• Recurring Earnings: EUR437 million for the first half of 2024.
• Return on Tangible Equity: 13.6%.
• Earnings Per Share: EUR0.18.
• Organic Capital Generation: 118 basis points, reaching 14.8% CET1 ratio, or 16.6% pro forma.
• Loan Growth in Wholesale: 6% year-over-year.
• Mutual Funds Growth: Up 50% in the last year.
• Net Interest Income: Expected to be marginally down versus 2023.
• Fees: Expected to be above EUR400 million for 2024.
• Cost of Risk: Expected to be below 70 basis points for the year.
• NPE Ratio: Expected to end the year at circa 4.5%.
• Normalized Profit: EUR214 million for the quarter, EUR437 million for the first half, up 23% year-on-year.
• Tangible Book Value Growth: 11% year-on-year.
• Assets Under Management Growth: 40% year-on-year.
• Customer Funds Growth: 8% year-on-year.
• Organic Capital Generation for Q2: 58 basis points.

• Warning! GuruFocus has detected 3 Warning Signs with ALBKF.

Release Date: August 02, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Alpha Services and Holdings SA (ALBKF) reported strong recurring earnings of EUR437 million for the first half of 2024, translating to a 13.6% return on tangible equity.
• The company achieved investment-grade status after 14 years, marking a significant milestone and external validation of its financial health.
• Alpha Services and Holdings SA (ALBKF) has shown robust growth in assets under management, with mutual funds increasing by 50% over the past year.
• The partnership with UniCredit is progressing well, with the merger of Romanian subsidiaries and the introduction of UniCredit mutual funds in the Greek market.
• The company has successfully reduced its non-performing exposure (NPE) ratio to 4.7%, already below the original guidance of 5% for the end of the year.

Negative Points

• Technical issues during the earnings call led to a portion of the CEO's presentation not being recorded.
• Loan growth in the wholesale segment is running at 6% year-over-year, which is less than the market growth, indicating a slower pace compared to peers.
• There is some spread pressure in the market, which could impact future profitability.
• The company is experiencing higher costs in retail and wholesale funding, impacting net interest income.
• Operating expenses have increased due to wage inflation and higher costs in IT and marketing, which could pressure future profitability.

Q & A Highlights

Q: Can you elaborate on the cost of risk guidance being below 70 basis points for the full year, given the first half performance? Also, what are your plans for excess capital use, considering the high levels of organic capital generation? A: We expect a slight increase in the cost of risk in the second half due to seasonality and external uncertainties. Regarding capital deployment, our focus remains on organic growth, but we are open to inorganic opportunities if they meet strict financial criteria. The current strategy includes a mix of cash dividends and buybacks due to market valuation disconnects.

Q: Why does Alpha Bank's loan growth appear slower compared to peers, even after accounting for one-offs? Is this due to pricing or timing issues? A: Our loan growth is impacted by syndications and debt-to-equity transactions, but we are confident in meeting our full-year guidance. We prioritize profitability over volume growth, ensuring returns on deployed capital exceed thresholds. The Greek market's focus on investment loans, which require longer incubation periods, also affects timing.

Q: Are there more opportunities for NPE sales, and how does your NPE portfolio look now? Also, is there a shift from term deposits to assets under management (AUM)? A: We see opportunities for further NPE reduction, but will only pursue them if economically viable. There is a migration from deposits to AUM, which is factored into our projections. We expect time deposits to account for a smaller percentage of total deposits than initially anticipated.

Q: What is driving the reduced net interest income (NII) sensitivity, and how is Alpha Bank gaining market share in AUM? A: The reduced NII sensitivity is due to increased hedges and fixed-rate securities, which lower the impact of rate changes. Our market share gain in AUM is driven by a strong product mix, increased relationship managers, and strategic partnerships, such as with UniCredit, enhancing our offerings.

Q: With a pro forma CET1 ratio of 16.6%, why is the full-year guidance at 16%? Also, what is the Basel IV impact? A: The 16% guidance accounts for potential delays in closing pending transactions. The Basel IV impact is a 20 basis point day-one effect and a 40 basis point fully loaded impact, phased in over a long period.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.