Ladies and gentlemen, thank you for standing by. I am your teleconference call operator. Welcome, and thank you for joining the National Bank of Greece conference call to present and discuss the full year 2024 financial results. At this time, I would like to turn the conference over to Mr. Pavlos Mylonas, CEO of National Bank of Greece. Mr. Mylonas, you may now proceed.
Good morning, everyone. Welcome to our fourth quarter 2024 financial results call. I'm joined by Christos Christodoulou, Group CFO, Greg Papagrigoris, Group Head of IR. After my introductory remarks, Christos will go into more detail on our financial performance, and then we'll turn to Q&A. So let's begin. Before I turn to our full year 2024 financial results, I will begin with a brief overview of Greece's economic environment, the positive backdrop to our robust financial performance.
It is important to understand that, one, strong fundamentals and, two, improved competitors build up over many years of reforms are the main reasons why economic activity in Greece remains remarkably resilient to external headwinds from a stagnant Europe. There are not many countries in Europe that possess these strong comparative advantages. Households and corporates have both been key drivers for a GDP growth of nearly 2.5% in 2024.
Turning to households, labor market conditions remain strong, with a steadily declining unemployment rate currently near 9% and at a 15-year low. Moreover, combined with positive wage adjustments of 4% so far in 2024, higher real disposable income is providing additional confidence to households. Looking forward, further increases in household income, combined with strong wealth effects arising from the housing and stock market, should sustain private consumption as well as demand for housing.
As regards corporates, activity remains solid, with business investment at an all-time high. The drivers behind this performance comprise high capacity utilization rates and strong corporate profitability. Indeed, gross fixed capital formation is currently at a 16-year high, which led the impressive pickup in corporate credit expansion in 2024, about 14% year on year.
Surging M&A activity and a rebound in inward foreign direct investment to the second highest level on record, an amount of EUR six billion in 2024, highlight the dynamism of the corporate sector. An additional boost comes from the increasing absorption of RRF funds, about 50% from a total of EUR 36 billion, with accelerating disbursements to the real economy in the second half of 2024, about EUR eight billion.
More than EUR 25 billion of RRF-related financial spending is expected in the next two years, 2025 and 2026. The external sector has also supported growth. Indeed, tourism had another strong year, and towards the end of the past year, the end of 2024, goods exports showed signs of strengthening, which is very encouraging. The last point on the economy, household as well as corporate loan demand should receive a positive boost from the significant ongoing relaxation of monetary conditions.
Now, let me turn to our financial results. Our full year 2024 performance showed remarkable strength across all business lines, leveraging on a positive economic environment, as just described. Our inherent comparative advantages reflected in a well-capitalized and liquid balance sheet, and our successful operational transformation, including our early and significant investment in technology and digital.
Indeed, even following positive revisions to our guidance in August, we exceeded these revised full year 2024 targets across all metrics. Specifically, our full year 2024 core PAT reached EUR 1.3 billion, up 10% year on year, delivering a core return on tangible equity of 17.5%, well above our full year guidance of over 16%. While this return increases to nearly 22% adjusted for our capital buffers.
From an earnings per share perspective, we have produced an earnings per share of EUR 1.4, again significantly higher than guidance, and up from an EPS of EUR 1.2 in 2023 and EUR 0.5 in 2022. The key contributor to the 2024 performance has been the resilience of our NII and NIM to normalizing rates. This was mostly due to the impressive net expansion of our performing loan book, up EUR 3.1 billion, 10% year on year, double the positively revised guidance of August 2024. Even though this result was driven by a sharp pickup in corporate disbursements.
Ladies and gentlemen, apologies for the short interruption. The management is back with us.
Okay. Sorry and apologies for that. I'll pick up again when I was speaking about our fees in 2024. Our fee business recorded a double-digit growth, with the most notable contributor being the cross-sell of investment products to our large deposit base. Indeed, these fees increased by nearly 50%, increasing our market share significantly in this segment as well.
These results bode well for fee business going forward. On the cost side, OPEX was kept tightly managed despite an ambitious IT and digital transformation plan. On tech, the IT makeover is near fruition and will provide NBG a significant competitive advantage in terms of speed and efficiency. Another positive, credit risk charges are dropping faster than expected, reflecting the quality of our loan book and the strong economy.
Our capital position has been further strengthened in 2024, comfortably absorbing first a payout accrual that has been increased to 50% from 30% the past year, and two, capital needs from our robust credit expansion that I just described. As a result, our CET1 ratio stands at more than 400 basis points above our internal target of 14%, providing significant strategic flexibility, including with regards to further increasing shareholder remuneration.
More on that later. One last point on 2024, following the second placement, which increased our free float to 92%, the highest in the Greek market, has led to a substantial increase in our liquidity, with turnover more than doubling compared with 2023. Now, as promised to the investor community previously, along with the full year results, we would also present new guidance arising from our 2025-27 business plan.
The most important takeaway is that even though market rates are on a steadily downward path and conservatively expected to reach a 2% level as soon as June, as soon as June as per our business plan, we will deliver a 2027 return on tangible equity of over 14% or over 18% adjusted for excess capital.
Moreover, our earnings per share will exceed the level of EUR 1.5. Regarding phasing, the P&L shows resilience in 2025 to the substantial cumulative rate reduction and then expands from 2026 onwards as NII benefits from robust credit growth of over 8% per year, while fees continue to grow strongly in high single digits, reflecting increased volumes and cross-sell. OPEX growth will remain contained, with investments in IT and digital infrastructure peaking in 2025, but also higher wages arising from the new collective agreement.
Cost of risk will normalize to below 40 basis points on benign asset quality trends. An important point in the business plan is the higher payouts to shareholders. We aim to increase payouts further to about 60% out of 2025 earnings, thus increasing the dividend per share, absorbing fully the hit from lower rates. Similarly sized payout ratios are planned for the outer years of the business plan, and they will be on a higher profit base.
Going forward, the split between cash dividends and share buybacks will depend on price per share and valuation developments. As regards our capital position, our high profitability provides room for, first, the above-mentioned higher payouts throughout the business plan horizon, two, an accelerated DTC depreciation, and three, strong credit growth, leaving our CET1 ratio consistently above 18% throughout the period. This buffer is sufficient for both incremental organic and accretive growth opportunities.
To close, I would like to emphasize once again the key objectives for 2025 to 2027. First, increase the top line by continuing to experience strong loan expansion, leveraging not only on the buoyant economy but also on improved customer experience and product offerings, and cross-selling to our large client base, especially by increasing penetration in wealth management and embedded finance to gain market shares across business lines.
Second, complete the investment in technology in 2025, which provides NBG with a strong comparative advantage not only among Greek peers but also most European ones. Recall that this journey started five years ago with heavy costs and high transition risk, but is now nearly completed.
Our people, our most important asset, are also being supported by new tools, training, and a gradual rejuvenation and are now becoming known in the market not only as providing the most trustworthy advice but increasingly for the increased efficiency as well, allowing them to focus on sales.
Third, create value for shareholders through sustaining a return on tangible equity exceeding 18% post-rate normalization and utilizing our substantial excess capital of over 2 billion post our stated shareholder remuneration policies to explore value-creating opportunities domestically and abroad in core and adjacent markets. With that, I would like to pass the floor to our Group CFO, Christos, who will provide additional insights to our financial performance before we turn to Q&A. Christos.
Thank you, Pavlos. Now, starting with the profitability on slide 22, in 2024, we reported a solid core profit after tax of EUR 1.3 billion, up by 10% year on year, translating into a core return on tangible equity of 17.5% before adjusting for excess capital, well above our guidance of over 16%.
From an earnings per share perspective, we have produced an EPS of EUR 1.4, significantly higher than the guidance of EUR 1.2 and higher from an EPS of EUR 1.2 in 2023. As shown on slides 27 to 29, a key contributor to this performance has been our resilience of NII and NIM to normalizing rates, aided by the sharp pickup in loan disbursements.
In fact, our net loan expansion in 2024 was EUR 3.1 billion relative to our guidance of about half that level, complemented by the resilience in our lending spreads dropping by less than 10 basis points year on year. As a result of the strong loan expansion, the increase in our fixed income securities portfolio, and the structural hedges in place, NIM far exceeded our guidance, reaching 319 basis points for the full year and 310 basis points in Q4.
Furthermore, our fee income recorded a strong pickup of 7% quarter on quarter and 12% year on year, again well ahead of guidance, with our fees over assets ratio increasing to 0.6% from 0.5% a year ago. This performance was driven by retail fees increasing by 15% year on year, as shown on slide 32, led by accelerating activity and cross-sell, especially in investment products.
As regards the latter, our success in shifting time deposits towards fee-generating mutual funds led us to achieve market share gains of circa 6 percentage points in mutual funds in 2024, recording the best performance in the domestic market. As a result, our fees from investment products increased by nearly 50% year on year, becoming the number one contributor of our fee income growth.
Moving to costs, on slide 33, the increase in OPEX was contained at circa 5% year on year on higher wage costs, including variable pay, the significant investments in IT and digital infrastructure. Cost discipline, combined with higher core income, kept our 2024 cost-to-core income ratio below 32%, well inside our target of 33%.
At the same time, the high quality of our loan book kept our cost of risk on a steady normalizing path, closing the year at 53 basis points against our guidance of circa 60 basis points. Our strong profitability enhanced our capital buffers year on year, comfortably absorbing the sharp increase of credit risk-weighted assets from the impressive credit growth, especially in Q4, as well as from increasing our payout ratio accrual to 50% in Q4 from the 40% accrued in the first three quarters of last year.
As shown on slide 24, our CET1 and total capital ratios reached 18.3% and 21.1% respectively, while our MREL of 28% already fulfilled the final target of 26.8%. Now, let me walk you through the highlights of our well-capitalized, highly liquid, and high-quality balance sheet summarized on slide 23.
As noted earlier, we expanded our performing loan book by a record EUR 3.1 billion year on year and a solid EUR 2 billion in Q4, led by EUR 8 billion corporate disbursements, up by 32% year on year, and solid growth across sectors as shown on slide 29.
Importantly, retail lending balances stabilized in 2024 following more than 14 years of deleveraging on the back of accelerating disbursements that reached EUR 1.5 billion, up by 30% year on year, with market share gains across all retail lending categories, as mentioned already by Pavlos and illustrated on slide 29. Deposits remained on an upward trend in 2024, up by EUR 0.5 billion year on year, supported by inflows from savings deposits, absorbing the notable time deposit switch to mutual funds and the reduction in corporate deposits due to working capital usage as shown on slide 30.
Our improving deposit mix, with core deposits currently comprising 80% of the total stock and the lowering of hedging costs absorbed deposit spread compression due to lowering benchmark rates. As regards our superior liquidity and funding profile, illustrated on slide 31, our net cash position exceeded EUR 6 billion, funding the strong loan expansion as well as our fixed income securities incremental exposure, which provides an excellent natural hedge against lowering rates.
Our liquidity coverage ratio of 261% is one of the highest in the Euro area, providing ample flexibility, while our loan-to-deposit ratio remains close to the 60% mark. Finally, our total funding cost stood at 72 basis points, with deposits comprising circa 93% of our total funding.
Turning to asset quality on slides 34 to 36, Group NPE stock dropped below the €1 billion mark in Q4, translating into a sector-leading NPE ratio of 2.6%, with NPE coverage at nearly 100%. We also maintain a sector-leading Stage 2 ratio at just 6.5% and sector-leading provision coverage across all three stages, which also stand at the high end of the European banks' spectrum.
Supported by favorable asset quality trends, net NPE flows came at near-zero levels in 2024, well inside expectations, allowing for a sustained cost of risk normalization to 53 basis points for 2024 from 64 basis points a year ago. The strong fundamentals of the bank and the momentum we have built in 2024 provide confidence for the execution of our business plan targets over the next three years.
With a proven track record of delivering strong results and creating value for our shareholders, we remain focused towards leveraging market dynamics for continued credit expansion, market share gains across business lines, and improving client experience through our products and service offerings.
Our new business plan also focuses on the acceleration of our cross-sell efforts, capitalizing our big client base and our partnerships, especially as regards wealth management and embedded finance, also leveraging on our improving IT infrastructure. Let's now look into the key drivers and targets of our business plan as presented on slides 10 to 20. As already stated by Pavlos, we aspire to attain a sustainable return on tangible equity in the mid-teens post-rate normalization, which implies a return on tangible equity of over 18% calculated on a CET1 level of 14%.
Post-2025, earnings per share growth resumes, allowing us to target an EPS of EUR 1.5, a level higher than the EPS we delivered at the peak of the interest rate cycle. This performance hinges on positive P&L dynamics as regards core income growth, cost containment, and cost-of-risk normalization, as well as the favorable impact of share buybacks, which forms part of our capital allocation strategy in the new three-year business plan.
Moving to our core income dynamics, NII is seen on a continuous recovery trend post-2025, exceeding EUR 2.3 billion by 2027 from circa EUR 2.1 billion in 2025, with our NIM sustained above 280 basis points throughout the business plan. The NII trajectory is driven by solid credit growth coming in at a CAGR of circa 8% in the three years, supported by structural changes we made in our balance sheet as referred to earlier.
Credit expansion will be driven by corporates, anticipated to grow by a CAGR of more than 9% over the three years, led by large corporates, project finance, SMEs, and shipping as shown on slide 17, while retail is expanding throughout the three-year period, contributing positively to loan growth and spreads in contrast with previous years as illustrated on slide 18.
Fees are expected to increase at a CAGR of over 8% in the three years, exceeding 70 basis points over assets by 2027. Besides strong loan origination, key drivers will be retail non-credit-related fees from cross-selling of investment products and increased wealth management penetration, also supported by new products and further improvements in our service offering.
Below the top line, operating expenses will be contained at a mid-single-digit growth, absorbing investment in human capital and hires, the new union-agreed wage raises, and depreciation charges arising from the rollout of our class-leading IT investment plan, with the cost-to-income ratio maintained at a level of circa 35% across the period. Our cost-of-risk will continue normalizing, dropping below 40 basis points by 2027, reflecting our strong asset quality.
At these levels of retaining profitability, organic capital generation remains strong, comfortably absorbing solid credit expansion and increasing payouts to shareholders, while accelerated DTC amortization delivers a DTC over CET1 ratio below 25% by 2027. As our CEO stated, our intention is to raise total payout levels, including share buybacks, to circa 60% already from this year's profit, offering a double-digit payout yield by 2027, while our CET1 ratio remains above 18% throughout the business plan horizon.
Our capital buffers denote capacity for sizable distributions and provide strategic flexibility, allowing us to be positive on the prospect of exploring opportunities domestically and outside Greece regarding both our core as well as adjacent markets. As always, our actions and execution strategy have as primary objective value creation for our shareholders, and with that, I would like to open the floor to questions.
The first question comes from the line of Eleni Ismailou with AXIA Ventures. Please go ahead.
Good morning and congratulations for the strong set of results. I have three questions from my side, so the first one is that you're making an assumption for 60% payouts throughout the period of your business plan. Can you talk about the upside and downside risks to that, and how are you thinking of the split between buyback and cash dividend in the outer years?
My second question is about your strategy against the dropping rates. If it changes at all for the outlook, for the near-term outlook, and if you could confirm the rate sensitivity assumed in your business plan for 25 basis points cut for 2025 at least. And my last question is on excess capital use.
As you continue to generate high levels of organic capital and as you're guiding for a payout of 60% out of the next year's profits, what other capital deployment strategies are you considering? Will the focus be more organic or inorganic growth? And on that note, any comments you can make on this morning's headline noise around NBG acquiring a stake in Bank of Cyprus? Thank you.
Okay. Upside and downside risk for the 60, approximate 6% payout ratios. Clearly, it's the upside and downside risk to the business plan.
So there, I think that for the moment we're looking at more upside risks and downside risks in terms that perhaps rates will not fall as rapidly as we have conservatively included in our business plan. Two, it seems that loan growth is faster than expected so far. So that's another upside risk. But clearly, if the geopolitical situation worsens and there's a recession in Europe, there could be some downside risk.
So I would link the 60% payout mainly to the macro environment, but clearly the regulator has to approve that. We also have the capital buffer in case there's some small deviation in profitability to make up, but our key point is to keep the payout ratio sustainable. Christos, do you want to take the dropping rate strategy and the sensitivity? Yep.
So in our business plan, at least, we anticipate that the average Euribor will go down to 2.2% in 2025. So that's a solid 130 basis points lower from where the average was for 2024. Our sensitivity remains the same. So for 25 basis points, we expect a reduction in NII all in all by about EUR 35 million. Effectively, that kind of suggests that we expect, given the dynamics that we have assumed in the business planning, about EUR 180 million-EUR 200 million of NII reduction.
Now, having said that, as Pavlos said, there are already upside risks in our planning. In our business plan, we assume that rates will be down to 2% by June. So we'll see how things unfold. And obviously, sensitivities are also affected by the dynamic changes in our balance sheet. But so far, our guidance remains.
So it's EUR 25-35 million for every 25 basis points. Okay. And thanks for the last question. It gives me the opportunity to explain again how we envision to deploy our capital. Our goal is to increase sustainable payouts to shareholders, and clearly, increasing revenue either organically or inorganically is key. Now, turning to the inorganic, we look at transactions which are value accretive and/or transformational.
And when I mean transformational, I mean either in size, in terms of tech benefits, or they're in adjacent markets which can increase our customer base and our type of business. We have the firepower. We're keeping our powder dry so far, and we have the discipline to await for the appropriate opportunity. So I hope that answers that.
Thank you, gentlemen, for your answers. This is most insightful, and again, congratulations for the results.
The next question comes from the line of Osman Memisoglu from Ambrosia Capital. Please go ahead.
Hi, Meni. Thanks for your time and the presentation. Just if you could elaborate a bit on the one-offs in Q4, particularly on the VES side as OPEX was a bit higher QoQ. I'm guessing part of it is seasonality, but on the VES side and any other one-offs that you would like to highlight would be helpful. Thank you.
Hi, Osman. Yes, indeed, Q4, as always, has some seasonality, so our OPEX were a bit higher than the previous quarters, but nothing spectacular there. With regards to one-offs, it was a quarter of higher one-offs. I will name a few for clarity. So as you very well noted, we had a VES. It was a very successful one.
And the one-off cost that we had to recognize was in the area of EUR 90 million. Now, over and above that, we had about EUR 30 million of costs relating to the market placement that took place in October. And also, we recognized in Q4 the donations for the schools that were initiated by the government announcements. So that also contributed to EUR 25 million of additional one-offs. But I think more or less that was it. And going forward, we don't expect one-offs to be at this high level.
Perfect. Thank you very much.
The next question comes from Andreas Souvleros with Eurobank Equities. Please go ahead.
Hello, can you hear me? Yes, we can. Yes. Okay. I have one follow-up question regarding OPEX. You had an increase in OPEX due to the change in union-agreed wages in 2024.
And now you assume 5% growth in your OPEX in the following years, per year. Do you expect any? Does this growth in OPEX include any other change in the union-agreed wage?
Okay. Let me clarify that. The previous union-agreed wage increase was done three years ago, and it was a cumulative increase that took place every year. So the increases that you've seen in the past wage cost had to do with what we had agreed in the past. Just to be more transparent, there was about two and a half increases in the costs of last year. Now, what we anticipate is that there might be a new increase given the negotiations that we have now for the next three years with the unions. These discussions will materialize in the next few weeks.
So that's what we try to capture as part of our future, let's say, evolution of OPEX in the business plan. That's it.
Okay. Very clear. Understood. Thank you very much.
We have another question from the line of Mikhail Butkov with Goldman Sachs. Please go ahead.
Yeah. Good day. Thank you very much for the presentation. I just wanted to ask to remind on the cost of risk composition between the underlying cost of risk and the servicing costs. In particular, as far as I remember, correct me if I'm wrong, you have a bit different composition there compared to other Greek banks. Yeah. Just if you could remind on that, and maybe there will be some follow-up.
Yeah. Actually, we have none other elements in our cost of risk with regards to, for example, synthetics or servicing costs. The cost of risk that we have on our presentation and our numbers is pure underlying cost of risk. So it's how we build our coverages going forward. Okay? Nothing there to clarify further.
I would just add that we are clearly relatively conservative on our cost of risk, which will allow us to have a faster normalization going forward.
And just to clarify, why you do not have the component of servicing fees because you have in-house?
Yes, exactly. When we did our big securitization a few years ago, we opted back then not to spin off our services. So we retained our services in-house. And we are the only bank, actually, in Greece that have done that. So we have our services in-house.
And yeah, so if I may ask connected to that, so do you see this in-house servicing as an advantage going forward? And basically, well, when comparing your cost of risk guidance with what other banks already disclosed, the headline cost of risk seems to be within the range of the guided ranges, but is it an advantage that you have in-house servicing fees, meaning that structurally you could afford maybe even lower cost of risk in the medium term, or it is not adding advantages?
Okay. Thanks for the question. I think the most important advantage of having the team in-house is not related to the cost of risk. It's related to the potential from the reperforming loan market. Okay? I've said it before. There are a lot of loans in the servicers. They will go off the servicers. The natural habitat is the banks. It may take some time to agree with the regulator how this will be done, and there are ongoing discussions with that.
But we have the people that can underwrite these reperforming loans, and we can thus take better advantage of this opportunity. So I think that's the most important advantage of having kept the team in-house. Now, on the normal cost of risk, we will be giving guidance that will be below 40 basis points by the end of the business plan. So therefore, I think we agree with you that there's room for further normalization.
Yeah. And maybe just one more follow-up then, as you mentioned the reperforming loans and also looking at your guidance on growth, like 8% through the business plan, it looks to be a bit higher than what some other banks guided. Do you include any volumes from the reperforming loans in your business plan already, or?
Yeah. Thank you for the question. No, we do not. That is pure upside. There's nothing included from reperforming in the business plan.
Okay. Okay. Thank you. Very helpful. Thank you.
The next question comes from the line of Stephan Potetter with UBS. Please go ahead.
Good morning. Thanks very much for the opportunity. Just a quick clarification, if I may, on your business plan, the EPS target of 1.5 EUR by 2027. Is that on a new basis, or is it still on the core PAT basis? I think there's a footnote there saying it is on PAT before one-offs, just to clarify that.
Yeah, that is correct. It's on PAT before one-offs. And of course, it's also subject to our buyback scheme also going forward. And you may assume, as I said also on the question on one-offs, that we expect our one-offs to be lower going forward compared at least to what we had recognized this year.
Just to clarify, so previously you had this core PAT metric which excluded trading revenue, whereas most of the banks actually included the normal trading revenue in their adjusted earnings number. Would you include, therefore, going forward, some of the trading revenue?
I think we would. The reason for exclusion in the past is because we've recognized very big amounts of one-off trading results, and we thought it was fairer to exclude it from our recurring profitability metrics. Now, assuming going forward that trading line is going to contribute something in the area of EUR 60 million per annum, which is not something extraordinary like we had in the past, yes, you could assume that we'll be including that in our recurring profitability.
Thanks. That's clear, and I think that's sensible as well to align with the other banks. Thank you.
The next question comes from the line of Mehmet Sevim with J.P. Morgan. Please go ahead.
Good morning, and thanks very much for the opportunity. If I may, I'll just have one clarification on your NII guidance. Specifically, you've already highlighted the upside risk that may come from the rate trajectory. Even if you assume that the average variable comes down to 2.2%, I think we would have the following picture.
First, in the fourth quarter, the run rate that gives us about EUR 2.3 billion NII in 2025. Then your rate sensitivity of EUR 35 million, simplistically assuming that this applies, that would give us about EUR 150 million decline. So we would be at EUR 2.1 billion NII in 2025, which is basically your guidance, but that would not have any balance sheet growth in it.
I would also assume there would be some benefit from the very strong fourth quarter balance sheet growth that we saw. So can I ask if I'm missing something here, or how would you basically respond to this if you have any views on that? And secondly, maybe just on the buyback, may I clarify the timing of it? So when would you expect it to be approved, and when would you expect it to be launched and finished? Thanks very much.
The question on the NII. I think what you are missing, if you are using as a point of reference the Q4 of 2024 NII run rate, is the fact that there is some time lag in the repricing of the loan book. That's on the high end, and that's why if you apply that for the fourth quarters of 2025, you end up with a higher number.
That's why we said that it's best if you use as a point of reference the sensitivity that we are sharing with you, our guiding force. It's EUR 35 million for every 25 basis points. If we do the math with that point of reference, we end up with a EUR 180-200 million reduction that I mentioned. With regards to the buybacks, obviously, this is still subject to regulatory and AGM approval. Our AGM is scheduled for the end of May, and we would like to start with the buyback program immediately after our AGM. That's the baseline plan.
Okay. Thanks very much. We have a follow-up question from the line of Osman Memisoglu with Ambrosia Capital. Please go ahead.
Could you confirm, does that 1.5 include impact from buyback? And if so, is the buyback similar proportion to this 3.5, 1.5 that you did for 2024? Thank you.
Yes, Osman. I can confirm that the 1.5 is including the buybacks that we aspire to perform. And that's, I mean, you could have as a rough point of reference, as we discussed also in the past, like two-thirds is cash and one-third is buybacks, more or less. But that would be subject to the developments of the valuation of the bank, of the share of the bank. So to be seen.
Sure. Thank you.
The next question comes from the line of Alexandros Boulougouris with Euroxx Securities. Please go ahead.
Yes. Good morning. Just a clarification on my end regarding OPEX as well on the three-year CAGR of 5%. Should we assume that in our models in a linear way, or should we expect that in 2025, cost growth should be slower given the benefits from the cost savings from the VES plan, the big VES plan that you mentioned, the EUR 90 million cost in Q4? Thank you.
Alex, you should consider our guidance to be linear. Our VES, as communicated, was a rejuvenation, voluntary exit scheme. So we do want to invest more in human capital. We want to have new people in and reward our people through variable remunerations as well. So you should not expect a big, let's say, upside in the wages next year just because we had the VES. It's part of the overall strategy of retaining a solid path of our OPEX going forward.
Thank you. Yes. And a follow-up on fees as well. Is it the same? Should we consider the linear or, given the government measures that were announced in January, maybe slower a bit into 2025 and then a pickup later on?
The base case is the latter, yes. We start the year, obviously, incorporating the measures that were announced by the government in our three-year business plan: a slower start in 2025 compared to the other two years. That's the base case.
Okay. Thank you.
The next question comes from the line of Salome Skhirtladze with Bloomberg Intelligence. Please go ahead. Hello.
Thank you for the call and for this opportunity. I have two questions to clarify. The first one on the cost side. Does your digitalization and AI strategy and related cost saving, does your business plan incorporate these savings, or what could be upside potential out of that, including the potential headcounts or other kinds of spending? This is the one question. Another one, assuming the higher-than-expected loan growth, would you revise your deposit structure, and are we expected to see a higher share of time deposits going forward?
Okay. I'll take the first question, and if this is, we'll take the second. On AI, it's included. An ambitious AI plan is included in the business plan. It's mostly in the CapEx rather than the OpEx. We already have a lot of uses for predictive AI, and we are starting to play around with GenAI. The costs are not the largest part of our CapEx, so to speak. It's more of an operational challenge rather than an expense challenge. So yes, it's in there. Clearly, what's going to happen with AI is unknown, but we are putting resources and having people in our team hiring a whole unit on AI, and we'll see how fast we expand on that side.
Just to add to that, obviously, since we cannot measure it credibly, we don't have any savings incorporated in the business plan. If it comes and when we can measure it credibly, we could apply to the business plan. But in the base case, we do not. Now, moving to your question about deposits, as you very well know, we enjoy a very strong deposit base.
We have about EUR 57 billion of deposits. 80% of them is core and 20% time. Our liquidity coverage ratio is over 260%, among the highest in Europe. Our loan-to-deposit ratio is 60%, so we can very comfortably manage any asset growth without needing to do anything hectic with regards to changing our strategy on deposits. Now, having said that, we obviously want to be always taking a fair share in the market growth of deposits, but nothing out of the ordinary in that respect.
Thank you very much.
The next question comes from the line of Panagiotis Kladis with Alpha Finance. Please go ahead.
Hello. Thank you very much. Two questions from my side. One on the loan growth. Again, should we expect something linear there, or you have a different pattern in your mind? And also, if you can elaborate on the key drivers, especially on the retail front. And second, on the buybacks, is there a level, valuation level that you above this level, you think that it does not make sense to proceed with buybacks? Thank you very much.
Okay. I'll start on the loan growth. So we have communicated a CAGR over the three years of around 8%.
The driver is corporate, which contributes mostly to this growth, over 9% in the three-year period. And then retail, as we said, unlike the previous years, will contribute something in the area of 3%. Why am I making reference to that? Given that corporate is the key driver, and we've witnessed in the recent years that corporate is mostly large tickets so far, it's hard to say if we are going to achieve it linearly or with a growing trend going forward.
What I can say is that in our business plan, we've assumed a linear-ish approach in the business plan. It's more skewed towards the outer years, but not by a big margin. Okay. It's tough to say depending on the tickets. What I can also give you as clarity and guidance, we do expect an over EUR 2 billion of credit expansion in 2025.
Now, with regards to buybacks, I will answer theoretically. A good point of reference for the way that we will unfold our strategy on buybacks is evaluation of the company or price to book. So definitely, up to the point where our price to book is below one, this is something that we would be considering. Even more than that, our cost of capital is also a relevant metric as to how we'll approach this strategy. But it's too early to commit or say anything yet.
Okay. Thank you very much.
The next question is from the line of Alberto Nigro with Mediobanca. Please go ahead.
Yes. Thanks for taking my questions. The first one is on the potential acquisition of reperforming loans. I was wondering what kind of discussion you are having with the regulator and what are the main concern or request from the regulator on this topic.
The second one is on Ethniki Insurance. If your current position is mainly due to devaluation of the assets or there are also strategic considerations that you have done it on Ethniki Insurance. Thank you.
Okay. On reperforming, the discussion with the regulator is ongoing. You can understand his hesitancy. The regulator wants to make sure that anything we put back on our balance sheets is of very high quality. And we need to make sure that what the servicers are going to offer are of that high quality. So it requires a three-part sort of negotiation, regulator, ourselves, as well as the servicers providing well-cured loans. So I am optimistic that we'll have more progress this year than we had last year. And on the last question, you clearly can understand why I can make no comment. Thank you.
The next question is from the line of Can Demir with Wood & Company. Please go ahead.
Yes. Good morning. Thank you for taking my question. Just a question on your M&A plans. You just said you don't want to comment on Ethniki, but I was just wondering. I mean, you know this company very well. You used to own it three years ago, and they are probably well plugged into your IT systems and things like that. So I'm just wondering why it didn't strike you as a compelling opportunity, or maybe you're not interested in the insurance sector specifically. I just wondered why you didn't look so closely to it. Thank you.
I'm going to disappoint you and say no comment again.
Thank you. Fair enough.
We have a question from the line of Petros Tsourtis with Optima Bank. Please go ahead.
Hello everybody. One question if I may.
Can you give us more color on your potential in inorganic actions? I mean, are you looking for opportunities in banking, asset management, IT? Which are the most favorable sectors are you looking for? Thank you.
I think I made a comment at the beginning of the call, which you may have missed. But I'll repeat it. How we envision to deploy capital, okay? Our goal is one, increasing payouts to shareholders, and clearly one way to do that is by increasing revenue either organically or inorganically. Inorganically, we need to look at transactions that create value and/or are transformational. Transformational means big size, some tech benefits, adjacent markets, things like that. We have the firepower. We're waiting for the right opportunity. We have the discipline to wait. So that's where we are.
Okay. Thank you very much.
Ladies and gentlemen, there are no further questions at this time.
I will now turn the conference over to Mr. Mylonas for any closing comments. Thank you.
Thank you all for participating in our full-year results call and the Q4 results. Apologies for the early morning hour, but I'm sure we'll have opportunities to go in more detail on everything that we presented today. And we'll be traveling to various conferences, but you can reach out to our team, to myself, to Christos, to Greg, so.