Eurobank Ergasias Svcs

Ladies and gentlemen, thank you for standing by. I'm Konstantinos, your chorus call operator. Welcome and thank you for joining the Eurobank Holdings Conference call to present and discuss the third quarter 2023 financial results. At this time, I would like to turn the conference over to Mr. Fokion Karavias, CEO. Mr. Karavias, you may now proceed.

Thank you. Ladies and gentlemen, good afternoon and welcome to the Eurobank 9-month 2023 results presentation. Together with me is our CFO, Haris Kologiannis, and the investor relations team. We will start with some key recent developments, then present our results and answer your questions. In an environment of weak European growth and geopolitical turmoil, the macroeconomic outlook of our three core markets stands out. Economic growth in Greece is expected around 2.5% for this year and the next, a multiple of the EU average. The government is committed to fiscal discipline, with primary balance increasing from 1% this year to 2% of GDP in 2024. Growth prospects, solid public finances, together with the strengthening of the banking sector balances were the primary drivers for the sovereign's return to investment rate. Economic sentiment remains positive. Tourism had a record year, unemployment ratio further decreases, and real estate prices remain resilient. Investments play a key role in the growth of performance, and Greece aims to close the gap in gross capital formation as a percentage of GDP with the European average. accelerated investments will be one of the catalysts for faster loan growth in the next years, as also confirmed by the number of projects already submitted to the RRF scheme, now in excess of €20 billion. Now, let's hear our financial results for the nine-month period, as highlighted on slides 5 to 9. Eurobank had a strong performance across segments and geographies. net profit, excluding one of gains, reaching €916 million. As a result, tangible book value per share increased by 21% year-on-year to €1.97, while the return on tangible book value reached 18% in the nine-month period. In more detail, net interest income remained on a strong trend increasing further by 3% on a quarter-on-quarter basis and 55% year-on-year. This was driven by higher URI rates, while the deposit's beta increase remains moderate. Fees, despite a weaker third quarter, increased by 6% year-on-year, which is in line with the trend expected for the full year. The cost-to-income ratio remains low at 33%. As a result, core pre-provision income was up by 72% year-on-year. Core operating profit reached €1.1 billion, up by 85% year-on-year. Our regional operations continued their strong performance nine-month period, more than double on an annual basis. Bulgaria's contribution increased to €150 million and Cyprus to €170 million. The Cyprus figure also includes the Hellenic Bank quarterly contribution of €30 million. Asset quality remains resilient in the third quarter. More specifically, We reached an NP ratio at 4.9%, while coverage remained at 75. The cost of risk ratio was 84 basis points in the nine-month period, in line with our full-year guidance. And our fully-loaded Z1 ratio rose to 16.8% in the nine-month period, up by 260 basis points year-on-year. while the total capital ratio to 19.5%. With our capital ratios well above the internal targets, we aim to utilize excess capital along three pillars. First, to finance loan growth. Although the credit expansion this year is below our initial expectations, this is due to loan repayment. and high interest rate rates, we expect that it will recover in 2024 onwards. Second, to fund M&A opportunities, enhancing our business franchise. In this context, we have signed agreements to increase our stake in Hellenic Bank of Cyprus to 55% from 29% currently, subject to regulatory approvals. This transaction should consume roughly 80 basis points of our capital, and it is EPS accretive. Third, to reward shareholders. In this respect, the share buyback of the HFSF shares was completed, leading to EPS accretion for shareholders. Furthermore, as previously discussed, we plan a dividend payout ratio of at least 25% out of 2023 profits. Overall, the bank is on a solid trajectory and the nine-month results point to upgrading our full-year estimates as shown on slide 10 to achieve a return on tangible good value of 17% for the full year 2023. At this point, I would like to ask our CFO, Haris Kokonoyanis, to present our nine-month results before opening the Q&A session. Thank you, Fakir.

Let's now provide more insight on the third quarter results, starting on stage 19 on lending growth. Performing loans increased organically the nine-month figures by €700 million, still below our expectations. In terms of disbursements, fourth quarter appears to be the strongest of the year, driving the full-year net credit growth to more than €1 billion. Group deposits recorded a solid third quarter, increasing by 600 million euro, as shown on page 20. As a result, net long-term deposit ratio decreased to 72%, while LCR ratio reached 171%, as shown at the left of page 21. As regards managed funds on page 23, in parallel with the positive trajectory, wealth sector continued its strong performance. Year-to-date, managed funds increased by €800 million and private banking assets and liabilities by €1.6 billion. Moving to profitability on page 27, net interest income increased quarter-on-quarter by 3.4% to €558 million. NII has been boosted by the further euro-bond increase and the SE growth. On the other hand, it has been affected by the cost of core deposits interest rate hedging. This initiative aims at reducing significantly our NIA sensitivity in the downward side of interest rates. On a year-on-year basis, NIA is higher by 55%. On page 28, commission income is higher year-on-year by 6.2%. In the third quarter in particular, all three lines are up, with the exception of lending fees, mainly due to the seasonal low on disbursements. Full year outlook points to a mid-singlet growth, which is better than our projections. Operating costs are almost flat in Greece, despite inflationary pressures. On a group basis, costs are higher by 5.9%. The increase is driven by AC operations, namely salary adjustments and the incorporation of BNP in Bulgaria, as well as the goal life of the new core system in Cyprus. Finally on this page, cost to core income ratio has been improved year on year by 10 percentage points, decreasing to 33%. On page 31, we summarize operating performance for the nine-month period. Core PPI is higher year-on-year by 72%, up to 1.33 billion euro, driven by the BOR effect, higher loan and bond volumes, better commissions, and higher core income from SCE, offsetting lower TLPRO income and higher MRL costs. Low-loss provisions for the period amounted to 255 million euro, or 84 basis points. As a result, core operating profit is higher year-on-year by 85% at 1.08 billion euro. Furthermore, there is a 30 million euro additional income, which is recorded for the moment as income from associates. This corresponds to the quarterly performance of Hellenic Bank for our 29% participation. The above constitutes a 10% accretion to our quarterly EPS. Upon reception of regulatory approvals, Hellenic Bank results will be consolidated line by line. Moving on to asset quality on page 33, NPE ratio fell below the 5% mark at 4.9%, while coverage increased to 75%. This is the result of accelerated write-offs and the contained NP formation of 27 million euro. Moving on capital and on page 38, our fully loaded C2R ratio increased quarter to quarter by 30 basis points to 16.4%. This is driven by circa 50 basis points organic growth, while the impact of HFSF sales buyback is also included. Furthermore, taking into account the upcoming synthetic securitization, the pro forma fully loaded CQR ratio amounts to 16.8%. Finally, on capital end of page 39, our total CAD ratio stands at 19.5%. The overall nine-month performance points to a further upward revision of our full year 2023 financial targets as shown on page 10. Core PPI is now expected to be at circa 1.8 billion euro and core profit at 1.4 billion. NPI ratio is anticipated at circa 4.5%. Fully loaded CP1 updated outlook is above 17%. Finally, return on tangible value is now estimated at circa 17% and TPS higher than 30 cents. This completes my presentation and we may now open the floor for your questions.