Ladies and gentlemen, thank you for standing by. I am Constantinos, your conference call operator. Welcome, and thank you for joining the Eurobank conference call to present and discuss the third quarter 2026 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-month results presentation. Together with me is our CFO, Harris Kokologiannis, and the investor relations team. We are starting with some key recent developments, followed by the results analysis and the Q&A session. As Europe faces an energy and inflation crisis with far-reaching political and social consequences, markets have brought concerns over fiscal deficits and rising public debt back into focus. Greece and Cyprus stand out in this environment with strong primary balances and rapidly declining debt levels. Their primary surpluses stand at 3.3% and 4% of GDP respectively. Greece's debt to GDP ratio is falling faster than any other in the E.U., while Cyprus is down to 50%. Bulgaria also maintains a low public debt at 33% of GDP.
According to the draft budget, Greece's economic growth is expected to accelerate to 2.3% in 2027 from 2% this year, supported by robust investments, which are projected to rise by close to 8%. Inflation should ease alongside further improvements in the labor market. In Cyprus, the economy is expected to grow by around 3% in 2026 and 2027 as all sectors of the economy perform well. In Bulgaria, economic growth should exceed 2.5% in both 2026 and 2027, while for the new government, reducing the fiscal deficit is a priority. Overall, the resilience of our core economies, underpinned by strong investment and sound fiscal fundamentals, continues to support banking activity and sustain credit growth across the region. Now, before we go into the financial results, let me highlight the closing of the Eurolife acquisition, another milestone transaction which announced earlier today
Eurolife provides an additional growth engine, particularly in insurance and asset management, adding circa EUR 100 million fees on an annual basis. Let's move now to our financial results. Eurobank accelerating its financial performance in the third quarter. As such, the net profit for the nine-month period approached EUR 1.2 billion and return on tangible book value 17%, on the back of strong organic growth. Now, in more detail, NII was up by 9% year-on-year and 5% quarter-on-quarter, while commissions were up by 13% year-on-year. Core operating profit reached EUR 1.48 billion, increasing by 14% from the previous year period. Let's now look at the organic growth figures starting from loans.
The loan growth rate remains above 10% year-on-year, with quarterly and nine-month net deltas of EUR 1.1 billion and EUR 3.8 billion respectively, on track to meet or even exceed the revised full year target of EUR 4.5 billion. Deposits were up by EUR 1.9 billion and EUR 4.7 billion on a quarterly and annual basis respectively. Wealth management maintained its strong momentum, with managed funds growing by EUR 900 million in the quarter and 22% year-on-year. Moving now into our regional operations, which had another strong quarter. For the nine-month period, they netted EUR 555 million or 46% of total. As Cyprus net profit reached EUR 356 million and Bulgaria's EUR 182 million. Asset quality remains resilient and the cost of risk ratio stable at 53 basis points. The CET1 ratio increased to 15.5% and the total capital ratio to 20.4%.
In conclusion, the strong nine-month performance demonstrates our consistent ability to deliver organic growth and give us confidence in meeting or exceeding our full year targets. Reflecting the strength of our performance and capital position, we will distribute an interim dividend of EUR 214 million on November 26th. This is equivalent to 5.99 cents per share, an increase of 27% versus last year's respective payment. 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 following the announcement of Eurolife acquisition completion, its numbers will be fully consolidated as of the fourth quarter, boosting our fee and commission income. Let's now provide more insight into the third quarter results. On page 20 and on lending volumes, loan growth remained strong in the third quarter, reaching EUR 1.1 billion, comprising EUR 0.7 billion from Greece, EUR 300 million from Bulgaria, and EUR 100 million from Cyprus. In the nine months, loan increase reached EUR 3.8 billion, with a year-on-year growth rate at 10.5%. Based on the year-to-date performance and our pipeline, we expect to comfortably reach or even exceed the revised full-year target of EUR 4.5 billion. Group deposits, shown on page 21, following a record second quarter, rose this period by EUR 1.8 billion, including EUR 0.8 billion from Greek retail.
As regards managed funds on page 24, during the quarter, managed funds rose by EUR 400 million to EUR 11.4 billion. Year-on-year, they are higher by EUR 2.1 billion or by 22%. Private banking customers' assets and liabilities reached EUR 15.9 billion, higher by 13% year-on-year. Moving to profitability on page 28, quarter-on-quarter, net interest income increased by 5%, reflecting higher loan and bond volumes, better deposit spread, and higher Euribor, which offset lower lending spreads and higher MREL cost. On a year-on-year basis, NII is higher by 8.7%.
The net interest margin for the period increased further to 253 basis points. Turning to fees on page 29. Despite seasonality, we had one more strong quarter, with fees up 2.7% quarter-on-quarter to EUR 216 million. Lending fees, although lower this quarter, are higher year-on-year by 19%. Our focus on wealth and insurance pays off, as reflected by the 35% annual growth.
Finally, transactions, credit cards, and capital market-related fees supported well third quarter's mark. Overall, group fees are higher year-on-year by 13%. Moving to cost on page 30, quarter-on-quarter, OPEX remained flat, confirming the trajectory communicated in our previous calls. Year-on-year increase decelerated to 6.9%, and the cost-to-core income ratio for the quarter improved to 35.6%. On page 32, we summarize operating performance for the nine months of the year. Core PPI reached EUR 1.7 billion, higher by 11% year-on-year. Loan loss provisions for the period amounted to EUR 224 million, or 53 basis points, in line with our plan. Consequently, core operating profit reached EUR 1.48 billion, higher by 14% year-on-year. Moving on to asset quality on page 34, NPE ratio decreased to 2.4% on the back of lower formation, while coverage remained stable at 22%.
On capital on page 38, CET1 ratio increased to 15.5% as organic profitability contribution offset loan growth, payout accruals, DTC acceleration, and fair value through OCI mark-to-market. Pro forma with Eurolife, our CET1 ratio amounts to 14.3%. The total CAD ratio on page 39 stands at 20.4%, and pro forma with Eurolife at 19.2%. Overall, despite the challenging external environment and risks, our nine-month results reaffirm the achievement or even outperformance of revised targets communicated to the market in July. The closing of Eurolife acquisition provides an additional growth driver, particularly in insurance and asset management. 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 and two. Please use your headset when asking your question for better quality. Anyone who has a question may press star and one at this time. One moment for the first question, please. The first question comes from the line of Ben Caven-Roberts with Goldman Sachs. Please go ahead.
Afternoon. Thanks very much for taking the questions and the presentation. Just two topics for me, please. First on NII and then second on Eurolife. On NII first, clearly a strong print for the quarter. But looking ahead, if Euribor stays at current levels, how much of the book would you say has left to reprice in Q4 onwards? Then just on that topic, I saw Greek lending spreads contracted in Q3 by about 12 basis points sequentially. Is that more a function of a repricing lag on the book versus the Euribor move? Or would you say any of that is a more structural reflection of the spread compression that you have been discussing for the past couple of quarters? Then just on Eurolife separately, how soon do you see the benefits of that coming through?
Is there any ramp up time and gradual build, or is that EUR 100 million fee addition that you mentioned pretty linear as soon as you consolidate it? Thank you.
On NII outlook, let me answer in a more generic way. As regards the full year outlook for 2026, we have said in our July call that we should expect an increase year-over-year by close to 7%. It appears that for the full year now, we should be close to 9%. This of course includes for the third quarter, a part of the book to be repriced. As regards spreads, of course, this is a technical result as regards a part of our portfolio, including a part of consumer and small business loans that are not floating. The major part is related to the competition and is coming from the corporate book.
On the other side, you should not ignore the fact that as shown on page 27 of the presentation, on the upper right-hand side of the page, deposit spreads are improving by 46 basis points, which is a result of no or very low repricing as a result of interest rates, which is also evident at the bottom left of the page where we show the deposit beta. As a result of that is the continuing increase of our net interest margin for a third consecutive quarter, reaching 253 basis points in the third quarter. As regards fee and Eurolife, this is, I would say, a more linear trajectory of fees and commission. So in the fourth quarter, you should expect something in the area of EUR 20 million-EUR 22 million.
Okay. Thank you very much.
The next question comes from the line of Mehmet Sevim with JP Morgan. Please go ahead.
Hi. Good evening. Thanks very much for your time. I have just a couple questions. Firstly, on Eurolife. Now, given the transaction is closed a couple quarters later than expected, and given you have claim to economic value for the previous two quarters, how should we think about the dynamics at consolidation? So book value, capital impact, et cetera, is there any change since the announcement? And maybe the EUR 100 million revenue impact guidance, given it has been about a year since you initially provided that, would this still stand today or is the business doing better, maybe? Would you see any upside risk to this going into 2027? You helpfully provide an update on the NII guidance. Is there any other line where you would see a difference, going into the year-end in terms of the guidance? Thanks very much.
Now, as regards Eurolife, the capital impact is unchanged versus what we said during the signing of the transaction. So it should be expected at the are
a of 120 basis points. So if it is one or a couple of basis points up or down, I do not think it is material, but it is at the area of 120 basis points. So in the fourth quarter, you should expect something between EUR 20 million and EUR 25 million accretive to our fee and commission income. Apart from that, you should expect some sort of negative goodwill credited to one-off close to the area of EUR 40 million.
Now, as regards NII, we should not expect any different driver, let me say it like this, in the fourth quarter, apart from the carryover effect of the latest, i.e., in September, interest rate increase, some continuation of the trajectory on the spread.
Because as we have said in our previous call, in the corporate book, we should expect for the full year a 20 basis points contraction in corporate spreads. We are at 16, 17 basis points, so we are on this trajectory. On the deposit, we should not expect something spectacular. So there is a stability in the pass-through and in the time-to-total ratio. We should expect some good growth in the fourth quarter as well. So it is the known driver. It is not something surprising one way or another.
Thank you. May I just ask again on the Eurolife and the EUR 100 million revenue impact expectation, do you think, is there any potential change to that into 2027, given it's been about a year since you initially released that guide?
You're right, I forgot this part of the question. Actually, this is something that we should revisit upon preparation of our business plan 2027 to 2029. So we will update the market accordingly at the end of February, where we are going to present our new business plan.
Okay. That's very clear. Thanks very much.
The next question comes from the line of Gabor Kemeny with Autonomous Research. Please go ahead.
Hello. There has been some recent news flow on Bulgaria possibly introducing a bank tax. Can you share your views on the likelihood of such a measure and what the impact could be on Eurobank? That was the first one. Secondly, back to NII, if I may, can you give us an update on your rate sensitivity? You talked about the various drivers, but given that your rates are expected to go up, I think it would be helpful if you could give us a sense of what sort of benefit could this offer to your NII next year. Thank you.
Now, regarding this case of windfall tax in Bulgaria, there are currently some discussions between the government and the stakeholders, because this does not concern only the banking sector. There is no final decision about the scheme as discussion between the different stakeholders continues. We have some information so far, and based on that, the potential impact for 2027 is expected to be below 1% of 2027 estimated groups net profit. So I would say something between EUR 10 million and EUR 15 million. Now, regarding the rate sensitivity, please consider that these discussions are still ongoing. As regards the rate sensitivity, our sensitivity currently stands at EUR 25 million NII impact per 25 basis points change.
Got it. So has it declined actually from, I think you indicated somewhat more before?
This is true because actually, we have increased our hedging position so as to capture the increase of interest rates. So this impact is going to be shown in the actual figures of NII instead of sensitivity.
All right. Okay. Thank you.
The next question comes from the line of Ben Maher with KBW. Please go ahead.
Hi, thank you for taking my question. I saw there was a good pickup or an acceleration in loan growth in Cyprus. I am just wondering what were the drivers of that? Was it broad-based growth or is there a particular sector that is driving that? And also just interested in any color. I know you touched on the improving deposit spreads in Greece and the actual share of term deposits falling in Greece, but just any general color or comment on the wider deposit environment in Greece at the moment, that would be helpful. Thank you.
Let me take the first question about the loan growth in Cyprus, and then Harris will answer the rest of your questions. It is business as usual. There is nothing extraordinary. The performance of Cyprus is according to our budget, and it is based on the strategy that we have with respect to the local market, as well as some small amounts that we have placed in international syndicated loans.
But the vast majority is from the local market, as per our initial budget. Harris, on the rest?
Yes. Overall, we are well on track as regards Cyprus to achieve our full year target of EUR 800 million loan growth. Now, as regards the deposit spread in Greece, I am going to return back again on the page 27 where we have an analysis of our spread. So you see a successive improvement in deposit spreads, mainly coming from the savings and sight deposits that are not repriced at all as a result of interest rate hike, as well as to the fact that we do not see any mobilization in terms of time-to-total mix. For 2027, we are still working on our budget figures, but based on some preliminary data, we should not expect any material movement either. So overall, it appears that the market participants behave in a quite rational way.
Okay. Thank you. Can I just ask a follow-up question, please? It is just on the NII guidance of 9%. I am just looking at your nine months and what is the implied 4Q evolution based off the back of that? 9% still seems, arguably, quite conservative if you look at the run rate in the fourth quarter. Is that just the preference to stay more conservative, or is it plausible that you could exceed that 9% guidance? Thank you.
We should take into account all the drivers of NII, including the negatives. One, as it is the MREL cost and the lending spread. Of course, we appreciate that always we have a small degree of conservative in our assumptions that we give at any point of time.
Okay, thank you.
As a reminder, if you would like to ask a question, please press star one on your telephone. The next question comes from the line of Alex Demetriou with Jefferies. Please go ahead.
Hi, thanks for taking my question. Just on the corporate spreads, if we think about the 4Q trajectory, should we see an improvement here Q1 and Q? Are you able to quantify how much of the repricing is yet to come through from the higher rate environment? I understand there's a bit of a lag in the total spreads from the consumer book because it's fixed rate, but just, yeah, any color in the corporate spreads going into 4Q would be helpful. Thank you.
It's by close to 20 basis points, so you should expect landing close to the area of close to 160 basis points.
Apologies, I think you just cut out at the beginning there. Could you just repeat the first part, please?
My answer is that we shouldn't expect any improvement on the corporate spreads. We are talking about a fully floating book, so this is actually affected by the client rate and the market competition. For the full year, we have said that we should expect a decline at the area of 20 basis points. That implies that in the fourth quarter, we should land somewhere at the area of 160 basis points.
Okay, perfect. Thank you.
Thank you.
Mr. Demetriou, have you finished with your questions?
Yes, all done.
Thank you very much. The next question comes from Osman Memisoglu with Ambrosia Capital. Please go ahead. Mr. Memisoglu, can you hear us?
Sorry, I think I was on mute. Sorry. Thanks for taking my question. Just quickly on capital, specifically on RWAs. Despite very strong loan growth at flat RWAs Q on Q, just wondering if it's just an SRT action or there's something else we should keep in mind for the quarter going forward?
Yes. That was mainly a result of the loan growth that anyway was lower than in the previous quarter, as well as some improvements in the asset quality and in the rating standing of some loans of our corporate portfolio.
Okay, thank you. That reminds me, your NPE formation was also quite an outlier on the low end. Anything interesting there with regards to cost of risk output?
The cost of risk should remain in the fourth quarter at the same level as the previous quarters, so you should not expect any change. Indeed, the Q3 was a positive outlier, but there was nothing really special there.
Understood. Thank you very much.
The next question comes from the line of Luis Garrido with Bank of America Merrill Lynch. Please go ahead.
Hello. Thank you for taking my questions. I have two, please. The first one on loan growth, maybe in the medium term. We have seen quite a depressed bank lending survey at least at a sector level. I appreciate the dynamics in Greece might be a little bit different, but how are you thinking about loan growth in the medium term if rates stay basically at this high level? My second question was on the MREL slide, you have mentioned a subordinated MREL target from January 2028. Could you talk a little bit about how you are steering your financial metrics ahead of that? Could we expect issuance of senior non-preferred? Thank you.
Now, starting from your first question, indeed, you are right that there were some ECB reports showing a slowdown of loan growth across Europe. You could appreciate that the growth conditions are different in our region compared to the rest of Europe, and this applies not only to Greece but also to the other two core markets in which we operate, Cyprus and Bulgaria. At the same time, we should appreciate that 2025 and 2026 were exceptionally strong in terms of loan growth. Our base scenario for 2027 is that loan growth will remain strong, but slightly below the levels that we have experienced in 2025 and 2026. As regards subordination requirements, as you correctly said, there is a subordination target which starts applying three years after Eurobank exceeded the EUR 100 billion threshold in assets.
Since this happened at the end of 2024, the subordination target will become applicable in January 2028 and stands at 18.2% compared with the current MREL subordination ratio of 19.2%. As you probably know, this must be met with own funds and senior non-preferred issuances. We are going to see how own funds and RWAs evolve over the next business plan cycle, or even the one of 2028, to see whether there is some need to be covered, in this case, through senior non-preferred. It depends on the business plan evolvement so as to keep the minimum ratio plus some sort of buffer. Currently, we have only the standard MREL target of 28%, which compares with the third-quarter ratio of 31.3%. This implies a buffer of 330 basis points.
Okay, thank you very much.
The next question comes from the line of Noemi Peruch with Morgan Stanley. Please go ahead.
Hello, thank you for taking my question. I would like to ask you if you could update us on the Swiss franc mortgages claim applications. Are they closed now? Can you comment on the level of your provision you already own balance sheet? Are you planning any SRTs in Q4? Finally, if you could comment on the usual positive fee seasonality in Q4, especially on the lending side, given the bulk of the lending that we have seen already coming through in the first part of the year. Thank you.
May you repeat your second part of question? It was about SRTs?
Yes, exactly. I was just wondering if you are planning any SRTs in Q4.
Okay. Let's start from the Swiss franc conversion law. Its effect was up to the end of September 30th. The participation in this law was quite impressive and higher than our initial expectations. Out of the eligible perimeter, more than 70% of the borrowers opt in the provisions of the law. As we have said in previous communications, we have already accounted for the relevant provisions through our overlays. As a result, you should expect that cost of risk, going into the fourth quarter, is going to remain at the same level as previous quarters. As regard SRTs, we have actually a rolling program that we are working upon. Almost in every quarter we have some new issuances, some other issuance are expiring.
Overall, our target is to keep the benefit in terms of RWAs of our SRT program at the area between EUR 3 billion to EUR 3.5 billion or between 75 to 85 basis points capital benefit. This is an ongoing process. Now, as regards fee, allow me to answer in a more generic way because we have positive seasonality in some fee categories and negative seasonality in some other categories. Overall, as we have said, we should expect a year-on-year increase, in fee and commission in organic terms of 10%. That was a revised upwards target that was presented in our July results. We comfortably stick to this target.
Thank you.
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. The first one is on Bulgaria. You said in the past that you were looking to acquire something in the insurance universe, so if you have any update on this. Second question, there was a press interview recently, from your Deputy CEO discussing your expansion plans in Middle East. Any comments on that? Any thoughts would be more than welcome. Thank you very much.
Yeah. Thank you for the questions. As we have said a number of times in the past, we remain open to considering consolidation opportunities in any of our core markets and across banking, insurance, and asset management. This is something that we continuously look if there is the right opportunity. However, there is currently no opportunity under serious consideration. Now, with respect to the interview that you mentioned, the bank has already a rep office up and running in Mumbai, in India since May of 2026. Hopefully in the first quarter of 2027, we should have also a category 4 branch in Abu Dhabi in UAE. Both units are mainly for promoting Eurobank in the region and any potential businesses are going to be booked in Greece. This is where we stand at the moment.
If I may follow up, what are the specific sectors that you will be looking for in these areas? Will it be wealth management, loans?
First of all, it is going to be on the corporate sector, given the interest of UAE companies to invest in our region, in Southeastern Europe and overall across Europe. Our ambition is to try to provide investment banking services to these UAE companies, identifying potential targets, and if there is a case like that, to finance these transactions as we have already done with a few of these companies.
Okay. Thank you very much.
The next question comes from the line of Mehmet Sevim with JP Morgan. Please go ahead.
Hello. Thanks again. May I just ask one question on capital, please? Given the CET1 pro forma for Eurolife is now running above 14.3%, which is, I think about 30 basis points above the target. You have also announced an interim divvy, which is up 27% year-on-year, well above the reported earnings growth. I was wondering in this context how we should think about the full year payout relative to your 55% guidance. Could there realistically be an upside there, given the CET1 position looks a bit better than expected? Thank you.
Mehmet, actually it is not 30 basis points, it is 130 basis points above the management target of 13%. This is what we have communicated also in the past. We have said that we would like to keep this buffer, potentially to take advantage of any sort of non-organic growth opportunities that we may have in any of the three core markets in which we are present. In terms of the payout ratio, we stick on what we have said before, a payout ratio of 55%, split between cash dividend and share buyback program.
Okay. That's clear. Thanks very much.
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.
Let me thank you all for participating on this call. Thank you also for the very interesting questions that we received. We're available for any follow-up, either ourselves, Harris and myself or our investor relations team. Thank you very much.
Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for calling. Have a good afternoon.