Eurobank Ergasias Svcs

Ladies and gentlemen, thank you for standing by. I'm Konstantinos, your course call operator. Welcome and thank you for joining the Eurobank conference call to present and discuss the second 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.

Ladies and gentlemen, good afternoon and welcome to the Eurobank First Half 2026 results presentation. Together with me is our CFO, Charles Kokologiannis, and the investor relations team. We will start with some key recent developments, then present our results and answer your questions. The global environment remains fragile and challenging, with geopolitical developments weighing on market sentiment and adding to inflation. Inflationary pressures, will push euro rates higher, even as the European economy remains subdued, despite a better-than-expected second-quarter performance. Nevertheless, the economies in the regions where we operate have so far demonstrated remarkable resilience, supported by a number of factors. First, investment activity remains robust. In Greece in particular, the government recently unveiled a 23 billion national development program for the period 2026 to 2030, focused on infrastructure, climate resilience and regional economic convergence. Second, the tourism sector continues to demonstrate resilience. In both Greece and Cyprus, tourist arrivals rebounded swiftly and current trends point to a season broadly in line with last year's strong performance. In Bulgaria, political stability has returned, providing support for economic growth. Nevertheless, the country still needs to address its budget deficit and persistent inflation. Prudent fiscal management in both Greece and Cyprus has translated into strong primary services. This creates the fiscal space needed to implement targeted measures that help mitigate the impact of higher energy prices and inflation on households and businesses. In this context, trade expansion has remained strong across our region. Eurobank has successfully capitalized on this favorable environment delivering double business annual loan growth driven by business lending in Greece and showing momentum in both Bulgaria and Cyprus. Now, let's move on to our financial results as highlighted on slides 5 to 11. Eurobank reported strong financial performance in the first half of 2026. With volumes, NII and fee growth trends accelerated on a quarterly basis. As a result, adjusted net profit reached €776 million and return on tangible book value at 16.6%. In more detail, loan growth continued unabated with a quarterly organic growth of €1.6 billion, This is 10% up year on year. Managed funds, another key pillar of our strategy, increased by 1.2 billion euros year to date, or 30% on an annual basis, while deposits also increased by circa 3 billion euros over the same period.

Net interest income rose 6.1% year on year,

As the quarter-on-quarter growth accelerated to 3.2%, season commissions were up by 14% year-on-year, supported by a strong second quarter. As a result, corporate provision income was up by 8% year-on-year to 1.1 billion euros. Consequently, Co-operating profit reached 952 million euros. This is 10% higher year on year. Now let's move on our activities outside Greece. Non-Greek revenues were strong and summed up to 361 million euros net profit, underscoring the strength and diversification of the group's franchise. This performance was driven by Cyprus, which contributed 230 million euros and Bulgaria 120 in net profit. The set-one ratio stood steady at 15.4% and the total capital ratio at 20.3%. So, overall, the second quarter results demonstrate solid organic growth at a pace even faster than previously. Both in Greece and across the region. Despite ongoing geopolitical risks, the strength of the underlying trends give us confidence that we will exceed our full-year targets. Accordingly, on slide 11, we present our updated targets revised upwards. We now expect full-year 2026 EPS moving higher than our initial estimate with its growth clearly above the 10% mark, resulting in a return on tangible book value close to 17% compared with our previous guidance of 16%. At this point, I would like to ask our CFO, Psycho Kokologiannis, to present our first graph results before opening the Q&A session.

Thank you, Fokion. Let me now provide more insight into the second quarter results.

On page 20 and on landing volumes, growth accelerated in the second quarter, there are some already strong fuel, reaching 1.6 billion euro, with 0.8 billion from Greece, 500 million from Bulgaria, and 200 from Cyprus.

In the first half, loan increase reached 2.7 billion,

with a year-on-year rate at 10.5%. Based on year-to-date performance and our pipeline, we will comfortably exceed the 3.8 billion full-year target to reach at least 4.5 billion, which translates to a year-on-year increase of 9%.

Group deposits shown on page 21 rose significantly in the second quarter by 3.1 billion euro, including 1.4 billion from Greek corporate. Furthermore, Bulgarian Cyprus had also a solid performance, with 600 and 400 million respectively. As regards Manas funds on page 24, during the quarter, Manas funds rose by €800 million to €11 billion. Year-on-year, they are higher by €2.5 billion or by circa 30%. Private banking companies' assets and liabilities reached €14.9 billion, higher by 10% year-on-year. Moving to profitability on page 28, quarter-on-quarter, Net interest income increased by a solid 3.2%, reflecting higher loan and bond volumes and the URIBO effect. On a year-on-year basis, NII is higher by 6.1%. The net interest margin for the period increased to 248 base points. Based on first half trajectory, We revised upwards our full-year NII guidance from 2.6 to more than 2.7 billion euros. This implies a year-on-year increase of circa 7% from 2.5% before. The new estimate assumes that ECB rates will remain flat at the current level of 2.25%. Tending to fees on phase 39, momentum strengthened with fees up 3.7% quarter on quarter to 210 million euros. Our focus on wealth and insurance pays off as reflected by the 40% annual growth. Lending commissions remain solid and are higher year on year by 30%. Overall, Good Fees are Highly Annulled Year by 17.5%. As a result, we are revising our Full-Year Organic Growth Outlook to nearly 10% from 7% previously.

Moving to costs from page 30, quarter on quarter, OPEX remains boggy flat, with limited fluctuation expected for the rest of the year, which is in line with the outlook provided in our previous course.

As a result, we reaffirm our full year target of €1.33 billion, implying a year-on-year increase of around 5.5%. On page 32, we summarize operating performance for the first half of the year. Core PPI reached €1.1 billion, higher by 7.7% year-on-year. Loan loss provisions for the period amounted to 148 million euro or 53 basis points in line with our plan. Consequently, core operating profits reached 952 million euro, higher by 10% year-on-year. Moving on to asset quality on page 34, MPE ratio decreased to 2.5%. Coverage Decreased to 82.4% as per our guidance, driven by the utilization of overlays related with CHF loans conversion and the transfer of circa 370 million euro house of loans to Shell Forte.

On capital and on page 38, C2R ratio remained stable quarter of quarter at 15.4% as organic profitability contribution was offset by strong loan and bond growth,

Payout accruals and BDC accelerates. The total cut ratio on page 39 stands at 20.3%. Overall, our 12-cup performance is beating our initial expectations and makes us confident to revise upwards our full year guidance as shown on page 11. The accelerated loan and AUM growth, the updated NII estimate, and the strong performance in fees is driving EPS higher, with growth at levels clearly above the 10% mark.

As such, return on tangible value is expected to be close to 17% versus 16% previously. This completes my presentation. Only I still need to open the floor for your questions.

The first question comes from the land of Gabor Kemeny with Autonomous Research. Please go ahead.

Thank you for the presentation. Firstly on the NII guide, a big upgrade. I believe your NII was annualizing around plus 7% already in the second quarter. Perhaps you could help us quantify how do you think about the benefits from from higher Euro rates in the second half and higher volumes and if there is anything additional we should consider on spreads and given the competitive environment. My other question would be on tourism actually and how do you see the trends running through the future tourist season and if you see any Thank you for the questions. As I mentioned in my introduction, the tourism season both in Greece and in Cyprus is doing very well.

In terms of arrivals we see a very material rebound after a couple of months of moderate pace when the war started. So based on what we see at the moment we expect that the overall performance for the year 2026 is going to be close to the record performance that we have seen in 2025. Close means slightly below, but no more than 2-4%, let's say. So, overall, the business is very good, and the business remains very good also in terms of financing these projects, as we have done in the previous years.

So actually, as regards the full year guidance on NII, it has taken into account the volume effect of 2.7 billion in the first half of the year, plus 1.8 for the second half, so as to total the full year at 4.5. On the other hand, we have done As regards the increase of our bolt position, although we may have some room for some further acquisitions up to 1 billion euros for the rest of the year, no material change as regards the deposit spreads, the annualized MREL costs, considering that we have front-loaded the major part of our licenses in the first half of the year, and some further contractions of Land Express, especially in corporate Greece, as well as in the household in Bulgaria. So, actually these are the variables that are driving NII full year outlook at higher than 2.7 billion and year-on-year increase of plus 7%.

Thank you.

The next question comes from the land of Ben Cave and Roberts with Paul Van Sass. Please go ahead.

Hello, thank you very much for the presentation and taking the questions. Two from you please. First on fees, or commissions rather, you're guiding to 10% organic growth now from around 7. Could you just comment on where you're seeing the biggest outperformance coming from versus your original expectations and then where you see the main moving parts and key upside and downside risks embedded within your guidance? And then secondly on cost of risk, could you please just provide a bit more colour on current trends and anything moving beneath the surface? Thank you.

Let's start from the cost of risk and then I'll take about the commission income.

In terms of asset quality, we see overall a very resilient performance. As you can see on the slide 34, there is a mild formation every quarter between 40 to 50 million euros per quarter. The NP ratio dropped from 2.6% to 2.5% at the group level and remains at very low levels both in Cyprus at 1.7% and in Bulgaria at 2.4%. This is on slides 13 and 16 respectively. Now on cost of risks. was 53 basis points in the first half of the year and we would like to speak to our guidance of circa 55 basis points for the full year 2026. Let me also comment since you ask about cost of risk you may have noticed that our coverage has dropped to 82.4%. This is down from 94% in the first quarter. If you recall when we presented the guidance for the full year 2026 in February of this year, that was the indication that we have given for coverage in the area of 80%. So this drop was expected. and is driven by the utilization of provision overlays related with the Swiss franc loan portfolio conversion and a transfer of some loans to held for sale status. So this explains the drop in terms of coverage. But in terms of cost of risk, let me reiterate what we have said. remains valid for the full year 2026.

Now, based on the revised full year estimate that we have done, the outperformance is coming primarily from the lending fees that were very strong in the first half of the year and the asset under management. For prudence reasons, we have kept the non-Greek commission income generation after our initial budget. So, this performance of lending and asset management in Greece actually is diving up the full year organic growth at 10% versus 7% previously and is enabling us to keep the full year 2026 Thank you very much. Let me mention again that the economic value of Eurolife in the second quarter is not lost anyway due to the agreement that we have made with the seller, but will not be booked to the Fisher Commission and will be a benefit for Groups NAB. and on this occasion let me update you that on Eurolife as we have announced in our third quarter results we have signed the contract with Fairfax in early May regulatory and supervisory approvals are progressing well and are moving forward so we expect the closing of the transaction to take place by the end of third quarter

Very helpful, thank you. The next question comes from the land of Nemetsivin with J.P. Morgan.

Please go ahead.

Hi, good evening. Thanks very much for your time. I have two questions please one on the deposit growth which was extremely strong this quarter as far as I can see 3.1 billion and specifically also really good inflows into site accounts as well I was wondering what drove that given it seems significantly larger than the ordinary moves is there anything transitionary in here or do you see this as a sustainable and can I also ask if this is also included in your NII guidance? For this year. And secondly, on fees and capital market fees specifically, you participate in several investment banking deals and you look good in the lead tables, but there doesn't seem to be a visible impact on the commissions this quarter. So I was wondering if I was reading that wrong or if you're expecting that line to improve maybe towards the end of the year. Thanks very much.

Sure. Actually, on deposits, it's coming from a number of drivers. As we said, 1.4 billion is coming from Greek corporate. Another 900 million is coming from the Greek retail. 600 million from Bulgaria. And 400 million in Greece. from Cyprus. So, I would say that a part of the Greek corporates may be less volatile than the rest. Also, a small part of Bulgarian deposits But as regards Greek retail, all Cyprus, I would say to a great extent, should remain stable over the next quarter. Now, as regards the second question, I pass to Fokion.

Indeed, we have seen a number of capital market transactions in which the bank has participated. but what we report in these under capital markets include also a number of other stuff that shows some seasonality so if you compare the reading of this quarter which was 14 million euros versus the second quarter of 2025 at 10 it shows a material increase which to a great extent reflects The increase activity of capital markets in the second quarter of 2026. Unless we have another pipeline of transactions, we don't expect any additional fees beyond what we report on a regular basis.

Super, that's very helpful, thank you.

Just if I may follow up again on the deposit question, would you expect that line to grow any further in the second half of the year, just given the scale of the growth this quarter, and would you have any insights into what's driving this? Is it simply just a very strong economic picture across the group, or is there anything specific going on?

As far as retail is concerned, the answer is yes. It is mainly a result of the economic growth. As regards corporates, we have to note that there are some idiosyncratic transactions of, for example, substantial share capital increases. So we are talking about inflows and to a great extent from outside the country. So, it's a number of drivers, actually. Now, going forward, I would say that by the end of the year, we shouldn't expect any material fluctuation. So, by the end of the year, you should incorporate in your model some flatties movement.

That's great. Thanks very much, Harris. Thank you, Fokion.

Thank you very much for your question. The next question is from Lenov Noemi with Morgan Stanley. Please go ahead.

Thank you for taking my question. I just have one on the first rank mortgages. If you could... Just update us on the participation rate that you are seeing and the average loss on this portfolio as the deadline has been extended to September.

Thank you. Thank you for the question. I could say that overall this Swiss Fund Convention law that was voted in December of 2005 have received a rather warm welcome by borrowers. At least this is what we see on our numbers. So far more than 50% of our balances that are within the perimeter of the law have participated. This is 800 million euros and about 60% of the number of borrowers. The average loss is between 16% to 18%. and we expect that this law will continue until the end of September. You said very correctly that this is when the law will be still applicable and we expect that the participation in terms of amount will increase from the current levels close to two-thirds of the initial perimeter.

Thank you.

And do you think the current amount of provisions are enough to cover us? Thank you.

Yes, thank you for giving me the opportunity to clarify that. As you may recall, we had assumed in the past a counter-cyclical provision strategy. We have prudently provided for these loans and therefore even for the Thank you all for participating on this call for the second quarter results.

I would like to thank also all of you that participated.

With your questions, you help us to clarify and give details on our results. Let me wish a relaxing summer break for those of you that are going to have the opportunity to take one. And we're going to be available, Harris, myself, and the investor relations team for any further questions. Thank you very much.