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Eurobank growing into a regional powerhouse — Cyprus central to its plans

eurobank omirou
Eurobank Headquarters, Athens

Eurobank has surpassed initial expectations with its financial results for the year 2023, setting the stage for a robust business plan spanning 2024 to 2026, with the aim of positioning the group as a regional banking powerhouse.

In addition, the bank’s forward-looking vision focuses on bolstering its regional footprint. In this context, there is particular attention on the bank’s thriving presence in Cyprus, which is expected to deepen in the coming years.

It should be noted that the bank’s board of directors will be meeting in Cyprus on March 20-22, a reflection of the island’s growing importance to the bank’s plans going forward.

 

Eurobank’s strong performance for 2023 and the plan for 2024-2026

The 2023 financial highlights include a per-share net profit of €0.31, exceeding projections, and a return on equity of 18.1 per cent.

The earnings per share of common stock increased by an impressive 21.1 per cent compared to 2022, reaching €2.07.

A significant portion, 37 per cent, of net profits was derived from international activities, reflecting the bank’s strong international presence.

Capital adequacy metrics demonstrated Eurobank’s robust financial position, with a Capital Adequacy Ratio (CAD) of 20.2 per cent and a Common Equity Tier 1 (CET1) ratio of 17 per cent.

Non-performing exposures (NPEs) were kept at a low 3.5 per cent, while the coverage ratio for non-performing loans reached 86.4 per cent.

The bank showcased resilience in its lending activities, with a loans-to-deposits ratio of 72.3 per cent, and a liquidity coverage ratio of 178.6 per cent, indicating strong financial stability.

Fokion Karavias. Chief Executive Officer (CEO), Eurobank Holdings.
Fokion Karavias. Chief Executive Officer (CEO), Eurobank Holdings.

Looking forward, Eurobank unveiled an ambitious business plan for 2024-2026, focusing on achieving high returns in a lower-interest-rate environment.

The plan involves further strengthening the bank’s position through the integration of Hellenic Bank in Cyprus, expanding its presence in the broader region, and diversifying revenue streams.

According to the bank’s statements, approximately 50 per cent of profits are expected to come from international operations, demonstrating the bank’s commitment to a global strategy.

The business plan also focuses on creating value for shareholders, targeting a capital return of approximately 15 per cent on a recurring basis and a gradual increase in the dividend payout ratio to nearly 50 per cent by 2026.

Eurobank’s impressive financial results for 2023 and its forward-looking business strategy position the institution as a key player in the ever-evolving financial landscape, showcasing adaptability and resilience in challenging economic environments.

The bank reported that net interest income increased by an impressive 46.9 per cent compared to 2022, reaching €2.17 billion. This surge was primarily driven by revenues from loans, bonds, derivatives, and international activities, resulting in a net interest margin improvement to 2.75 per cent.

Fee and commission income saw a growth of 4.2 per cent in 2023, totalling €544 million.

Contributing factors include income from loans, accounting for 69 basis points on total assets.

Organic revenues experienced a substantial 35.8 per cent increase on an annual basis, reaching €2.71 billion. Total revenues also rose by 3.2 per cent to €2.803 billion in 2023.

Operating expenses increased by 5.2 per cent compared to 2022, reaching €902 million, driven by international activities, inflationary pressures, and technology-related investments.

The cost-to-income ratio improved to 33.2 per cent in 2023, from 42.8 per cent in 2022, with the cost-to-income ratio standing at 32.2 per cent.

Organic pre-provision operating income increased by 58.6 per cent annually, totalling €1.816 billion.

Moreover, total pre-provision income rose by 2.3 per cent to €1.902 billion compared to 2022.

Provisions for impaired loans increased by 24.7 per cent compared to 2022, reaching €345 million, corresponding to 85 basis points on average loans.

Organic pre-tax operating profits surged by 69.4 per cent in 2023, totalling €1.47 billion.

Adjusted pre-tax profits amounted to €1.55 billion, with adjusted net profits increasing by 6.6 per cent to €1.256 billion.

In addition, earnings per share stood at €0.31, and the return on equity reached 18.1 per cent in 2023, while total net profits amounted to €1.14 billion, compared to €1.347 billion in 2022.

Eurobank’s results also showed the bank has been profitable in its international activities with adjusted net profits increasing to €468 million in 2023, compared to €211 million in 2022.

These operations accounted for 37.3 per cent of the group’s overall profitability.

Operational performance in Cyprus and Bulgaria showed substantial improvement, with adjusted net profits of €258 million and €189 million, respectively.

“Eurobank reflects on a remarkable year in 2023, on the back of a combination of higher interest rates and favourable conditions in the countries where it operates. The bank surpassed all set goals and implemented significant strategic actions, aiming to further strengthen its presence in the broader region,” CEO Fokion Karavias stated.

Karavias explained that the macroeconomic environment remains favourable in Greece, Cyprus, and Bulgaria, with growth rates significantly outpacing the Eurozone average.

eurobank spyrou kyprianou 04b Eurobank Cyprus
Eurobank Cyprus

Greece’s growth is predominantly fueled by investments and financing projects from the Recovery and Resilience Fund, offering the potential for further credit expansion.

He noted that “Eurobank is well-positioned to leverage market conditions and support the high growth rates of the Greek economy”.

Moreover, he stated that “organic growth in Greece and the reinforcement of the bank’s regional presence form essential pillars of its strategic planning”.

“In this context, Eurobank acquired a majority stake in Hellenic Bank and completed the acquisition of BNP Paribas Personal Finance in Bulgaria,” he added.

What is more, Karavias said that the bank’s performance, business model, and strategic planning provide confidence that Eurobank will continue to deliver strong results, noting that “the 2024 target is a 15 per cent return on equity”.

“The achievements of 2023 and the prospects for the next three years set the conditions for dividend distribution, starting with a minimum of 25 per cent of profits for this year, gradually increasing in the following years,” the CEO stated.

 

Eurobank’s growing regional presence and the role of Cyprus

Stavros Ioannou, Deputy Chief Executive Officer (CEO) and group Chief Operating Officer (COO), has explained that “by developing a diversified business model with transparent corporate governance rules and a robust capital base, where a central role is played by a human-centric and customer-oriented approach, Eurobank stands as a modern European bank synonymous with dynamic growth”.

1.Φωτογραφία Στ. Ιωάννου
Stavros Ioannou, Deputy Chief Executive Officer (CEO) and group Chief Operating Officer (COO)

“It is the only systemic Greek bank with a significant international presence and the first to initiate the disinvestment of the Financial Stability Fund, proving that its resilient developmental outlook is built on solid foundations,” he added.

Furthermore, he said that Eurobank’s strong presence in its regional markets, contributing approximately 37 per cent to its profitability in 2023, “stems from the bank’s visionary strategy systematically implemented to enhance its regional role”.

He added that it “is also a consequence of the continuous improvement of its digital and technological infrastructure, driven by investments in cutting-edge technologies exceeding €200 million over the last 3 years”.

“Aligned with its commitment to external orientation and growth, Eurobank implements targeted initiatives to further strengthen its presence in the main markets where it operates,” he stated.

“These initiatives”, he continued, “include efforts to enhance the group’s presence in Bulgaria and Cyprus, with the latter expected to play a central role as a European gateway for businesses from the Middle East and India”.

Meanwhile, in his own statements, Michalis Louis, CEO of Eurobank Cyprus, recalled that Eurobank Cyprus began its operations in the Cypriot market in 2007 and today stands as the third-largest bank on the island.

He explained that “it is distinguished for its reliability, customer-centric approach, high-level services, and well-trained, experienced human resources”.

“Our business model sets us apart from our competitors, offering specialised solutions based on the needs of our clients,” he said, noting that the bank operates in five core business pillars, namely Corporate Banking, Wealth Management, International Business Banking, Global Markets, and Affluent Banking.

2.Φωτογραφία Μ. Λούη
Michalis Louis, Eurobank Cyprus CEO

“Our goal is to remain the bank of choice in the areas where we operate and continue our upward trajectory,” Louis stated.

Additionally, he explained that the financial results of 2023 “highlight the bank’s dynamism, with increased profitability, strengthened capital adequacy, and good loan portfolio quality”.

“At Eurobank Cyprus, we take pride in our successful journey, allowing us to raise the bar even higher,” Louis said.

“Our commitment is to continue financing the Cypriot economy, strengthen entrepreneurship, promote sustainable development, and enhance Cyprus’ position as a significant regional service centre,” he added.

“At the same time”, he continued, “we will continue to be responsible citizens, supporting actions and initiatives that make our society more progressive and humane”.

Meanwhile, in a meeting with Cypriot media in Athens, which took place earlier this week, CEO Fokion Karavias provided some comments on the group’s growing presence in Cyprus, albeit pending regulatory approval.

He said that “Hellenic Bank has many great members of staff and we want to work with them and utilise them”.

Furthermore, he noted that at the present stage, the two banks, Hellenic Bank and Eurobank, will continue to operate separately, until the right conditions are met for their merger.

In addition, he noted that “Eurobank has no intention of using Hellenic Bank’s excess liquidity elsewhere in the group because there is no need to do so”.

He also explained that the group would only use that liquidity to fund projects related to Cyprus, including, for example, energy sector initiatives.

What is more, he explained that Eurobank believes in the potential of the Cypriot economy, saying that “Cyprus can act as a point of entry into the European Union for Indian businesses, while it can also become a base from which to target the Middle East”.

Karavias also outlined a number of benefits that Cyprus offers, including its proximity to the above markets, the fact that its judicial system is based on English common law, the double tax treaties currently in place, as well as supervision by the ECB, something which foreign investors view in a positive light.

 

Greece and India’s blossoming relationship

Elsewhere, in a move towards redefining cross-border payments, NPCI International Payments Limited (NIPL), a subsidiary of the National Payments Corporation of India (NPCI), and Eurobank S.A., officially inked a Memorandum of Understanding (MoU).

The signing ceremony, held at the Embassy of Greece in New Delhi, marked a significant step in forming a strategic alliance focused on enhancing international money transfers, particularly streamlining remittances from Greece to India.

Ritesh Shukla, CEO of NIPL, and Eurobank CEO Fokion Karavias sealed the MoU in the presence of distinguished guests, including Kostas Fragogiannis, Deputy Minister of Foreign Affairs of Greece, Maira Myrogianni, Secretary General for International Economic Affairs of Greece and Chairperson, Enterprise Greece, and Sanjay Tugnait, President and CEO of Fairfax Digital Services.

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Left to right: Fokion Karavias, Sanjay Tugnait, Ritesh Shukla, (back) Kostas Fragogiannis, Maira Myrogianni

According to a joint statement, this agreement lays the groundwork for a strategic collaboration, positioning both entities as key intermediaries for facilitating Foreign Inward Remittance transactions from Greece to India.

The collaboration extends to managing fund settlement, reconciliation, and dispute resolution within their respective jurisdictions.

The statement noted that Greece is poised to become one of the pioneering European countries enabling the Indian diaspora residing within its borders to conduct swift and seamless remittances to India.

This initiative, the statement continued, harnesses the power of UPI (Unified Payments Interface) rails, promising efficiency and speed in cross-border transactions.

“We are excited about the prospect of cooperating with NPCI International to leverage its pioneering UPI technology in payments from Greece to India. UPI remittances will be particularly useful to the Indian community in Greece,” Karavias said.

“A strategic alliance with NPCI International is also fully in line with Eurobank’s strategic commitment to becoming the bank of choice for Indian businesses seeking to establish themselves in Greece or in Cyprus, as an entry point for their EU franchise,” he added.

Ritesh Shukla, CEO of NIPL, said that “this strategic alliance with Eurobank marks a significant milestone in the expansion of payment technologies built in India beyond our borders”.

“It showcases the versatility and strength of UPI within the international financial landscape, paving the way for strengthening India-Greece economic ties through enhanced remittance flows. Moreover, it underscores our commitment to innovation and customer-centric solutions, setting a new standard for international payment systems and reinforcing our vision for a more connected and financially inclusive world,” he added.

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