Piraeus Finl Hldgs Sa

Ladies and gentlemen, thank you for standing by. I am Nina, your call-to-call operator. Welcome and thank you for joining the Paris Bank conference call and live webcast to present and discuss Paris' 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 have 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 send the conference over to Paris Bank's 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. This is Christos Megalou, Chief Executive Officer, and I am joined today by Theo Gnardelis, Chrysanthi Berbati, and Xenophon Damalas to present and discuss Paireus' fourth quarter and full year 2025 results. Today, I will take you through the first two sections of the presentation covering the main financial and business year period and demonstrating our standing in the European banking landscape. This will be followed by a Q&A session. Let's begin with our presentation and slide 4. Paireus is the leading bank in Greece, ranking first across all major business lines. We serve 4.5 million clients, with a workforce of 8.1 thousand employees in Greece. Our total assets stand at 91 billion euros with 37 billion in client loans and 66 billion in client deposits representing 28% market share in deposits. We operate an omni-channel distribution platform with 370 branches, 1,500 ATMs, and serving 3.2 million digital clients. Our mobile app is top-ranked, reflecting our commitment to digital excellence and customer satisfaction. We are a leader in sustainable banking, with euros 5 billion in sustainable financing, Euros 2.2 billion in green bonds outstanding and a strong focus on supporting small businesses and farmers. All these outstanding results have been delivered thanks to our people and our clients. Let's move on to slide 5 for the key highlights of our full year 2025 performance. We generated normalized return on average tangible book value of 16% or 14% on a reported basis. Our earnings per share reached 82 cents. the fast decumulation of base rates. On the back of our strong performance, we increase our payout ratio to 55%. We intend to distribute 40 cents per share cash dividend in Q2 2026 on top of the 100 million share buyback that was completed in the fourth quarter of 2025. In total, we are on track to a total distribution of 592 million euros out of the 2025 profit, which corresponds to a 7% yield. We have expanded our loan book by a Europe leading growth rate of 11% year on year and achieved 4 billion net credit expansion maintaining pricing discipline at the same time. Importantly, net credit expansion reached 300 million euros in the retail segment After 15 years of contraction, our cost-to-core income ratio stands at 33% among the best in the European banking market, confirming our strong cost discipline. Revenues from services reached 700 million in 2025, up 7% year-on-year. Our revenue diversifying efforts are reflected in our services revenues over total revenues of 26% and fees over assets that exceed 80 basis points. Both metrics are best in class in Greece and close to or above average in Europe. We delivered 2.7 billion net revenues in 2025, with net interest income rising in Q4 quarter on quarter, and we consider that we are now Interest income. Asset quality dynamics remain solid with the NPE ratio at 2%, while organic cost of risk shaped at 52 basis points. NPE coverage increased to 73% from 65% a year ago, solidifying our balance sheet. Our assets under management increased to 14.5 billion in 2025, up 27% year-on-year, with 1.5 billion net inflows. Furthermore, client deposits rose by 3.2 billion annually and are now at 66 billion. Practically, our deposits almost fully funded our credit expansion in 2025. Our total capital ratio reached 18.7%, absorbing the Ethniki insurance acquisition, 55% distribution accrual, the strong low growth and DTC amortization. We maintain a buffer of 275 basis points above Pillar 2 guidance with the CET1 ratio standing at 12.7%. Slide 6 presents the details of our fourth quarter and full year operating results. The reported pre-provision income was up 7% quarter on quarter. Below pre-provision income, the quarter has some one-offs. aimed at further strengthening our balance sheet in the areas of non-performing assets and non-core participations to lay out a clean backdrop for the new strategy. We sustainably grow our tangible book value per share, now at 5.9 euros per share. which is net of the 30 cents per share cash dividend paid in June 25, the 8 cents per share of share buyback in November 25, and the impact of the Ethnic Insurance Acquisition. On slide 7, we present our strong loan origination dynamics. Performing loans increased by 11% in 2025, driven not only by old business lending segments, but also by an increase in household lending. Importantly, Q4 marked a new cycle record of $250 million for mortgage disbursements. On slide 8, we present a detailed sector breakdown of our CIB net credit expansion of 3.6 billion in 2025. As you can see, our corporate platform outreach is very granular, reaching all sectors of the Greek economy. Among other initiatives, we are increasing our presence in syndicated deals, and we are offering greenhouse technology financing solutions. At the same time, we keep focusing on SME clients in Greece, as shown by the top performance in disbursements. Slide 9 demonstrates that we have achieved Europe's strongest corporate loan growth while maintaining pricing discipline, which is a testament to the commercially rigorous approach of all of our teams. We have been able to compete and win business. while pricing at par with the market average and keeping risk-adjusted returns at the core of our business credit underwriting. Turning to slide 10, the key milestone to 2025 is the first year that mortgage loan growth net of repayments has turned positive with net credit expansion of 110 million euros. This follows net consumer loan growth, which already turned positive in 2024. Consumer investments have been growing since 2021 by 10%, but this growth was previously outweighted by heavy repayments. We now have reached an inflection point that bodes well for future expansion of our loan book and revenue streams. Slide 11 outlines the impressive evolution of our services revenues, which is being supported by loan originations, asset management, and bank assurance. Ethniki Insurance of the new operating model still to come and expected to elevate services revenues with expansion across all segments of the market namely life and health protection and P&C protection. More on this during our capital market day next week. Slide 12 demonstrates the growing trend of assets under management that reached $14.5 billion in December, backed by strong net inflows of $1.5 billion. We have upscaled our investment solutions offering to private banking and retail clients Incorporating robo-advisors while our open architecture strategy combining Paereus asset management expertise with a wide suite of best-of-breed third-party products is paying off. Slide 13 presents detailed information regarding net interest income intrinsics. In a nutshell, our growing CIB loan book drove NII improvement along with the stabilization of base rates. Spread erosion was milder in Q4 versus the previous quarter, while deposit costs stabilized As a result, NII rose by 1% in a quarterly basis, indicating that the trough of the cycle is behind us, given current yield curves. Turning to slide 14, our cost control efforts kept G&A costs under control, while still making extensive IT investments. Overall, we remain cost-conscious, maintaining cost-to-core income ratio below 35%. Slide 15 provides a summary of our asset quality indicators. Our MPE ratio stands at 2%, while the organic cost of risk shaped at 51 basis points in the fourth quarter. Our MPE coverage is strengthened, reaching 73%, while our Stage 1, Stage 2 and Stage 3 coverage ratios are increasing, standing higher than EU average. Paereus enjoys a superior liquidity profile, presented on slide 16. Our liquidity ratios remain strong as evidenced by the high balance of deposits at 66 million and the 216 percent liquidity coverage ratio. Turning to our capital base on slide 17, Our CT1 ratio stood at 12.7% at the end of December post the Ethnic Key Insurance Acquisition, absorbing loan growth, 55% distribution accrual, and accelerated DTC amortization. Slide 18 depicts Ethnic Key Insurance performance in 2025. Profitability was significantly improved to 45 million before tax at a recurring level from 26 million in the previous year. With a leading 14% market share and 1.9 million customers, groceries and premium posted growth in health and P&C. On slide 19, we present an update on Snappy, our neobank, with its own portable pan-European banking license. Snappy launched commercially in September and is already gaining significant traction with its fully digital, app-based, branchless, low-capex model, as it currently has 60,000 app users. Turning to the second section of our presentation for our positioning within the competitive landscape, I want to point out that Paireus is in a leading position in Greece in terms of performing loans, deposits, equity brokerage and network as highlighted on slide 21. In addition, Paireus ranks at par or above average on all major KPIs in the European banking space. In slides 22 to 27, we present the key metrics for Paireus versus European bank averages. On slide 22, Paireus delivers best-in-class loan growth in Europe, outpacing EU peers by a wide margin. On slide 23, our net interest margin is far above the European average, reflecting our pricing power and effective balance sheet management. Slide 24, net fee and commission income over assets is well above the European average and the best in Greece. Slide 25, our cost to core income ratio is best in class in Europe, demonstrating our ongoing focus on operational efficiency and cost discipline. On slide 26, Paereus returns on tangible book value is well above the EU average, highlighting our ability to generate superior returns for our shareholders. Concluding with slide 27, Despite our strong fundamentals in absolute and relative terms in relation to our European peers, Paereus trade below EU banks with similar earnings implying significant upside 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. One moment for the first question, please. The first question is from the line of Salim Ahmed with J.B. Morgan. Please go ahead.

good afternoon thanks very much for your time um i have just a couple of questions please um one on the fee income this quarter um which you renamed to revenues for service from services um seems like a very good strong print i was just wondering if there are any one-offs or anything else um to highlight in that print or is this a good uh run rate for us to consider for 2026 And maybe related to that also, it seems like a strong initial contribution from the business in just one month. I was wondering how we should think about 2026 when it comes to revenue contribution and integration costs here, and maybe anything else that we should be aware of when it comes to modeling the business. And finally, just want to ask on the payout ratio, which came in higher than expected it. with the $0.40 per share dividend payment. But at the same time, you're set slightly below the target of 13%. So how do you balance this? And going forward, should we think about this double payout ratio as the base, or is there anything that you'd like to highlight here as well? Thanks very much.

Thank you for the question. I'll start with the fee income. We had indeed a very strong fourth quarter, and this is highlighting the franchise value of of Paireus. We have always maintained that we are a strong earner in fees over assets and particular areas like asset management, the banking business, the bank assurance are areas of growth for us and they will continue to be. For the fourth quarter, there were a few, let's call it, highlights, especially on the investment banking side. So I wouldn't extrapolate this number for the whole of the year. But I would just say, and of course we will come with guidance next week on our Capital Markets Day in London, I would just say that this is an indication of the strong franchise value that results in fees from services for Piraeus Bank. Now, on the payout ratio and the level of capital, first of all, we felt very comfortable with the level of capital that we were in, given the balance sheet and given the way the bank has de-risked over the years. and therefore to give an extra return to our shareholders from 50% to 55%, we thought it was more than appropriate given the fact that with the level of CET1 that we are currently at, We are at a total capital level of above 270 basis points above P2G. And of course, this whole exercise was facilitated by the fact that the P2G went down to 1%. So, as you can imagine, given the strong fundamentals of the ban, we thought that this reduction on the P2G should be passed to our shareholders. And this is what we did right now, rewarding our shareholders with an extra 5% on the payout ratio.

On your question, Ahmed, about, you know, Ethniki, I mean, this is really one month plus a few days that you're seeing here. Let's just wait for the 5th of March where we're going to be giving you guys a detailed guidance. We're giving a preview of the solo result. I mean, it's still an audit and it's going to be published by the end of March, but we're giving you kind of a preview on page 18. but we'll discuss much more about the ethnic year and the accounting effect and the value effect on the group consolidation on March 5th. Let's just wait for that.

Super. Thanks very much.

The next question is from the land of Kevin Roberts Benjamin with Goldman Sachs International. Please go ahead.

Afternoon. Thank you very much for the presentation and for taking my questions. Just two, please. Firstly, could you please provide some further color on the one-offs that were recorded this quarter, and if we should expect any further one-offs going into 2026, for instance, relating to the recent Cancelli ruling? And then secondly, on the net credit expansion, just looking through the different categories, as you mentioned, a very positive pickup in mortgages, but large corporate net credit expansion was a little lower in Q4. Could you elaborate on how we should think about that mix and run rate going forward? Thank you.

Indeed, quarter four, we found the opportunity and we recorded some one-off expenses, which are below the normalized line. What primarily we did was on the cost side, there were some adjustments that we did. on VES and some transaction-related costs with the Ethnic E-Trade, valuation adjustments that were done on the equity and the MPA line, and, of course, on loans. We're all aware of the Swiss franc legislative actions that happened throughout the quarter. And as a result, there was an additional adjustment there. Given the nature of these adjustments, I would not say that these are to be repeated in the future. We will not have, again, one-offs of that kind going forward. Overall, the guidance and the profitability... communication that we will be giving and we have given in the past regarding 25 is on the reported side so our objective is always to be meeting that both on the returns a ratio perspective and a nominal perspective this is what we did so kind of nothing to write home about there that produces the future Robert also on the long growth

As we were going into the fourth quarter, we were well above our target of $3.5 billion by some margin, and therefore there was no real urgency on pushing forward. Naturally, we have been slowing down a little bit in the fourth quarter, so that we will be in a position to have a very strong Q1. So, nothing to think about the Q4. great expansion, especially on the CAB, other than that the trend is very strong. We have a very strong pipeline. And as we will come up with new guidance on the 5th of March, in our Capital Markets Day, you will see this coming through. Very helpful.

Thank you.

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

Hello, I have a question on your capital distribution. If you could comment on how you think about the mix of cash dividends and buybacks going forward in light of the strong performance of the shares recently. That's the first one. And the second question on the net interest margin, do you see the name stabilizing going forward? Is Q4 a good run rate for the coming quarters? Or do you see any additional headwinds coming through? Thank you.

Gabor, hi. I mean, on capital distribution, you know, the way we are right now, we think cash. So that's what, you know, we're planning for 26, and this is how we strategically look to, you know, conduct ourselves in the future.

And on the NIM Gabor, indeed, I think we're reaching a point given the interest rate status and what we're seeing on spreads where NIM is finding its lows. There are some tailwinds actually on the ratio that we'll be discussing next week, but I'll refer you to the 5th of March for those.

Right, thanks so much. Just another quick one on your capital ratio. I think you had a valid case for increasing your payout, the CET1 ratio slightly dropped below 13. How would you think about steering your capital going forward? Are you looking to build it up to 13 or above? Or is there now a possibility that you stay maybe a little bit below that?

Gabor, look, I think this is a franchise that generates earnings. It's a high-yielding one, high distribution one, and generates capital as well. We have been talking about our strategic direction and philosophy on distributions and rewarding our shareholders. In the future, as we generate more capital, we will be following the same strategic direction. We will come with specific guidance on the Capital Markets Day. Our philosophy is this is a capital accretive franchise and we have to be delivering back capital to our shareholders. Brilliant. Thank you.

The next question is from Nelly Simon with Citibank. Please go ahead.

Thanks for the opportunity. First question would be on the losses from participations or impairments. Can you just elaborate on what the nature of those one-offs are? A second question would be on the increase in bank assurance fees. I guess that's with existing insurance partners. How do you see that transition from existing insurance partners to Ethniki occurring and the impact it might have on that line? Those would be my two questions. Thank you.

Hi, Simon. Yeah, the one-off part of the adjustments on associates had to do with a particular case that exists in our book. We saw some market intrinsics, some market information. that led us to do a one-off valuation adjustment on the particular exposure. As I said, this is a very one-off situation. This does not prelude to any further such one-offs. It was something that we found an opportunity to do now so that we can have a clean horizon ahead with no kind of gray areas or question marks. 35 million was the one-off adjustment that we had done on the equity side. You can find it on page, I believe, 52. So on the bank of fees, yeah, it was a strong quarter. Generally, a bank as a franchise, we know that Preos is running the strongest bank of sales. Quarter 4 was particularly strong. It is with the existing partners that we've got. The arrangements that we've got with the two bank insurance partners are, of course, active, and it's a testament of how the network continues to produce insurance regardless of other things that might be happening on the side. The particular line, I think we will see it next week in conjunction with a lot of other things that are affecting the future overall of the group when it comes to insurance sales. and insurance revenue. So we'll just hold on for another week. Thanks so much.

The next question is from the line of Novel Shed Asia with Bank of America. Please go ahead.

Hi, thanks for taking my questions. So one question on your interest expense paid on deposits. So I can see that it's constant in the quarter. So as far as I know, that relates to both the actual expense on deposits and also the hedge impact. And both of them seem to be constant. Or I would have expected both of them to have a positive impact. So, maybe if you can tell us how we should see interest expenses on customer deposits developing from here, maybe split between the two impacts. And then, again, if I stay on the hedges, if I look into the Excel dataset on the NII section, I see big changes in the non-maturing deposit hedging cost. which is kind of offset by a similar change in the IRS liability side. So maybe if you can tell us what has caused that, because the change is around $90 million in each of the lines. And maybe finally, one more on the hedges. So you started with $10 billion. You have about $9 billion now. So how can we expect the portfolio to develop throughout this year? Thank you.

Kyle, overall, the deposit cost, as you saw, we have netted out and well pointed out with the NMDs. It's on 29 base points right now. It is a flat situation. There's multiple, I would say, minor movements there. But, you know, for the future, I know we're trying to keep the line, but you guys keep coming back on guidance for the future. But for the future right now, what we can tell you is that it's a stable outlook. So if you want to make an assumption, I think that's a fair one. My answer to your hedging question from a strategy perspective, it depends a little bit on our outlook on interest rates, so we will be discussing that next week. I've said many times when – One believes that you have reached a terminal level of interest rates and those positions stop having value or you're free to kind of materialize and monetize the value that these carry. But, again, let's discuss this more next week. Thank you.

The next question is from Rano Suvleros-Andreas with Eurobank Equities. Please go ahead.

Hello from my side and congratulations for the results. I have one quick question which is regarding the calendar provisioning that is around 300 million, if I'm not wrong, and remains a meaningful drug on the common equity to run ratio. So could you please clarify under what timeline or condition this is expected to be reversed?

Hi Andrea, thank you for the question. Indeed, it is of course part of the capital reduction that you use for following the calendar provisioning guidance. It will reduce over time the expectation that I would say we do it rapidly, probably around the 50% mark over the next five years. Part of the recovery strategy, that's the way calendar works. You front load and then eventually at recovery, hopefully you release. Okay. Thank you.

The next question is from Gilde Santivane, Fernando, with Intesa, Sao Paulo. Please go ahead.

Thank you for taking my question. This is a very general one regarding the latest Supreme Court ruling the last Feb of February on interest payments. Can you give us some views on the balances the bank has and what potential impact might we see and if this ruling is to be appealed by banks or not? Anymore would be very helpful. Thank you very much.

Thank you, Fernando. Let me start on the Caccelli Law by saying that the Caccelli Law served its purpose, I would say, when it was legislated in 2010. If you look at the exposures that we have in our book right now, and Theo will follow up with the numbers, all the Calcelli law exposures that we have in our balance sheet are stage one paying loans and performing, which means that there was some good work done out of his law. We are monitoring this decision and also we have to wait, I'm afraid, for the final script because details matter. But we can give you an outlook of what we have in our books and what that could potentially mean. So, Theo? Yeah.

So, Fernando, the overall book that we've got right now on the balance sheet of such loans is about 50 million. Obviously, depending on how the decision will be scripted, there might have to be adjustments there, which is a percentage of that. We have a hypothesis, obviously, which is being budgeted within 2026 that will be included in the guidance we give out next week. But you understand it's a percentage of $50 million, so actually it's within the margin of error of any cost of risk estimation for the future.

Thank you. As a reminder, if you would like to ask a question, please press star and one on your telephone. The next question is from with UBS, please go ahead.

Good afternoon. You've answered most of my questions, so just on follow-up on the Katsili loans, the reading there, obviously outlining your own exposure, but do you have any views of what this could mean for the industry? I suppose most of these loans are sitting in the securitization structures, if you have any views on that.

Stefan, again, we need to wait for the actual detailing because, you know, the impact might range a lot, obviously. It's a cash recovery question of the securitizations. It doesn't concern Biro's Bank or the banks overall, given the fact that these loans are deregulized. But in terms of the overall recovery outlook of HABs and what that means, this is to be seen as we see the details. Overall, the outfits are producing cash reserves. the overall recoveries that come out of these loans are a percentage. I would say a small percentage of the expected recoveries. We'll see what that means for this phase for the future. But overall, I think for the bank's balance sheets, no effect. Thanks very much. Thank you.

Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to Mr. Magalu for any closing comments. Thank you.