Ladies and gentlemen, thank you for standing by. I'm Constantinos, your call operator. Welcome, and thank you for joining the Eurobank Ergasias Services and Holdings conference call to present and discuss the first quarter 2022 financial results. At this time, I would like to turn the conference over to Mr. Fokion Karavias, CEO. Mr. Karavias, you may now proceed.
Ladies and gentlemen, good afternoon, and welcome to the Eurobank first quarter 2022 results presentation. Together with me is our CFO, Harris Kokologiannis, and investor relations team. We will start with some key recent developments, present our results, and then answer your questions. In the first quarter of 2022, our economic prospects dimmed, and inflationary pressures became more pronounced, increasing the risk of stagflation in the global economy. Volatility remains high, fueled by geopolitical uncertainty and disruption of supply chains, leading to soaring commodity and energy prices. In this environment, the estimates for the Greek economic growth are trimmed down from close to 5% previously to around 3%-3.5% for 2022, which is still a good performance. As a result of the external challenges, domestic economic sentiment dropped in April, although in a measured way.
On the other hand, unemployment is at the lowest levels in the past decade and keeps improving. Job creation trend returns to pre-pandemic growth path, and the minimum wage was recently increased by 7.5%. High inflation is obviously a burden on households' available income and corporate profit margins, but it is mitigated by the government's recently announced support measures relating to energy costs. All indicators point to a strong tourism season, and revenues are expected to reach the 2018 level, which is at least 60% higher than last year's respective figure. Even Cyprus, which had a high share of Ukrainian and Russian tourists in previous years, is expected to offset a lost revenue from visitors coming from other European countries. We see healthy investment appetite across all segments of the economy, while FDI remains solid and local corporate M&A is picking up.
Energy is the leading sector in this investment cycle, and the country is becoming an energy hub for the Southeastern Europe through several infrastructure projects. As a result of the above, demand for business loans is robust as working capital needs have increased, and investments, including those projects under the E.U. programs, are progressing smoothly. Finally, after the recent upgrades from two rating agencies, Greece is just one notch below investment grade. Now, let's hear our financial results for the first quarter of the year, as highlighted on slides five to 11. Despite the negative external environment, the first quarter recorded solid figures across all areas. Net interest income was better than expected. Fee and commission growth was strong. Asset quality metrics continued to improve, and profits of our regional activities increased substantially year-on-year. All of these contributing to a robust bottom-line result.
Consequently, our conviction is getting stronger that our full year targets will be met or even exceeded in some areas. Let me go into some more detail. Our net profits in the first quarter of 2022 reached EUR 6,005 million. Core pre-provision income was up by 10.4% on a year-on-year basis, driven by higher than initially expected NII, up 1.4%, and strong fee growth, up 25% year-over-year. In the same period, loan loss provisions are down by 53% at 63 basis points, and as a result, core operating profit more than doubled. Our regional operations continue their strong performance, with net profits of EUR 47 million in the Q1 , up 46% year-over-year. Now, in terms of asset quality, it is clearly encouraging that NPE formation remains slightly negative in the first quarter.
However, we remain cautious because of the rising energy cost and inflation and its implications on households' income. In this environment, we continue to improve our NPE ratio to reach 6%. Our remaining NPE perimeter is limited to EUR 2.4 billion, or net NPEs million EUR after the accumulated provisions. The coverage ratio also improved at 72%. Our total capital ratio stands at 16.5, while the fully loaded CET1 at 13.6, reaching already our full-year targets. In all our core markets, credit demand remains solid. Loan disbursement increase reached EUR 2.3 billion in the first quarter, and there is a strong pipeline for the second quarter and the rest of the year. We see bright prospects, especially in the energy and tourism sectors, shipping, infrastructure, and development projects.
Concluding my introduction, we operate in a global environment which is volatile and fragile to external shocks. On the other hand, Greece has special idiosyncratic characteristics that mitigate some risks. Following a strong first quarter, we reiterate our guidance for the full year 2022, especially for at least 10% return tangible book value and dividend distribution out of 2022 profits. At this point, I would like to ask our CFO, Harris kokologiannis , to present our first quarter results in more detail before opening the Q&A session.
Thank you, Panos. Let's now provide some more insight on the first quarter results. Starting on page 19 on lending growth. Performing loans increased organically in the quarter by EUR 400 million, driven by Greek corporate and SME loans. Including April, year-to-date growth amounts to EUR 700 million and is almost equally split between Greece and Southeastern Europe.
Considering the low demand for new investments and working capital and the existing pipeline, we reiterate our outlook for a net organic growth of performing loans by EUR 2.3 billion in 2022. Moving on funding and liquidity on page 20. As shown at the right of the page, Greek deposits decreased in the first quarter by EUR 700 million, mainly related with a few large corporates. This change was fully reversed by EUR 1.2 billion inflows in April coming from the same segment. Net loans-to-deposit ratio increased in the first quarter to 75%, and NPL ratio remained broadly stable at 151%, as shown at the left of the page. Moving to profitability on page 25.
Net interest income increased quarter-on-quarter by 5.7% to EUR 339 million, as the lower income from Mexico NPE consolidation and the base effect were more than offset by CPRO, lower funding costs, and higher bonds and performing loans income. On a year-on-year basis, net interest income is higher by 1.4%, better than anticipated. On page 26, commission income continued its growth trajectory, increasing by 25% year-on-year and being just EUR 70 million lower than the previous quarter's mark. Asset management and bancassurance fees had a solid quarter. However, inflows were lower than our plan due to market volatility. In tandem with transactional fees and credit cards, capital markets and lending commissions performance point to a full year outlook in line with our business plan.
On page 27, operating expenses are flat year-on-year in Greece and higher by 3% in the group due to de-risk measures and higher staff costs in Bulgaria. In the first quarter, we successfully completed a VRS increase, reaching 750 FTEs. The pre-tax charge amounted to EUR 42 million and is fully included in the first quarter restructuring costs. Furthermore, we continued the rationalization of our network, closing another 35 branches, representing 8% of our footprint. These initiatives are in line with our business plan and strategy to save resources from around the bank to grow the bank. On page 29, we summarize operating performance for the first quarter of 2022.
Core PPI is higher year-over-year by 10.4% up to EUR 140 million, mainly driven by performing assets in AII, higher commissions and core income from Southeastern Europe, which more than offset lower income from NPEs. Cost of risk amounting to 63 basis points for the period and loan loss provisions are lower year-over-year by more than 50%. As a result, core operating profit is higher year-over-year by more than 100% at EUR 178 million. Finally, on this page, profit before tax increased to EUR 404 million for the quarter. This includes EUR 212 million trading gains from hedging instruments, fully offsetting the valuation of bonds classified in fair value through OCI. Moving on to asset quality on page 31.
As shown on the top left of the page, NPE formation in the first quarter was slightly negative by EUR 24 million. NPL ratio decreased to 6.7% and pro forma with solar securitization to 6%. This translates to EUR 2.4 billion gross NPEs or just EUR 700 million net of provision stock. Coverage in the first quarter increased to 70.6% and pro forma with solar to 71.5%, as shown at the bottom right of the page. Finally, on capital and on page 36. Our fully loaded CET1 was stable at 12.7%, as the quarterly CAT profitability was offset by VRS costs and primarily by business growth. This includes new loans, loan commitments, letters of guarantee and investment securities.
Pro forma with Project Triumph, that is expected to close in the next few weeks, our fully loaded CET1 ratio increases to 13.6%. Further on capital on page 37, our total CET ratio amounted to 15.8%. This is 30 basis points lower than the previous reading due to the full year IFRS 9 phasing. Pro forma with Triumph, total CET ratio amounts to 16.5%, which is already 10 basis points higher than our full year in 2022, as provided to the previous results call. Wrapping up on page seven. Despite the challenging environment, we remain fully on track of all our goals set for this year, or even outperforming some of them. This completes my presentation, and we may now open the floor for your questions.
The first question is from Floriani Jonas with AXIA Ventures Group. Please go ahead.
Hello. Yeah, good evening, everyone. Thanks for the presentation. I have a few questions. First of them is on asset quality. I remember that in the previous conference call, you were mentioning the expectation for EUR 400 million NPE inflows in 2022. Given what Fokion mentioned now about the impact on disposable income, I'm just wondering if this figure remains the same for the year. Secondly, I was wondering if you could go through the breakdown of your disbursement figure. I see the EUR 2.3 billion disbursements increase, but there is no increase on the Greek side of things in terms of performing loans, right? The increase is coming from the international.
I'm just wondering if you could also mention about out of this EUR 2.3 billion, what is corporate SME and mortgages, and also if there was any kind of unexpected, higher than expected one-off in terms of repayments in Q1 that it was like a headwind for your performing loan growth. And I'll leave it there. Thanks.
Okay, Jonas, thank you for your questions. Let me go through the asset quality one, and then Harris will elaborate on the loan disbursements. Let me start from the first quarter, and as you can see on slide 31, we have reported a negative NPE formation of EUR 24 billion. Further on page 32, we saw that the formation from households was slightly positive, whereas that from business loans was slightly negative. In May and June, the trend has not changed, with formation remaining flattish. Overall, for the second quarter, we expect formation to be slightly positive. May and June should be a little bit positive. Overall, the payment behavior of our clients has not really changed in any sort of material way.
It is, I think, true that the high inflation, especially with what we see with increased energy costs and food prices, are a burden on households available income. At the same time, there exists a few mitigating factors that I would like to share with you. The first is what I already mentioned about the government's support measures. The amount year to date, I think euro, close to EUR 7 billion, what has been announced so far. It is also important, as I mentioned, that unemployment keeps dropping, and we have reached a level of 12.2, which is the lowest of the past decade. We have a graph on page 47 in which we present the evolution of unemployment.
It is also important that household deposits have remained unchanged between year end and today, around EUR 135 billion, despite the fact that there was increased spending need. All these factors, together with the fact that growth will still projected at 3%, and also that residential real estate prices remain firm. Let me remind you at this point that in 2021 we had an increase of 7%. These factors, I think, make any sort of deterioration, if it happens to be, quite contained. This is what we have seen so far and what we expect based on the facts that we have at this point.
As you mentioned very correctly, we have projected for the year a positive net inflow of EUR 400 million. Despite the fact that, effectively for the first half of the year, we expect to be around zero, we had a slight negative figure. In the first quarter, we expect a positive figure in the second quarter. Overall the first half of the year will be flattish. Again, we keep this estimate of EUR 400 million for the full year, 2022, because we feel that we should remain cautious and be on the conservative side. Based on that, we also reiterate our guidance for cost of risk and NPE ratio at 65 basis points and 5.8% respectively.
In terms of coverage, we have reached 71%, as you can see on page 31, if I remember correctly. This is quite higher than what we had projected a few months ago about reaching 64% in year end. Coverage may well drop from the current levels due to the expected write-offs for the second half of the year. Jonas, as regards to your second leg of the question, by far the major part of the EUR 2.3 billion investments are related with business loans, corporate and SME. On that occasion, let me provide you a fresh outlook on how we see loan growth in the year.
I would say that as of the last month of the third quarter, in March, and the first two months of the second quarter, April and May, loan demand is picking up, driven by the business sector. I would say many energy renewals, shipping, where we saw a very strong performance, tourism, real estate, construction and manufacturing. In this context, RRF loans are already acting as an accelerator for loan growth in the next years. At the same time, our regional subsidiaries are producing a quite steady and healthy flow of loan Delta. Overall investment appetite remains strong, despite the economic uncertainty.
Furthermore, we see apart from investments, we see increased loan demand for working capital purposes. Especially by big corporates. In the first four months of 2022, as I said previously, we increased group performing loans by EUR 700 million. This is equally split, EUR 350 million from Greek corporate and another EUR 650 million by international. We are on track to meet our 2022 target of EUR 2.3 billion net increase of performing loans, as we said in our previous call.
Got it, thanks. Just a final question. Can you share anything on the interest rate environment, if there's any change to NII expectation or general P&L trajectory through the end of the year and 2023? I mean, we already heard from some European banks guiding for that, so I'm just wondering where you stand and what we can expect?
As we discussed, during the call in the previous quarter, our guidance and business plan for the three-year period, including 2022, is under the assumption that we have no interest rate increases. Obviously, it appears that this is not going to be the case. We expect the first rate increase in July, maybe a second one in September. We have provided some sensitivity what is the upside because of that. Let me turn to Harris to provide you some figures on our interest rate sensitivity. Let me provide an update on that. I remind you that the majority of our loan book is floating rates and flow to zero.
Thus, based on our basic calculations for negative rates, i.e., between -50 to 0, the impact on a group basis is approximately EUR 80 million. Once Euribor rates turn positive, of course, the positive effect accelerates, and from 0 to +50 basis points, the additional impact is circa EUR 150 million. For rates higher than 50 basis points, the sensitivity starts decreasing because we assume that a larger part of interest rate increases will be passing to the deposit. Overall, for rates ranging from -50 to +100 basis points, the cumulative impact has been calculated at approximately EUR 300 million.
I repeat what Fokion said that in our business plan, for purposes, we haven't incorporated any impact from that.
Thank you.
The next question is from the line of Sevin Mehmet with JP Morgan. Please go ahead.
Good afternoon. Thanks very much for the presentation. Just three questions from me, please. Firstly, on the asset quality side, is there any color you can share with us, with regards to the loans that were under any pandemic support schemes at the end of last year, particularly the ones under the GEFYRA program or any bank-specific programs, there were any? How are they faring so far? You know, is the performance in line with your expectations? Secondly, on the RWA growth in the quarter, which looks quite sizable, can you talk about the nature of this growth? Is this related to rating migration, or how should we think about it also for the full year, if possible?
Finally, on the trading gains, I see you mentioned this is related to hedging instruments, but is this one-off in nature, or are these existing hedges that would further benefit the trading line should, for example, the government bond yields continue to go up? Any color on that will be helpful. Thank you.
Okay. Starting again from the asset quality question. In the first quarter, we have already seen, to a great extent, the effects of the end of moratoria, which overall has a performance according to our expectations. Defaults from this segment continue to remain low. Therefore, this is not the point that raises any sort of red flags to us at the moment. As I said before, as in my previous answer, overall asset quality is something that we monitor very closely for the different segments of our portfolio. Definitely, loans coming from moratoria is one of these segments of that require high monitoring, as well as the segment of the performing forborne loans that we also monitor very closely.
So far, we have not seen any sort of signs of deterioration in these segments. On RWA growth related to as we get RWA increase related to asset growth, if you go on page 37, for example, we provide the Note 5 that actually explains the drivers of this increase, that it is mainly, it's coming from loans by EUR 400 million. Loan commitments and leases, that it is actually off-balance sheet, by EUR 300 million. And investor securities by EUR 160 million. This is the main drivers of RWAs increase. Regarding your question about potential trading gains in the second quarter, the answer is that we may have some as well.
The overall impact on capital from first, hedging instruments and second, investment securities revaluation from fair value through OCI, so far in the second quarter is flat.
Okay. That's all very helpful. Thanks very much for the color.
Thank you.
The next question is from the line of Osman Memisoglu with Ambrosia Capital. Please go ahead.
Hello, many thanks. A couple on my side as well, please. First one, if I understood you correctly, you mentioned a couple of times that NII was better than expected, a positive surprise. Where is that coming mostly? Is it more volume or pricing? That's my first question. Second one is, you mentioned on asset quality a few times, but I'm just looking if you could give us a bit more color on the international side, given the geopolitical.
Developers we've had, the unfortunate ones we've had over the last few months, and your exposure to Bulgaria and Cyprus. Then final one is on your issuance plans. Specifically would you consider skipping issuance at all for any other reasons this year? Thank you.
Okay. I'll get the first and the third one, and you may comment on the asset quality of branches in international. As regards the NII trajectory, you may recall that in our last year call, we provided for a full year trend of NII -3%. It looks we ran in the first quarter by 1.4%. It looks that on that aspect, we may be. This trajectory may continue. The reason is that primarily we have better bonds income, which is a combination of higher positions and high yields.
Second, it looks that we have a better funding cost both on in terms of government in terms of deposit costs and slightly higher on performing loans net interest income may due to the carryover of the very strong quarter that we had in the fourth quarter of 2021.
Mm-hmm.
This is the main drivers of so far better performance versus our initial outlook. Now, as regards, let me provide you an update as regards MREL and funding plan, et cetera. As shown on page 21 of the presentation, based on the latest official SRB decision, the MREL requirement stands at 37% of RWAs, including 3.7% of CBR. This shortfall should be covered by the end of 2025. The interim binding MREL target for first of January 2022 was 17.8%, and has been already fully met. The interim non-binding MREL target of January 1st, 2023 is 20.5%.
The major part versus the 2.3 that we have today will be for the difference versus the one that we have today will be covered by the full year profitability, first of all, and the Triumph capital impact of 80 basis points that is not included in the MREL ratio at that page. Furthermore, we monitor the markets. We understand, you may have seen the market volatility so far. We monitor the markets for any opportunities for senior issuances, including of course, potential issuance of certain paper.
Now let me discuss your questions about asset quality outside Greece, and in our two other core markets, namely Cyprus and Bulgaria.
Cyprus definitely was the country that had the largest exposure to Russia and Ukraine due to the services that they were offered to customers of these two countries. Namely in the area of tourism, about 25% of the tourists were originated from Ukraine and Russia in the previous years. That was a point of concern for the economy. As I mentioned already in my introduction, having already discussed the situation with a number of our customers in the island, it appears that 2022 is not going to be worse than 2021 in terms of tourist revenues. Because visitors from the two countries will be replaced from visitors coming from Europe.
Let me remind you that the market of the U.K., which is a very important market for Cyprus, was closed until August last year because of the COVID, and obviously this is not the situation this year. Overall, we expect positive growth in Cyprus, growth of 2.5%. Definitely, this would be a factor, a positive factor for the overall performance. Second point, our bank in Cyprus has almost zero exposure in retail. We are only in corporate banking, which also is another comfort level. Our current NPL ratio is very low, 2.3%, as you can see on page 16. Actually, it dropped 30 basis points during the first quarter of 2022.
Also coverage is the highest in our group at 94%. Overall, we feel quite comfortable with the asset quality inside. Let me now go to Bulgaria. I'm sure that you have followed some recent developments about the stop of natural gas supplies from Russia to Bulgaria, which obviously was an important development. As you can see on page 52 of our presentation, natural gas is only 15%, one five, in the energy mix of the country. Although this is an important development, it's not going to affect the economy of the country in any sort of significant way. Greece has stepped in, replacing some of the supplies that Bulgaria was getting from Russia in terms of natural gas.
Greece is providing some supplies out of LNG coming to our country. The energy is not going to be a factor that will affect the economy because of the stop of supplies out of Russia. The economy is expected to grow between 2.2%-2.3%. We have a low NPEs in the country, 4.5%, which also dropped further in the first quarter, about 40 basis points. The coverage has also increased at levels north of 70%. At the moment, we don't have any sort of signs pointing to alarming trends. Definitely, asset quality is our main concern because of the current situation, and we monitor it very, very closely.
Thank you.
The next question is from the line of Petros Tsourtris with Optima Bank. Please go ahead. Mr. Tsourtris, can you hear us? There's no sound coming from Mr. Tsourtris's line. We'll now move to the next question. The next question is from the line of Daniel David with Autonomous Research. Please go ahead.
Hi. Good afternoon, and thanks for taking the question. I've got three, and hopefully not too long. On slide 25, you show that the TLTRO income is gonna boost in this quarter. I'm just wondering if you can give us a bit of guidance on what you think TLTRO is likely to drop to in Q2, so Q2, Q3, and Q4. Just to retouch on the MREL slide, thanks for the disclosure. I'm just interested that you mentioned a non-binding target. Is there any consequence of not meeting that non-binding target at January 1, 2023? Finally, just a question on the Tier 2 that you've got coming up for call.
I hear your comments on market conditions being a bit volatile at the moment. I guess if you can't issue a new Tier 2, my assumption is that you wouldn't be able to call. I guess I'm interested. Could you revisit that instrument at a later date? I guess I'm asking if you don't call, is an LME on the table to potentially reduce that government-held Tier 2 and come back to the market? I would be interested to hear your thoughts. Thanks.
Thank you for your question. As regards the TLTRO, let me provide you some insight. In 2021, we recorded a positive impact of close to EUR 90 million from TLTRO. In the first quarter, we had an impact of EUR 25 million. This compares to close to 10-11 in the previous quarter. For that reason, we had this +15 quarter on quarter. For the following quarter, we expect similar amount. Overall, for the year, the TLTRO impact is expected close to EUR 100 million, more or less evenly distributed throughout the quarters. Now, as regards the MREL, the non-binding means no consequences.
However, from a strategy point of view, we intend and we will meet this target for 2022 and 2023 and any year onwards. As regards Tier 2, a dilution, as we have discussed in the previous calls, as well, a dilution kicks in as of February 2023. In tandem, as of 2023, there is a gradual five-year phase out of 20% per annum. Of course, there is no any possibility for LME.
We don't intend to execute an LME, so we haven't thought about that. Now, what we intend to do actually, if the current market volatility persists, we intend to proceed to partial issuances as of next year, tapping the market, of course, addressing the fade out part of the existing instruments so as not to have any impact on capital. If the market volatility uncertainty persists, we are going to go to smaller tranches of new resources, replacing the one that it is gradually phased out.
Thanks. Just to clarify, if you can't issue or refinance ahead of the call date, I guess the option would be not to call, but then to issue the pieces of capital that phase out over that five-year period.
Mm-hmm. Correct.
Thank you.
The next question comes from the line of Alex Boulouris with Wood & Co. Please go ahead.
Hello. Thank you for the presentation. A quick question on your targets. As you mentioned, NII seems to be the trajectory on NII seems to be heading better than what you had input at the -3% on a year-on-year basis. Fees also seem to be very strong as we saw in the first quarter. You keep the target of on core operating profit and core PPI despite the interest rate hikes that potentially would provide an extra boost. Is there some other line that you feel less confident, for example, the OpEx or the cost of risk line, and that's why you maintain the targets, which seem to me the absolute minimum at the moment?
Overall, as regards our stance vis-à-vis the targets that we have announced in the previous call, the first quarter performance indeed was stronger across all areas despite the volatile environment. As we said, net interest income was better than anticipated. We had a solid performance in commissions in a seasonally weak quarter. On OpEx, I would say we're in line with our annual target despite the inflationary pressures. Finally, NPE formation was slightly negative compared with an annual outlook of provision of positive EUR 400 million, as for Fokion extensively elaborated. In summary, first quarter results, I would say in increased conviction of achieving full year 2022 targets or even outperforming some areas.
However, as we say, and you may appreciate the economic uncertainty, we are not going to revise upwards the targets, but we have to wait and remain cautious given the current uncertain conditions. Having said that, despite the challenges and based on the performance of the first quarter, we should reiterate our target for at least 10% return on tangible book value for the year and dividend distribution out of 2022 profits. Of course, the latter subject to regulatory approval.
Okay, thank you. Just on the cost side, do you see the inflationary pressures mounting up at all, or is it still relatively in check with what you were expecting?
Listen, the line of cost is one of the risk areas related with the recent inflationary pressures for two reasons. First, related with the higher administrative expenses for electricity, and second, related with the pressure for wage increase. However, starting from the latter, let me note that the collective bargaining agreement recently signed with the unions calls for a cumulative increase on the base salary for bank employees of 5.5% cumulative for the next three years. So far, we don't see pressure for a wider level wage increases. However, in several cases is highly skilled staff, where in that area there is some pressure.
On the second area, that it is the admin cost on energy-related admin costs, we are already implementing a set of initiatives targeted to reduce both electricity and fuel cost footprint. Overall, despite the risks coming from inflation, we expect not to exceed the guidance provided for the full year 2022.
Thank you.
The next question comes from the line of Luis Garrido with Bank of America Merrill Lynch. Please go ahead.
Yes, good afternoon. Thank you for taking my questions. I have a couple, please. First, could you clarify two things? Number one, on the trading gains, you've said something about your expectations, but just to come back on this quarter, can you very simply explain what the hedging instruments were that led to the very large trading gains? What is your hedging strategy that explains this gain? Secondly, on the risk-weighted asset move, you've pointed to the disclosure on the increase related to loans. Apologies if I missed it, but I don't think you've explained how much of that is linked to volumes and how much is linked to risk-weighted assets, inflation or credit migration. Two bigger questions.
Can you provide a sensitivity of your capital to the 10-year government bonds? Finally, it would be quite simple, do you expect to meet the non-binding 2023 MREL target? Thank you very much.
Let me take the first question about the trading gains and the hedging strategies that we have used. Effectively it's very simple instruments. It is integrated swaps and some credit default swaps and some short positions in bonds that enhance our portfolio on an aggregate basis. These are under the economic hedging in terms of accounting and they intend to hedge our balance sheet as a whole. Obviously because of the deterioration in terms of credit spreads and rising interest rates, this hedge has made money in the first quarter of the year. As Harry said, second quarter to date also they show some sort of positive income.
Again, these are for hedging purposes, and therefore they balance any sort of evaluation we have on the fair value through OCI investment securities. Now, in terms of sensitivity that we have in this book, given that we report separately the effect of the trading gains versus the effect on the NAV, you can get an idea of what is the sensitivity in the first quarter of the year. We saw this number on the capital page. Now, Harry, the rest of the questions.
Regarding MREL, I repeat that the target is not binding. However, our intention and goal is to achieve this target on January 1st, 2023.
I'm not sure I have gotten your question about the RWAs. May you repeat that, please?
Yes. No, I just wanted to know what portion of the increase in RWA is linked to loans. How much of that was just higher volumes, and how much of it was the same volume of loans but just credit deterioration?
Actually, the whole part is coming to asset growth. We haven't seen any category of our asset showing any deterioration. On the contrary, in some we had also improvement. Exclusively the increase is associated with asset growth.
Okay. Very clear. Thank you.
The next question is a follow-up question from the line of Osman Memisoglu from Ambrosia Capital. Please go ahead.
Hi, just two follow-ups. One, coming back to the NII front, some of your competitors have been mentioning spreads stabilizing. Just wanted to get color on your side, both for the Greek part and the international bit. A bit of a technicality, apologies for that, but the other income in this quarter, which is usually a slow quarter, a negative quarter, is showing a positive EUR 31 million. Just wanted to see if you could share any color, thoughts on that. Thank you.
Regarding the first question on the spread side, indeed, on the retail portfolio, we don't expect any material change versus 2021 levels. On the contrary, as regards the corporate portfolio, as a bank, we have seen a declining trend during the last couple of years, which we have extrapolated in the 2022 budget and the whole three-year plan. If you ask me to quantify that, it is close to 15 basis points per annum for the corporate portfolio. Now, as regards the other income, there is a EUR 32 million gain for selling a part of our participation to Grivalia Hospitality.
Thank you.
As a reminder, if you would like to ask a question, please press star one on your telephone. The next question is from the line of Petros Tsourtris with Optima Bank. Please go ahead.
Hello, everyone. I apologize for earlier, some technical problem. Just a quick question, please. Do you intend to increase your stake in Hellenic Bank by the end of the year?
We have already said that Hellenic Bank is something that we follow closely, but we don't have any sort of plans at the moment that can be announced or discussed in the market. At the moment, we are at the 12.6% equity participation in the bank. We don't have any sort of deals or transactions to increase it.
Okay. Thank you very much.
Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to Mr. Karavias for any closing comments. Thank you.
Let me thank you all for participating in this conference call. Let me also thank you for the very interesting questions that gave us the opportunity to elaborate on our results. Our investor relations team, Harry and myself will be available for any further clarifications. Thank you very much.