Eurobank Ergasias Svcs

Ladies and gentlemen, thank you for standing by. I'm Konstantinos Rakouris, call operator. Welcome and thank you for joining the Eurobank Holdings Conference call to present and discuss the third quarter 2025 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's nine-month result presentation. Together with me is our CFO, Halifo Koloyanis, and the investor relations team. We are starting with some key recent developments, then presenting our results and answering your questions. The macroeconomic environment remains favorable across our core markets, Greece, Bulgaria and Cyprus, which continue to outperform the EU average in terms of growth. In Greece, fiscal performance remains solid, with the debt-to-GDP ratio improving the most among EU member states. At the same time, investments continue to be a key driver of economic expansion. Bulgaria's adoption of the euro on January 1st represents a significant milestone in its economic convergence. These positive trends are supporting banking business overall and are reflected in sustained trade growth, with expansion rates reaching double digits in both countries.

Let's now focus on Eurobank's strategic initiatives.

As stated in the past, one of the pillars of our strategy is to diversify our income sources both geographically, across our core markets, as well as through our primary business lines, that is, banking, insurance, and wealth management. Milestones reflecting this strategy include the acquisition and integration of three banks in Bulgaria in the past, and more recently, the acquisitions of Hellenic Bank and CNP Insurance in Cyprus. The legal merger of the two banks in Cyprus was successfully completed on September 1st, and we are now advancing into the operational integration phase. Synergy realization is well underway, with the NEF initiatives implemented to date, capturing approximately 40% of the total targeted 120 million envelopes. As part of this strategy, we recently announced the acquisition of the remaining 80% of Eurolife's life insurance operations in Greece, as shown on slide 7. This transaction carries strong strategic importance, fully aligned with our vision of becoming a leading integrated banking and insurance organization. Eurolight was the natural partner for our group, given our long-lasting collaboration through the Back Assurance partnership. As such, we expect a smooth integration, which will strengthen our capacity to deliver integrated financial solutions to our customers. Eurolight has consistently demonstrated robust and recurring profitability. The acquisition is expected to increase client commission income by approximately 12%, or around 100 million euros, driving the contribution of insurance and asset management to over 30% of total fees. Additionally, the transaction will enhance return on tangible book value by about 100 basis points and earnings per share by 2 cents.

before any potential revenue and cost analysis. Slide 8 highlights our regional insurance presence.

Near Dini, Cypriolife commands a 30% market share in Cyprus and Eurolife holds 22% in Greece. In Bulgaria, we continue to operate successfully through a well-established back-assurance model cooperating with a major European partner. Now, let's move on to our financial results as highlighted on slides 5 to 12. Eurobank reported robust financial performance for the nine-month period, achieving an adjusted net profit of €1.58 billion and a return on tangible book value of 16.2%. In more detail, Net interest income was up by 4% year-on-year to 1.9 billion euros, stable quarter-on-quarter, while commissions were up by 24% year-on-year. Cooperation profit approached 1.3 billion euros, at par with the previous year. Loan growth continued unabated, with quarterly and nine-month net increases of 1.1 and 3.3 billion euros respectively, on track to exceed the revised full year target of 4 billion euros. Deposits were also up by 900 million euros quarter on quarter. And wealth management performance has been impressive with managed funds ending 900 million euros in the quarter and being up by 32% year-on-year, already exceeding the full-year targets. On our regional operations, performance was strong for another quarter, netting 557 million euros, or 53% of total, highlighting the group's diversified franchise. Cyprus net profit 370 million euros and Bulgaria 167.

Asset quality remained resilient for another quarter at the group level.

The set one ratio stood at 15.5% and the total capital at 18.9% following the legacy tier 2 call in September. So, in conclusion, the nine-month results confirm our strong track record to deliver organic results, as well as take inorganic growth initiatives. Going forward, our priorities are the operational merger of Eurobank Limited in Cyprus and the integration of Eurolight activities. on organic performance, the nine-month results were better than our initial plan. We now expect return on tangible book value roughly 1 percentage point higher than the original target, that is close to 16%, supported by higher NII and stronger fees. Our dividend policy remains unchanged, so we are distributing an interim dividend of 4.7 cents per share in a couple of weeks, actually on November the 12th, and overall, more than 50% of our profits for the year. At this point, I would like to ask our CFO, Hariso Kologiannis, to present our third quarter results before opening the Q&A session.

Thank you, Fakio. Before start, let me know that reported profit

has been affected by 25 million euro contribution to the schools' refurbishment project. This has been offset by the positive impact from additional negative goodwill related with the SEMPE insurance acquisition in Cyprus.

Let's now provide more insight into the third quarter results. Starting on page 21, on lending volumes. The group continued its solid growth trajectory with 1.1 and 3.3 billion euro in the third quarter and nine months respectively.

Corporate loans in Greece and mortgages in Bulgaria were the primary drivers of this increase. In Greece, there are signs of increased activity for mortgage lending, as we are experiencing net growth for a second consecutive quarter, along with an acceleration in consumer lending.

Given these trends and the current pipeline, the full-year loan growth is projected to be at least 4 billion euro. Group deposits on page 22 increase in the third quarter by 0.9 billion, mainly due to retained deposits in Greece with positive contributions from Bulgaria. The loan-to-deposit ratio on page 23 remains stable at 67%.

while the liquidity coverage ratio reached a healthy online 180%, despite the legacy €950 million tier 2 cost.

As regards Manas Funds on page 25, as of September end, Manas Funds reached €9.3 billion, exceeding the previous target. More specifically, in the third quarter, wealth sector accelerated its growth pace,

Quarter to quarter, managed funds increase by 800 million euro and year-on-year are higher by 2.2 billion or 32%. Price-backing customers' assets and liabilities amounted to 14 billion euro up by 10% year-on-year.

Moving to profitability on page 29, on a year-on-year basis, NII is higher by 4%. Quarter on quarter, net interest income remained stable, as the impact from the lower Uribor, by circa 25 basis points, and lending spread decrease in Greece and Bulgaria, was fully offset by the higher loan and bond volumes. The net interest margin for the nine months stood at 246 basis points. Moving on fees on page 30, This quarter matched previous period's record performance with a rating of €193 million. On a year-on-year basis, commissions are higher by 24%. Fees over asset ratio stood at 75 basis points for the Group and 84 basis points for Greece. On page 31, Group operating cost increased by 6% on a light-for-light basis, with Greece expenses rising by 6.8% due to higher IT spending and staff remuneration. The cost-to-core income ratio for the 9 months was 37.8%.

On page 33, we summarize operating performance for the 9 months of the year. Core PPI reached €1,529,000,000. stable year-on-year. Low-loss provisions for the period amounted to €238 million, or 61 basis points in line with our plan.

Consequently, core operating profit reached €1,292,000,000 at par with the previous year. Moving on to asset quality on page 35, NPI ratios stayed at 2.8%, with coverage rising further to 94%. On capital and on page 39, organic profitability contributed 67 basis points to the C2R ratio, which remained stable quarter on quarter, absorbing the impact of strong asset growth, payout accrual, and BTC amortization. The total cut ratio on page 40 decreased by 90 basis points to 18.9% after the €950 million legacy tier 2 call. In conclusion, during the third quarter, the group maintained a strong performance momentum, driven by high lending growth, increased deposits and assets under management, and solid profitability. Net interest income, who are stable quarter on quarter, has low net bond growth of set low base rates, while fee income remains strong across all segments. Based on the performance over the past nine months, the group anticipates surpassing its 2025 revenue targets.

Additionally, the return on transit book value for the year is now projected to be approximately 100 basis points higher than the planned 15% level. This completes my presentation and we may now open the floor for your questions.

The first question comes from the line of Keneni Gabor with Autonomous Research. Please go ahead.

Thank you for the presentation. First one would be on NII, which interestingly stabilized in the first quarter. Shall we see this as a kind of inflection point and going forward, do you think that your NII will possibly switch to growth mode together with loans and securities? That's the first question. Second question would be on the payout, which I believe you indicated could be above 50%. Could you be possibly a bit more specific here and indicate how high could this possibly get? And the third question is a Eurolife deal, another substantial deal from Eurobank. Having, once you close the deal, and I guess you tied for this 170 basis points capital impact, do you see yourself as fully utilizing your capital surplus, or do you view Eurobanks to have any access left post-competition? Thank you.

uh let me take the first and the third question if i have understood well the third question because the line is not so clear and then um what you may elaborate on the on the um payout issue um as you saw nia was indeed flat quarter of quarter and four percent up year-on-year. So, in this context, it is expected to easily exceed the 2.5 billion budget target, assuming, of course, that rates will remain at 2% until year-end. And this is due to higher loan and bond volumes and better wholesale funding costs. while we see some control, some measuring on the deposit cost, and a gradual, slow improvement of deposit mix. Now, whether third quarter we are at inflection point, my view is that second, third, and fourth quarter will be at quite close level, and third quarter NII is close to bottom level. Let's Let's stay there for the moment. On Eurolife and as regards our capital standing regarding Eurolife acquisition, let me start with the current position. As we speak, our excess capital currently stands at 150 basis points. That is comparing 15.5% with 14% that it is the level of capital where we feel comfortable including not only P2G but also management buffers. If we utilize the additional 81 capacity of 100-110 basis points, the internal management target is being reduced to 17%. So that means that our excess capital rises up to 200, 50-160 basis points. And accounting for the your life acquisition and the capital impact of 120 basis points, the excess capital becomes 130 basis points. This is, let's say, the picture regarding our capital study. I don't know whether that was your question or something else. Let's pass to Fokion for the moment, for the payout.

Yes, in terms of the payout, we keep saying that we commit on a payout ratio higher than 50%. Let's say it's going to be in the range between 50% to 60%. Oh, very clear. Thank you. Just one small follow-up on... Are you planning to issue AT1 to fund the EuroLife deal, or is this just a possibility for the more remote future?

As I have said, we have an unused capacity of 100 basis points. This may be utilized depending on market condition on an opportunistic basis.

Got it. Thanks very much. The next question comes from the line of Munari Filippo with JP Morgan. Filippo, go ahead.

Yes, good afternoon, thank you. Thank you very much for taking my question. So just one, actually, on the Eurolast deal. P&D, please give us some initial indication of what level and also the nature of the revenue and cost that we might be seeing.

Thank you. Actually, the whole P&L of Eurolast on a before-tax basis will be incorporated in the insurance income of as regards the group P&L. And on that front, we should expect something close to 100 million euro additional insurance income.

Did I answer your question?

Yes, maybe if you can just give us an indication if there is any potential kind of like a different cost images that you can be allowed or any scenarios that can provide you through P&L despite, I mean, besides the integration.

This 100 million euros is a normalized current profit before tax of Euro life. We're now in the process of reviewing the possibility of cost and revenue synergies. But in due course, we should be able to update you. But what is more important than the synergies is the growth potential of this business. because insurance penetration in Greece is well below the EU average. Premiums as a percentage of GDP is about half of what is in the rest of the EU. Therefore, this is where we see the value of this acquisition. We expect to have, over time, quite strong growth rate. of this business, both through vacations but also through the independent agents of Eurolife.

Thank you very much.

The next question comes from the line of Novoselsky, India with Bank of America. Please go ahead.

Hello. Two questions from my side. First, on your security strategy, currently you have about $24.6 billion in your securities portfolio. If I remember correctly, in your business plan, you were saying that by the end of this year, it would be $23 billion, and then by the end of 2027, it's going to be more than $25 billion. So can I just ask how can we expect this to move from now on? and whether you would get some benefits from reinvestment maturing security, so it would be mainly from nuance. And my second question is for the fees that you pay for NP services. Do you have any updates on what is happening on that front? So, for example, whether you're renegotiating and what can we expect to come with that in the future? Thank you.

Thank you. Regarding your first question, currently we stand the investment securities total assets at close to 23%. Now, I'll tell you we have set specific limits for each country based on selective and idiosyncratic KPIs, such as loans to assets or investment securities to assets. For instance, limits in Bulgaria are quite lower as it has higher proportion of loans over assets, while on the contrary in Cyprus are higher given its substantial excess liquidity. Overall for the group, the proportion of bonds to total assets may reach up to 27% earlier. Now, as regards to your second question, our intention is to enter to some sort of renegotiation with Duvalu in the next 12 months.

Thank you.

The next question comes from the line of Buzkov Mikhail, which goes on site. Please, go ahead.

Good day. Thank you very much for the presentation. I have a few questions, one on NII. I think in the previous conference call you said that 2.5 billion NII is confirmed on the basis of 1.5% policy rate. So as we are at around 2% on consensus, what can you remind maybe on the sensitivity for 25 basis points? what incremental support can it have. And then maybe, apologies, maybe I didn't catch the answer on the first question related to utilize, but what is your current internal target capital ratio and do you see it changing as a result of acquisition of the insurance company and also when do you expect to receive the Danish compromise status? Thank you.

Yes, let me start from the NII. Our sensitivity hasn't changed since the last call, so it remains at 35 million per 25 base point rate cut. So as I said at the beginning, considering that base rates remain at the 2% level at EGRN, our NII is expected to easily exceed 2.5 billion euro. Now, regarding your second question, as regards our internal capital level, currently stands at 14%, following a potential issuance of This will go down to 13%. Now, as regards to the advanced compromise, the first step is to qualify as a financial conglomerate. This is something that, as we have included in the announcement of the transaction, it is within our intention to do as of 2026, but you may appreciate that it is a long process. It may take longer than 2026, but it is something that, of course, it does reserve any effort to get the qualification to proceed with the damage compromise.

So the process is first you receive the financial conglomerate status and then there will be some additional time to get the damage compromise.

Correct, correct.

Is it correct?

Correct, correct. Because it has to be assessed under a financial conglomerate that we have seen all the quantitative and qualitative criteria by the legislator We have to be assessed by the regulator to fulfill all the quantitative and qualitative criteria so as to be eligible for the damage compromise.

Okay, thank you. Very helpful.

The next question comes from the line of Gladys Panagiotis with Alpha Finance. Please go ahead.

Thank you very much. Three questions from my side, please. First, on spreads, we see some pressure mainly on corporate spreads in Greece, so I would like your comment on your expectations going forward, and if we can have a comment on the other segments on the retail front. Second, on the long growth for 2026, What are your expectations? Maybe it's a bit early, but I think any comment would be useful. So what are your expectations for 2026? And if you can comment per country. And last one, and forgive me if I missed that, if there are any estimates, what will be the relief on your regulatory capital if you manage to use the damage compromise? Thank you very much.

Okay. Starting from a lending spread, I think what we see is fully anticipated in our budget. So, in our budget we had assumed a decrease in corporate spreads in Greece from 210 to 185. We are well within this range. At the end, we may be a few bits better. On the retained segment, we don't see any material movements one direction. or the other in Cyprus as well we don't see any material movement in Bulgaria we see some normalization of spread coming from very very high levels in the previous years also taking into account the new adoption as of next year now I think that this gives me an opportunity to refer to long growth for 2025. In nine months, the loan portfolio, as you have seen, expires organically by 3.3 billion. Out of which, from Greece, are coming the 2.1 billion. And from Southeast Europe, it's coming direct to 1.2 billion euros. So, 3.3 versus an initial target of 3.5 for the full year 2025. So, it appears that we are on track to meet or even exceed the revised target of 4 billion euros. Now, I think that the composition in Greece is mostly driven by Greek corporates and in Bulgaria primarily from mortgage and business loans. While I have to say we are also present in the international syndicate loan markets. In Greece, the growth is coming from the sectors that we have mentioned in the past, such as energy production, storage and distribution, infrastructure projects, logistics, pharmaceutical, tourism. While we have seen lately some net positive growth, although it's quite early and the numbers are small, but we have seen for a couple of consecutive quarters net growth in the mortgage market in Greece. Now, for 2026, you may appreciate that we are in a stage to of preparing our business plan for the next three years so we are going to be able to update you in our full year 2025 course where as every year we update you in detail about business plan but what i can say that 2026 is going to be a one more good year for loan growth Now, as regards to your last question on Danish compromise, when achieved, it's going to give us a capital leave of 50 base points, of close to 50 base points.

Okay. If I may follow up on the first question on the corporate loan spreads, do you think that we have seen the draft or you expect some further deterioration over the coming quarters?

For certainty, I can say that we see deceleration at the decline pace.

Okay, thank you very much.

The next question comes from a Lennon of Renegro Alberto with Mediobanca. Please go ahead.

Yes, thanks for taking my questions. The first one is more technical question on Eurolight impact on capital. Can you tell us how much is going as a deduction and how much is within the threshold, the capital threshold? The second one is still on bank assurance. You will be a fully vertically integrated bank assurance model in recent cycles. How easily would it be to expand this model also in Bulgaria? And if you see any upside from this strategy. And the third one, is on fees if you can update us on the income target for 2035. Thank you.

Regarding your first question, the smaller part of the consideration will be weighted at 250 base points for the room corresponding to the significant financial institution. while the major one is a one-to-one deduction from capital and the combination of the above results is the 120 base points total 6 to 1 impact. On three commission income, following two very good quarters and based on the nine months performance, we have revised upwards of guidance to levels higher than 740 million euro, mainly driven by transaction, bank assurance and wealth management fees.

Now on your second question. It is true that now we have a fully integrated model for insurance-slash-bank assurance in Greece and Cyprus. In Bulgaria, as I mentioned during my introductory call, we continue to operate successfully through a well-established and tested bank assurance model, cooperating with a major European partner. At the moment, we don't have any plans or we don't see any opportunity to get a factory within the group in Bulgaria. But obviously, if such opportunity arises, it is something that we may review quite carefully.

Thank you. The next question comes from the line of Mavisoglosman with Ambrosia Capital. Please go ahead.

Hello, many thanks. Most of my questions have been answered. I wanted to ask you about Cyprus specifically post the acquisition How are things going on the ground versus your plans regarding synergies? What is left out there? Are we close to normal operations for your plan, or are there still opportunities, challenges that are in front of you? Any cover there would be helpful. Thank you.

Thanks for the question. Opportunities and challenges never stop. after the general answer to your question. Now, as I said before, we completed on September 1st the legal merger of the two banks. On October 10th, we completed the legal merger of the insurance companies. So, we operate under one bank and under one insurance company for life and P&T. However, we have ahead of us the operating integration, especially the banks, therefore moving into a single IT platform. This would take something like 15 to 18 months, so we should be in place by the end of 2026, not beginning of 2027. Now, in terms of synergies, as I mentioned during my introductory note, we have realized, as a matter of fact, 40% of the 120 million euros, which is the total envelope. Therefore, there is still work for us to do there, both on the cost side and the synergy side. So, all in all, the integration is moving ahead according to plan, but it is far from completed. We still have a lot of work to do.

Understood. Thank you for that. And if I could maybe squeeze in two relatively technical questions. One, on your loan growth, do you have... organic at 1.1 reported at 0.7 just wondering what the gap is I guess part of it is Cypress from my understanding but if there is something else there because FX was not really a factor and also with regards to NII outlook time deposit repricing is it going as you had expected or are there any material changes on that front thank you

On the first part, the difference is twofold. The one in the text and the second is the sale of a 200 million euro NP portfolio in Cyprus from Eurobank ATD to the Cyprus Asset Management Company, a state interest asset management company with the acronym KEDITES. So, these are loans which now have been reclassified as assets held for sale. This was a legacy portfolio, originated from the ex-cooperative bank and Cyprus Asset Management Company had guaranteed this portfolio and its MPEs. And with this agreement, KDTES takes back these MPEs on its balance sheet and the guarantee ends. And the result of this transaction was a gain of 10 million euros that it is under our other income line. The rest is effectively coming from dollars. And as regards deposit pricing evolution, I think it is going quite smoothly and well within our plan. What you may appreciate is that if you go on page 22 of the presentation, You may see that gradually on the upper right-hand side of the presentation, gradually with the decrease of base rates, we see some de-escalation of the mix of time to total. So from a peak of 36%, now on a group basis we are at 33%, and in Greece from a 33% peak we are currently at 29%, which is of course a positive evolution.

Understood. Thank you. Thank you very much. Thank you as well.

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

Okay. I would like to thank you all for participating in this call. I would like to thank you also for the very interesting questions that we received and hopefully we fully answered. For any follow-up questions, any clarifications, our investor team could be available. Thank you very much.