Alpha Bank: Dividend 20%-30% of 2023 earnings

By Leonidas Stergiou

Achieving a single-digit Non-Performing Exposure (NPE) rate of 8.2% through 1.6 billion transactions, Alpha Bank, in Q2 2022, is turning the page on dealing with non-performing loans, having undergone a period of detailed planning and successful actions for the consolidation of its loan portfolio, noted Alpha Bank’s managing director, Mr. Vassilis Psaltis, to international analysts, during the presentation of the results of the first semester.

With a total capital adequacy ratio of 16% and with the strong results, combined with the prospects that open up in the future, they are optimistic indications for a dividend distribution from the profits of 2023, at a rate of 20-30%, according to the presentation of the management.

At Group level, non-performing loans (NPLs) fell by 89% from the end of 2017 to 3.2 billion in June 2022. Profit after tax was 117.3 million in the quarter and 243 million in the quarter. in the first half, fully in line with the Bank’s annual profitability targets, based on the Tomorrow plan, as noted to analysts.

Furthermore, there was a 6.9% increase in Net Interest Income from the first quarter of the year, to €302.7 million, and a steep increase of 60% in Net Interest Income from the bond portfolio, to annual base. The annual target has been set at 1.2 billion euros, as reported by the Group’s management.

In Q2 2022, the Bank achieved a Return on Equity (RoTBV) of 8.6%, remaining on track to achieve its target of over 6% return for the year.

Net credit growth since the beginning of the year reached 1.7 billion, with the new target for the year set at 2.2 billion euros. The credit expansion in the first half of the year returns the Bank to first place in business financing.

The bank’s management underlined during the presentation that the achievement of a single-digit ACE ratio in the second quarter of 2022, “is a central point of today’s results. With the ACE Ratio now standing at 8.2%, the Bank is turning the page on the issue of the reduction of “red loans”. The progress is confirmed by the overwhelming difference of the Index, which in December 2017, stood at 51.7%, with a total of Non-Performing Loans amounting to 29.3 billion, said Mr. Chanter.

As mentioned, five years later, Alpha Bank, quickly and efficiently implementing a detailed strategic plan, managed to reduce this amount by 89%, to 3.2 billion. This results in the consolidation of the Bank’s balance sheet and the return to profitability, allowing it to more vigorously continue its mission as a key financier of the Greek economy.

Single digit ACE rate

The above performance was based on the completion of 13 major securitization transactions and MEA sales, amounting to approximately 23.7 billion, from 2017 to date. The last two years were decisive, as in 2021 securitization and sale of MEA transactions were completed, amounting to 14 billion, while in 2022 additional transactions totaling 5 billion were launched.

These transactions, most notably Project Galaxy, amounting to 10.8 billion in 2021, were instrumental in achieving the target of a single-digit MEA Index as early as Q2 2022, six months faster than was foreseen in the original design.

6.9% increase in Net Interest Income

Net Interest Income returned to an upward trend, recording an increase of 6.9% from the first quarter of the year to 302.7 million, as the positive contribution from the growth of loan originations and securities income, offset the decrease that had occurred in the previous quarter due to balance sheet consolidation and increased funding costs.

In particular, through selective investments in high-quality securities, Net Interest Income from the bond portfolio has skyrocketed by 60% year-on-year – from 25 million in Q2 2021 to 40 million in Q2 2022. Overall, the incremental uptrend is expected to continue, as a result of rising interest rates, according to Alpha Bank management.

New loans

New loan disbursements in Greece totaled 1.9 billion in the second quarter, mainly in the trade, manufacturing, tourism and infrastructure sectors. It is noted that the total book value of the Grants portfolio includes the 5.5 billion senior bonds of the “Galaxy” and “Cosmos” MEA transactions.

The Group’s NPL portfolio (excluding senior notes of the “Galaxy” and “Cosmos” transactions) further strengthened, by 3% quarter-on-quarter or 0.9 billion, to 30.6 billion, as a result the increase in new disbursements to businesses and repayments in the Individual loan portfolio. It is noted that of the total loans, only 100 million euros related to loans to households in the first quarter and the same amount in the second quarter.

Domestic net credit expansion stood at 0.7 billion, with large disbursements of mainly Business loans. As a result, in the first half of the year, the Bank has already achieved 73% of its overall net credit expansion target for 2022.