ATHEX-listed Alpha Bank, one of four systemic banks in Greece, on Tuesday reported after-tax profits of 297 million euros in the first nine-month period of 2021.
Other highlights in the released results are new disbursements in Greece of 3.8 billion euros over the same period, and new credit expansion of 800 million euros.
Alpha Bank’s CEO, Vassilios Psaltis stated:
“We are making significant progress towards reshaping Alpha Bank as a leaner, more efficient and better capitalised bank, capable of supporting sustainable economic growth for the benefit of all our stakeholders, having successfully completed Project Galaxy in June and now signed in October an agreement on Project Cosmos.
For the first nine months of 2021, we are reporting a normalised profit after tax of almost Euro 300 million, after adjusting for non-recurring items, a return of 5.8% on tangible book value. We continue to execute on the key pillars of our Strategic Plan (Project Tomorrow) – customer centric growth, revamping of our operating model, further strengthening of our organizational effectiveness – to restore profitability to double-digit levels.
A testament to that has been the public launch of a new brand for our transformation efforts (“the alpha blueprint”), which are warmly embraced by the internal audience and key stakeholders.
Alpha Bank provided significant support to the Greek economy with new loans of Euro 3.8 billion in the year to date and has seen an acceleration in the rate of credit expansion. Higher loan growth and the improving economy helped generate increased fees of Euro 109.8 million in Q3 2021, above the Euro 100 million mark for a second quarter in a row. In addition, we have already secured around 50% of the total cost reductions envisaged between 2021 and 2024, the benefits of which we will reap starting from 2022. Our “alpha blueprint” is running at full speed to deliver the remaining efficiencies. The Cosmos portfolio has been reclassified as held for sale following the agreement reached with Davidson Kempner, enabling a very meaningful reduction of our Non Performing Exposures, while the underlying Cost of Risk has come in below 1% for a third consecutive quarter. The imminent completion of the majority of the remaining envisaged transactions will ensure the full optimisation of our balance sheet, as we are on track to achieve our target for a single digit NPE ratio in early 2022.
We remain determined and are now implementing an ambitious ESG development plan to ensure the sustainability of our business, navigate the transition to a low-carbon economy and align our working practices with the expectations of regulators, investors and other stakeholders.”
Solid Commercial Activity in Q3 2021
- New disbursements in Greece of Euro 8 billion in 9M 2021, providing significant support to the economy. Alpha Bank’s Franchise power drives solid demand of Wholesale Banking credit as the Bank is currently underwriting a number of significant projects in the energy, hospitality and infrastructure sectors; Credit demand is expected to further accelerate with the utilization of RRF funds that will kick-in from 2022.
- Net credit expansion stood at Euro 0.8 billion in 9M 2021 driven by a Euro 1 billion expansion of credit
towards businesses. We remain on-track to meet our FY 2021 target.
- Higher loan growth and the pick-up in economic activity generated Fees of Euro 8 million in Q3 2021, above the Euro 100 million mark for a second consecutive quarter. Sustained growth in Asset Management AUMs, primarily in non-money market funds, up by 50% y-o-y; Partnership with Nexi SpA to place merchant acquiring business in leading position.
- New record high in domestic deposit base, up by Euro 4 billion q-o-q to Euro 40.7 billion, reflecting inflows to core deposits that now account for more than 80%.
Trends in Q3 2021 confirm Alpha Bank is on track to beat near-term target of 5% RoTBV1 in 2021
- Core PPI stood at Euro 7 million, down by 16.4% q-o-q or Euro 37.8 million, materially affected by the derecognition of Galaxy and supported by an improved Recurring OPEX line due to the deconsolidation of Cepal. On a yearly basis, Core PPI performance was flattish at Euro 657.8 million (+0.3%).
- Net Interest Income was 14.2% lower q-o-q at Euro 5 million due to the derecognition of Galaxy and the TLTRO-III retrospective benefit booked in Q2.
- Recurring OPEX down by 8% q-o-q, mainly as a result of the deconsolidation of Cepal. In 9M 2021, Recurring OPEX down by 0.9% y-o-y on lower Staff Costs.
The Bank has already locked-in circa 50% of the 2021-2024 anticipated cost savings.
- The Voluntary Separation Scheme (VSS) of our Greek operations completed in October 2021 is expected to lead to a gradual departure of more than 550 Employees, with an estimated annualised cost benefit upon full completion, of circa Euro 24 As a result of the successful VSS and on the back of the continued Employee attrition, headcount in our Greek operations is anticipated to reach 5,500 FTEs.
- Pre-Provision Income generation of Euro 9 million vs. Euro 246.5 million in the previous quarter, reflecting the rebase effect post Galaxy derecognition.
- In Q3 2021, impairment losses on loans reached Euro 437 million Euro 127.9 million in the previous quarter, materially affected by additional transaction-related impairments of Euro 354.5 million, associated with Projects “Cosmos” and “Orbit”, with the former already reclassified to Held For Sale. The underlying impairment charge declined further to Euro 59 million, driving the underlying2 Cost of Risk to 60bps, for a third consecutive quarter below the 1% mark, whereas servicing fees, which were reclassified in Q3 to the impairment line, amounted to Euro 24 million. Underlying CoR is expected to reach 90bps in 2021, outperforming the initial Business Plan target.
- In 9M 2021, Normalised3 Profit After Tax stood at Euro 297
- Including the losses from Galaxy 4, booked in Q2, reported Profit/(Loss) After Tax stood at Euro -2.5 billion in 9M 2021, in line with the Bank’s estimates and capital
Capital – Asset Quality and Liquidity Position
- Our capital position remains solid with the Total Capital Ratio at 5% and CET1 at 13.9%, or 17.2% and 14.5% respectively, accounting for the RWA relief of the “Cosmos” securitisation which is anticipated to be realised in Q4. At the end of September 2021, the Group’s Tangible Equity stood at Euro 6 billion. Overall, the implementation of our planned internal capital measures will more than offset the anticipated negative impact from the remaining inorganic NPE reduction and enhance the capital ratios by circa 60bps.
- NPE stock in Greece is now below the Euro 6 billon mark, down by Euro 2.9 billion q-o-q, mostly attributed to the reclassification to the Held for Sale category of a non-performing portfolio related to the Cosmos securitization in view of its expected NPE formation in Greece of Euro 0.1 billion in Q3 2021, substantially lower than anticipated, allows the Bank to positively revise its 2021 NPE formation and CoR targets.
- NPE ratio in Greece contracted further to 6%1; Group NPE ratio well on track to reach 13% by year- end and a single-digit by mid-2022.
- Group NPE cash coverage increased to 56% and to 51% in Greece. Group NPL coverage ratio stands at 86% while total coverage including collateral came to 124%.
- The Group’s robust liquidity position is evident by the strong Liquidity Coverage Ratio (LCR) which surged to 189% at the end of Q3 2021, from 169% in Q2, far exceeding the regulatory threshold, and the material improvement in Loan to Deposit ratio, to 77% versus 96% the year
- In September 2021, the Bank issued its inaugural EUR 500 million Senior Preferred instrument at a reoffer yield of 2.625%, attracting EUR 1 billion of demand from a diversified range of investors.
- ECB funding reached Euro 13 billion, reflecting the further utilization of our TLTRO III borrowing Benefiting from the low-cost liquidity drawn from the ECB, the Bank’s blended funding cost remained in negative territory in Q3 2021 (-7 bps) and continued to support Net Interest Income.
Driving change towards a more efficient and sustainable operating model
- Alpha Bank’s Transformation Program, currently in execution mode, is expected to be the key enabler of rapid and successful change, driving the Bank towards a more flexible and efficient business and operating model. The plan, which requires a total funding of Euro 430 million, will support the Bank’s targets in both enhancing its revenues by Euro 350 million, whilst achieving an annual cost saving of more than Euro 60 million between 2021 –
- On the back of already strong ratings performance, Alpha Bank is implementing an ambitious ESG development plan to secure the sustainability of its business and align with the expectations of regulators, investors and