Eurobank Ergasias Services And Holdings SA (EGFEF) reported a solid underlying business and financial performance in Q1 2025, with adjusted net profit reaching 348 million and a return on tangible book value exceeding 16%.
Net interest income rose by 12% year on year, benefiting from the Hellenic Bank consolidation.
The cost of risk ratio was contained to 59 basis points, and operating profit reached 426 million, up 5% year on year.
Regional operations performed strongly, contributing 184 million or 53% of total profits, highlighting the group's franchise strength.
The company maintains a robust capital position with a CET1 ratio of 15.5% and a total capital ratio of 18.9% at the end of the quarter.
Negative Points
Deposits decreased by 1.5 billion in Q1 2025, following an exceptionally strong performance in the fourth quarter.
Operating expenses in Greece increased by 6%, primarily due to higher IT costs.
The immediate effect of global turbulence may result in faster and deeper interest rate reductions in Europe, potentially impacting financial projections.
The company faces challenges from market volatility and slowing global economic growth due to tariff developments and international trade issues.
The legal merger process with Hellenic Bank is ongoing and expected to complete in Q3, which may present integration challenges.
Q & A Highlights
Q: Can you provide an update on your rate sensitivity and expectations for deposit spreads given the lower EUR rate trajectory? Also, should we expect further charges related to Hellenic Bank restructuring? A: We do not expect any further negative one-off charges from Hellenic Bank for 2025. On the contrary, we anticipate a positive impact from the negative goodwill related to the acquisition of SAM pay. Regarding interest rates, the reduction is expected to be faster than anticipated, but our NII projection reaffirms our 2.5 billion guidance. The main reasons are anticipated faster growth of loan volumes and bonds, and a slowdown in the contraction of corporate spreads. The sensitivity for every 25 basis points change is 35 million.
Q: With your investment securities book nearing the 23 billion target for 2025, do you plan to continue increasing it? Also, given the synergies with Hellenic Bank, is there a likelihood of upgrading your full-year guidance for 2025? A: The continuation of increasing our investment securities book depends on market rates. If rates remain stable, we do not expect significant changes. Regarding synergies with Hellenic Bank, we have already realized the full-year 2025 synergies target of 48 million. We may have additional synergies, which we will specify in the coming quarters.
Q: How do you see the deposit side evolving, particularly with the share of time deposits coming down internationally? A: Deposit inflows were exceptionally strong in the fourth quarter, driven by corporates, and some excess liquidity was utilized in the first quarter. Currently, deposits are stable. The reallocation of deposits from time to sight deposits is observed across Europe and is included in our NII outlook of 2.5 billion.
Q: With your MREL ratio above the target, do you need to maintain this level of senior preferred liabilities? What are your issuance plans for the next 1-2 years? A: Our MREL ratio is 100 basis points above the target, implying minimal net funding needs for 2025. We may issue up to 1 billion to call the outstanding legacy Tier 2 bond, which is expensive. The decision to issue depends on whether and when we call this bond.
Q: What is the expected impact of Basel IV for this year, and what should we expect in the future? Also, when should we see loan growth in Cyprus? A: The Basel IV impact for 2025 is a 10 basis point reduction, fully accounted for in the first quarter. The total impact by 2033 is expected to be 56 basis points. In Cyprus, moderate loan growth is expected in 2025, likely in the second half of the year.
