Alpha Bank A E : H1 2021 Results

H1 2021 Results: Normalised1 Profit After Tax of Euro 213 million; Material improvement of CoR in Q2, ahead of FY 2021 target

Alpha Bank's CEO, Vassilios Psaltis stated:

"In May, we embarked on a game-changing transaction for the Greek banking landscape, as we decided to proceed with the first growth-oriented Share Capital Increase since 2008, raising Euro 800 million. With overwhelming support from our shareholders, we have very successfully completed this capital raising endeavour, and have firmly positioned our Bank as a leading partner to our customers, supporting them to benefit from the strong growth impetus from the forthcoming deployment of the RRF funds.

Our focus is now fully on the implementation of Project Tomorrow. Following the completion in June of the second largest rated NPE securitization in Europe (Project Galaxy), we are already making excellent progress on our plan to further reduce NPEs, by progressing multiple transactions in excess of Euro 8 billion in Greece and Cyprus even ahead of schedule, with an aim of reaching a 7% Group NPE ratio in 2022.

Our strong quality balance sheet delivered, once again, a best-in-class performance among our Greek peers in the ECB's 2021 Stress Test, with the highest ending CET1 FL ratio under the adverse scenario of 8.3%, jumping to 10.2% pro forma for the capital increase.

On the business development front, our strategy to partner with internationally reputable players in selected fields to deliver a compelling value proposition to our customers is progressing swiftly. Following the establishment of a new partnership with Generali in bancassurance, we shifted our attention to the area of payments, where we agreed with Nexi, a leading European paytech company, to enter into a long-term strategic partnership. Furthermore, in real estate, we are launching a process to identify the right partner to maximise our value potential in this field.

In the first half of the year, our commercial activity in Greece also excelled. Net credit expansion stood at Euro

0.4 billion, while we are building a strong pipeline that will allow us to meet, and even exceed, this year's target.

We have also made strong inroads in asset gathering: deposit additions reached Euro 1.3 billion, while we added Euro 0.8 billion of AUMs2. These intense efforts allowed for a first half core pre-provision income of Euro 463 million and a normalised profit after tax of Euro 213 million, vs. Euro 66 million last year. Our total capital ratio, post Galaxy and the capital increase, is at 17.4%, with CET1 at 14.8%, allowing us to credibly support the expansion of our loan book.

The strong recovery in tourism and the timely inflow of the first RRF funds give us confidence that Greece is back on a growth trajectory. Alpha Bank is on track to meet its ambitious targets and management is fully committed and excited to grasp all opportunities of this new phase of expansion."

1. Normalised Profit After Tax in H1 2021, adjusted for losses related to Project Galaxy of Euro 2.1 billion and excluding gains on financial transactions of Euro 91 million, non-recurring expenses of Euro 173 million, transactions related impairment losses of Euro 351 million and tax of Euro 21 million.
2. Non Money Market AUMs.

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Main Highlights

Solid Commercial Activity in Q2 2021

• Following the successful completion of its capital raise in June 2021, Alpha Bank is best placed to support its customers on the upcoming deployment of RRF funds,capitalising on its reputation as the Bank of choice among corporates and SMEs.
• New disbursements in Greece of Euro 2.3 billion in H1 2021, providing significant support to the economy. Domestic performing book expansion momentum maintained, up by 3% y-o-y or Euro 0.7 billion to Euro 24.4 billion. Net credit expansion stood at Euro 0.4 billion in H1 2021 and is on track to meet the FY 2021 target. Credit demand to further accelerate with significant pipeline of projects gaining pace in the second half of the year.
• Increased activity and the positive impact of partnerships in Q2 2021 generated Fees of Euro 105.4 million vs. Euro 84.3 million in Q1 2021; Sustained growth in Asset Management AuMs, primarily in non- money market funds, up by 52% 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 1.4 billion q-o-q to Euro 39.3 billion, reflecting inflows from core deposits that now account for 79% of domestic deposits.

Trends in Q2 2021 confirm Alpha Bank is on course to meet near-term target to deliver a 5% RoTBV1 in 2021

• Core PPI2 stood at Euro 225.9 million, down by 4.5% q-o-q, with improved Fee Income performance offset by lower NII and increased costs.
• Net Interest Income was 7.2% lower q-o-q at Euro 371 million due to a lower retrospective TLTRO-III benefit and the derecognition of Galaxy.
• Recurring Operating expenses amounted to Euro 260.9 million, up by 1% q-o-q, mainly as a result of higher non Staff costs.
• Pre-ProvisionIncome generation of Euro 243.2 million vs. Euro 137.5 million in the previous quarter, as Euro 160.1 million of Restructuring Costs3 and other one-off charges materially impacted Q1.
• In Q2 2021, impairment losses on loans decreased significantly to Euro 124.6 million vs. Euro 390.6 million in the previous quarter (-68.1%q-o-q), driving the Cost of Risk to 1.3% with the underlying4 CoR, below the 1% mark.
• In H1 2021, Normalised5 Profit After Tax stood at Euro 213 million.
• Including the Galaxy losses6, reported Profit/(Loss) After Tax at Euro -2.3 billion in H1 2021, in line with the Bank's estimates and capital plan.

Capital - Asset Quality and Liquidity Position

• Successfully completed a Euro 0.8 billion Share Capital Increase in July 2021, the first growth-oriented capital action in the Greek banking sector since 2008. Post completion of Galaxy and equity raise, our capital position remains solid with Total Capital Ratio at 17.4% and CET1 Ratio at 14.8%, while the respective Fully loaded Ratios stand at 15.4% and 12.7%. At the end of June 2021, the Group's Tangible Equity Book post SCI stands at Euro 6.2 billion.

1. RoTBV on Normalised net income.
2. Net Interest Income and Core PPI in Q1 2021 includes Euro 24.7 million TLTRO-III benefit not accrued in H2 2020.
3. In H1 2021, Restructuring charges are mainly attributed to Euro 97.2 million provision for VSS cost and Euro 19.2 million to replacement of infrastructure, while Other one-offs mainly to Euro 26.8 million goodwill and intangible assets impairment.
4. Excluding impairment losses allocated to portfolio transactions and Covid related impairments.
5. Normalised Profit After Tax in H1 2021, adjusted for losses related to Project Galaxy of Euro 2.1 billion and excluding gains on financial transactions of Euro 91 million, non-recurring expenses of Euro 173 million, transactions related impairment losses of Euro 351 million and tax of Euro 21 million.
6. After Tax Galaxy impact, including Cepal deconsolidation ("Project Aries"), of Euro 2.1 billion.

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• Best-in-classperformance among Greek systemic banks in the ECB's 2021 Stress Test exercise, consistent with previous exercise, as Alpha Bank registered the highest ending CET1 FL ratio for year- end 2023 under both baseline and adverse scenarios of 17.3% and 8.3%, respectively. It is noted that, the exercise did not take into consideration the Bank's Euro 0.5 billion Tier II issuance, completed in
  March 2021, the recent Euro 0.8 billion share capital raise, that would further support capitalisation under stress test scenarios, or the balance sheet de-risking achieved through the Galaxy Transaction.
• NPE ratio in Greece has nearly halved within six months to 23.8% (-44%y-t-d), on track to reach a single- digit NPE ratio by mid-2022.
• NPE formation flat y-t-d.
• Group NPE cash coverage increased to 54% and in Greece to 49%. Group NPL coverage ratio stands at 84% while total coverage including collateral came to 126%.
• The Group's Loan to Deposit Ratio materially improved to 83% at the end of June 2021 versus 96% the year prior, enabling the Bank to address the credit demand expected under the utilization of RRF funds that will take effect in H2 2021, while the Group's Liquidity Coverage Ratio (LCR) surged to 164%, far exceeding the regulatory threshold.
• ECB funding stable q-o-q at Euro 12.9 billion or 18% over Total Assets, with a significant positive contribution on Net Interest Income from the benefit of -1% TLTRO cost.

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KEY FINANCIAL DATA

	(in Euro million)	Six months ending (YoY)	Quarter ending (QoQ)
			30.06.2021	30.06.2020	YoY (%)	30.06.2021	31.03.2021	QoQ (%)
	Net Interest Income
	770.6	771.9	(0.2%)	371.0	399.6	(7.2%)
	Net fee & commission income	189.7	166.7	13.8%	105.4	84.3	25.1%
	Income from financial operations1	91.3	217.7	…	30.4	60.9	…
	Other income	21.5	12.5	…	10.4	11.1	…
	Operating Income	1,073.1	1,168.7	(8.2%)	517.2	555.9	(7.0%)
	Core Operating Income		981.8	951.0	3.2%	486.9	495.0	(1.6%)
	Staff Costs	(211.9)	(213.4)	(0.7%)	(105.6)	(106.3)	(0.6%)
	General Administrative Expenses	(226.8)	(212.5)	6.8%	(117.9)	(109.0)	8.2%
	Depreciation & Amortisation	(80.6)	(75.9)	6.2%	(37.4)	(43.1)	(13.2%)
	Recurring Operating Expenses		(519.3)	(501.8)	3.5%	(260.9)	(258.4)	1.0%
	Extraordinary costs2	(173.1)	(18.0)	…	(13.0)	(160.1)	…
	Total Operating Expenses	(692.4)	(519.8)	33.2%	(274.0)	(418.4)	(34.5%)
	Core Pre-Provision Income		462.5	449.3	2.9%	225.9	236.6	(4.5%)
	Pre-Provision Income		380.7	649.0	(41.3%)	243.2	137.5	76.9%
	Impairment Losses on loans	(515.1)	(568.1)	(9.3%)	(124.6)	(390.6)	(68.1%)
	Other Impairment Losses	(15.2)	(12.7)	…	(9.6)	(5.6)
	Profit/ (Loss) Before Income Tax		(149.6)	68.2	…	109.0	(258.7)	…
	Income Tax	(36.8)	21.1	…	(13.4)	(23.4)	…
	Profit/ (Loss) After Income Tax	(186.5)	89.2	…	95.6	(282.1)	…
	Profit After Tax attributable to Equity
	owners of the Bank	(186.5)	89.2	…	95.7	(282.2)	…
	Galaxy impact (After Income Tax)	(2,140.1)			(2,140.1)
	Profit/ (Loss) After Tax attributable to Equity
	owners of the Bank post Galaxy		(2,326.6)	89.2		(2,044.4)	(282.2)
	Normalised3 Profit After Tax		212.7	65.6		104.4	108.2
			30.06.2021	30.06.2020		30.06.2021	31.03.2021
	Net Interest Margin (NIM)
	2.2%	2.3%		2.1%	2.3%
	Cost to Income Ratio (Recurring)	52.9%	52.8%		53.6%	52.2%
	Common Equity Tier 1 (CET1) 4		14.8%	17.2%		14.8%	16.0%
	Total Capital Ratio	17.4%	18.3%		17.4%	18.3%
	Loan to Deposit Ratio (LDR)	83%	96%		83%	90%
			30.06.2021	31.03.2021	31.12.2020	30.09.2020	30.06.2020	YoY (%)
	Total Assets		70,468	71,168	70,057	68,564	68,620	2.7%
	Net Loans	37,500	39,376	39,380	39,808	39,428	(4.9%)
	Securities	10,376	10,012	10,081	10,473	9,907	4.7%
	Deposits	45,032	43,612	43,831	41,657	40,868	10.2%
	Equity	5,987	7,945	8,289	8,415	8,357	(28.4%)
	Tangible Book Value5		6,196	7,394	7,687	7,834	7,835	(20.9%)
			Group			Greece
	Asset Quality	30.06.2021	31.03.2021		30.06.2021	31.03.2021
	Non-Performing Loans (NPLs)	7,279	15,349		5,203	13,335
	Non-Performing Exposures (NPEs)	11,364	21,322		8,815	18,745
	NPL ratio (%)	16.7%	30.8%		14.1%	30.8%
	NPE ratio (%)	26.1%	42.8%		23.8%	43.3%

1 In published financial statements, Galaxy impact and Cepal deconsolidation of Euro 2.1 billion (Pre-Taxation) booked in Trading Income line of Q2 2021. After Tax, impact stands at Euro 2.1 billion.

2 In H1 2021, Restructuring charges are mainly attributed to Euro 97.2 million provision for VSS cost and Euro 19.2 million to replacement of infrastructure, while Other one-offs mainly to Euro 26.8 million goodwill and intangible assets impairment.

3 Normalised Profit After Tax in H1 2021, adjusted for losses related to Project Galaxy of Euro 2.1 billion and excluding gains on financial transactions of Euro 91 million, non-recurring expenses of Euro 173 million, transactions related impairment losses of Euro 351 million and tax of Euro 21 million. In H1 2020, Normalised Profit After Tax adjusted for gains on financial transactions of Euro 218 million, adjustment for Covid-19 related impairments of Euro 234 million, non-recurring expenses of Euro 19 million and tax of Euro 59 million.

1. For Q2 2021, capital figures include the Share capital increase of Euro 0.8 billion completed in July 2021.
2. Tangible Equity in Q2 2021 is After Share Capital increase of Euro 0.8 billion completed in July 2021.

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Growth expectations revised upwards due to the weaker than expected recession in Q1 2021 and the upward trend of key economic indicators from Q2 onwards

Business development initiatives strengthen franchise positioning

Key Developments and Performance Overview

Domestic economic activity is expected to bounce back, re-entering a strong recovery phase marked by the attraction of fresh investment and the closing of the investment gap accumulated during the previous decade. Real GDP is expected to return to positive growth rates from the second quarter of the current year onwards, which is already reflected in the evolution of several leading economic indicators. Mobility related to retail services and recreation activities, as well as in transit stations and workplaces, increased sharply during the second quarter. Business confidence in all sectors of the economy is in an expansionary phase as of July 2021, with business confidence in construction reaching its highest level (148.6 units) since April 2000.

Risks are skewed to the upside in the long run mainly due to the incoming RRF funding which is expected to be activated from the second half of 2021 onwards. The National Recovery Plan, combined with a structural reform agenda - that aims to improve fundamentals, strengthen infrastructure and address institutional weaknesses - is expected to provide a unique opportunity for revitalizing the Greek economy and transforming its productive model towards an investment- driven growth pattern with sustainable growth rates. In the short run, downside risks relate to the "Delta" variant and the rapid spread of the fourth wave of the pandemic in the autumn as well as the saturation of the vaccination programmes across the EU.

Following the conclusion of Project Galaxy - the second largest rated NPE securitization in Europe - in June 2021, Alpha Bank announced in Q3 2021 the implementation of two business development initiatives in the context of its updated business plan, "Project Tomorrow". These initiatives are: firstly, the selection of a strategic partner to pursue a JV through the listed subsidiary Alpha Astika Akinita so as to capture the positive momentum in the Greek real estate market and form a unique investment proposition ("Project Skyline"); and secondly, the formation of a long term partnership for the Bank's merchant acquiring business with Nexi SpA ("Project Prometheus"). Both transactions - which are targeted to be signed within 2021 - are expected to be capital accretive and will strengthen the Group's franchise positioning, generating management fees and profits for the Group.

Solid capital base with Total Capital Ratio at 17.4% and CET1 at 14.8% post Galaxy completion and SCI

At the end of June 2021, Alpha Bank's Total Capital Ratio stood at 15.5%, down by 285bps q-o-q, negatively impacted by the Galaxy impact, booked in Q2 2021, as well as an increase in credit risk and partly counterbalanced mainly by the quarterly result. In July 2021, the Group successfully completed the first growth- oriented Share Capital Increase in the Greek banking sector since 2008, raising Euro 0.8 billion and strengthening its Total Capital Ratio to 17.4%, providing a buffer of Euro 1.3 billion over our Overall Capital Requirement (OCR) of 14%1.

Tangible Equity stood at Euro 5.5 billion at the end of June 2021, or Euro 6.2 billion pro-forma for the SCI. Tangible Book Value per Share came to Euro 3.6 and adjusted to Euro 2.6 post-SCI.

RWAs at the end of June 2021 amounted to Euro 38.1 billion, down by 14% q-o-q or Euro 6.2 billion, reflecting the derecognition of Galaxy which was fully booked in Q2 2021.

1According to our Overall Capital Requirement (OCR) pre ECB's Relief Measures. Excluding Counter Cyclical Buffer of 2.5% and OS-II Buffer of 0.5%, the Buffer over OCR (11%) stands at Euro 2.5 billion.

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