National Bank of Greece S.A

Ladies and gentlemen, thank you for standing by. I am Yota Yokoro's call operator. Welcome and thank you for joining the National Bank of Greece 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. Pavlos Milonas, CEO of National Bank of Greece. Mr. Milonas, you may now proceed.

Good morning, everyone. Welcome to our nine months 2025 financial results call. I'm joined by Christos Christodoulou, Group CFO, Greg Papagrivoris, Group Head of IR. After my introductory remarks, Christos will go into more detail on our financial performance and then we will turn to questions and answers. Before we turn to our presentation on the nine month financial results, let me briefly describe our operating environment, a key driver of our performance. Greece's economy remains on a superior growth trajectory displaying resilience and adaptability in a highly uncertain external environment with geopolitics, protectionism and fiscal challenges in several countries to name just a few sources of uncertainty. Moreover, I am confident that the positive momentum of the Greek economy will continue reflecting both fiscal and monetary policy support and solid corporate and household fundamentals leading to increasing fixed capital formation and buoyant exports on the one hand and healthy private consumption and demand for housing on the other. In fact, leading indicators are overwhelmingly aligned in this regard. Let's turn briefly to the fundamentals of the corporate and household sectors starting with corporate. Business turnover and profits remain on a steady upward trend with gross fixed capital formation excluding construction reaching an all-time high, indeed near European levels, reflecting high capacity utilization rates in both services and industry, as well as favorable credit conditions. Indeed, in the first nine months of 2025, net credit to enterprises has expanded by about $6 billion and is set to accelerate considerably into the fourth quarter, aided by positive seasonality. As regards service and goods exports, tourism is on track to hit a new record high this year, while goods exports have held up well despite external headwinds, evidencing the competitiveness of the Greek corporate sector. Turning to households, labor market conditions remain robust, with rising employment supporting household income and consumption, and the reduction in the employment rate to a 17-year low boosting consumer confidence. Furthermore, real wages have surpassed pre-COVID levels and continue to grow. Looking forward, an additional boost to activity will arise from the normalization of Greece's primary surplus from last year's 4.7% of GDP to an expected 3.6% in 2025 and a budgeted 2.8% in 2026, mainly through tax cuts to the middle class. Furthermore, public spending through the RFNs and the public investment budget is expected to reach 6.5% of GDP in 2026, from nearly 6% this year, with the related capex remaining close to all-time highs for the next couple of years. I believe the above describe an economy with sound fundamentals, able to overcome external headwinds, and result in GDP growth exceeding 2% for the next couple of years, thus requiring significant financing from the banking system. Now let me turn to our financial results. Against the backdrop of sharp benchmark rate normalization, 200 base points off from the peak and 150 base points lower in average terms in the first nine months of 2025, we continued to deliver a solid financial performance in line with our recently upgraded full year 2025 financial targets. specifically our profit after tax in the nine months reached a billion and our return on tangible equity for the same period stood at 16.1% or 15.6% if we normalize for trading income and if one adjusts for our large capital buffers return on tangible equity increases to over 20% I would like to focus on five noteworthy points regarding our P&L first The NII was broadly flat quarter and quarter in Q3, and this quarter should be considered the trough, with NII gradually picking up from the fourth quarter unless there's a further ECB rate cut. Key to this success has been the strong loan expansion combined with the reduction in our cost of funding. As regards the former, and the second point I want to emphasize, our stock of loans has has expanded by 12% year-on-year, or $1.8 billion, since the beginning of the year. Factoring in a strong pipeline of over $2 billion of corporate disbursements, which have been approved and a good amount is expected to be dispersed by year-end, as well as a sizable pipeline of not-yet-approved projects, we are confident that we will exceed our recently revised target for a net loan expansion of over $2.5 billion for this year, moving closer to the $3 billion mark rather than the $2.5 billion one. Third point, fees. They are turned into strong performance despite the impact of state measures. A key driver was a successful distribution of investment products resulting in continued mutual fund market share gains, executing effectively on our plan to increase fee income to support our core income overall as market rates decline. The highlight in corporate fees is the increased sale of treasury products. An overall observation is that cross-sell efforts for both retail and corporate sides of the business has been steadily improving. Fourth point, our costs, which reflect continued investment in human capital and our goal to be technological and digital leaders at a pan-European level. Regarding the former, we are onboarding new talent, as well as rewarding our people with remuneration to match productivity and to provide appropriate incentives. Regarding technology, investment reflects the depth, breadth, and speed of change including the replacement of our core banking system. OPEX also reflects the delayed impact of inflation, the shift to cloud services, the extra burden from regulatory requirements, and the care we take with cybersecurity in a tightening labor market for skilled services. Nevertheless, we're achieving a cost-to-income ratio in line with our guidance and one that remains at the low end of the European banking spectrum. Finally, as regards credit quality, our cost of risk comprising purely of creditless charges stood at 41 base points in the nine months against a revised target of 45 base points for the full year, reflecting extremely benign asset quality trends. our goal in this area is to have prudently attained class leading coverage ratios across stages while at the same time gradually normalize our cost of risk. On this front, there is clearly upside. A few words on another comparative strength of NBG, our capital buffers. Our set one ratio reached 19% in September, up by 70 base points year to date, the highest capital creation among our peers despite accumulating for a 60% payoff. It is important to remind the investment community of our strategy regarding this excess capital. First, it enhances our strategic optionality as regards incremental organic growth including participation in international syndicates in areas of our comparable expertise. Second, it allows us to search for value-accretive opportunities. Third, it allows us to enhance distribution to our shareholders. In this context, and in view of a sector-leading payout ratio in the domestic market of 6%, we are distributing $200 million in the form of an interim dividend, again the highest among Greek peers. The distribution will take place on November 14th. A final point. at the time of our full year 2025 results and following the completion of our business and capital plans we will announce our final payout ratio looking ahead we are well positioned to build further on our strong momentum our focus remains on building the foundations for sustainable growth through continued investment in technology and human capital enhancing the banking experience for our customers through digital transformation and building a stronger and more innovative bank for the future. Our solid capital base, disciplined execution, and clear strategic vision give us confidence in our ability to deliver continuous value for our shareholders, supporting Greece's energy transition, infrastructure development, and innovation ecosystem. With that, I would like to pass the floor to our group CFO Christos. who will provide additional insight to our financial performance before we turn to questions and answers. Christos, over to you.

Thank you, Pastor. Let me start with the key highlights of our profitability on slide 13. Our profit after tax for the nine months of 2025 reached nearly $1 billion after having absorbed the bulk of benchmark rate normalization in our net interest income. This produced a return on tangible equity of 16.1% before adjusting for excess capital or 15.6% normalized for the strong trading gains in the first half of the year, holding well with our full-year guidance of over 15%. This performance demonstrates the resilience of our top line to lower interest rates, underpinned by solid long growth and the sustained momentum in fees. From an earnings per share perspective, we generated an EPS of 1.4 euros on a normalized basis, aligning with our full-year guidance. Going into more detail on slide 17, our net interest income came in at 527 million in the third quarter of the year from 531 million the previous quarter, with the nine-month NAEI standing at a solid 1.6 billion, down 9.8% year-on-year, reflecting market interest rates moving lower by more than 150 basis points year-on-year. Our net interest margin for the nine months stood at 284 basis points, comfortably supporting our full year target of 280 basis points. Encouragingly, net interest income in Q3 was only marginally lower quarter on quarter, as rates normalization decelerated, likely denoting the trough, assuming market rates stabilized at current levels. Quarterly net interest income evolution was supported by the sustained loan growth, the ongoing repricing of our time deposits, as well as by the positive contribution of deposit hedges. As shown on slide 19, term deposit yields dropped by 11 basis points quarter on quarter, 254 basis points, leading our total deposit cost to 29 basis points and the total funding cost to just 59 basis points, both at the lowest level in the Greek space. As regards fee income on slide 22, year-on-year growth stood at 8% or 14%, excluding the negative impact from state measures on fees. corporate fees were up by 13% year-on-year, led by lending fees increasing by 30% on the back of strong loan origination. Retail fees were also up by 11% year-on-year on a like-for-like basis, spearheaded by the strong momentum in investment products, up by an impressive 74% year-on-year, driven by strong mutual fund inflows and reflecting a successful cross-selling. Notably, As shown on slide 8, our market share in neutral funds increased by 3 percentage points year-on-year, as time depositors continued to switch towards fee-generating neutral funds, driving our retail funds under management up by $2.2 billion, or 34% year-on-year, to $8.6 billion. Moving to operating expenses on slide 23, costs were up by 6.5% year-on-year, normalizing for variable pay accruals in 2024, allowing for continued investment in human capital through the onboarding of new talent and skills, as well as rewarding performance and productivity. Our depreciation charts reflect our sector-leading investments in IT and digital infrastructure, including the replacement of our core banking system with NEAS completion, delivering multiple benefits in our efficiency, commercial effectiveness, customer experience, and cyber risk security. Moving to GNAs, these reflect higher customer experience-related costs and delayed impact from inflationary pressures. All in all, the resilience in our top line, along with our discipline in costs, kept our nine-month cost-to-income ratio at low levels by European standards, just over 33%, well within our full-year guidance of circa 35%. As regards credit risk, the nine asset quality trends continue in the third quarter of the year. Our cost of risk dropped further to 37 basis points in Q3, reaffirming our strategy for gradual normalization and limited volatility, while we maintained leading coverage levels across stages by European standards. Cost of risk for the nine months of 2025 came in at 41 basis points, well inside our full year guidance of less than 45 basis points. On slide 15, our sector-leading capital position, a key comparative strength of MBG, enhances our strategic optionality. In the nine months, our strong profitability drove our core Tier 1 ratio to 19%, 70 basis points higher year-to-date post payout accrual of 60%, implying a capital surplus of 500 basis points over our internal core Tier 1 capital target of 14%. Similarly, Our total capital ratio stood at 21.8%, with our emerald ratio at 28.5%, 170 basis points above our emerald target of 26.8%. Factoring in our strong capital generation in the nine months, we are distributing an interim dividend of $200 million on November 14th, the highest in the domestic market. And as Pablo mentioned earlier, we will be finalizing the payout level for 2025 with our full year financial results. Now let me walk you through the highlights of our balance sheet summarized on slide 14. Our performing loan book was up by a solid 12% year-on-year, up 1.8 billion year-to-date. This strong performance reflects loan disbursements of 5.7 billion during the first nine months of the year, 10% higher year-on-year, mainly driven by corporates, allocated across key sectors of the economy, including energy and renewables, infrastructure projects, hotels, shipping, and transportation. The loan origination dynamics were positive in the retail segments as well, with disbursements up by 14% year-on-year to $1.2 billion, driving retail performing exposures 3% higher year-on-year, putting an end to a long period of retail disintermediation as shown on slide 18. As regards the fourth quarter of the year, A strong corporate pipeline of approved, yet to be disbursed credit in excess of $2 billion, coupled with additional credit coming in, are set to accelerate reforming loan expansion considerably, allowing us to exceed our full-year target for a loan expansion of over $2.5 billion, moving closer to the $3 billion mark. That, along with positive dynamics on time deposit and repricing and mix, will allow Q4 net interest income to edge higher quarter-on-quarter, assuming no further rate cuts. In any case, net interest income recovery will be more evident starting 2026. On the liability side, on slide 19, deposit balances increased by 1.4 billion year-on-year, mainly driven by deposit influence in low-cost core deposits, up by 1.8 billion year-on-year, leading to a positive mix effect with 81% of our deposits being core. Our class-leading liquidity and funding position as shown on slide 21 manifests in a liquidity coverage ratio of 249% among the highest in Europe, complemented by a loan-to-deposit ratio of 64%, while our ample net cash position is set to fund increasing exposures in interest-bearing assets. Turning to asset quality on slides 24 to 26, our group NPs amounted to just 0.9 billion, reflecting much in R&P inflows, translating into an NP ratio of 2.5%. Our leading coverage levels across stages comprise yet another strength of MBG's balance sheet. Summing up, in the nine months of 2025, we delivered a strong performance with net profit of nearly one billion, equivalent to a return on tangible equity of 15.6% before adjusting for excess capital. Looking into the last quarter of the year, we are set to deliver a set of results that comfortably fulfill our targets putting the theme of lower interest rates behind us as we enter 2026. Leveraging this solid performance and the strength and resilience of our business model, we intend to continue on a disciplined and value-enhancing capital deployment path, balancing increased shareholder distributions with capturing growth opportunities, maintaining strategic optionality, and positioning the bank for sustainable growth, greater innovation, and long-term value creation. And with that, I would like to open the floor for questions.

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

Hi. Thank you for the presentation. Two questions from me, please. Costs. I believe your recurring cost growth of 6.5% is towards the high end or just above the high end of the of the range you indicated in your mid-term strategy. I would be interested to hear your thoughts on the trajectory from here. Is there any incremental spending left on the core banking system, or in turn, if you expect any savings from the new system to become visible? And the other point on capital deployment, yeah, 19% CET1 ratio, very strong. you are running with close to 2 billion euros of excess capital by my estimate for how long would you be willing to run with such very strong excess capital or on the question differently come Q4 end of year results would you consider any action beyond a slightly higher ordinary payout and

depending on your M&A pipeline thank you okay thanks for the questions you're right on course it's on the high end of the range we gave Q4 will probably be the same just keep in mind that 2025 was the first year long time we didn't do a voluntary exit scheme we plan to do so in early 2026 so that will offset some of these trends that you see capital deployment in my remarks I said that we will tell you any changes in our in our payout use of excess capital at that time so please Until then, there is no change to what we said. Thank you.

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

Hello. Thanks for taking my question. Two for me, please. First, there seems to be a bit of a wave of bolt-on acquisitions within Greece. So some of your peers have been quite active in that space. So just wanted to ask you, especially given that you have a large capital buffer, are you thinking in that direction? So do you think there's some meaningful targets? And if yes, what are you looking for? And number two, if I look at page number 17 and I see your components of NII, So there's been two components of NII increases, which are number one, your securities, and number two, your deposits, including your NMD hedges. So your securities portfolio I see is now 28% of your assets. So do you have scope to increase further, and how should we expect NII from securities to perform from here? And two, your deposits, your term deposits, you state that the new production is at 120 base points. and there's 16% of your domestic deposits total. So can we expect that you'll get much more benefit in 2026 as well? Thank you.

Let me start with the first question. Christos will take the second. Both on acquisitions, clearly we're looking for value creation, not transactions for transaction's sake. So... Within the space of Greece, there are not that many potential, and I clearly will not talk about the Bank of Greece space, given what's going on there with us there. So within Greece, there isn't that much... of a bolt-on acquisition that would require any meaningful capital requirement.

Christos, the second. Okay, I'll take the second question, Ilya. So, on NII, first of all, let me repeat what I said in my remarks, that we were happy to see a deceleration in the decrease of the NII reduction quarter-on-quarter, just $4 million in absolute terms from Q2, $527 million. Securities has been supporting our NII for a long time, so we are currently at around 21 billion in terms of volumes. Opportunistically, we could be seen to increase a bit more, but I would say if you want the bold figure, what you see currently of an NII from securities in the area of 160 million is a good point of reference. And with regards to deposits, we are enjoying on that front an improvement in our NII costs. it's 14 million improvement versus the previous quarter it's about half and half from time deposit repricing and mix and the other one is coming from our deposit hedges so there is still some upside to be seen you picked it nicely our new production is coming in at 120 basis points so from the levels that we are here which is a blended mix of course of also foreign time deposits as well there is some upside to be seen in the next quarters and in 2026 as well. Thank you.

The next question comes from the line of Butkov Michael with Goldman Sachs. Please go ahead.

Good day. Thank you very much for the presentation. I have a question on provision releases in this quarter. I think based on page, on one of the page in the appendices, yeah, page 45, you had likely significant provision release this quarter. We calculate 51 million on before tax basis in this quarter. Can you maybe elaborate on to what this was related to? And also considering your high NPE coverage ratio of over 100% now, which is well above, I think the average is in Europe. do you see scope for more provision releases in the next quarters considering healthy asset quality position and what is your strategy and policy related to that thank you okay so on the first of your two questions on the provision releases so

What we had this quarter, we recognized a benefit from a sale of an NP portfolio that we closed in Q3, Project Italia, about 200 GBV of NPs. That resulted in a result that was better than the provisions that we had accumulated, so that led to the release that you see, and we included in one-offs so that we don't create any volatility in our cost of risk. That's it. On the second question with regards to our coverage level, so yes, you see us strategically normalizing our cost of risk in an efficient and timely manner. There is upside as the CEO said in his remarks to be achieved there as well. What we are doing is we are trying to have high provision coverage, not only in our Stage 3 loans, which, as I said, are just below a billion as we speak. We are trying to be prudent in our new generation of loans, and that's how we preserve this high level of coverage. But, yes, the strategy is to lower our cost of risk going forward because the coverage that we enjoy can come a bit down.

thank you and may I also follow up on your one off cost in this quarter maybe could you unpack the key items there since you I think didn't release the detailed financial statements yet just for us to have the full color of what is included in that line yeah as you can see it's mostly zero we don't have any deviation between profit before and after one off the fact is that the benefit

that we have from this NPE portfolio sale is effectively counter-affected by the donation that we had for the Marietta Yanagou school donation, which is in the area of $25 million. So that effectively cancels out the positives with the negatives.

Okay. Okay. Thank you very much. That is clear.

The next question comes from the line of Dimitrio Alex with Jefferies. Please go ahead.

Hi, thanks for taking my question. So just on NII, if we think about the asset side and lending yields, with rates now stabilizing, how much longer will it take the repricing lag to come through and we start to see stable loan yields? And just secondly, on the retail side, could you provide any color you are seeing on the mortgages and disbursements at the moment? Thank you.

Okay. On the first question, While we believe that the trap quarter for NIA is Q3, we have to say that there is still some repricing coming in from the lowering market rates, but that is counter-affected by the loan growth. So I would say, assuming that the average arrival will be some basis points lower in 2026, you will continue to see some pressure on the loan spreads going forward and the loan yields in general. With regards to mortgages, we've been experiencing an increase in our disbursements, and given the fact that the repayments that we had to realize from the disbursements that we had in the early 2000s was effectively eating up the growth. For a few quarters in a row now, we've been seeing mortgages growing as a portfolio, and we expect that this is going to be the trend going forward as we are optimistic about the growth in this sector of retail.

Thank you very much.

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

Yes, good morning. Two questions for me, please. One on your senior preferred debt. Is it reasonable to assume that the stack of senior preferred debts will increase meaningfully as you reduce your CT1 ratio towards your target? And if so, how quickly do you think that will happen? And secondly, just to come back to the securities book and the growth in non-Greek government debt, can you give a bit of color on what type of assets you've been investing in to fuel that growth and what are the criteria that you think about when growing that book? Thank you.

On the first question, as you may have seen from the presentation and the remarks, we are currently enjoying 170 basis points of excess versus our MREL target of 26.8%. Our MREL issuance plan has to do with two things. First of all, refinancing existing instruments, and the second, obviously supporting our growth. So the way that we use issuance of MRL instruments, senior preferred bonds going forward, has to do with our capital deployment strategy, to answer the second part of your first question. So that's to be seen in the following quarters and years. On the securities book, we're quite prudent, I would say, in where we invest. So whatever is not Greek sovereign bonds, it's EU sovereign bonds. We are mostly positioned in health to maturity in terms of accounting recognition and to the extent that we invest in shorter term bonds like T-bills, then we also accounting wise classify them under our health to collect and sell portfolio. But we don't have any exotic, let's say, bonds in our securities book. Thank you.

The next question comes from the line of Buluguris Alexandros with Euroc Securities. Please go ahead.

Yes, good morning. Many thanks for the presentation. Just a quick question regarding the strong pipeline of disbursements you mentioned in the fourth quarter. Could you give us a bit more color? I assume it's mostly large corporates, maybe a bit the sectors. You already mentioned about mortgage as a gradual improvement, but you should give us a bit more color on the corporate side. Thank you.

Yeah, I'll take that one. The loans that are approved and dispersing are mostly requiring construction, and we disperse as the construction occurs. It's certainly mostly in the project finance space. Energy, various construction projects, building of hotels, hospitality. I think those are the... The ones that are taking more time to fully disperse the approved credits.

Okay, thanks. Is there any maybe color on how you see 2026 in terms of credit growth? I mean, similar trends as we are seeing in 2025?

Absolutely. Good question. I give a macro introduction every time because the bank does well when the macro is good. and the macro is very good so I think that there will be continued investment and in a bank centered system like Greece there will be long growth again similar strength in the corporate and there will be additional support coming from as I mentioned earlier and Jesus just mentioned from retail so I think that 2026 will see similar growth Strong growth, very strong growth as we saw in 2025. Great, many thanks for the call.

The next question comes from the line of Kiftladze Salome with Bloomberg. Please go ahead.

hello thank you for the presentation I have two questions on the IT expenses as long as you are almost near end of your IT system upgrade shall we expect lower IT related spending next year and how would you break down the major digital related spending and on the asset under management side if you could summarize your strategy how you envision gaining market share in this space and whether the asset under management rising trend is pressuring the deposit growth or could pressure deposit growth going forward thank you okay on the on the first question on the IT expenses so first of all as we said the core banking system upgrade is coming to an end in the early months of 2026 so we

We recognize the bulk of the burden from the IT expenses there. We see that we've reached, let's say, the peak of our IT expenses. But nevertheless, we should not underestimate the need for keeping up to standard with the technological advancements that are taking place. That includes cybersecurity, as the CEO said. AI as well and trying to find ways to improve customer experience and also be more efficient. So while we are disciplined on cost, we are trying to spend a euro if we can make three euros out of this. On the assets under management, we've been recognizing, as we said in our remarks, about three percentage points of market share increase as we speak. We have been revamping our offering as well as our operating model. We are also making investments in terms of our digital offering in AUMs. And despite the fact that we've been transitioning a lot of our time depositors to mutual funds, we still see a growth in our deposit franchise. To give you some more color with regards to our AUM flows about 90% of the flows have to do with pure net flows. 55% of that is from our own depositors and the rest are from the market. And about 10% from growth comes from revaluation. So the strategy is paying off and will continue on that front as well.

And I think it's also important to note that in terms of the core savings franchise for retail, that has not been affected by this strategy on mutual funds.

Thank you. The next question comes from the line of Nigro Alberto with Mediobanca. Please go ahead.

Yes, good morning all. Thanks for taking my questions. One quick one on potential capital allocation. What do you think about Cyprus and if you see some opportunities there? And the second one, what kind of bank assurances reorganization you are thinking? going forward. Thank you.

Clearly on the second question, you'll have to wait. We are in a situation right now where we cannot discuss bank assurance as you can well imagine. And also on Cyprus, I think there's no comment to be made on that either. Thank you.

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

Thank you all for joining us for the call. I think there's a trip to London to meet investors in the next few weeks, so we look forward to meeting you in in person and having further conversations. So thank you very much for joining us and we're available for questions of clarification that you may have.