Eurobank CEO: On track to create a regional banking group with €100b balance sheet

It has been a positive first half for Eurobank, having gained investment grade status by two rating agencies after over a decade and then finalising its takeover bid and gaining a 55.9% majority stake in Hellenic Bank.

With the takeover bid now completed, according to Eurobank’s CEO Fokion Karavias, the next step is to proceed with full consolidation, which will create a regional banking group with a €100b balance sheet.

In a statement accompanying the announcement of the group’s first-half financial results, Karavias noted: “Eurobank has recently achieved several milestones: For the first time since 2007, the bank distributed dividends to its shareholders. After more than ten years, Eurobank regained investment grade status by two rating agencies, Moody’s and DBRS. In Cyprus, we became majority shareholder in Hellenic Bank with 55.9% stake, paving the way for full consolidation, which will create a regional banking group with €100b balance sheet. The bank maintains a systemic presence and plays a pivotal role in each of its three key markets: Greece, Cyprus, and Bulgaria.”

The macroeconomic environment remains favourable in all regions Eurobank operates, he added. Greece is still outperforming the average GDP growth of the Eurozone. The labour market is robust and investments are accelerating, bolstered by RRF and additional European funds, he said. “We are on track to reach or exceed the ambitious targets we have set for the year. There is a noticeable uptick in loan requests, faster deposit gathering and flow in assets under management higher than anticipated. “

As for the first half results, Karavias said Eurobank had produced “another solid set of results”, elaborating: EPS amounted to 20 cents, tangible book value per share increased to €2.25, while RoTBV reached 18.5%. Indications of a sustained economic climate coupled with our robust results in the first half of the year, have prompted us to an upward revision of the RoTBV target to around 16.5% for the full year.”

Eurobank said its performance was robust in 1H2024. Specifically:

Net interest income rose by 8.6% against 1H2023 to €1,132m, driven by loans, bonds and international business. Net interest margin increased by 20 basis points y-o-y to 2.83%.

Net fee and commission income expanded by 4.7% y-o-y in 1H2024 to €283m, mainly due to fees from Network activities and Asset Management, accounting for 71 basis points of total assets.

As a result of the above, core income grew by 7.8% y-o-y to €1,415m. Total operating income increased by 9.7% against 1H2023 to €1,460m.

Operating expenses were down by 1.2% y-o-y in Greece but increased by 3.1% y-o-y at a Group level to €457m, due to SEE operations. However, on a like for like basis (excluding BNP Bulgaria) these were stable. Both the cost to core income ratio and the cost to total income ratio improved further to 32.3% and 31.3% respectively in 1H2024.

Core pre-provision income was up by 10.2% y-o-y to €958m, whereas pre-provision income strengthened by 13.0% compared to 1H2023 to €1,003m.

Loan loss provisions decreased by 12.6% y-o-y to €144m and corresponded to 69 basis points of the average net loans.

As a result of the above, core operating profit before tax rose by 15.5% y-o-y to €814m.

Adjusted net profit rose by 22.2% y-o-y to €732m in 1H2024. Reported net profit reached €721m and includes €99m negative goodwill from stake increase in Hellenic Bank and €101m VES cost in Greece. EPS and the return on tangible book value reached €0.20 and 18.5% respectively in 1H2024.

SEE operations were profitable, as the adjusted net profit increased by 35.5% to €277m, contributing 37.8% to the profitability of the Group. Core pre-provision income grew by 25.3% y-o-y and amounted to €292m, with core operating profit before tax rising by 27.6% y-o-y to €264m in 1H2024. The financial performance both in Cyprus and Bulgaria improved substantially, with the adjusted net profit reaching €176m and €100m respectively in 1H2024.

The NPE ratio fell by 2.1 percentage points y-o-y to 3.1%. NPE formation was positive by €125m in 1H2024. Provisions over NPEs improved by 20 percentage points y-o-y to 93.2%.

Capital adequacy remained robust, as Total CAD and CET1 ratios reached on a pro-forma basis 19.3% and 16.2% respectively, accounting for the full-consolidation impact of Hellenic Bank and the dividend distribution of €342m.

Tangible book value per share increased by 18.4% y-o-y to €2.25.

Total assets stood at €81.3b.

Performing loans grew organically by €1.2b in 1H2024. Total gross loans amounted to €43.4b, including senior & mezzanine notes of €4.3b. Corporate loans stood at €25.8b, mortgages at €9.8b and consumer loans at €3.6b.