National Bank of Greece S.A. ($ETE)

Ladies and gentlemen, thank you for standing by. I am Yiota, your Chorus Call operator. Welcome, and thank you for joining the National Bank of Greece conference call to present and discuss the first quarter 2026 financial results. At this time, I would like to turn the conference over to Mr. Pavlos Mylonas, CEO of National Bank of Greece. Mr. Milonas, you may now proceed.

Good morning, everyone. Welcome to our first quarter 2026 financial results call. I'm joined by Christos Christodoulou, Group CFO; Greg Papagrigoris, Group Head of IR. After my introductory remarks, Christos will go into more detail on our financial performance, and then we will turn to questions and answers. I will begin with the description of the macroeconomic backdrop of the Greek economy in view of the recent unrest in global energy markets and their potential repercussions. To start, the Greek economy entered 2026 on a strong footing, bolstered by significant carryover effects from 2025, approximately 1 percentage point of GDP, and solid underlying fundamentals. Moreover, Greece continues to benefit from a set of structural and cyclical buffers, which should offset most headwinds, if the current shock eases by mid-2026, as markets expect. Specifically, private sector balance sheets keep getting stronger, underpinned by sustained corporate profitability and a robust labor market. In fact, leading indicators of business activity remained resilient through April 2026, while the response of forward-looking survey data has been markedly milder compared with the initial phase of the war in Ukraine. Following a temporary slowdown in April, tourism activity is expected to gain traction in the core months of the tourism season with flight scheduling and early booking data indicating high single-digit growth in arrivals, though there's a question mark surrounding pricing, which may be soft. The main growth driver in 2026 will be investment, reflecting high capacity utilization rates across the business sector and a robust pipeline of projects scheduled for completion over 2026, 2028. This momentum is further reinforced by the additional impulse from the historically high inward foreign direct investment and M&A activity recorded in 2025, EUR 12 billion and EUR 24 billion, respectively. Moreover, around EUR 15 billion of RRF resources, both public and private sector use are scheduled to be injected into the real economy over the next few quarters. An additional important buffer to the current external developments is provided by the high primary surplus of 4.9% of GDP recorded in 2025, the highest in the EU. Indeed, new fiscal measures of EUR 2.5 billion have already been activated for 2026. That's approximately 1 percentage point of GDP. At the same time, structural improvements in the energy mix, including higher renewable usage and a broader fossil fuel supplier base alongside the geographical diversification of tourism and a widening export base further enhance the economy's resilience and security. Overall, these supportive factors are expected to sustain the economy's positive growth trajectory in fiscal year 2026 with a robust recovery forecast following a crisis-induced slowdown anticipated in the second quarter. In fact, the Greek economy should remain firmly on track for another year of robust growth, albeit slightly slower than 2025, but with a continued outperformance -- strong outperformance relative to the euro area. In this environment, loan demand from both corporates and households should remain strong in the high single digits in total. The European macro developments may have countervailing impacts on the bank's results as a slightly higher euro interest rates due to inflationary pressures would boost NII, while a sharper GDP slowdown would slow external demand and thus activity. On that note, let me turn to our financial results. Our first quarter 2026 financial performance has remained solid, underscoring the resilience of the Greek economy as well as the strength of our balance sheet. Based on market expectations for the duration of the geopolitical uncertainty, we expect to achieve our fiscal year 2026 -- our full year 2026 guidance. Our first quarter 2026 profit after tax amounted to EUR 344 million, up 23% relative to the fourth quarter of 2025 on the back of an accelerating NII recovery, continued strength in fee and noninterest income generation and lower operating costs. As a result, our return on tangible equity stood at 15.3% normalized for high trading or 16.3% on a reported basis, supporting the achievement of our full year expectations. Adjusted for excess capital, but also the high first quarter 2026 trading income, our return on tangible equity stood at an impressive 20%. Turning to main drivers of our results. First quarter NII up a solid 2% quarter-on-quarter, reflected recent healthy asset growth, especially in Q4 despite seasonality in Q1 and a notable drag from the lower calendar days. Importantly, net interest margin, NIM, is stabilizing as both spread reduction and the effect of lower benchmark rates are both fading. Upside risks are materializing moreover from the market's projected path for euro area interest rates. As regards credit expansion, both corporate and retail disbursements accelerated significantly relative to the first quarter of 2025, leading to a double-digit growth rate in loans of 12% year-on-year and a performing exposure expansion of EUR 700 million. Corporate credit continued driving its performance, up 16% year-on-year, with credit demand diversified across a broad range of sectors, energy, shipping, accommodation. Regarding the retail segments, growth across all segments, consumer, mortgages and small business exceeded that of the market, resulting in market share gains. In the second quarter, we have not observed an impact from uncertainty on credit demand. In fact, we see a mild acceleration in the corporate segment, partly linked to RRF deadlines brought forward, while the pace of retail application remains unchanged. Combined with our sizable pipeline of approved, not yet disbursed loans of about EUR 2 billion, we can reconfirm our full year target for net expansion of over EUR 3 billion. Turning to commissions. Our fee income growth continues to be in the high single digits, up 8% year-on-year, with investment fees remaining the most notable contributor, up 60% year-on-year, reflecting sustained and significant gains in mutual fund market shares, about 7 percentage points since the beginning of 2024 and nearly 1 percentage point in just the first quarter of 2026. The evolution of our cost results in a cost-to-income ratio of 34% or 35.7% normalized for the first quarter 2026 trading income. We balance our cost discipline with our commitment to invest in our people through the onboarding new talent, leveraging the cost savings from our recent VES, about 280 departures, as well as some higher wages, partly emanating from the collective agreements and from variable pay linked to productivity improvements. In the same direction, our multiyear investments in technology and digital infrastructure provide us with competitive advantages as regards to commercial effectiveness, digital offerings and cybersecurity. Special mention, the completion in the next few weeks of the bank's final step to the new cloud-based core banking system, a major achievement, on time and on budget, which opens the door to a plethora of new functionalities and opportunities for the bank, just to name a few, virtual accounts, open up accounts, more efficient liquidity management. As regards our capital, organic generation before distributions continue to be strong in the first quarter, adding 40 basis points of capital. Post payout accruals CET1 [ hedge ] slightly lowered to 18.4% and to 17.4% pro forma for the EUR 300 million special dividend -- special payout. As in 2025, the final payout level for 2026 will be determined at the end of the year. This extensive capital position, one of the key competitive advantages, provides security during these uncertain times while allowing for superior shareholder returns and significant strategic opportunity. In line with the strategic direction, we have taken a significant step toward enhancing our fee-generating capabilities, signing a memorandum of understanding, MOU, with leading global insurer Allianz that sets out our intention to enter into a long-term bancassurance partnership. The rationale of the agreement is to strengthen our ability to deliver enhanced customer-centric insurance solutions while maintaining a capital-light model, thus contributing to sustainable earning growth and long-term value creation for our shareholders. Specifically, the agreement would establish a 10-year exclusive collaboration expected to commence in the first quarter of 2027 with the potential for an extension and is complemented by the signing of a memorandum of understanding that sets out the intention for NBG to acquire a 30% minority stake in Allianz European Reliance, subject, of course, to regulatory approvals. This strategic partnership is expected to lead to a meaningful uplift in our fee income, up 4x for insurance fee income. The key drivers will be access to a comprehensive market-leading product suite, leveraging Allianz's expertise in products and sales. Moreover, Allianz's advanced digital capabilities will facilitate a quick transition to the new operating model, but also support the rapid introduction of new product and service offerings. From a financial perspective, the partnership is set to deliver EPS and return on tangible equity accretion of 4% and more than 50 basis points, respectively, already by 2028. To close, it is important to highlight that the current environment defined by heightened geopolitical uncertainty, our strategic priority remains firm: to increase shareholder value by increasing our revenue base on a sustainable basis and in the event of inorganic growth to create tangible value through synergies. And with that, I conclude, and I'd like to pass the floor to our group CFO, Christos, who will provide additional insight to our financial performance. And then we turn to Q&A. Christos?

Thank you, Pavlos. So let me walk you through the key highlights of our profitability, starting with Slide 15. Despite geopolitical uncertainty and Q1 seasonality, we delivered a strong start to the year with key performance indicators supporting our full year guidance. Profit after tax reached EUR 344 million, up 23% quarter-on-quarter, translating into an earnings per share of EUR 1.52 or EUR 1.43 normalizing for the trading income in the quarter. Our profit after tax in Q1 delivers a return on tangible equity of 16.3% on a reported basis before adjusting for excess capital or 15.3% normalizing for trading income, placing us comfortably on track to meet our full year guidance. Importantly, adjusting for excess capital, return on tangible equity rises to 20%, highlighting the potential [indiscernible] as we utilize our excess capital as well as the significant earnings capacity embedded in our franchise. Our strong financial performance reflects increasing momentum in net interest income recovery, complemented by continued strength in fee and noninterest income generation. Going into more detail on Slide 19. Our NII continued to build momentum in Q1, increasing by 2% quarter-on-quarter despite the negative calendar base effect as well as some residual repricing of our interest-bearing assets, reflecting last year's lowering market rates. Growth was primarily driven by healthy net credit expansion of EUR 0.5 billion on a seasonally low quarter, alongside increased exposure in our fixed income securities, providing additional support to our NII. Notably, our net interest margin has broadly stabilized as spread reduction is easing off. Sustained balance sheet expansion supports a favorable NII trajectory in the coming quarters, reinforcing our confidence in delivering our full year guidance while higher base rates provide upside potential if maintained. Our fee income remained on a strong trajectory, increasing by 8% year-on-year, driven by retail fees, which are up 20% year-on-year as shown on Slide 25. Growth in the retail segment reflects continued momentum in investment product fees, increasing by nearly 60% year-on-year, evidencing the effectiveness of our cross-selling strategy and increasing customer engagement. We continue to see a structural switch of time depositors to fee-generating mutual funds, supporting mutual fund market share gains of nearly 1 percentage point in the first quarter and 3 percentage points year-on-year. As shown on Slide 26, our retail funds under management reached EUR 9.6 billion, 26% higher year-on-year. This performance is testament to the growing client confidence in our wealth management capabilities and our cross-selling capacity. Building on this strong momentum in fee generation, we announced yesterday the signing of an MOU with a leading global insurer, Allianz, setting out the intention to enter a long-term exclusive bancassurance partnership as well as the acquisition of a 30% minority stake in Allianz European Reliance as outlined on Slides 12 and 13 of our presentation. This strategic move, expected to commence in the first quarter of 2027, will bring together NBG's leading distribution platform with Allianz's global expertise, technological strength and innovative products, enabling us to offer a comprehensive market-leading suite of insurance solutions supported by enhanced digital capabilities and superior client experience across channels. The partnership will accelerate our fee growth with our insurance-related income expected 4x higher compared to the 2026 numbers. This will add 6 percentage points of incremental fee growth over and above our guidance for a high single-digit growth on total fees for 2027 and 2028, delivering a return on tangible equity and EPS accretion of over 50 basis points and 4%, respectively. Overall, this transaction represents a key step in scaling up our fee income and reinforces our strategy to diversify revenues and create sustainable long-term value for shareholders. Below our top line, operating expenses were up by 8% year-on-year as disclosed on Slide 27. Personnel costs reflect increasing remuneration in line with the sectoral union agreements and the continued investment in our people, including variable pay to incentivize performance and productivity as well as the onboarding of new talent, leveraging voluntary exit schemes to rejuvenate our workforce. Higher G&As are mainly driven by spending that enhances our customer experience, while depreciation charges reflect our leading investments in technology and digital infrastructure. These investments, including the replacement of our core banking system, which reaches completion this month, are translating into tangible gains in our competitiveness, productivity, commercial effectiveness and, as the CEO mentioned, cybersecurity. Alongside these strategic investments through which we aim to offer innovative products and high-end services to our clients, our cost discipline remains sharply in focus with our cost-to-income ratio kept at sector low levels of 34.3% or 35.7% normalizing for Q1 trading income, comfortably within our full year guidance. As regards credit risk charges, we have seen no pickup in formation trends, while sector-leading coverage levels provide additional security during uncertain times. Our cost of risk remained below 40 basis points, boding well with our full year guidance. Moving to Slide 17. Our capital position allows for a superior shareholder returns, also evidenced in the EUR 1 billion capital distribution recently approved by our Annual General Meeting. Organic capital generation amounted to 40 basis points quarter-on-quarter, absorbing risk-weighted asset growth, driving our core equity Tier 1 ratio to 18.9% in Q1. Factoring in a provisional payout accrual, our CET1 ratio stood at 18.4%. As already mentioned by Pavlos, the level of the 2026 payout will be determined at year-end 2026. Finally, pro forma for the special buyback of EUR 300 million that will commence in June, our CET1 ratio stands at 17.4%. Our total capital ratio stands at 21.1%, with the MREL ratio at 28.8%, including our inaugural AT1 issuance in February, standing well above our requirement of 26.7%. As our CEO mentioned, our strong capital buffers provide resilience in an uncertain geopolitical environment as well as significant strategic optionality. Now let me walk you through the highlights of our balance sheet summarized on Slide 16. As referred to earlier, credit expansion had a good start to the year despite seasonality and affected by geopolitical uncertainty, driving our performing loan book EUR 0.7 billion higher year-to-date, as also shown on Slide 21. This reflects loan disbursements of EUR 2.5 billion, up by nearly 50% year-on-year, highlighting sustained credit demand and our success in capturing high-quality lending opportunities. Corporate lending was a key growth engine with disbursements up by 55% year-on-year, focused on dynamic sectors that continue to benefit from structural growth trends and investment flows, namely energy and renewables, shipping and tourism. Adding to this, the retail segment also delivered a solid performance with disbursements rising by nearly 30% year-on-year, supported by market share gains across small business, consumer lending and mortgages on the back of improving customer penetration and product service offerings. Encouragingly, momentum has carried into April and disbursements remaining strong, providing comfort towards fulfilling our full year guidance. On the liability side, deposits remained resilient, up by EUR 2 billion year-on-year, as shown on Slide 22, driven by continued inflows of low-cost sight and saving accounts, comprising more than 80% of our deposit stock. At the same time, the migration of time deposits to mutual funds continued, benefiting our fee generation as well as our funding mix and cost. With deposits comprising almost 90% of our total funding and term deposit yields 3 basis points lower quarter-on-quarter to 140 basis points, our deposit and total funding costs remained below 30 and 65 basis points, respectively, the lowest in the domestic market as depicted on Slide 24. Evidencing our superior liquidity profile, our liquidity coverage ratio stands at 237%, amongst the healthiest in the euro area with our loan-to-deposit ratio settling at 69%. Now a few words on asset quality, illustrated on Slides 28 and 29. Our NPE ratio at 2.4% and our NPE coverage of over 100% are supported by benign asset quality trends as net NPE flows came at near 0 levels in the first quarter. At the same time, our leading coverage across stages by European standards comprises another strength of NBG's balance sheet, providing cushion against potential downside risks, reinforcing our resilience. To conclude, despite uncertainty, we delivered a strong start to the year, confirming the strength and resilience of our operating model and our capacity to create value for our shareholders. Performance across key metrics supports our full year guidance. Core revenues in an upward trajectory, efficiency kept at best-in-class levels despite significant investments in technology and innovation, solid asset quality and the balance sheet that continues to act as a lever for growth. Our strong capital position balances superior shareholder returns with strong capital buffers, providing resilience during uncertain times as well as strategic optionality, allowing us to navigate the current environment with confidence. And with that, I would like to open the floor for questions.

The first question comes from the line of Ben Caven-Roberts with Goldman Sachs.

Two from me, please. First, on the lending pipeline. Could you just elaborate a little more on the interplay you're seeing between your lending pipeline and the current situation in the Middle East, how that's impacting, for instance, shipping and tourism lending, which I know you mentioned as contributing to the Q1 disbursements? And then where you see upside and downside risks compared with a few months back? And then secondly, just a technical point on Q1 trading, clearly a high income level, as you mentioned in the slides. Anything you would highlight there in particular?

Okay. Thanks for the questions. It's a bit early. I think the disbursement pipeline is still based on approvals that have already occurred, so between sort of time to money -- from time -- from yes to money, it takes almost 2 months, 1.5 months. So you're still seeing approvals of projects which are pretty mature. The key question is on appetite for new projects. And it's still, I would say, a bit early to make a decision. I think most people are still moving forward with their projects. Certainly, on retail, which is more granular, we're not seeing a slowdown in applications. Quite the contrary, they're quite steady at the levels pre end February. So I think the question is, let's see how long the crisis lasts. Clearly, if there's high uncertainty, I would guess there will be some delays in investments, but I think that this would have to be a much longer period of uncertainty than what is now sort of being bandied about by markets and by investors sort of until the midyear. So I guess the quick answer to the question is, if uncertainty lasts past the midyear, then we would probably see a slowdown in large investment products. On trading, it was an opportunity in the volatility to -- for trading, let me put it that way. Okay?

The next question comes from the line of Mehmet Sevim with JPMorgan.

I have 3 questions, please. One on NII, which is very strong this quarter, came well above expectations. I was wondering how you're thinking about the coming quarters now considering the strong pipeline as well as the recent moves in short-term rates given your sensitivity? And my second question is on the Allianz deal, the 6 percentage point incremental fee CAGR that you're guiding. Is this a plug-and-play assumption from day 1? Or do you expect any synergies over the period? And I'm assuming this is a combination of the bancassurance fees as well as the associate income from your stake. So could you please confirm if I'm thinking in the right way? And finally, on the VES, the EUR 60 million charge, could you please disclose how many FTEs are exiting? And what's the expected annual cost savings and over what period -- time period this will come?

Now indeed, our NII came in nicely in the first quarter despite the seasonal effect of the calendar days. Obviously, this is benefiting from the strong pipeline of disbursements that we had in Q4 and also the fading, let's say, repricing of our back book given the lowering market rates that we had to endure last year. Now going forward, the key lever for growth is what we have discussed also during our annual results and the guidance. Growth of our loan book especially is going to be the driver for growth in our NII. And as we disclosed also on our NII slide, the market rates will also play an effect. So our guidance stands as of now for a low single-digit growth in NII for the year. Given the sensitivity for every 25 basis points for EUR 40 million on an annual basis for an NII, if the current, let's say, view on market rate sustains, there is upside risk for NII going forward. Having said that, we want to wait until the second half -- the second quarter of the year until things settle down before we update on our guidance. And another point on our net interest margin, given the dynamics we see, we believe that this quarter is probably the trough quarter for our NIM. So from this point onwards, it's going to be an improvement also on NIM. On the second question with regards to our prospective partnership with Allianz, the 6 percentage points upside on the guidance that we've given on fees CAGR is not assuming any synergies from cost. It's pure income generation based on the strategic partnership. So it's pretty straightforward. And with regards to our VES, I think the CEO mentioned that this VES was more or less in the area of 280 people. The annual saving will be in the area of EUR 15 million. And in 2026, we will assume about half of that depending on the timing of the exits of our people.

The next question comes from the line of Gabor Kemeny with Autonomous Research.

Further questions on Allianz. Can you give us a sense how this guided 4% EPS accretion compare with Allianz's recent performance, like what they actually delivered in the last year or 2? And just to confirm the numbers, do you mean here about EUR 45 million, EUR 50 million of profit contribution? So that's firstly on Allianz and then I have another question.

Let me start on the first question. So the key driver of the growth in our fees is mostly deriving from the strategic bancassurance agreement. So the performance of the company in Greece so far is not the key driver for growth. And you have to put into the equation that given our partnership, the profits of the company are expected to grow and not be very relative to what they've been doing so far. But I don't want to comment on the profits of Allianz Reliance yet. So that's our view.

Okay. I mean you guide for EUR 40 million, EUR 50 million of earnings accretion as I understand, the 20 basis points of CET1 consumption maybe implies EUR 80 million, EUR 90 million of capital consumption. Am I missing anything there?

Well, that's part of the equation. You need to take into account regulatory filters and any goodwill, which would contribute to that 0.2% capital consumption that you see. But given where we are at the moment, I think you should be okay with the 02%.

And just on -- do you see yourself being a minority shareholder longer term in this surely very capital-effective way of owning the stake? Or do you see a chance of raising your stake?

No, I think we are happy with the 30%. I think you've heard our views on insurance. We prefer to partner with a large European world, in this case, a partner who has expertise and they provide the expertise in the factory, we provide the expertise on the distribution and the combination is a win-win.

The next question is from the line of Robert Brzoza with PKO BP Securities.

I have 2 quick questions. Some of my questions actually have been answered so far. What are your thoughts on the potential increase in the macro overlay given the current situation in the Gulf? That's number one. And number two, on the Allianz acquisition again, I'm just wondering if you could provide any specific examples where you think a new bancassurance offering could add value? Would it be more in the retail lending offering or corporate lending? And in which specific areas of the bank activities you might offer something new for your clients?

Okay. I'll take the first question. So if I understood the question correctly, you were asking whether we have taken into account the macro effect of the volatility and geopolitics in our asset quality and provisioning models. The answer is yes. So what we have come out with takes into account this situation, the current situation. And on the second, Pavlos, we will take it.

Clearly, the bulk of the bancassurance agreement comes from selling to retail. It's not -- so this is a retail model for the most part going mostly to branches, and I'm sure in a second stage through digital channel. But it is a way to reach the very large customer base of National Bank.

The next question is from the line of Alex Demetriou with Jefferies.

Two questions, please. Firstly, on the NIM, could you just unpack how you expect it to grow from here over the coming quarters to reach the full year guidance? And just second question, another one on Allianz, sorry. Just on the fee side, is this purely on the bancassurance side? Or are you also seeing some kind of uptick from investment products as well?

Okay. On the NIM, so as you've seen, we've landed the NIM of 272 basis points for Q1 with all the, let's say, the negatives that we had in Q1. I'm repeating the calendar days and the fact that we still had some delayed repricing in our back book from lowering market rates in 2025. So going forward, given the benefit that we expect from our growing assets, adding to that, the fact that we see the spread compression slowing down. And going forward, as we guided at the year-end results, we expect not more than 15 basis points of overall spread compression in the year. And also taking into account current market rates, I think we are very well set to meet, if not exceed our full year guidance of over 275 basis points of NIM for this year. And going forward, I think we are very well set again to exceed 290 basis points, which was our target for 2028. Your second question on asset management, yes, I think what we have pointed out as upside potential from the partnership, the long-term strategic partnership with Allianz is clearly on bancassurance and insurance. But having said that, partnering with a global player like Allianz, we do see upsides in other streams as well. And to be very frank, that could be another lever for growth for us in the future.

Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to Mr. Mylonas for any closing comments. Thank you.

Okay. Thank you all for joining us for the first quarter results despite an exciting day in the markets once again. We're available for further follow-up questions, as always, and we hope to see you in forthcoming roadshows. So have a good day.