Ladies and gentlemen, thank you for standing by. I am Maria, your Chorus Call operator. Welcome, and thank you for joining the Piraeus Bank conference call and live webcast to present and discuss Piraeus nine-month 2026 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 would like to turn the conference over to Piraeus Bank CEO, Mr. Christos Megalou. Mr. Megalou, you may now proceed.
Good afternoon, ladies and gentlemen, and good morning to those joining us from the U.S. This is Christos Megalou, Chief Executive Officer of Piraeus. I am joined today by our CFO, Theofanis Varelidis, and Head of Investor Relations, Xenofon Damalas. Thank you for joining us for our nine-month 2026 results. I would like to start with three messages. First, Piraeus has delivered another strong period of profitable growth. Our 2026 targets remain firmly on track. Second, the composition of our earnings continues to broaden. Loan growth remains strong. Net interest income has accelerated. Services revenues are growing rapidly, and we continue to operate with a best-in-class cost-to-income ratio. Third, the strength of our 2026 performance gives us confidence to raise the number of our 2027 aspiration. Let me take you now through the drivers of that performance. Uncertainty remains elevated globally.
The ongoing energy and inflation challenges have raised concerns over fiscal deficits and public debts in Europe. However, as you can see on slide four, the Greek macro environment remains resilient, and the Greek economy continues to outperform the Eurozone. Growth remains supported by a sound fiscal framework, continued reform implementation, and sustained investment. At the same time, Greece will continue to benefit from substantial European funding flows, declining debt ratios, and ongoing improvement in economic fundamentals. Against this backdrop, our focus remains straightforward: grow the franchise, diversify earnings, and maintain balance sheet and capital discipline. Turning now to our financial performance, and on slide five, we delivered record core operating profit of EUR 930 million in the nine-month 2026 period. This performance is driven by strong dynamics in net interest income, diversification of revenues, strong efficiency, and asset quality metrics.
We generated EUR 0.68 earnings per share, placing us firmly on track to achieve our full-year target of approximately EUR 0.90 earnings per share. We achieved normalized return on average tangible book value of 15.4% in the nine-month period, on track to meet the 2026 target of approximately 15%. Net interest income momentum has strengthened materially during the quarter, increasing 7% quarter-on-quarter, while net interest margin climbed to 2.3%. We continue to deliver leading growth in Europe. Our loan book is up 8% year-on-year, reaching EUR 40 billion. During the nine-month, credit expansion reached EUR 2.2 billion, maintaining the strong momentum. Revenues from services grew 39% year-on-year, reaching EUR 679 million in the nine-month, shaping at 100 basis points over assets, among the best in class in Europe.
In line with the updated target of above 90 basis points over assets for 2026, overall, core revenues grew 15% year-on-year, with sustainable diversification of revenue mix towards fees, which now account for 31% of total revenues. Our assets under management increased to EUR 16.9 billion in the nine months, up 19% year-on-year, with EUR 1.3 billion net inflows above our full-year target. Furthermore, deposits rose by 9% annually, now at EUR 69 billion, with a total deposit cost remaining low at 39 basis points. Our cost-to-income ratio stands at 33%. This is top-tier efficiency and confirms our cost-disciplined approach. Asset quality dynamics remain solid, with NPE ratio down to 2% from 2.2% in the previous quarter. Organic cost of risk shaped at 57 basis points in the nine-month period, in line with the 2026 updated target of approximately 60 basis points.
Our capital position is strengthening, withstanding unfavorable market movements. Our CET1 ratio increased by 10 basis points quarter-on-quarter to 12.9%, driven by strong organic results, and it is well on track to meet the end-2026 target of above 13%. To this end, we will proceed with the distribution of an interim dividend of EUR 0.10 per share out of the 2026 net profit that will be paid to Piraeus shareholders in December, subject to supervisory approval. Slide six presents the details of our third quarter and nine-month operating results. We grew our core operating profit by 10% year-on-year to EUR 301 million in the third quarter, driven by strong top-line dynamics. On slide seven, our net interest income grew strongly, up 7% quarter-on-quarter, driven by rate tailwinds, while at the same time, we preserved spread discipline.
Based on our nine-month performance and current market dynamics, there is upside to the full-year NII ambition of EUR 2 billion. On slide eight, we present one of the main pillars of our performance, which is customer loan growth. The EUR 2.2 billion net credit expansion during the nine months is putting us firmly on track to meet our aspiration of more than EUR 3 billion net expansion for the full year. Importantly, growth remains broad-based. We continue to support investment across all the sectors of the Greek economy, like energy, hospitality, infrastructure, and shipping. At the same time, we are also witnessing an encouraging recovery in household lending. Slide nine demonstrates our pricing discipline. We compete for business, we support economic growth, but we maintain risk-adjusted return at the core of all underwriting decisions.
At the same time, as we see on slide 10, the orderly repricing of our time deposits balance keeps funding costs low. Our EUR 69 billion book of deposits is our core strength, with total deposit beta remaining stable at 15%. Slide 11 outlines one of the major themes of the nine months, which is revenue diversification. Ethniki Insurance is an important driver for this, leading the acceleration in revenues from services, with its nine-month contribution standing ahead of the annual target. Fee growth is increasingly supported also by solid financing activity, asset management, and bancassurance. Slide 12 depicts the Ethniki Insurance highlights in the nine months. The business performs ahead of expectations. Gross written premiums reached EUR 666 million, 4% higher year-on-year, driven by solid trends in health.
The next phase of group integration is now under preparation and is expected to support accelerated growth from 2027 onwards. Slide 13 demonstrates the momentum in wealth and asset management. Assets under management reached EUR 16.9 billion, increasing by 17% year-on-year. Net inflows amounted to EUR 1.3 billion during the nine months, exceeding already our full-year target. Turning to slide 14, our cost-income ratio stands at 33% in the nine months and at 32% in the third quarter, on track to meet the 2026 target of below 35%. We maintain one of the strongest efficiency positions in Europe while continuing at the same time to invest in growth initiatives. Slide 15 provides a summary of our asset quality indicators. NPE ratio declined to 2%, and underlying cost of risk increased to 60 basis points as we transferred some loans to held-for-sale status.
The key message is that asset quality remains strong, and as we continue to expand the loan book, we are maintaining a prudent approach to risk management. Piraeus enjoys a robust liquidity profile presented on slide 16. Our strong deposit franchise, combined with superior liquidity coverage ratio, supports profitable growth, offering strategic optionality. Turning to capital on slides 17 and 18. Capital generation remains strong and supports growth and shareholder returns. The performance in the nine months and the dynamics of the fourth quarter of the year give us confidence in achieving the full-year CET1 ratio target of above 13%. Moving on slides 19 and 20. We present the highlights of our digital bank. Snappi's momentum is accelerating as it reached 260,000 app users and EUR 130 million of deposits in its first year since launch.
This performance compares favorably to what other leading neobanks have achieved at the same point of their development and gives us confidence for our 2027 aspiration. At a rate of EUR 1 million inflows per day, deposits are expected to reach EUR 500 million in 2027, while we aspire to double the customer base to over 400,000 next year. On slide 21, the strong execution delivered in the nine months gives us increased confidence in our 2026 outlook. All our targets for the year are well on track, while there is upside on net interest margin and revenues from services over assets ratio. Based on this performance, we are revising several of our 2027 ambitions compared to the Capital Markets Day aspiration on the 5th of March, 2026.
As you can see on slide 22, we now target for 2027 EPS growth of approximately 10%, return on tangible book value above 15%, net interest margin of more than 2.4%, revenues from services over assets at 90 basis points, and CET1 ratio above 13.5%. These upgrades reflect the momentum we continue to see across the franchise and our confidence in the sustainability of current trends. Turning to the second section of our presentation for our positioning within the competitive landscape. Piraeus is in a leading position in Greece in terms of performing loans, deposits, equities brokerage, and network, as highlighted on slide 24. In addition, Piraeus ranks at par or above average on all major KPIs in the European banking space. In slides 27 to 29, we present the key metrics for Piraeus versus European bank averages.
In slide 25, Piraeus continues to deliver best-in-class loan growth in Europe, outpacing EU peers. Slide 26, our net interest margin is far above the European average, reflecting our pricing power and effective balance sheet management. Slide 27, revenues from services over assets is well above the European average and the best in Greece. Slide 28, our cost-to-income ratio is best in class in Europe, demonstrating our ongoing focus on operational efficiency and cost discipline. Slide 29, our return on tangible book value is well above the European average, highlighting our ability to generate superior returns for shareholders. Concluding with slide 30, despite our strong fundamentals in absolute and relative terms in relation to our European peers, Piraeus trades below EU banks with similar earnings, yet lower growth dynamics. With that, let's now open the floor to your questions.
Thank you. 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. For those participating in the question-and-answer session, 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 is from the line of Noemi Peruch with Morgan Stanley. Please go ahead.
Good afternoon, and thank you for taking my questions. In Q3, you have taken EUR 50 million of provision related to an NPL sales, and I was wondering if you expect 2027 cost of risk to be still burdened by one-offs. I was wondering if you could give us a sense of how you get to above 13.5% in 2027. Are you considering the Danish Compromise. I would also like to ask you an updated estimate for the Danish Compromise after the upstreaming of capital from Ethniki. Thank you.
Thank you. Hi, Noemi. Indeed, in 2026, it was a choice to proceed with holding for sale some accounts in a portfolio that cost about EUR 50 million, and brought our NPE ratio down to 2%. It increased the asset quality of the balance sheet and created confidence for the future in what is still a situation that can inspire some volatility. The 2027 P&L does not have any cost of risk budgeted for sale. It's one of the reasons why we did it. It was the basis of the upgrade of the cost of risk of 26 to 60 basis points in Q2. It was done, as we told you at the time, with this thinking in mind, to secure the P&L and the return and all the elements of 2027, which is now proving to be a substantial upside story. 2027 capital, it's really organic capital generation.
It's increased profitability that is generating while holding and keeping all distribution promises. It is generating organic capital. It has nothing to do with Danish Compromise, or any, I would say, other capital adjustments. The Danish Compromise is, I would say, a mid-to-long-term target of the group. The Ethniki acquisition is, as you guys are seeing, performing already very well, with a superior return on invested capital as we are. The company is ready to provide products going forward also to the channels of the group, which will, in effect, over the short-term and mid-term period, lead to its growth and the classification of the group as a financial conglomerate. For that, as I would say, a mid-term target, it has nothing to do with the short-term capital guidance.
Thank you. Can you update us on the impact in terms of capital?
When, given the size of the balance sheet now, the Danish Compromise should add 70 basis points of CET1 capital. As I said, this is not in the short-term aspirations, nor is that the objective of getting FICO status. The number, Noemi, the number that we are guiding is full organic growth.
Mm-hmm. Thank you.
The next question is from the line of Benjamin Caven-Roberts with Goldman Sachs. Please go ahead.
Afternoon. Thanks very much for the presentation. Two for me, please. First on NII, and then secondly on costs. Firstly, on NII, you mentioned upside to your EUR 2 billion full-year target. Can you help us think about the moving parts there as we're looking into Q4 and beyond? It looks like there is still some positive repricing effect which should come for the loan book, given where your EURIBOR levels are currently tracking, plus sustained volume trends. Of course, other range of moving parts, cross-spread compression, deposits, et cetera. It would be helpful just to hear how you are thinking about that all tying together. Then on costs, is there any more color you could please provide just on what is moving beneath the surface in terms of inflation, investments, how you are balancing those against savings and synergies? Thank you.
Hi, Ben. Indeed, there is a clear upside to the NII of 2026 and of 2027, as we have guided for. The risk-free rerating is clear. The accrual EURIBOR right now is below spot. Going forward, we will be, I would say, enjoying a higher risk-free on the accrual of NII. The accruing base was at 237 for the three months, and the spot is already about 260. The risk-free rate, I would say, is one of the primary drivers. Growth is the other big one. It is not only growth of loans, but also growth of deposits, if not more so growth of deposits, especially given the fact that the deposit book is sustaining a very healthy beta and a very low overall average cost. I would say these are the basic two pillars of the NII growth.
Spread erosion is very mild, and I would say very controlled. It continues. For us, it was about 5 basis points this quarter. It is something that we have talked about also in the past. After a hiatus of about two quarters, the erosion is very steady and I would say very healthy, in line with the de-risking of the economy. Going forward, we expect another 20 basis points erosion on a cumulative basis over the next, I would say, 12 to 18 months. That was also an assumption given a different situation on the sovereign risk. We need to see the recent widening, what that means for loan spreads in the country, but that remains the key assumption, that erosion will continue at this pace. On costs, we have discussed this in the past. It is really in the bank's control as to how the cost will evolve.
Inflation is, of course, hitting some of the, I would say, admin cost lines, but given the cost governance of the bank and the cost discipline that we have internally, it has been managed rather comfortably, I would say, with the savings achieved on other lines. The question for operating expenses for Piraeus Group has primarily to do with variable compensation, reward of talent, benchmarking also ourselves with other institutions, and also the choice as to how quickly we will deploy IT investments. The guiding light for us is always cost to income. So low 30s remains the objective, and whatever happens on the top line, that will always be, I would say, the key KPI for us.
Thank you. Very clear.
The next question is from the line of Gabor Kemeny with Autonomous Research. Please go ahead.
Thanks. My first question is on loans, and within that, shipping. I think shipping drove more than 40% of net credit expansion in the first nine months. How do you think about the sustainability of that growth, and how does a slowdown there, possible slowdown, feed into your high single-digit loan growth guidance for next year? If you could comment on the pricing trends in shipping, that could be helpful too. Secondly, a follow-up on corporate lending spreads, please. If I look at slide nine, you clearly went from a mid-pack, like market average pricing, to more like a premium pricing bank over the past quarters. So, my question is, how much do you expect to retain this position, or do you see possible catch-up with the sector average going forward? And my last question would be on your NIM outlook, which you upgraded.
I guess rates are higher, but also deposits have been evolving much more strongly than you assumed on the CMD. I think you assumed 3% annual growth rate. Can you update us on how you think about your rate sensitivity here, how that's impacting your NIM outlook? Thank you.
All right, Gabor. Thank you. Look, on the margins, and talking about corporate spreads, I would say it's a linear evolution, given the structure of the portfolio, that is very similar to what the market has been evolving. Piraeus has been at these, I would say, relative spread levels and relative spread differences throughout the past two to three years. It has to do with the structure of the book, the penetration, the type of the accounts that we've got. There are some banks that are below us. There is one bank that is a little bit above us. What for us is important is that the erosion is happening at steady pace across market, which is telling us that it is not, although competition is very intense, there is very overall rational behavior on a risk-adjusted basis in the market. On the NIM outlook, yes, indeed.
As I said before, the deposit growth sided with the loan growth is a big part of the story, of course, together with the risk-free. We were assuming a deposit growth versus credit expansion that was much lower than what we have experienced in 2026. The ratio of deposits delta over loan delta is now above 130% for 2026, and the average assumption in the plan was 60. So, that creates a massive tailwind for the NIM, and that is one of the reasons that, of course, right now it is obvious that given this trend, and with the risk-free kind of locked at the close to 3% area in terms of expectation for 2027, that we're looking at a much more profitable NII line and overall bank. The rate sensitivity is still at EUR 40 million for 25 basis points on the risk-free rate.
It is something that more or less will be staying with us for the coming years, given the structure of the balance sheet. We have noticed that given the curves, there is an opportunity for us to sustain NII in the midterm, even if we see at some point rates accumulate in 2028. We're looking at hedging strategies and decisions, and we will continue to do so over 2027, also depending on what we are allowed to do given IRB constraints.
Yes, Gabor, as to the shipping, as you can see on page 36, shipping is about 10% of our overall group loan composition. It is a very conservative selection set of clients. It takes advantage of the current momentum of the market, and it is at an LTV ratio we feel very comfortable. It is about 50%, and the new production is almost at the same rate. We cannot say that this is a trend for next year, because all our work and analysis is coming on a year-for-year basis, recognizing that this is a cyclical business and making sure that we maintain the quality of the business. For next year, the plan is to be selective and conservative, as we were up to now, and that is how we will continue growing the book there as well.
Okay. Just a small follow-up. What do you expect to, let us say, replace shipping or grow more quickly if that slows down?
Hospitality is an area, infrastructure as well, construction. These are areas that we see growth for next year, as well as energy. We still see energy opportunities in the Greek market for 2027.
Understood. Thanks very much.
The next question is from the line of Mehmet Sevim with JP Morgan. Please go ahead.
Hi, good afternoon. Thanks very much for your time. If I may, just coming back to your comments there on deposit growth, obviously, it has been a key driver of NII. If I read it correctly, this relates to 2026. I was wondering how you see 2027, specifically maybe more broadly, are we entering a new cycle in Greece, where the strength of the economy, the corporates, households, and loan generation can lead to higher deposit generation over time compared to the past? Or is this just a cyclical tailwind that is limited to this year? Then two more. On the held-for-sale portfolio, I do appreciate the conservatism there, given the strength of revenues, of course, this year. Can you please provide some more color on what is in that portfolio? Are there any single exposures that you have moved there?
If yes, in what sector would that be? Maybe current coverage, et cetera. Then, just the trading book, which has been quite volatile this year, and losses we saw in 1Q and 3Q on the back of the market moves. How is 4Q faring so far? Given this line seems to be a bit more volatile than what we see it is, could you please explain the nature of that? Thanks very much.
Mehmet, the deposits, we actually see a trend, and we see positive flows in repatriating capital and deposits into Greece, and namely into Piraeus Bank. We think this is the beginning of a new trend. We saw 3 billion deposits, net flow deposit this year. As you know, our net credit expansion was EUR 2.2 billion, and we understand that a large part of it has to do with funds being repatriated into the Piraeus deposit base. So, spot on. It is a trend. We believe we are at the beginning of a trend which we expect to continue in 2027.
In the context of the new business plan in Q4, Mehmet, we will give you more color as to what we believe this means for the coming years. Clearly, what we told you in Capital Markets Day is now proving to be obsolete. The held-for-sale portfolio, look, it was a mix of accounts. There were some accounts that were already NPLs and were outflowed from the NPL book that had comfortable provisions, but maybe needed a little bit more. There were also accounts that were going sour and would be hitting the stage reclassification in NPL book, and they were included also in that portfolio with some extra provisions to make sure that they do not impair the NPE ratio. Overall, the net effect, as you saw, was positive for the NPE ratio, and it was a choice that we did.
As I said, creating a foothold of 2.0% NPE ratio. In this situation, we can much more comfortably guide for, I would say, an acceptable high-quality balance sheet over the course of 2027, and a stable cost of risk guidance. On trading, look, Q4 is so far flat. Piraeus has a trading book that is probably larger than some other peers. Primarily, it is Hellenic Republic and NGEU. We have been the top market maker of the Republic and the top Greek performing primary dealer of NGEU. That makes us keep, I would say, a bigger trading book. Of course, it is fully hedged for interest rate risk, but still, a credit spread movement can create some P&L volatility that we have experienced in the previous quarters. Long term, this bodes well for us. It creates revenue, and it creates also collateral benefits on fees.
That is why we are also treating this particular quarter as a, I would say, one-off rather than something to be extrapolated. We are focusing more on the core profit result, as well as the intrinsics behind it, which speak for a very healthy and much stronger than originally expected 2027.
That is super helpful. Thanks very much.
The next question is from the line of Ben Maher with KBW. Please go ahead.
Hi. I just have two questions. The first is on the NII guidance for 2027. What does that assume in terms of deposit costs? I think you also previously guided to the bond portfolio yield staying around 3.2%. You obviously have above this at the moment, so do you still believe that 3.2% is the expected figure going forward? My second question is just on Ethniki Insurance. You have commented on how it is outperforming initial expectations. I think the guidance for later years, I think at around EUR 210 million, if I remember correctly. Does that still stand, or is that oddly very conservative? Thank you.
Hi, Ben. The assumption for NII after 2027, the deposit cost is a beta that is higher than what we are experiencing right now. We have a beta on the time table of about 67. The assumption, we have also talked about it in the past, around 80, so that might create some further revisions going forward. We have talked about a bigger than 2.4% NIM. Obviously, the calculated number right now is higher, but we will talk more about that in the Q4 result with the new business plan. Equally for bonds, it is a 3.2% to 3.3% coupon. The bond book has pretty much achieved its, I would say, target size, at least for the next 12 to 18 months. There might be some sales and purchases, of course, depending on the maturities that we are facing. But overall, I would not assume anything different.
On Ethniki, look, clearly we are having a very good 2026, driven by a very solid, I would say, OPEX management, as well as negative variance and outperformance on the health book, where we are experiencing a very good claims performance versus what we were expecting. That is obviously very welcome, and I would say ticks the box for the first stage of integration of the company into the group. The second stage of making it part of the bancassurance franchise of Piraeus, as I said, is coming up in 2027. And then, of course, a third stage of expanding product suites beyond the traditional life savings products that most European banks are selling, into protection and other, I would say, more innovative solutions.
The 210 million that we talked about in March was the very first, I would say, assumption of simply plugging in a company such as Ethniki into the sales of the Piraeus network. It does not incorporate any of our, I would say, increased ambitions, but we will quantify them in Q4, as I said before.
Great. Thank you.
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 Alberto Nigro with Mediobanca. Please go ahead.
Yes. Thanks for taking my questions. First one, you are targeting 0.9% revenues from services in 2027, while this year, we should reach almost 1%. Can you explain the underlying assumptions and if there is a deceleration in some segments of the fee income? On capital, are you planning any other SRTs in the coming quarter? Finally, last week, the U.S. authority has started an investigation on a Greek law firm on potential sanction related to Iran. I was wondering if you have any exposure to any related corporates, as the press reported this week. Thank you.
Thank you, Alberto. When it comes to the fee performance, every year we guide for something, and then we end up printing something higher. Let's just say that for the time being that 2026 was also blessed with some extra benefits, one-offs that we had from some RRF disbursements. Investment banking also came in, fees quite strong. It is stuff that you cannot really extrapolate. They can come your way one year, maybe they will not come the next year. One-offs such as these are not included in the 2027 guidance. I would say even more importantly, remember that the bancassurance fees are moving from third-party fees into insurance contribution from a subsidiary company. We have discussed it in the past.
The accounting will move from an upfront booking to an amortized booking over time, and that creates a, I would say, nominal headwind in the fees of about EUR 50 million. That in itself is overall another reason. But as I said, every target is communicated until it is beaten, and Piraeus has had that tradition with this particular line. On capital overall and SRTs, it is business as usual. There is one transaction that is included in the capital of Q4. There is another one coming up in Q3. There is another one coming up in Q4 that will also give some boost to the capital. It is a management of CET1 relief between 70 and 100 basis points. We were at 70 at the beginning of the year. Now, we will approximate 100. Then stuff will expire, new stuff will be coming in.
That is the way the SRT play is managed.
Alberto, on your question on sanctions, I confirm we are not under investigation and that we have not received any request for provision of information.
Thank you.
The next question is from the line of Osman Memisoglu with Ambrosia Capital. Please go ahead.
Hello, many thanks for your time. Just looking at your revised 2027 aspiration, the 10% EPS growth, just wanted to check if that's a bit prudent given all the strong trends. Maybe related to that, I don't know if that includes any buybacks. In terms of your distribution mix outlook, how should we think about? Thank you.
The distribution is all cash, Osman. On the earnings per share outlook, it is a conservative number. It's likely that we may have there an upside, but let us kind of revise this as we move towards the Q4 results, and where we will be giving further guidance for the year 2027. But things are looking good.
Understood. Thank you.
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 nine-month 2026 results conference call. We look forward to discussing with all of you physically or virtually during our investor outreach program. Thank you all very much.
Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for calling, and have a good afternoon.