Welcome and thank you for joining the Eurobank Holdings conference call to present and discuss the first half 2025 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 you 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 Mr. Fokion Karavias, CEO. Mr. Karavias, you may now proceed.
Ladies and gentlemen, good afternoon and welcome to the Eurobank first half 2025 results presentation. Together with me is our CFO, Mr. Harris Kokologiannis, and the Investor Relations team. We are starting with some key recent developments, then presenting our results and answering your questions. Global economic conditions are normalizing, overcoming any concerns related to tariffs and geopolitical events. In Europe, a more relaxed fiscal policy adopted by some countries, combined with increased investments in infrastructure defense, may provide sustained economic stimulus and strengthen resilience. The region we operate in, Greece, Bulgaria, and Cyprus, continues to grow faster than the U.S. Greece, fiscal discipline remains strong, as seen in primary surplus figures in the first five months of the year, and the debt-to-GDP ratio improved the most among EU countries. These trends were reflected in sovereign bond spreads, as GGBs are trading through Italy and at par with Spain.
Taking advantage of the favorable market conditions, Eurobank proceeded to its first AT1 issuance in May. Trade expansion continues to demonstrate strength, supported by sustained business lending in Greece and solid growth across all loan categories in Bulgaria. The forthcoming euro adoption in Bulgaria, scheduled for early next year, is anticipated to be a significant milestone towards further economic convergence with Europe. Now, let's move on to our financial results as highlighted on slide 5-1 0. Eurobank reported robust financial performance in the first half of 2025, achieving an adjusted net profit of EUR 711 million and a return on tangible book value of 16.6%. In more detail, net interest income rose 12% year on year, as the quarter-on-quarter drop decelerated to less than 1%. Fiscal commissions were up by 29% year on year, supported by a strong second quarter.
As a result, core pre-provisional income was up by 7% year on year, to over EUR 1 billion. The cost of risk ratio remained at 60 basis points, in line with our full-year guidance. Asset quality remained resilient for another quarter, with the NP ratio decreasing to 2.8% and coverage exceeding 90%. As a result, core operating profit reached EUR 866 million. This is more than 6% higher year on year. Regional operations performed strongly, netting EUR 374 million, highlighting the group's franchise trend. Cyprus' net profit reached EUR 250 million and Bulgaria's EUR 110 million. Now, on volumes. Loan growth continued unabated, with a quarterly net increase of EUR 1 billion. This is 11% up year on year. The strong pipeline allows us to revise upwards our full-year loan growth target, from EUR 3.5 to EUR 4 billion. Deposits returned to growth in the second quarter, increasing by EUR 1 billion.
Wealth management performance was also strong, with managed funds and private banking customer asset liabilities moving up by 26% and 11% year on year, respectively. The total capital ratio was further enhanced by the AT1 issuance to reach almost 20%, while the CET1 ratio stood at 15.5%, absorbing the impact of the CNP Cyprus acquisition in Cyprus. In conclusion, the first half results were in line with our plan, notwithstanding a more rapid decline in ECB interest rates. Consequently, we anticipate that the return on tangible book value will exceed the initial annual target of 15%. The strong first half performance allows us to align with other European banks' policy by introducing for the first time a 2025 interim cash dividend of EUR 170 million. This is EUR 0.047 per share to be distributed in the fourth quarter.
At this point, I would like to ask our CFO, Harris Kokologiannis, to present 2025 first half results before opening the Q&A session.
Thank you, Fokion. Prior to commencing, I would like to highlight that this quarter marks the first-time consolidation of Stem Insurance. In this context, we have provisionally recorded negative goodwill of EUR 38 million, with the final figure to be determined by year-end. Let's now provide more insight into the second quarter results. Starting on page 21, on lending volumes, for another quarter, the group experienced strong organic growth, with an increase of EUR 1 billion in the second quarter and EUR 2.2 billion in the first half of the year. This growth was primarily driven by corporate lending in Greece and mortgage lending in Bulgaria. Based on these trends and the current pipeline, the full-year loan growth target was raised from EUR 3.5 billion to EUR 4 billion.
Group deposits on page 22 recovered in the second quarter, rising by EUR 1 billion, or EUR 1.5 billion excluding FX effect, mainly due to retail deposits in Greece, with positive contributions from Postbank and Hellenic Bank. The net loan-to-deposit ratio remained stable at 67%, while the LCR ratio improved to 191%. Following the issuance of AT1 capital, as shown at the left of page 23. As regards managed funds on page 25, in the second quarter, the wealth sector continued unabated its growth pace. Quarter-on-quarter, managed funds increased by EUR 450 million, and year-on-year are higher by EUR 1.7 billion, or 26%. Private banking customers' assets and liabilities reached EUR 13.5 billion, increased by 11% year-on-year. Moving to profitability on page 29, on a year-on-year basis, NII is higher by 12.2%.
Quarter-on-quarter, net interest income declined only slightly by 0.8%, as the impact from the lower Euribor by circa 50 basis points was largely offset by the higher loan volumes and the days effect. The net interest margin for the first half stood at 251 basis points. Moving on fees on page 30, commissions are higher year-on-year by 29%, driven by the consolidation of Hellenic Bank and the high single-digit organic growth. The second quarter fee income reached a record for this period, EUR 195 million, supported by higher platform and credit card fees, as well as wealth and insurance revenues, including the effect of Stem Insurance. Fees over asset ratio reached 77 basis points for the group and 82 basis points for Greece, reinforcing confidence in achieving or probably exceeding the full-year fee income target of EUR 740 million. On page 31, group operating costs increased by 6% on a like-for-like basis.
With Greece expenses rising by 6.7% due to higher IT CapEx and staff remuneration, the cost-to-core income ratio for the second quarter was 37.4%. Cost optimization efforts continued. Indicatively, in Bulgaria, staff decreased by more than 400 FTEs year-on-year, and branch network reduced by 34 branches. This rationalization improved Bulgaria's cost-to-income ratio from 40%- 37.8%. Despite a declining interest rate environment, in Cyprus, the scheduled legal merger between Hellenic Bank and Eurobank Cyprus is set for September, expecting to accelerate consignments. On page 33, we summarize the operating performance for the first half of the year. Core PPI reached EUR 1.021 billion, up 6.6% year-on-year. Loan loss provisions for the period amounted to EUR 155 million, or 60 basis points, in line with our plan and almost 10 basis points lower than first half 2024. Consequently, core operating profit increased by 6.3% year-on-year to EUR 866 million.
Moving on to asset quality on page 35, the NP ratio decreased to 2.8%, while NP coverage improved to 93%. Moving on capital and on page 39, organic profitability contributed 67 basis points to CET1 ratio, which remained stable despite the 20 basis points impact from the consolidation of Stem Insurance. The total capital ratio on page 40 increased by 90 basis points quarter-on-quarter to 19.8%, boosted by the new AT1 issuance. Overall, in the second quarter, the group delivered accelerated performance, supported by robust lending expansion, increased deposit volumes, and strong underlying core profitability indicators. The decline in net interest income was moderated, as loan growth helped offset the adverse effect of decreasing rates. The consolidation of Stem Insurance had a positive impact on fee income, which remained solid overall, while strategic cost optimization initiatives continued to be implemented across all regions.
Looking ahead, based on the first half performance, along with projected loan and bond volumes, anticipated lower envelope costs, and solid fee income, the group expects to exceed its 15% return on tangible book value target for 2025. This completes my presentation, and we may now open the floor for your 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 on two. Please use your handset when asking your question for better quality. Anyone who has a question may press star on one at this time. One moment for the first question, please. The first question comes from Alessandro Garrone with J.P. Morgan. Please go ahead.
Good evening. Thanks very much for your time. I have just two questions, please. Firstly, on NII, it seems like it's evolving very nicely now, given the loan growth. I just wanted to understand how you think about the quarterly NII trajectory from here. If we take into account that the pace of decline has meaningfully decelerated this quarter, but also rate cuts are now behind us, should we see a stabilization in the run rates from here? My second question is on capital. Now that you've done CNP Cyprus and you've also issued your AT1, I was just wondering what else we can expect from you when it comes to capital deployment. For example, is there anything that we can think of in markets like Bulgaria that you could consider for M&A? Is there any potential upside to the dividend payout ratio already this year, considering also the front-loading?
Thanks very much.
Let's take the first question, and then Fokion will go on for the second one. For NII, we have run a top-down exercise some weeks ago. Based on that, we reaffirmed our initial target of EUR 2.5 billion, even assuming the ECB terminal rate reaching 1.5%. That was the assumption when we ran this top-down exercise. This implies that we expected the average GFR for the year to be 35 basis points lower than our initial expectation, i.e., at 219 versus 253. So the EUR 2.5 billion NII guidance is maintained as a result of higher loan, deposits, and bond volumes, and better envelope management. Now, as regards the quarterly evolution and probable question, where is the trough, let's say, I would say that this depends on the ECB trajectory. For sure, the third quarter will be lower than the second quarter. Why?
Because the base rate at best will be 25, 26 basis points lower on average, third versus the second. At any case, whether it's going to be the third or the fourth quarter, what we say clearly is that despite the lower average base rate versus our business plan, we reaffirm our EUR 2.5 billion NII.
Now, moving into the capital use. You correctly pointed out that we have already consolidated the ex-subsidiary of CNP Cyprus, absorbing about 20 basis points of capital impact. What is next? We have stated before that we are interested not only for non-organic growth in banking, but also in insurance and asset management in any of the three countries that we have presence. Bulgaria could be a possibility if there is the right opportunity. The interest may be not only in banking, but also in insurance and asset management.
At the moment, there is nothing that is advanced in terms of discussions. There is no specific target. This opportunity may come at a time that we don't expect. For this reason, we would like to keep an amount of excess capital for potential inorganic growth opportunities. This discussion is driving our decision with respect to payout ratio. We have already stated that for the full year 2025, we have been committed for at least, and I'm repeating, for at least 50% payout ratio, meaning that this may be higher than 50%. This ratio was based on the assumption of a strong loan growth, which actually has materialized, and it is stronger than what we have anticipated. Let me remind you, I'm sure you have seen the data based on the ECB 2025.
May 2025 data, the credit growth in Greece and the private sector has been the fourth highest in the euro area. We should continue to see this strong growth also in the second half of the year. Based on these facts, the fact of strong loan growth and our desire to keep an amount of excess capital, we reiterate our commitment for a payout ratio more than 50%. Our decision to initiate an interim dividend distribution of EUR 170 million, or EUR 0.047 per share to our shareholders, underscores also our commitment to shareholders' reward. Let me also remind everybody that our share buyback program, which is the largest as we speak in the Athens Stock Exchange, remains active. Out of the EUR 288 million of the program, so far, EUR 80 million have been used, which corresponds to an acquisition of 28 million shares, which is 0.77% of the share capital.
As we have stated in the past, any shares acquired through the program will be cancelled out.
That's very helpful. Thanks very much.
The next question comes from Gábor Kemeny with Autonomous Research. Please go ahead.
Hello. Just to follow up on NII, please. I noticed that you had some income from money market and repo businesses, EUR 12 million plus in Q2. Is this a one-off, or do you think it is more of a recurring NII stream from here? The other question would be on Bulgaria. Can you give us a guidance on what sort of NII impact, NII boost you expect from the reserve requirements dropping with the country's euro accession from next year? Also, a broader question on Bulgaria. Do you see this euro accession and the new supervisor, new financial supervisor coming in, driving any consolidation in the market? Now, to your comment on possible M&A opportunities. Thank you.
Yeah. Let me start from the second question about Bulgaria, and then Harris will discuss about the NII. In Bulgaria, we expect about, if I recall correctly, roughly EUR 1 billion of liquidity to be released because of the reserve requirements. This is going to boost the NII. 2026 onwards, the euro adoption is going to have definitely positive consequences for the economy overall. This is good for the banking sector. The four largest banks, and Eurobank is one of them, control about 75% of the banking sector. There is still some room for further consolidation, which we monitor very closely.
As regards your first question, overall, there is nothing, let's say, exceptional in this quarter's NII, including the money market and repos, which includes hedging results as well. There's nothing extraordinary in this quarter that may not be repeated in the following ones.
Thank you. On the EUR 1 billion excess liquidity, what sort of spread shall we assume? Maybe 200 basis points? Is that a good transfer?
Obviously, you could appreciate that. This amount is going to be allocated to lending activity on a gradual basis. It's not going to happen overnight. The income that you can assume on this amount day one is the ECB DFR rate. Gradual is going to be translated into lending activity with spreads on average in Bulgaria in the area of 2 to 2.5%.
Very helpful. Thank you.
The next question comes from Michael Bukov with Goldman Sachs. Please go ahead.
Good day. Thank you very much. I have several questions. Firstly, on return on tangible equity upside risk. In the first half, you recorded around 16.6% return on tangible equity, and your guidance on NII seems to be implied for a quite marginal contraction in the second half, which I presume was the biggest risk for declines in the second half. To this end, would you think that you can repeat the second half in line with the first half in terms of ROE, or are there some other headwinds, either on the expense side, cost of risk, anything which would result in a lower run rate? Also, a question on dividend payout ratio. You mentioned that you committed to more than 50%, and this was based also on different scenarios related to the lending growth.
Now that your lending growth is higher than expected, what are the other considerations which you take into account when you will be deciding either to pay 50% or more? Thank you.
Okay. Let me start from the second question. One thing that helps in terms of a dividend, sorry, a payout ratio more than 50% is the Additional Tier 1 issuance that we had earlier this year. This is one factor that could drive the payout ratio at a level higher than 50%. The stronger loan growth actually is in the opposite direction. It's not helpful because it consumes more capital. Despite having a stronger loan growth, we feel we can accommodate, taking also into account the AT1 issuance, and have a payout ratio more than 50%.
On your first question, as regards the second half of the year, of course, we should expect a lower NII figure based on the trajectory of interest rates. In the first half of the year, the average DFR rate was at 2.52%.
Even if it stays at the level of 2%, we are going to have a 50 basis points lower NII. Even deducting the full year outlook that we have provided of EUR 2.5 billion minus the first half figure, we are going to have a lower NII mark by EUR 240 million depending on the trajectory of ECB base rate. Apart from that, there is nothing, let's say, there's no aberration in the second half of the year compared to a business-as-usual trajectory. We are quite conservative on trading income, which is not easy to be forecasted. Based on that figure, we have approached the return on tangible value at a figure higher than 15%.
Good. Thank you. Just to clarify, you revised three metrics with these results. You basically highlight the upside to ROEs. You highlight you increase the guidance for performance loan growth to EUR 4 billion, and also you see upside to the fees. Are there any other revisions?
No. You are absolutely correct.
Good. Thank you. Thank you very much.
Thank you.
The next question comes from Alessandro Garrone with Ambrosia Capital. Please go ahead.
Hi, Many. Thanks for taking my question. Just to clarify on NII, did I hear correctly? If the DFR ends at 1.5% this year, then you'll get to EUR 2.5 billion. If it doesn't, there is upside to NII guidance?
Yes. That's a good question. Let me elaborate further on that. You correctly received our answer. Now, if rates remain at 2%, so we have no any other movement on base rate going forward, we should expect a positive impact on NII between EUR 10 million and EUR 11 million. Why? Because in this case, if the ECB continues rate cuts, we have assumed a cut in October and the last one in December at 1.5%. In such a case, the average fourth-quarter DFR would come down to 1.71%. However, if rates remain unchanged at 2%, this 29 basis points difference multiplied with our sensitivity results in a potential NII upside at the area of EUR 10 million, EUR 11 million.
Okay. Clear. Thank you for that, Harris.
Thank you.
If I missed, apologies, but you have one of the higher exposures to Swiss franc loans. Where do you stand on that? Because some of your peers took some one-off charges this quarter, some didn't need to. Could you remind us how much you have taken? Do you have more? Is it part of the 60 bps guidance? Related to that, is there positive risk, i.e., because the formation is very low, particularly this quarter? I see almost nothing in Greece. Do you have, is part of the RoTE upside risk coming from cost of risk or not really?
Yeah. Osman, thank you for this question. We have discussed a number of times and even during such calls that the bank has followed the countercyclical provision policy during the last few years, increasing overlays, provision overlays across all loan segments, including Swiss franc loans. As such, we do not expect any changes to the cost of risk guidance of 60 basis points for 2025. We had 60 basis points covered in the first half of the year. Coverage. Sorry. Let me repeat. 60 basis points of cost of risk for 2025. We had 60 basis points cost of risk in the first half of the year. We expect to have the same level in the second half of the year.
Okay. If I could squeeze in one final one, a small one, frankly, the associate income line, what drives it? There is a bit of a pickup, it happened last year as well, actually at a higher level. I'm just curious if you could give us some color.
Yeah. This is the 20% of Eurolife. It is driven by Eurolife results. It is also the 20% of Dubai, but the major driver is Eurolife as well.
Okay. Thank you very much, Harris. Thank you.
The next question comes from Alessandro Garrone with Ambrosia Capital. Please go ahead.
Hi, guys. Thanks for the opportunity. Can I quickly ask? Obviously, you've given quite a lot of detail there around how we should think about net interest income over the next couple of quarters. The run rate that we're getting to in Q4 is not quite EUR 2.5 billion, but close to EUR 2.5 billion. I was just really thinking about moving forward then. Are we assuming ECB has done cutting rates? Presumably, the moving parts then are just volume growth as we go into 2026 from that kind of base rate. Am I right in assuming that? Thank you.
I'm not sure that I have understood correctly your question. Does it concern 2026 onwards or no?
Yeah. I'm basically just thinking about how the balance sheet sort of reprices. You've given fairly clear guidance around the second half, and obviously, we can make our own rate assumptions. I guess what I'm sort of saying is that assuming the rate cuts are largely done by the end of this year, which I think is sort of a little bit more bearish maybe than the forward curve is now suggesting. On that basis, presumably then, as you look into 2026, whatever we end up getting to in the second half, that's the run rate, and then it's really just volume growth from there that's driving it. I'm just asking, are there any other things that we need to be thinking about, any other moving parts in 2026?
This is something, actually, that we are going to revisit when we are preparing our budget at the end of the year. I think we have provided a number of drivers as regards loan volumes, deposit volumes, our sensitivity, but a more detailed picture as regards 2026 or onwards, let us demand it to revisit towards the year-end. Of course, we are going to provide in detail our business plan for the next two years in March 2026.
Okay, makes sense. Thank you.
Thank you very much.
As a reminder, if you'd like to ask a question, please press star and one on your telephone. The next question comes from Simon Berg with Citibank. Please go ahead.
Oh, hi. Thanks for the opportunity. Quick question on the EUR 6 million positive other impairments. What was the nature of that? Historically, it's usually been the negative figure. I see that you've booked EUR 20 million of restructuring costs in one-offs. How much more do you need to book in the second half, if any? I didn't catch all of the revisions to guidance. If you could just summarize what's changed in your guidance, that would be helpful. Again, thank you.
On other impairments, the release has to do with a release of general risk provisions. Actually, there we record the plus or minus of operational risks. There is a quarterly assessment of operational risk status and situation, and based on that, either we record further impairment or we proceed to some release as the case is currently. As regards the second half of the year, I would say that the major, I'm looking at the numbers here, the major item that we may expect is the finalization of the negative goodwill. This means that we may expect some more amount positive, not as positive as the one that you saw in our first half figures. Apart from the rest, we may have some small single-digit restructuring cost, and that's it. It is not something material.
Okay. In terms of the guidance, the main changes were the EUR 4 billion credit expansion, right?
There are three items. In terms of volumes, we said we update our guidance from EUR 3.5 billion to EUR 4 billion for the full year 2025. In terms of fees, the guidance that we have provided before is the minimum that we should expect. There is upside potential there given the second-quarter results in terms of fees that were quite encouraging. Overall, in terms of return on tangible book value, we said that they were going to be higher than the 15% initial target.
Super. Thank you so much.
The next question comes from Hans D'Haese with Bank of America. Please go ahead.
Hi. Just two questions for me. First, I'm looking at the Excel file that shows the breakdown per Greece versus international in P&L, and I can see that NII in your Greek business has already inflected. Can we assume that that's going to continue? Right now, you're just waiting for the international portion to inflect. I believe your sensitivity is mainly outside of Greece, or is that not the right way to think about it? The second question, I'm looking at page 29 from your presentation that's showing the NII components. I see that the NII that you get from bonds is down this quarter from 207 to 200. If this wasn't down, then your total NII would have been up quarter on quarter. Is there some one-off reason why the bond NII is down? You're targeting bonds to increase, or is this just a normal development? Thank you.
Okay. The answer is your first observation is correct on the international, especially Cyprus. We are more sensitive on NII due to the very high surplus liquidity. We may have some delay versus the inflection point of Greece versus non-Greek operations. On bonds, actually, you have to take into account as well the impact of the base rate. Considering that this is in gross income basis, may be not so much representative. The answer is that the increase of bonds volume is contributed to the impact of NII, positively addressing any negative impacts from base rate decrease.
Thank you.
Thank you.
Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to Mr. Karavias for any closing comments. Thank you.
I would like to thank you all for participating in this conference call. I also thank you for the very interesting questions that help us to elaborate on our results. Our Investor Relations team would be available for any follow-up questions. Thank you very much.
Ladies and gentlemen, the conference is now concluded. You may disconnect your telephone. Thank you for calling and have a pleasant evening.