Alpha Bank expansion plan in Romania and Cyprus

By Leonidas Stergiou

Alpha Bank plans to restructure its international operations at a rapid pace. The plan includes three main pillars:

– First, strengthening the presence in the rapidly growing Romanian market, through capital raising and possible cooperation.

-Second, development of the subsidiary in Cyprus, with the first step the liquidation from the red loans amounting to 2.2 billion euros

-Third, use of funds amounting to 600 million euros in the three years, from the sales of subsidiaries in Albania and London in 2022, for non-organic growth in Romania and the restoration of the leading role in Cyprus.

According to the strategic plan, the main market of Alpha Bank’s international activities is that of Romania, where it already holds a significant share, 4.5%, and is the fourth largest private bank. Alpha Bank considers it important to maintain a “critical” size in a fast-growing economy, such as Romania, which will also benefit from the Recovery Fund by the end of 2024.

Thus, in addition to using capital from sales in Albania and London, Alpha Bank aims to increase operations and revenue through loans to small and medium-sized enterprises and the digital transformation. The plan also envisages the scenario to take advantage of the strong concentration of the banking market in Romania and attractive valuations. This, according to analysts and investors, implies the possibility of cooperation and deal with a banking institution in Romania. Moreover, the target of increasing profitability by 11% in the three years, new loans of 2.1 billion euros (approximately 20% of the Group) and the target of a 1% contribution of Romania to the Group’s profits, justify the possibility of strategic cooperation within in 2022.

As for the funds that will be channeled from Albania and London, these are estimated at around 600m euros, in terms of risk-weighted assets. For example, the sale price of Albania was announced at 55 million euros, almost double the target for the Bank’s “Tomorrow” program. The sale of the subsidiary in London is in the phase of non-binding offers.The transaction is expected to be completed in the first half of 2022.

As far as Cyprus is concerned, the process of selling red loans is accelerating to 2.2 billion euros (compared to 0.4 billion that was the original plan), within the framework of the Sky project. Binding offers are expected within the month, while the transaction will close in the first half of 2022. The cost of Alpha Bank funds from the Sky program is estimated at less than 200 million euros.