CrediaBank S.A. (CREDIA) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. I'm Vassilios, your Chorus Call operator. Welcome, and thank you for joining the Attica Bank conference call to present and discuss the full year 2024 financial results. [Operator Instructions] The conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Mrs. Eleni Vrettou, CEO of Attica Bank. Mrs. Vrettou, you may now proceed.

Ladies and gentlemen, good morning, and welcome to our fourth quarter 2024 results call. I am Eleni Vrettou, Chief Executive Officer of Attica Bank. I am joined here today by Mrs. Valerie Skoubas, our Chief Financial Officer; Mr. Evangelos Kanelis, Chief of Strategy; Mr. George Kouroumalos, Chief Risk Officer; and Konstantinos Manolopoulos, Director of Financial Planning and Investor Relations. After my introductory remarks, Valerie will go into more detail over our financial performance, and then we will turn into Q&A. Before turning to our 2024 financial results, I will start with a brief overview of what we have delivered over the last 2 years and how we have ended up in today's situation. This call marks the return to normality for this bank after a long period of consecutive losses, high NPEs and thin capital. We hope that today will mark the official launch of a new bank coming out of the combination of good assets for both Attica and Pancreta Bank. Our key achievements are summarized on Slide 5. The first and most important milestone for the bank is the conclusion of the legal merger with Pancreta Bank in record time and its full absorption by Attica Bank. The merger was concluded in just 5 weeks within August 2024, leading to the creation of the fifth largest bank in Greece in terms of assets and footprint. Secondly, we have achieved the steepest NPE cleanup in history in one go, bringing our NPE ratio down to 2.8% in end 2024, slightly better versus the average of our larger peers. Note that just 24 months ago, both Attica Bank and Pancreta Bank had NPE ratios to the tune of 65% and a very weak capital position. Thirdly, we have recapitalized the new bank successfully raising EUR 735 million in December. In addition to the share capital increase, we have also successfully executed our first-ever synthetic securitization and disposed noncore assets. Post cleanup, our CET1 ratio stands at 11.9%, well above our OCR minimum. Our capital is free of any DTC. We will continue this year with further actions of generating organic capital, aiming to further strengthening our total capital position. Fourth milestone, we have privatized the bank. Onboarding Thrivest, our strategic private investor, now controlling circa 55% of our share capital. Moreover, we have managed to attract more than 1,500 new investors in our recent share capital increase along with numerous domestic and international institutional investors. We have also consolidated the market. As the new bank is effectively the outcome of the merger of 4 banks, namely Attica Bank, Pancreta Bank, HSBC's Greek operations and the Cooperative Bank of Central Macedonia. As such, the new bank has now full coverage around Greece with a network of circa 86 branches. Number six, we have achieved a major profitability turnaround in former Attica Bank, creating a pre-provision income delta of approximately EUR 80 million in the last 3 years reporting on Attica Bank stand-alone basis, a recurring pre-provision income of circa EUR 40 million in 2024 from a pre-provision income -- actually loss of EUR 40 million back in 2022. And finally, we have managed to grow the bank, regaining market share. From a market share of circa 2% in loans, Attica Bank managed to secure a 7.8% in new business originations and net credit expansion terms in 2023, while on a pro forma basis for 2024 the new bank's market share in new business rose further to circa 10%, with net credit expansion reaching EUR 950 million versus EUR 10.5 billion for the entire market post the credit expansion. We have achieved that during years, which was the peak of our restructuring efforts, while in parallel, we were planning and executing a highly complex merger, raising capital as well. This is the outcome of a major reshuffling of our internal processes, the hiring of new talent, investments in IT and automation as well as focusing in offering the best possible service to our clients. These practices will continue and further accelerate this year. So how does the new bank look like today? On Slide 4, we present our key figures for 2024. Note that P&L numbers are on a pro forma basis, i.e. presenting figures as if the merger has taken place as of January 1, 2024, to illustrate the full firepower of the bank before the integration and any synergies being achieved. As shown at the top left box, our recurring PPI reached nearly EUR 50 million. We expect our pre-provision income, or PPI, to grow multiple times starting from this year, having a medium-term aspiration of the PPI level in excess of EUR 280 million. We plan to present our 3-year new business plan target later in the second quarter of 2025. Our balance sheet is comprised of EUR 3.2 billion of loans with NPEs being limited now only to circa EUR 100 million. On the liability side, our deposits are over EUR 6.1 billion, indicating a strong liquidity profile. We have a circa 3% legacy market share in loans and deposits, while our market share in terms of branches more than doubled at circa 7%. As we previously stated, we continued to grow right now on the pace of more than 10% and positive credit expansion. We intend to capitalize on this extensive footprint in order to further increase our penetration into the retail and SME business in Greece. 2025 for us is again a transition year, given that we need to front lead the restructuring assets and realize the synergies in the business plan. Our key priority for this year is the conclusion of the operational merger. We aim to complete the integration of all IT systems and operations by December 2025 at the latest, which again is a record time given that normally, such integrations would take more than 2 years to complete. We'll continue to focus our efforts on reducing the high cost base stemming out of the merger. As such, we have already launched branches closures and colocations aiming to reduce branches to 65 with additional 5 business centers. The branches closure are aimed at the ones with close proximity to each other and to reduce the density in some geographies. To complement the branch closure, a parallel voluntary exit scheme has also been launched and is nearing completion as well. The full benefits of these efforts will show in the third quarter of this year. On the business side, we will not lift our foot from the accelerator aiming at higher net credit expansion levels versus 2024, exceeding the EUR 1 billion mark and driving growth, not just on the corporate side, but also on the retail side. To support this, investment in the branches will take place to improve the branch look and feel, while we also invest in better skilled personnel. This will be complemented by the rebranding of the banks effectively signifying the launch of the new bank with a completely new identity versus the past. The retail network will also serve as a catalyst to further increase our fee and commission income, given the redesign of our bancassurance services and corporations as well as building further on our wealth management platform, which involves currently circa EUR 800 million of assets under management by our customers. Finally, we have already started the planning of our new digital capabilities, and we hope to start executing this ambitious plan close to the end of the integration later in the fourth quarter of 2025. By closing, let me reiterate once again our commitment to delivering on all our targets, continuing the same focus we had in the last 2 years to execute what seems almost like an impossible plan to deliver. Thank you once again for your time today. Let me now pass the floor to Valerie to present our 2024 financial results in more detail. Thank you.

Thank you, Eleni. Good morning from my side as well. I'm Valerie Skoubas, the CFO of the bank. Before going into the details of our financials, I'd like to clarify that the presentation includes 2 different views of the bank results. The first view is the reported figures, i.e., this is the accounting view, whereby we consolidate PCB's contribution from the day of the merger, which was September 4, 2024. The PCB results from January 1 through September 3 have impacted equity. The second view is the pro forma view, which presents figures as if the merger had taken place on January 1, 2024. In the presentation, both views, it's important to note, are adjusted for nonrecurring items on the revenue and cost side, while the pro forma aligns also accounting policies for the 2 banks. I will start now with the accounting view first, which is on Slide 10. We present the key highlights of our P&L. Our full year recurring pre-provision income year-on-year reaching EUR 43.9 million, EUR 44 million, while also Q4 was another record with PPI reaching EUR 16.6 million, nearly 70% higher Q-on-Q. The key drivers of this stellar performance was the strong core revenue growth. Specifically, NII was up 44% year-on-year benefiting primarily from the higher loan and bond volumes, while fees more than doubled, benefiting from lending, letters of guarantee and network fees. In fourth quarter fees were also enhanced from PCB's Wealth Management business. Total revenue was also enhanced from a very good trading results, leading recurring total revenues up 53% year-on-year. On the cost side, they've also been impacted from the full consolidation. Therefore, we see a rising of 38% year-on-year. If we move to Slide 11 on a like-for-like basis, we can see actual recurring OpEx was effectively flat year-on-year, up just by 1% for Attica Bank. Similarly, recurring PPI was up 81% year-on-year for Attica Bank stand-alone with PCB's contribution being limited to EUR 4 million or approximately 10% of the reported pre-provision income figure. The bottom line has also been impacted from the HAPS loss turning the results to red with net losses shaping at EUR 368 million. At this point, I report that PCB HAPS losses have been in equity. Effectively, all of PCB's P&L up until the day of the merger was transferred to new bank's equity position while post the day of the merger, PCB's P&L is included in the reported figures of the new bank, as you can see on Page 11. If we turn to the pro forma on Slide 12, on the top left, you can see that the recurring PPI more than tripled year-on-year, reaching nearly EUR 50 million. Attica Bank contributed nearly EUR 40 million and PCB nearly EUR 10 million. Importantly, as shown on the top right, Q4 PPI constitutes a new record at approximately EUR 19 million. All major lines contributed positively with recurring revenues rising 20% Q-on-Q at EUR 58.3 million and OpEx actually dropping 7% Q-on-Q at EUR 39.5 million. The same picture is presented into more detail on Slide 13, where we see the PPI bridge on the right. As evident, all core items had a positive Q-on-Q evolution with NII adding EUR 6 million, fees EUR 1 million, noncore revenues EUR 3 million and costs another EUR 3 million. You can see a more detailed analysis of the pro forma figures on Slides 43 and 44, which are in the appendix. If we turn to Slide 15 to our balance sheet, we have EUR 4.4 billion of loans, which includes the EUR 1.2 billion seniors of the 2 securitizations, Domus and Rhodium. We also have EUR 1.7 billion of securities with GGBs including T-bills and other sovereign constituting the bulk to 75% of the total. As Eleni mentioned, in parallel, our 275 DTA is clean of any BTC. Our assets are primarily funded from our deposits. Specifically, our client deposits stand at 6.1% represents our main source of funding, constituting 92% of total liabilities and equity. Importantly, of this, individual deposits represent the majority at 69%. Briefly, if we move to page -- Slide 18, as Eleni said, we managed to achieve net credit expansion shy of EUR 1 billion. Q4 constitutes another record for our bank with disbursements reaching a new high of over EUR 600 million at EUR 624 million. Q4 2024 net credit expansion was negatively affected from elevated repayments, but results remained above our initial expectations. As a result of the merger and our appealing offerings, our deposits, as shown on Slide 19, nearly doubled year-on-year. Group deposits grew 6.2% Q-on-Q, double the growth rate of the market. Similarly, client AUM rose by a strong 22% year-on-year with mutual funds rising by a higher 28% year-on-year and 5% Q-on-Q. If we move to Slide 24, our capital, we present the evolution of our CET1. As mentioned, our CET1 ratio is now restored, standing at 11.9% post the share capital increase, which has absorbed all the HAPS-related losses. Our CET ratio is comfortably above our OCR minimum of 8.7%, 320 basis points. Organic capital generation and new organic actions planned for this year and for 2026 should further boost the numerator CET1 of our ratio. We believe that this is the trough. As presented on the next page, the main culprit of our CET1 erosion versus Q3 pro forma was the DTA where the former temporary difference became permanent final following our securitization of the portfolio, eating 150 basis points of capital. As CET1 will be growing from organic profitability, the DTA drag will be gradually diminishing. Finally, on Slide 28, we see the Domus and Rhodium securitizations resulted in the full cleanup of our balance sheet. We now have an NPE ratio of 2.8 being comfortable with our 48% coverage. With that, I have concluded my presentation. We will now open the floor for Q&A. Thank you.

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

My question would be more on the medium-term targets and the path to growing the lending book in order to reach this return on tangible equity of over 20%. Where would you envisage the performing loan book to stand in the medium term? And what kind of market share would you be looking at? And maybe tell us a bit more about the segments you're targeting? Is it more on the SME side or the large corporates or also you're looking at the retail given the branch network?

So thank you for your question. So effectively, we're looking to continue on the same strategy pretty much that we're today. So main focus remains the SME sector, but we're looking to grow equally our retail business, hence, the investments, as I mentioned, on the branch network and digital capabilities in the wealth management business. And at the same time, like whilst we remain focused on SME, we also continue to be present in the large corporate segment and also like in other segments like shipping. So more like an SME bank, but with a universal SME strategy.

Okay. Maybe a color on what kind of growth you would be looking ballpark?

So we're looking to continue more or less on the same pace as today. So if we continue to be posting like positive credit expansion of around EUR 1 billion a year, in the next 3 years, we will comfortably meet like now a return on tangible equity targets that we have set out in our plan.

The next question comes from the line of Varelas, Theodore with Pantelakis Securities.

On the technical side, do you expect any Basel IV impact, please? And I would also like to ask how you see the synergies evolving over the next 2, 3 years given the unit efficiencies out of the combined entity?

Hello, I'm George Kouroumalos, the CRO. Regarding Basel IV, from our latest dry runs, we measure an impact of circa 40 basis points as a day 1 impact and the fully loaded impact of circa 60 basis points on our capital ratios.

And question relates to the synergies. The synergies are expected to exceed EUR 30 million mark in the next 2 years. the total restructuring and transformation costs, including all the rebranding, are seen as about circa EUR 80 million, equally spread through the next 2 years, 2025 and '26.

To clarify this. So you're expecting EUR 40 million of restructuring charges over '25, '26, you said.

Somehow. Yes, it's correct.

That is correct.

And that would probably lead to savings of around EUR 25 million, EUR 30 million?

We're looking at around EUR 30 million expect coming from the rationalization of the branch network as well as like the rightsizing of the employees like base. So that's why I mentioned that the voluntary exit scheme is pretty much complete right now. We're looking for the execution of that. We have the applications in. We're looking to execute this in the next 3 to 4 months gradually. So this does not disrupt our integration process. And we believe that in the third quarter 2025 results, you will see the full benefit on a recurring basis of this cost optimization program that has already been launched.

That's fantastic. And one more question, please, if I may, on the lending side. Do you see any changes in the competitive behavior between the banks on your space between last year and this year?

So I'd say that overall, this remains a highly competitive market. So all the banks have announced pretty much ambitious growth targets in terms of positive credit expansion. The good news is that so far, the macro environment and the growth of the country is helping the banks to realize the target so far. So I think 2024 has been overall a good year. We do see that this competitive landscape does have an impact on the margin. So we do see pressures on the spreads that effectively the borrowers can command, like I would put this mildly but this is a borrower-led market, if anything else. Now given that our model effectively focuses on optimization of service to the client, we see that we're able to still command health care margins in our book and still have be able to achieve fully our market share targets in the sense that the customers that come to us don't necessarily come to us because we're the cheapest bank out there in terms of lending, but because they can have a holistic relationship and better service from the channels that we have and the people that service them.

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

We would like to thank you once again for joining today's call. I mean, as you probably appreciate, this is the inaugural call we had on our results. And we hope to see you soon for the business plan, the new 3-year business plan that we're going to announce probably by the end of the second quarter of 2025. So thank you once again, and let me wish you all a good day.

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

Thank you.