9M 2020 Results: Improved operational performance; Core Pre-Provision Income up by 4% y-o-y
Profit After Tax of Euro 130.4 million; Total CAD at 18.3%
Alpha Bank's CEO, Vassilios Psaltis stated:
"The pandemic continues to induce a significant level of volatility to the economy. Following the decision of our government to enter into a second nation-wide lockdown, relevant news-flow on the effe-tiveness of vaccines has provided significant underpinning to confidence. In these unprecedented circumstances, we held a steady course in our Project Galaxy, a Euro 10.8 billion NPE securitization, accompanied by the sale of our wholly owned servicer, Cepal Hellas. Despite a most challenging environment, we received two binding offers from international high-quality investors and we selected a preferred bidder, with a view to sign our transaction within the year. Shedding off these legacy assets will transform our balance sheet, as it will reduce our NPLs in Greece by 62%, to Euro 4.8 billion, within our envisaged capital envelope.
Our operational transformation and digitalisation are progressing well. The strong support to our Customers, through to October 2020, gets manifested by the outstanding repayment moratoria in Greece of Euro 4.2 billion and by the new loans of Euro 4.6 billion we provided them. Our sound liquidity and capital position, at 18.3%, empower us to play a leading role in supporting our Customers in achieving an early return to normal economic activity.
In the nine months, we managed to increase our core pre-provision income by 4% year-on-year, with a continuous focus on our cost base. This resilient performance allowed us to comfortably absorb loan impairments of Euro 737 million, of which circa 40% are Covid-related, thus delivering a profit of Euro 130 million, up by 42% year-on-year.
In these extremely challenging conditions, I want to thank our Employees for their commitment and all the hard work they are putting in to service our Customers so that we manage the current difficulties together and we position our Bank to come out as a clear winner from this crisis."
1 Press Release 9M 2020 Results
Main Highlights
Alpha Bank is nearing completion of Project Galaxy, the largest NPE securitisation in Greece
- Galaxy has entered the final stages of the transaction process; following an assessment of the binding offers received, Davidson Kempner European Partners LLP was declared as the preferred bidder. Finalization of the agreement is targeted by year-end, with the transaction completion, anticipated within Q1 2021.
- Post the acquisition of 100% of Cepal, the first independent servicing company in Greece, in July 2020, the Carve-out of Alpha Bank's NPE Management Unit onto CEPAL will have been completed by the end of this month, ensuring a seamless transition. Employees' acceptance of their voluntary transfer to CEPAL currently exceeds 90%.
- HAPS-compliantcredit pre-ratings have been received and applications for the provision of guarantees by the Greek State, on Senior notes of an amount up to Euro 3.7 billion, have been submitted for Euro 10.8 billion gross book value, securing key financials of the Transaction.
- Post Galaxy, Alpha Bank's NPL ratio in Greece will be reduced to 13%1 over total loans, while its NPE ratio will be reduced to 24%1.
Alpha Bank remains focused on supporting its Customers throughout the pandemic
- Strong commitment to supporting the Greek economy through the provision of Euro 4.6 billion in new credit through to October 2020.
- In September 2020, outstanding moratoria extended to our performing corporate and retail Customers in Greece amounted to Euro 4.2 billion.
-
Bank participation in the "State Guaranteed" Sponsored Program for Businesses, with disbursements of Euro 0.7 billion in the year-to-date and new lending to SMEs of Euro 0.4 billion through the
"Entrepreneurship Fund II" Business Program. - Private sector deposits up by Euro 0.8 billion in Q3 2020, mainly from Businesses.
- The acceleration of digital penetration witnessed in Q2 was sustained post lockdown; the Bank registered circa 260K new e-banking subscribers in 9M 2020, while the share of monetary transactions performed in Q3 2020 through digital channels remained elevated at 92.7%, stable q-o-q, as opposed to 87.3% a year ago.
Solid and resilient operating performance in 9M 2020 despite macro headwinds
- Strong Core PPI performance in 9M 2020 at Euro 656.9 million, up by 3.6% y-o-y, driven by resilient core revenues and improved operational efficiencies.
- Solid Pre-Provision Income generation of Euro 892.5 million in 9M 2020, up by 1.5% y-o-y or 3% over Net Loans on an annualised basis, allowed for the absorption of frontloaded impairments in 9M 2020.
- Impairment losses on loans in 9M 2020 of Euro 736.6 million vs. Euro 750 million last year, or 2.5% over net loans, materially affected by additional impairments of circa 287 million recognised by the Bank to account for the anticipated Covid-19 impact.
- Despite Covid-19 headwinds, Profit After Tax stood at Euro 130.4 million in 9M 2020 vs. Euro 91.6 million over the same period in 2019.
Capital, Risk and Liquidity Position
-
Robust capital base, with Total CAD ratio at 18.3%, stable q-o-q, with capital buffer standing at Euro 3.42 billion vs. minimum OCR threshold. At the end of September 2020, the Group's Tangible Equity Book
Value amounted to Euro 7.8 billion with the Leverage ratio standing at 12.4% vs. 11.6% in the previous quarter. - Group deposits up by Euro 1.3 billion in the 9M 2020 period; Loan to Deposit Ratio at the end of September 2020 declined to 96% from 100% the previous year, while the Group's Liquidity Coverage Ratio (LCR) stood at 118.3%.
- TLTRO III participation at Euro 11.9 billion, expected to provide a substantial improvement to funding cost.
- Our NPE stock in Greece stood at Euro 18.3 billion, stable q-o-q due to the temporary halt in liquidations, lower curings and repayments. Group NPEs contracted by Euro 1.3 billion y-o-y.
- Pro-formaratios are as of 30.9.2020 taking into account the senior notes.
- Excluding OS-II 0.5% Buffer
2 Press Release 9M 2020 Results
KEY FINANCIAL DATA
(in Euro million) | Nine months ending (YoY) | Quarter ending (QoQ) | |||||||
30.09.2020 | 30.09.2019 | YoY (%) | 30.09.2020 | 30.06.2020 | QoQ (%) | ||||
Net Interest Income | |||||||||
1,153.6 | 1,160.1 | (0.6%) | 381.8 | 390.7 | (2.3%) | ||||
Net fee & commission income | 251.5 | 247.0 | 1.8% | 84.8 | 77.5 | 9.5% | |||
Income from financial operations1 | 256.2 | 277.4 | … | 41.9 | 128.6 | … | |||
Other income | 19.5 | 18.3 | … | 7.0 | 2.6 | … | |||
Operating Income | 1,680.9 | 1,702.8 | (1.3%) | 515.5 | 599.3 | (14.0%) | |||
Core Operating Income | 1,424.6 | 1,425.4 | (0.1%) | 473.6 | 470.7 | 0.6% | |||
Staff Costs | (321.7) | (341.4) | (5.8%) | (108.0) | (106.7) | 1.2% | |||
General Administrative Expenses | (330.9) | (342.5) | (3.4%) | (116.4) | (108.4) | 7.4% | |||
Depreciation & Amortisation | (115.1) | (107.2) | 7.4% | (39.2) | (38.4) | 2.3% | |||
Recurring Operating Expenses | (767.7) | (791.2) | (3.0%) | (263.6) | (253.5) | 4.0% | |||
Extraordinary costs | (20.6) | (32.4) | … | (5.0) | (7.4) | … | |||
Total Operating Expenses2 | (788.4) | (823.6) | (4.3%) | (268.6) | (260.8) | 3.0% | |||
Core Pre-Provision Income | 656.9 | 634.2 | 3.6% | 210.0 | 217.3 | (3.4%) | |||
Pre-Provision Income | 892.5 | 879.2 | 1.5% | 247.0 | 338.5 | (27.0%) | |||
Impairment Losses on loans | (736.6) | (750.0) | (1.8%) | (168.6) | (260.6) | (35.3%) | |||
Other Impairment Losses | (14.7) | 10.5 | … | (2.0) | (3.7) | ||||
Profit/ (Loss) Before Income Tax | 141.2 | 139.7 | 1.1% | 76.4 | 74.2 | 3.1% | |||
Income Tax | (10.6) | (48.2) | … | (32.5) | 23.4 | … | |||
Profit/ (Loss) After Income Tax | 130.6 | 91.5 | 42.7% | 43.9 | 97.5 | … | |||
Profit/ (Loss) After Tax attributable to | |||||||||
Equity owners of the Bank | 130.4 | 91.6 | 42.4% | 43.8 | 97.5 | (55.0%) | |||
30.09.2020 | 30.09.2019 | 30.09.2020 | 30.06.2020 | ||||||
Net Interest Margin (NIM) | |||||||||
2.3% | 2.5% | 2.2% | 2.3% | ||||||
Cost to Income Ratio (Recurring) | 53.9% | 55.5% | 55.7% | 53.8% | |||||
Common Equity Tier 1 (CET1) | 17.2% | 17.2% | 17.2% | ||||||
Total Capital (Total CAD) | 18.3% | 18.3% | 18.3% | ||||||
Loan to Deposit Ratio (LDR) | 96% | 100% | 96% | 96% | |||||
30.09.2020 | 30.06.2020 | 31.03.2020 | 31.12.2019 | 30.09.2019 | YoY (%) | ||||
Total Assets | 68,565 | 68,622 | 66,632 | 63,458 | 62,725 | 9.3% | |||
Net Loans | 39,808 | 39,428 | 39,767 | 39,266 | 39,451 | 0.9% | |||
Securities | 10,473 | 9,907 | 9,058 | 8,703 | 8,475 | 23.6% | |||
Deposits | 41,657 | 40,868 | 41,894 | 40,364 | 39,612 | 5.2% | |||
Equity | 8,415 | 8,357 | 8,236 | 8,432 | 8,527 | (1.3%) | |||
Tangible Book Value | 7,834 | 7,835 | 7,714 | 7,939 | 8,050 | (2.7%) |
- Trading Income in Q3 2020 includes Euro 14.3 million gain resulted from the valuation of fair value of CEPAL before the full acquisition of the Company's control.
- CEPAL's consolidation impacted Total Expenses by Euro 2.6 million.
3 Press Release 9M 2020 Results
Considerable impact from Covid-19 and National lockdown on 2020 GDP in line with rest of EU and milder rebound in 2021 amid second wave; optimism growing around economic upside of an effective vaccine and NGEU funds
Key Developments and Performance Overview
The Greek economy experienced a historic recession in the second quarter with a 15.2% y-o-y decline in GDP due to the pandemic and the associated containment measures. Despite the sharp GDP contraction, the swift policy response supported employment. Residential property price growth dynamics remained resilient in the first half of 2020 with house prices rising by 5.4% y-o-y. The vulnerability of the Greek economy to shocks triggered by travel restrictions and social distancing measures is expected to determine the depth of the recession in the second half of the current year. More specifically, the trade balance is also expected to register a record decline in 2020, with net exports contributing negatively to GDP growth. Exports of services in particular are expected to remain well below their steady state as tourist arrivals are anticipated to only partially recover in 2021.
The new nationwide lockdown in November is expected to further weaken business activity and engender a GDP contraction for 2020 of around 10%, or even greater if there is an extension of the containment measures, also bringing down the GDP estimate for 2021. On the upside, as findings on the vaccine front seem enormously positive - and if the mass of the population is vaccinated quickly
- then, thanks to the better outlook and the confidence it brings with it, a potentially virtuous circle could take effect next year. Economic activity in 2021 is expected to be supported by the additional fiscal measures, while earlier-than-expected funding from the Recovery and Resilience Facility may prove a solid ground for a strong upside. The budgetary costs of the crisis will continue accumulating, but the fiscal deficit is expected to narrow in 2021 and 2022.
Having declared a preferred bidder, the Galaxy securitisation has entered the final stages of the transaction process
Project Galaxy has entered the final stages of the transaction process, as the Bank following an assessment of the binding offers submitted in the context of the bidding process, declared Davidson Kempner European Partners LLP as the preferred bidder. The Bank is targeting the finalization of the agreement by year- end, with the transaction completion, following the receipt of all necessary approvals, anticipated within Q1 2021. To this end, further progress has been made across other important transaction workstreams. Applications submitted under HAPS that relate to the provision of guarantees, on Senior notes of an amount up to Euro 3.7 billion, by the Greek State for securitisations of Euro 10.8 billion Gross Book Value. In parallel, the Bank has received preliminary credit ratings for the senior notes of all three SPVs. Moreover, the carve-outof the Bank's NPE Management Unit onto CEPAL will have been completed by the end of this month, ensuring a seamless transition.
Post Galaxy, Alpha Bank's NPL ratio in Greece down to 13% over total loans
Following the first Covid-19 lockdown, Alpha Bank registered an unprecedented increase in digital sales penetration
The completion of Project Galaxy will deliver a material improvement in the Bank's Asset Quality. More specifically, Alpha Bank's NPL ratio in Greece will be reduced to 13%, while its NPE ratio will fall to 24%. This frontloaded de-risking of the Balance Sheet will allow Alpha Bank to normalise its cost of risk and continue its transformation plan towards its stated profitability targets.
During the Covid-19 lockdown, technology and digital banking were instrumental in accommodating the changing needs of Customers. To this end, the migration of Alpha Bank's Clientele to digital channels, which accelerated in the previous quarter, has been sustained post-lockdown. More specifically, the share of monetary transactions performed through digital channels remained elevated at 92.7%, stable q-o-q, as opposed to 87.3% a year ago. Additionally, new e-banking subscribers reached 260,000 year-to-date, while in 9M 2020 the share of new e- banking subscribers through mobile onboarding (without visiting a Branch) almost doubled to 46% vs. 24% in the same period in 2019.
4 Press Release 9M 2020 Results
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Alpha Bank SA published this content on 25 November 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 25 November 2020 16:06:02 UTC