Eurobank Ergasias Svcs

Ladies and gentlemen, thank you for standing by. I am Mina, your Chorus Call Operator. Welcome and thank you for joining the EuroBank Holdings Conference Call to present and discuss the full year 2024 financial results. At this time, I would like to turn the conference over to Mr. Joaquin Carabias, CEO. Mr. Carabias, you may now proceed.

Ladies and gentlemen, good afternoon and welcome to our call. Together with me is our CFO, Haris Gokologiannis and the Investor Relations Team. I'm starting the call with a quick review of the 2024 performance and then focusing on our business plan and the financial targets for the years 2025 to 2027. Haris will give you more details on the business drivers for the three-year period. And finally, we will answer your questions. For Eurobank, 2024 was a year of exceptional organic growth and transformational M&A activity. We outperformed all targets initially set for the year, as highlighted on pages 5 to 10. Value creation was outstanding, with return on tangible book value reaching 18.5% and earnings per share at 39 cents. Our net profit reached a new record, close to 1.5 billion euros, of which almost half was generated outside Greece. With respect to Hellenic Bank, we are practically controlling 100% of its share capital quite earlier than initially anticipated, and our regional presence is further enhanced by the acquisition of CNP insurance in Cyprus. Volume growth outperformed across the board, with the fourth quarter in particular being extraordinary. More specifically, for the full year, loans expanded by almost 4 billion euros and deposits by more than 6, while managed funds and private banking grew at high double-digit rates, 38 and 18 percent respectively. Capital levels remained strong, with ratios ending the year as expected. This was achieved despite the full participation in Hellenic Bank's share capital and stronger loan growth than initially assumed. Asset quality improved further, with the NP ratio declining to 2.9%, while coverage increased above 88%. This exceptional performance results to a substantial increase of the shareholder rewards, with payout 50% of our 2024 profits, up from 30% in the previous year. The 674 million euros total payout includes 10.5 cents per share cash dividend, and 288 million euros share by back program to be approved by the AGM in April. Now let's move into our business plan for the three-year period 2025 to 27. On page 11, we summarize key assumptions. Economic growth is expected to remain strong for our three core markets, in the area of 2 to 3 percent, well above the European average. This affects positively all key economic metrics, such as unemployment, real estate prices, investments, all feeding into a solid credit expansion. As for interest rates, we assume a gradual decrease of the ECB deposit facility towards 2 percent by the end of 2025. The key goals for the 2025-2027 business plan are summarized on page 13. Our key objective is to achieve a sustainable return on tangible book value of 15% throughout the business plan period. We focus on three pillars of growth. First, credit expansion is expected to continue both domestically and outside Greece. with loans overall growing by 7.5% annually. This rate of growth is a multiple of the average for European banks. Second, wealth management and insurance, which are the biggest drivers for fee growth in the next years, become strategic priorities. Private banking and managed funds will grow by 15% per annum, Fees from wealth management and insurance should grow by 30% per annum. Third, we are capitalizing on the recently completed acquisitions in Cyprus. The merged Hellenic with Eurobank Cyprus becomes the largest bank in terms of assets and provides significant synergies. The CNP insurance acquisition creates the largest insurance provider in the country and the ability to explore the untapped back assurance potential. The organic growth combined with the benefits from the recent acquisitions ensure that the return on tangible book value ratio will be sustained at 15% in the next years, even in a lower interest rate environment. As shown on slide 14, this is translated into value creation through a tangible book value per share, steadily improving year after year, and also increased shareholder rewards. In the three-year period, the payout ratio will be at least 50%. For the purpose of this business plan, 50% is the figure assumed. Under this assumption, the cumulative payouts in the next three years will exceed 2 billion euros, and this compares with 1.1 billion euros in the period 2022 to 2024. The business plan was built on the three pillars of growth already described. Furthermore, as shown on slide 15, in case any M&A opportunity arise, not only in banking but also in insurance and asset management, we have an envelope of 300 basis points or over of 1.5 billion euros of capital capacity as well as managerial expertise to pursue them. It is clarified that such future M&A opportunity are not included in the business plan. So, concluding, we have established a track record of consistently delivering our plan and exceeding our targets. We possess a well-diversified regional business model and operate in a high-growth area within the Eurozone, following a record year in 2024, which established a robust base to build upon, the bank's prospects remain highly promising for 2025 and the three-year period from 2025 to 2027. At this point, I would like to ask our CFO to present our business plan in more detail.

Thank you, Fakio. Before starting, let me update you about the latest developments and next steps regarding Hellenic Bank, as shown on page 17. We recently completed the acquisition of an additional 37.5% stake, hence we currently hold 93.5%. Following that, we are submitting a mandatory tender offer to the remaining shareholders of Hellenic Bank upon the completion of which we intend to exercise our squeeze-out right, reaching 100% of Hellenic Bank's share capital. In parallel, We are initiating the legal mergers process between Eurobank Cyprus and Hellenic Bank, aiming at its completion in the third quarter of this year. This will pave the way for setting forth the operational merger and for accelerating the synergy realisation, which, according to our current estimates, may reach €120 million per annum. A significant part of them, circa 40% of total, should be anticipated within 2025, reflecting also initiatives which have been already launched or completed. Furthermore, our regional presence is also enhanced by the acquisition of SEMPE Insurance Cycle, a transaction which is expected to close over the next few weeks. Let's now provide more details about our budget and three-year business plan, starting from the evolution of loan volumes on page 21. Following a record year, and in particular an exceptional Q4, loans are expected to maintain a strong growth momentum, increasing by circa 3.5 billion during 2025 and by more than 11 billion in the three-year period. This translates to an annual average growth rate of 7.5%. In Greece, corporate is anticipated to increase by a solid 8% annually, mainly powered by investments in infrastructure and concessions, energy production and storage, manufacturing and tourism. Furthermore, in Greece, retail is gradually recovering. In mortgages, the combination of the recent state initiative and the increased housing construction activity addressing partly the supply problem may spare a segment that we have a leading position. In addition, consumer lending is anticipated to accelerate its growth pace, driven by further penetration of digital channels, embedded finance initiatives, and higher car loan activity. As regards Bulgaria, it is expected to grow annually by a double digit ratio, or by 2.9 billion over the business plan period, out of which 40% driven by mortgage loans and the rest by business and consumer loans at similar rates. Loans in Cyprus are forecasted to increase on average by circa 7% per annum, or for the three years by 1.7 billion. Growth is 80% driven by corporate lending, including the participation in European syndicated transactions. Group deposits on page 22, following an exceptional 2024, with a double-digit growth rate and an outstanding Q4, they are anticipated to increase annually by 3% on average. On the left part of the page, and on MREL, we present the issue schedule. But let me also note our plan to call a legacy €950 million tier 2 later this year. Moving on spreads, on page 23, Lending spreads erosion increase is expected to continue but decelerate, ranging on average at 10 basis points per annum, as the market competition in business lending should be partly offset by the lower base rates abating the pressure on spreads and the new disbursements in consumer lending. Furthermore, in Greece and in deposit cost, we have assumed the pass-through rate to remain stable in 2025 at 24%, decreasing slightly to 22% in 2026 and 2027, mainly reflecting mixed improvement and time deposits repricing. In Bulgaria and Cyprus, lending spreads are expected to remain flatties in 2025 and then moderately increase, mainly driven by new production in corporate and the impact of base rate instead of Euribor indexed loans of Hellenic Bank. Furthermore, deposit beta in Southeastern Europe should slightly decrease in 2025, as the time to total deterioration is technically offset by the full-year effect of Hellenic Bank's low beta to the relevant index. Finally, as regards group net interest margin, It is anticipated to decrease by circa 20 basis points in 2025, mainly reflecting base rates trajectory, and move around 250 basis points in 2026 and 2027. The evolution of interest income drivers, as explained above, are reflecting on our NII evolution shown on page 24. Specifically, net interest income is expected to remain unchanged in 2025 at €2.5 billion. As the impact of the Euribor decrease, lending spreads decline and high MRL costs are offset by strong loan growth and the full-year consolidation of Hellenic Bank. In the following years, NII should increase as the volume growth and deposit beta improvement offset the negative impact of Euribor spreads and MRL. Moving on fees and commissions from page 25, for 2025, we anticipate group commissions to increase further to 740 million euro compared with 666 million euro in 2024, which included an exceptional Q4 performance. For the three-year period, we expect an average annual growth rate of circa 8%. driven primarily by wealth management, followed by retail fees in Cyprus and Bulgaria. As regards insurance, CMP, in combination with the current insurance business of Hellenic Bank, are forming a leading insurance provider in Cyprus. Furthermore, in Greece, our constructive and long-term cooperation with Eurolife sets the stage for significant upsides of bank insurance fees in the local market. In wealth management, the fee growth is substantiated by coherent strategy, which is analyzed on page 18. More specifically, our strategic initiatives include significant investments in putting in place a new IT system in Luxembourg and Cyprus. Attraction of senior RMs with international experience. Strategic partnerships with global asset managers, such as Eurizon and JP Morgan. set Luxembourg as the group's private banking center, overseeing servicing points in Greece, Cyprus, and London. And finally, exploration of growth to new markets in Southeastern Europe and East Mediterranean. Deploying our strategic plan, we envisage to reach 13 billion Euro managed funds and 18 billion customers' assets liabilities in 2027, translated to revenues of circa €220 million. Back on page 25, the second largest fee growth area is Retail Commission Cyprus, taking advantage of the underpenetration of fee-businessing Hellenic Bank customers, as well as in Bulgaria, driven by the further exploitation of the ex-BMP clientele. For wholesale lending fees, Following a very strong 2024, driven by record new lending, we anticipate remaining flatties in 2025 and slightly increase in the following years of the business plan. Overall, group fees are expected to reach €850 million in 2027, representing 80 basis points over assets and 24% of total income. For Greece, These KPIs should be 85 basis points and 28% respectively. Moving on to operating expenses on page 26, it appears that cost management will continue being a challenging exercise for two reasons. First, we accelerate IT investments, which now exceed €0.5 billion for the period 2025-27, mainly related with further digitization of customer journeys, new core systems in Cyprus and Luxembourg, preparation for your adoption in Bulgaria, embedded banking, transition to cloud, and the gradual introduction of GenAI. Second, the inflationary context and the increasing demand for talent exercise pressure for higher remuneration. as well as for new hires, especially on areas where the group intends to maintain a competitive advantage. Against this backdrop, we have planned and already realizing savings in around-the-bank costs, aiming at keeping G&As flat throughout the business plan period. Overall, our total cost base is anticipated to increase by an annual rate of lower than 5%. enabling cost-to-core income ratio to stay below 40% for the period of the plan. On asset quality and on page 27, despite the favorable macro environment in our core countries, we continue to be prudent on cost of risk and coverage. Specifically, in line with our counter-cyclical approach, cost of risk, decreases modestly in 2025 to 60 basis points and further to circa 50 basis points in 2027. Such approach is also reflected to our MPE coverage, which is expected to fluctuate around 75% throughout the business plan period. As regards MPE ratio, we anticipate to be below 3% at the end of this year and circa 2.5% in 2027. Finally, on capital and on page 28, in 2025, organic capital generation fully offset the impact of high single-digit asset growth, 50% payout, the capital effect of S&P acquisition, and the regulatory headwinds related with Basel IV. For 2026 and 2027, CTO ratio accruing for payouts should be around 16%. This translates to a buffer of an OCR at the area of 330 basis points throughout the business plan period. Concluding this presentation, our diversified business model ensures sustainable profitability through the interest rate cycle, as shown on page 19. Specifically, despite envisaging a significant drop of Euribor, our core profit remains resilient, reaching 1.7 billion in 2025 and circa 1.9 billion in 2027. In parallel, revenues will be further diversified, with the share of profits outside Greece increasing to 55% of total by the end of the planned period. This completes my presentation, and we may now open the floor for your questions.