Eurobank Ergasias Svcs

Ladies and gentlemen, thank you for standing by. I am Vassilios, your chorus call operator. Welcome and thank you for joining the Eurobank Holdings Conference call to present and discuss the third quarter 2024 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 nine-month 2024 results presentation. Together with me is our CFO, Haris Kokologiannis, and the investor relations team. We are starting with some keys and developments, then presenting our results and answering your questions. In our region, the macroeconomic environment remains positive, despite a challenging EU outlook, with GDP growth in Cyprus at 3.3 percent, the second highest in Eurozone, 2.3 in Greece, and 2.1 in Bulgaria for 2024. In our home market, the economy should continue expanding above 2 percent for the next couple of years at least. Furthermore, Greece also stands out among the European countries in terms of fiscal discipline, with a primary balance comfortably above 2% of GDP in 2024 and 2025. The positive economic sentiment is supported by a number of factors, including tourism, which had another strong year, the unemployment ratio further decreasing, and residential real estate prices remaining strong at 9.2% year-on-year growth. The investment's contribution to GDP, although it needs to improve further, follows a positive trajectory, having increased to 15% from 11% in recent years. Investments are one of the main drivers of credit expansion, which for the sector is 6.6% year-on-year so far in 2024, higher than expectations. For Eurobank in particular, organic loan growth reached 2.1 billion euros, almost meeting the full year target, while the fourth quarter is also expected to be strong. As such, Eurobank may reach close to 3.5 billion euros loan growth for the full year. The lower interest rate outlook and the gradual RRF disbursements of projects already contracted support the credit expansion in 2025 as well. Moving now to Eurobank results. For the first time, we consolidate the lending bank line by line. On slide seven, it shows that the group has reached a balance sheet size of 100 billion euros, 50 billion euros of loans, and 75 billion euros of deposits, with a well-diversified presence, 60% of assets out of Greece, 27 in Cyprus, and 11 in Bulgaria. In terms of profits, The split is quite similar, 57% to 43% in favor of Greek business. The profit contribution of the business outside Greece is expected to increase in the following years, given the upside potential from the Hellenic Bank acquisition. More specifically, on Hellenic Bank, a new management team has been appointed in September, already working on a new business plan. We intend to discuss a detailed picture of the Hellenic Bank outlook and synergies potential early next year when we present our full year 2024 financial results. Besides synergies, further upside from Hellenic Bank will come from increasing our equity stake beyond the current 56%. In this context, we announced earlier today an agreement to acquire an additional 12.8% stake subject to regulatory approvals. Now, let's look at our financial results for the nine-month period, as highlighted on slides five to nine. The strong performance across segments and geographies continues, with net profit reaching 1.14 billion euros. As a result, the tangible book value per share increased to 2 euros and 27 cents, up 5% quarter-on-quarter, while the return on tangible book value exceeded 19% in the nine-month period. In more detail, net interest income increased further by 14.3% year-on-year, including the effect of the lending bank. Fees increased by 12% year-on-year. Operating costs remained flat on an annual basis in Greece. and up 1% only for the total group, excluding the effect of the Hellenic Bank consolidation. The cost-to-income ratio remains low at 33%. As a result, corporate provision income was up by 14.6% year-on-year, or 6.2%, excluding the Hellenic Bank effect. Asset quality remained resilient for one more quarter. More specifically, the NPE ratio dropped below 3% at 2.9, with coverage remaining at 90%. The cost of risk ratio was 68 basis points for the nine-month period. Co-operating profit reached 1.3 billion euros, or up by 20.5% year-on-year. Net profits from our regional operations reached half a billion euros. Now, on volumes for the nine-month period, we already discussed the loan volumes that were very strong. Equally strong were deposit volumes that increased by 2.3 billion euros, while managed funds and private banking increased by 1.4 and 1.9 billion euros, respectively. Our fully loaded SET1 ratio rose to 17.8 percent, while the total capital ratio to 20.9 up by 100 and 140 basis points year-on-year respectively. Now, as our CFO will explain in detail, the bank is adopting an accelerated DTC amortization path 2025 onwards. In this context, we may consider increasing the payout ratio from 40% previously up to 50% payable in 2025 of the 2024 profits. At the same time, the bank maintains a significant capital buffer, which is used to fund asset growth, support higher payouts, and finance M&A opportunities in banking, insurance, and asset management. To conclude, the bank remains on a solid growth trajectory, and the nine-month results allow us to further upgrade our full-year estimate for return on tangible book value from 16.5% to 17.5%. Going forward, our key objective is for a sustainable return on tangible book value of 15% through the cycle, even in a lower-rate environment. taking into account the full benefits of the Hellenic Bank acquisition. At this point, I would like to ask our CFO, Haris Kokkologiannis, to present our nine-month results in detail before opening the Q&A session.

Haris Kokkologiannis Thank you, Fokion. Before start, let me refer to the accounting treatment of Hellenic Bank. This quarter includes, for the first time, a line-by-line consolidation of Hellenic Bank's balance sheet and Q3 results. It also includes, as income from associates, our share of Hellenic Bank's second quarter profits. Let's now provide more insight into the nine-month results, starting on page 22 on lending growth. Including Hellenic Bank, our group gross loans amounted to 50.4 billion euro organic growth accelerated in the third quarter reaching 1 billion euro and for the nine months 2.1 billion almost meeting our full year target the increase was mainly driven by large corporate structure finance and shipping in greece and all sectors in southeastern europe for the full year 2024 And based on the current pipeline, organic growth is expected to be close to €3.5 billion, which exceeds by more than €1 billion the initial target. On page 23, group deposits, including Hellenic Bank, amounted to €74.6 billion. Quarter on quarter, deposits increased organically by €1.1 billion. and year-to-date by 2.3 billion, mainly due to retail sector in Greece and Southeastern Europe. Net loan-to-deposit ratio reflecting Hellenic banks surplus liquidity rebates to 65.8 percent, while LCR ratio increased to 187 percent as shown at the left of page 24. As regards managed funds on page 26, In the third quarter, wealth sector continued its growth pace. Year-on-year, managed funds increased by €1.7 billion, or 34%. Private banking customers' assets and liabilities reached €12.8 billion, increased by 20% year-on-year. Both KPIs have already exceeded their respective full-year targets. Moving to profitability on page 30, year-on-year, NII is higher by 14.3% and excluding Hellenic Bank by 4.8%. Quarter-on-quarter, net interest income is higher by 24.4% to €698 million due to Hellenic Bank consolidation and the higher loan and bond volumes, which offset the impact of the lower URIBOR and the higher MREL and deposit costs. Finally, net interest margin for the first nine months of the year amounted to 281 basis points. For the full year 2024, NEM is expected to be at similar levels and almost 20 basis points higher than the budget target of 260 basis points. Moving on fees on page 31. Year on year, commissions are higher by 11.8% and excluding Hellenic Bank by 6.1%. As regards the quarterly reading, this is higher by 21 million euro or 14.2% versus the previous one, as it includes Hellenic Bank and the strong organic performance. Specifically on the latter, fees like for like were almost at par with the previous record high mark, mainly driven by solid platform and wealth management activity. Finally, as shown at the right part of the page, the fee-to-assets ratio gap between Greece and Southeastern Europe demonstrates the opportunity for fair revenue growth in the region. On page 32, operating costs are stable year-on-year in Greece, as the discontinuous of resolution contribution and savings of random bank costs offset the introduction of variable compensation and higher IT spending. On a group and like-for-like basis, costs are slightly higher year-on-year by 1%, as shown at the left part of the page. Furthermore, the consolidation of Hellenic Bank added €62 million to our cost base. This translates to circa 250, 260 million Euro annualized OPEX, which is the starting point for related synergies assessment. Finally, on this page, cost to core income ratio for the nine months amounted to 33.1%. On page 34, we summarized operating performance for the nine months of the year. Core PPI, including Hellenic Bank, reached 1.53 billion euro, and is higher year-on-year by 14.6%. Loan loss provisions for the period amounted to 229 million euro, or 68 basis points, compared to 84 basis points in the previous year. As a result, core operating profit amounted to 1.3 billion euro, higher year-on-year by 20.5%. Considering the nine-month figures and the current trends, we expect full-year 2024 core operating profit to exceed €1.7 billion versus higher than €1.6 billion in the previous guidance. Moving on to asset quality on page 36, NPE formation amounted to €50 million, a reading similar to the previous quarters, with asset quality dynamics broadly unchanged. NP ratio decreased below the 3 percent threshold at 2.9 percent, while NP coverage remained at the 90 percent area. Moving on capital and on page 41, our fully loaded C2R ratio increased quarter-on-quarter by 160 basis points to 17.8 percent as a result of organic profitability and of a domestic credit rating agency upgrade by the competent European authority. Considering the year-to-date accrued dividend, CTO ratio amounts to 16.9%. As regards total cut, and on page 42, our ratio for the third quarter amounted to 20.9% or 20.1% after dividend accrual. Finally, on regulatory capital, let me refer to the initiative of DTC prudential acceleration, as shown on page 43. As of September end, DTC to CTO ratio amounted to 36%, the lowest among peers. According to the current linear amortization path, DTC was expected to be eliminated by 2041. Given our strong profitability, In an effort to deal with the last legacy of the crisis and further improve our quality of capital, as of 2025, we will accelerate prudential amortization, adding on a DTC amount corresponding to the total payout amount of each year multiplied by the income tax rate. This way, DTC amortization is expected to accelerate materially, and be eliminated circa eight years earlier than the current trajectory. The acceleration of DTC amortization is made for potential purposes. It is expected to have an annual impact on regulatory capital between 15 to 20 basis points, but no effect in either the P&L or the tangible book value of the bank. Before concluding my presentation, let me also update you that the group intends to proceed to a merger between Eurobank SA and Eurobank Holdings within 2025 in order to achieve operational efficiencies and a linear group structure. It is anticipated that the merger, to be launched formally late in the year, will occur by Eurobank SA absorbing Eurobank Holdings and will be subject to customary approvals. We do not expect this action to have any material effect on the group's financial position and results. This completes my presentation, and we may now open the floor for your questions.