Piraeus Finl Hldgs Sa

Ladies and gentlemen, thank you for standing by. I am Mina, your Chorus Call Operator. Welcome and thank you for joining the Paredes Financial Holdings Conference Call and Live Webcast to present and discuss the Paredes First Half 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 Paris Financial Holdings CEO, Mr. Christos Megalou. Mr. Megalou, you may now proceed.

Good afternoon, ladies and gentlemen, and good morning to those joining us from the U.S., Today, we will cover our first half 2025 financial results. This is Christos Megalou, Chief Executive Officer, and I'm joined today by our CFO, Theo Gnarvelis, Chrysanthi Berbati, and Xenophon Damalas. Paireus achieved solid performance in the first half of 2025, demonstrating significant progress against our full year targets. Based on our strong first half results, we upgrade today our loans and client assets guidance for the year. On top, we announced that we intend to introduce an interim dividend in Q4. Let's dive now into our first half results. Paireus delivered a solid set of financial results with top line exhibiting resilience on the back of stellar client assets growth, stabilized margins, and best-in-class operating efficiency. Let's move on with slide 4 for the key highlights of our first-half performance. We generated net profit of €559 million, corresponding to earnings per share of €0.43. in line to meet or exceed our guidance for earnings per share of 80 euro cents for 2025. On the back of our performance, Paireus intends to proceed with an interim distribution to our shareholders out of the 2025 profits. amounting to Europe 100 million in the form of share buyback to be executed during the fourth quarter 2025, subject to EGM green light and supervisory approval. In total, we are on track for more than 500 million distribution out of 2025 profit. This is approximately 40 euro cents, which correspond to a 7% yield on our end-June market capitalization of 7.4 billion, now higher by 1 billion. We achieved a return on average tangible book value of 15%. above the 2025 target of approximately 14%, despite the dropping interest rates. We have expanded our loan book by 15% year-on-year to $36 billion. During the first half, our loan book grew by $2.2 billion, already surpassing our end 2025 target. Today, we are raising our full-year guidance for loans to more than $36.5 billion. We delivered 6% net revenue growth in the second quarter, while the decline in net interest income decelerated materially to minus 1.5%, compared to minus 6% in the first quarter. Our revenue diversifying efforts are reflected on our fees over revenue ratio of 24%. This metric is best in class in Greece. Net fee income reached 325 million in the first half, at par with the upgraded 2025 target of $650 million for the year. Our cost-to-core income ratio stood at 34%, among the best in the European banking market, confirming our cost-disciplined approach. Asset quality dynamics remain solid, with NPE ratio at 2.6% and NPE coverage at 68%, while cost of risk shaped at 51 basis points, in line with our target of approximately 50 basis points for 2025. We increased our assets under management to 13.2 billion during first half, up 27% year-on-year, exceeding the 2025 target of above 12 billion. As a result, we upgrade our target to above 13.5 billion for end of 2025. Furthermore, Deposits rose by 5% annually, now standing at 63 billion. Our total capital ratio reached 20.4%, absorbing the 50% distribution accrual, robust loan growth, and DTC amortization. We retain solid buffer of approximately 440 basis points above P2G or approximately 290 basis points if we include ethnically insurance. Slide five presents the details of our first half operating results. We sustainably grow our tangible book value per share, which now stands at 5.9 euros per share. On slides six to eight, we present the dynamics of our performing loan book. Credit expansion has been strong. with performing loans rising but €2.2 billion in the first half, supported by all business lending segments, while household lending improved. Importantly, loan origination dynamics remain positive and reach all sectors of the economy. The strong performance lead us to revive upwards our 2025 net loan growth target to above 3 billion from 2.5 billion previously. On slide eight, we present a detailed sector breakdown of our CAB net credit expansion of 2.3 billion in the first half. As you can see, our corporate platform outreach is very granular, reaching all sectors of the Greek economy. We are very happy that we are the bank of choice for SME clients in Greece, as shown by our NPS score in this space. Before going into more detail on the group's performance, I would like to comment briefly on selected Paireus retail initiatives, which we have summarized on slide nine. In the second quarter of 2025, Paireus introduced several products and services that target to enhance the mortgage lending experience, address the housing and investing needs of younger population, and support Greece's agricultural sector. Slide 10. outlines the evolution of our net fee income, which has been supported by asset management, bank assurance, loan origination, and rental income. Slide 11 demonstrates the growing trend of assets under management that reached 13.2 billion in June, surpassing the 2025 target. As a result, we now upgrade the full-year target to more than $13.5 billion. Slides 12 to 14 present detailed information regarding net interest income intrinsics, which makes us confident about the 2026 trends. In a nutshell, our growing loan and bond books mitigated the material drop in base rates. Moreover, time deposits and downward repricing is driving funding costs lower. Overall, the NII intrinsics in the first half lead us to reconfirm our 2025 guidance of 1.9 billion NII, with 2026 guidance of 1.9 billion presenting upside. Turning on slide 15, our cost management is trending as per the budget. Overall, we remain very conscious and on track with our annual target. Slide 16 provides a summary of our asset quality indicators. Our MPE ratio stands at 2.6%, with MPE coverage at the level of 67.5%. The organic cost of risk, shaped at 50 basis points in the second quarter in line with our annual target. Paereus enjoys superior liquidity profile presented on slide 17. Our liquidity ratios remain solid as evidenced by the high balance of deposits at 63 billion and the 2006 liquidity coverage ratio. Moreover, we are the Greek bond with the highest green bond issuance, totaling 1.65 billion. Turning to our capital base, on slide 18, our CET1 ratio stood at 14.4% at the end of June, absorbing best-in-class loan growth 50% distribution accrual, and accelerated DTC amortization. On slide 19, our embryo position now stands at 30.4%, with approximately 300 basis points buffered to the requirements. On slide 20, we depict the key financial KPIs that will be impacted from Paireus' acquisition of Ethniki Insurance. To remind for those that are new to the Paireus developments, that in March 2025, we entered into a Share Purchase Agreement to acquire 90% stake in Ethniki Insurance from CVC. The consideration for the transaction is Euro 600 million in cash on a 100% basis. The Ethniki insurance acquisition will further diversify our revenue sources and enhance value for our shareholders. While it is estimated to be earnings per share and return and tangible equity accretive, by more than 5% and 1%, respectively, without any synergies included yet. Post the transaction, Pireo CET1 ratio is expected to land at the level of 13% and subsequently move higher. The transaction is subject to approvals of the competent regulatory authorities, and we are working diligently to conclude all required steps by the end of 2025. On slide 21, we present an update on SNAP's progress. The platform is already in use, while its commercial launch is expected in the third quarter of 2025. On slide 22, there is a summary of our KPIs. demonstrated that we are in line or outperforming in some areas our 2025 financial targets. Our strong results position Pareus well among the broader group of regional peers. To give you some context, on slide 25 to 33, we present the key metrics for Pireus versus domestic and regional peers. We benchmark ourselves in terms of return on average tangible book value, credit expansion, net interest margins, net fee margin, fees over revenues, cost to core income ratio, NP ratio, cost of risk and capital ratio. In all KPIs, we are either at par or best in class while we are growing at an accelerated pace. we expect to generate significant value for our shareholders. And with that, let's now open the floor to your 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. For those participating in the question and answer session, please use your hands when asking your question for better quality. Anyone who has a question may press star one at this time. One moment for the first question, please. The first question is from the line of Ismailo Eleni with Axia Ventures. Please go ahead.

Hello. Congratulations for this set of results, and thank you for taking my question. So given the strong loan growth year to date and the robust pipeline, particularly in corporates and the resilience spread, how should we interpret the decision not to upgrade your full year 25 NII guidance at this stage? You've already flagged the FX drug and we expect a great path. So is it a case of conservatism or are there any other setting factors that we should be mindful of going into the second half of the year? Thank you.

Hi, Eleni. The NAI is actually trending well. We have seen a drop of about 7 million, something under 2% between quarter one and quarter two. Indeed, the extra volumes are mitigating the rate drops to a large extent. So the guidance of $1.9 billion for this year, I would say, stands, given the fact that we had accelerated rate cuts on the risk-free era versus what was originally anticipated. But what we like is that we have now reached, I would say, the low-point area. So we're looking at a stable, resilient NII that if one annualizes and extrapolates, can calculate the 1.9 billion. We're excited about the extra volumes, what that means for the balance sheet and overall for the interest of the economy, and what that would do to 2026. So given the situation... We do expect upside in 2026, given the fact that we will enter at the terminal rate that we're originally budgeting, so it looks, but with increased volumes. So overall, 2025 on guidance with a rather stable stabilizing profile. And in a few months' time, once we know more and we have done the work in 2026, we'll come back and tell you what that means for the coming years.

Excellent. Thank you, Theo.

The next question is on the line of Samir Mehmet with J.B. Morgan. Please go ahead.

Hi. Good afternoon. Thanks very much for your time. Maybe just following up on the first question, on the 2026 NII, Theo, you guys are now guiding for or signaling some upside to the 1.9 billion euro guidance. If you could please share a bit more on the underlying assumptions here, and also, if you can, the magnitude of this upside, that would be very helpful. And my second question is on the buyback, obviously a pleasant surprise. I just wanted to see if there's any particular reason for bringing forward the timing of it, considering obviously the ethnic insurance deal also is expected to close around that time. And just to confirm that this is clearly as part of the 500 million plus distribution plan for this out of 2025 earnings, right? So we'll not be on top of the plan distribution that we will see next year. Thank you.

I mean, so the upside, if we believe that the terminal rate will be in the area of, you know, 175 to 2%, as we have budgeted, then you basically need to make an assumption as to what the volumes will be like. One billion of extra credit on a run rate basis means 20 to 25 million extra in AI given the spread. with the assumption of deposits, bonds, et cetera, and assuming a steady rate. We're looking at $50 million to $70 million upside on the NII for 2026, given what we've discussed. Now, whether that rounds to a 2.0 or a 1.9 plus, we're going to talk about it in the coming months.

And, Mehmet, on the buyback, look, I mean, in 2025, we are already – running with a distribution of 500 million, which is about 40 cents per share. We decided to give to our shareholders the opportunity through the buyback to do this 100 million, which is part of the 500, given your question. rather than wait for the cash payment, which could have been in June of 2026. Also, we believe it will have a positive effect because it will help with the EPS of next year. So an early dividend repayment, which compensates our shareholders for being with us.

Great, that's very clear. Thanks very much.

The next question is from the line of Kemeny Gabor with Autonomous Research. Please go ahead.

Hi, Kim. Just a follow-up on the buyback point, please. How do you think about the split of your distributions going forward from 26 between cash buybacks and dividends? And also, if you could comment on any upside to the 50%. The other question I had was on ethnic insurance, please. If you could comment on what are your latest thoughts on the contribution of the new insurance business to your results? I mean, I saw the 2024 Statements of Ethnicity, and I think they were relatively close to break even. So it would be just helpful if you could walk us through again on how you think about their contribution from next year. Thank you.

Gabor, on the buyback, this is a decision that we would like to be in a position to take on an annual basis. you know, depending on where our share price is a tangible book value and taking into account, you know, cost distribution level. So it is going to be assessed annually and decisions will be made. And at this stage, we cannot say anything more than just stick to the 50% distribution level. line that we have been maintaining and for which we are actually taking into account in our numbers.

And, Gav, on your question on Ethnic Key, P&L, and Prospects, in page 20, we have incorporated what the current business plan of Ethnic Key prescribes, which, of course, has various commercial assumptions that will be reviewed in the future. But that said, they're still on plan. So what they've done in 2024 has to do with their transformation and overall reserve management. We believe that they're on track for the 2025 target. And going forward, the expectation for a $90 million pivot contribution for 2027, as far as we understand, stands. Of course, as we've said, everything will be reviewed and redone, given their combination with the franchise of the payrolls bank after the transaction is completed. Okay. Thank you.

The next question is from the land of Skidlarge Salome with Bloomberg Intelligence. Please go ahead. Hello. Thanks for taking my question. I have actually two questions. Number one, on the loans, could you break down the growth drivers and refer which part and what part of the loan growth comes from the RRF? And the second question is on the NII, if you could explain how the portfolio, securities portfolio hedging works. Is it like a 100% interest rates hedged over the full year, or shall we expect some net interest income pressure from the portfolios in the second half of the year? Thank you.

Salam, just on page 8. we have a pretty granular description of where this credit expansion comes from. And as you see, I mean, it's divided by sector and by number of customers. We have a pretty good SME credit expansion number and overall pretty granular across sectors. let's say, growth. Now, the RRF number out of this is about 100 million per quarter. That's what we are, you know, expecting also to be for the future.

And Salomon, your question on NII. If we look at page 12, I think we can look at the bond line. we'll see that despite the rate drops that we've had in quarter two and quarter one, the bond book contribution to the overall NII is quite resilient, actually increasing. That is basically because the hedge ratio on the bond book has been reduced substantially in terms of protecting the NII against rate drops, and that's why it's increasing. On the contrary, we have the opposite. We have non-maturity deposit hedges that are actually contributing positively to the NII. So quarter two, we had an $11 million contribution versus what was $1 million in quarter one. That's a few lines further down. So overall, we still have a floating NII-sensitive balance sheet to rate cuts. but much more contained given the fact that we have reduced hedges on bonds and instead early introduced non-maturity deposit hedges on liability.

Thank you. The next question is from the line of Boutkolou Mikhail with Goldman Sachs. Please go ahead.

Good day. Thank you very much for the opportunity. I'm My first question is on volumes. So if we look at your guidance, updated guidance for the full year, it would imply that for the second half of the year you expect to deliver more than 600 million volumes compared to 2.2 in the first half of the year. It looks like that usually Greek banks command that the second half of the year is seasonally strong. So to this end, I would like to ask, do you expect this, is this slowdown which you expect in the second half is driven by some underlying assumptions or maybe the front loading of some volumes from the second half to the first half, or it's rather a conservative approach and the number could be possibly, so could be possibly higher if it's a conservative approach. And then also, On NII, just alluding to what you mentioned, about 50 to 70 million potential upside next year, and also your sensitivity, which you disclosed, of 30 million to 25 basis point cut. Would it be fair to say that even at the level of rates of 1.5, you would expect your NII guidance to stay at 1.9 at least for 2026? Yes. So, these two questions.

Michael, on your first question on the volumes, it's fair to say it is a conservative approach. We actually indicated above 3 billion. Obviously, if you look at the run rate, you know, it's much higher than that. But we want to be conservative in our approach. And we are talking above $3 billion with a lot of risk to the upside.

And, Mikael, yes, I mean, very fair point. And actually, well calculated indeed, even at 1.5%. The $1.9 billion NII for 2026 looks quite promising. a confident estimate. We will see what happens to the terminal rates, and that's why we refrain from coming out with 2026 guidance this time around.

Good. And just one last simple question on buybacks. So do you cancel all of the shares? What's your strategy there?

Yeah, the shares all will be bought and canceled within Q4 and before the completion of the reverse shutdown.

Okay, okay. Thank you very much. Very helpful.

The next question is from the line of Dimitrios Alex with Jefferies. Please go ahead.

Hi, two questions, please. So firstly, on the FICO status, have you started the process to obtain this yet? And just any comments on the timing of when you could have this approved? Secondly, so there have been some press reports commenting that the regulator may require banks to reclassify mortgages with step-up arrangements. Could you just comment on your exposure here and how this could potentially impact your MPE ratio?

Thank you. Nothing to comment on FICO status. It's not actually a process that banks trigger. It is an assessment that happens on a standalone basis by supervisory authorities. What we care about is intensifying our risk management profile and framework so that we can command and control the additional risks that come with owning a large insurance company like I think that's what is the case. So we're mostly focused on the integration and the upgrading of our internal governance and risk management skills rather than supervisory classifications that are not up to us anyway. On your question on... Yeah, we do have exposures of increasing payment requirements in the future. These are well-performing exposures and have been since the restructuring during the years of crisis and COVID-19. We will be proactively attempting to reprofile those mortgages, and in that effort, we will have additional costs that will come with it. That's why we took a $45 million postmodal adjustment on cost of risk and keeping it at 50 basis points this time around. We expect potentially an equivalent amount to be taken in half, too, within the cost of risk guidance of 50 basis points. That amount has been estimated to be enough to counter any additional impairment requirement from such exposures, including Swiss franc mortgages that, as I'm sure all of you have read, the government is now regulating an opt-in solution for borrowers to take.

Thank you very much, Mark.

As a reminder, if you would like to ask a question, please press star and one on your telephone. The next question is from the line of Michel Glosman with Ambrosia Capital. Please go ahead.

Hello. Many thanks for your time. Just a quick one on your slide 23 on the new guidance. I see your set one guidance has come down slightly. Just wanted to check what's driving that. Any color there would be helpful. Thank you.

Hi, Osman. Yeah, I think you're talking about CD1 being approximately 14.5 guidance versus higher than 14.5. It's really driven by the higher volumes that we're taking and the higher growth. So we're burning extra capital. We're burning extra capital on the additional loan growth that we've been experiencing and we believe we will continue to experience and have to. Thank you.

The next question comes from the line of Nelly Simon with Citibank. Please go ahead.

Oh, hi. Thanks a lot. Just to follow up on the Swiss franc mortgage issue, have they decided what discount that is going to be applied or is that still yet to be decided? And how conservative are you? I mean, how confident are you that the post-mortem adjustment times two is enough for the full year?

The final regulation has still to come out. What we understand is that the discount will range on an average basis between 10% and 15%. What we've assumed is a 60% take-up on a 500 million book, so approximately 300 million of Swiss franc loans will opt in for that. with an expected cost of $40 million to $45 million. So, hence, the first PMA adjustment overcovers for that. And then the second one that we will potentially do and have to will cover other re-profiling that we will do on euro-denominated mortgages.

Got it. Thank you. Thanks very much.

As a final reminder, to answer 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 Mr. Megalou for any closing comments.

Thank you all for participating in our first half 2025 results conference call. We look forward to discussing with all of you physically and virtually during our investor outreach program, commencing as of early September. In the meantime, please enjoy some time off. Thank you.

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