Ladies and gentlemen, thank you for standing by. I am Jutta Jokorus, Operator. Welcome, and thank you for joining the Alpha Bank conference call to present and discuss the first quarter 2026 financial results. All participants will be in a listen-only mode, and the conference is being recorded. The presentation will be followed by a question-and-answer session. Should anyone need assistance during the conference call, you may signal an operator by pressing star and zero on your telephone. At this time, I would like to turn the conference over to Alpha Bank management. Gentlemen, you may now proceed.
Hello everyone, welcome to the presentation of our first quarter results. I am Iason Kepaptsoglou, Alpha Bank's Head of Investor Relations. Our CEO, Vassilios Psaltis, will lead the call with the usual summary and a few updates. Our CFO, Vassilios Kosmas, will go through this quarter's numbers in some detail. Q&A will come at the end of the call, we should wrap up within the hour. Vasilis, over to you.
Good morning everyone, thank you for joining our call. Let's start with an overview of the first quarter results on slide four, please. This quarter, we have reported EUR 182 million of profit, or EUR 221 million, on a normalized basis. These numbers are down both on a quarterly and on an annual basis, affected by one-off items that do not reflect underlying dynamics in the business, relating to a voluntary separation scheme and non-recurring factors affecting the performance of income from associates. On closer inspection, we're firing on all cylinders. Our net interest income is up 1% versus Q4 and 5% versus last year. Fees have increased 3% versus a seasonally strong fourth quarter and have jumped 29% versus last year. At 39%, our cost-to-income ratio has remained within guidance. At 44 basis points, the same can be said also for our cost of risk.
Performing loans have grown a double digit versus last year, and customer funds are up both on a headline and on an underlying basis. Asset quality remains benign, and we continue to post good levels of organic capital generation in spite of the quarter-specific headwinds. Overall, the first quarter serves as a solid foundation to deliver on our guidance for the year, which remains firm despite the geopolitical uncertainty. With that, let's take a look at the macro picture, starting with slide five. Well, here you can see that Greece entered 2026 with a macroeconomic profile that would have seemed highly improbable a decade ago: declining public debt as a share of GDP, sustained primary surpluses, and resilient growth.
The first chart here highlights the continued de-escalation of public debt, which reflects a combination of sizable and sustained primary surpluses, prudent fiscal management, and the credibility gains achieved in recent years, combined with persistent headline inflation mainly driven by services. Sizable and sustained primary fiscal surpluses have strengthened the country's resilience to external shocks. Fiscal discipline over recent years has not yet reduced vulnerabilities but has also created policy space, allowing the economy to absorb uncertainty more effectively than in the past. Greece's sovereign position has strengthened. The country now holds an investment-grade rating by all rating agencies. Despite an environment of heightened global uncertainty, Greece continues to expand at a pace above the European average. According to the latest official data, real GDP grew by 2.1% in 2025, and this compares with a 1.4% average in the euro area.
This performance confirms that the recovery has both momentum and depth. What is particularly encouraging is the changing composition of growth. For the first time since the pandemic, investment has become the leading contributor, surpassing private consumption. In 2025, investment contributed 1.5 percentage points to GDP growth, reflecting broad-based momentum across housing, equipment relating to logistics, industry, and defense, and construction. Exports continue to grow, albeit at a more moderate pace of 1.7%, reinforcing the ongoing transition towards a more export-driven growth model. Turning to the labor market, unemployment fell below the 10% threshold for the first time in 15 years, marking a significant structural improvement reflecting stronger job creation and enhanced labor market efficiency. Tourism remains a cornerstone for the Greek economy. Travel receipt reached EUR 23.6 billion in 2025, reflecting a new record year with nearly 10% growth. This underscores Greece's global competitiveness as a tourist destination.
At the same time, the expansionary phase of the Greek real estate cycle continues, with residential prices having surpassed the pre-crisis level. Finally, economic sentiment remains robust. Although it has moderated over the past two months amid heightened geopolitical uncertainty, the economic sentiment indicator continues to stand above both its long-term and the European averages, signaling sustained confidence, especially in construction and services. That said, moving now to slide six, improved fundamentals do not eliminate exposure to global shocks. The conflict in the Middle East adds yet another supply-side disturbance to an already fragile international environment. For Greece, the impact of the war does not stem from direct energy dependence on Iran. The country does not import oil or natural gas from Iran, with oil-energy supplies fairly diversified across a number of countries. However, price risk is global, not bilateral.
For Greece, the transmission of this shock operates through four main channels. First, energy. A supply shock, especially via the disruptions in the Strait of Hormuz, translates into higher oil and gas prices, passed through into consumer inflation, and a potential widening of the trade deficit. This dynamic is already unfolding, with oil prices remaining above $100 per bbl since late April, contributing to renewed inflationary pressures. Thus, recent inflation focused for the current year were revised upwards by 1 percentage point on average. As a net energy importer, Greece remains vulnerable to sharp increases in international energy prices. Oil, oil products, and natural gas together amount for 61% of final energy consumption, one of the highest shares in the EU. Any sustained rise in prices would therefore affect inflation, production costs, and the external balance. Second, shipping and logistics.
Longer routes, higher insurance premium, and increased trade costs affect maritime activity and disrupt supply chains. For a country with a globally significant shipping sector, this presents both operational complexities and pricing pressures. Ultimately, however, these dynamics imply an inflationary chain reaction across global supply chains, allowing dominant operators to leverage capacity shortages to command premium freight rates. Third, tourism. Tourism represents one of the highest direct contributors to the total gross value added in Europe, second only to Croatia. Heightened regional risk perceptions can interrupt inbound tourist flow, especially in the Eastern Mediterranean. Cruise activity is especially sensitive, with potential pressures on travel receipts during peak seasons. Past experience points to a potential substitution effect. If the conflict remains geographically contained, Greece could capture market share from more directly affected destinations, as we have already seen during the Arab Spring in the early 2000s. Fourth, uncertainty.
Prolonged geopolitical ambiguity delays investment decisions and leads to a broad repricing of risk premiums. 2026 is the final year of the Next Generation EU program, with strict milestones for the absorption of Recovery and Resilience Facility funds. Delays would therefore jeopardize timely fund absorption and reduce the program's intended macroeconomic impact. At the same time, this same timeline can act as a stabilizing force, incentivizing the timely completion of investment projects and supporting growth dynamics in the rear term, as we have actually seen. The key challenge at the current juncture is not the immediate shock, but the duration, the scale, and the spillover dynamics of the conflict. These factors remain inherently unpredictable, particularly given the risk of renewed escalation of military actions in the region.
Should the shock persist for several months, inflationary pressures could reemerge through both energy prices and elevated transport costs, echoing, probably on a smaller scale, the supply shock observed after the Russian invasion of Ukraine. For now, we have updated weights using the ECL calculation, increasing the probability of a downside scenario. Despite the downward revision to recent GDP forecasts, the growth outlook currently remains positive, with the Greek economy still expected to expand by just under 2% this year. The healthy starting point, combined alongside the available fiscal buffer, should allow the Greek GDP growth to remain in positive territory, even in adverse scenarios, outperforming our European peers. The ability to use fiscal space to caution the impact of heightened inflation, as has been the case in the recent past, provides some comfort for the asset quality outlook on individuals.
While in the corporate space, healthy balance sheets with low leverage and ample cash buffers, particularly in the more exposed sectors of shipping and tourism, alleviate any concerns. Last but not least, we are positively geared to higher rates, both due to our interest rate sensitivity of circa EUR 1 million per basis point, as well as the current environment creates opportunities for reinvestments in our bond portfolio. Despite this uncertainty, we have continued to build upon our track record of disciplined capital deployment and inorganic transactions, as you can see in slide seven. Flexfin: enhanced our data-driven factoring platform, unlocking access to small businesses and lower-tier SMEs with strong risk-adjusted returns and EPS accretion from year one.
AstroBank: added scale to our Cypriot presence, instantly positioning us as the number three bank in the country with circa 10% market share and doubling local profitability while remaining NPV neutral and Common Equity Tier 1 light. AXIA: forms the backbone of our new regional investment banking and capital markets platform, bringing market-leading advisory capabilities and immediate scale in Greece and Cyprus. The combination of Altius and Universal Life Insurance scales our insurance presence in Cyprus, creating a top three player, strengthening our life, non-life, and health offering, and materially expanding our distribution and cross-selling capabilities. All of the above transactions are progressing swiftly towards full integration, with a full EPS accretion visible from 2027.
Across all these transactions, a clear and consistent strategic rationale emerges: we are selectively acquiring product factories in Greece and Cyprus, platforms that enhance our ability to originate, manufacture, and distribute high-value products while simultaneously driving consolidation in our core markets, where we see structural opportunities to build scale. This disciplined approach ensures that every acquisition is earnings-accretive, strengthens our core franchise, expands fee-generating capabilities, and deepens client penetration, ultimately reinforcing the resilience and sustainability of our operating model. This year, we have announced one more deal, which we can look at in more detail on slide eight. The acquisition of Alpha Trust marks a decisive step in scaling our wealth and asset management platform, expanding our high-net-worth individual client base, enhancing product depth and offshore capabilities, and delivering capital-light, fee-based growth fully aligned with our disciplined M&A framework.
Alpha Trust is a leading independent asset manager in Greece, managing over EUR 2.2 billion of AUMs, having delivered a roughly 19% CAGR between 2022 and 2025 across retail, private, and institutional clients, with a longstanding tradition spanning more than three decades. Alpha Trust benefits from a highly recognized and trusted brand in the domestic market, consistently earning best-in-class distinctions over time, reflecting the strength of its investment performance and client franchise. The transactions deliver multiple benefits. It broadens our client base, including a meaningful high-net-worth individual segment, accelerated AUM growth through the addition of a proven discretionary model. It also enhances our product offering, expanding our range of mutual funds, discretionary mandates, and alternative investment solutions while supporting the development of our offshore wealth proposition, including private banking initiatives outside Greece.
A key differentiator is the strong profitability of Alpha Trust's asset management business, with mutual fund margins structurally higher than the sector average, driven by a more active allocation towards equities, alternatives, and higher-yielding products, further strengthening our overall fee-generation capacity. A key pillar of the transaction is talent. Alpha Trust brings a seasoned management team and a high-quality pool of private banking and asset management professionals, significantly strengthening our human capital in a segment where expertise is scarce and difficult to replicate. The founder and the CEO will remain actively involved post-completion, ensuring continuity, alignment, and a smooth integration while playing a pivotal role in shaping the group's broader wealth strategy. The combination accelerates Alpha Bank's ambition to build a scaled, fee-based, capital-light wealth and asset management platform, enhancing recurring income and reinforcing the diversification of our revenue mix.
The transaction also brings group efficiencies in custody, transactional income, and the optimization of operating costs. From a financial perspective, the acquisition fully meets our group M&A criteria. It is expected to deliver circa 1% EPS accretion, a return on capital employed exceeding 15%, and a return on tangible equity uplift of more than 10 basis points, with a limited Common Equity Tier 1 impact of approximately 17 basis points. Completion of the transaction is expected by the end of the second quarter of this year, subject to regulatory approvals. We will keep investors updated as the process progresses in full compliance with applicable legal and regulatory requirements. Overall, this acquisition represents exactly the type of growth we prioritize: scalable, fee-based, capital-light, and accretive, reinforcing Alpha Bank's leadership in wealth management and positioning the group to capture long-term structural growth in private wealth, both domestically and offshore.
Let's now turn to the outlook, starting with page nine. We need to be cognizant of the fact that 2026 is a transitional year for us. We're very much focused on integrating the acquired entities. Both, quite reasonably, we will not see the full benefit of the expected synergies from year one. The bottom line is that we expect to deliver 11% growth in normalized earnings. Credible recurring earnings growth is the natural outcome of our strategy and what we believe will continue to differentiate us going forward. On slide 10, we present the model that is driving this earnings growth. We're fortunate to operate in a conducive macro environment, yet our earnings growth is not simply driven by cyclical tailwinds or one-off optimization. Our structurally differentiated operating model is built around deep client relationships, capital-light revenue expansion, and disciplined execution. That is what drives superior earnings growth.
The model rests on four mutually reinforcing pillars. First, Alpha Bank is evolving into the only truly universal business bank in Greece and the region, combining relationship banking depth with a breadth of advisory, capital markets, and transaction services that no domestic peer can replicate in an integrated way. The core advantage lies in share of wallet capture. Our offering extends beyond lending into investment banking also, transaction banking, trade finance, structured products, and cross-border solutions, converting existing relationships into recurring capital-light fee income. The AXIA acquisition gives us a vertically integrated investment banking and capital market platform, enabling clients to access M&A advisory and market-based financing in a single conversation, activities that historically migrated entirely to international banks. This structurally upgrades revenue mix and improves returns across the wholesale portfolio.
Transaction banking is being strategically scaled to close the historic gap between our lending market share and fee penetration, transforming credit relationships into durable annuity-type revenues. Shipping and Cyprus act as proof points, demonstrating that the model already works at scale: deep, longstanding relationships supported by multi-product coverage, cross-border reach, and disciplined balance sheet usage. Our corporate offering leads to higher fee income growth, improved capital efficiency, and reduced volatility versus pure lending-led models. Second, we're moving from a transaction-led retail offering to financial planning at scale. A single, integrated wealth engine serves all segments, combining asset management, structured products, discretionary mandates, pension, banc assurance, and cross-border booking through Cyprus, Luxembourg, and London. This democratizes private banking quality services while retaining operating leverage and cost discipline. The defining advantage is the introduction of a retail advisory capability and early mover in Greece.
This allows our relationship managers to proactively advise clients, accelerating the penetration of investments and advisory mandates and shifting revenues from transactional to recurring fee-based income. The model is built on a unified financial planning framework, ensuring consistent penetration across the existing and new client bases. Alpha Bank's existing best-in-class Gold segment, investment penetration, demonstrates both the credibility of the model and the remaining upside across underserved segments. Again, this second engine leads to fee income growth, lower RWA intensity, and more predictable earnings through higher recurring revenues. Third, our growth will be accelerated and amplified by our partnership with UniCredit. This is a permanent structural advantage we have and a structural accelerator embedded across both revenue engines. UniCredit provides product factories, balance sheet scale, and cross-border reach that is hard to replicate organically, immediately expanding the addressable wallet of both corporate and wealth clients.
For corporates, it enables participation in large-scale, cross-border, and complex financings while also allowing Alpha Bank to bring international capabilities into domestic mandates that exceed local balance sheet limits. For individuals and wealth clients, UniCredit broadens the investment product shelf and strengthens wealth capabilities, reinforcing fee-rich growth without proportional capital consumption. Importantly, the partnership is positioned as enduring, embedded in daily client coverage, revenue generation, and strategic planning rather than dependent on episodic initiatives. It leads to faster revenue scaling, higher value client engagement, and enhanced competitiveness versus peers. Fourth, our growth engines are funded and sustained by a performance-led operating model. We have already demonstrated delivery credibility, reducing our cost-to-income ratio from 54% to below 40%, with further productivity gains embedded in the forward plan.
Our investments in technology focus on measurable financial outcomes: process automation, cross-selling uplift through next-steps action engines, and risk reduction, directly supporting revenue growth while protecting asset quality. Also, a refreshed people module links career mobility, targeted learning, and performance incentives explicitly to commercial outcomes with enhanced relationship manager productivity treated as a core earnings lever. The result is a model where efficiency gains fund growth in investments, preserving discipline while enabling scale. This model delivers structurally higher returns, operating leverage, and sustained EPS compounding. Our earnings growth is driven by a coherent system: deeper client coverage, capital-light fee expansion, permanent external acceleration, and disciplined execution. This combination underpins faster compounding of EPS, tangible book value, and shareholder distribution than peers, even where point-in-time profitability metrics temporarily converge rather than lead.
It also comes with enhanced diversification, both in terms of an increasing share of fees but also in terms of sourced assets due to higher growth in our international insurance and real estate businesses. Last from my side on slide 11, on how we create and return value to shareholders. We have been deliberate and consistent in how we think about capital allocation, and our framework and the hierarchy within it remain very clear and unchanged. Our first and foremost priority is to fund profitable loan growth. Long growth in Greece continues to show solid resilience, with corporate lending firmly leading the way. This is a reflection of strong underlying fundamentals, an active investment cycle, and increasing corporate engagement with the banking system. We are deploying capital where returns are attractive while remaining disciplined in underwriting, particularly in a competitive large-cap corporate environment.
This allows us to grow the balance sheet without compromising profitability, ensuring that capital is deployed where it generates sustainable value. Beyond lending, our investments in transaction banking, trade finance, asset management, and advisory businesses are strengthening the quality of our earnings growth with diversified revenue streams enhancing the durability and visibility of earnings. Second, our capital generation capacity supports higher and sustainable shareholder payouts. The strength of our earnings growth is giving us confidence that distributions should continue to increase over time, underpinned by strong capital generation through the cycle. As a result, we are currently accruing, aligned with our objectives of delivering predictable and growing returns to shareholders. This is reflected in our actions. We reinitiated dividends conservatively, scaled them rapidly as confidence grew, and have now embedded a higher payout as part of our capital planning.
The introduction of an interim dividend further reinforces both our confidence in the outlook and our disciplined approach to capital deployment. Share buybacks remain an important complementary tool, particularly in periods of market dislocation, and we continue to assess the optimal mix between cash returns and buybacks based on market conditions and relative returns. Last but not least, our excess capital provides us with significant firepower and increased strategic flexibility. So far, this has come in the form of value-accretive M&A, but where appropriate, we may consider extraordinary distributions. The recent bolt-on acquisitions are a textbook illustration of this approach. Highly selective, strategically aligned, earnings-accretive, and capital-efficient. This way, we can balance between rewarding shareholders with good returns while at the same time keeping firepower to grow EPS through M&A. With that, Vasilis, over to you.
Thank you, Vasilis. Hello from my side as well. Let's go through the P&L overview on slide 13, please. Reported profits came in at EUR 182 million this quarter, while on a normalized basis, profits stood at EUR 221 million. We have a couple of notable items this quarter that are worth flagging. First, as discussed during our full year results, in Q1, we have conducted the voluntary separation scheme. At EUR 47 million, the cost has come in above our original guidance of EUR 30 million. This is largely due to the higher-than-anticipated participation, coming in at circa 350 employees, as well as, to a lesser extent, a higher proportion of more expensive extended sabbaticals. The higher the cost has come to higher benefit of circa EUR 15 million, meaning that the payback remains at circa three years, outperforming similar programs in the market.
The additional gains of the program are fully aligned with the performance-led operating model described by Vasilis earlier, front-loading part of the envelope and visits for the upcoming business plan. Although not evident on the slide, income from associates has come in at EUR 6 million this quarter, significantly below the run rate required to reach our EUR 50 million annual guidance. This has come in part due to a goodwill write-down at Nexi and in part due to provision top-up in Romania. I need to make one thing absolutely clear. We have already identified mitigant actions to offset the negative one-offs that we had this quarter. Our full-year guidance of EUR 950 million in reported profits and EUR 0.40 of EPS remains firm. With that, let's move to the next slide and talk about the underlying results and the main P&L items.
Operating income was up 1% quarter-on-quarter, with growth in NII and fees and solid levels of recurring client trading activity, partly offset by lower real estate-related revaluation gains. On costs, we had a stellar performance with cost-to-income ratio at 39%, in line with guidance. Headline growth rates are affected by M&A, so on an underlying basis, excluding M&A, recurring operating expenses actually decreased by 3.1% versus Q4. We had a normal quarter for impairment losses, coming in at EUR 48 million or 44 basis points. We've already spoken about the bottom line, so let's move to the next slide and the balance sheet. Let's start the year with performing loans up 2% in the quarter and still in the double-digit year-on-year. Clearly, this is above our high single-digit guidance for the year.
For customer funds, the headline picture is positively affected by a single-ticket transfer of EUR 5.8 billion. Even on an underlying basis, we have inflows to deposits during what is a typically seasonally weak quarter and a good pace in net sales. Obviously, the March snapshot is affected by valuation effects that have since reverted. tangible book value up 2% in the quarter and up 10% year-on-year. On capital, we stand at 14.7% in terms of fully loaded CET1, down versus Q4 on account of RWA growth. On slide 16, we showed two main components of revenue. net interest income was up for another quarter, continuing the upward trajectory. Looking at the quarterly performance, there are two effects that we need to keep in mind. First, we had two less calendar days, costing us about EUR 9 million.
Second, we had AstroBank for another month, adding a bit more than EUR 5 million. On an underlying basis, net interest income is actually up 2.2% this quarter. Driving forces behind this underlying growth. To start with, performing loans continue to have a strong positive contribution on the back of volume growth, which is lost in this picture due to the calendar days effect. Deposits also had a small positive contribution on account of repricing. Contribution of the bond portfolio is also increasing, equally attributable to volumes and the increase of the yield of the book on account of reinvestments, something that we have flagged repeatedly. The only headwind this quarter has been the wholesale funding side due to increased issuance. From an interest rate perspective, we remain positively geared, with earnings supported by the structural positioning of our balance sheet.
Our sensitivity stands at about EUR 1 for every basis points increase in Euribor, EUR 1 million. When it comes to the securities portfolio, we have mentioned that we have space to increase it in size and additionally have EUR 3.5 billion of maturities over the next two years. In the current market context, characterized by a period of volatility, this approach allows us to selectively deploy liquidity at improved spreads, supporting NII resilience over the medium term. During the first quarter and given the volatile environment, we maintained a defensive stance and refrained from front-loading purchases. This stance has paid off since both swap curves and iTraxx spreads have widened since the beginning of the year. Now, there are ample buying opportunities at the right levels.
On the fee side, the M&A impact is less pronounced, so we're still up 4.5% versus last quarter and up on a, quite frankly, stellar 20% year-on-year. The underlying quarterly performance is even more striking if one considers that in Q4, we had a EUR 4 million performance fee in asset management and received a EUR 5 million dividend from Prodea. We have been able to sustain a high level of business credit-related fees despite the natural drop in disbursements, showing the breadth of our product offering. Our asset management business has benefited from a higher starting point for AUMs, offsetting the impact of transaction activity from volatility in the markets. Bank assurance is up to EUR 7 million, and you can get a first state of benefit from having AXIA on board in our investment banking fees and other fees.
Overall, very happy with our core revenues are progressing and confident for our full-year guidance above EUR 2.4 billion in operating income. Moving on to slide 17 to look at loans and customer funds. Performing loan balances reached EUR 38.2 billion, up 2%, with EUR 500,000,000 of net credit expansion in the quarter. Disbursements amounted to EUR 3.2 billion, obviously slower than the very strong fourth quarter, but a solid start of the year in line with expectations. On customer funds, we're backing the sectoral trend in deposits this quarter with a growth of circa EUR 300 million. On AUMs, we continue to see good underlying net sales, up EUR 200 million this quarter despite the market turmoil. On valuation and other, we obviously haven't defined gravity. The March snapshot was significantly affected by negative valuation effects that have since reverted.
The reason that this doesn't show up in the numbers is that we had a nice inflow of a single ticket, EUR 5.8 billion, this quarter. Slide 18 on asset quality. The NPE ratio came in at 3.7%, coverage ratio landed at 55%. The underlying picture remained solid, and we're not particularly concerned with flows, as should be evident by the underlying cost of risk that stood at 29 basis points this quarter. Retail inflows, we are seeing primarily reflect proactive restructuring actions to stabilize cash flows, which we expect to cure over the planned horizon, with coverage calibrated to the involving risk profile and supported by continued strong collections and cures. We don't expect any meaningful surprises in the upcoming quarter, and at 44 basis points, we feel comfortable with a guidance of 45 basis points for the year. Finally, slide 19 on capital.
This quarter, we had 25 basis points of organic capital generation. RWA growth was slightly higher than expected, in part as some SRTs are rolling off, real estate investments, and an increase in market risk limits to capitalize on market-making opportunities. Transaction-related impact here relates mainly to VSS, and also we have the payout accrual at 55%, including DTC acceleration. All in, CET1 ratio stands at 14.7% on a fully loaded basis or 15% on a transitional basis. With that, let's now open the floor for questions.
Ladies and gentlemen, at this time, we will begin the question-and-answer session. Anyone who wishes to ask a question may press star followed by one on their telephone. If you wish to remove yourself from the question queue, then you may press star and two. Please use your handset when asking your question for better quality. Anyone who has a question may press star and one at this time. One moment for the first question, please. The first question comes from the line of Ben Caven-Roberts with Goldman Sachs. Please go ahead.
Good afternoon. Thanks very much for taking the questions. Just two from me, please. To follow up on the fee comments and the strong performance in Q1, it didn't sound like there was anything non-recurring there. I just wanted to check if there were any more color you would give in terms of how you see that fee profile evolving over the remainder of the year and if there are upside or downside risks in terms of the shape of that trajectory. Secondly, just as a follow-up to your helpful comments on the macro situation, I recognize you highlighted that the duration of the Middle East conflict is key.
Following performing loans being up double-digit year-over-year in Q1, is there any more color you'd provide on how conversations have been with clients on the pipeline for the remainder of the year and whether you'd expect any lengthening of the conflict to be more impactful to your 2026 or 2027 pipeline and if there are any offsets that could help mitigate impacts? Thank you.
Vassilios, to well, you're both Vassilios. CFO, to go first on the fee evolution and the guidance for the year and then from the CEO on the macro point.
Thank you. Confirm your understanding on the fees. There's not much of a non-recurring item there. The only thing to note on page 16 is that you will note real estate income will have some volatility, so we don't expect subsequent quarters to run at a EUR 4 million run rate per quarter. We expect a higher number than that. The reason is that what we call a property tax in Greece, it's called ENFIA, is typically printed in Q1. You should expect this number to go up in the upcoming quarters. The rest, as you rightly mentioned, are recurring. There is obviously seasonality, so typically, Q4 numbers are higher than the rest. Other than that, there's nothing non-recurring in the Q1 numbers.
Just as a reminder, the guidance for the year is for above EUR 600 million in fees.
Now, going on to the macro, I think you would all agree that we are confronted with an unprecedented situation, and still, there are many things that the outcome can vary significantly. Our clients obviously couldn't be different in their approach to that. What we see at the moment is, number one, a very strong focus as the RRF has come to an end, and everyone was held bound to meet deadlines. Not all of our clients made it, which means that there's going to be some tail, which will need to be financed directly from banking sources. Therefore, that 50% that would belong to RRF, that would come to a good extent from bank financing. That's for the short term. I think for the medium term, Greece is in a secular trend. As we have seen over the past few years, confidence has returned.
There are ample investment opportunities in Greece, and the confidence both from Greek and foreign operators in specific sectors, we expect that to continue. The pacing of it, the timing of it, may differ depending on the final outcome, both of the events relating to the geopolitical crisis as well as also to the ripple effects that relate, on the one hand, to the inflation, on the other hand, also to the reaction that we may see from the monetary authorities. I think all in all, Greece, as I have said in the introduction, is well-equipped, on the one hand, for the public side and thus for the individuals through the significant fiscal buffers, and on the other hand, on the corporate side through the significant cash buffers and also lowish leverage that they have. Let's see how this plays out.
Thank you very much.
The next question comes from the line of Gabor Kemeny with Autonomous Research. Please go ahead.
Hello. My first question is on NII, please, and your updated rate sensitivity of EUR 20 million. I believe this is a bit higher than it was before. Is this just a function of balance sheet growth, and are you taking any action to gear your balance sheet towards the expected Euro rate hikes? Yeah, that's the first one. Another question on NII, on your securities. What sort of NII tailwind share we model from your securities portfolio? I think you talked about EUR 3.5 billion of maturities this year.
I would be interested to hear how much of a support could your NII get from this portfolio in 2016, 2017. My other question will be on your fee income, and in particular, this EUR 5.8 billion of single ticket. Do you consider this sticky or rather transitory? To what extent has the related fee income been reflected in your first quarter performance? My last question would be on politics. Cyprus elections are coming up in a few days. Do you have any view on how the outcome may impact your operating environment there? Thank you.
Let me clear a couple of these things off. The single ticket that has come in is what you call sticky, or at least we expect it to remain with the bank. It has not had a material contribution to the first quarter results. It hasn't had any contribution to the first quarter results, but at the same time, given its nature, we don't expect it to have a material contribution to fees. On the rate sensitivity, I'll do the easy part, which is the backward-looking. It has increased passively on account of the inflow of floating rate assets on our balance sheets, and I'll leave our CFO to comment on the forward-looking aspect of whether we're gearing up for higher interest rates and on the securities portfolio, what is the tailwind that we have to NII from there. Our CEO will take the question on politics.
Sure. Thank you, Iason. I mean, on the NII, as Iason mentioned, what's happening is that the balance sheet is growing. It's typically wholesale lending, which are floating rate instruments, we don't actively hedge them as we're used to do that when the rates and when the environment was different. I mean, just to give you a sense, our fixed-rate assets to liability have decreased from 84%- 71%. Part of that is the balance sheet growth and another part of non-renewing the interest rate swaps. Now, when it comes to the outcome, I would prefer to stay firm at the EUR 1.7 billion we've given you for 2026. When it comes to the outer years, it clearly depends on the level of rates that you assume. Obviously, if you remember, much of our base rate environment was assumed at the 2% for 2026.
If I remember correctly, the base rates that other Greek banks have circulated for 2027, 2028 were maybe 20 basis points higher. If you try to factor in a higher interest rate for the planning horizon, that should give you a bit higher NII for the sector. Our sensitivity, as we mentioned, is around EUR 20 million for 25 basis points, and we expect this to increase a bit in the coming quarters, but not massively. Hope, Gabor, that answered the question.
Yes, thank you.
On the final point on politics. Well, what we have heard from the Prime Minister is that the elections should happen in 2027. They are scheduled to happen towards the latter end of the first half. Given that we're going to be having the presidency of the European Union in the second half, I think one sensibly would expect to have that rather towards the first part of the first semester. As far as news flow on that is concerned, what we're witnessing is an increased willingness from leaders to establish new parties. I mean, some of them are new faces. Some are not that new. In any case, structurally, what this may mean is that the more parties you have participating at the elections and that's a second condition, they don't make the 3%.
That means that the bar for creating a single-party government is going to be lowering from the 38%. I think, if anything, that potentially may be a tailwind for the governing parties. In terms of the impact on the operating environment, I think our clients are much more focused on what will happen at global scale. The inner politics, the in-country politics, are not really something that we see them impacting in any shape or form. Their agenda, that obviously may change as we come closer to the announcement or when the elections may be announced. I think we have some good breathing space to that point.
Was there any public discussion about bank taxes? In terms of banking taxes, if there's been any discussion? Sorry.
Well, as you do know, devaluation and one-off taxes are those things that are never discussed before. What I can sense, though, is that as it was the case in last year, the dialogue that we have with the government does not leave us to believe that we may be faced with such an adverse event. In my book, there are no extraordinary taxes in sight.
We also hear one answer on the securities book. Back to the CFO. What is the NII uplift that we expect from reinvestments and the growth there?
I mean, effectively, Gabor, there, we keep going on the roundabout EUR 1.5 billion reinvestments per year for the planning horizon. The spread for this quarter has increased by roundabout 15 basis points on the securities book. The very fact that we're going to be able to do these reinvestments at a better rate environment allows us to be more optimistic on the NII contribution from this book. I would say, yes, there is a bit of a tailwind on these numbers as we move along.
That was very comprehensive. Thank you.
The next question comes from the line of Alex Kantarovich with Roemer Capital. Please go ahead.
Yes. Thank you. Thank you for a very interesting presentation. The numbers look good. Revenue is strong. Just a couple of follow-up questions. I noticed a nice increase in the international loan book. Can you please give us a little bit of color to what extent this is organic or any details that you can share? This is my first question. The second, in the presentation, you mentioned extraordinary dividend. Could you please give us some more detail, if possible, and also refresh my memory what levels of payout you are looking at in 2027? Thank you.
I think both of those are for our CFO.
Thank you, Iason. Alex, the first one on international, I guess you're referring primarily to the Q4 number. The international book has grown significantly from Q3 to Q4, and that is primarily the inclusion on AstroBank. More on underlying trends, the book has grown by another EUR 100 million in Q1. This quarter, this is primarily on account of roundabout 2/3 of our Cyprus book and 1/3, the syndicated market, on our wholesale book. Syndications we're doing with the likes of UniCredit in Central Europe. That's more of the trend, if you like, on this book. On the extraordinary dividend, by definition, I would say this is something which is extraordinary, so not something I can give you firm guidance.
What we feel is that our current regular accrual of 55% allows us both to keep our capital framework, as Vasilis mentioned it, so allow us to fund our loan profitably, our loan book, be able to give a very firm remuneration to our shareholders, and keep flexibility on capital on account of new opportunities. Sorry to disappoint you. I'm not going to announce an extraordinary dividend on this call.
No, it's okay. Thank you for your answer.
The next question comes from the line of Cihan Saraoğlu with HSBC. Please go ahead.
Hello. Thank you very much for taking my questions. First one is with regards to RWA growth. You explained this, but I couldn't catch it completely. RWA growth seems to be much faster than credit growth in the quarter. What's the reason for that? With regards to Common Equity Tier 1, I realized that in the last almost 12 months or so, Common Equity Tier 1 has been more or less stable. Maybe it grew by a low single- digit or so despite very good profitability. What seems to be the drag there, if you can shed some light on that? With regards to asset quality, cost of risk, you obviously change your macro forecasts. Have you reflected those in your IFRS 9 model? This 44 basis points of cost of risk, does it also reflect the change in macro? Thank you very much.
Lots of work for our CFO there. If you can repeat the comments on RWA.
Sure. On RWA growth, you're right to point out that the RWA growth this quarter was higher than what would imply the loan book. There are three additional elements there. One is that we had an SRT, which has effectively phased out. We will likely replenish it in Q3. The benefit out of this RWA relief will sit back roundabout Q3. The second is that, as we see also on our fee income line, there is significant growth in our rental income that requires real estate investments. These also absorbed a good part of the RWA growth this quarter. Last but not least, as all of you are aware, this has been a pretty volatile quarter in the market that has created market-making opportunities for our brokerage firm and for our brokerage and AXIA business.
Effectively, what we do there is that we increase limits so that we can provide more market-making opportunities in the market. Again, to be very clear, we do not take principal risk. We increase limits. We do not take any delta risk. We just are able to bridge bid-ask in days that are volatile, be it in the fixed income or the equity markets. There's some good trading gains there that we have posted this quarter. That sort of puts down what has happened on the RWA growth and how it's linked to the business. On your third one, that I remember off the top of my head, the cost of risk in the IFRS model, yes, we have adjusted the scenarios. We have increased the downside scenario by 5%. We have decreased the positive scenario by an equivalent amount.
The cost of that has been EUR 10 million and is incorporated in our organic cost of risk. Fair to say that the other part was even lower. We will keep continuing looking at the macro situation and adjust it, not necessarily in the next quarter. Last but not least, on CET1, you mentioned that CET1 growth is not very high on a quarter-to-quarter basis, if I understand your. No. Sorry, yeah.
My question was that CET1 growth over the last 12 months has been relatively subdued when I look at your numbers. Am I reading it correct? If I'm reading it correct, what's the reason behind that?
I think we should be taking some of that offline. I think much of that has to do with M&A. If you look at the year-on-year numbers, I don't have it handy in front of me, but let's take it offline and hopefully be able to answer this question. My recollection is that organic capital generation is pretty much on track. The very fact that we have been doing some almost 100 basis points of M&A has obviously depleted our CET1 ratio. All the investments we've done for AXIA, AstroBank, Flexfin, etc. Thank you very much.
The next question comes from the line of Mehmet Sevim with JP Morgan. Please go ahead.
Hi. Good afternoon. Thanks very much. Just one question from me. This is with regards to your recognition of some of the paying mortgages as Stage 3. I noticed that last quarter you had about EUR 70 million. This quarter, the balance seems to be at EUR 219 million as per the footnote. You mentioned that it's as a result of bank-initiated reprofiling. I was just wondering what's driving this. Given the number seems to have increased this quarter, whether you expect any further inclusions there and whether you would expect this to be recognized in the NPE balances at some point. Thanks very much.
Sure. Thank you for the question. Not really. We don't expect it, just to get to the bottom of it, to be recognized in the NPE numbers. Let me take this opportunity to explain what is happening there. For starters, this is a book of fully performing mortgages. These are clients that have been with us for eight, nine years, fully seasoned mortgages, fully paying. Effectively, what we're doing with these clients is that we are taking a preemptive step to reprofile their debt so that with what's happening nowadays, they are able to withstand to keep paying customers but basically converting floating rates to fixed rates.
Effectively, what this does from an accounting point of view is that it triggers a transition to Stage 3 loans. As I said, these customers have been paying, are paying, and we think will continue to pay. What you would expect to see in the coming years is a deflation of the Stage 3 loans, but you wouldn't see much movement out of that, very minor movements in the NPE ratio. I mean, a decrease in NPE ratio. That hopefully answers your question.
Yes, that's very clear. Thanks very much.
The next question comes from the line of Miguel Dias with WOOD & Co. Please go ahead.
Hi, good afternoon. Thank you for the presentation and taking my questions. Most of them have been already answered. Just have two final questions. One is regarding the Alpha Trust you are guiding for EPS accretion of 1%. My question is this just for half year of 2026 or for the full year to 2027? The second one relates to VSS costs, just to try to get a sense if you are done booking VSS costs for the year. Thank you.
On Alpha Trust, the EPS uplift that we are showing is on a fully integrated basis. It's relevant for 2027. Given the timing of the deal, there's not going to be a very material contribution during 2026. On the cost about VSS programs, Vassilios, if you can.
On the cost of the VSS program, this has been a VSS program for Greece. It has closed, we should not expect any charges for the rest of the year. I need, though, to remind people that there is an additional EUR 20 million charge that we have guided as restructuring charges for AstroBank. Part of that will be VSS. As I said, this is planned for Q2, maybe Q3. I think the most important thing, which I mentioned during my presentation on all these items, is that these items, A, are expected, and even the bit that is not expected, the increase in the VSS in Q1, we have already a plan to fully mitigate this. Our guidance for EUR 950 million remains fully firm.
If we can have a final question because we've already overrun.
The next question comes from the line of Luis Garrido with Bank of America Merrill Lynch. Please go ahead.
Yes. Hello. Three quick questions from me, if I may. First, on NII and the outlook after the Iran war, do you have a good sense of what the net impact might be when you consider volumes and pricing? Secondly, on the SRT point that you mentioned, can you give us some sense of what the impacts would be on your capital if all of the SRTs were to drop today or at least give us some sense of how these transactions are phased across time? Finally, if you could give us some color just on how your shipping clients are performing, what they're telling you, is it that they're simply benefiting from higher freight rates, or is the picture a bit more nuanced by asset class? Thank you.
Okay. Let's clear a couple of those. The SRT impact is about 50 basis points, and it's going to be a good number of years for that to drop off. I think it's five, if I remember correctly. On the NII outlook around the world, we've mentioned that obviously we have one side effect of the war is higher interest rates. We have a positive sensitivity. Depending on what you expect, you could see between, I don't know, EUR 40 million or a bit more in terms of NII. We've already said that we don't see any impact on the pipeline. For the time being, it would be a minor positive on NII. With that, Vassilios, if you want to comment on the shipping clients' performance.
Well, shipping mood is utterly correlated with volatility. This volatility obviously is playing well into their hands. Those that are energy-related, tankers and LNG, obviously have a much better situation, mostly tankers. Also we have seen recently bulk freights as well as also container freights picking up. I think they are in a very good mood. That comes after a very dense streak of significant profitability that they've experienced over the past four to five years. They are really, really in good shape.
Excellent. Very helpful. Thank you.
Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to management for any closing comments. Thank you.
Well, thank you very much for your strong engagement and participation in this quarter results. We are truly looking forward to speaking to you again with our first half results towards the end of July. We are quite sure that plentiful of things would have happened up to that point. Thank you very much. See you then.
Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for calling and have a pleasant evening.