CrediaBank S.A. (BCA0.F) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. I'm Constantino, your Chorus Call operator. Welcome, and thank you for joining the CrediaBank conference call to present and discuss the first half 2025 financial results. [Operator Instructions] And the conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Ms. Eleni Vrettou, CEO of CrediaBank. Ms. Vrettou, you may now proceed.

Thank you very much. Good morning, ladies and gentlemen, and welcome to our first half 2025 results conference call. I am Eleni Vrettou, Chief Executive Officer of CrediaBank. I am joined here today by Mrs. Valerie Skoubas, our CFO; Mr. Vangel Kanelis, Chief of Strategy; Mr. George Kouroumalos, Chief Risk Officer; and Mr. Konstantinos Manolopoulos, Deputy CFO and IR Head. After my introductory remarks, Valerie will go into more detail over our financial performance, and then we will turn into Q&A. So let's begin. CrediaBank has gained momentum in the second quarter of this year, delivering a robust set of results in line with the targets set, driven by record new disbursements resulting in stellar growth rates in net interest and fee income both on a yearly but also on a consecutive basis. As a result, we reached another record in the history of the bank, delivering recurring pre-provision profit of EUR 38.9 million in the first half of the year. Our vision was to transform the bank into a high-growth, high-return banking champion within Greece, and I'm pleased to say today that we are indeed gradually but consistently delivering on this plan. 2025 started as a transitional year as this is effectively the first year post the legal merger with Pancreta Bank and the launch of the new bank. We are growing faster than the market in terms of credit expansion while, at the same time, we're restructuring our bank and are expanding into new geographies, diversifying our revenue base. At the same time, we have also secured a strong vote of confidence from the international capital markets following the successful concurrent AT1 and Tier II issuance and, of course, from HSBC Continental Europe for the acquisition of their Maltese franchise. Our new beginning has been marked by the launch of our new name, CrediaBank, a name that reflects who we are and what we aspire to become: a bank inspired by people, focusing on people. The new name expresses the trust-based relationships we aim to build with our customers, offering the best possible service for everyone. The new name is inspired by the word credibility and effectively implies what we want to be: a reliable, credible partner for our clients, for our employees, our investors and our regulator. In September, another milestone has been achieved. The operational merger of the IT systems of the former Attica Bank and Pancreta Bank is now complete. CrediaBank now operates as a single entity technologically and operationally, which effectively marks the full completion of the merger between Attica Bank and Pancreta Bank this year. This was a demanding and highly complex project completed exactly 1 year after the legal merger, thanks to the hard work and dedication of our staff and our partners. This has been completed ahead of our target set initially at the end of 2025. Besides the synergies and the completion of systems integration it's going to generate, it also adds to our credentials and strong experience as we embark into the integration of HSBC Malta, an even more demanding project. Following the unification and stabilization of the systems, our goal is to improve customer experience across all points of contact within the bank from digital platform to the physical branches. The operational integration has also been the necessary prerequisite and foundation for launching the bank's full digital transformation in both customer-facing applications but also internal processes automation, which will further enhance the bank's cost structure but, at the same time, improve the customer journey and create further efficiencies. Within this very busy and intense business framework, we have set the foundations to deliver the medium-term targets as set in our business plan, which include elevated growth rates and efficiency improvements. Despite the integration challenges that naturally stem from such complex projects, we have managed to deliver both growth as well as execution on achieving the targeted synergies, and I'm thankful to all my colleagues for their commitment, drive and resilience. Indeed, competition has increased recently, and this is obviously a signal of health for our banking system. It calls for constant improvement for all of us. Still, the performance of our financial metrics as well as the net credit expansion achieved provide evidence that the new bank has a strong commercial appeal and that there is a clear need for banking alternatives in what is a mature banking environment. Proof to this is that for yet another quarter, we grew faster than our historical market share and well above the market average. Turning now to our financials into more detail. On loans, new disbursements accelerated by 37% quarter-on-quarter to EUR 922 million in the second quarter and circa EUR 1.6 billion in the first half of the year, setting a new record for our bank and on target to meet our full year targets. Hence, loan growth continued unabated with our loan book up 9% quarter-over-quarter versus 1% for the market. This means that we have captured a double-digit market share in new loan production, which we estimate north of 10% at circa 11%. This is significantly higher than our market share in the back book, which is close to 3%. Our liquidity position remained solid with customer deposits up 9% quarter-on-quarter or by EUR 560 million to approximately EUR 6.6 billion and with a significantly improved mix as core deposits account for 49% of our deposit base versus just 31% in the first half of 2024. In the same vein, our cost of deposits further rationalizes in line with the movement in interest rates. Specifically, our time deposit cost has squeezed 40 basis points quarter-on-quarter compared to the 46 basis points average Euribor drop. This trend is expected to continue as there is a time lag in the repricing process for our deposits. Overall, approximately 60% of our time deposits will get repriced in the next 3 months and more than 80% in the next 6 months. Our best-in-class loan-to-deposit ratio of 58% stands well below our peers and allows us to implement our strategy of financing the Greek economy and primarily SMEs and households unabated. As compared to the first half of 2024, our deposits have more than doubled growing by 103%, benefit from the merger. Total client assets, i.e., deposits plus assets under management, shaped at EUR 7.4 billion, up 8% year-to-date. Asset quality dynamics remain strong with the NPE ratio at 2.9%, in line with Greek and Spanish banks' average, following a very successful hub transaction in the last quarter of 2024. Our NPE coverage is also satisfactory at a prudent 48%, while new NPE flows are well contained, being approximately 1% on annual basis on average for the last 3 quarters. On the P&L front, we delivered another robust quarter and recorded a new all-time high of recurring PPI, pre-provision income, thanks to the strong performance of our core income lines. Specifically, our recurring PPI jumped by 124% year-on-year to EUR 38.9 million, which is a new record for our bank. On a like-for-like basis, meaning excluding the income contribution of NPEs, our incurring pre-provision income grew more than sixfold year-on-year. Key drivers of growth were net interest income and fees. NII grew 13% quarter-on-quarter and 97% year-on-year, benefiting from strong net credit expansion, higher loan and bond volumes as well as lower cost of deposits. As such, NIM expanded by 20 basis points quarter-on-quarter, posting the sole increase in the sector. On top of that, fees contribution to core revenues rose further to 19% from 16% in the previous quarter, primarily driven from lending and network fees. On the cost side, cost containment efforts have started to bear fruit as personnel costs dropped 5% quarter-on-quarter while total recurring operating expenses were up by just EUR 2.2 million quarter-on-quarter solely due to higher G&A, which were associated with the growth in our business. Turning to synergies. Implemented actions thus far have already locked in EUR 14 million of cost savings on an annualized basis. Valerie will elaborate further on that front shortly. Finally, as far as the bottom line is concerned, our recurring profit before tax came in at EUR 27.6 million in the first half of 2025 from just EUR 1.6 million a year ago. Similarly, the second quarter recurring profit before tax was up 76% quarter-on-quarter, illustrating that we're on the right path to earnings recovery. Lastly, on capital, which stands well above the regulatory minimum requirements, things have also moved as planned. As mentioned earlier, in early June, we proceeded with our landmark debut in the international bond market, issuing concurrently EUR 100 million AT1 and EUR 150 million Tier II bond, placing the bank as one of the most innovative issuers. As a reminder, the issues were oversubscribed more than 4x with the order book exceeding the EUR 1 billion psychological threshold. More than 80% of the total book has been allocated to foreign institutional investors while the bonds' secondary trading performance is also quite strong. Apart from the bond issuances, the completion of the restructuring program associated with the merger with most of the charges taken upfront during the first half of 2025 along with the credit expansion have consumed capital but in line with our plan. Front-loading restructuring charges for the strategic decisions that allows the bank to benefit earlier from the realization of synergies and reduce the cost base post merger. On the process side, organic capital generation and additional capital actions such as the noncore asset disposals and synthetic securitizations expected to take place in the second half of the year are expected to fortify further our capital position in the second half, expecting to return to close to 11% CET1 by the end of the year. For the remainder of the year and for 2026, our key priorities have not changed. If anything, we have added one more key item on our list. This refers to our inorganic expansion and our focus for a smooth integration of HSBC Malta. The acquisition remains subject to regulatory approval by the MFSA, ECB and Bank of Greece. As such, we do not expect the transaction to close before the end of 2026. Nonetheless, integration preparation will start sooner. Furthermore, we are currently revising our business plan for the Greek franchise. We are finalizing our business plan for Malta as well as the business plan for the combined entity. Once we are ready, we will share our new targets with the market. Within this framework, we also intend to strengthen further our management team so as to oversee and integrate Malta smoothly. To that end, a Chief of International is expected to join us by early November, having full responsibility over the Maltese business from regulatory approval to integration and, subsequently, to growth thereafter. In addition to this role, there will be further changes in our enabler and control functions to ensure that the Maltese integration does not distract us from the Greek business but, at the same time, we're able to have good control over all aspects of the combined business. On the business front, we continue aiming at diversifying further revenue sources, focusing on improving our fee-generating capabilities. In parallel, we are still focused on increasing our performing loan book. On fees, we have so far intend to launch more targeted and specialized propositions in the wealth management business and the bancassurance space so as to enhance fee income. On this front, we look how we can best exploit the synergies from the two subsidiaries in the Maltese business, namely asset management and insurance, once the Maltese acquisition is complete. On the net interest income aspirations, which remains our key profitability driver, we stick to our guidance for net credit expansion levels in excess of EUR 1 billion per year. We have a healthy pipeline already well exceeding this target, which supports our confidence on this level. Our digital transformation is our fourth priority. As we are at the end of the integration process, we have already mapped our new digital capability target, and we are very close to launch the execution of this ambitious digital transformation plan even within this year. We have set the foundations and now aim at improving both the front and the back end of our operations. This will also further enhance our efficiency, which will ultimately drive to more cost savings via optimization of our processes. Ultimately, we hope that this will enhance the customer journey across all our channels and offer as well a wider digital offering across all our products. Our fifth priority is the revamping of our branch network. To support growth, investments in our branch network have started taking place as this complements the rebranding of our bank, effectively signifying its new launch, improving the branch look and feel while also continuing to invest in better skilled personnel. The very first branch with a new concept was opened just last week. That is a unique concept across Europe, banking returning back to the basics. We're building trust with the customer, welcoming to the branch while using technology to complement and support but not cannibalize. All our new branches are equipped with the most modern technology, including the virtual teller machines. Furthermore, in parallel with our digital transformation, we will be launching new products in the fourth quarter of the year and further optimize our internal processes. For both of these, the systems integration completion was absolutely essential and, hence, our main focus until today. Finally, strengthening our capital base through additional nondilutive capital actions remains among our key priorities. On that front, we intend to proceed with a new synthetic securitization of performing exposures that will further optimize our risk-weighted assets. This is expected to take place in the third quarter of the year. On top of that, we have also decided to proceed with the carve-out of our payment sector, which includes our merchant acquiring business, the POS, our off-site ATMs and the card issuing and management operations. We intend to conclude this action within the year, and for this reason, we are optimistic that we have seen the trust of our CET1 ratio. By closing, let me reiterate once again our commitment to continue with the same focus we had in the last 2 years to execute what seemed almost like an impossible plan. Our efforts have started bearing fruits, evident from our improved financials consistently every quarter, but more is yet to come on all angles of our business. We have demonstrated not only that we have the ambition to drive change and revolutionize the bank, but we also have the drive and capability to execute with laser focus on all our initiatives no matter how ambitious or challenging they may seem. Thank you once again for your time today. I will now pass the floor to Valerie to present our first half '25 financial results in more detail. Thank you.

Thank you, Eleni. Good morning from my side as well. I'm Valerie Skoubas, CFO of the bank. I will start with the key highlights of the first half as presented on Page -- Slide 15. Our profitability is on an upward path as half 1 recurring PPI, pre-provision income, more than doubled year-on-year, reaching EUR 38.9 million, setting a new record for the bank. Moreover, adjusting for NPE income, our half 1 pre-provision income rose more than sixfold compared to the same period last year. Importantly, recurring core PPI, which excluded the volatile noncore income line, rose 62% Q-on-Q, illustrating that the bank is on the right path to earnings recovery. Key driver of this stellar performance was the robust core income growth. Specifically, half 1 2025 net interest income surged by 97% year-on-year, bolstered by strong credit expansion and higher loan and bond volumes despite the declining interest rates. Moreover, lower cost of deposits and improved deposit mix added further support. Core deposits augmented further their contribution and now accounts for 49% of the deposit base compared to the 45% in Q1 and 31% in half 1 2024. On a more positive tone, net interest income also rose by 13% Q-on-Q and NIM widened by 20 basis points Q-on-Q at 2.2%, posting the sole increase in the sector. It is important to highlight at this stage that the contribution of NPEs was nearly 0. Following the cleanup, 99% of our interest income is attributed to performing exposures versus 72% 1 year ago. In the same vein, fee income more than doubled on a yearly basis and grew at an impressive 41% on a sequential basis, thanks to robust growth across all lines. Further down our P&L, total revenue was also boosted by strong noncore revenues, leading recurring total revenues up 112% year-on-year in the semester. Recall that our other income in Q1 2025 was boosted from an episodic but recurring revenue of circa EUR 5 million relating to a structured finance deal we have concluded. On the cost side, obviously costs were also affected from the full consolidation of Pancreta doubling year-on-year. Post implementation of the voluntary exit scheme announced in February, total headcount has decreased by 211 FTEs to 1,258. On the branch rationalization front, following the colocation of branches in close proximity and other planned closures, our footprint dropped to 65 branches. As a result, we've locked in synergies on an annualized basis from the executed voluntary exit scheme, the branch rationalization and other actions, topping the EUR 14 million mark. With respect to provisions, the total P&L charge reached EUR 9.4 million in the quarter -- in the half year. This includes EUR 6.3 million of recurring provisions, EUR 1.8 million one-off provisions and EUR 1.3 million, which is the semester cost of the synthetic securitization we implemented last year. The EUR 1.81 million of provision is associated with the Rhodium securitization and refers to its collection account. As a result, our underlying cost of risk shaped at 36 basis points, while our all-in cost, including the aforementioned one-off and the cost of the synthetic, shaped at 53 basis points. Recurring profit before tax came in at EUR 27.6 million in half 1 from just EUR 1.6 million last year due to the impressive performance of core revenues, net interest income and net fees. Reported earnings before tax soared by 49% year-on-year and almost sixfold compared to Q1. Results were burdened from the EUR 29 million one-off voluntary exit scheme and other restructuring charges we frontloaded. Still, these will accelerate the realization of synergies, which already adds to EUR 14 million on an annualized basis, and we believe that these have a circa 2-year period payback time. If we turn to Slide 24 to our balance sheet. We have EUR 4.9 billion of loans, including the EUR 1.1 billion senior of the two securitizations. We also have EUR 1.5 billion of securities with GGBs, Greek government bonds including T-bills and other sovereigns constituting the bulk 82% of the total. In parallel, our EUR 272 million deferred tax assets is clean of any DTC. Our assets are primarily funded from deposits. Specifically deposits stood at EUR 6.6 billion and represent our main source of funding, constituting 82% of total liabilities and equity. Importantly, individual deposits represent the majority of deposits at 62%. Briefly on loans and net credit expansion on Slide 27. As Eleni said, we managed to achieve net credit expansion of EUR 309 million in Q2 and EUR 542 million in the first half. Q2 2025 constitutes another record for our bank with disbursements reaching a new high of circa EUR 922 million, 37% higher versus the first Q level and 48% compared to Q4 2024. Half 1 disbursements stood at EUR 1.6 billion, well on track to meet full year target of the EUR 2.1 billion. As a result, we continue to outperform the system as our loan balances grew 9% Q-on-Q versus just 1.1% for the market. We therefore estimate that our market share in new production exceeded the EUR 10 million mark. Similarly, as shown on Slide 28, group deposits nearly doubled year-on-year, benefiting from the merger and rose by 9% Q-on-Q, outperforming again the market that grew by 2.5% Q-on-Q. Total client funds stood at EUR 7.4 billion, supported primarily by deposits while also assets under management grew 7% year-to-date. If we move to capital on Slide 35, we present the evolution of our CET1. Our CET1 ratio narrowed to its floor level at 10.4% from the 11% in Q1 due to the strong net credit expansion that has consumed 70 basis points as well as the front-loading of all the restructuring actions post merger. Recall branch closures, VES integrations that have eaten up 40 basis points. As discussed in previous conference calls, front-loading restructuring charges was a strategic decision that allows us to realize synergies earlier. And as a result, the temporary drop of our regulatory capital is in line with our strategy and our expectations. Despite the sequential drop, our CET1 ratio is standing well above the regulatory minimum of the 8.7%. Looking into the second half of the year, CET is expected to return close to 11%, thanks to organic capital generation and additional capital actions as noncore asset disposal, a carve-out and continuous use of synthetic securitization for capital optimization. Finally, if we turn to Slide 39 and 40. Asset quality dynamics remain positive with our NPE ratio flattish Q-on-Q at 2.9%, in line with Greek and Spanish banks, whilst our cash coverage ratio improved 100 basis points Q-on-Q at 48%. In the same manner, new NPE flows are well contained being at circa 1% on average on an annualized basis. With that, I have concluded my presentation. We may now open the floor for Q&A.

[Operator Instructions] The first question comes from the line of Boulougouris Alexandros with Euroxx Securities.

Quick question on your capital. You mentioned that nondilutive capital actions that will take place in the second half, are these actions that relate to the core equity Tier 1 going up to 11%, as you mentioned, by year-end? Or is this something separate? Apologies if you already mentioned this. I didn't catch it on the call.

Correct. I'm sorry, it's correct, Mr. Boulougouris. These are the two actions that we hope is going to drive, along with the organic profitability, I see -- to answer, to the 11% by the end of the year.

[Operator Instructions] The next question comes from the line of Maggio Domenico with Jefferies.

I'm just curious. Yes, you guided for your common equity Tier 1 by the end of the year at 11%. Maybe more forward looking, after all the transactions are going to be completed, at what run rate do you expect to run your common equity Tier 1?

At this stage, we cannot make any statements as to forward-looking plan because as we mentioned on the call, we are currently revising all our business plans in line with the Malta acquisition. So we are currently reviewing the business plan for Malta. We are reviewing the business plan for Greece and, at the same time, we are reviewing the consolidated business plan. We hope that this exercise will be complete by the end of this month. And at that point, we will go to the market with a full disclosure of our targets for the medium term. Now as I mentioned during last week's call when we announced the Maltese acquisition, our target CET1 will, to a large extent, depend not just in our business plan but also on the minimum regulatory requirements that ECB may pose because of the Malta acquisition. This is something that we do not have clarity yet as the regulatory dialogue has still not commenced regarding the Malta acquisition. We believe that we will prudently manage that given the expected capital nondilutive actions that we have announced not just for this year, but also for 2026. Nonetheless, because this is a cross-border transaction, which also makes us a systemic bank, we cannot at this point commit to a minimum CET1 target and the regulatory expectations around that. So more to come in the following few months.

[Operator Instructions] Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to Ms. Eleni Vrettou for any closing comments. Thank you.

Thank you very much all for your time today. We will speak again soon, probably when we release our new business plan target. Have a good day to all. Thank you.

Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for calling, and have a pleasant evening.