Release Date: February 27, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Eurobank Ergasias Services And Holdings SA (EGFEF) achieved a record net profit of nearly 1.5 billion in 2024, with significant contributions from outside Greece.
• The company reported exceptional organic growth and transformational M&A activity, outperforming all initial targets for the year.
• Asset quality improved with the non-performing (NP) ratio declining to 2.9% and coverage increasing above 88%.
• Shareholder rewards increased significantly, with a payout of 50% of 2024 profits, including a 0.05 per share dividend and a 288 million share buyback program.
• The business plan for 2025-2027 aims for sustainable growth, with a focus on credit expansion, wealth management, and insurance, targeting a 15% return on tangible book value.

Negative Points

• The company anticipates a decrease in net interest margin by approximately 20 basis points in 2025 due to base rate trajectory.
• Operating expenses are expected to increase by an annual rate of less than 5%, driven by accelerated IT investments and inflationary pressures.
• The cost of risk is expected to decrease modestly, but the company remains prudent, reflecting a cautious approach to asset quality.
• The payout ratio is based on strong loan growth assumptions, which may not materialize if economic conditions change.
• The impact of Basel 4 regulations is expected to be 30 basis points in 2025, increasing to 60 basis points when fully phased in, potentially affecting capital ratios.

Q & A Highlights

• Warning! GuruFocus has detected 7 Warning Sign with EGFEF.

Q: Could you give us an indication of when should we expect the synergies from CMP to start impacting fee and commission income? Also, regarding the 50% payout assumption, can you discuss the risks involved? A: The synergies from CMP are expected to gradually phase in, with about 40% anticipated in 2025, mainly from the acquisition expected to complete soon. Regarding the payout, the assumption is based on strong loan growth and maintaining excess capital for potential M&A opportunities. A slightly higher payout is possible if growth is milder or if no suitable M&A opportunities arise. - Unidentified_3 and CEO

Q: Is the 50% payout option applicable from the 2025 results, and does it depend on achieving 7.5% growth? Also, what is your current NII sensitivity to EUR rate moves? A: The 50% payout applies to each year of the business plan, including 2025. The NII sensitivity is approximately 40 million for every 25 basis point change in EUR rates, which is factored into our 2025 guidance. - CEO and Unidentified_3

Q: Given the strong loan growth, what has changed over the last few quarters, and do you expect this growth to continue? Also, when do you expect to start the buyback program? A: Growth has accelerated due to RRF projects and large transactions in Q4 2024. We expect continued growth, driven by both domestic and international markets. The buyback program will start after AGM approval in April, lasting 9 to 12 months. - CEO

Q: Can you clarify the impact of recent transactions on bad will from the Hellenic acquisition and the Basel 4 impact? A: The acquisition resulted in a positive goodwill of 136 million, recorded in equity. The Basel 4 impact is 30 basis points for 2025, with a full phase-in impact of 60 basis points. - Unidentified_3

Q: How should we think about the mix between dividends and buybacks going forward? A: The mix will be similar to this year, with a slightly higher percentage for cash dividends, depending on market valuation. - CEO

Q: Regarding international expansion in wealth management, how does this impact your fees going forward? A: Current plans in India and the Middle East are not included in the business plan for wealth management. We are awaiting approval to open an office in Mumbai and considering an office in Abu Dhabi. - CEO

Q: On buybacks, how should we think about the number of shares and their cancellation? A: Shares bought back will be canceled after AGM approval. Treasury shares will not participate in dividends. - CEO

Q: What is your strategy regarding M&A opportunities and the potential use of the Danish compromise? A: We are open to M&A in our core markets and sectors like insurance and asset management. The applicability of the Danish compromise in Greece is unclear, but if applicable, it would be considered positively. - CEO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.