Letter to stakeholders

2023 was a milestone for our Bank. On the back of an outstanding set of financial results, coupled with significant progress in social initiatives and our sustainability commitments, we are able to duly reward our loyal shareholders with the first dividend distribution after 15 years. Amid a positive macroeconomic backdrop in all our core markets, the Bank delivered on its purpose and mission: to create value for all stakeholders, and to promote inclusive and sustainable growth, helping to bring prosperity in all the countries and communities we serve. This was not the fruit of one year’s work. The 2023 outcome was the culmination of a long and challenging journey. With the support of our shareholders, we became the first bank in Greece with a single-digit NPE ratio in 2021. Then, last year, we also were the first with no state participation in our share capital as we bought back the remaining 1.4% of our share capital from the HFSF. And finally, we reported the best set of organic results in the Group’s history, expanded our business, enhanced our social footprint through major CSR initiatives and, most significantly, moved forward with a strategic acquisition in Cyprus, which will contribute positively to our future results.

Eurobank is consolidating its position as a regional banking group. Greece remains our main market, but we keep building on our diversified earnings stream, which includes another two core markets: Cyprus and Bulgaria. We made optimal use of our excess capital to improve our position in both countries. In Cyprus, we are building a majority stake in Hellenic Bank. Hellenic Bank is a strong banking franchise, specialising in retail banking, and the country’s second largest bank in terms of assets, with a loyal clientele of households and SMEs. In this respect, it is fully complementary to our subsidiary, Eurobank Cyprus, the country’s leading business bank, which continues to produce strong results year after year. In Bulgaria, Postbank completed the acquisition of BNP Paribas Personal Finance, strengthening its position in the retail sector by adding more than 300,000 clients; and we look forward to reaping the benefits of the expected synergies and cross-selling opportunities. At the same time, we seized an opportunity and decided to exit the Serbian market, selling our 70% stake in Eurobank-Direktna to a local bank. The transaction was fully in line with our strategy to focus our efforts on markets where we have a systemic presence and to direct capital in areas with higher return prospects. Finally, Eurobank Private Bank Luxembourg increased its profitability, as it continues to serve our clients in one of Europe’s major financial hubs, also operating a branch in London. We continue to invest heavily in our regional operations, as we aim to provide top-level services to our clients in all geographies. A leap forward in this direction is our new core IT system. We chose Temenos, a global leader in banking technologies, and migration to the new systems was completed in Cyprus in 2023. Roll-out of Temenos in Eurobank Private Bank Luxembourg should be completed by 2025.

The macroeconomic outlook in all three core markets remains positive. The Greek economy expanded by 2% in 2023 and is expected to overperform the euro area over the next 3 years. With the general government balance posting a primary surplus of 1.9% of GDP, the gross public debt-to-GDP ratio, although still high, continued its downward trajectory, dropping to 161.9%, from 172.7% in 2022. The unemployment rate was also down to 11.1%, economic sentiment rebounded after a mid-year decline and the business environment improved significantly, with Greece gaining 16 places in the EIU rankings compared to 2019. On these trends, Greece achieved a milestone multi-year target of its economic policy, reclaiming investment grade status from 4 out of the 5 external rating agencies accepted by the Eurosystem. Cyprus and Bulgaria are also expected to record growth rates, higher than the eurozone average, in the next years. In Cyprus, real GDP growth stood at 2.5%, the 3rd best performance in the eurozone in 2023. Bulgaria decelerated to 1.8%, still markedly higher than the EU average of 0.4%; with euro adoption in sight, fiscal discipline remains. Disinflation proceeded fast in both countries.

For Greece, our strategic priority is organic growth. Eurobank is already playing a key role in financing the economy and we are well positioned to capitalise the extended upward cycle. As our economic research team has documented, restoring a level of investments in line with the rest of the eurozone remains essential to secure the resilience of the Greek economy. The availability of European funds is instrumental for keeping up the growth pace, with RRF grants and loan disbursements expected to peak in 2025. Eurobank has focused on funnelling RRF funds to the real economy and was the first bank to request the 6th tranche from the available pool. Overall, we have secured €1.3 billion in RRF funds, of which €1.16 billion have been earmarked for our customers, corresponding to €4.67 billion of total investment to the economy. We place particular emphasis on expanding our sustainable loan portfolio. Our target of having at least 20% of annual loan disbursements to corporates satisfying sustainability criteria was achieved in 2023. The total outstanding balance of our sustainability portfolio in our Corporate and Investment Banking division increased to €2.1 billion. Multiple energy transition projects were signed in 2023, including landmark transactions for the construction of some of the largest renewable energy projects in Europe, which will contribute to the accelerated decarbonization of Greece.

For yet another year, our shipping unit deserves a special note, as in 2023, it regained its top position in financing Greek-owned merchant shipping among all Greek lenders. With a total exposure of around USD 4 billion, Eurobank ranks 1st in Greece and 2nd globally in loans to the Greek shipping community.

In Retail Banking, Eurobank continued to strengthen its leading position, focusing on enhancing its product range and leveraging digital capabilities to meet the diverse needs of individuals and small businesses, always with a keen eye on customer experience. Our digital offering is continuously being upgraded, providing our clients with additional functionalities and seamless financial management tools. Alongside these technological strides, we have also bolstered our loan product offerings.

Notably, we continued to offer attractive alternatives to new mortgage lenders and maintained our leading position by holding the largest mortgage portfolio in the Greek market at €7.8 billion. Additionally, in the self-employed and small business landscape, we sustained our robust presence, actively supporting sectors that are longstanding pillars of the national economy and employment. In consumer credit, for another consecutive year, we successfully managed to maintain our leadership in new business, with consumer loan disbursements increasing by 20% compared to 2022, constantly focusing on tailor-made offerings that meet our clients’ targeted needs.

The launch of a new investment platform has significantly facilitated the management of mutual funds, allowing our clients to engage in investment opportunities directly through various distribution channels, including e-Banking. Complementing our financial offerings, we introduced a personalised insurance planning tool, in collaboration with Eurolife FFH Insurance, which guides customers to choose suitable products. These initiatives underscore Eurobank's commitment to lead the retail banking landscape by seamlessly blending innovative solutions with personalised services, aligning with our customers' experience expectations.

The Group’s financial results in 2023 exceeded our targets across all the lines. As interest rates remained at a high level throughout the year and the macroeconomic environment in our core markets proved more resilient than the rest of the eurozone, we were able to reap the fruits of our proven business model. Core operating profit leaped almost by 70%, to €1.471 billion from €869 million in 2022, mainly on a 46.9% year-on-year increase in net interest income. Net profit was €1.25 billion, with international activities contributing €468 million.

Earnings per share reached €0.31 and the return on tangible book value came well above our initial expectations at 18.1%. Also, better than expected was the decline in NPE ratio to 3.5%, a post-crisis low, covered with provisions at a rate of 86.4%. The total stock of NPEs is €1.5 billion and just €200 million after provisions. Sustained and rising profitability has further strengthened our capital base. Total capital adequacy ratio exceeded 20% and core equity ratio rose to 17%, well above the regulatory requirement of 12.2% (for 2024). Tangible book value per share climbed to €2.07, a 21.1% annual increase.

The Stress Test conducted by the EBA in cooperation with the ECB and the ESRB in 2023 confirmed our robust financial position, with materially improved results and resilience under the adverse scenario, compared to the previous 2021 exercise.

As outlined in our business plan for 2024-2026, our target return on TBV is 15% at the beginning and 13% at the end of the period. We expect core operating profit to remain above €1.5 billion a year and NPE ratio to decrease further to 3%, with a CET1 ratio north of 17%.

We are delighted to report that on the back of these results, and our previous strategic initiatives, we are able to distribute dividends to our shareholders from the 2023 results. The payout ratio is 30% and dividend per share is 9.33 cents of the euro. This is the first dividend distribution since 2008 – and a truly well-deserved one. The green light from the relative supervisory authority, the ECB/SSM, for a dividend in line with our submitted request is yet another sign of the Greek banking system operating in full normal mode. For the following years, we are looking forward to the payout ratio gradually reaching 50% of the year’s net profit in 2026.

We are pushing forward with our “Eurobank 2030” Transformation Programme, preparing the Bank for future challenges. Technology is a key enabler, but we remain convinced that our most valuable asset is our highly trained, experienced and loyal staff. We are investing in the People-Technology-Sustainability three-fold, leading to an operating model aiming to offer top-notch services to our clients by leveraging tech tools, to allow our people to develop their full potential and offer personalised, fast and reliable services to our customers.

As we transform and future-proof our Bank, sustainability is at the core of our business strategy and our operational modus, reflecting its importance for the long-term viability of the economy, its central position in our society’s value sets and its relevance to all aspects of our lives – and those of the next generations. On this basis, Eurobank has made specific commitments and has set a path towards a Net Zero 2050 for both our operations and our portfolio. 2023 was the first year in which our Sustainability Strategy was deployed, across 2 pillars of impact: financed and operational, whereas the Group recently joined the Net Zero Banking Alliance (NZBA).

Integration of sustainability into risk is key and we aligned our risk appetite with the Sustainability Strategy as it was rolled out. We published our first TCFD Climate-related and Environmental Risk Report and we also proceeded with the disclosure of GHG financed emissions for loan, bond and share positions.

We believe in setting tangible and measurable targets in our sustainability journey, rather than making vague statements. We had set ambitious but pragmatic targets for our loan portfolio, and we achieved major milestones, reaching the target of 20% of new corporate disbursements classified as green/environmental, and a two-fold increase in loans to households and SMEs against a target of 100%.

It is also worth mentioning that this year, we moved into new headquarters, a landmark building that transpires green throughout. The central Athens building was renovated by Grivalia on specifications for LEED Gold certification. Being operational, it supports our related Net Zero objectives, the GHG emission reduction targets and the promotion of circular economy practices. The latter found a great application in “Just Go Zero”, a new recycling programme for the Nea Ionia complex and the Central Warehouse. At both sites, we have installed PV production infrastructure that will contribute to our 2024 reporting, as will the new policy for hybrid/electric vehicles in the corporate fleet. This effort bears fruit, as we considerably improved our score in all major sustainability ratings (Sustainalytics, MSCI, S&P and CDP), gaining recognition as “The Best Bank for Sustainable Finance in Greece for 2024” from the reputable Global Finance magazine.

Eurobank’s mission goes well beyond its financial aspect. We aim to contribute to economic growth, but also to enable an inclusive and sustainable economic model, one that champions innovation, supports communities and generates widespread prosperity. To this end, Eurobank continuously strives to incorporate environmental and social sustainability criteria into the full array of its activities. The Bank has committed to contributing to the achievement of the UN Sustainable Development Goals (SDGs) and the UN 2030 Agenda, as a signatory to the UN Global Compact since 2008, by actively promoting its fundamental principles and applying the precautionary approach.

Our employees’ prosperity, personal and professional, has always been a matter of extreme focus and attention for us. We listen to and support our people, consistently, diligently and without bias, a finding that came through clearly during the last “WeSay2023” employee survey, whereby participation exceeded 80%. We launched “MyProsperity”, an all-around support framework aiming to assist employees in striking a balance between their professional and personal life. Through live and interactive talks by expert professionals, volunteer initiatives, with over 3,000 employees participating, support call centres and dedicated training on financial literacy, we support our people’s prosperity with actions. We introduced the “We Think Innovatively, We Work Alternatively” culture initiative, through which we envisage changing the way we communicate and conduct our everyday business, adding value to our time and laying the groundwork for an engaging and insightful work environment. We are building a holistic approach with regard to our people’s development and growth: over 80% of our employees have been trained in modern, state-of-the-art digital applications as well as in sustainability-related topics. For a second consecutive year, the Bank ran the “Women in Banking” mentoring initiative internally, while at the same time, it supported the “The Boardroom”, an organisation aiming to empower women executives in claiming seats as members of non-executive boards within corporations.

Eurobank contributes over €10 million annually for the support and wellbeing of its employees and their families through medical and pension plans, special allowances and entitled time-off.

In 2023, a year with record-high inflation, Eurobank was the only financial institution that decided to bring forward, by a year, the 3rd statutory base salary increase of the banking sector collective agreement, while at the same time, it distributed targeted financial aid to the more compromised employee groups in the organisation. Our hires for the year were equally divided on a gender basis. We operate transparently, fostering inclusion and equity, applying international policies and adopting modern models of work.

We create value for all stakeholders, first of all through our banking operations, but we also return value to society via an extensive Corporate Social Responsibility programme. Our social footprint has been enhanced significantly over the last few years. We make long-term commitments and we run some of the longest-standing CSR initiatives in Greece, focusing on supporting the younger generations in various ways, under the “moving forward” motto.

In 2021, we launched an ambitious initiative to raise awareness on the importance of the demographic challenge in Greece. It has become a point of reference for the involvement of the private sector, given that it is an issue that is widely recognised as the paramount challenge for the country in the long term and is also constantly rising in the public opinion polls on current issues of concern. We continue and expand our initiative for the demographic challenge, with particular reference to the border regions of eastern Greece and the Aegean, building partnerships with several NGOs and social institutions. 2023 saw 20 babies being born by IVF through our cooperation with the dedicated BeLive NGO. We are inspired and encouraged to see other Greek businesses recently undertaking initiatives in the same direction.

Our “Moving Education Forward” initiative has been running for 21 consecutive years, rewarding academic excellence in secondary education and success in entering higher education in every Greek school. For 2022-2023, 1,035 top graduates won the award, while the initiative is entering a new and exciting phase, expanding into university fellowships and offering the first private-sector-funded postgraduate programme.

We support entrepreneurship – in all its phases and forms. Since 2016, we have partnered with Grant Thornton for what is now the widely known entrepreneurial excellence recognition, the Growth Awards, which have been awarded to a total 44 of Greece’s most robust and innovative companies so far. Young and innovative entrepreneurs have been finding support since 2013 at egg – enter grow go. Eurobank’s pioneering incubator, in partnership with Corallia, saw 36 startups being created and another 29 becoming businesses in 2023. The Bank has invested a total €12 million in the egg accelerator.

Beyond many other CSR actions, including several on financial literacy and inclusion (a full list is available on the Eurobank Holdings website), Eurobank also participates in wider sector initiatives, whenever special circumstances arise. We did so during the pandemic, supporting the NHS, and we contributed an equal part to the €50 million donation by the 4 Greek systemic banks following the devastating wildfires and flooding in Thessalia in the summer of 2023.

Our social footprint is ever enhancing, and we are keen on continuing and expanding our initiatives. Our vision is to be a leading bank in the region where we operate and a model for the sector in all our geographies. We see Eurobank as a catalyst of prosperity, through inclusive economic growth for our customers, for our employees, for our shareholders and, most importantly, for society at large, as we move forward with those we serve, by financing households and businesses for their own future plans, offering innovative banking solutions and enabling viable financial projects to become reality, adding value for all. Our 2023 results prove that we have the people, the plan and the motivation to make good on this promise. PROSPERITY NEEDS PIONEERS.