Alpha Svcs & Hldgs S/Adr

Ladies and gentlemen, thank you for standing by. I am Yoda Yokoro's call operator. Welcome and thank you for joining the Alfa Bank conference call to present and discuss the full year 2025 financial results. All participants will be in a listen-only mode and the conference is being recorded. The presentation will be followed by a question and answer session. Should anyone need assistance during the conference call, you may signal an operator by pressing star and zero on your telephone. At this time, I would like to turn the conference over to Alfa Bank Management. Gentlemen, you may now proceed.

Hello, everyone. This is Iasson Kepap-Tsoglu, Alfa Bank's head of IR. Welcome to the presentation of our full year results. Vassilios Psaltis, our CEO, will lead the call as ever with a short summary. And then it's over to Vassilis Kosmas, our CFO for the numbers. Q&A will come at the end of the call, and we should wrap up within the hour. Vassili, over to you.

Good morning, everyone, and thank you for joining our call. Let's start with an overview of 2025 on slide four, please. For 2025, we recorded 943 million euro profits. This is up 44% versus last year. On a normalized basis, profits stood at 907 million, up 5% year on year. Of the 81 coupon payments, earnings came up 36 cents per share, and this is up 3%. we are proud of the growth we have been able to deliver. On the one hand, we have defended against the fall of interest rates due to our prudent positioning of the balance sheet. On top, we have leveled up our feed generation capacity, enhancing our product factories. But at the same time, we have kept costs well contained as we continue to optimize the way we work, and we have managed to instigate a lower recurring cost of risk through management actions and the overlays taken at the end of the second quarter. Growth has come with solid commercial trends. As you can see, net credit expansion reached 3.5 billion for the year, and this is driven by corporates. Deposits were up 4 billion for the year, and we have generated 1.3 billion in net sales of assets under management. Thus by, asset quality was stable. Return on tangible equity stood at 11.9% on a reported basis and 13.8% based on normalized profits, while organic capital generation reached 206 basis points. We continue to position the business to maximize the recurring value we can create for our stakeholders in a sustainable way. And that value is increasingly distributed back to shareholders, as you can see on slide five. Here you can depict that we intend to pay 55% of 2025 reported profits as an ordinary distribution, always subject to AGM and regulatory approval. That equates to 519 million in distributions, which is a 6.1% yield on our current market cap. Since the reinitiation of dividends out of 2023 profits, we have been able to increase the payout ratio from 20% to 43% and now 55%, with ordinary distributions up fourfold in EURMJ. We intend to split the 2025 ordinary payout equally between a cash dividend and a buyback. At 259 million, this means that total cash distributions for 2025 profits will be more than three times those of last year. Given the 111 million interim dividend paid in December, the final dividend should be 148 million or approximately 6.5 cents per share. At 259 million, the size of the proposed buyback is proportional to the one conducted out of 2024 earnings. It is also in line with feedback we have received from a wide range of shareholders. In 2025, we have also built a demonstrable track record of disciplined capital deployment in inorganic transactions, as you can see on slide six. Astrobank added scale to our Cypriot presence, instantly positioning us as a top three bank in the country with a circa 10% market share and doubling local profitability while remaining NP neutral and CET1 light. FlexFin enhanced our data-driven factoring platform, unlocking access to small businesses and lower tier SMEs with a strong risk-adjusted returns and EPS accretion from year one. Axia. forms a backbone of our new regional investment banking and capital markets platform, bringing market-leading advisory capabilities and immediate scale in Greece and Cyprus. All of the above transactions have now been closed, and we are progressing swiftly with full integration. We finished the year announcing one more deal, which we can look at in more detail on slide 7. Alphabank has reached an agreement on the key commercial and legal terms for a transformational combination of insurance activities in Cyprus, bringing together universal life and outage insurance. The agreement comprises of two parallel steps, the acquisition of 100% of outage insurance and the merger of universal life and outage into a single combined entity in which Alphabank Group will acquire a majority stake. To support execution and ensure continuity, we are forming a long-term strategic partnership with the Fotos Fortiades Group, Universal's cornerstone shareholder. The RTS management team, which has delivered an impressive turnaround in recent years, remains fully committed, and this is materially reducing any integration risk. Completion is expected towards the end of 2026, subject to regulatory approvals. We will keep investors updated as the process progresses, in line with all legal requirements. This transaction will create one of the top three insurance groups in the country with a leadership position in accident and health and a clear path to long-term growth. The combination creates a platform with over 400 agents and more than 100,000 clients, more than doubling our cross-selling potential for banking products and boosting our asset management revenues. It also allows us to actively shape the Cypriot insurance market, building a powerful, diversified insurance platform with strong positions across life, non-life, and health. Universal brings an impeccable brand and deep expertise in life and health, while Altius contributes strong non-life capabilities, bank of France expertise, and a high-performing sales force. The combined strengths of the two franchises unlock a clear winning proposition, a broader, more competitive product suite, a more extensive distribution network, a stronger ability to serve households and businesses, and an enhanced customer experience and digital capabilities. This partnership offers a rare opportunity to build the best quality insurance group in Cyprus, supported by exceptional talent from both Universal and Altius. It positions us as a major player in financial services with a scalable insurance platform complementing our lending and wealth positions. It reinforces AlphaBank's enduring commitment to Cyprus, a market where we already hold a strong banking presence and see attractive macro prospects. From a financial perspective, the transaction is fully aligned with our disciplined capital allocation framework and exceeds all group-level M&A criteria. It delivers an EPS accretion of circa 2%, reflecting a strong profit uplift from Cyprus. a return on tangible equity accretion above 30 basis points, and a minimal cost for equity or one impact of just 23 basis points, fully consistent with our commitments. This is exactly the type of capitalized, fee-based growth we aim to prioritize. Scalable, accretive, resilient, and consistent with our long-term strategy. Let's now turn to slide eight, please. For yet another year, we have delivered on our promises. Results for 2025 have surpassed our original expectations. Revenues have come in line with guidance as we have been able to counteract exogenous headwinds to our net interest income through a significant outperformance in fees. Costs have also come in line with guidance, showing our disciplined approach to cost management. And cost of risk has been better than expected, as during the second quarter, we were able to boost management overlays on provisions releasing future cost of risk. The bottom line is that on EPS, on returns, on tangible book value and capital generation, we have been able to surpass expectations. At the same time, capital has been invested through value-accretive M&A to boost future earnings. Let's now turn to slide 9, please. As you can understand, we're going to be a bit frugal with guidance this time around, as our investor day is just around the corner. Vasilis, our CFO, will give you more details on the numbers in a minute, but I would like to highlight one or two things. First, 2025 was a fantastic year for us. We have been fortunate to produce more than 940 million profits for our shareholders. But, admittedly, our recurring profitability stood closer to 907 million. Secondly, we need to be cognizant of the fact that 2026 is a transitional year for us. We are razor focused on integrating the acquired entities, but quite reasonably, we will not see the full benefit of the expected synergies from year one. The bottom line is that we expect to deliver 11% growth on normalized elements. Credible recurring earnings growth is the natural outcome of our strategy and what we believe will continue to differentiate us going forward. The rest, I'm afraid, will have to wait until our investor day. And with that, Vasile, over to you.

Thank you, Vasile, and hello from my side. I'll start from where you left and talk about the guidance for 2026, and then we can move to results. Starting with the bottom line, we expect EPS to reach circa 40 cents in 2026. Remember that this is on a normalized basis, post-81 coupons. To make things easier, this translates into profits of circa 950 million euros, or circa 39 cents of reported EPS, in line with current consensus expectations. Before we look at the recurring side, let's keep in mind of some one-offs to take into account. We have a voluntary separation scheme that we expect will cost us about 30 million euros. And we also need to take into account a 20 million restructuring charge for Astroba. So underlying profits are close to the 1 billion mark. Just to be clear, this is before the full phasing of synergies from our positions. In terms of individual components, NII is expected to surpass 1.7 billion. We're cautiously assuming a 3.5 month Euribor of 1.9. Clearly volumes will be a tailwind. You expect mid to high single digit growth in loans with circa 90% of credit expansion coming from corporates. We expect this growth to be funded by deposits with no real change in the mix between time and core. We also aim to grow securities book closer to the 25% mark of the asset base. Together, with the 1.5 billion of yielded creative reinvestments we have, the securities book will provide an additional tailwind. The stock of time deposits will also continue to reprice towards front book levels, with a benefit of circa 20 million from Q4. All in, the cumulative benefit of the APOE equates to circa 120 million euro, versus Q4 annualized NII levels, after we adjust for Astrobank. There are, however, two clear headwinds. The first is the cost of increased wholesale funding issuance as we grow the balance sheet. The second, and equally important, is that we expect loan spreads to drift lower for the stock by another 10 basis points on account of competitive tension. Fees should land close to the 600 million mark versus 510 we reported for 2025. There are a couple of important things to note here. Inorganic growth, mainly coming from Astrobank and Axia, should bring in about 30 million more year-on-year. So the pro forma starting price is closer to 540 million, and we expect to grow that at a double-digit rate. Growth in real estate income, previously in other income, should bring in more than 10 million year-on-year on account of recent investments. The remaining 50 million is split between lending and transaction banking, circa 20 million on account on increased penetration and corporate related fees as we continue to leverage our relationship with Unicredit. Growth in asset management with a billion of expected net sales and higher year-end balances bring together an additional 20 million. And finally, international business and expanded capabilities elsewhere account for the rest. Based on the above, fees should reach to above 25% of revenues. While revenues should land above $2.4 billion, growing by just under 10%. Costs. We expect to extract some synergy from the Afrobank acquisition. Those are more likely going to materialize in 2027. As anticipated last year, we don't expect a repeat of admittedly stellar performance for 2025, so underlying cost growth should revert to 3 or 4%, with the cost-to-income ratio edging towards 40. No news on cost of risk. We still expect 45 base points going forward. Income from associates should increase to 50 million, and that brings the pre-tax of slightly above 1.3 billion. Last, in terms of tax rate, we expect 26% going forward. Moving to results of slide 11. Nothing notable to report in terms of one-off items, other than some tales of certain NP transactions. They reported normalized profits at $237 and $225 million, respectively, inching towards the $250 million mark. In terms of full year numbers, as Vasilis mentioned, we have 943 million of reported profits and 907 million on reported basis. This gives us a normalized VPS of 36 cents. With that, let's move to next slide and talk about the underlying results and the main panel items. Operating income was up 12% quarter on quarter. largely driven by a more normal quarter for trading, as well as the addition of Astrobank for two months. If you exclude the expect of these two items, growth was still a respectable 5% in the quarter, on the back of solid performance for fees, but I'll get into that in a bit. Overall revenues, in line with our above 2.2 billion guidance. At 233 million, costs show a significant uptick versus the third quarter due to the anticipated seasonal effects, as well as the inclusion of Astrobank. Overall, we still landed well within our 870 million euro guidance for the year. Not sure one can find many banks in Europe who have achieved a decrease in absolute OPEX during 2025. Impairments came in at 62 million for the quarter, bringing the Cost of risk to 58 basis points for the quarter and 48 basis points for the year versus our 45 BP guidance. And we've already talked about profits, so let's move to the next slide on the balance sheet. On slide 13, strong finish for the year for performing loans, up 5% Q&Q, including Astrobank, or 3% if it is excluded. Year on year, that same figure came in at 8.3%, better than the original guidance. Customer funds were also up 4% in the quarter, or 1.4, excluding the effect of AstroBank, with a year-on-year increase at 8.4. Tangible book value down in the quarter, but if we add the interim dividend in the amount spent on buyback, it's actually up 2.1%. And then on capital, we stand at 15% in terms of fully loaded CET1, down versus Q3 on account of the completed acquisitions. On slide 15, we show the two main components of revenues. NII was up for another quarter, continuing the upwards trajectory. Most of the increase is attributable to consolidation of Astrovan. On the remainder, we continue to have good tailwinds from volumes on the loan side, while loan spreads continue to be a headwind. Most of the increase in contribution of the securities book came from MasterBank this quarter. Deposits continue to be a tailwind on account of repricing. Then in funding, we have average balances for debt outstanding, where this is 300 balance by number of costs. On the fee and commission side, I should first highlight that we have introduced a new accounting policy that looks at income from real estate separately, given it has now gained more significance in our footprint. on a quarterly basis, and again, excluding Astro Bank, fees were up 19%. In Euro million terms, the biggest delta was business credit related fees. But we've also seen a very strong result in both asset management, as well as real estate income. Moving on to slide 15, and take a look at loans and customer funds. Performing loan balances reached 37 and a half billion euros. This is up 5% on headline basis, or 3% excluding Astrobank, with 1.25 billion net credit expansion in the quarter. Another strong quarter with 4.2 billion of disbursements, and a similar pattern as before, with corporates, including SME, driving growth, evenly spread out across sectors. Year-to-date net credit expansion has reached 3.5 billion euros, clearly outperforming our guidance. Spreads continue to be under pressure, but we remain disciplined on underwriting criteria. As such, we will avoid deals or refinancings that do not meet our own credit criteria and are not accretive to our shareholders. Earned customer funds, another quarter of solid growth, bringing the total for the year to $4 billion, half of that attributable to AstroBank. Note that most of the outflow of corporates It relates to the bond placement we led at the end of the previous quarter, something that we have flagged at the time. On AUMs, we continue to see good underlying net sales, 300 million this quarter, bringing the total for the year to 1.3 billion, and AUM growth to 21%, once we include valuation effects. On asset quality, slide 16, with the NPE ratio flat at 3.6%, coverage ratio has edged higher to 58%. The underlying picture remains solid and we have no particular concerns with flows, as should be evident by the underlying cost of risk that stood at 40 basis points this quarter. We don't expect any meaningful surprises in the coming quarters, and at 48 basis points for the year, we feel comfortable with a guidance of 45 going forward. Then, on slide 17 on capital to finish it up. This quarter we had 52 basis points for capital generation organically, and this includes everything, P&L, DTA, the usual DDC amortization, and RWA group. This brings the total for the year to 206 basis points. As mentioned, we have increased the payout to 55%, so the impact this quarter also takes into account the increase for the preceding nine months. with the total for the year amounting to 213 basis points, including DDC acceleration. All in, CET in one ratio stands at 15% on a fully loaded basis, or 15.4 on transitional. We're also showing here, on the right-hand side, the main components that bridge the 130 basis points gap to our original guidance of 16.3. 70 basis points attributed to acquisitions, 50 coming from management actions we took in Q2 on provisions, taking advantage of the positive one-offs we had, and 20 basis points as a result of the higher payout. FYI, we have also provided you with a separate slide covering the main impacts on the P&L and balance sheet from the two bigger acquisitions. With now, let's now open the floor for 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 Kevin Roberts with Goldman Sachs. Please go ahead.

Hello. Thank you very much for the presentation. Just two questions from me please. First on fees and then secondly on costs. So on the fees, clearly a strong print in Q4. Could you elaborate a bit, please, on the key drivers that you see looking ahead through into 2026 and where you're particularly focused as a management team? And then secondly, on costs, could you just discuss how you anticipate that mix of costs evolving over 2026, in particular where you're directing that investment, whether it's in tech, personnel, other strategic builds? Thank you very much.

Thank you. Let me start with fees first. I think fees, on the fee side there's I would say three engines that have driven growth in 2025 and we expect these to continue in 2026. These have to do with assets under management. The very fact that we continue exploiting the relationship with Unicredit along with the franchise means that more and more people trust us with their investments. We expect this trend to continue in 2026. Secondly, on transaction banking, we had a mixed effect in 2025. A stress, if you like, a headwind on retail transaction fees from the government measures, which we do not expect in 2026. This has been already absorbed. And a headwind on corporate transaction fees, the very fact that we are able to offer solutions to our clients, which are unique, accessing all the 13 plus 1 unit credit markets, which we expect to grow, to continue growing in 2026. Last but not least, real estate. This is something that we have invested heavily during 2025. As I mentioned, there's another 10 million coming out from this line, even on the investments that have already been completed in the 2026 numbers. Going to the costs side, I think we mentioned quite a few times in the past that Greek banks do face service inflation, most in staff costs and GNAs that have to do with main suppliers. This inflation is somewhere in the tune of six to 7%. I think this is very similar to what our peers have been showing. In our case, we have been managing to drive this down to zero this year, or let's call it three to 4% our guidance for next year. The way we do that is we actively manage the refreshing of personnel through voluntary exit schemes. A reminder, we're already underway for one a month ago. And secondly, on the technology side, we're investing in new applications, but at the same time, we're very active in discontinuing the legacy applications, hence not carry the burden of maintaining the old applications. These are the drivers who we feel will keep containing this line to 3% to 4% over the planning horizon.

Thank you very much.

As a reminder, if you would like to ask 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.

Great. Thank you. Short and sweet, as I would prefer it on a Friday. Everybody enjoy the weekends. I know it's been a long reporting season for everyone, and we're going to come back to you soon with the dates on the investor day. Thank you very much.

Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for calling, and have a pleasant evening.