Release Date: February 28, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- National Bank of Greece SA (NBGPRA.PFD, Financial) reported a solid core profit after tax of $1.3 billion in 2024, up by 10% year on year.
- The bank's core return on tangible equity reached 17.5%, exceeding the guidance of over 16%.
- Net interest income (NII) and net interest margin (NIM) showed resilience to normalizing rates, with a net loan expansion of 3.1 billion euros.
- The bank's fee business recorded double-digit growth, with investment product cross-selling increasing fees by nearly 50%.
- The capital position was further strengthened, with a CET1 ratio more than 400 basis points above the internal target, providing strategic flexibility for shareholder remuneration.
Negative Points
- The bank faces potential downside risks from geopolitical tensions and a possible recession in Europe, which could impact the 60% payout ratio.
- There is uncertainty regarding the impact of AI and digitalization on cost savings, as these are not yet credibly measurable.
- The bank's cost of risk is expected to normalize to below 40 basis points, but there is still room for further improvement.
- The bank's strategy against dropping rates includes a potential reduction in NII by about 180 to 200 million euros, which could affect profitability.
- The bank's ambitious IT and digital transformation plan has led to higher operating expenses, which need to be tightly managed.
Q & A Highlights
Q: Can you discuss the upside and downside risks to your 60% payout assumption and how you plan to split between buybacks and cash dividends?
A: The upside risks include slower-than-expected rate declines and faster loan growth. Downside risks could arise from geopolitical tensions or a European recession. The payout ratio is linked to the macro environment and requires regulatory approval. We aim to keep the payout sustainable, with a capital buffer for deviations in profitability. (Respondent: CEO)
Q: How does your strategy adapt to dropping rates, and what is the rate sensitivity in your business plan?
A: We anticipate rates to average 2.2% in 2025, a 130 basis point drop from 2024. Our sensitivity remains at a 35 million reduction in NII for every 25 basis point cut. Upside risks exist, and our guidance assumes rates will be down to 2% by June. (Respondent: CFO)
Q: What are your plans for excess capital use, considering high organic capital generation and a 60% payout guidance?
A: We aim to increase shareholder payouts and revenue, both organically and inorganically. Inorganic growth will focus on value-accretive or transformational transactions, potentially in adjacent markets. We have the discipline to wait for the right opportunity. (Respondent: CEO)
Q: Can you elaborate on the one-offs in Q4, particularly on the VAS side?
A: Q4 had some seasonality, with higher OPEX. Notable one-offs included a successful VAS costing around 90 million, 30 million related to a market placement, and 25 million for government-initiated school donations. We don't expect such high levels of one-offs going forward. (Respondent: CFO)
Q: Regarding your cost of risk, how does it compare to other Greek banks, and do you see in-house servicing as an advantage?
A: Our cost of risk is purely underlying, without synthetic or servicing costs. We retained our servicing in-house, unlike other Greek banks, which is advantageous for reperforming loan opportunities. We expect cost of risk to normalize below 40 basis points by the end of the business plan. (Respondent: CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
