Addiko Bank AG

Ladies and gentlemen, welcome to the publication of the Consolidated Annual Report 2025 conference call. I'm Lorenzo, the callers' call operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and 1 on your telephone. For operator assistance, please press star and 0. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Erberk Jurnalnek, CEO. Please go ahead, sir.

Good afternoon, ladies and gentlemen. Let me welcome you to the presentation of the results of the business year 25 of Adico Bank on behalf of my colleagues Ganesh Tadej, Edgar, and Stefan. We have prepared the following agenda for you. I will start with the key highlights and the related achievements of 25. After that, I will pass on to Ganesh, who will update you on our results on the business side. In the second chapter, Edgar will share insights into our financial performance, while Tadej will outline the progress made in the risk area. At the end, I will present to you the cornerstones of our new midterm specialization program and our updated guidance 2026. After that, we will move on to Q&A. So let's begin with the highlights. I'm confident to inform you that despite negative influences coming from the legislative changes in several countries, we were able to close 25 with a net profit of 44 million Euro. This results includes a net profit for the fourth quarter of 25 of 8.7 million Euro, which is one million Euro higher than the result of 7.7 million Euro in the fourth quarter of 2024. Our earnings per share for 25 amount to two Euro and 28 cents. And our return on average tangible equity comes in at 2.5 sorry, 5.2% also influenced by the increased equity base. Overall, 2025 was a challenging year for Ardico because of reasons we will come back later on. Nevertheless, we were successful to achieve a 20% growth rate on new business in consumer lending and finally, to return to a positive trend in SME with an 11% growth rate on new business. Net interest income was with 1.8% slightly lower year on year, driven by the impact of the lower interest environment on our back book and on our national bank deposits. A key positive is that thanks to our strong sales performance and the strategic cooperation agreement in our insurance business, we were able to increase our net commission income by 7.6% year-on-year. Altogether, we managed to slightly improve our net banking income by 30 basis points, despite a significantly lower rate environment. Ganesh will give you more insights into the business development during his presentation. Because of our strict cost management, we accomplished to limit the increase of our administrative costs below inflation to only 1.6%. Nonetheless, due to the factors mentioned before, our operating result ended up at €109.8 million compared to €112.3 million in 2014. Let's briefly comment on our positive risk performance. We successfully reduced MPE volume further to 125.5 million Euro compared with 144.7 million Euro at the end of 2024. Consequently, our MPE ratio also improved to 2.5% down from 2.9% in the previous year. On top of that, our coverage ratio continues to improve to 81.7% from 80% at the end of last year. Ultimately, the cost of risk on that loan ended up at 0.96% or 35.2 million Euro compared to 36 million Euro last year. Today we'll give you more details on the risk development later. Our funding situation remained quite solid with 5.3 billion Euro deposits and a loan-to-deposit ratio of 70%. Our liquidity coverage ratio is currently comfortable above 300% at group level. And finally, our capital position gets even a bit stronger with 22.4% total capital ratio all in CT1 based on Basel IV regulations compared to 22% based on Basel III in the previous year. Next page please. As mentioned earlier, ADIGO faced interventions from regulators and governments that negatively impacted the bank's performance in several of our markets. Brescia introduced a 40% debt-to-income cap for non-housing loans effective 1st of July 2025 and required banks to provide essential banking services free of charge since January 26. Serbia, Republika Srpska and Montenegro introduced interest rate caps, fee restrictions and debt caps. Overall, these measures are having a significant negative impact on our core revenues. Consequently, we have introduced initiatives to counterbalance the income reductions and to develop new income sources. Going forward, all regulatory effects as known of today are already reflected in our updated guidance. As reported in our earnings calls last year, we entered the Romanian market via our Slovenian bank through EU Barspotting, offering a fully automated digital lending solution for consumers. In the second half of 2025, we launched several marketing campaigns to build awareness and strengthen our brand positioning. Although we achieved our recognition and recall targets, the conversion rates were below our expectations. Consequently, we refined our marketing approach. The new marketing campaign, supported by an article song and a life-sized Oscar, combined with targeted brand-building initiatives, was launched in mid-February. We will keep you updated on the progress and will conduct a results-driven review in the second half of this year. Now, with regards to our ESG program, I can confirm that all initiatives remain on schedule and are advancing in line with plan. Additional information is set out in the appendix of this presentation. Let me briefly touch on our regulatory sustainability disclosures. As part of the updated EU taxonomy framework, the Commission has introduced a temporary opt-out for financial institutions. In our case, this is fully aligned with our business model. ADEGO made use of its opt-out as we do not engage in taxonomy relevant lending activities. This approach avoids unnecessary administrative burden while maintaining full transparency in our ESG reporting. Let me briefly comment on our share performance and the schedule changes to our listing. Adikos share price increased noticeably during 2025, closing the year at 22.5 Euro and continued to rise further in 2026 to 27.4 Euro as of yesterday evening. At the same time, trading volumes and overall liquidity has remained persistently very low, making professional market making difficult and not economically viable for providers. As a consequence, and in line with the Vienna Stock Exchange rules, our shares will be reclassified from the prime market to the standard market with effect of 1st of April 2026. This reclassification has no impact on our strategy or operations, but it better reflects the liquidity profile of the stock. Let me now address the regulatory concerns regarding our shareholder structure. Following the sanction imposed by the European Central Bank in 2024 for exceeding the 10% ownership threshold without prior approval, certain regulatory uncertainties continue to persist. Although the voting rights restrictions applicable to a specific shareholder group were lifted in early February 2025, The supervisory authorities continued to identify residual uncertainties concerning the bank's shareholder structure. The bank remains fully committed to maintaining a transparent, cooperative and constructive relationship with all relevant regulatory bodies and we continue to engage actively with them to address the outstanding supervisory considerations. In this context, I need to mention that the current shareholder situation continues to create significant additional efforts and a severe distraction for the bank. Nevertheless, we will carry on to do our best to fulfill the increasing related demands put upon us by our regulators. In line with supervisory expectations and regulatory requirements, the dividend distribution financial year 2025 remains suspended, taking into account regulatory considerations related to the shareholder structure. From the perspective of the bank's long-term stability and in the best interest of all stakeholders, the Management Board maintains its position that dividend payments will not be resumed until the shareholder until the ownership structure has been conclusively verified and the related concerns raised by the supervisory authorities have been fully resolved. Now, let me briefly outline how we performed against our 25 guidance. The positive message is that despite headwinds, we delivered on our 25 guidance. In income and business, our loan book grew by 7% year-on-year, supported by strong consumer demand and a renewed pickup in SME in the fourth quarter. Our NIM ended up at 3.7% and net banking income held stable. Costs were managed well, with OPEX at 195.4 million Euro coming in below guidance. In risk and liquidity, performance remained fully in line with expectation. We kept the costs of risk below 1%, achieved an NPA reduction to a level of 2.5% and closed the year with a loan to deposit ratio of 70%. In profitability, we reached a return on average tangible equity of 2.5%. Overall, these results reflect our disciplined approach in a demanding environment. Now, let me hand over to Ganesh for further insights into the business development.

Thank you, Herbert, and good afternoon, everyone. Moving to page 7, as Herbert mentioned, 2025 has been a challenging operating environment. Credit demand remained resilient across our markets. However, interest rates declined rapidly during the year, This intensified competition and created significant pricing pressure. As a result, loan book retention also became more challenging, as customers increasingly refinanced their loans at the lower rates. At the same time, unexpected regulatory interventions also affected market dynamics. The most notable example is Croatia, where a 40% debt to income cap was introduced on July 1st. In Serbia, authorities mandated lending rate caps, which led to interest rate reduction. These measures tightened our lending conditions and also affected our pricing in both the markets. Nevertheless, despite these headwinds, our continued focus on digital savvy customers, the micro SME segment, and point of sale financing combined our strategy of offering lower ticket high margin loans with speed and convenience while maintaining prudent risk discipline enabled us to deliver strong growth. Consumer new business strongly increased by 20% year over year resulting in 10% growth of our consumer loan book with an attractive new business yield of around 7%. In the SME segment, the new business grew 11% year-over-year with a yield of around 5%. Overall, our focus loan book expanded by 7% year-over-year with a blended yield of 6.4%. As a result, the focus book now represents 92% of our total portfolio, demonstrating the resilience of our specialized strategy. even in a more competitive and regulated environment. Please turn to page 8 for more detail outlook. Looking more closely to our consumer segment, the strong double-digit growth we delivered was driven by several key factors. First, we benefited with solid market demand across our core geographies. Second, we successfully launched full digital end-to-end lending with zero human interventions in three of our core markets, clearly differentiating our offerings from competitors and significantly improving speed and customer convenience. Third, our point-of-sale proposition continues to perform well, delivering 14% year-over-year growth, further supported by the launch in Bosnia and Herzegovina. Fourth, we identified a sweet spot between growth and pricing, allowing us to proactively retain customers and protect the loan book through disciplined repricing actions. In addition, we launched newly redesigned mobile app with the introduction of new card features, including Google Pay and Apple Pay integrations, which contributed to a 12% year-over-year increase in net commission income. Finally, in response to evolving regulatory environment, we are already implementing mitigating measures, including downselling, introducing code after structures, and focusing on high quality customer segments with larger ticket size. We are confident these initiatives will not only offset regulatory headwinds, but also strengthen the foundation for sustainable quality growth going forward in 2026. Let's turn into S&E segment. Our core business model remains unchanged to be the fastest provider of unsecured lower ticket loans to underserved micro and small enterprises through our digital agents platform. As mentioned earlier, the market environments remain challenging due to aggressive pricing, which has created some pressure on a loan book retention, However, with improving market demand, we implemented several targeted initiatives to reignite the growth. First, our turnaround plan in Serbia, supported by new leadership team, delivered strong momentum with 43% year-over-year growth in new business. Second, we placed a strong emphasis on retaining quality clients and protecting the loan book through more targeting pricing. loan prolongations and enhanced service delivery. Third, while maintaining our core focus on unsecured lending, we broaden our product offering by placing also greater focus on slightly larger tickets and secured lending supported by experienced and high quality teams to ensure continued risk. This resulted in double digit year over year growth in investment loan volumes. Finally, we launched a new digital SME tool designed to process high ticket loans faster and with greater simplicity, providing a clear competitive advantage. Overall, we believe these initiatives will position us well to return to sustainable growth in the SME segment going into 2026. Lastly, let me briefly touch on our progress in AI adoption last year. We are actively investing in AI technologies to enhance both operational efficiency and customer experience across the organization. The two AI applications are already live, one supporting employees by handling HR related inquiries, and others assisting our call center by analyzing customer inquiries and generating response recommendations. In addition, we are currently exploring further AI use cases across IT risk and marketing with the aim of strengthening operational efficiency and enabling core data-driven decision-making across the bank. To summarize, while 2025 presented a challenging operating environment, it also pushed us to further refine our specialist business model and adapt our pricing approach. Most importantly, we launched several new propositions that enhance speed, convenience, and value for our customers across consumer and SME segments, positioning us well for continued growth going forward. Looking ahead to 2026, we will continue to focus on profitable growth while implementing measures to mitigate the impact of the recent regulatory restrictions. In particular, we aim to accelerate growth in Romania through a refreshed marketing approach and strengthened broker partnerships, and we will launch our point of sale lending business in Croatia At the same time, we will further enhance our end-to-end digital value proposition and refine our dynamic pricing capabilities to better balance growth and profitability. In parallel, we are developing a new specialized program focused on new lending products aimed at deepening customer engagement and further expanding our fee-driven income streams. Herbert will provide you more details on this later. Please let me hand over to Edgar.