Letter to stakeholders

2022 was a year of major developments in the international economic and geopolitical environment. It was also a year when Eurobank had the opportunity to fully deploy its business model, effectively responding to challenges, achieving outstanding financial performance, meeting all the goals it had set, and laying the foundation for achieving its main objective: to promote sustainable prosperity in the countries where it operates and create value for its clients, employees, shareholders and society at large.

The major changes in the economic environment stemming from the Russian invasion of Ukraine, the consequent escalation of supply chain disruption, and the intensification of persistent inflationary pressures, initially triggered by the pandemic and relatively flexible monetary and fiscal policies. The central banks responded with successive interest rate hikes, at the fastest pace in 40 years, which in turn contributed to the slowdown in the global economy. Nevertheless, in Greece and the other key markets of the Eurobank Group, economic activity remained relatively robust, as is expected to continue to be the case in the coming years.

Our main business priority is to make good on our pledge that Eurobank is the Bank for Development. Especially when it comes to the Greek economy, after a rapid recovery from the pandemic, it has entered a growth cycle. The growth rate reached 5.9% in 2022, significantly higher than the eurozone average (3.5%). The quality traits of the Greek economy’s growth potential are equally important, as it is not only supported by the performance of traditional sectors, such as tourism, but also by the enhanced exports of goods and the inflow of investment capital, both domestic and direct foreign investments. The first signs of investment have emerged in sectors where Greece traditionally lagged behind, such as manufacturing and advanced technology. In terms of prospects, high growth rates are directly linked to the level of investment activity. Eurobank has published a special study quantifying the impact of investments on 5 specific sectors (Infrastructure and Real Estate, Energy and Green Transition, Telecommunications and Digital Upgrade, Tourism and Manufacturing) on economic development and employment.

Eurobank had a distinct contribution to growth, through strong credit expansion. The performing loan portfolio increased by 3.3 billion euros, primarily stemming from the business loan portfolio expansion, with loans extended to businesses of all sizes, large and SMEs, as our customers, through the Bank’s financial and advisory support, took advantage of the strong post-pandemic recovery opportunities. More than 20% of business loans disbursed met sustainability criteria, exceeding relevant targets set.

The funds provided by the Recovery and Resilience Facility (RRF) are the cornerstone of investment activity, representing a main contributor to the regeneration of the Greek economy. Eurobank champions the Hellenic Republic’s choice to entrust the approval process to banks and advisory firms, supporting businesses to access the earmarked capital and implement investments that promote green transition, digital transformation, innovation, economies of scale and extroversion. Eurobank is setting the pace in applying for its share of RRF funds and in swiftly channelling them to the market. In this context, we place particular emphasis on financing projects with green tagging, such as those related to energy transition, a strategic priority sector for the Bank. Overall, in 2022 Eurobank signed contracts for over 300 million euros in RRF loans, corresponding to investments exceeding 1 billion euros.

Amongst several notable achievements, special reference should be made to our performance in Shipping Finance. With a portfolio exceeding 3 billion US dollars in 2022, Eurobank was one of the leading banks globally in financing Greek-owned merchant marine.

Eurobank maintains and strengthens its strong presence in retail banking. In the mortgage loans market, which we brought back to the forefront as early as 2019 by introducing for the first time fixed-rate loans for the entire term of the loan, Eurobank holds the largest portfolio in the Greek market. The same applies to loans to self-employed and to small businesses, where the majority of businesses in Greece belong. For this client category, we have created loan products that provide liquidity even on an unsecured basis.

2022 was an exceptional year for consumer credit as we upgraded customer experience and our digital offering, securing the highest market share in consumer loans in the Greek market. In Bancassurance (life insurance), we hold the largest portfolio in Greece, in collaboration with our long-standing partner, Eurolife Insurance.

Our innovative service model through next-generation branches resonated well among our customers. These branches provide a top-notch customer experience in an environment of the highest standards, focusing on advisory services and taking advantage of modern technological solutions. 10 Future Branches are already operating, not just in Athens and Thessaloniki, but also in regional centres, such as in Chalkidiki and Alexandroupoli.

Within a positive economic environment, Eurobank overperformed on its profitability, capital adequacy and asset quality targets, while further improving its liquidity position. Central bank interest hikes led interest rates back to positive territory, favouring the Bank’s revenue and offsetting the higher cost of borrowing in capital markets. The capital adequacy ratio increased organically by around 300 basis points, while the non-performing exposure (NPE) ratio continued to drop, reaching 5.2%.

International operations remain a fundamental competitive edge for Eurobank. Driven by this, we aim to further strengthen our presence in the main markets of Cyprus and Bulgaria, while also restructuring and reinforcing our Private Banking operations, including our subsidiary in Luxembourg and its branch in London. In Cyprus, Eurobank Cyprus keeps growing organically and is the most robust and dynamic bank in the country. Additionally, taking advantage of a market opportunity, we increased our stake in Hellenic Bank, the second-largest bank in Cyprus, to 29%. In Bulgaria, we successfully celebrated the 30-year anniversary of Postbank, while also agreed to acquire the local retail operations of BNP Paribas, adding 400 million euros in loans to our portfolio and complementing our existing operations. Both the Cypriot and Bulgarian economies present positive economic prospects, as evidenced by the robust growth rates (5.6% and 3.4%, respectively) recorded in 2022.

Overall, international operations contribute approximately one third to the Group’s positive results. We keep investing in upgrading them, particularly in the field of technology, most recently with the installation of a new core banking system (TEMENOS) in Cyprus, which will also be introduced to Luxembourg.

Based on the 2022 results, we set a target for the return on equity to reach 12-13% over a three-year period. This target has already been revised upwards. After fortifying the Bank’s balance sheet and confirming the sustainability and recurring profitability of our business model, we have made the reward of our shareholders – who have supported our recovery, restructuring and growth over the years – our central goal. In 2022, we initiated the necessary dialogue with the supervisory authorities to secure their agreement before submitting an offer to the Hellenic Financial Stability Fund (HFSF) for the acquisition of their stake (1.4%) in the Bank. Our efforts bore fruit, as we received regulatory approval in the first half of 2023.

Eurobank’s mission is not only to contribute to economic growth, but to also enable a sustainable economy that promotes and generates societal prosperity. To this end, Eurobank continuously strives to incorporate environmental and social sustainability criteria into its activities. The Bank has committed to contributing to the achievement of the United Nations Sustainable Development Goals (SDGs) and the UN 2030 Agenda, as a signatory to the UN Global Compact since 2008, and by actively promoting its fundamental principles and applying the precautionary approach.

In this context, in 2022 the Group prepared a new holistic sustainability strategy, the implementation of which has already started. This strategy is based on two main pillars. Firstly, the Operational Impact Strategy, which concerns the Bank’s own operations and activities and includes three strategic axes – Environmental Impact, Social and Business Impact, and Employer Impact – with specific measurable targets and time commitments. Secondly, the Financed Impact Strategy, which involves on the one hand the Bank’s investment choices and on the other hand actions and initiatives related to extending customer financing and working with them in meeting environmental goals, addressing climate change, thus jointly contributing to the creation of a sustainable economic environment.

As already mentioned, more than 20% of the annual new disbursements to businesses met the environmental sustainability criteria. Eurobank continues to finance all its customers, while fully supporting their green transition plans.

In this context, we have incorporated sustainability risk assessment into our credit policy. To this end, we have developed special tools for assessing both our portfolio and our customers, classifying them into corresponding risk categories. Sustainability assessment is applied to the entire business portfolio and includes classification into risk levels as provided by the supervisory framework, through the use of a tailormade questionnaire. The second tool we developed involves the assessment of loan applications submitted to the Bank based on sustainability criteria. This allows us to provide optimal advice to clients to choose environmentally sustainable financing, while limiting the scope of false or misleading sustainability claims (greenwashing), resulting in a more accurate recording of actual environmental risks. Using the same methodology, we design retail banking products, promoting and offering our customers financing solutions with a positive environmental impact (such as green mortgage loans, loans under the “Energy Saving” (Exoikonomo) programme, and loans for the installation of net-metering systems to offset energy consumption through RES).

On a social level, in 2022 we expanded our Corporate Social Responsibility programme, actively engaging in various areas, but mainly focusing on supporting the younger generation and its prospects. The Bank’s flagship initiative to raise awareness on the demographic issue as a major national priority for Greece has received widespread social acclaim and recognition. We keep expanding the scope of the initiative and accelerating the relevant actions. In the reporting year, we developed and started implementing a pioneering plan to relocate permanent job positions from Athens to regional Greece. The initiative was successfully launched in the border area of Evros to a welcoming local community, with all stakeholders and representatives present at the event we organised. We are continuously working on this initiative, preparing to launch in other areas, where we believe it will have the maximum positive impact.

Eurobank has been and remains a pioneer in introducing inclusive economy institutions in Greece. We aim to facilitate groups with limited access to conventional banking financing, such as young and women entrepreneurs, to be integrated in economic activity. To this end, since 2014 we have been working with the Action Finance Initiative (AFI), founded by ActionAid Hellas and the French ADIE, a European leader in microfinance. In this context, we provide loans under the EU Programme for Employment and Social Innovation (EaSI) guarantee scheme.

At the same time, we continue to run and adapt the longest-running CSR initiative in Greece, Moving Education Forward. Completing 20 years of continuing contribution, it highlights the role of education and excellence in personal progress and social welfare. Over 20,000 top students across Greece have been awarded so far through the initiative which is carried out with the support of the Ministry of Education, Religious and Athletic Affairs. In the area of Education, we also support the scholarship programme of the Center for Talented Youth (CTY Greece), created by Anatolia College in collaboration with Johns Hopkins University. This programme gives students with exceptional academic skills the opportunity to participate in tailored educational activities with innovative teaching methods.

10 years after its launch, the egg – enter grow go business accelerator has evolved into one of the most active and recognisable hubs for innovative entrepreneurship in Greece. Eurobank has invested over 12 million euros in egg, supporting more than 1,100 young entrepreneurs, over 300 startups and 170 companies, many of which have already expanded their activities by raising capital through venture capital funds and angel investors. In the largest deal to date, Augmenta, a company incubated at egg and specialising in agricultural technology, was acquired by CNH Industrial, one of the global leaders in the sector, at a $110 million valuation.

Through the Group’s CSR initiatives, Eurobank is present whenever extraordinary conditions and needs arise. It carries out a wide range of initiatives for health, following up on pandemic-era actions, such as the renovation of the Special Respiratory Infection Unit, Sotiria Hospital. Other actions concentrate on the natural environment, as in Ancient Olympia, in the aftermath of the devastating wildfires, where we focus on supporting local producers and raising awareness, particularly among young people, on environmental prevention and protection. In the same region, a group of volunteer employees participated in a series of activities, such as tree planting, food drives and more.

We owe all this mainly to the quality and professionalism of our restless employees. That’s why we never tire of repeating that Eurobank is its people. Continuously improving the work environment is a priority. In this context, Eurobank was the first Greek bank – and one of the first companies in the country – to formally establish the hybrid work model, first tried during the pandemic. Our staff greatly responded to the option of remote working, which contributes to work-life balance, along with the right to disconnect from online applications, which was also put in place.

Eurobank traditionally invests in the continuous training of its personnel, focusing on the new digital era and the acquisition of next-generation skills, as evidenced in special sustainability training scheme. In 2022 our employees spent an average of 11 working days in educational activities, a record number for the organisation.

In 2022 we introduced two new policies that form the foundation for a healthy, diverse, fair and inclusive work environment. The Policy on Diversity, Equity and Inclusion (DEI) reflects our commitment to equal treatment and against any form of discrimination within the organisation. The Policy against Violence and Harassment in the Workplace includes, in addition to general principles, specific guidelines for preventing and addressing all forms of verbal or physical abuse.

Furthermore, Eurobank actively promotes the ascent of women to senior corporate positions, today and in the future. This is reflected in the Sustainability Strategy, which incorporates long-term goals for inclusion and diversity up to 2030. To this end, in 2022, 130 of our female officers participated in the mentoring actions of the Women in Banking initiative, while the Bank supports the presence of “the Boardroom” organisation in Greece, which aims to enable women to serve as companies’ Board Directors.

Dear shareholders and social partners,

After years of hard work, thanks to the unwavering support of our shareholders, the trust of an ever-expanding customer base and the continuous efforts of our employees, Eurobank has evolved into a strong banking group in our geographic region, with very positive prospects. We have ample capital and liquidity, a multifaceted long-term plan and outstanding human capital, allowing us to focus on expanding our business and making the most of all the opportunities for further growth. We remain firm to our fundamental values, to fulfil the Bank’s purpose, which is also our commitment: to support the pioneers of sustainable and socially inclusive growth, which promotes long-term prosperity, free from discrimination, in the countries and societies where we operate.