Release Date: February 27, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Bank of Siauliai AB (FRA:ZH5) exceeded its 2024 financial expectations, outperforming its guidance across all key metrics.
• The bank reported a significant 44% year-on-year growth in net fee and commission income, enhancing its revenue diversification.
• A strong performance in bond issuances was noted, with substantial amounts issued, contributing to a robust track record.
• The bank maintained a commitment to a 50% dividend distribution of net profit, proposing EUR6.1 cents per share.
• The bank achieved a 28% total shareholder return in 2024, surpassing its promised 20% rate of return for shareholders.

Negative Points

• Operating expenses increased due to headcount growth and one-off expenses related to strategic transformation projects.
• The bank faces pricing pressure in the mortgage segment, which is expected to persist into 2025.
• There are concerns about external risks, such as potential US tariffs on the EU, which could impact the Lithuanian economy.
• The bank's cost-to-income ratio is expected to be higher in the coming years due to ongoing investments in core banking systems.
• Rebranding and investments in new premises are anticipated to impact profitability in the near term.

Q & A Highlights

• Warning! GuruFocus has detected 6 Warning Signs with FRA:ZH5.

Q: What is the rationale behind the rebranding of Bank of Siauliai? A: The rebranding is part of the bank's strategic plan to unify all subsidiaries under one umbrella brand and to reflect its transition from a lending-focused institution to a more universal bank with a strong retail presence. This move aims to boost internal energy and support growth across various sectors. (Respondent: CEO)

Q: What are the key challenges for growth and profitability in 2025? A: The main challenges include geopolitical uncertainties and potential legislative changes in the mortgage market. However, Lithuania's resilience and adaptability, along with a strong macroeconomic outlook, provide a positive environment for growth. The bank remains focused on serving clients and maintaining flexibility in its operations. (Respondent: CEO)

Q: Why did the bank decide to expense the Temenos project rather than capitalize it? A: The decision was made from an accounting perspective to use capital more efficiently. By expensing the costs, the bank can better utilize capital for organic growth and shareholder distributions. The investment size for the Temenos project is expected to be around 30 million over the next two years. (Respondent: Unidentified_3)

Q: What is the strategy for attracting new deposits? A: The bank competes by offering slightly higher rates for deposits, which has resulted in a healthy growth of the deposit portfolio. Additionally, the bank is leveraging synergies from recent transactions and its existing client base to attract more deposits. (Respondent: Unidentified_3)

Q: Will the share buyback program restart in May? A: The base case scenario is to restart share buybacks in May, allowing shareholders time to reinvest dividends. However, the bank is monitoring market conditions and is prepared to adjust the timeline if necessary. (Respondent: Unidentified_3)

For the complete transcript of the earnings call, please refer to the full earnings call transcript.