Ladies and gentlemen, thank you for standing by. I am Gail, your conference operator. Welcome and thank you for joining the National Bank of Greece conference call to present and discuss the first quarter 2025 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 afternoon, everyone. Welcome to our first quarter 2025 financial results call. I'm joined by Christos Christodoulou, the Group CFO, and Greg Papagrigoris, Head of IR. After my initial remarks, Christos will go into more detail on our financial performance, and then we will turn to questions and answers. So let's begin. Before I turn to our first quarter 2025 financial results, I believe it would be useful in the currently highly uncertain external environment to review Greece's strong fundamentals and its relatively low direct exposure to the U.S. market. I believe these make the economy quite resilient and will permit GDP growth at a pace of around 2.5% for a third year in a row. Five points to explain the key drivers. First point: robust activity at the tail end of 2024 allows the economy to enter 2025 with strong momentum.
Indeed, the so-called carry effect is about 1.2 percentage points of GDP. Robust business investment, as well as construction activity, supported by credit expansion of the order of 10% year on year, provide clear signals that entrepreneurs continue to find the economy attractive. Strong airline and hotel bookings also point to another record year for tourism. Second factor: both monetary and fiscal policy will provide significant support to activity. ECB rates will have come down by about 200 basis points since late 2023, and their decline should be feeding through the monetary transmission mechanism, especially in an environment dominated by floating-rate loans. Furthermore, fiscal policy should be about two percentage points of GDP looser in 2025 than in 2024, when the primary surplus reached an exceptional 4.8% of GDP, with a looser fiscal stance providing an estimated one percentage point further boost to GDP in 2025.
Third factor: energy prices will be significantly lower in 2025 versus 2024 by some 15%, with a concomitant terms of trade gain providing further support to the economy. Fourth factor: real estate prices will continue to rise following their nearly 40% increase over the past three years, providing both positive wealth effects and improving collateral values. Fifth: 2025 is a year when a large amount of RRF funds are expected to be dispersed into the Greek economy, approximately EUR 5 billion equivalent to 2.5% of GDP, with a further increase to 3.5% of GDP in 2026. Now, the other important point to note is that Greece has a relatively low direct exposure to the U.S. as regards both goods and services, less than 1% of GDP each, suggesting that even a marked decline in exports to the U.S. would not put a severe dent in Greece's growth trajectory.
Thus, it is not unsurprising that all leading and conjunctural indicators continue to trend positively at or near short-term highs. In a nutshell, the economic backdrop to operations in 2025 remains quite solid. Now, let me turn to our financial results. Despite sharply low interest rates about 100 basis points during the past six months, we continue to generate strong profitability. Specifically, first quarter 2025 profitability exceeded EUR 380 million, equivalent to a return on tangible equity of over 19%. That becomes 16.5% after normalizing for the strong trading result of the first quarter. This is well above our fiscal year 2025 guidance of over 13%. Similarly, our earnings per share, again normalized for the trading results, stood at EUR 1.44, also well above our full-year guidance for earnings per share of about EUR 1.3. The key contributor to this performance has been the resilience of our income.
NII was not unsurprisingly lower, fully aligned with our full-year 2025 guidance, but lower loan rates and liquidity yields were buffered by: one, the strong loan expansion experienced in the second half of 2024. Two, the move into the money of our structural hedges. And three, the repricing of our time deposits. Fees also continued to be quite robust, up 13% following an adjustment for the 2024 state measures on payments and 6% up on a reported basis, with notable support from investment products and loan fees. Third item on income: trading turned in a solid quarter, reflecting bond market developments. Importantly, credit expansion was healthy in the first quarter, especially if one takes into account the negative seasonality traditionally experienced in this quarter. It was up EUR 0.3 billion.
With a large outstanding pipeline of approved corporate credits of over EUR 2 billion, we continue to expect net expansion to be around EUR 2.5 billion for the full year. We also expect the retail banking segment to provide a positive impetus to net expansion as the new government-sponsored mortgage program kicks in. On the cost side, recurring OPEX was up 5%, aligned with our full-year 2025 guidance, reflecting increased wages and variable remuneration, as well as investment in human capital as we keep onboarding new talent. Total headcount will continue to decline as departures from the recent Voluntary Exit Scheme occur in the second half of 2025. As regards our strategy to front-load investments in technology, the replacement of our core banking system is anticipated to be complete around the end of the year, providing NBG a significant competitive advantage in terms of speed and efficiency.
Finally, our credit risk charges continue their steady downward trend, reflecting favorable asset quality trends in the first quarter of 2025, dropping below 50 basis points as guided. As regards our capital position, we continue to strengthen the first quarter with a CET1 ratio and total capital ratio increasing by 40 basis points quarter on quarter to 18.7% and 21.5% respectively, increasing despite absorbing a payout accrual that has been increased to 6%, up from 50% in the past year, as well as the concomitant accelerated DTC amortization. Our CET1 ratio currently stands nearly 450 basis points above our internal target of 14%, underscoring our capital allocation optionality, which focuses on maximizing shareholder remuneration while maintaining strategic optionality as regards growth and M&A opportunities.
In sum, in an uncertain global environment, NBG demonstrates the adaptability and resilience of its business model, capitalizing on the strength of our balance sheet to deliver a solid set of results which are in line or above our full-year 2025 targets on an annualized basis. Moreover, in view of the performance to date and the solid macroeconomic prospects and fundamentals of the Greek economy, we stand confidently by our guidance as provided during the Q4 announcement call. And 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. So, Christos,
thank you. I will start with profitability as illustrated on slide 13.
For the first quarter of 2025, we reported a profit after tax of EUR 0.4 billion, translating into an earnings per share of EUR 1.67 or EUR 1.44 after normalizing for the strong trading gains in the quarter. Our Q1 profits deliver a return on tangible equity of 19.1% or 16.5% on a normalized Q1 trading basis before adjusting for excess capital, which stands well above our full-year 2025 guidance of over 13%. Our strong profitability was underpinned by our resilient income, fully absorbing the impact of sharply lower rates, especially in the last two quarters, with all key performance indicators comfortably supporting our full-year 2025 guidance as disclosed on slide 10, highlighting the strength, the resilience, and adaptability of our balance sheet and business model.
Going into more detail, our net interest income was down 4% quarter on quarter, coming in slightly better relative to our expectations and our full-year guidance. As shown on slides 17 and 18, the reduction clearly reflects the significant drop in average Euribor rates by approximately 100 basis points cumulatively since the third quarter of 2024, as well as a sizable calendar-based effect. Healthy credit growth acted as a mitigating factor, with disbursements up by more than 40% year on year, resulting in a credit expansion of EUR 0.3 billion in Q1. Furthermore, deposit hedges started to support NII during the first quarter, while the optimization of our deposit mix and repricing added further support. As a result, our net interest margin for the first quarter settled above 290 basis points.
Fees remained on a solid growth path, up by 13% year on year, excluding the impact from state measures estimated at EUR 6 million for Q1, highlighting our successful efforts to enhance the bank's fee-generating capacity by improving commercial offering and increased cross-sale, leveraging our class-leading digital capabilities. Growth was primarily driven by corporate fees, increasing by 35% year on year, spearheaded by lending and trade finance fees. Retail fees were also performing well, up by 15% year on year on a like-for-like basis, with the most notable driver being fees from investment products, increasing by 60% year on year, as shown on slide 21, reflecting impressive mutual fund market share gains of 4 percentage points year on year. Specifically, our retail funds under management posted an increase of over EUR 2 billion year on year, up by 37%, reaching EUR 7.6 billion in Q1 2025,
as we show on slide 8.
Moving to OpEx on slide 22, costs were up by five% year on year, normalizing for variable pay accruals in Q1 2024, and delayed exits from our December voluntary exit scheme expected to fully materialize by year-end 2025. The increase in personnel expenses reflects increased wages and variable remuneration, as well as additional investment in human capital, including onboarding new talent and skills. G&As were up by eight% year on year, supporting business growth, while elevated depreciation charges reflect our class-leading IT investments, with NBG being the only Greek bank to upgrade its core banking system expected to be completed this year. Our cost-to-income ratio remained at low levels of 30%, or 33% normalizing for the high trading gains in Q1, relative to our full-year 2025 guidance of 35%, evidencing again our top-line resilience.
As regards credit risk, the absence of NP flows in Q1 allowed our cost of risk to remain on a steady normalizing path, settling at 46 basis points and in line with our guidance for a cost of risk below 50 basis points. Our strong profitability enhanced our capital buffers further, comfortably absorbing credit expansion, the increased payout accrual of 60% versus the 50% payout in 2024, the accelerated DTC amortization, as well as the 2025 baseline core impact. As illustrated on slide 15, our CET1 and total capital ratios increased by 40 basis points quarter on quarter to reach 18.7% and 21.5% respectively, while our MREL ratio of 28.4% comfortably exceeds the final target of 26.8%. Our strong capital generation supports increased shareholder remuneration while preserving healthy buffers over our internal capital targets, which enhances our strategic flexibility for capturing further organic and inorganic growth opportunities.
Now, let's see the highlights of our well-capitalized, high-liquid balance sheet summarized on slide 14. Our performing loan book was up by a solid 12% year on year in Q1, comparing favorably to our target three-year CAGR of 8%, having also in mind our strong pipeline. Despite seasonality, disbursements reached EUR 1.6 billion in Q1, supporting credit expansion, led by corporates, which amounted to EUR 1.2 billion, nearly 60% higher year on year, with contributions from multiple sectors including energy, hotels and leisure, shipping, and machinery and equipment. Retail disbursements were up by 5% year on year to EUR 0.4 billion, as shown on slide 18, also providing support to loan growth.
Deposits remained on a positive year-on-year trend in Q1, up by EUR 0.1 billion on the back of core deposit inflows from retail customers, offsetting time deposit shifting towards our mutual funds, as well as corporate working capital repayments affecting corporate deposits, as shown on slide 19. The impact from the corporate client balance sheet optimization witnessed this quarter reversed in April, as corporate deposits were up by EUR 0.4 billion. Our improving deposit mix, with core deposits comprising 80% of the total stock, lowering deposit yields and deposit hedges increasingly in demand, helped to offset part of the pressure of lower benchmark rates on our net interest income. As regards liquidity and our superior funding profile on slide 20, our net cash position remains high and the key comparative advantage, funding loan expansion and our fixed income securities book shielding our NII as ECB rates normalize.
Our liquidity coverage ratio of 259% is among the strongest in Europe, while our loan-to-deposit ratio stands at 64%. Our total funding cost stood at 71 basis points, with deposits comprising 94% of our total funding. Our vast share of low-cost core deposit funding provides resilience in uncertain times, as well as a springboard for balance sheet growth. Turning to asset quality on slides 23 to 25, our NP stock stands below €1 billion on the back of favorable formation trends, translating into an NP ratio of 2.6%. Importantly, our leading coverage levels are across stages by European standards, providing resilience in times of uncertainty, highlighting yet again NBG's balance sheet strength. Summing up, our first quarter results represent a strong start of the year, with top-line performance keeping us well on track to deliver on our full-year 2025 targets.
Our profits of EUR 0.4 billion, practically flat year on year despite sharply lower rates, and the sustained delivery of returns on tangible equity in the high teens despite our high capital levels are a testament to the resilience and strength of our business model. We remain focused on navigating through an uncertain global environment with prudence, while continuing to invest for growth and explore strategic opportunities with discipline, enhancing long-term value for our clients and our shareholders. And with that, I would like to open the floor to questions.
The first question is from the line of Eleni Ismailou with AXIA Ventures. Please go ahead.
Hello, and thank you for taking my questions. My first question is on loan growth. We see that the group performing loan portfolio increased by 12% year on year, yet we see EUR 300 million in net credit expansion in the quarter, following an exceptionally strong fourth quarter and full-year 2024 results. Could you provide us with some guidance on how we should be expecting your pipeline to unfold in the coming periods? Should we expect any changes in your full-year guidance? That would be my first question. My second question is, what should we anticipate as a trend going forward in terms of spreads and loan pricing? And my third question on capital is whether you have any inorganic capital deployment actions in mind that you could comment on. Thank you.
Okay, let me start, and Christos will add. As I made clear, I hope in my introductory remarks, we have a strong pipeline.
Most of the pipeline should be dispersed in 2025, so we feel quite confident about the EUR 2.5 billion net expansion that we have guided for. For all of the Greek banks, it's mostly corporate and the large corporates that are providing the loan expansion, so you've seen it over yourselves over the past quarters. It's quite choppy, with some big tickets coming in quarters and providing faster loan growth when they do come. I'm also a bit more optimistic on the mortgage markets. You see there's a new government program out. The leading indicator here is applications, and the applications are almost double in the first quarter what they were a year ago, and the approval rate is also significantly higher than last year. So there's a long lag between applications and disbursements in mortgage markets about four months.
It could be more if people are having difficulty finding properties, but that should start also providing support as a second engine to loan growth. On spreads, I think we've seen most of the loan spread contraction, especially on the corporates. Now that rates are coming down rapidly, there's even less pressure on that, so there may be a bit more to come, but nothing major. And there's nothing to report on the last question. Christos, did I cover everything?
Yeah, I think you've covered everything.
Thank you. Thank you very much, gentlemen, for taking my questions.
The next question is from the line of Dominic Borthwick, Autonomous Research. Please go ahead.
Hello, thank you for all your comments. Quick follow-up on the loan growth side of things. I noticed that your performing loan stock remained flat in Q1 despite the strong originations. Were there any redemptions we should be aware of? And if you could comment on how you expect the redemptions to develop going forward? The other question I had was on the NIM outlook. Obviously, your Q1 NIM comfortably above the full-year target. My question would be, what is your level of confidence on the NIM staying above 2.8% given this kind of lower rate trajectory? And if you could please update us on your NII sensitivity to euro rates. Thank you.
Okay, I'll take the first question on the loan growth. So effectively, what has absorbed, let's say, the EUR 0.3 billion of credit expansion that you see is the FX impact that we had due to our exposure on the shipping portfolio in USD. So that accounts for just over EUR 100 million of the growth. And then we also have two additional effects.
One is the gradual amortization of the securitization bonds that we have following our NP cleanup. So that's about EUR 40 million-EUR 50 million as well. And then we had one repayment. Effectively, it was a deferred consideration from a previous sale that was repaid in Q1, and that accounts for the rest of it. So more or less, that's it about the number. Now, with regards to NIM, yeah, absolutely. We feel very confident about us being above the 280 mark by the end of the year, the way that we see NII evolving at the moment. Our sensitivity hasn't changed, so we still see that for every 25 basis points, our NII would be affected in the area of EUR 35 million. Obviously, growth of the balance sheet would affect these numbers.
Just to add a bit more color, we believe that this sensitivity is linear up to 2% and even lower. Now, if the rates go down below 1.5, obviously, the repricing deposits will not be as large, so there the sensitivity might become a bit higher. But in general, we've seen a big chunk of the lower rates affecting our NII in Q1. We've said that the average variable rates have come down by 100 basis points since September. There is some time lag in our repricing of the loan book, but still, though, we feel confident about the remainder of the year.
I think if I can also add one more point on the NIM, we have an even larger lag in the repricing of our time deposits. The back book is about 180 basis points, while the front book is just below 100.
So this is going to take a bit of time, nine months, because now the time deposit duration has been extended. But there, the time lag should be providing an extra benefit to NIM over the next nine months. So from a pass-through now of around 20%, if you take just the mathematical calculation, it'll go to around 50% pass-through in nine months. So that's an additional benefit, and clearly, we are thankful that we put in the structural hedge, which is turning into quite a money-making machine. Indeed.
So just to confirm, please, up until rates drop to or below 1.5%, you expect a largely linear NII sensitivity of EUR 35 million. Is that correct?
Yeah, that's correct, but again, with the caveat of the balance sheet size. So assuming the balance sheet of today, yes.
Sure. Thanks very much.
The next question is from the line of Alex Demetriou with Jefferies. Please go ahead.
Hi, maybe just one more on lending growth and maybe potential uses of your excess capital. So can you just speak to the opportunity you see in lending outside of Greece? Potentially, what areas or countries do you see the opportunity to conduct transactions abroad? And then just secondly, recently, you've increased the amount of capital in your Cypriot subsidiary. Could you just provide some color there on what the strategy is there in Cyprus more broadly?
Okay, let me start with the first part of the question, which is lending abroad. Yes, we're looking at the International Syndicated Desk, mostly in Europe, in sectors that we are more comfortable with, with energy, infrastructure, hospitality. So we have set up an International Syndicated Desk and have been doing a little bit of that. The other thing we're looking at is in the Middle East, especially in Riyadh. And as you know, we got awarded for our EUR 300 million data transmission pipeline, which was done under Islamic banking law first for us. So we are being a bit more bold in that direction.
Okay, on the second question with regards to the capital increase we've done in our Cypriot subsidiary, obviously, some of the lending that we are exploring abroad is going through the balance sheet of the Cypriot subsidiary. So as a result, we need to enhance its capital level so as to abide by the regulatory thresholds that a banking subsidiary should. That's the only reason.
Thank you very much.
The next question is from the line of Siva Natarajan with Principal Asset Management. Please go ahead.
Yeah, hi, thank you. I have two questions. First one, could you quantify the deposit hedge benefit this quarter? And two, could you talk about your exposure to shipping loans and what you're seeing, or at least do you anticipate any issues there in terms of if there's lower trade volumes impacting some of the shipping loans, if you will? So just trying to see what your outlook is on shipping.
Okay, thanks for the question. So I'll take the first one. As we described during the delivery of the remarks, our demand deposit hedges came in demand effectively midway through the quarter. So the profitability, let's say, is marginally positive in the quarter, but the benefit will mount up, and we expect that to materialize in greater numbers towards the second quarter and towards the end of the year as well.
Nothing material to report so far, but yet again, quarter on quarter, given that we've been paying quite a lot for preparing ourselves for the benefit of today, it's a significant improvement, let's say. On a quarter-on-quarter basis, we are up by €10 million, but the benefit in terms of the positive profits will mount up in the following quarters. Pavlos will take the second question.
Yeah, no, just to follow up on Christos' point, currently, what we're gaining is far more than what we were gaining at the beginning of the year. As the €STR rate goes down, it keeps improving. Now, on the shipping, anyone who has a crystal ball on this, great. A lot of unknown factors.
Just what we do know, though, is that we are, as NBG, don't have a lot of container vessels, financing of container vessels, and that's mostly what goes to the US, and second, though, the statements keep changing day to day. It was like anything that was built in China would get penalized, and now it seems that anything that's owned by China, which means it has a Chinese lease, would get penalized. That actually looks like an opportunity because the shipowners are coming to us to refinance Chinese leases, so the various factors that are leading to pluses and minuses on shipping, clearly, a very large slowdown in shipping worldwide due to the lower trade would have an impact on rates, but we have pretty good collateral values, loan-to-value ratios, so this is temporary. This would be fine, so there could be some opportunities.
Greek shipowners are very good at taking advantage of turmoil, so let's see. But again, we have a €3 billion portfolio, mostly tankers and a bit of bulk. So let's keep our fingers crossed.
Mr. Natarajan, are you finished with your questions?
Yes, thank you.
The next question is from the line of Demetriou Fellows, Martin with Ambrosia Capital. Please go ahead.
Hello, thanks for taking my questions. A couple on my side. One on OpEx. Is it still the case we're seeing 7% growth in Q1, but this will normalize going forward lower? That's the first question. And then with regards to RoTE guidance, and maybe it was even mentioned in the commentary earlier by Christos, more than 13%, but clearly, you're starting with 16.5%. Is it possible to elaborate a bit more as things stand now, where you see the RoTE? Thank you.
I'll start with the second question. As our CEO said in his opening remarks, we stand by the guidance at this moment in time. I think it's premature now to talk about overperformance, so maybe we'll revisit subject to developments during our Q2 results announcement. With regards to OpEx, absolutely, we are set to deliver the 5% or mid-single-digit increase in OpEx year on year. That's why we try to elaborate that there is some benefit to be earned through the delayed exits that we had from our voluntary exit scheme in December. So this delayed exits, the benefit will kick in in the latter quarters of the year, which will drive the comparison between last year's OpEx and this year's OpEx to the area of 5%. So pretty solid on that one.
Perfect. Thank you.
There's one last question by Alberto Nigro with Mediobanca. Please go ahead.
Yes, thanks for taking my question. I have just one. Now that the upgrade of your core banking system is almost finalized, can you elaborate a little bit more and I'll pause to understand how this will translate in a competitive advantage compared to peers? Shall we expect more exit going forward in the coming years or higher revenues per employees going forward? So it is a structural higher profitability compared to European peers. Thank you.
I don't think you can do it one-to-one with the P&L. Clearly, the core banking system gives you flexibility. Okay? If you want to put out a new product, you can do it in a matter of days. I would actually even say almost hours, when currently, it takes three months or so. So we can be far more flexible in providing you products and services.
From having many systems, we are now on one system. So that reduces maintenance costs and licensing costs. That's the second one. And the third is clearly in terms of operational risk and cyber risk, which is clearly something that keeps us up at night; you are in far better shape. So for me, the people that move first on tech in the banking sector in Europe are the ones that are going to be the winners in the consolidation game.
Thank you.
The next question is from Gary Dolores with Bank of America Merrill Lynch. Please go ahead.
Yes, good afternoon. Thank you for taking my question. Just to come back on the shipping point, can you elaborate a little bit on the second-order links maybe between the shipping industry or your shipping portfolio to the rest of the corporate book?
I guess we sometimes get questions on that, and it's not necessarily very easy to appreciate the dynamics there. And then secondly, can you comment a little bit? I know it's really early, and the color you've provided is really useful, but can you comment a little bit on how your appetite for loan growth in the shipping sector might change if there is indeed a downturn? I appreciate it's a bit early, but I see that it's one of the ingredients for your corporate segment growth into 2027. So anything you might say that there might be very useful.
Thank you.
I'm not sure that I may be missing something on your question. I don't see much of a link between shipping and domestic lending. I mean, the Greek shipowners are basically doing international routes and not linking so much to the domestic business.
If there's a downturn, probably their investment in Greece may come down, but I think that's not what you were talking about. Now, in terms of our appetite for shipping, we do have a good appetite for shipping. Now, clearly, if there's a downturn in the sector, you don't lend into the downturn, but if things hold up, we have an appetite to increase in shipping. Also, looking at not only the Greek shipowners, but also looking at maybe some Northern European routes, some of the, as we said, we're looking at the Middle East, some of the appetite for Saudis to build their fleet. So there's other things going on there as well.
Okay, super useful. Thank you very much.
Ladies and gentlemen, if there are no further questions at this time, I will now turn the conference over to Mr. Mylonas for any closing comments. Thank you.
Okay, everyone, thank you very much for joining us. As always, we'll be standing by for further follow-up questions in the next days, and looking forward to seeing you in the upcoming conferences. So thank you.