Ladies and gentlemen, thank you for standing by. I'm Poppy, your Chorus Call operator. Welcome, and thank you for joining the National Bank of Greece conference call to present and discuss the full year 2022 financial results. At this time, I would like to turn the conference over to Mr. Pavlos Mylonas, CEO of National Bank of Greece. Mr. Mylonas, you may now proceed.
Good afternoon, everyone, good morning to those of you joining from the U.S. Welcome to our Fourth Quarter 2022 Financial Results Call. I'm joined by Christos Christodoulou, Group CFO, and Greg Papagrigoris, Group Head of IR. After my introductory remarks, Christos will go into more detail on our financial performance, and then we will turn to Q&A. Before we start, on behalf of NBG, I would like to express to everyone our deepest condolences to the families of the victims of the devastating train crash. Now to begin. I'll describe briefly Greece's economic performance and prospects, then turn to our financial performance and end by providing some guidance as regards expectations for this year, 2023, and beyond to 2025. On the first point, economic growth in Greece has remained robust throughout 2022, despite the energy crisis and the concomitant inflationary pressures.
Greek GDP growth exceeded 6% in 2022 and was among the highest in the developed world. Key drivers of growth were a buoyant tourist season, targeted government support programs, and the general good health and competitiveness of the Greek enterprises, which also helped attract record foreign direct investment inflows of approximately 3% of GDP. As a result, Greece experienced employment growth of 5% for 2022 and high corporate profitability. In fact, the highest in over a decade, which absorbed increased production costs. It is noteworthy that fixed investment increased by 12% in 2022, reaching a 10-year high of 15% of GDP, evidencing the attractiveness and competitiveness of the Greek economy. Turning to 2023, evidence so far is encouraging.
External conditions are improving as it seems that activity in the Euro area and the U.S. will be better than expected, while energy and other commodity prices also are lower than expected. Moreover, leading indicators, including from the important tourist sector, are pointing to another robust year. Fixed investment should remain strong, with many projects in the pipeline and RRF flows are just beginning to support activity. 2% of GDP inflows in 2022, which will hit the economy in 2023. All in all, combined with the positive momentum coming into the year and solid fundamentals, Greece is expected to outperform once again the rest of Europe in 2023, with GDP exceeding 2.5%, despite the significant monetary policy tightening. Inflation is expected to end the year near 3%.
With a relatively benign macroeconomic scenario emerging as the baseline, I feel increasingly confident that asset quality will not be a major concern in 2023. While credit demand, especially from the corporate sector, will continue to be strong. Indeed, so far in 2023, early delinquencies have not exhibited any signs of deterioration. Part of the explanation for this Goldilocks performance is the very low credit penetration, with performing loans at about 55% of GDP, a fact which mutes the impact of higher interest rates. Let me now turn to profitability. Our full-year core operating profit came in at about EUR 700 million, up nearly 60% year-on-year and more than EUR 200 million above our guidance.
It is equivalent to a core after-tax return on tangible equity of around 10%. This outcome meets the previous 2024 business plan target a full two years ahead of schedule. The driver behind this superior performance derives mostly from our solid core income trends, with NII up 13% year-on-year compared with initial guidance of a decline of 9%. Fees were up by 21% year-on-year, 8 percentage points higher relative to our initial guidance. Our costs were contained to low single digits despite high inflation. Encouragingly, the biggest component of our costs, personnel expenses, were approximately 2% lower year-on-year on a like-for-like basis, as our CFO will soon explain.
The strong recovery in our fiscal, in our full year 2022 core income, up by 15% year on year, combined with relatively contained costs, reduced group cost to core income by more than 5 percentage points to below 47%. Our domestic NPE exposure declined to 5%, a full percentage point lower than our guidance for an NPE ratio of 6%, reflecting sustained negative formation throughout the year. The strong profitability added nearly 200 base points of capital in 2022, while organic capital generation reached nearly 100 base points despite a strong.
Backloaded in the year expansion of our domestic loan book by EUR 2.5 billion, a result which far exceeds our annual target of EUR 1.5 billion. In sum, our fully loaded CET1 ratio increased to 15.7% by far the highest increase. I would like to emphasize that our high-quality balance sheet positions NBG well in the current choppy financial environment. Looking forward, we are revising up our guidance for fiscal year 2023 to reflect the significant outperformance we've achieved in 2022, as well as the continued efforts of our transformation program to improve the efficiency and productivity of the bank. For 2023, we expect solid double-digit growth in our core profit after tax, translating into a core return on tangible equity of 11%.
This will be achieved through our continued strong NII performance, reflecting the higher level of benchmark interest rates and the continued strong growth in corporate loan volumes and revising retail volumes. Fees will grow at a high single-digit growth rate, while costs are expected to evolve similarly to 2022, supported by the successful VS of 460 FTEs achieved at the very end of 2022, which will offset wage and inflation costs. Thus, our efficiency ratio will improve further with the cost to core income ratio expected to drop to 42%. We do not foresee any meaningful increase in the credit risk in 2023, consistent with our gross NPE expectations for an unchanged ratio of 5%, dropping to 3% by 2025.
As regards guidance beyond 2023, we target a sharp and consistent improvement in our core profit after tax and return on tangible equity. Specifically, our core return on tangible equity for 2025 is expected to exceed 12%, up by more than 250 basis points versus 2022, whilst earnings per share accretion will exceed 50% over the same period. Organic capital generation will increase our CET1 ratio by more than 350 basis points over the three years. This level of capital permits us to return value to our shareholders on top of exploring growth options. Indeed, we expect NBG to consistently return value to shareholders over the next years through dividend distributions and potentially complemented by share buybacks.
The question on our 2023 distribution for the 2022 profit will be vetted by the regulator in the coming months. With that, I would like to pass the floor to our Group CFO, Christos, who will provide additional insights to our financial performance before we turn to the Q&A. Christos?
Thank you, Pavlos. Starting with the profitability highlights on slide 15, for the full year 2022, we reported an attributable profit after tax of EUR 1.1 billion, driven by strong core profitability of EUR 0.7 billion, more than EUR 200 million ahead of guidance and up by nearly 60% year-over-year. Key driver of this performance was the accelerating recovery in our NII throughout the year on the back of positive volume effects, complemented by base rate-driven repricing in the second half of the year.
It is important to note that this result was achieved despite the significant reduction of NPE and NII by over EUR 100 million from the last leg of our NPE cleanup, as well as considerably lower TLTRO interest compared to the previous year. Fee income also witnessed an equally impressive performance, increasing by 21% year-on-year, driven by increased transaction demand and cross-selling, further diversifying the bank's core revenue stream. Costs were contained despite high inflation and our ongoing strategic IT investment plan, with our full year 2022 cost to core income ratio down by more than 5 percentage points year-on-year, breaking the 47% mark, demonstrating the sharp improvement in our operating efficiency.
Finally, cost of risk, in line with guidance, remained in the 70 basis points area throughout 2022, reflecting our conservative approach through post-model overlays, despite consistently negative organic formation, leading to further increases in coverage levels. Turning to balance sheet and asset quality highlights on slide 16. In 2022, we accelerated our loan expansion to EUR 2.5 billion year-on-year against a target of EUR 1.5 billion, factoring in a very strong fourth quarter where domestic performing loans surged by EUR 1.2 billion quarter-on-quarter, reaching circa EUR 28 billion. At the same time, the quality of our portfolio keeps improving, with domestic NPEs further down to EUR 1.6 billion for just EUR 0.2 billion net of provisions.
NPE ratio increase stood at 5.1% compared to 6.9% a year ago, beating our target for 6%, while our cash coverage rose to 88%, by far the highest in the sector. The reduction in our NPE exposure reflects consistently negative organic NPE flows, with no signs of pickup in early areas to this date. Moving to capital on slide 17, we strengthened further our best-in-class capital ratios throughout 2022 on the back of strong profitability of nearly 200 basis points, comfortably absorbing sharp credit risk with asset expansion.
All in all, fully loaded CET1 ratio rose to 15.7%, with fully loaded total capital ratio reaching 16.8%, up by 130 basis points year-on-year. As per our 2023, 2025 business plan, going forward, net organic capital generation remains strong and well in excess of 1% per annum, enhancing our optionality towards capturing growth opportunities as well as returning value to our shareholders. On slide 19, we present the high quality structure of our balance sheet. NBG is a key beneficiary of this environment, as almost 90% of our loans are floaters. Our securities portfolio is hedged, effectively becoming floating as well. Notably, both loans and securities are funded by deposits, with circa 85% in demand deposits with an average balance of less than EUR 4,000 per account, allowing for a marginal pass-through.
Most importantly, even assuming full TLTRO repayment, we retain a net cash position of about EUR 7 billion, supporting NII and NIM going forward, as depicted in the left-hand side chart. On slides 20 to 26, we provide some more insight to the key drivers of our profitability. Starting with domestic NII on slides 20 and 21, we have seen accelerated growth in the interest income from performing loans in Q4, increasing by 22% quarter-on-quarter as base rate-driven repricing gained traction, with performing loans yield reaching 4.1% in the fourth quarter, up by circa 80 basis points quarter-on-quarter, implying approximately a 65% rate pass-through. As we show on slide 23, time deposit yields have also started to pick up, with pass-through rates currently at approximately 45%, with no significant change in mix as depicted on slide 24.
Moving on to fee income on slide 25, domestic fee growth was sustained at 23% year-on-year, with strength witnessed across all business lines, driven by cards, payments, trade finance, loan origination, as well as fees from our investment products. Moreover, the switch of our customer to digital channels continues, with e-banking transactions up by 11% year-on-year in Q4, and total transactions 6% higher year-on-year, underlying the high quality of our digital offering, also acknowledged by third-party surveys. Operating expenses, as presented on slide 26, remain contained despite high inflationary pressures and incremental depreciation from our ambitious strategy on IT infrastructure upgrade, including the ongoing replacement of our core banking system.
The strong recovery in core income, combined with relatively inelastic costs, led our full year 2022 cost to core income ratio below 47% from 52% a year ago, with the Q4 metric down to a record low of 43.5%. Going forward, we will continue keeping operating expenses under control through further optimization actions, including tight demand management. On slides 27 to 29, we present our improving asset quality profile. Domestic NPEs dropped by EUR 0.5 billion year-on-year to EUR 1.6 billion, with circa one-third of our gross NPEs comprised of NPEs less than 30 days past due, fueling future curings. Net organic flows amounted to minus EUR 0.3 billion for the year as curings comfortably absorbed new defaults and redefaults, with cures remaining at high levels in markets.
Moreover, the mix of our loan exposure kept changing favorably as continued stage one loan growth far offset stage three reduction, as depicted on slide 29. Our robust liquidity position is shown on slides 30 and 31. Domestic deposits kept increasing in 2022, up by EUR 1.8 billion year-on-year to EUR 53.4 billion, indicating the resilience of household disposable income and corporate inflation. Our superior liquidity profile is also evidenced by our TLTRO balance repayments, which exceeded EUR 5.5 billion from November 2022 to date. This brought our TLTRO position down to EUR 6 billion currently from EUR 11.6 billion in Q3 2022, with our LCR and NSFR ratios well above regulatory thresholds.
As regards MREL, following senior paper issuances of circa EUR 0.9 billion in Q4 2022 and strong organic capital generation, we are well above our interim non-binding target for January 2023 of 20.4% by a comfortable margin of 150 basis points. We hope to continue addressing the market in a recurrent manner, subject to market conditions and anticipating the upgrade of the Greek economy to investment grade. On slides 33 to 36, we provide the key achievements and priorities of our ESG agenda. We are pushing forward with our environment and climate strategy, leading the market in sustainable energy financing to record corporate renewable energy projects in 2022, up by 45% year-on-year.
In parallel, we accelerate the transition to sustainable economy through over EUR 300 million in RRF loans, of which approximately a third under the green pillar and more than EUR 100 million in green business and green housing loans. Finally, we monitor closely our clients' carbon footprint and continuously improve environmentally responsible practices. Summing up, in 2022, we continued demonstrating solid progress, delivering best-in-class results in our balance sheet cleanup, as well as adding up further to our already high levels of capital. At the same time, we improved markedly our profitability well above initial guidance. Our full year 2022 results demonstrate the high potential of NBG. We are well on track to boost our core return on tangible equity further to over 12% on the back of an increasing core income base, capitalizing on our robust balance sheet and improving operating model efficiency.
Value creation and the return of value to our shareholders is one of our top priorities. With that, let's now open the floor to questions.
The first question comes from the line of Alevizakos, Alevizos with AXIA Ventures. Please go ahead.
Hi, thank you very much. Well done for this great set of results. I've got a couple of questions, if I may. The first question is regarding the organic capital generation. You state 350 basis points, which I'm assuming it does not include a payout. You haven't mentioned anything about a payout for this year. Am I right to assume that this would mean 19% plus CET1 ratio? What does that mean for the future? Does it mean that you're open for M&A, or is it gonna be just dividends and buybacks just backloaded? The second question is, your budget is with the deposit facility rate of 2.5%. I was wondering, what is the sensitivity if the DFR goes to, let's say, plus 100 basis points?
What does it mean for the NII? Thank you very much.
Thank you, Alevizos. Let me start from the second question. You rightly say that our budget is based on a DFR of 2.5% for the next three years. Now our sensitivity to an increase in the rates by about 100 basis points is in the area of EUR 120 million over and above of what the business plan assumes. We discussed last year, and it still is the case that from the first 300 basis points of interest increase from the base rates, we expected about EUR 240 million of increase in our annualized NII. The EUR 120 million from the next 100 basis points of increase is not incorporated in our business plan.
Going to your first question on the organic capital generation, yes, the 350 basis points of increase does not incorporate any dividend, any shareholder return. That's point number one. I have to say, though, that we do have accrued in the numbers that you see for 2022 an amount for dividend. On your question on the possible usage of capital for whatever reason, M&A included, the CEO will address it.
Okay. Clearly, capital, excess capital provides us with optionality. We will look at whatever growth we do in Greece, including from the assets coming from the services. We will look at the portfolios outside Greece. We will look at, clearly, remuneration of shareholders. You know, my preferred acquisition is of having JVs with technologically more sophisticated partners. I think those are the first on my list of what we'll do with the excess capital generation over the next three years.
That's great. I've got a follow-up on what the CFO said, if I may. What's the level of the accrued dividend for this year?
The accrual is in the area of 20 basis points, for 2022.
Great. Thank you very much.
The next question comes from the line of Creelan -Sandford, Benjie with Jefferies. Please go ahead.
Yes. Good afternoon, everyone. Thank you for taking my question. It's Benjie here at Jefferies. Yeah, two questions from my side, please. The first one was just on the asset quality outlook. I mean, you've mentioned that you don't see any major concern for 2023, but you are guiding to a slight increase in the cost of risk in the 2023 guidance, despite the coverage levels looking very conservative. I just wondered whether you were assuming that you build your coverage levels further from here, or are you expecting, you know, a slightly meaningful pickup in NPL formation this year? Perhaps, you know, more broadly year to date, are you seeing any signs of deterioration across particular segments?
My second question was just on the, the loan growth target for 2025 to 7% CAGR. You know, that is running above, I guess, nominal GDP growth. I was just wondering whether you were targeting or whether that target assumed, you know, market share gains. And if so, are there any particular segments in which you see opportunities for higher growth going forward? Thank you.
Okay. On the asset quality, I think the answer is that we are conservative. The business plan was done in November, December. The outlook for 2023 was significantly worse then compared to now. I think that you should look at this as a number that has a bit of buffer in it. Now on the loan growth, don't forget, and as I mentioned in my introductory remarks, that there has been significant disintermediation in Greece. I mean, loans to GDP are 55%. That's got to build up to more
Normal levels for a country with Greece is, per capita income, which should be close to double. That's why you're looking at, even if we get our fair share of loans at the loan growth that exceeds the nominal GDP. Even that number is, I think, be seen as conservative.
That's great. Thank you very much.
The next question comes from the line of Sevim, Mehmet with JP Morgan. Please go ahead.
Good evening. Thanks very much for taking my question. One question on your net interest margin, please. I see that you're targeting a 40 basis points expansion for this year, it stays flat afterwards. What would be the moving parts after this year that would keep the margins flat, given we would normally assume that, you know, deposit repricing, but also the mix shift would happen over time. Could you please be more specific there? On the back of the global developments in the last few days, would you expect to see higher deposit betas in Greece as well, or do you think the market dynamics are supportive for the existing guidance? Thanks very much.
I'll take the first question, and I'll pass the floor to Pavlos for the deposits. We had a very strong quarter in Q4 with regards to having also incorporated in our NII the start of the repricing due to the base rate increases. Going forward, we do see that this increase will benefit also 2023, but you should be conscious that as the months pass, we have some headwinds in our NII as well. I'll mention a few. We have MREL issuances that will burden our NII. We assume that there will be a change in the mix of our deposit of our deposit base.
We're currently, as I said, with about 85% of our deposits in core deposits versus time, and we expect that this mix will change more or less to the area of 65% to 35% in the following months. We do have the issue of the pass-through rates, which have not yet materialized in full. We expect that will also burden our NIM going forward after the initial peak of that we will see materializing in 2023. I think those are the driving factors that more or less explain for the flattish NII and NIM that we experience post 2023, probably after the first half of 2024.
Your question on deposits. The question was whether we are concerned with regards to the change in the pricing of deposits or the mix. Since you are not clarifying, I understood the question that had to do with the pass-throughs. What I can say is that we expect that the pass-throughs for the time deposits will pick up. We're currently in the area of 45%. We expect time deposits to move to the area of 75%-80%. That's what we assumed in our plan. With regards to core deposits, we have assumed something in the area of 20% in our business plan. It might be less than that. I can see an upside risk in that assumption. I hope that answers your question.
It does. Thanks very much. And apologies, I was on mute earlier. Thank you.
The next question comes from the line of David Daniel with Autonomous Research. Please go ahead.
Good afternoon. Thanks for taking my questions. I've just got a couple. Just on MREL, you just mentioned there's a headwind in NII. Can you just guide us talk to what you're thinking issuance-wise this year in MREL, just volumes and when you might be looking at the market, given I understand the market is a bit off at the moment. I also just wondered if you'd look at the AT1 market if things settle down again, cognizant of what your peers have done. Just on your securities portfolio, I can see that EUR 10.4 billion is Held to Collect. Can you provide a guide on fair value of that portfolio at the moment? Be helpful. Thanks.
Thanks for the questions. With regards to MREL, I've mentioned that we have a healthy buffer compared to the interim target that we have for January 2023. That gives us optionalities. I think the base case is that we'll go for an issuance towards the second half of the year, most probably at year two. Having said that, you mentioned AT1, that's also part of our internal exercises so that we have the optionality to tap that instrument probably later in the time horizon of our MREL plan. As I said, the base case is at year two this year. With regards to our Held to Collect portfolio, yes, we have about EUR 10.5 billion of Held to Collect. We have these bonds to maturity.
The fair value of this portfolio, which is not marked to equity, is not that significant. I think losses are in the area of a few hundred million . To be honest, I think the important thing with regards to this portfolio is the generation of income that they provide. Please note that this portfolio generates more than EUR 300 million of NII per annum. I think we are well where we stand with the Held to Collect portfolio in our book.
Thank you.
The next question comes from the line of Butkov, Mikhail with Goldman Sachs. Please go ahead.
Good day. Thank you very much for the presentation. One question on your capital, potential capital distributions, the capital allocation strategy. Could you consider as a part of that any buybacks from the core shareholder, or? Yeah, where is that anywhere on the priority list? Thank you.
The HFSF has published their divestment guidelines, and buybacks are one of the options. I think the answer is, it's possible, but clearly this is something that needs to be discussed with the shareholder. We need to wait on this. It's possible.
All right. Thank you for clarifying.
We have a follow-up question from the line of Sevim, Mehmet with JP Morgan. Please go ahead. Mr. Sevim, can you hear us?
Apologies again. I was on mute again. My apologies. I just had a follow-up on the very last question. First of all, in terms of capital allocation, what do you think your normalized dividend payouts could be from 2023 earnings and onwards, given the strength of the capital? Secondly, if a buyback from the core shareholder is a possible option, do you think the regulator would be okay with it if we consider, for example, an option where you buy a significant amount of shares so it goes into excess capital rather than paying out from ordinary earnings?
Okay. On the, what we'd like to see a normal payout ratio, I think something between 20% and 30% would be something we would suggest. In terms of deep buybacks, dipping into capital, I'm not sure what the regulator would say. I guess it would depend on when we ask. If we ask as soon as the now, where we're fighting for a small dividend, I think the answer would be probably negative. If we ask in a year or two when we are in a much better position, I think the odds would be better. I've expressed my view on dividends and buybacks.
Let's walk first and take things in small strides rather than do anything, ask for things which are too big and make things more difficult.
Great. Thanks very much for the comments.
The next question comes from the line of Athanasakis, George with Pantelakis Securities. Please go ahead.
Hi, good afternoon. I think you may have mentioned that, but what is the level of Euribor that you assume, 3-month Euribor, going forward for your, for your guidance? If Euribor was to rise by 100 basis points more, what effect that would have on your NII? If you could discuss the pass-throughs. You've already discussed the pass-throughs, there is information in your presentation about the deposit rate pass-through. How about the loan yield pass-through? There is some info on page 20. I also wanted to hear your comments going forward on that, on that front. Thank you.
On the, on the Euribor question, the assumption that we have adopted in our business plan is that the three-month Euribor would peak somewhere in 2023, 2024 to 2.9%, and then it would come down a bit in 2025. To ask how our NII will be affected by an increase of about 100 basis points on the Euribor, I think the answer that I gave before with regards to the sensitivity on the BFR applies here as well. About 100 basis points increase on the Euribor will increase other things being equal our NII by about EUR 120 million.
On the pass-throughs of our loans, we said and we have it in the presentation that we are experiencing with the time lag with regards to repricing about 65% pass-through rates in loans. Effectively, what we expect and what we have tried to capture in the business plan is that out of the increase in the base rates, we expect about two-thirds of that to materialize in our profits, and the other third, let's say, to be returned to our customers through a spread compression. That remains to be seen. It's an estimate that we are making where we stand now.
Great. Thank you very much. Thank you.
The next question comes from the line of Boulougouris, Alexandros with Wood & Co. Please go ahead.
Good afternoon. Congratulations on the numbers. Quick question on loan growth. Could you comment a bit on what loan growth you're assuming for 2023? Is the 7% CAG more or less similar every year? Would you expect a slowdown softening in 2023 and then an acceleration? Maybe a comment on when you would expect retail lending to start picking up in Greece, as it's still in negative territory. That's my first question. The second regarding a clarification on what you mentioned on the accrued small dividend for 2022 in the area of 20 basis points of RWA, if I put that down correctly. When should we expect more information on this from the regulator? That would be before the AGM.
Is it, is this correct to assume? Thank you.
Okay, thanks for your questions. Let's start on the loan growth. Yes, we assume that at the beginning of our business bank horizon, 2023, the growth will be more modest, even the more, let's say, subdued environment that we expected when we drafted the balance sheet, the business plan, and we expect that to pick up in the latter years of the business plan horizon. We discussed about the sectors that we expect the growth. It's mainly in the renewables, energy, infrastructure. Generally, the growth will come from larger tickets in the early years of the business plan, and then SMEs and the retail will come in place.
With regards to retail, we see 2023 another year of slight contraction in the balances, and we expect that in 2024, we will start accruing increased balances in our retail business as well. That's the expectations from the loan growth. The second question was with regards to the accrual on dividends. We said that the accrual is about 20 basis points. That's an accrual. We have not yet decided on amounts or if we'd be allowed to pay out the dividend out of 2022 profits in 2023. We mentioned that in previous calls, we will have to sit down with the supervisor after the year-end results and the publication of our financial statements. I think the ICAAP exercise is important to making such decisions.
Obviously, if we are about to pay dividend in 2023, it will happen, and we'll know it before the AGM of July, yes.
Great, many thanks.
The next question comes from the line of Kladis, Panagiotis with Alpha Finance Investment. Please go ahead.
Thank you very much. Thank you for taking my questions. Two questions, if I may. One, on your deposit evolution, during the quarter where we see a decline Q- on- Q. If you have any comment on that. Second, on asset quality, if you could share your assumption for the expected organic flows for this year, and what you have seen so far in the year on that front. Thank you very much.
On the first question on deposits, there was some slight reduction. It had to do with seasonality. The other element of the decrease had to do with some side accounts of corporates, of large corporates with high liquidity that optimized with regards to their working capital facilities given the increase in interest rates. That was expected and fine at the end of the day. With regards to our expectations for 2023, as the CEO said just a while ago, when we drafted the balance sheet, the outlook for the economy for 2023 was a bit more subdued. What we have assumed going forward is about just over EUR 330 million of formation, positive formation of NPEs.
Let me just say that we are coming from a year where we had outflows of EUR 0.3 billion. We took a conservative view. To answer the last point of your question, we have not seen any pickup in early areas so far in the year. I think the signs are good, but let's wait and see how this develops further in the year.
Thank you very much.
The next question is a follow-up question from the line of Creelan-Sandford, Benjie with Jefferies. Please go ahead.
Yeah. Thanks very much for taking another question. I just had a question on costs. I mean, there were some upward pressure on personnel costs this quarter. I think that included some element of front loading of variable remuneration for 2023. I just wondered if you could quantify that, and also just repeat your sort of expectations for absolute cost growth going forward. I didn't quite catch that earlier. Maybe if I can squeeze in another quick one, just, going back to the NPL outlook. I mean, the curings this quarter were very strong.
I'm just wondering, you know, as the NPL ratio continues to come down, you know, do you still see a reasonable pipeline of potential curings going through this year, or is that something that we should expect to decline going forward? Thank you.
Okay. Let's start with costs. Indeed, in Q4, we front loaded an accrual for a variable remuneration for our staff. For 2023, that's in the area of EUR 16 million-EUR 17 million, and it was a one-off in the last quarter of the year. Going forward with regards to costs, we expect that 2023 would be a year with all in all, a low single-digit increase in our costs. The same pattern that we experienced in 2023. We do have the tailwind from the VS that we executed at the end of the year with 450-460 people leaving the organization. That would absorb the salary increases that are a result of the sectoral agreement that we signed in 2022.
With regards to other lines of our OpEx space, in G&As, again, we expect some pressure in 2023 because of inflation, but we have mechanisms in place to try and minimize the increases. The other line of our OpEx is depreciation. We've discussed about our ambitious plan of upgrading our IT infrastructure, so that effectively transloads depreciation expenses. All in all, I would expect a low single digit increase in our OpEx. Now, with regards to NPL, yes, we said that the formation that we have estimated for the next year, 2023, is about EUR 300 million plus. The curings that we experienced in Q4 had some large corporate tickets that have helped the numbers.
Across the business plan horizon, we expect more or less this level of curings with a slight decline in 2023, given the overall expectations at the time when we drafted the business plan. I would expect 2023 with about 100 or maybe a bit more curings less than the numbers that you saw in 2022.
Brilliant. Very clear. Thank you. Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to Mr. Mylonas for any closing comments. Thank you.
Thank you. Thank you all for joining us for the call. I'm sure we'll have a chance to have more questions with you. The team, CFO and Greg of IR are heading out to London tomorrow for the Morgan Stanley. We'll probably be on a roadshow, including myself, at the end of the month, early next month. With that, I want to thank you all and hope to see you all in person soon. Thank you.