Eurobank Ergasias Svcs

Ladies and gentlemen, thank you for standing by. I am Geli, your chorus call operator. Welcome and thank you for joining the Eurobank conference call to present and discuss the first quarter 2026 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 first quarter 2026 results presentation. Together with me is our CFO, Haris Vakologiannis, and the investor relations team. We are starting with some key recent developments, then presenting our results, and we will answer your questions. The global economy continues to be affected by developments in the Gulf region and their effects on confidence, energy markets, and economic prospects. The extent of these effects will depend on both the duration of the conflict and the persistence of elevated energy prices. Nevertheless, forecasting within this context remains notably complex. But there is a broad expectation of higher inflation and growth taking a hit across Europe with GDP estimates for Greece and our broader region revised downwards by around half percentage point. However, all our core markets should continue outperforming Eurozone peers in growth rates. Tourism and shipping are sectors with notable contribution to the GDP of Greece and Cyprus. At present, tourism indicators do not suggest any material downturn, while the shipping sector appears to take advantage from increased freight rates. Against this backdrop, fiscal discipline remains critical. Budget execution in 2025 was strong in both Greece and Cyprus, providing room for targeted temporary relief measures to help cushion households and businesses from the energy-driven shock. Today, we have not seen any adverse impact on credit expansion. Loan demand remains strong in Greece and Cyprus, and momentum is encouraging in Bulgaria, supported by the positive sentiment following Euro adoption in January. In this operating environment, We remain focused on discipline execution of our strategic priorities across the group, with particular emphasis on organic growth and the integration of our recent acquisitions. More specifically, in Cyprus, we're progressing with the operational merger, which is expected to be completed in early 2027. In parallel, a voluntary exit scheme involving 200 FTEs was successfully implemented. In Greece, we announced earlier today the SPA signing for the Eurolife transaction. Thus, we now expect the transaction to close in the third quarter after the required regulatory and supervisory approvals. Now, let's move on to our financial results for the first quarter of 2026, as highlighted on slides 5 to 10. Eurobank's financial performance was in line with our business plan during the first quarter, with especially strong loan volumes, net interest income and commissions. Overall, net profit reached €351 million and return on tangible book value 15.1%. The tangible book value per share reached €2.55. In more detail, starting from the loan growth, which remained strong for another quarter, resulting in a net quarterly increase of 1.1 billion euros and almost 10% year-over-year expansion. Trade demand was robust in every country. In Greece, corporate loans saw significant growth due to increased investments, while mortgages are gradually making a larger impact. In Bulgaria, credit demand continues unabated and Cyprus experienced its highest loan growth in five quarters. Balance and expansion supported our top line numbers. In particular, net interest income was up by 2.6 and 4% quarter on quarter and year on year respectively. In addition to NII, commission rose 20% year-on-year, driven by lending fees, insurance, and wealth management. Managed funds, especially, continue their strong momentum, with assets under management growing by 26% year-on-year. The strong top-line performance has driven corporate provision income up by 6.6% year-on-year. The cost of risk ratio was 55 basis points, in line with our full year estimate. So, based on the above, core operating profit reached €460 million, or up 8% year on year. Regional operations performed in line with our plan, netting €165 million, almost half of our total profits. highlighting the group's franchise strength. Finally, our asset quality remains resilient and our capital position strong with set one and total cut at 15.4 and 20.4% respectively. So overall, the first quarter demonstrated robust top line performance and reaffirmed our ability to sustain organic growth. As such, without underestimating the volatile geopolitical environment and its adverse impact on growth rates, we are on track to deliver our 2026 plan. At this point, I would like to ask our CFO, Haris Vakologiannis, to present our first board results before the Q&A session.

Thank you, Fakir. Let's now provide more insight into the first quarter results. Overall, the year commenced on a strong note demonstrated by organic growth in loans and assets under management, NII and fees. More specifically, on page 19 and on lending volumes, first quarter continued the solid momentum of last year with organic growth reaching 1.1 billion euro 500 million coming from greece 400 from bulgaria and 200 from cyprus first quarter results strengthen our confidence in reaching the full year 2026 growth target of 3.8 billion euro as regards managed funds on page 23 at the end of the period managed funds reached 10.2 billion euro, with 500 million quarterly net inflows, offset by 200 negative mark-to-market, reflecting market volatility in March.

Year-on-year, managed funds are higher by 2.1 billion euro, or by 26%.

Moving to profitability, on page 27, quarter-on-quarter net interest income, despite the day's effects, increased by a solid 2.6%, reflecting the high loan and bond volumes.

For bonds specifically, this quarter, we increased our holdings by circa 3 billion euro, primarily in foreign government bonds. On a year-on-year basis, NII is higher by 4%. Net interest margin for the period stood at 246 basis points at par with the previous two quarters. Turning to fees on page 28, year-on-year are higher by 20%, reaching €203 million.

Lending commissions, supported by significant loan transactions, remain strong, while wealth and insurance fees continue being the largest driver.

piece-over-assets ratio stood at 75 basis points for the group and 84 basis points for Greece. In this context, we reiterate our target for a 7% year-on-year organic growth to be further enhanced by Eurolife's contribution. Moving to cost on page 29, first quarter performance

is in line with our plan for full-year OPEX reading at 1.33 billion euro and a year-to-year increase of circa 5.5%. IT-related expenditures are a primary driver, consistent with our digital acceleration strategy as outlined in the business plan presentation. In addition, staff cost rose by circa 6% incorporating accruals for variable pay and remuneration adjustments. This rate is anticipated to slow down as of the second quarter, also considering the recently completed VES in Cyprus.

On page 31, we summarize operating performance for the first quarter of the year.

Core PPI reached €536 million, higher by 6.6% year-on-year. Low-loss provisions for the period amounted to €76 million, or 55 basis points in line with our plan.

Consequently, core operating profit reached €460 million, higher by 7.8% year-on-year.

Moving on to asset quality on basis 33, Entry ratio stayed at 2.6%, with coverage reaching 94%. On capital and on page 37, CET1 ratio amounted to 15.4%, lower quarter-on-quarter by 20 basis points, as organic profitability contribution was offset by strong loan and bond growth, payout accruals, DTC acceleration, and mark-to-market of fair value through OCI portfolio. Total cadresi on page 38 increased by 40 basis points to 20.4%, also boosted by the 400 million euro tier 2 issued in January.

In conclusion, in the first quarter, the group demonstrated strong performance, especially in loan and AUM growth,

Notwithstanding the challenges stemming from a prolonged crisis in the Middle East and its repercussions on economic sentiment and growth outlook, first quarter performance sets a solid base for the achievement of our 2026 plan. This completes my presentation and we may now open the floor for your questions.

The first question is from the line of Ben Caven Roberts with Goldman Sachs. Please go ahead.

Ben Caven Roberts Good afternoon. Thank you very much for the presentation and for taking the questions. Two from me, please. Firstly, just I wanted to follow up on how you're thinking about the lending pipeline both in 2026 and 2027, and if you could elaborate on where you're seeing upside or downside risks compared with a few months ago. In particular, could you touch on any changes in the outlook for Cyprus given the current situation and potential impacts on tourism there? I know you mentioned that, you know, so far there's not much, but clearly something in focus across the market. And then just as a technical follow-up on the adjustments this quarter, It looks like there are a few negative items when bridging between the adjusted and reported profit before tax, and then again between adjusted and reported net profit. It sounds like one of the main moving parts there is the Cyprus VES scheme, but could you run through the other components of that as well, please? Thank you.

Sure. Thank you for the questions. Let me take the first one about the lending pipeline, and then Haris will elaborate on the adjustments. So, as we already said, and this is shown by the numbers, Q1 was a very strong quarter, which followed Q4, which also was very strong. And 1.1 is what we recorded in the first quarter versus 3.8. for the full year, and despite the issues that we have with the lower growth in Greece and Cyprus and in Bulgaria, at the moment we feel very comfortable that the 3.8 billion euro target will be achieved. Now for 2027, I would say it is rather early to say anything because visibility is anyway low for 2026, so let's not try to make any sort of extrapolation to 2027. In Cyprus in particular, as we said, Q1 was the strongest quarter of the last fight. This is something that we expected. We have anticipated so. Cyprus was rather slow during the course of 2025 during the merger project. And we have said also in the previous call that we were expecting Cyprus to accelerate, something that was confirmed in the previous quarter. So overall, we remain also very constructive about Cyprus, and we expect to achieve the target of 800 million euros, which is the loan growth for 2026. Now, in terms of the adjustments, let's turn over to Haris.

So, starting from the below-the-line items, we have actually two items, one negative, one positive. The negative is the VES in Cyprus. As you correctly said, this is the major one. This has an impact of 35 million euro. It encompasses 200 FTEs, and the annual saving for 12 months is 14 million euro, while for 2026 alone, the benefit is expected to be at 11 million euro. On the positive side, don't forget to say that the VES cost had been included in our business plan, to take place in the second quarter of the year, so it has been anticipated by one quarter. And it also has a positive 20 million euro, but it is the release of a provision related to a legal case won in the Supreme Court in Romania. Now, as regards the difference between the PPI minus provisions and the PBT. We have some recurring items there that occur every quarter. Most of them occur every quarter. It is the tax levy in Cyprus, 9 million euros. It is other impairments that relate with property and bonds. This is close to 3 million euros. And there is also the result of associates that mainly includes Eurolife, the 20% of Eurolife. In this quarter, we had a negative result of €4 million, affected by the mark-to-market of Eurolife's investment portfolio. Let me note here that as per the SPA-signed report, yesterday with the seller, the effect, this effect will be reversed at the closing of the transaction.

I hope I have provided all the details you asked for. Very helpful. Thank you.

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

Hello. A few questions from me. First one on this impressive free income growth, 20% year-over-year. Shall we expect the normal seasonal pattern here in the coming quarters, so stronger Q2 and Q3, or do you see any reason to model deviation from the previous years on the annual growth rates? Costs. As you pointed out, this was a time-proportionate amount, like one quarter of the full-year guidance, even though I believe Q1 tends to be a bit more positive seasonally, so what is the likelihood of costs coming in somewhat above the guidance? And finally, on NII, can you quantify the impact of lower reserve requirements in Bulgaria, and have we seen the full impact of the benefit, on the NII benefit on this line? Thank you.

Okay, let me take these questions, starting from the fees. On the fees, indeed, we had a strong quarter. For the full year, let me reiterate the at least 7% organic growth that we have communicated in our plan, plus the positive impact of EuroLife. it is quite early to provide an updated guidance, so let's stick to the one that we provided to our business plan. Overall, we are quite optimistic as regards the evolution of the fees reading. Now, as regarding OPEX, let me provide you an overview of the, regarding OPEX outlook. First of all, the increase that it is shown on the right hand side of page 29 is driven by IT cost, reflecting our IT CAPEX plan as explained in detail in our business plan presentation. Staff cost and administrative expenses related mainly with your adoption in Bulgaria, mainly consulting and cash transfers and security, and integration costs in Cyprus. Overall, first quarter mark is in line, fully in line with our quarterly budget. Actually, it was a couple of million lower, and with our guidance for the full year, 2026, at 1.33 billion euro, translated to a year-on-year increase of 5.5%. Now, let me also finish with OPEX about the technical point. The evolution of 2026 quarters is expected to be quite smoother than the one of 2025. So apart from the business drivers, i.e. synergies, the VES impact, etc., there's going to be also a base effect bringing gradually the 8.5% to the 5.5% that it is our annual guidance for year-on-year cost increase. Finally, on NII, the big picture is that we had a quite strong quarter. Again, on that, we maintain our guidance for the full year, although we acknowledge that there are upside risks. Now, specifically as regards Bulgaria, the full year impact is 20 million euro, and we have already reaped in the first quarter five of them.

That's brilliant. Thank you.

The next question is from the line of Mehmet Sevim with JP Morgan. Please go ahead.

Good evening. Thanks very much for taking my question. I just wanted to follow up on the NII point. Obviously, it was very strong this quarter. In fact, if we actually just normalize this, sorry, if we annualize this quarterly run rate, it gets us to 2.7 billion already, including the calendar day impact. And obviously, hopefully, this will continue to grow going forward. Haris, I know you acknowledge the upside risk, but what is stopping you from maybe updating the guidance at this point and how should we think about the coming quarters in terms of NII? And my second question And II from Bonds seems to have picked up quite nicely this quarter. I also see you've expanded your securities book quite significantly, 2.8 billion quarter on quarter. Is that part of the initial plan or was it maybe opportunistic? And can I ask the securities book expansion, was that in Greece or maybe is it related to the targeted synergies in Cyprus? And can I just confirm finally the tax rate and minorities seems to be a bit higher this quarter, the effective tax rate. Am I missing something or was it actually related to that point you mentioned with regards to the minorities of EuroLife? Thank you so much.

Sure. Starting from the NAEI, I take note of what you say. As you know, every year we provide updated guidance at the second quarter of the year. So let's, a few months pass. You may appreciate that the geopolitical situation is a bit volatile. So let's wait a bit until we see also the second quarter, how it evolves. although the volumes as regards April are encouraging again, and to provide an updated guidance on the second quarter results release. As regards the bonds, no, it was part of our plan. Of course, It is an opportunistic movement in the sense that we take benefit of our surplus liquidity, but indeed it was part of our plan. So, as regards the allocation between the countries, out of the 2.8 billion euro that was the growth of the increase of our bond position. One billion was booked in Athens, 700 million euro in Bulgaria, and 1.1 billion euro in Cyprus. And that was also part of the synergies in taking advantage of the very high surplus liquidity of Cyprus. Now, as regards the tax rate, Yes, there was an aberration in the first quarter for technical reasons. The tax rate was at 22.8% in the first quarter. However, going forward, it will converge towards the 21% that it was our budgeted tax rate and used to be also the effective tax rate of 2025.

That's all very clear. Thanks very much.

The next question is from the line of Luis Garrido with Bank of America Merrill Lynch. Please go ahead.

Yes, hello. Thank you for the call and taking our questions. I had one on the impairments and the cost of risk. Have you updated the macro scenarios underpinning the assumptions for loan impairments this quarter, or can you talk a little bit about that? And a second subsection within that, can you talk a little bit about SEE and the loan loss provision this quarter? There seems to be a mild increase this quarter in the context of, I guess, quite rapid loan growth. Can you talk a little bit about what drove that increase in the quarter?

Yeah. First of all, your two questions interrelate. as you are going to see. So in the first quarter, we shifted. Indeed, we shifted the IFRS 9 macro scenario weights on an interim basis towards the adverse scenario due to the mid-list crisis, reducing the baseline weight from 50% to 40% and rising the adverse scenario weighting from 30% to 40%. The effect was 24 million euro one-off provisions. And although, as you correctly noted, at the level of subsidiary banks, the effect was visible, at group level, cost of risk held steady at 55 basis points as the additional cost was absorbed by existing overlays. In the second quarter, to have the full picture, we are planning to revisit the macro scenarios and revert the respective weights to the previous percentages. Now, what should we expect? Taking into account even conservative estimates of the GDP impact, we project the cost of risk to remain at the 55 basis points guidance for the full year. So, this answer also explains why we have this small let's say, hiccup in the cost of risk of Bulgaria and Cyprus.

Okay, super clear. Thanks so much.

The next question is from the line of Alberto Negro with Mediabanka. Please go ahead.

Yes, thanks for taking my questions. I have one regarding the investment securities. You have reached already $28 billion, I think was one of the targets. for this year what should we expect for uh the rest of the year if you can build up more securities during the year and the second one is on euro life closing i think today you announced that you will close it in q3 you are expecting to close it in q3 um it's uh just after the summer or it's more towards the the q4 just for estimating the fees.

Thank you. Let me start from the second question. We are in the process of getting the approvals from the Bank of Greece and the SSM. So, we cannot really commit on their behalf on any date, but hopefully it's going to be before the summer vacation. So this is what we expect. Now in terms of investment securities, at 28 billion euros, we don't have any further plans, but depending on how markets may move, on an opportunistic basis, we may readjust the position. Thank you.

The next question is from the line of Panagiotis Glavis with Alpha Finance Investment Services. Please go ahead.

Good afternoon. Thank you very much. Two questions from my side. First, I would like a comment on lending spreads. We do see some pressure. So I was wondering what do you see in the second quarter and going forward, what are the expectations? And second, on the asset quality, Again, in the second quarter, if you have seen any negative signs. Thank you very much.

Let me start from the spreads front, and then I pass to Hokeon to comment overall for the asset quality. On page 25 of the presentation, on the upper left-hand side, on the upper right-hand side, apologies, you may see the spreads of corporates to be quarter-and-quarter lower by three basis points. This is entirely in line with our full-year budget of a yearly decline by 15 basis points.

We see some mild decline but not something extraordinary and outside our Let's say forecast Now on asset quality It remains resilient We have seen mild formation during the last few quarters There is nothing special that we have observed during the months of March or April.

Okay. Thank you very much. And if I may, an additional question on your expansion plans. You have mentioned repeatedly in the past about India. So if you can give us an update on what are your plans there and where you stand. Thank you.

As we have mentioned, in India we're planning to open just a Rep Office. Actually, we're going to inaugurate it this month, but that's about it.

Okay. Thank you very much.

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

I would like to thank you all for attending this call and especially to thank you for your questions. We are at your disposal for any follow-up questions. Our investor relations are always available and we may have the opportunity to meet some of you when we visit London during this month. Thank you very much.