Pricing for Protection Can Margin Expansion Offset Credit Risk

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1 Pricing for Protection Can Margin Expansion Offset Credit Risk Mr. Marinos Yannopoulos, General Manager and Board Member GOLDMAN SACHS EUROPEAN FINANCIALS CONFERENCE FRANKFURT 4 June 2009

2 A strong franchise with a regional footprint Alpha Bank at a Glance Geographical Footprint Founded in 1879 by the Costopoulos family which today controls 11% of the Bank Consistency in management ensuring firm implementation of Alpha Bank s strategy Branches Loans ( bn) Deposits ( bn) Pre-Provision Income ( m) Q Greece Q YoY 9.8% 12.0% 15.7% (23.7%) A leading franchise in Greece Romania 3rd largest branch network with 450 branches Serbia 39.5bn of customer loans, up 12% y-o-y 34.4bn of customer deposits, up 16% y-o-y Albania Fyrom Greece Bulgaria Well-established presence in SEE Cyprus 6.6bn of customer loans in SEE (excl. Cyprus), up 36% y-o-y SEE Contribution to Group 4.5bn of customer loans in Cyprus, up 23% y-o-y Immature branch network; Only 40% out of 619 branches is more than 2 years old Branches Loans ( bn) Deposits ( bn) Pre-Provision Income ( m) Q Q YoY 48.8% 30.6% 10.6% (1.4%) Q % 19% 15% 16% Q % 21% 14% 19% Note: Financial information as of 31 st March

3 Components of loans and liabilities margin Loans Margin Components Liabilities Margin Components Cost of Credit Cost of Platform Gross Profit Margin Sovereign Spread Bank Specific Spread Cost of Platform Deposit Spread 3

4 Greek banks at structural disadvantage (but so are others) Greece s Widening Spreads vs. the German Bund Comments 5-year Government Bond Yields as of 1/6/09 Germany Greece Austria Spain Portugal 3.60% 3.73% 3.59% 3.63% 3.70% 4.14% 4.31% 4.19% 4.18% 4.23% 3.69% 4.45% 3.95% 4.01% 4.13% 2.66% 4.22% 3.23% 3.11% 3.37% Low fiscal flexibility due to continuing widening in government deficit 156 Downward revision of GDP estimates for 2009 and Delays in implementation of public sector reforms as of 1/6/09 Source: Bloomberg Note: Spread on 5-year government bond yield Greece Austria Spain Portugal 4

5 High sovereign spreads reflected in wider corporate spreads Wholesale Wholesale Funding Funding Spreads Spreads Senior Senior Debt Debt (in (in bps) bps) Note: Illustrative spread relative the ECB rate on wholesale funding raised Corporate Bonds CDS* Ratings History Baa3 Baa1 BBB A3 BBB+ A1 A- A2 BBB+ 150 BBB- 100 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr Europe US S&P Moodys *i-traxx 5yr Euro Main CDS Index CDX N.America IG 5yr CDS Index 5

6 Alpha Bank benefiting from a strong deposit franchise Deposits / Assets (2008, in %) Funding Structure (2008, in %) Alpha Bank 65.2% 60.5% 41.2% Debt Securities Net Interbank 5% 14% 81% Sight & Savings 34% ( 13.9bn) Term 66% ( 27.1bn) Deposits 1, 3 2, 3 Alpha Bank Greek Peers International Peers Greek Peers 1 Net Interbank Wholesale Funding Cost (in m and in bps) Debt Securities 9% 15% Average Spread in bps 76% Deposits 43 9, , Schuldschein Loan ECP EMTN Debt Securities International Peers 2 Net Interbank 38% 6% 56% Deposits De c. 08 Source: Companies 2008 annual and interim reports and investor relations (1) Greek peers include NBG, EFG, Piraeus (2) International selected peers include Swedbank, Sabadell, Banesto, Bankinter and Banco Popular (3) Asset weighted average 6

7 Deposit spreads came under pressure in 2008 but improvement is already visible Incremental Loan Funding and Spreads (in m and in bps) 4Q 08 vs. 3Q 08 1Q 09 vs. 4Q 08 (in bps) Euribor Euribor Euribor (in bps) Euribor +295 Euribor Euribor (in m) (in m) 760 (1,528) 1, , Incremental Customer Loans Increase in Deposits ECB Funding Incremental Customer Loans Decrease in Deposits ECB Funding [ ] New Time Deposit Cost Spreads Greece 3 Sight [ ] & Savings Deposits Spread (Greece) vs ECB Rate Sep. 08 Oct. 08 Nov. 08 Dec. 08 Jan. 09 Feb. 09 Mar. 09 Apr. 09 May Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 ECB Rate Sight & Savings Spread (1) Spread on total loan book (vs. incremental balances) (2) Spread of Time Deposits in Greece (3) Excluding Alpha Bank bonds 7

8 Highly diversified loan portfolio with distinct defensive characteristics Gross Loan Portfolio Breakdown (1Q 2009, in bn and in %) Comments Euro Area 87%, 45.6bn Group Loans: 52.2bn Non-Euro Area 10%, 5.1bn Non-EU 3%, 1.5bn Greece & Cyprus Loan Portfolio 1 : 43.9bn Mortgages 29%, 12.9bn Consumer Credit 12%, 5.4bn Mortgages 15%, 1.0bn Business Loans 59%, 25.6bn SEE (ex Cyprus) Loan Portfolio: 6.6bn Business Loans 73%, 4.8bn 97% of loan exposure within EU countries SEE loan exposure only amounting to 13%, coupled with a strong defensive profile Total consumer lending (incl. SEE) only amounting to 12% Greek mortgages accounting for 25% of loan exposure Consumer Credit 12%, 0.8bn (1) Excluding UK 8

9 Asset quality deterioration stable Comments Group NPLs and NPL ratio Loan Portfolio Loss Given Default (1Q 2009, in %) (in m) (in %) 1,685 1,596 2,044 2,235 (in m) 5.1% (in %) 254 < 6.0% Balances (in bn) % 3.9% 4.3% 70% 33% 10% Mar E Business Loans Mortgages Consumer Loans Proactively Enhancing Coverage Group Impairment Losses Coverage 136% 130% 140% 139% (in m) (in bps) < % 79% 79% 77% 60 58% 53% 61% 60% Mar Mar E On-Balance Sheet Provisions Collaterals 9

10 Actively re-pricing the asset side Consumer Credit Spread (in bps) 12% [ ] Mortgages Spread (in bps) 27% 106bps 9bps Q Q Q Q Q Q Q Q Q Q Small Business Loans Spread (in bps) 12% Medium & Large Business Loans Spread (in bps) 49% 162bps 41bps Q Q Q Q Q Q Q Q Q Q Note: Indicated spread refer to Greece only 10

11 Track record in managing cost efficiently Cost / Customer Exposure (Avg. Loans + Avg. Deposits) Cost / Customer Exposure (Avg. Loans + Avg. Deposits), 2008 Benchmarking 1.58% 1.49% 1.46% New Branches since % 1.21% Q1 09 Addition of Branches 1.39% 1.74% 252 1, % Alpha Bank Greek Peers International Peers Dec Mar Source: Companies 2008 annual and interim reports and investor relations (1) Greek peers include NBG, EFG, Piraeus (2) International selected peers include Swedbank, Sabadell, Banesto, Bankinter and Banco Popular 11

12 Putting the individual pieces together: margin expansion does offset credit risk Liabilities Spreads Build-up (in bps) (265) Q Q Q1 09 (180) Q1 09 (105) Q Sovereign Spread Bank Rating Spread Cost of Platform for Attracting Deposits Liability Mix Spread Liabilities Margin Loans Spreads Build-up (in bps) Q Q Q Q1 09 Cost of Risk 2 Cost of Platform for Loan Profit Margin Loans Margin Distributing Loans 3 (1) Calculated as operating expenses, adjusted for interest income, over customer exposure (avg. loans and deposits), multiplied by % of deposits in customer exposure (2) Spreads calculated on Alpha Bank s average loans (3) Calculated as operating expenses, adjusted for interest income, over customer exposure (avg. loans and deposits), multiplied by % of loans in customer exposure 12

13 Conclusions A. Alpha Bank s suffering, from widened Greek sovereign spread is contained due to its limited reliance on wholesale funding B. Marginal deposit spread has come under pressure, but worse is already behind us, due to decisive actions undertaken C. Alpha Bank is successfully re-pricing its loan book and expects further improvement in this respect D. Proactive and prudent risk management continues to be an area of focus E. Alpha Bank has track record in maintaining an efficient platform 13

14 Appendix

15 Group Results by Business Unit ( million) Retail Commercial & Corporate SE Europe Investment Banking & Treasury Asset Management Other Group Jan-Mar Jan-Mar Jan-Mar Jan-Mar Jan-Mar Jan-Mar Jan-Mar Operating Income Net Interest Income Net fee and Commission Income (0.2) (0.4) Income from Financial Operations (5.0) Other Income Operating Expenses Staff Costs General Expenses Depreciation Impairment Losses (0.0) (0.0) 0.0 (0.0) Profit before tax (1.1) (2.8) Risk Adjusted Return on 8% Regulatory Capital 7% 51% 4% 20% 13% 29% 38% 20% 17% 70% 10% (*) 27% (*) Cost / Income Ratio 61% 45% 30% 28% 59% 53% 18% 36% 76% 55% 107% 135% 52% 45% (*) Including excess tier I regulatory capital of 74 mn in Q1 09 and 512 mn in Q

16 Alpha Bank Group ( million) Q Q Q Q Q % Change Q109-Q108 Operating Income (8.4%) Net Interest Income (8.9%) Net fee and commission income (19.5%) Income from Financial Operations 29.8 (45.0) (2.2) % Other Income (3.0%) Operating Expenses % Staff Costs (0.3%) General Expenses % Depreciation and amortization expenses % Ιmpairment losses % Profit before tax (86.1) (59.5%) Income Tax (63.5%) Net Profit after tax 85.3 (56.1) (58.4%) Net Profit attributable to shareholders 85.7 (55.8) (58.2%) Net Interest Margin (net of impairment losses) 2.4% 2.7% 3.0% 3.2% 3.2% Cost / Income 51.5% 63.8% 48.5% 45.9% 44.6% Return on Equity After Tax and Minorities (ROE) 11.3% (7.0%) 18.5% 25.4% 24.5% 16

17 Investor Relations Contacts Mr. Marinos Yannopoulos, General Manager and CFO, , Mr. Michael Massourakis, Group Chief Economist, , Mr. Vassilios Psaltis, Head of Group Investor Relations & Corporate Development, , vpsaltis@alpha.gr Mr. Dimitris Kostopoulos, Assistant Manager, Investor Relations, , dkostopoulos@alpha.gr Ms. Elena Katopodi, Investor Relations Officer, , ekatopodi@alpha.gr Ms. Maria Chatzi, Investor Relations Officer, , mchatzi@alpha.gr Ms. Stella Traka, Investor Relations, , straka@alpha.gr ALPHA BANK 40, Stadiou Street, Athens, Greece Internet Reuters Bloomberg : : ACBr.AT : ALPHA GA 17

Successful Delivery in a De-levering Environment

Successful Delivery in a De-levering Environment Marinos S. Yannopoulos Board member, CFO CHEUVREUX European Spring Large Cap Conference, Paris May 2008 1 Table of Contents Contents Pages I II III IV Alpha