Alpha Bank S.a. · ATHEX:ALPHA
Alpha Bank — Investor Presentation (October 2015)
45 slides from Alpha Bank's investor presentation, October 2015
Slide 1: Presentation to Equity Investors
Alpha Bank Presentation to Equity Investors October 2015
Slide 2: Disclaimer
Disclaimer This presentation contains certain forward-looking statements. These forward-looking statements involve risks and uncertainties that could significantly affect expected results and are based on certain key assumptions. Many factors could cause actual results to differ materially from thos
Slide 3: Table of Contents
Table of Contents Pages I. Introduction 4 II. Recent development update 7 III. Path to normalisation 17 Appendix I: Q1 2015 Results 31 Appendix II: Stress Tests Macro Assumptions 43 9M FY 2013 Results 2013 Investor Results Relations Presentation 3
Slide 4: I. Introduction
I. Introduction 9M FY 2013 Results 2013 Investor Results Relations Presentation 4
Slide 5: Alpha Bank - A conservative, predominantly Greek focused bank
Alpha Bank - A conservative, predominantly Greek focused bank Balance sheet (Mar-15, € billion) Greece SE Europe Group¹ Net Loans 41.4 8.0 49.7 Second largest bank with a 22% loan Deposits 30.3 5.0 36.0 market share in a highly concentrated Tangible Book Value ─ ─ 7.0 Greek banking sector Loans /
Slide 6: Alpha Bank exhibits best-in-class performance amongst its peers
Alpha Bank exhibits best-in-class performance amongst its peers based on a number of key metrics Alpha Bank compares well to peers based on PPI generation… … its prudent approach to provisioning… NPL coverage % NPL ratio % Net NPLs¹ / FL CET1 Op.income / average net loans PPI / average net loans % C
Slide 7: II. Recent development update
II. Recent development update 9M FY 2013 Results 2013 Investor Results Relations Presentation 7
Slide 8: Key highlights of recent events in Greece
Key highlights of recent events in Greece Greek economy exhibited positive real GDP growth in Q1’15 and Q2’15 despite prevailing political uncertainty on the back of growing private and public consumption and tourism Macroeconomic and 3rd bailout programme for Greece agreed between Greece and th
Slide 9: Greek economic contraction has reversed and forecasts suggest a U-shaped recovery
Greek economic contraction has reversed and forecasts suggest a U- shaped recovery Real GDP: A U-shaped Recovery Greek economic activity is expected to drive back into a negative territory in 2015, triggered by capital controls imposition and 2% 2.5% implementation of the new fiscal austerity meas
Slide 10: Q2 performance has shown certain resilience
Q2 performance has shown certain resilience and could support a more benign environment Surprisingly Positive Q2 2015: Real GDP growth (seasonally adjusted) Higher than expected real GDP growth at 1.6% yoy in Q2 2015 despite the escalating uncertainty signals a GDP decline of no more than 2% in 20
Slide 11: Tourism, fiscal requirements, banking system and privatisations can support recovery
Tourism, balanced fiscal requirements, re-functioning banking system and privatisations can support further the recovery Tourism Arrivals (in thousands) Several key factors are expected to support the economic recovery in 5,000 the medium term, including 4,500 2014 Strong tourism revenues, drive
Slide 12: Banks undergoing AQR and Stress Test Diagnostic by ECB
Banks undergoing AQR and Stress Test Diagnostic by ECB Agreement Final ST Data Banks recap between Greece ATHEX began Submission framework and the Institutions trading June 28 July 12 July 20 August 3 August 26 Sept Oct Year end Capital Controls on Recap Completion Interim ST data Elections Banks an
Slide 13: 3rd Memorandum of Understanding on NPL resolution
3rd Memorandum of Understanding (“MoU”) on NPL resolution “The authorities will develop a credible strategy for addressing the issue of NPLs that aims to minimise implementation time and the use of capital resources and draws on the expertise of external consultants for both strategy development and
Slide 14: The revised Greek law and new NPL framework
The revised Greek law and new NPL framework bring the 3 key improvement areas into the NPL management process According to the new framework auction date should be set within 7 months from foreclosure date with prior law not having any time limitations (could be set any time after 40 days) Acceler
Slide 15: Banking sector deposit outflows have stabilised
Banking sector deposits outflows have stabilised, while the capital controls helped banks to restore more normalised spreads Greek System Customer Deposits Evolution System Deposit Mix Evolution (€ billion) 238 28% 39% 2.82% 1.31% 45% 59% 210 13% 16% +€0.3bn 174 Dec-14 Jun-15 161 163 165 160 increas
Slide 16: NPL and NPE levels remain elevated
NPL and NPE levels remain elevated, with increased NPL formation in the first quarter 2015 New NPL formation per quarter € million 1Q’14 2Q’14 3Q’14 4Q’14 1Q’15 1Q’14-1Q’15 228 158 116 260 554 1,316 Alpha Bank since 2014 has had the lowest cumulative NPL formation Peer 1 681 382 236 239 391 1,929
Slide 17: III. Path to normalisation
III. Path to normalisation 9M FY 2013 Results 2013 Investor Results Relations Presentation 17
Slide 18: Greek banks are yet to benefit from consolidation
Greek banks are yet to benefit from the massive consolidation effort in the banking system as the situation normalises Evolution of key metrics Greek banking sector has €mm 2008 2014 Change contracted in a similar fashion as nominal GDP Greece nominal GDP 242,096 179,081 (26%) since financial cris
Slide 19: Alpha Bank's return to profitability rests on key improvement areas
Alpha Bank’s return to profitability rests on 3 key main improvement areas Mar-12 peak before consolidation New time deposit rates (%) Time deposits repricing has supported Greek banks’ NII throughout the economic crisis and will further continue to Euro Area Greece Italy Spain PBT Annualised bene
Slide 20: Declining cost of deposits lowers cost of customer funding
Declining cost of deposits combined with smaller proportion of term deposits result in lower cost of customer funding Group Deposit Spread Evolution Deposit Spreads (bps) (bps) 11 22 (2) 7 1 (0.2) (5) (11) (10) (9) Sight and Savings - (117) Greece (92) (82) (133) (127) (129) (125) (121) (113) (105)
Slide 21: Reliance on Eurosystem funding remains elevated
Reliance on Eurosystem funding remains elevated, return to more normalised levels could bring significant interest expense savings Alpha Bank’s Eurosystem Funding Evolution Drivers behind future reduction of ELA (€ billion) ECB ELA I Pillar II / ELA % Cost of funding Gradual return of deposits 27.
Slide 22: Outstanding delivery on cost saving initiatives
Outstanding delivery on cost saving initiatives ahead of the plan confirming Alpha Bank’s clear focus on stringent cost control Operating expenses evolution Headcount and branch evolution (€ million) Incl. Emporiki and Citi Greece Agreed actions 2012 - 2016 Target Cost Synergies from Emporiki acquis
Slide 23: Detailed overview of Alpha Bank's asset quality
Detailed overview of Alpha Bank’s asset quality Alpha Bank asset quality by portfolio (Mar-15) Group Greece €bn Business Mortgages Consumer Total Business Mortgages Consumer Total Gross loans 34.7 21.2 7.3 63.1 28.8 17.3 6.5 52.6 NPLs 11.5 6.7 3.1 21.3 10.0 5.4 2.8 18.2 (+) FNPLs <90dpd +2.3 +2.1 +1
Slide 24: NPLs to NPEs Bridge
NPLs to NPEs Bridge NPLs or NPEs ratio The alignment to full EBA definition results to an NPE figure of 47% €29.4bn that includes: Forborne non performing loans (FNPLs) of €5.4bn which 2.7 29.4 34% are currently below 90dpd, but under full EBA definitions 5.4 (€ billion) must be considered as no
Slide 25: Aktua, the leading Spanish NPL servicer, supports Alpha Bank
Aktua, the leading Spanish NPL servicer supports Alpha Bank effort in combating retail NPLs Aktua highlights Assets managed & services offered ► Aktua was founded in 2008 in Madrid as the EUR million servicing branch of Banesto quickly The only fully integrated independent and becoming the leader in
Slide 26: Aktua Hellas operating model at a glance
Aktua Hellas operating model at a glance: collections, judicial, and REO1 management on Alpha Bank in NPL stock Aktua Hellas Alpha Bank retail NPL stock NPL for servicing Mortgage loans, SBLs, consumer, mostly collateralized exposures will Servicing fees be assigned to the platform Collections Judic
Slide 27: Aktua Hellas will deploy innovative loss mitigation strategies
Aktua Hellas will deploy innovative loss mitigation strategies to achieve higher recovery rates supporting current Alpha Bank practice Recovery Description Currently offered by Alpha Offered by Aktua Hellas strategy ► Standard collections operations Cash recovery ► Loan terms modification at neutral
Slide 28: Key strategy objectives for Corporate NPL workout strategy
Key strategy objectives and rationale for adopted Corporate NPL workout strategy Key Objectives and Rationale Going forward plan for corporate NPLs • Market liquidity and overall current lack of investor interest have not • Focus on going concern customers to restructure their debt allowed for subst
Slide 29: Corporate NPL strategy: stratification into Workout and Liquidation
Alpha Bank’s strategy regarding corporate NPLs will be based on stratification of the NPL portfolio into Workout and Liquidation Existing Business Portfolio Basic Stratification & Strategy Key structuring options for the portfolio Interest rate Debt: asset swaps Reduction Workout portfolio Mortgage
Slide 30: Conservative actual provisioning compared to stress test projections
Conservative actual provisioning compared to stress test projections despite milder GDP evolution than assumed by historical stress tests 2011 Blackrock I estimated losses vs. actual results (€mm) 2014 Comprehensive Assessment estimated losses vs. actual (€mm) 7,760 2014 GDP (0.6%) 0.7% 5,443 growth
Slide 31: Appendix I: Q1 2015 Results
Appendix I: Q1 2015 Results 9M FY 2013 Results 2013 Investor Results Relations Presentation 31
Slide 32: Q1 2015 Performance and Key Figures
Q1 2015 Performance and Key Figures qoq % Balance Sheet (€ billion) 31/03/2015 31/12/2014 change Funding Position Assets 73.0 72.9 0.1% Net Loans 49.7 49.6 0.3% Deposit outflows reduce base by 16% qoq Deposits 36.0 42.9 (16.1%) Eurosystem exposure at €23.6bn by end of March 2015 Eurosystem Fundi
Slide 33: Significant Deposit Outflows in the Quarter
Significant Deposit Outflows in the Quarter; Pace Decelerating Thereafter Alpha Bank Deposits in Greece Greek Deposit outflows at a lower pace post Feb. (€ billion) Jan. 15 Feb. 15 Mar. 15 Apr. 15 May15 0 (1.3) -1,000 -2,000 (5.3) -3,000 (€ million) (1.5) 36.9 -4,000 30.3 -5,000 -6,000 -7,000 Dec. 1
Slide 34: Eurosystem Funding Reliance Increases and Shifts to ELA
Eurosystem Funding Reliance Increases and Shifts to ELA due to Liquidity Pressures from Deposit Outflows and ECB Rules Change Greek System Funding Reliance Evolution Alpha Bank’s Eurosystem Funding Evolution (€ billion) (€ billion) 136 Almost double 113 107 1.5 0.3 25.4 In 3 months 23.6 62 2.2 ELA 6
Slide 35: Common Equity Tier I Ratio of 13.1%
Common Equity Tier I Ratio of 13.1% Affected by Tax Credit Implementation & GGBs Price Decline in Q1 2015 Common Equity Tier I (CET1) Ratio Build up CET1 7,555 7,197 6,875 capital (€mn) 14.3% 13.8% 13.4% 13.1% 12.6% (54bps) (22bps) (27bps) (19bps) CET1 Tax Credit 1 CET1 Q1 2015 Result Yearly CET1 ex
Slide 36: Negative AFS Impact to Equity to be Reversed
Negative AFS Impact to Equity to be Reversed upon Spread Normalisation Evolution of Tangible Book Value (TBV) GGB Synthetic STRIP Price TBV/ € 0.64 € 0.57 € 0.55 80 share (€ million) 70 (343) 60 31/03/2015 (560) (148) 8,223 (178) 7,880 7,320 7,320 7,172 50 6,994 6,994 40 Sep. 14 AFS Comprehensive De
Slide 37: Core PPI Increased 17% Driven by Cost Efficiency
Core PPI Increased 17% Driven by Cost Efficiency PPI Build-up and Impact from Trading and Extraordinary Items (€ million) +17% 25 59 (14) (2) 295 320 252 Includes €10mn calendar effect 1 Δ NII Δ Fees Δ OPEX & Other 2 2 Q4 2014 Q1 2015 Trading Income & Reported Core PPI Core PPI Integration Costs Q1
Slide 38: ELA Usage Negatively Affects Funding Cost
ELA Usage Negatively Affects Funding Cost Central Bank Funding Balances & Cost Banking Book NII Decomposition3 1.24%1 0.79% 2.6% 2.7% 2.7% 2.7% 2.6% 0.57% 0.27% 23.6 ELA (€ million) Loans (€ billion) 0.13% 0.06% 15.7 ECB 14.8 Deposits 0.9 13.2 11.9 18.8 0.0 Funding 597 595 591 586 Cost 2 570 NIM 14.
Slide 39: OPEX Performance on Track to Beat Target of €1.2bn in 2015
OPEX Performance on Track to Beat Target of €1.2bn in 2015 Operating Expenses Evolution1,2 Staff Costs yoy1,2 (€ million) (€ million) (9.9%) (31mn) (18.2%) 167 343 317 314 311 30 137 27 286 (5.0%) 24 24 23 26 29 126 124 128 153 122 (21.1%) 137 108 167 166 160 163 137 Q1 2014 Q2 2014 Q3 2014 Q4 2014
Slide 40: First Quarter of Full Impact of VSS Brings Staff Cost down by 20%
First Quarter of Full Impact of VSS Brings Staff Cost down by 20% Staff Costs Evolution1,2 General Expenses Evolution1,2 (€ million) (€ million) (14.7%) (19.9%) (21mn) (34mn) 143 171 163 15 122 137 13 Remedial (22) management / (2) (2) Crisis driven 128 costs 109 Recurring G&A Average Q4 2014 VSS Im
Slide 41: Current Commotion Negatively Affects NPL Formation
Current Commotion Negatively Affects NPL Formation Total NPL formation Business (€ million) NPL ratio (€ million) NPL ratio Last 12-m formation (1 year ago) +€1,213mn 33.8% 33.3% Last 12-m formation +€658mn +€1,088mn +€583mn 791 546 554 260 322 241 228 158 171 178 162 199 116 44 (76) (352) 2 2 Q2 13
Slide 42: Cash Coverage Continues to Increase Reaching 63%
Cash Coverage Continues to Increase Reaching 63% Loan Loss Provisions NPLs ratio and Cash Coverage Evolution (bps) 494 63% 62% 60% 58% 285 272 56% 253 224 216 54% (€ million) 773 449 395 426 349 337 33% 33% 34% 34% 33% 34% Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Impai
Slide 43: Appendix II: Stress Tests Macro Assumptions
Appendix II: Stress Tests Macro Assumptions 9M FY 2013 Results 2013 Investor Results Relations Presentation 43
Slide 44: EBA macroeconomic assumptions
EBA macroeconomic assumptions EBA macroeconomic assumptions in 2014 Stress Test Baseline Adverse Macroeconomic Factors in % 2014 2015 2016 2014 2015 2016 Real GDP growth 0.6 2.9 3.7 -1.6 -0.6 1.2 -1% Inflation -0.6 0.2 1.1 -1.0 -0.9 -0.7 Unemployment ratio 26.0 24.0 19.5 26.5 25.3 21.6 Residential P
Slide 45: Alpha Bank Contacts
Alpha Bank Contacts Vassilios Psaltis Lazaros Papagaryfallou General Manager – CFO Executive General Manager vep-office@alpha.gr lap-office@alpha.gr +30 210 326 2181 +30 210 326 4017 Dimitrios Kostopoulos Elena Katopodi Manager Assistant Manager Investor Relations Division Investor Relations Divisio