Alpha Bank S.a. · ATHEX:ALPHA
Alpha Bank — Investor Presentation (November 2019)
40 slides from Alpha Bank's investor presentation, November 2019
Slide 1: Alpha Bank Strategy Update 2020-2022
Alpha Bank Strategy Update 2020 – 2022 Investor presentation November 2019
Slide 2: Our vision for the future
Our vision for the future Vassilios E. Psaltis, CEO 2
Slide 3: The Greek economy has entered a sustainable growth trajectory
From To Real GDP restored to stable and positive growth rate 0.7% ~2.0% The Greek economy has Real GDP average annual growth, % 2015-2018 2020-2022 entered a sustainable growth trajectory Declining unemployment 25% 14.5% Unemployment rate, % 2015 2022 Disposable income on the rise Disposable income,
Slide 4: New policy mix and reforms aim to push for faster economic growth
New policy mix and reforms aim to push for faster economic growth Key areas of reform Market momentum Already 22% average reduction in the real estate tax (ENFIA) Commercial Real Estate prices Net FDI1 in Real Estate Index 2010 = 100 EUR bn completed Corporate income tax rate from 28% to 24% 1.1 100
Slide 5: At the same time, we are operating in a challenging market context
Negative interest rate environment over the medium term At the same time, we are Pressure on spreads, especially for large corporates that operating in a challenging can access capital markets directly market context Rising expectations for better customer experience that is seamless across all chan
Slide 6: Alpha Bank will build upon a set of strong assets to return to sustainable profitability
Alpha Bank will build upon a set of strong assets to return to sustainable profitability Utilize our market-leading capital position1 in quantum and quality for decisive NPE resolution, within comfortable capital envelope Empower our committed, loyal and motivated Mobilize change with a new, talente
Slide 7: Our vision for Alpha Bank for 2022
Our vision for Alpha Bank for 2022 Customers Be the preferred Bank in Greece for our target segments, offering best-in-class customer experience Shareholders Achieve market-leading efficiency and profitability, through a combination of targeted growth and cost efficiency Employees Strengthen our org
Slide 8: Where we want to be in 2022
From To Q3 2019 2022 Decisive de-risking of NPE ratio1 44% <10% the balance sheet and ~200bps <70bps CoR de-escalation Cost of Risk2 Where we want to be in 2022 Cost/ Income 55% <48% Continuously improving efficiency Cost/ Assets ~170bps <145bps Creating shareholder Return on Equity2,3 <1% ~9% value
Slide 9: We have identified tangible value creation levers to deliver value to shareholders
We have identified tangible value creation levers, which we will use to deliver value to our shareholders 1 2 3 Project Galaxy Operating model Customer-centric growth ~Up to EUR 12bn NPE ~EUR 120mn (>10%) reduction in Increase penetration from 1.3 to securitization, ~EUR 7bn total Group cost from 20
Slide 10: We will decisively reduce NPEs through a large scale transaction
We will decisively reduce NPEs through a large scale transaction within a comfortable capital envelope Project i ii iii Galaxy Front-loaded, substantial NPE reduction Carve-out of NPE platform and outsourcing of Hive-down of core banking assets and through a large securitization transaction servicin
Slide 11: Our operating model will be transformed to radically improve productivity and efficiency
Our operating model will be transformed to radically improve productivity and efficiency Operating Recurring Group Opex model EUR mn NPE management a ▪ NPE operations carved-out ▪ Achieve cost reduction in line with NPE deleveraging 1,077 Operating model efficiency ▪ New cost governance framework -1
Slide 12: We will put our customers at the center of what we do
We will put our customers at the center of what we do Customer- … what we will do to cover their centric growth What our customers need… needs Key targets a Fast and reliable service Make customer satisfaction a strategic priority Highest NPS1 among Greek banks Redesign our back-office operations to
Slide 13: Business Banking: A revamped product and service offering
Business Banking: A revamped product and service offering through an efficient service model and rigorous capital profitability management Greek Operations Customer- centric growth Key areas of focus for businesses Key figures Corporate, SME and Structured Gross new disbursements Finance disbursemen
Slide 14: Individuals Banking: a cost efficient, digitally-enabled value proposition
Individuals Banking: a cost efficient, digitally-enabled value proposition; focus on high potential under-penetrated segments Greek Operations Customer- centric growth Key areas of focus for individuals Key figures Serve all customers through a low-cost, Gross new disbursements Bancassurance & asset
Slide 15: International presence to benefit from disciplined capital allocation
International presence to benefit from disciplined capital allocation across jurisdictions, with Romania the key contributor of growth Targets for 2022 Target RoE 9% Target CAD Romania Albania Advance to Tier 1 bank status1 ▪ Retain a self-funded and profitable position ▪ Take advantage of high grow
Slide 16: We have appointed a new management team and strengthened our corporate governance
We have appointed a new management team and strengthened our corporate governance Organizational effectiveness Management team1 Chief Executive Officer General Manager Member of the V. Psaltis Executive Committee Growth & Innovation S. Filaretos Chief Human Resources Officer (CHRO) F. Melissa2 Commu
Slide 17: We have implemented changes that will empower our people
We have implemented changes that will empower our people and promote a performance-based culture Organizational effectiveness a Strengthened New performance scorecards for management team, connected to performance a variable remuneration scheme management Clear accountability and ownership of target
Slide 18: We are setting up a dedicated Transformation Office
We are setting up a dedicated Transformation Office to deliver our Strategy Plan Transformation Office A Chief Transformation Officer (CTO), member of the Executive Committee will soon be appointed to oversee the delivery of the transformation program. A Transformation Office of 10-15 senior dedicat
Slide 19: Strategy Update: Financial performance
Strategy Update: Financial performance Lazaros A. Papagaryfallou, CFO 19
Slide 20: The three pillars of performance re-rating
The three pillars of performance re-rating Key components of the strategy Key areas of improvement ▪ Up-front de-risking of our CoR, bps 2001 <70 balance sheet, the principle ~9% factor affecting our profitability in the last few years, and potential 2.0 – 2.5% future driver of profitability and/or
Slide 21: Overview of our NPE acceleration plan (project Galaxy)
Overview of our NPE acceleration plan (project Galaxy) Project Galaxy Alpha Bank AE Non-Core NPEs – Project Galaxy i iii 100% Hive-down Mortgage loans Senior SPV notes Retail Secured “New” Alpha Bank Wholesale DTC Retail Unsecured Performing assets Core NPEs New CEPAL (Servicer) Mezzanine/Junior 11
Slide 22: Decisive action on Non-Core NPEs to reach SSM targets well ahead of plan
Decisive action on Non-Core NPEs to reach SSM targets well ahead of plan Bank perimeter in Greece Project Galaxy NPE ratio1, % 44.1 ~20 NPL ratio1, % 27.8 ~10 Alpha Bank intends NPE stock, 18.9 to apply to the EUR bn ~0.5 Up to 12 recently approved Hercules Asset ~7 Protection Scheme 1i Q3 2019 Furt
Slide 23: Transaction opens clear path towards an NPE ratio <10% by 2022
Transaction opens clear path towards an NPE ratio <10% by 2022 with lower cost of risk over the period Bank perimeter in Greece Project Galaxy NPE ratio1 ~20% <10% NPL ratio1 ~10% <5% ~7 NPE stock EUR bn ~2.0 1i ~1.5 <3.5 Focus on restructurings Pro forma for Modification Closing 2022 securitization
Slide 24: Improved quality of retained NPE portfolio
Improved quality of retained NPE portfolio will be a key component of the value creation strategy Bank perimeter in Greece Project Transformation plan materially Galaxy addressing high risk areas... …resulting in a significantly better portfolio quality Retail NPEs Wholesale NPEs Evolution of total
Slide 25: Cost of Risk is expected to be significantly reduced post transaction
Cost of Risk is expected to be significantly reduced post transaction Project Main driver of Cost of Risk is the management of troubled assets, we therefore expect Cost of Risk Galaxy normalization in line with NPE ratio reduction Group Cost of Risk, bps Group NPE ratio2, % 250 Galaxy 50 ~46 NPE rat
Slide 26: Creating a market-leading servicer combining Alpha Bank and CEPAL platforms
Creating a market-leading servicer by combining the capabilities of Alpha Bank’s and CEPAL’s servicing platforms Project CEPAL Alpha Bank Servicing Platform Galaxy A Leading servicer in the market with: First licensed servicer by the Bank of Established platform with wide ▪ End-to-end servicing capa
Slide 27: Maintaining strong capital ratios and ample buffers above requirements
Maintaining strong capital ratios and ample buffers above requirements remains core to our strategy Phase-in of capital requirements vs. capital targets Key capital Capital as % of RWAs management targets De-risking of our balance sheet ~17.0% should allow ~2.0% Tier 2 13.75% 14.5% reduction of our
Slide 28: We will retain a controlled capital buffer above minimum requirements
We will retain a controlled capital buffer above Tier 2, % CET1, % minimum requirements Minimum regulatory requirements 2022 RWAs ~47 ~43 EUR bn 18.3% 2.4% 2.4% ~17% 3.5% ~2.0% ~2% 14.5% (OCR) 11.0% (CET1) ~15% PF Q3 20191 NPE Tier 2 capital Organic capital IFRS 9 2022 transaction generation3 Phase
Slide 29: Aiming at bringing Group Opex down building on proven executional ability
Aiming at bringing Group Opex down building on proven executional ability Operating Strong track record of reducing Group costs model Group recurring Opex and C/I, EUR mn and % C/I 64% 54% 48% 51% 55% <48% Proven 1,371 execution 1,285 ability to decrease costs 2 >20% 1,117 1,097 1,077 Historical dec
Slide 30: Group Opex reduction to ~EUR 960mn through NPE savings and efficiency levers
Group Opex reduction to ~EUR 960mn will be attained through a combination of NPE savings and key efficiency levers Operating Reduction in Group recurring Opex model EUR mn Main levers of productivity & efficiency enhancement 2019E Opex1 1,077 ▪ New cost governance framework: Clear cost ownership and
Slide 31: Businesses: key metrics and levers
Businesses: key metrics and levers Greek Operations, EUR mn Customer- centric growth Gross disbursements 2019-22 SME and Corporate: 3,800 3,800 ▪ Focus credit growth on sectors driving economic growth (60-70% of new disbursements in energy, 3,200 hospitality and industry/ manufacturing) ▪ Increasing
Slide 32: Individuals: key metrics and levers
Individuals: key metrics and levers Greek Operations, EUR mn Customer- centric growth Gross disbursements 2019-22 Consumer lending: Increase our market share in new originations: ▪ Underpenetrated customer base (~8% vs. European benchmarks of 9-14%) 1,100 ▪ Development of fully digital products enab
Slide 33: Net Loan evolution and lending spreads per segment
Net Loan evolution and lending spreads per segment Bank perimeter in Greece Customer- centric growth Net Loan evolution, EUR mn Lending spreads evolution, bps 35.0 Medium and Large Businesses 32.9 SBL Consumer 3.4 3.6 Consumer 1,000 Mortgage 900 862 Mortgage 12.6 8.9 ~840 3 800 700 3.0 SBL 3.2 579 6
Slide 34: Capital reallocation to the healthy part of the book
Capital reallocation to the healthy part of the book Customer- From To centric growth Q3 2019 2022 Performing exposures & securities 52% 68% 3 NPEs 31% Tangible assets 12% 3% 5% DTA & Other 14% 14% 34
Slide 35: Assets will grow by ~10% through new lending and investments in securities
Despite NPE deleveraging, assets will grow by ~10% through new lending and investments in securities EUR bn Customer- centric growth 67.1 ▪ Reduction in Net Loans due 0.4 Net Loans to Project Galaxy and additional core NPE workout 3.0 ▪ Targeted growth in performing volumes, driven mainly by busines
Slide 36: We target to further increase our deposit base by ~EUR 5bn
We target to further increase our deposit base by ~EUR 5bn, in line with expected market growth Greek operations Customer- centric growth Key remarks LDR2, % 106 ~93 ▪ System deposits are increasing due to the restoration of customers’ confidence in the banking system, the abolishment of capital con
Slide 37: Committed to our Digital Transformation program
Committed to our Digital Transformation program, which is already delivering results Customer- Where we want centric growth Program highlights Transformed customer journeys to be in 2022 Retail onboarding time Business legalization/ 3-year plan aiming at minutes onboarding time, days transforming th
Slide 38: Closing remarks
Closing remarks Vassilios E. Psaltis, CEO 38
Slide 39: Our vision for 2022
Our vision for 2022 Be the preferred Bank in Greece for our target segments, offering best- in-class customer experience Achieve market-leading efficiency and profitability, through a combination of targeted growth and cost efficiency Strengthen our organizational effectiveness by developing a stron
Slide 40: Q&A
Q&A 40