CompetingCompeting inin thethe “New“New Normal”Normal”
Mr. Marinos Yannopoulos General Manager, CFO and Board Member
Bank of America Merrill Lynch Banking & Insurance CEO Conference London, October 1st 2009 A Strong Franchise with a Regional Footprint
Alpha Bank at a Glance Geographical Footprint
Greece
H109/H108 Founded in 1879 by the Costopoulos family FY 07 FY 08 H1 09 which today controls 11% of the Bank (yoy) Branches 411 445 455 9.6% Loans (€bn) 34.0 39.1 39.7 9.4% Consistency in management ensuring firm Deposits (€bn) 28.8 35.9 35.8 15.7% implementation of Alpha Bank’s strategy Pre-Provision Income (€m) 1,059.8 955.4 486.1 (13.2%)
A leading franchise in Greece Romania
9 3rd largest branch network with 455 branches Serbia
Bulgaria 9 €39.7bn of customer loans Fyrom Albania
9 €35.8bn of customer deposits Greece
Well-established presence in SEE Cyprus
9 €6.6bn of customer loans in SEE (excl. Cyprus), up 14% y-o-y Contribution SEE to Group
H109/H108 FY 07 FY 08 H1 09 Sep. 09 9 €4.5bn of customer loans in Cyprus, up 13% (yoy) y-o-y Branches 403 621 619 38.5% 58% Loans (€bn) 7.6 11.2 11.0 13.8% 21% 9 Nationwide coverage across all SEE countries Deposits (€bn) 5.3 6.1 6.3 5.7% 15% Pre-Provision 144 202 101.6 1.4% 17% with a network of 619 Branches. Income (€m)
Note: Financial information as of 30th June 2009 2 Parameters of the “New Normal”
Parameters of the “New Normal” Success Factors in the “New Normal”
Increased capital requirements De-risking
Counter-cyclical buffers Prudent risk managementRomania
Serbia
Balanced fundingBulgaria with Increased focus on liquidity strong deposit gatheringGreece capabilities
Macro-deleveraging Cost efficient platform
Tighter regulation Back to basics
3 Greek banking system generally well positioned for the “New Normal”
European Countries – Loan/Deposit Ratios (H109, in %) European Countries – Penetration Levels (2008, in %)
250%
223% Austria
130% Ne the r lands 126% 200% 121% 120% 114% Spain 110% 108% France 101% 95% 93% Portugal Germ any 150% Italy Belgium Customer Loans / GDP(%) / Loans Customer
Cyprus
100% Greece
e in m iu al ce tria a ec d aly g n s p e n S Cyprus It tu Gr 50% r Fra Au Belg ela o Ir P 50% 100% 150% 200% 250% Germany Netherlands Customer Deposits / GDP (%)
Note: Ireland excluded as outlier; confidence interval R2 of 81%
Source: Central Banks 4 ECB funding not essential for liquidity purposes
ECB Funding and Bond Portfolio Evolution (as of June 2009, in €bn) ECB Funding – Net Utilisation and Collateral (in €bn) (€ billion)
Surplus in ECB -0.1 0.9 2.9 0.7 €15.3bn Liquidity: €11.8 bn 0.9 net utilisation 3.1
3.7
7.6 10.0 8.8 5.2 Bonds Covered Liquidity Preference Shares Bonds/Securitisation 1.7 1.1 (1.6) (1.4) (3.7) Proven Access to Public Funding (4.7) (11.8) 8 Sep 2009: Issuance of €750m bond due (8.0) 2012 at 190bps over mid-swaps
28 May 2009: Issuance of €500m bond due 2011 at 285bps over mid-swaps – now Jun. 08 Dec. 08 Mar. 09 Jun. 09 trading at 183bps over
Net Interbank Liquidity ECB Funding Investments in Bonds Both rated A2 by Moody’s
5 Deposit franchise at the core of the business
Deposits / Assets (H109, in %) GroupLoan / NIIDeposit - Deposits Ratio ContributionEvolution (in %)
57.9%
37.5% 125% 113% 117% 121% 123% 113% 109%
Alpha Bank International Peers (1)( 2) Dec. 07 Mar. 08 Jun. 08 Sep. 08 Dec. 08 Mar. 09 Jun. 09
Group Deposits Structure (H109, in %) Strong Deposit Franchise
No further migration from savings to time deposits Sight & Savings 37% Loan / deposit ratio at comfortable levels € 15.7 bn Term 63% Strong deposit generation in 2Q 2009 € 27.1 bn
Source: Companies data (1) International selected peers include UniCredit, Intesa Sanpaolo, Erste Bank, Raiffeisen intl’, Nordea, Swedbank (2) Asset weighted average 6 Re-pricing of the asset side set to continue
Medium & Large Business Loans Spread 46% Mortgages Spread (in bps) (in bps) 28%
70bps 33bps
228 167 193 134 135 136 143 158 159 163
Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009
13% Consumer Credit Spread (in bps) 13% Small Business Loans Spread (in bps)
174bps 222bps
784 842 668 660 699 690 733 511 519 563
Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009
Note: Indicated spread and loans splits refer to Greece only 7 Net interest result expected to remain strong
Interest rates Scenarios – Impact on Net Interest Result
Low Interest Rate Environment ECB Interest Rate (Until Mid/ Late 2010E) Hike (Mid/Late 2010E)
Lending
Deposits
Funding
Measures Continued asset re-pricing Exit ECB Funding Re-pricing of term deposit base Deposit Spread Widening Gradual replenishment of ECB funding with public market funding
8 Long track record in managing operating expenses efficiently, despite sizeable investments
Cost / Customer Exposure (Avg. Loans + Avg. Deposits) Cost / Customer Exposure (Avg. Loans + Avg. Deposits)
1.58% 1.49% 1.46% 1.39% 1.23% 1.48% 1.23%
Alpha Bank Weighted Average of Peer Group(1) 2005 2006 2007 2008 H1 09 Source: H109 Financial Statements (1) Greek peers include NBG, EFG, Piraeus
Branches Evolution Operating Expenses – Y-o-Y growth
Delta +101 +153 +252 +8 Freeze of SEE Expansion 1,069 1,077
817 664 14.9% 14.1% 563 12.9% 13.4%
5.8% 4.1%
2005 2006 2007 2008 H109
Q1 08 H1 08 9M 08 FY 08 Q1 09 H1 09
9 Highly diversified loan portfolio with distinct defensive characteristics
Gross Loan Portfolio Breakdown (June 2009, in €bn and in %) Comments
Greece & Cyprus Loan Portfolio1: 97% of loan exposure within EU €44.1bn countries Mortgages 29%, €12.9bn SEE (ex Cyprus) loan exposure only Business amounting to 13%, coupled with a Loans Group Loans: €52.2bn Consumer 59%, strong defensive profile Credit €25.8bn Non-Eur o 12%, Area €5.4bn 10%, €5.1bn Total consumer lending (incl. SEE)
Non-EU only amounting to 12% Eu r o Ar e a 3%, €1.5bn 87%, €45.6bn SEE (ex Cyprus) Loan Portfolio: €6.6bn Greek & Cypriot mortgages accounting for 25% of loan exposure Business Loans Mortgages 73%, €4.8bn 17%, €1.2bn
Consumer Credit 10%, €0.6bn
(1) Excluding UK 10 Credit quality deteriorating at anticipated pace
Group NPLs and NPL Ratio (in % and in €m) Evolution of Loans in Arrears (% of loans per segment)
(in €m) 1,685 1,596 2,044 2,500 Consumer 5.8% 5.9% < 6.0% Credit (in %) 5.3% 5.1% 4.8% 4.8% Business 3.7% 3.9% 4.4% Loans 4.2% 4.1% 4.2% 4.1% 4.2% 4.0% 4.0% 4.2% Mortgages
3.8% 3.8% 3.3% 3.1%
2.5% 2.5% 2.6% 2.4% Dec. 06 Dec. 07 Dec. 08 Jun. 09 2009E Dec. 07 Mar. 08 Jun. 08 Sep. 08 Dec. 08 Mar. 09 Jun. 09
Group Impairment Losses (in bps and in €m)
(in €m) 254 227 542 327
125 < 130 114 (in bps)
83
60
2006 2007 2008 H1 '09 2009E
11 Quality of risk management reflected in sound coverage and low business loans LGD
Coverage vs Loan Book Structure (in %) Loan Portfolio Greece – Loss Given Default (Jun. 09) (Q2 09 vs Peers, IFRS 7 NPLs, past due over 90d) Balances 23.5 11.2 5.0 56% 56% (€ billion)
48% NPL Coverage 46%
% Consumer 27% 24% Credit 20% 20% 70% 16% 12%13% 13% % Loans New 33% Europe (ex Cyprus) 10%
Alpha Peer 1 Peer 2 Peer 3 Business Loans Mortgages Consumer Loans Source: H109 Financial Statements
Cash Coverage Returning to Normal Levels Comments
Total Coverage • Loan book of defensive structure 127% 133% 136% 140% 139% 135% • € 1.2 billion in pre-provision income (annualized) 61% 60% 56% 56% 53% 50% ~ 50% • Accumulated provisions of € 1.4 billion
• LGD at 30%
Mar. 08 Jun. 08 Sep. 08 Dec. 08 Mar. 09 Jun. 09
12 Sound capitalisation levels with further upside
Strong Organic Capital Generation - Core Tier I(1) Further Room for Potential Improvement in Capital (RWAs/Net Loans, H109)
Non-IRB IRB
98% 98% 7.1% 88% 6.5% 0.4% 0.2% 86%
Dec. 08 Organic Capital Other Jun. 09 Generation Alpha Peer 1 Peer 2 Peer 3
(1) Proforma, including treasury stock placement (Aug. 31st 2009) Note: Peers include NBG, EFG, Piraeus
Sound Leverage Ratio (Tangible Equity/Total Assets, H109) Capital Adequacy Ratios
11.3%
9.8% 1.5% 9.4% Subordinated 4.3% Capital (Tier II) 1.8% 3.4% 1.5% 2.7%
1.5% 1.3% Hybrid Capital & Preference Shares
7.1%(1) 6.5% 6.6% Equity Capital (Core Tier I) Alpha Bank International Peers(1)(2)
Source: Companies annual and interim reports and investor relations Dec. 08 Mar. 09 Jun. 09 Note: tangible equity calculated as shareholders’ equity including minorities and excluding hybrid (1) International selected peers include UniCredit, Intesa Sanpaolo, Erste Bank, Raiffeisen intl’, Nordea, Swedbank (2) Asset weighted average (1) Proforma, including treasury stock placement (Aug. 31st 2009)
13 Closing Remarks
“New Normal” is set to redefine the characteristics of banking, both in terms of growth and profitability outlook
Greek banks are in general well positioned for the “New Normal”, in particular with respect to funding and growth outlook
Alpha Bank’s earnings capacity has stabilised and is set to improve further, underlining Alpha Bank’s success in managing its balance sheet
Alpha Bank has a track record in maintaining high operating efficiency, while still retaining scale to fully capture growth in a recovery
Alpha Bank has demonstrated a pro-active and prudent approach to risk management, i.e. “New Normal” with only limited impact in this aspect
Alpha Bank enjoys solid capitalisation levels allowing for further growth
14 Appendix Alpha Bank Group
% Change (€ million) H1 2009 H1 2008 H1 09/H1 08
Operating Income 1,166.9 1,215.2 (4.0%)
Net Interest Income 844.9 897.8 (5.9%)
Net fee and commission income 191.2 233.8 (18.2%)
Income from Financial Operations 98.7 40.3 144.9%
Other Income 32.2 43.2 (25.4%)
Operating Expenses 572.9 550.3 4.1%
Staff Costs 278.1 285.3 (2.5%)
General Expenses 248.5 222.8 11.5%
Depreciation and amortization expenses 46.3 42.2 9.7%
Ιmpairment losses 326.7 142.0 130.2%
Profit before tax 267.3 522.9 (48.9%)
Income Tax 53.5 108.1 (50.5%)
Net Profit after tax 213.9 414.9 (48.4%)
Net Profit attributable to shareholders 214.7 414.1 (48.2%)
Net Interest Margin (net of impairment losses) 2.4% 3.2%
Cost / Income 49.1% 45.3%
Return on Equity After Tax and Minorities (ROE) 13.6% 24.9%
16 Alpha Bank Group
(€ million) Q2 2009 Q1 2009 Q4 2008 Q3 2008 Q2 2008 Q1 2008
Operating Income 625.6 541.4 523.2 607.4 624.2 591.0
Net Interest Income 442.3 402.6 436.2 464.5 455.9 442.0
Net fee and commission income 98.4 92.8 111.1 119.4 118.5 115.3
Income from Financial Operations 68.9 29.8 (45.0) (2.2) 23.2 17.1
Other Income 16.0 16.2 20.8 25.6 26.5 16.7
Operating Expenses 294.1 278.8 333.5 294.5 286.7 263.5
Staff Costs 139.2 138.9 153.0 151.3 146.0 139.3
General Expenses 131.4 117.1 156.4 120.7 118.9 104.0
Depreciation and amortization expenses 23.5 22.8 24.2 22.6 21.9 20.3
Ιmpairment losses 169.5 157.3 275.7 124.1 74.4 67.6
Profit before tax 162.1 105.3 (86.1) 188.8 263.1 259.9
Income Tax 33.5 20.0 30.0 34.1 53.3 54.7
Net Profit after tax 128.6 85.3 (56.1) 154.7 209.7 205.1
Net Profit attributable to shareholders 129.0 85.7 (55.8) 153.7 209.1 205.0
Net Interest Margin (net of impairment losses) 2.5% 2.4% 2.7% 3.0% 3.2% 3.2%
Cost / Income 47.0% 51.5% 63.8% 48.5% 45.9% 44.6%
Return on Equity After Tax and Minorities (ROE) 16.3% 11.3% (7.0%) 18.5% 25.4% 24.5%
17 Investor Relations Contacts
Mr. Marinos Yannopoulos, General Manager and CFO, +30210 3262 366, [email protected]
Mr. Michael Massourakis, Group Chief Economist, +30210 3262 828, [email protected]
Mr. Vassilios Psaltis, Head of Group IR, Corporate Development & Capital Management +30210 326 4 009, [email protected]
Mr. Dimitris Kostopoulos, Assistant Manager, Investor Relations, +30210 3264 195, [email protected]
Ms. Elena Katopodi, Investor Relations Officer, +30210 3264 184, [email protected]
Ms. Maria Chatzi, Investor Relations Officer, +30210 3264 112, [email protected]
Ms. Stella Traka, Investor Relations, +30210 3264 182, [email protected]
ALPHA BANK 40, Stadiou Street, 102 52 Athens, Greece
Internet : www.alpha.gr Reuters : ACBr.AT Bloomberg : ALPHA GA
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