Ladies and gentlemen, thank you for standing by. I am Mina, your call's call operator. Welcome and thank you for joining the Piraeus Financial Holdings conference call online webcast to present and discuss Piraeus' first quarter 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 anyone need assistance during the conference call, you may signal an operator by pressing star and zero on your telephone. At this time, I go back to turn the conference over to Piraeus Financial Holdings CEO, Mr. Christos Megalou. Mr. Megalou, you may now proceed.
Good afternoon, ladies and gentlemen, and good morning to those joining us from the US. Today, we will cover our first quarter 2025 financial results. This is Christos Megalou, Chief Executive Officer, and I'm joined today by our CFO, Theodore Gnarvellis, Chryssanthi Berbati, and Xenophon D'Amallas. Piraeus started the year strongly, delivering a solid set of financial results in the first quarter, confirming its good progress towards achieving or surpassing its full-year targets. I am proud of our results and thankful to our people for their hard work. Before going into more detail on the group's performance, I'd like to comment briefly on the current macroeconomic environment. As you can see in slide four, the Greek economy is well positioned to navigate the uncertainty of the global macro landscape.
In 2024, the Greek economy sustained its growth momentum, with GDP increasing by 2.3%, significantly exceeding the Eurozone average of 0.9%, with one of the highest primary surpluses in the EU at 4.8% of GDP. GDP growth is expected to be maintained at similar levels in 2025, driven by investments and the next generation EU funds. The low reliance of Greek exports to the US implies manageable impact from tariffs. Importantly, the Greek sovereign has regained the investment-grade rating by all major credit rating agencies, with further upgrades taking place inside the investment-grade status. Let's now move on with slide five for the key achievements of the first quarter of 2025. We generated net profit of EUR 284 million, up 22% year-on-year, corresponding to earnings per share of EUR 0.22.
With our strong first-quarter performance, we are in line to meet or exceed our guidance for earnings per share of approximately EUR 0.80 for 2025. On the back of our solid financial performance, Piraeus' annual general meeting of shareholders in April has approved a cash dividend amounting to EUR 373 million for 2024 results, which will be paid on June 10, 2025. This is almost EUR 0.30 per share, up from EUR 0.60 last year. In the first quarter of 2025, we accrued for a 50% distribution out of the quarterly profits. This is an annualized run rate of EUR 0.44 per share, or 9% distribution yield. We have expanded our loan book by EUR 5 billion in five quarters, 16% year-on-year, to EUR 35 billion. During the first quarter, our loan book grew by EUR 1.1 billion, continuing the strong momentum of 2024.
We achieved return on average tangible book value of 14.7%, above the 2025 target of approximately 4%. We delivered 10% net revenue growth in the first quarter, supported by the strong performance of net fee income. Fees increased by 10% year-on-year, while net interest income retreated by 7% annually, reflecting the material drop of interest rates. Our revenue diversifying efforts are reflected on our net fees over net revenue at 25%, while fees over assets reached 80 basis points, and both metrics are best-in-class in Greece. Following this, we are confident to upgrade our net fee income target for 2025 to approximately EUR 650 million from EUR 600 million previously. Our cost-to-core income ratio stood at 35%, among the best in the European banking market, confirming our cost-disciplined approach. Asset quality dynamics remain solid, with NPE ratio at 2.6%.
Importantly, cost of risk landed at the historic low level of 35 basis points, below our target of approximately 50 basis points for 2025. We increased our assets under management to EUR 12.5 billion during the first quarter, 25% year-on-year, already exceeding the 2025 target of above EUR 12 billion. The strong performance was mainly driven by mutual funds, which grew by 39% year-on-year. Furthermore, deposits rose by 5% annually and are now at EUR 61.4 billion. Our CET1 ratio reached 14.4% on the back of solid organic capital generation, while at the same time absorbing the 50% distribution accrual, approximately EUR 90 million DTC amortization, the EUR 1 billion loan growth, and the transitional impact from Basel IV that kicked in in January 2025. Slide six presents the details of our first quarter operating results: a clean performance without one-offs. We sustainably grow our tangible book value per share now at EUR 6 per share.
On slides seven to nine, we present the dynamics of our performing loan book. Credit expansion has been strong, with performing loans rising by EUR 1.1 billion in the first quarter, supported by all business lending segments. Importantly, loan origination dynamics remain positive, and our total financing of RRF projects has reached EUR 2.2 billion, fueling EUR 7 billion investments. Slide ten outlines the impressive evolution of our net fee income, which has been supported by loan origination, bancassurance, asset management, and rental income. Our diversified model brings results, with net fee income accounting for 25% of our net revenues in the first quarter. Slide eleven demonstrates the growing trend of assets under management that reached EUR 12.5 billion in the first quarter, already surpassing the 2025 target on the back of market-leading net sales of approximately EUR 600 million.
On slide twelve, we depict the key financial KPIs that will be impacted from Piraeus' acquisition of Ethniki Insurance. To remind those that are new to the Piraeus developments that on March 2025, we entered into a share purchase agreement to acquire a 90% stake in Ethniki Insurance from CVC. The consideration for the transaction is EUR 600 million in cash on a 100% basis. The Ethniki Insurance acquisition will further diversify our revenue sources and enhance value for our shareholders, while it is estimated to be earnings per share and return on tangible equity accretive by approximately 5% and 1%, respectively, without any synergies included yet. Post the transaction, Piraeus' CET1 ratio is expected to sustain a level of 13% and higher, and total capital will be above 18.5%.
The transaction is subject to the approval of the competent regulatory authorities, and we are working diligently to conclude all required steps by the end of 2025. Slides 13 to 16 present detailed information regarding net interest income intrinsics. In a nutshell, our growing loan book and bond books mitigated the material drop in base rates. Loan spreads evolution has been in line with our expectation, as the average three-month Euribor has dropped by 140 basis points from the peak of Q4 2023, compared to minus 113 basis points for loan yields. Moreover, lower time deposit pricing is expected to drive funding costs lower. Overall, the NII intrinsics in the first quarter lead us to reconfirm our 2025 guidance of approximately EUR 1.9 billion NII. Turning on slide 17, our cost management is trending as per budget. We have front-loaded some expenses in the first quarter, mainly related to property charges.
Overall, we remain very conscious of using CapEx investments to ensure long-term productivity gains. Slide 18 provides a summary of our asset quality indicators. Our NPE ratio stands at 2.6%, while the underlying cost of risk fell to new historic low levels, shaping at 35 basis points or 14 basis points excluding servicing fees. NPE coverage stood at the prudent level of 64%. Piraeus enjoys a superior liquidity profile presented on slide 19. Our liquidity ratios remain solid, as evidenced by the 201 liquidity coverage ratio and the high balance of deposits at EUR 61 billion. Turning to our capital base on slide 20, our CET1 ratio stood at 14.4%, comfortably above management target of 13%. We also retain a comfortable MDA buffer of more than 400 basis points. On slide 22, we present an update on Snapy's progress towards its expected launch in the second quarter of 2025.
On slide 23, there is a summary of our KPIs demonstrating that we are in line or outperforming our 2025 financial targets. Our strong results position Piraeus well among the broader group of regional peers. To give you some context, on slides 26 to 34, we present the key metrics for Piraeus versus domestic and regional peers. We benchmark ourselves in terms of return on average tangible book value, credit expansion, net interest margin, net fee margin, fees over revenues, cost-to-core income ratio, NPE ratio, cost of risk, and capital ratio. In all KPIs, we are either at par or best in class, while we are growing at an accelerated pace. We expect to generate significant value for our shareholders. Let us now open the floor to 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. Those participating via the webcast, please review related information in the Q&A live session tab should you wish to ask a question. For those participating in the question and answer session, please use your hands 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 is from the line of Ismailou Eleni with AXIA Ventures. Please go ahead.
Good afternoon, and thank you for taking my questions. I've got a few from my side.
In this quarter, we continue to see a healthy increase in the securities book, but it seems that none of the increase in this quarter was booked in the amortized cost. What is the rationale behind that choice, and are you considering counteracting the potential capital volatility from these positions? That would be my first question. Moving to capital, am I right to think that the 14.4 proforma or the 14.2 reported CET1 is on a transitional basis? Could you let us know what the fully loaded ratios would be and how quickly or slowly you expect the two to converge? Also, I mean, just for my better understanding, is the regulator focusing solely on transitional ratios, or do they also look at fully loaded in the stress test and the ICAP reports you submit?
A follow-up on capital, and last one, if I may, could you tell us if the capital impact from the acquisition of Ethniki Insurance has changed at all in light of the CRS3 and what it is as of today? Thank you.
Hi, Eleni. Lots and diverse questions. Let's start with your question on bonds. Yes, that was primarily OCI booking. Hedges are there, so we do not expect any volatility from the trading book. Given what, I mean, our strategy in terms of expanding, we took the NII, but the decision was to put the new additions under the OCI book with corresponding hedging instruments. On the capital, the 14.2, the 14.4, not relevant to Basel IV.
These are really proforma calculations for some helpful sale transactions that are still under play for the relevant RWA relief, the NP deal, and the repossessed asset deal that were all held for sale late last year. The mitigation of that RWA is really the difference, which we expect to happen within the year. I guess your question on fully loaded is mostly related to the kind of Basel IV hit over the coming years. The Q1 effect on capital that you've seen has primarily the credit risk side impact as per everybody of about EUR 1.1 billion additional RWAs. We're expecting, of course, the decision on FRTB as to whether it's going to hit next year or not. If it does, that is EUR 400 million additional RWAs for us next year.
Everything else regarding fully loaded is primarily for us revolving around our equities book, which on balance sheet is around EUR 1.2 billion. Calculating right now, fully loaded ratios for the course of the next, whatever, eight years, not so relevant, and it is not in the discussion. For stress test, because you asked, it is there, but it is primarily on information purposes. The discussion is very much still on transition. The primary reason is that there is lots that one can do over the course of the coming years to mitigate any effect that is finally decided. I think your last question was on the capital impact of the Ethniki Insurance deal. It is pretty much what we had discussed last time, between 150 and 160 basis points.
This is what, at completion, we should expect on a reported basis to hit the capital, notwithstanding any potential opportunity of applying Article 49 of CRR3, what is commonly known as the Danish compromise, which is still not in play and not in any, I would say, plan A calculations.
Okay. Thank you for answering my questions.
The next question is from the line of Alexander Demetriou with Jefferies. Please go ahead.
Hi. Just credit expansion was quite strong this quarter. How should we think about the historic seasonality now that across the year? And then just secondly, a follow-up on that. Are you able to provide any color on the current lending pipeline you were seeing or any change in customer behavior recently? Thank you.
Hi, Alex. Look, I mean, the first quarter was particularly strong. We had a couple of big transactions, about 15% of total disbursements.
Our disbursements for the quarter were around EUR 3 billion, and the transactions were closer to 500. These are setting the tone for the year. The rest was pretty granular and across the board on sectors of manufacturing, hospitality, energy, construction, real estate were all part of the mix. We are currently evaluating the next few quarters, looking at the second quarter. At this stage, we are not going to be upgrading our full-year guidance, but we remain vigilant and will be updating you as things are developing. What is quite interesting is that first quarter and the second quarter, as it stands, is pretty good activity across the board, which sets the tone for, we believe, a good year for 2025.
Thank you. Maybe just a quick follow-up, any kind of comments on the outlook you're seeing in the retail or mortgage market?
Retail consumer is already positive. The mortgage market for us was kind of balanced for the first quarter. We expect moderate growth for the end of the year as we have been guiding the market. There are some initiatives that are taking place. We are still waiting to see some progress, especially in relation to Spiti Mutu. It has been slower than what the market was anticipating, but there is still some room for further growth, so it remains to be seen. Overall, on mortgages, we are expecting a slight positive year.
Thank you very much.
The next question is from the line of Mehmet Sevim from JPMorgan Chase & Co. Please go ahead.
Good afternoon. Thanks very much for the presentation. Just on NII sensitivity, if I may ask, should rates go below a certain level, let's say 150 or 175, how would the business outlook look?
Do you think you can defend the guidance until a certain level of rates, and then what happens below that rate? Maybe connected to these, it seems the reported NII sensitivity has increased just slightly this quarter. I think previously you were saying 25, and now it's 30. I know it's just a small difference, but if you could please help me understand the drivers behind it. Finally, just to clarify it maybe, should rates go below 150, let's say, just as a sensitivity, how would this number look? This 30 million, where would it go? Thanks very much.
Hi, Mehmet. Thanks a lot for the question. We've got pages 13 and 14 where we're discussing this very important topic. First of all, let's start with the increased sensitivity. It's very straightforward. It's really the unfreezing of mortgages primarily that broke through the freeze level of about 2.9%.
The year-over-year one-month broke through that level last December. As a result, now mortgages have been added, I would say, to the floating pool of loans that are now sensitive. The majority of mortgages are now sensitive to rate cuts as well, and hence the increase. Any sensitivity move from now on would primarily have to do with a potential switch on the assumed pass-through of the rate cut into the time deposit cost, where we are assuming 60%. We are currently at 52% and increasing, apparently, because in April, we had a further reduction of the time deposit cost. It looks like we are on the spot as to what the benefit is going to be on the deposit cost versus the rate cuts. This is what supports, I would say, right now the EUR 30 million.
Any move we don't expect to be spectacular or affecting, I would say, overall the guidance. In terms of where we see the thing landing, I mean, on page 14, I think it's kind of pretty clear that the lag effect that we're expecting from the reduction of base rates, together with all the effect that we've got carrying with us, as the book transcends into the acting yearbook, because there is a lag effect there, together with the growth, that kind of confirms the EUR 1.9 billion for this year. And honestly, I wouldn't say it's sensitive at all to an extra cut, 25 basis points here, 25 basis points there in half to of 25. The major question, of course, is about 2026, where right now, simply by, I would say, extrapolating the current situation into 2026, you can see that 2026 is most likely going to land at the same levels.
The book will have accrued throughout the year at 2.4. The exit run rate right now assumed is 1.9. That is 50 basis points. At the current sensitivity, 50-60 million drop mitigated by a corresponding growth, which is what we are seeing this year. Overall, 1.9 holds. An extra cut would mean another 30 million down, but then you bake in next year's growth, and you come pretty much at the same level. Right now, we are mostly focused on working the book, capturing the expansion that is on healthy spreads, as we have discussed, continuing to excel on our fees and our cost of risk lines, which are defending the bottom line and eventually the value to shareholders.
That is great. Thank you, Theo.
The next question is from the line of Gabor Zoltan Kemeny with Bernstein Autonomous. Please go ahead.
Hi, team.
Just a couple of follow-up questions from me, please. One is on the rate sensitivity and the NII outlook. Thank you for your thoughts on the impact from lower rates. Now, just given all the repricing effects and the potential legs on the asset and liability side, how shall we think about the NII outlook for the coming quarter? Just for Q2, do you think your NII would start to stabilize here, or shall we assume a further step down due to the lower Euribor effect? That is the first one. The second one, I heard you mentioning a strong pipeline for corporate lending, but perhaps can you elaborate a little bit on that and how you see the loan growth shaping up over the rest of the year after this very strong Q1 reading? Thank you.
Gabor, again, in page 14, we're showing that the rolling three-month Euribor, a sample, I would say, Euribor, because there's multiple base rates that has been used for accrual of interest throughout the quarter, was 3.3%, right, when the actual average Euribor for the period was 2.6%. The book, I would say, is still normalizing to the new rates, and that's why simply annualizing Q1, you would still have EUR 105 million of reduction in this annualization from converging the 3.3% that was the rolling average of Q1 into what we expect to be 2.4% for the entire year. Simply that effect means that the coming quarters, we'll see a further drop. That further drop is not going to be one-for-one on sensitivity because growth is also kicking in, and it's mitigating part of the drop.
I would say for every two euros we drop on rates, one euro we're increasing on growth. This is not the floor of NII. The coming quarters will have a further, I would say, mild reduction, but what we care about is overall confirming the EUR 1.9 billion for the year and giving you guys how the mechanics will work for the coming years, which I understand is in everyone's interests.
Gabor, on your growth, loan growth question, first of all, as I said, we are reconfirming our guidance of EUR 2.6 billion. Obviously, given the very strong quarter, the risks are to the upside of this number. There is a strong dialogue across the board on a number of mostly large corporate transactions and situations on manufacturing, on energy, on hospitality, on construction, and real estate. It is pretty granular. There is no real kind of really big tickets.
We expect that this will basically work out in Q2, Q3 until we see how things are developing for Q4. We will provide more clarity with the Q2 results, but right now, we are reconfirming our guidance for 2.6% net credit growth for the year.
That is helpful. Thank you.
The next question is from the line of Xavieros Andreas with Eurobank Equities. Please go ahead.
Hello, and congratulations for your presentation. Most of my questions have been already covered, so I have a couple left. The first one is regarding Snapy. Can you please clarify the magnitude of the relating expenses in the first quarter? And the second one is regarding the servicing fee. Is the first quarter level a good proxy for the run rate, or should we expect some fluctuation in the coming quarters? That is my question. Thank you.
Hi, Andrea.
Snapy, as you know, and we have discussed many times, is preparing for launch, so we have started to scale up cost in that preparation. Q1 includes EUR 5 million. The OpEx of the Q1 base of EUR 224 million includes EUR 5 million for Snapy, and that is expected to continue over the coming quarters. The MPE fees on service are in overall. We expect a mild reduction, I would say, not something spectacular. I think we have pretty much normalized those levels, but we have made some moves that we should see a mild reduction over the coming quarters normalized from now on, nothing major in terms of fluctuation.
Thank you very much.
As a reminder, if you would like to ask a question, please press star and one on your telephone. The next question is from the line of Memisoglu Osman with Ambrosia Capital. Please go ahead.
Hello, many thanks for your time and the presentation. It sounds like you're quite confident on the disbursements front for loan growth. I'm just curious if you're seeing any also upside risk from repayments. They were slightly lower year over year, with rates potentially coming lower even from these levels. Do you think that could be an upside for the loan book? Thank you.
No, I think, I mean, if you compare it to the last year's first quarter, repayments were actually moderate, Osman. They were in line with what we have been budgeting, projecting, and predicting. We expect that this is going to be the trend over the next few quarters as well. Thank you.
The next question is from the line of Novoselski Lilia with the Bank of America. Please go ahead.
Hello. One question on your NII expectations that are on page 14.
From the bridge, we can see the effect from the lower base rates and the asset growth. However, in one of your previous presentations, I believe the one from Q3, you were also talking about earlier bond IRS monetization. The effect that you showed was between EUR 25 million and EUR 50 million. I just want to ask whether that's still relevant. One other question on NII. If we go up to slide number 13, we can see that from the NII that you get the cash from the central banks, EUR 17 million was due to Q1 seasonality. First, can you explain what that seasonality is? Because if I'm looking at your cash in the last quarters, I have not noticed any particular seasonality in Q1.
Second, if these EUR 17 million is due to seasonality, if that did not happen, your NII drop quarter on quarter would be two times lower. Are you expected to get these EUR 17 million back in the next quarter? Thank you.
Hi, Lea. Yeah, the monetization of the swaps that we have done basically helped with the steady state, I would say, yield of the bonds, right? Now those accumulated values are amortizing over the lifetimes of the respective bonds. Therefore, the yield has increased, and overall, the average is what it is today. That effect is within the annualization of Q1. Q1 has that benefit in it. When we start with the annualization, you are seeing that in the 196. On the cashing, I mean, that is well spotted. Indeed, the cash balance dropped.
That's a one-to-one, and you can actually see that on page 63, where you can see kind of the cash balances reducing between December and March. Of course, multiple angles there with the expansion of the credit book and other elements, but we also had the seasonal drop of deposits. If you look a few lines down, that happens for the entire market. It happened in Q1 last year as well. Indeed, the reduction of the liquidity affected the NII of the quarter. In our projections, in our discussions for the future, we're not bringing that back, right? Of course, if that came back, as it did the previous year, that would help with a nominal NII, but we're not counting on that per se. Let's say that we are taking what is a proven seasonal thing, and we are kind of assuming it to be more steady.
It's an upside together with other things that might help the NII in the future.
Thank you.
Once again, to register for a question, please press star and one on your telephone. As a final reminder, to register for a question, please press star and one on your telephone. Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to Mr. Megalou for any closing comments. Thank you.
Thank you all for participating in our first quarter 2025 results conference call. We look forward to discussing with you physically or virtually during our investor outreach program. Thank you very much for participating.
Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for calling and have a pleasant afternoon.