Pebblebrook Hotel Trust

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Ladies and gentlemen, thank you for standing by. I'm Vassilios, your Chorus Call operator. Welcome, and thank you for joining the Eurobank Holdings conference call to present and discuss the third quarter 2024 financial results.



At this time, I would like to turn the conference over to Mr. Fokion Karavias, CEO. Mr. Karavias, you may now proceed.

Thank you. Ladies and gentlemen, good afternoon, and welcome to the Eurobank 9 Months 2024 Results Presentation. Together with me is our CFO, Harris Kokologiannis, and the Investor Relations team.



We are starting with some key recent developments, then presenting our results and answering your questions. In our region, the macroeconomic environment remains positive despite a challenging EU outlook with GDP growth in Cyprus at 3.3%, the second highest in Eurozone, 2.3% in the Greece, and 2.1% in Bulgaria for 2024. In our home market, the economy should continue expanding above 2% for the next couple of years at least. Furthermore, Greece also stands out among the European countries in terms of fiscal discipline with the primary balance comfortably above 2% of GDP in 2024 and '25.



The positive economic sentiment is supported by a number of factors, including tourism, which had another strong year, the unemployment ratio further decreasing, and residential real estate prices remaining strong at 9.2% year-on-year growth. The investment contribution to GDP, although it needs to improve further, follows a positive trajectory, having increased to 15% from 11% in recent years. Investments are one of the main drivers of credit expansion, which for the sector is 6.6% year-on-year so far in 2024, higher than expectations.



For Eurobank in particular, organic loan growth reached EUR 2.1 billion, almost meeting the full-year target, while the fourth quarter is also expected to be strong. As such, Eurobank may reach close to EUR 3.5 billion loan growth for the full year. The lower interest rate outlook and the gradual RRF disbursements of projects already contracted support the credit expansion in 2025 as well.



Moving now to Eurobank results. For the first time, we consolidate Hellenic Bank line by line. On Slide 7, it shows that the group has reached a balance sheet size of EUR 100 billion, EUR 50 billion of loans and EUR 75 billion of deposits with a well-diversified presence, 60% of assets out of Greece, 27% in Cyprus, and 11% in Bulgaria. In terms of profits, the split is quite similar, 57% to 43% in favor of Greek business. The profit contribution of the business outside Greece is expected to increase in the following years, given the upside potential from the Hellenic Bank acquisition. More specifically, on Hellenic Bank, a new management team has been appointed in September, already working on a new business plan. We intend to discuss a detailed picture of the Hellenic Bank outlook and synergy potential early next year when we present our full-year 2024 financial results.



Besides synergies, further upside from Hellenic Bank will come from increasing our equity stake beyond the current 56%. In this context, we announced earlier today an agreement to acquire an additional 12.8% stake subject to regulatory approvals.



Now let's look at our financial results for the 9-month period, as highlighted on Slides 5 to 9. The strong performance across segments and geographies continues. with net profit reaching EUR 1.14 billion. As a result, the tangible book value per share increased to EUR 2.27, up 5% quarter-on-quarter, while the return on tangible book value exceeded 19% in the 9-month period. In more detail, net interest income increased further by 14.3% year-on-year, including the effect of Hellenic Bank. Fees increased by 12% year-on-year. Operating costs remained flat on an annual basis in Greece and up 1% only for the total group, excluding the effect of the Hellenic Bank consolidation. The cost-to-income ratio remains low at 33%. As a result, core pre-provision income was up by 14.6% year-on-year or 6.2%, excluding the Hellenic Bank effect.



Asset quality remained resilient for one more quarter. More specifically, the NPE ratio dropped below 3% at 2.9%, with coverage remaining at 90%. The cost-of-risk ratio was 68 basis points for the 9-month period. Core operating profit reached EUR 1.3 billion or up by 20.5% year-on-year. Net profits from our regional operations reached EUR 0.5 billion. Now on volumes for the 9-month period, we already discussed the loan volumes that were very strong. Equally strong were deposit volumes that increased by EUR 2.3 billion, while managed funds and private banking increased by EUR 1.4 billion and EUR 1.9 billion, respectively.



Our fully loaded CET1 ratio rose to 17.8%, while the total capital ratio to 20.9%, up by 100 and 140 basis points year-on-year, respectively. Now as our CFO will explain in detail, the bank is adopting an accelerated DTC amortization path 2025 onwards. In this context, we may consider increasing the payout ratio from 40% previously up to 50% payable in 2025 of the 2024 profits. At the same time, the bank maintains a significant capital buffer, which is used to fund asset growth, support higher payouts, and finance M&A opportunities in banking, insurance, and asset management.



To conclude, the bank remains on a solid growth trajectory, and the 9-month results allow us to further upgrade our full-year estimate for return on tangible book value from 16.5% to 17.5%. Going forward, our key objective is for a sustainable return on tangible book value of 15% through the cycle, even in a lower rate environment, taking into account the full benefits of the Hellenic Bank acquisition.



At this point, I would like to ask our CFO, Harris Kokologiannis, to present our 9-month results in detail before opening the Q&A session.

Thank you, Fokion. Before start, let me refer to the accounting treatment of Hellenic Bank. This quarter includes, for the first time, a line-by-line consolidation of Hellenic Bank's balance sheet and Q3 results. It also includes as income from associates, our share of Hellenic Bank's second-quarter profits. Let's now provide more insight into the 9-month results. Starting on Page 22 on lending growth. Including Hellenic Bank, our group gross loans amounted to EUR 50.4 billion. Organic growth accelerated in the third quarter, reaching EUR 1 billion and for the 9 months, EUR 2.1 billion, almost meeting our full-year target. The increase was mainly driven by large corporate, structured finance, and shipping in Greece and all sectors in Southeastern Europe.



For the full year 2024 and based on the current pipeline, organic growth is expected to be close to EUR 3.5 billion, which exceeds by more than EUR 1 billion, the initial target. On Page 23, group deposits, including Hellenic Bank, amounted to EUR 74.6 billion. Quarter-on-quarter, deposits increased organically by EUR 1.1 billion and year-to-date by EUR 2.3 billion, mainly due to retail sector in Greece and Southeastern Europe. Net loan-to-deposit ratio, reflecting Hellenic Bank's surplus liquidity rebased to 65.8%, while LCR ratio increased to 187%, as shown at the left of Page 24.



As regards managed funds on Page 26, in the third quarter, wealth sector continued its growth pace. Year-on-year, managed funds increased by EUR 1.7 billion or 34%. Private banking customers' assets and liabilities reached EUR 12.8 billion, increased by 20% year-on-year. Both KPIs have already exceeded the respective full-year targets.



Moving to profitability on Page 30. Year-on-year, NII is higher by 14.3% and excluding Hellenic Bank by 4.8%. Quarter-on-quarter, net interest income is higher by 24.4% to EUR 698 million due to Hellenic Bank consolidation and the higher loan and bond volumes, which offset the impact of the lower Euribor and the higher MREL and deposit costs.



Finally, net interest margin for the first 9 months of the year amounted to 281 basis points. For the full year 2024, NIM is expected to be at similar levels and almost 20 basis points higher than the budget target of 260 basis points.



Moving on fees on Page 31. Year-on-year, commissions are higher by 11.8% and excluding Hellenic Bank by 6.1%. As regards the quarterly reading, this is higher by EUR 21 million or 14.2% versus the previous one as it includes Hellenic Bank and the strong organic performance. Specifically on the latter, fees like-for-like were almost at par with the previous record-high mark, mainly driven by solid platform and wealth management activity.



Finally, as shown at the right part of the page, the fee-to-asset ratio gap between Greece and Southeastern Europe demonstrates the opportunity for fee revenue growth in the region.



On Page 32, operating costs are stable year-on-year in Greece as the discontinuance of resolution contribution and savings of Rande Bank costs offset the introduction of variable compensation and higher IT spending. On a group and like-for-like basis, costs are slightly higher year-on-year by 1%, as shown at the left part of the page. Furthermore, the consolidation of Hellenic Bank added EUR 62 million to our cost base. This translates to circa EUR 250 million to EUR 260 million annualized OpEx, which is the starting point for related synergies assessment.



Finally, on this page, cost to core income ratio for the 9 months amounted to 33.1%. On Page 34, we summarize operating performance for the 9 months of the year. Core PPI, including Hellenic Bank, reached EUR 1.53 billion and is higher year-on-year by 14.6% Loan loss provisions for the period amounted to EUR 229 million or 68 basis points compared to 84 basis points in the previous year. As a result, core operating profit amounted to EUR 1.3 billion, higher year-on-year by 20.5%.



Considering the 9-month figures and the current trends, we expect full-year 2024 core operating profit to exceed EUR 1.7 billion versus higher than EUR 1.6 billion in the previous guidance.



Moving on to asset quality on Page 36. NPE formation amounted to EUR 50 million, a reading similar to the previous quarters with asset quality dynamics broadly unchanged. NPE ratio decreased below the 3% threshold at 2.9%, while NPE coverage remained at the 90% area.



Moving on to capital and on Page 41. Our fully loaded CET1 ratio increased quarter-on-quarter by 160 basis points to 17.8% as a result of organic profitability and of a domestic credit rating agency upgrade by the competent European authority. Considering the year-to-date accrued dividend, CET1 ratio amounts to 16.9%.



As regards to total CA and on Page 42, our ratio for the third quarter amounted to 20.9% or 20.1% after dividend accrual. Finally, on regulatory capital, let me refer to the initiative of DTC prudential acceleration as shown on Page 43. As at September end, DTC to CET1 ratio amounted to 36%, the lowest among peers. According to the current linear amortization path, DTC was expected to be eliminated by 2041. Given our strong profitability in an effort to deal with the last legacy of the crisis and further improve our quality of capital, as of 2025, we will accelerate prudential amortization, adding on a DTC amount corresponding to the total payout amount of each year multiplied by the income tax rate. This way, DTC amortization is expected to accelerate materially and be eliminated circa 8 years earlier than the current trajectory.



The acceleration of DTC amortization is made for prudential purposes. It is expected to have an annual impact on regulatory capital between 15 to 20 basis points, but no effect in either the P&L or the tangible book value of the bank.



Before concluding my presentation, let me also update you that the group intends to proceed to a merger between Eurobank S.A. and Eurobank Holdings within 2025 in order to achieve operational efficiencies and a leaner group structure. It is anticipated that the merger to be launched formally later in the year will occur by Eurobank S.A. absorbing Eurobank Holdings. and will be subject to customary approvals. We do not expect this action to have any material effect on the group's financial position and results.



This completes my presentation, and we may now open the floor for your questions.

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

I have just a couple of questions, please. So first of all, on your upgraded guidance for this year with RoTE at 17.5%. Could you outline the individual components of this? And you mentioned Fokion, that now you see 15% normalized RoTE, and this is in line with the synergies that you'll get hopefully from Hellenic. How are your views for 2025, if I may ask? And I'm just trying to understand the timeline for the synergies and when we can expect to hear and see more on that front. And maybe secondly, just on the acceleration of your DTC balances, you mentioned you're increasing the payout to 50% for this year from 40%. Can I ask also, if not too early, what your views or what the implications of that would be on 2025 payout, so out of 2025 earnings? And how do you see buybacks currently in the overall payout strategy?

Thank you for your questions. Lots of questions. All of them are very interesting. Let me start from the synergies that you mentioned about Hellenic Bank. As I mentioned, we are preparing now the budget for 2025, including a new business plan for Hellenic Bank that is going to also take into account the synergies. As we do every year, we're going to present the guidance for 2025 early next year when we will announce also the full-year 2024 financial results.



But in terms of the synergies, let me give you a preview, a rough preview. Based on what we have calculated so far, we see an envelope of synergies of about EUR 120 million. coming from all lines of the income statement. More specifically, all other things being equal, NII should see a boost by increasing the loan portfolio, which currently is EUR 6 billion. Then in terms of fee and commission income, which is low in the case of Hellenic Bank, only 45 basis points in terms of assets. There is room both for organic increase, but also, you should take into account the effect from the consolidation of CNP insurance that will come early in 2025.



In the OpEx line, there is the opportunity for cost consolidation and rationalization and some cost synergies. Last but not least, we have also the potential reduction of MREL-related costs. On that last one, you may have seen that Hellenic Bank has already announced its intention to call the outstanding AT1-like securities, hopefully by year-end. This is an amount of securities of EUR 130 million with a 10% coupon that they carry. Now the envelope of synergies of EUR 120 million that I mentioned before, will be fully deployed over a period of roughly 3 years, so 2025 to '27. But already in 2025, we should be able to realize at least 1/3 of this envelope.



Now I move to your second question about the return on tangible book value. The previous guidance that we had provided was for a return on tangible book value higher than 16.5%. Based on the performance of the third quarter, we have upgraded this guidance to 17.5%. And the contribution comes from all different businesses. All businesses are performing better than the initial plan. The normalized return on tangible book value that we target at 15% assumes also the declining interest rate environment in which we are. And for the period of the next 3 years, 2025 to 2027, taking also into account the synergies that we're going to realize from Hellenic Bank and also the eventual increase of our participation from the current level to 100% should be able to allow us to deliver this 15%.



I move now to your last question about the payout. Harris explained in quite some detail how the new DTC plan is going to work. By applying this add-on to the DTC amortization formula, we should be able to bring the full elimination of DTC by the end of 2033. But already by 2030, DTC should become immaterial in our capital structure, given that it's going to drop below 10%. Now as a result of this, we said that we may consider the increase of the payout ratio from 40% that was the previous guidance to something up to 50% for 2025 out of the 2024 financial results. Now this is going to include both a cash dividend and a share buyback component. We have not decided yet about the split between the 2.



And your last point was whether it is too early to say anything about 2026 onwards. I'm afraid it is indeed too early to comment on that. We know that there are other banks in Europe that pay already payout ratios higher than 50%. So going forward, any increase of the payout ratio above 50% may be possible to the extent that excess capital is not used for growth opportunities of the bank, namely opportunities in the M&A area and also an accelerated organic loan growth.

Let me elaborate more on your first leg of the question as regards to the specifics of upgrade, guidance upgrade. I would say that the major driver on that front, it is NII. As I said before, the net interest margin is expected to be at the level of 280 basis points at this area, more or less, which is close to 20 basis points higher than the budget of 260. And the major driver of this positive outlook, it is, first, the deposit mix. As you may see -- the deposit mix and deposit beta. As you may see on Slide 23 of the presentation, it appears that up to now time to total reaching a kind of plus 33%. And especially this quarter, we have seen some slight decline in Greece to 32%. So deposit mix and deposit beta are moving better than our estimates. Loan growth is moving significantly better than our initial estimates. And overall, international in all lines is a better performance than our guidance.



So it appears that NII may be circa 15% year-on-year better versus an initial estimate of plus 7%. Beyond NII on fees and commissions, no change on our guidance. So we expect them close to 15% higher year-on-year. While on OpEx, despite the pressures, we may be able to achieve a low single-digit increase at the area of between 3% and 3.5% like-for-like, excluding the impact of BEP consolidation that was consolidated for just 1 half in 2023 and of course, Hellenic Bank. So these are able to -- and the cost of risk at the area of 70 basis points. This will mainly be to a core PPI with a 2 digit in front and the core profit of higher than EUR 1.7 billion.

The next question comes from the line of Butkov Mikhail with Goldman Sachs.

Maybe continuing on the NII topic. I have 2 questions there. One is to Eurobank stand-alone specifically. So looking at the year 2025 and accounting for the factors which you mentioned, including the time deposit mix and the lending growth, would you expect NII in that year to be higher net-net compared to your previous expectations, accounting for the lower rate environment and expectations currently? So do you see the picture net-net developing better for 2025 and '26 on NII for the Eurobank on a stand-alone basis?



And secondly, on the Hellenic, if we look on the development of its net interest margin in the last quarters and maybe years, there was a significant benefit, it seems from the rate hiking cycle. So on the way down, what contributions offsets maybe do you see there to protect the NII? And what level of contribution of Hellenic do you have in your NII and earnings guidance? Was it assumed to be flat or this assumption was for the balance sheet only?

Let me say very few words as regards to 2025. Why? Because we are still under the stage of budget preparation. So as every year, we are going to be very explicit as regards 2025 budget in our 2024 full-year results call. But I underline the drivers that you also mentioned. We cannot ignore the interest rate decrease that is going to have an impact on most probably the major impact on our NII and somewhat higher MREL cost. On the other side, we cannot ignore the fact of the very strong loan growth that it is expected at EUR 3.5 billion this year. And at the area of 6% to 7% overall next year. These are the preliminary outcomes that is coming from our budget. The stabilization or even some sort of start declining of the deposit beta and further growth on fees and commissions and a measurable increase of OpEx.



So overall, apart from the organic movement, of course, we are going to have Hellenic Bank for one more half compared to 2024. But for more details, let me be a bit reserved and wait until the full-year results call to provide you with full details of our NII projection.

And just one more question on this quarter results. There was a EUR 60 million positive contribution in the associate income on the Hellenic Bankside. May I just reconfirm what was that related to -- yes, if I look at that in the right way.

Yes. Up to the second quarter results, actually, we accounted for Hellenic Bank result of 1 quarter before. So what was missing was the second quarter of 2024. On top of that, since we are consolidated line by line Hellenic Bank, we also include the third quarter results. So this quarter included effectively 2 quarters profitability of Hellenic Bank, our share of 2 quarters' profitability actually.

The next question comes from the line of Ismailou Eleni with Axia Ventures.

Congratulations for this great set of results. I just have a couple of follow-up questions from my side on NII. My first one would be how and when do you plan to combine the hedging strategies of Eurobank and Hellenic Bank. And if there are any changes in the hedging strategy that you're planning to apply going forward? And if yes, what would the cost be? Another follow-up on NII is whether you could give us a little bit of color in terms of the pass-through levels you're expecting on lending and deposits as rates start falling. Any geographical color would be helpful.

On NII, what we provide, I think, is the most helpful input for analysts is the NII sensitivity. So we have included this time Hellenic Bank in our global NII sensitivity. This is updated as follows that for each 25 basis points rate movement, it is estimated at the area of EUR 42 million to EUR 45 million per annum. This includes, of course, the current level of our hedging. Now as regards the deposit beta, you may have seen on Page 29 that there is a stabilization of deposit beta, both in Greece and abroad. That is mainly due not only to the stop repricing time deposits but also to the transition -- substantial transition deceleration from core to time.



This trend is expected to continue and sometime in 2025, we may start seeing the opposite movement, but all this will be reflected in the 2025 budget as well.

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

A few follow-ups from me, please. Just staying on this Page 29 in the presentation. Can you comment on this 25 basis point decline in the Greek NIM? What drove that? And how you expect this to evolve if rates drop further? The other question I had was on your acquisition of this 8% I think it was 8% stake in Metra. Do you seek to increase your shareholding further here? And would you potentially consider gaining control of the company? And the last question will be, I'm not sure I heard you well. Were you referring to collapsing the operating company, holding company structure at the end of your presentation? I wasn't sure I heard it well. And if that's the case, can you talk about the rationale, please?

So the answer to your third question is correct. We intend to collapse the structure. This was created back to some years ago as a result of the crisis. And it's actually a legacy item. There is no reason to keep 2 cost structures and admin expenses. So this is now the time to execute something that will lead to a leaner organization. As regards to the net interest margin for Greece, this is lower by 15 basis points, not 25. This is mainly due to the Euribor effect actually that has offset the loan and bond growth and some carryover of higher deposit beta in the previous quarters as well as to the higher MREL cost.



Now on your question about Demetra, Demetra, as you may know, is a holding company. 77% of its assets are Hellenic Bank shares. Demetra owns about 21.3% of Hellenic Bank equity. Eurobank acquired the 8.5% of Demetra. That was a package deal with the union of bank employees in Cyprus, a package deal, meaning including both the shares of Hellenic Bank as well as the shares of Demetra. The ticket for Vimitra was around EUR 32 million consideration. And you could look at it as a sort of indirect economic interest of Eurobank to Hellenic Bank, roughly, if you make the math, this is almost 2% on top of the 69% that we own directly. 69% is the sum of 56% that we currently have plus the 13% that we are going to acquire.



So effectively, Demetra could be viewed as a derivative of Hellenic Bank shares. Whether we increase further our stake to Demetra or not, this is something that has not been considered yet. Take into account that Demetra is a very liquid stock in the Serbia stock market. And through the market, someone cannot really buy any material amount.

The next question comes from the line of Potgieter Stephan with UBS.

Just a quick follow-up on the DTC acceleration. Just to understand the add-on, would that be a constant number, or linear amortization based on 50% payout? Or are you seeing that as a variable as you pay out more, you just increase that amount?

The variable factor will be the payout amount. So depending on this payout evolution, actually will be the product of the payout multiplied by the corporate income tax rate will give us the DTC accelerated amount. So of course, there is variability, but it is the payout amount for each year.

The next question comes from the line of Garrido Luis with Bank of America.

A couple of credit questions from me, please. The first one, if you could update us on your expected path for the CET1 ratio for the next year or so? And how much senior debt you expect to have to issue next year, which I guess might be related to where you see your CET1 ratio landing next year? And the second question is on the merger of the Holdco with the OpCo. Can you tell us a bit more about why now and whether this was part of the discussions you had with regulators, maybe in the context of the DTC amortization? And if you could give us any sense of the cost savings that you think you can extract from that merger?

First of all, it has nothing to do with the discussion with the regulator of about DTC. It is one of the legacies that were inherited during the crisis period. So there is no reason to keep these 2 structures separate and will lead us to save more than EUR 1 million or EUR 2 million in terms of admin expenses, audit fees, and all this, but it has nothing to do with the DTC discussion.



As regards senior issuances, let me update you on our MREL, let's say, context in general. As we show on Page 25 of the presentation, as at 30th of September, the MREL ratio stood at 29% of RWAs, sufficiently higher than the final MREL target of 28%. So Eurobank has reached the final MREL target more than 1 year earlier than the deadline set by the SRB that used to be the 31st of December 2025. Now as regards new issuances, we successfully tapped the senior market in April with a EUR 650 million 7-year tenure senior preferred. In September, we issued our first green senior preferred bond of EUR 850 million with a 6-year tenor.



In terms of Tier 2, we may have a transaction early 2025 to compensate for the amortization of the existing Tier 2 instrument held by the Greek state. As Fokion said, Hellenic Bank has already initiated the regulatory process for calling its outstanding AT1 issuances. Now as regards the capital plan for next year, of course, you may appreciate that it is in the context of budget preparation. So this is something that we are going to present together with our full-year results at the end of February. Of course, the dynamics of capital plan will be a strong organic profitability, a strong organic growth that means also RWAs increase and the dividend payout. But apart from that, let me be more specific during the end of February results call.



As regards seeing our plan for 2025, this is again under assessment and will follow the capital plan and then the issuance that we have to make in order to maintain our MLA ratio at the necessary level.

The next question comes from the line of Memisoglu Osman with Ambrosia Capital.

One quick thing on Hellenic Bank. If I missed it, apologies. When do you expect to get to 100%? And regarding that business, your CET business as it has a low loan-to-deposit ratio. Could you give us a bit more color on how you're going to improve loan growth in that business? And linking that to your loan growth expectations for '25, you're the second bank in a row showing a very strong Q3 performance, guiding for a very strong Q4. How do you get comfortable about '25? Is there any risk of this being front-loaded? Is it more lower rates giving you comfort? You mentioned RRF as well. Is it being now disbursed more effectively or something else, some other segment? Any color would be very helpful.

Thank you for your questions. I will answer this, but I'm afraid this is going to be the last question that we're going to accept because there is a peer of ours that is going to follow with his investor call. So starting from the first question, when we expect to reach 100%. First of all, let me confirm that this is our objective to reach 100%. However, I'm sure you can appreciate that we cannot provide any sort of exact timing to that. At the moment, the decision is for the 2 banks to run as 2 separate entities. Given their business model, which is complementary, quite complementary, this is feasible. And despite the fact that we have not included in our plan any sort of immediate merger of the 2 entities, still we are able to start realizing synergies. So we follow the situation closely. And of course, we're going to update you when we have news for the rest.



Anyway, as we have announced earlier today, in early 2025, we're going to launch a second mandatory tender offer for the sales of Hellenic Bank. Your second question about the excess liquidity that exists with Hellenic Bank, given its EUR 15 billion of deposit base versus the EUR 6 billion of loans. The objective is to increase the loan portfolio. And for every EUR 1 billion of additional loans, all other things being equal, we can increase NII by roughly EUR 20 million. It is true that the opportunities in the local market are not unlimited because Cyprus is a small economy. However, there exist opportunities with the European loan syndicated market that we have already started exploring.



Your last question was about the outlook of loan growth in 2025. It is true that in 2024, we had a couple of large transactions that have boosted the credit expansion. Such transactions may not be the case for 2025. However, we remain quite upbeat because there are 2 factors that should be taken into account. One is the lower interest rate environment, that all other things being equal, should boost loan demand. And second, there is already a pipeline of RRF-related projects that we have already contracted. And the disbursement of these loans is in progress and a significant part of that is going to come during the course of 2025.



So in 2024, we may achieve a credit growth of around 9%. Most likely, we're going to be slightly lower in 2025, let's say, in the area of 7%, which is still a very solid number.

The next question comes from the line of Clavis Panagiotis with Alpha Finance Investment Services.

I'll try to be quick. Two questions. One on the lending spreads, what do you expect going forward given the lower rates? Second, since you have mentioned the excess capital and potential M&A opportunities, if you can give us a color on sectors or countries that you are interested?

Okay. Let me start from the second question. I will try to be quick. And again, we're not going to accept any more questions because we have to respect the call that is going to follow us. In terms of M&A opportunities, we look in 3 areas: banking insurance and asset management. We have already a track record in banking, both in Bulgaria as well in Cyprus. Also in insurance, we have done through Hellenic transactions in Cyprus. We keep looking for these opportunities mainly in our 3 core markets for banking and insurance. In terms of asset management, we may look also in other markets. In terms of the lending spreads, I'm passing to Harris.

Yes. As we have seen in the last quarter, we have started to see some sort of deceleration in the decrease of lending spreads. The major drivers of ups and downs, of course, is corporate that has the major part of new disbursement is affecting spreads trajectory. So we expect that in 2025, together with the decrease of interest rates, we should see a deceleration and some sort of stabilization at some time of lending spreads also.



So let me thank you all for participating in this call. We received a lot of interesting questions, and thank you for them. We're going to be at your disposal for any sort of follow-up, either our Investor Relations or our CFO and myself. Thank you very much. Have a good evening.