entered into a restructuring plan with Brussels, actually we were not allowed to grow anymore our balance sheet. You appreciate that tied up with the crisis, led into a position of shrinkage of that presence. It ended up when we were able to grow it back again in 2020 in the seventh position.
At that moment, we made, we took stock of where we stood, and we realized that we had a presence. We still had access to a significant customer franchise, which was appreciated by stakeholders, as we witnessed in our frequent visits there, and also it had talent. On top of that, it had excess capital. What we have decided to do, because we firmly believe that this bank can create value again for our shareholders, is to give it a bit more time, to allow it to invest in order to get into a position to deliver that value. In 2022, I think there are two ways of looking at the situation. The first is the one that you pictured.
If you take a photo of that, it still delivers a high cost to income. In our mind, this is because we have set up a platform which is ready to onboard much more assets than the ones that we currently have. 2022 has been a turning year because we have been able to show double-digit growth for the loans and deposits, attract more customers, deliver better business for our existing customers, and grow faster than the market. A market which has a good number of characteristics, and in particular, the Tier 1 banks, to which we are now closer to, are able to deliver return on tangible equity, which are similar to the ones that we are delivering here in Greece.
From that point of view, I think Romania is an upside, has significant upside potential, to contribute to our numbers, and more to that, we will be able to deliver when we discuss at investor day.
That is great. Thank you very much, both, and looking forward for investor day.
The next question is from the line of Alex Boulougouris with Wood & Co. Please go ahead.
Yes, good morning. Congratulations on the good results. two questions on my end, regarding income from securities and the pickup in the fourth quarter. As you saw on page 15, EUR 51 million. Is this the run rate you assume in the plan for 2023, or should we expect an even higher number as the portfolio gradually resurfaces to higher rates? That's my first question. My second is regarding the repayments from corporation. We saw a rise, as you already mentioned in the fourth quarter.
Maybe if you could give a color on the trends in the first quarter. Regarding your payments and maybe a bit on the loan growth, the single-digit dip, what is the level of growth you expect from corporate, and what is the level on retail? I guess retail is marginal, but just to see a color would be interesting. Thanks.
I'll take the first, Alex, on securities. You should expect to see higher income growing in our 2023 accounts. That is driven by both price and volume. You would expect to see EUR 150 million more in interest income terms out of the securities portfolio.
Just to clarify, that's on a year-on-year basis, obviously, right? Because you were referring to the Q4 number. We don't expect to grow that by EUR 100 million.
EUR 150 million in 2023 incremental, compared to the full year of 2022?
Correct.
Got it. Thank you.
Alex, this is Vassilios. As far as your second quarter is concerned, let's deep dive a bit on the reasons why we have seen this acceleration in the fourth quarter. Practically for that, there are two reasons to look at. The first is that 2022 has been a real particular year as far as the sourcing cycle is concerned of energy companies. The significant hiking of their energy has led to a massive increase in working capital needs that they had. This is something that the Greek banking system, along with their own profitability, has been able to procure and sustain throughout the year.
As in the fourth quarter, we have seen a significant deceleration of those energy costs, practically, correspondingly, the associated working capital and margin needs that they had, has gone significantly down. From that point of view, they have been commensurately quick on their feet, to repay those working capital, that working capital. That is the first reason. The second reason is that 2022 has been a strong year, not just for banks, but also for a good number of other sectors. I've just mentioned the energy companies, but there were more of that have a mass profitability and most importantly, in liquidity, as they have been, as they could monetize their profits.
Among those, I would highlight the shipping sector along with the hospitality sector. These sectors, which also had leverage on themselves, it was only natural to start thinking of reducing their exposures by netting on with deposits that we're having. This, because you alluded also to that, if this trend continues into the first quarter, I would consider this as a one-off phenomenon, in the sense, one-off in the sense that people do take stock of where they stand and do make their adjustments. From a calendar point of view, I think a good number of that has happened in the fourth quarter. However, it continues obviously into the first couple of months of the first quarter.
This is, if you would want this is a one-off step change for that. We do expect from that moment onwards to gradually revert back to the mean of repayments that we had seen. I would also add that another point that has allowed them to be quite flexible in taking that decision is that there is. They consider the Greek market as being very liquid and ready to help them leverage back when they feel a need to do so. Just as a quick note, because you asked also for that, where actually the loan growth comes from, I mean, needless to say that practically it all comes from the business side.
Thank you.
The next question is from the line of Daniel David with Autonomous Research. Please go ahead.
Hi, good morning. Congratulations on the results. I've just got a couple of questions. Can you just maybe talk about your MREL issuance plans this year and what the how much you're planning and kinda what you're thinking about at the moment? Just got a quick question on your held-to-maturity portfolio. Could you give us an indication of the fair value of that portfolio? Also on your deposit base, could you give us an indication of the size of the insured deposit base? Thanks.
Can you repeat your first question, please, because it was unclear.
Oh, sorry. I'm just asking about your MREL issuance plans in 2023, whether you might look to capital market this year and potentially by how much?
Yeah. We'll start with MREL issuance. You have seen that in the last few months, we have been quite active in terms of wholesale funding with two issuances of senior, one issuance in AT1, and there was also a private placement as well as an asset liability management exercise. A very busy period for us in wholesale funding, showing that we have the ability to tap the right windows and implement our strategy. Going forward, you know, we are committed to complying of course with our MREL targets, so you should expect to see us regularly in the markets with one or two issuances of MREL in a year.
Because of the latest activity, which has been quite intense, we do not really expect in the short term to tap the markets for MREL. Most probably there could be an initiative in the second half of the year. Coming to AT1, again, we have issued EUR 400 million. We have space to issue another EUR 350 million, which is not part of our plans for this year. We do plan to tap the full capacity for AT1 until the end of the planning horizon, which is 2025. With regards to our securities, and I need to draw some lines here. The portfolio has been and is part of our overall book...
banking book strategy with regards to capital, liquidity, and interest rate risk. We have crystallized significant gains up to the end of 2021 out of the securities book and with very muted investments in 2021. The portfolio has somewhat built up in 2022 with more than 90% of the risk in the held-to-maturity, which has minimum capital volatility, 85% of HQLA level one assets, so high quality liquid assets of level one, which are currently below 50% in GGBs. The annual run rate as of the fourth quarter is EUR 200 million and will, you know, increase further in 2023 up to EUR 290 million or so with new investments.
The interest rate risk shocks on the banking book, that is the relevant metric for the banking book, including derivative hedges, as reported in our half yearly Pillar III report, which is, you know, available in our website. With regards to Economic Value of Equity, they are all within the ±50% EVE to Common Equity One limits. I do not expect to see material different numbers into our next submission.
Okay, thanks. Just, with regard to that EVE number, I can see it's quite strongly positive. Am I right to assume that the repricing of assets overshadows the fair value revaluation of held-to-maturity assets? Then finally the last point was just on the insured deposit base. Do you disclose the % of deposits which are insured?
Insured deposits are site of 70%.
Okay, thanks.
The next question is from the line of Osman Memisoglu with Ambrosia Capital . Please go ahead.
Hello. Many thanks for the presentation and your time. Just a couple of modeling questions, if I may. What's the outlook for trading income, particularly given the reclass that you've done in Q4? What should we expect for 2023 for that line? Also, on OpEx, you mentioned the benefits from the upcoming transactions. I just wanted to ask what timeframe have you included in your budget regarding the completion of these transactions? Thank you.
Hi, Osman. On the very simple question on trading income, the view hasn't changed in terms of the clients that are actively driven trading income. We still expect to generate anything between EUR 50 million and EUR 70 million per year. In terms of the timing on the completion of transaction, I'll pass the floor to Lazarus.
There are two transactions which drive the OpEx numbers, Sky, the NPE portfolio in Cyprus, and Project Skyline portfolio in Greece. The Sky portfolio is expected to complete in the first half of 2023, whereas the Skyline portfolio is completed in two stages. One by mid 2023 and the second stage by end 2023. There is a staged closing as we're talking about a very large number of real estate assets and formalities are required behind the transfer to the buyer.
Great. Thank you.
The next question is from the line of Chrysis Aristidou with Sefton Place. Please go ahead.
Hi, thanks for taking my questions. I've got a couple of follow-ups on the securities book. First, if you can give us the duration of that book and if you can split that between the GGBs and the rest of the book, that would be useful. If you, if I understand correctly, you are asking to basically look at the securities book, including the hedges, you hedge the interest rate risk. Can you give us the level of your hedges, and several book between the two different parts again, the GGBs and the non-GGBs part lastly, you see on the presentation that there's been no, you know, no losses on the GGBs on slide 38 between September and December.
Can you give us the, any color on the rest of the book outside the GGBs? Because in the amortized book, it's got like five and a half GGBs and then EUR 96 billion of non, GGBs. Thank you.
Hi, Jason here. I'll take most of the questions. Probably we're gonna have to follow up with some of the data. The modified duration of the held-to-maturity portfolio currently stands at 3.7 years. From memory, there's not a meaningful differentiation between the various geographies in the book. Happy to follow up with that if you want. Same goes with regards to the hedges. With regards to the evolution of the, let's call it mark-to-market for the GGB book or the book overall, actually, it improved in Q4. Obviously, a natural consequence of the drop in yields that we have seen lately, means that the situation has improved further more recently. If you want more details, we can dig through the numbers.
Feel free to contact IR, and we'll reach out.
Okay. Thank you.
As a reminder, if you would like to ask a question, please press star and one on your telephone. Once again, to register for a question, please press star and one on your telephone. As a final reminder, to register for a question, please press star and one on your telephone. Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to management for any closing comments. Thank you.
Well, thank you very much for participating in our full year 2022 results call. We're looking forward to welcoming you in our first quarter results in May. In the meantime, you will be hearing from us the exact date for our Investor Day. Thank you very much.
Ladies and gentlemen, the conference is now concluded. You may disconnect your telephone. Thank you for calling. Have a pleasant evening.