Ladies and gentlemen, thank you for standing by. I'm Konstantinos, your call operator. Welcome and thank you for joining the Eurobank Ergasias Services and Holdings S.A. conference call to present and discuss the third quarter 2025 financial results. All participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a question- and- answer session. Should anyone need assistance during the conference call, you may signal an operator by pressing star and zero on your telephone. At this time I would like to turn the conference over to Mr. Fokion Karavias, CEO. Mr. Karavias, you may now proceed.
Thank you. Ladies and gentlemen, good afternoon and welcome to the Eurobank nine months result presentation. Together with me is our CFO Harris Kokologiannis and the Investor Relations team. We are starting with some key recent developments, then presenting our results and answering your questions. The macroeconomic environment remains favorable across our core markets, Greece, Bulgaria, and Cyprus, which continue to outperform the EU average in terms of growth. In Greece, fiscal performance remains solid with the debt- to- GDP ratio improving the most among EU member states. At the same time, investments continue to be a key driver of economic expansion. Bulgaria's adoption of the euro on January 1st represents a significant milestone in its economic convergence.
These positive trends are supporting banking business overall and are reflected in sustained rate growth with expansion rates reaching double digits in both countries. Let's now focus on Eurobank 's strategic initiatives. As stated in the past, one of the pillars of our strategy is to diversify our income sources both geographically across our core markets as well as through our primary business lines, that is, banking, insurance, and wealth management. Milestones reflecting this strategy include the acquisition and integration of three banks in Bulgaria in the past and more recently the acquisitions of Hellenic Bank and CNP Insurance in Cyprus. The legal merger of the two banks in Cyprus was successfully completed on September 1st, and we are now advancing into the operational integration phase.
Siemens digitalization is well underway with the initiatives implemented to date capturing approximately 40% of the total targeted EUR 120 million envelope. As part of this strategy, we recently announced the acquisition of the remaining 80% of Eurolife's life insurance operations in Greece. As shown on slide 7, this transaction carries strong strategic importance, fully aligned with our vision of becoming a leading integrated banking and insurance organization. Eurolife was the natural partner for our group given our long-lasting collaboration through the bancassurance partnership. As such, we expect a smooth integration which will strengthen our capacity to deliver integrated financial solutions to our customers. Eurolife has consistently demonstrated robust and recurring profitability. The acquisition is expected to increase fee and commission income by approximately 12% or around EUR 100 million, driving the contribution of insurance and asset management to over 30% of total fees.
Additionally, the transaction will enhance return on tangible book value by about 100 basis points and earnings per share by EUR 0.02 before any potential revenue and cost synergies. Slide 8 highlights our regional insurance presence. ERB Cyprialife commands a 30% market share in Cyprus and Eurolife holds 22% in Greece. In Bulgaria, we continue to operate successfully through a well-established bancassurance model, cooperating with a major European partner. Now let's move on to our financial results as highlighted on slides 5 - 12. Eurobank reported robust financial performance for the nine-month period, achieving an adjusted net profit of EUR 1.058 billion and a return on tangible book value of 16.2%. In more detail, net interest income was up by 4% year- on- year to EUR 1.9 billion, stable quarter- on- quarter, while commissions were up by 24% year- on- year. Core operating profit approached EUR 1.3 billion, at par with the previous year.
Loan growth continued unabated with quarterly and nine-month net increases of EUR 1.1 billion and EUR 3.3 billion respectively, on track to exceed the revised full-year target of EUR 4 billion. Deposits were also up by EUR 900 million quarter- on- quarter and wealth management performance has been impressive, with managed funds ending EUR 900 million in the quarter and being up by 32% year- on- year, already exceeding the full-year targets. On our regional operations, performance was strong for another quarter, netting EUR 557 million or 53% of total, highlighting the group's diversified franchise. Cyprus net profit reached EUR 370 million and Bulgaria's EUR 167 million. Asset quality remained resilient for another quarter. At the group level, the CET1 ratio stood at 15.5% and the total capital at 18.9% following the legacy Tier 2 call in September.
In conclusion, the nine-month results confirmed our strong track record to deliver organic results as well as take inorganic growth initiatives. Going forward, our priorities are the operational merger of Eurobank Limited in Cyprus and the integration of Eurolife's activities. On organic performance, the nine-month results were better than our initial plan. We now expect return on tangible book value roughly 1 percentage point higher than the original target, that is close to 16% supported by higher NII and stronger fees. Our dividend policy remains unchanged, so we are distributing an interim dividend of $0.047 per share in a couple of weeks, actually on November 12th, and overall more than 50% of our profits for the year. At this point, I would like to ask our CFO Harris Kokologiannis to present our third quarter results before opening the Q & A session.
Thank you, Fokion. Before I start, let me note that reported profit has been affected by a EUR 25 million contribution to the school's refurbishment project. This has been offset by the positive i mpact from additional negative goodwill related with the CNP Insurance acquisition in Cyprus.
Let's now provide more insight into the third quarter results. Starting on page 21 on lending volumes, the group continued its solid growth trajectory with EUR 1.1 billion and EUR 3.3 billion in the third quarter and nine months respectively. Corporate loans in Greece and mortgages in Bulgaria were the primary drivers of this increase. In Greece, there are signs of increased activity for mortgage lending as we are e xperiencing net growth for a second consecutive q uarter, along with an acceleration in consumer lending. Given these trends and the current pipeline, the full year loan growth is projected to be at least EUR 4 billion.
Group deposits on page 22 increased in the third quarter by EUR 0.9 billion, mainly due to retail deposits in Greece, with positive contribution from Bulgaria. The loan to deposit ratio on page 23 remains stable at 67% while the liquidity coverage ratio reached a healthy 180%. Despite the legacy EUR 950 million Tier 2 call, as regards managed funds on page 25, as at September end managed funds reached EUR 9.3 billion, exceeding the full year target. More specifically, in the third quarter, the wealth sector accelerated its growth pace. Quarter- on- quarter, managed funds increased by EUR 800 million and year- on- year are higher by EUR 2.2 billion or 32%.
Private banking customers' assets and liabilities amounted t o EUR 14 billion, up by 10% year- on- year. Moving to profitability on page 29, on a year- on- year basis NII is h igher by 4% q uarter- on- quarter, net interest income remains stable as the impact from the lower Euribor by circa 25 basis points and lending spread decrease in Greece and Bulgaria was fully offset by the higher loan and bond volumes. The net interest margin for the nine months stood at 246 basis points.
Moving on, fees on page 30 this quarter matched previous period's record performance with a reading of EUR 193 million o n a year-on-year basis, commissions are higher by 24% f ees over asset ratio stood at 75 basis points for the group and 84 basis points for Greece. On page 31, group operating cost increased b y 6% on a like-for-like b asis with Greece expenses rising by 6.8% due to higher IT spending and staff remuneration.
The cost to core income ratio for t he nine months was 37.8%. On page 33, we summarize the operating p erformance for the nine months of the year. Core PPI reached EUR 1.529 billion, stable year- on- year. Loan loss provisions for the period amounted to EUR 238 million or 61 basis points, in line with our plan. Consequently, core operating profit reached EUR 1.292 billion, at par with the previous year.
Moving on to asset quality on page 35, NPE ratio stayed at 2.8% with coverage rising further to 94% on capital. End on page 39, organic profitability contributed 67 basis points to the CET1 ratio, which remained stable quarter- on- quarter, absorbing the impact of strong asset growth, payout a ccrual and DTC amortization. The total CAD ratio on page 40 d ecreased by 90 basis points to 18.9% a fter the EUR 950 million legacy Tier 2 call.
In conclusion, during the third quarter the group maintained a strong performance momentum, driven by high lending growth, increased deposits and assets under management, and solid profitability. Net interest income was stable quarter- on- quarter as loan and bond growth offset lower base rates, while fee income remains strong across all segments. Based on the performance over the past n ine months, the group anticipates surpassing its 2025 revenue targets. Additionally, the return on tangible book value for the year is now projected to be approximately 100 basis points higher than t he planned 15% level.
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 the telephone. If you wish to remove yourself from the question queue, then you may press star and two. Please use your handset when asking your question for better quality. Anyone who has a question may press star and one at this time. One moment for the first question, please. The first question comes from the line of Gabor Kemeny with Autonomous Research. Please go ahead.
Hello. Thank you for the presentation and your thoughts. First one would be on NII, which impressively stabilized in the third quarter. Shall we see this as a kind of inflection point? Going forward, do you think that your NII will possibly switch mode together with loans and securities? That's the first question. Second question would be on the payout, which I believe you indicated could be above 50%. Could you be possibly a bit more specific here and indicate how high could this possibly get. My third question is the Eurolife deal, another substantial deal from Eurobank. Once you close the deal and I guess you got this 120 basis points capital impacts, do you see yourselves as fully utilizing your capital surplus or do you view Eurobank to have any excess left post completion? Thank you.
Let me take the first and the third question. If I have understood well the third question because the line is not so clear, and then Fokion may elaborate on the payout issue. As you saw, NII was indeed flat quarter- on- quarter and 4% up year- on- year. In this context, it is expected to easily exceed the EUR 2.5 billion budget target, assuming of course that rates will remain at 2% until year end, and this is due to higher loan and bond volumes and better wholesale funding cost. We see some control, some measuring on the deposit cost, and the gradual slow improvement of deposit mix.
Now, w hether third quarter we are at inflection point, my view is that second, third, and fourth quarter will be at quite close level, and third quarter NII is close to bottom levels. Let's stay there for the moment.
On Eurolife and as regards our capital standing regarding Eurolife acquisition, let me start with the current position. As we speak, our excess capital currently stands at 150 basis points. That is comparing 15.5% with 14%. That is the level of capital where we feel comfortable including not only P2G but also management buffer.
If we utilize the additional AT1 capacity of 100-110 basis points, the internal management target is being reduced to 13%. That means that our excess capital rises up to 250-260 basis points. Accounting for the Eurolife acquisition and the capital impact of 120 basis points, the excess capital becomes 130 basis points. This is, let's say, the picture regarding our capital study. I don't know whether that was your question or something else. Let's pass to Fokion for the moment for the payout.
Yes, in terms of the payout, we keep saying that we commit on a payout ratio higher than 50%. Let's say it's going to be in the range between 50% - 60%.
Very clear and helpful, thank you. Just one small follow-up on are you planning to issue AT1 to fund the Eurolife deal, or is this just a possibility for the more remote future?
As I have said, we have an unused capacity of 100 basis points. This may be utilized depending on market condition on an opportunistic basis.
Got it. Thanks very much.
As a reminder, if you'd like to ask a question, please press star one on your telephone once again to register. The next question comes from the line of Filippo Munari with JP Morgan. Please go ahead.
Yes, good afternoon. Thank you, t hank you very much for taking my question. Just one actually, on the Eurolife deal, maybe please give us some initial indication of what level and also the nature of the revenue and cost issues that we might be seeing. Thank you.
The full P&L of Eurolife on a before-tax basis will be incorporated in the insurance income as regards the group P&L. On that front, we should expect something close to EUR 100 million additional insurance income.
Hello? Did I answer your question?
Yes, maybe if you can just give us an indication if there is any potential kind of like additional cost images that you can realize or avenue synergies that can sort of like fit through P&L despite. I mean besides the integration.
EUR 100 million is the normalized current profit before tax of Eurolife. We're now in the process of reviewing the possibility of cost and revenue synergies. In due course, we should be able to update you. What is more important than the synergies is the growth potential of this business, because insurance penetration in Greece is well below the EU average. Premiums as a percentage of GDP is about half of what it is in the rest of the EU. Therefore, this is where we see the value of this acquisition. We expect to have, over time, quite strong growth rates of this business, both through the bancassurance model, but also through the independent agents of Eurolife.
Thank you very much.
The next question comes from the line of Ilija Novosselsky with Bank of America. Please go ahead.
Hello. Two questions from my side. First, on your security strategy, currently you have about EUR 24.6 billion in your securities portfolio. If I remember correctly, in your business plan you were saying that by the end of this year it would be EUR 23 billion and then by the end of 2027 it's going to be more than EUR 25 billion. Can I just ask, how can we expect this to move from now on and whether you would get some benefit from reinvestment of maturing securities or it would be mainly from new ones? My second question is for the fees that you pay for NP Servicers. Do you have any update on what is happening on that front? For example, whether you're renegotiating and what can we expect to come with that in the future? Thank you.
Thank you. Regarding your first question, currently we stand the investment securities to total assets at close to 23%. Now, actually we have set specific limits for each country based on selective and idiosyncratic KPIs such as loans to assets or investment securities to assets. For instance, limits in Bulgaria are quite lower as it has higher proportion of loans over assets, while on the contrary in Cyprus are higher given its substantial excess liquidity. Overall, for the group, the proportion of bonds to total assets made it up to 27% area. Now, as regards your second question, our intention is to enter to some sort of renegotiation with doValue in the next 12 months.
Thank you.
The next question comes from the line of Mikhail Butkov with Goldman Sachs. Please go ahead.
Good day. Thank you very much for the presentation. I have a few questions. One on NII, I think in the previous conference call you said that EUR 2.5 billion NII is confirmed on the basis of 1.5% policy rate. As we are at around 2% on consensus out, what is, can you remind maybe on the sensitivity for 25 basis points and what incremental support can it have? Apologies, maybe I didn't catch the answer on the first question related to Eurolife, but what is your current internal target capital ratio? Do you see it changing as a result of acquisition of the insurance company? Also, when do you expect to receive the Danish compromise status? Thank you.
Yes, let me start from the NII. Our sensitivity hasn't changed since the last call, so remains at EUR 35 million per 25 basis point rate cut. As I said at the beginning, considering that base rates remained at the 2% level at TGRN, our NII is expected to easily exceed EUR 2.5 billion. Now regarding your second question, as regards our internal capital level, currently stands at 14%.
Following a potential issuance of AT1, this will go down to 13%. Now, as regards our Danish compromise, the first step is to qualify as a financial conglomerate. This is something that, as we have included in the announcement of the transaction, it is within our intention to do as of 2026. You may appreciate that it is a long process, may take longer than 2026, but it is something that of course does deserve any effort to get the qualification to proceed with the Danish compromise.
The process is first you receive the financial conglomerate status, and then there will be some additional time to get t he Danish compromise. Is it correct?
Correct. Correct. Correct.
Because we have to be assessed under a financial conglomerate, we fulfill all the quantitative and qualitative criteria by the regulator. We have to be assessed by the regulator to fulfill all the quantitative and qualitative criteria so as to be eligible for the Dan's compromise.
Okay. Okay, thank you. Very helpful.
The next question comes from the line of Kladis Panagiotis with Alpha Finance. Please go ahead.
Thank you very much. Three questions from my side, please. First, on spreads, we see some pressure mainly on corporate spreads in Greece. I would like your comment on your expectations going forward and if we can have a comment on the other segments on the retail front. Second, on the loan growth for 2026, what are your expectations? Maybe it's a bit early, but I think any comment would be useful. What are your expectations for 2026 and if you can comment per country, and last one, and forgive me if I missed that, if there are any estimates, what will be the relief on your regulatory capital if you manage to use the Danish compromise? Thank you very much.
Okay, starting from leading spread, I think what we see is fully anticipated in our budget. In our budget we had assumed a decrease in the corporate spreads increase from 210 - 185. We are well within this range. At the end we may be a few bps better. On the retail segment, we don't see any material movements one direction or the other. In Cyprus as well, we don't see any material movement. In Bulgaria we see some normalization of spreads coming from very, very high levels in the years. Also taking into account the euro adoption as of next year. As regards this, give me an opportunity to refer to loan growth for 2025.
In nine months the loan portfolio, as you have seen, expanded organically by EUR 3.3 billion, out of which from Greece are coming the EUR 2.1 billion and from Southeastern Europe is coming the rest, EUR 1.2 billion. So EUR 3.3 billion versus initial target of EUR 3.5 billion for the full year 2025. It appears that we are on t rack to meet or even exceed that r evised target of EUR 4 billion. Now as regards the composition, i ncrease is m ostly driven by Greek corporates and in Bulgaria primarily from mortgage and business loans. I have to say we are also present in the international syndicate loan M arkets.
In Greece, The growth is coming from the sectors that we have mentioned in the past, such as energy production, storage and distribution, infrastructure projects, logistics, pharmaceutical, tourism. While we have seen lately some net positive growth, although it's quite early and the numbers are small, we have seen for a couple of consecutive quarters net growth in the mortgage market in Greece.
Now for 2026, y ou may appreciate that we are in a stage of preparing our business plan for the next three years. We are going to be able to update you in our full year 2025 call, where as every year we update you in detail about business plan. What I can say is that 2026 is going to be one more good y ear for loan growth. Now as regards your last question on Danish compromise, when achieved, is going to give us a capital relief of close to 50 basis points.
Okay, if I may follow up on the first question on the corporate loan spreads, do you think that we have seen the trough, or you expect some further deterioration over the coming quarters?
For certainty, I can say that we see deceleration at the declining pace.
Okay, thank you very much.
The next question comes from Alberto Nigro with Mediobanca. Please go ahead.
Yes, thanks for taking my questions. The first one is a more technical question on Eurolife impact on capital. Can you tell us how much is going as a deduction and how much is within the capital thresholds? The second one is still on bancassurance. You will be a fully vertically integrated bancassurance model in Greece and Cyprus. How easy would it be to expand this model also in Bulgaria and if you see any upside from this strategy. The third one is on fees. If you can update us on the fee income target for 2025. Thank you.
Regarding your first question, the smaller part of the consideration will be weighted at 250 basis points for the room corresponding to the significant financial institution. While the Major 1 is one to one deduction from capital. The combination of the above results is the 120 basis points total CET1 impact on fee and commission income. Following two very good quarters and based on the nine months performance, we have revised upwards our guidance to levels higher than EUR 740 million, mainly driven by transaction bancassurance and wealth management fees.
Now on your second question, it is true that now we have integrated the fully integrated model for insurance bancassurance in Greece and Cyprus. In Bulgaria, as I mentioned during my introductory call, we continue to operate successfully through a well-established and tested bancassurance model cooperating with a major European partner. At the moment we don't have any plans or we don't see any opportunity to get a factory within the group in Bulgaria. Obviously, if such opportunity arises it is something that we may review quite carefully.
Thank you.
The next question comes from the line of Osman Memisoglu with Ambrosia Capital. Please go ahead. Hello.
Many thanks. Most of my questions have been answered. I wanted to ask you about Cyprus specifically post acquisition, how are things going on the ground versus your plans? Regarding synergies, what is left out there? Are we close to, you know, normal operations per your plan? Or are there still opportunities, challenges that are in front of you? Any color there would be helpful. Thank you.
Thank you for the question. Opportunities and challenges never stop. As a general answer to your question now, as I said before, we completed on September 1 the legal merger of the two banks. On October 10th we completed the legal merger of the insurance companies. We operate under one bank and under one insurance company for Life and P&C. However, we have ahead of us the operating integration, especially in the bank, therefore moving into a single IT platform. This will take something like 15 - 18 months. We should be in place by the end of 2026 or beginning of 2027. In terms of synergies, as I mentioned during my introductory note, we have completed, we have realized as a matter of fact 40% of the EUR 120 million which is the total envelope. There is still work for us to do there both on the cost side and the synergy side.
All in all, the integration is moving ahead according to plan, but it i s far from completed. We still have a lot of work to do.
Understood. Thank you for that. If I could maybe squeeze in two relatively technical questions. One, on your loan growth, do you have organic at 1.1% reported at 0.7%? Just wondering what the gap is. I guess part of it is Cyprus from my understanding. If there's something else there because FX was not really a factor. Also, with regards to NII outlook, deposit time, deposit repricing, is it going as you had expected or are there any material changes on that front? Thank you.
On the first part the difference is twofold. The one is FX and the second is the sale of a EUR 200 million NP portfolio in Cyprus from Eurobank S.A. to the Cyprus Asset Management Company Estate Interest Asset Management Company with the acronym, so these are loans which now have been reclassified as assets held for sale. This was a legacy portfolio originated from the ex Cooperative Bank and Cyprus Asset Management Company had guaranteed this portfolio and its NPEs. With this agreement, KDP takes back these NPEs on its balance sheet and the guarantee ends. The result of this transaction was a gain of EUR 10 million that it is under our other income line. The rest is effects mainly coming from dollar and as regards deposit pricing evolution, I think it is going quite smoothly and well within our plan.
What you appreciate is that if you go on page 22 of the presentation, you may see that gradually, with the upper right hand side, right hand side of the presentation, gradually with a decrease of base rates, we see some de-escalation of the mix of time to total. From a peak of 36% now on a group basis, we are at 33%. In Greece from 33% peak we are currently at 29%, which is of course a positive evolution.
Understood. Thank you. Thank you very much.
Thank you, Osman.
As a final reminder to register for a question, please press star one on your telephone. 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. Okay.
I would like to thank you all for participating in this call. I would like to thank you also for the very interesting questions that we received. Hopefully we fully answered. For any follow up questions, any clarifications, our investment, our investor team could be available. Thank you very much.
Ladies and gentlemen, the conference has now concluded and you may disconnect your telephone. Thank you for calling and have a pleasant evening.