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
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) Q1 08 410 35.2 29.8 273.2 Greece Q1 09 450 39.5 34.4 208.4 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) Q1 08 416 8.5 5.4 51.9 Q1 09 619 11.1 5.9 51.2 YoY 48.8% 30.6% 10.6% (1.4%) Q1 08 50% 19% 15% 16% Q1 09 58% 21% 14% 19% Note: Financial information as of 31 st March 2009 2
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
Greek banks at structural disadvantage (but so are others) Greece s Widening Spreads vs. the German Bund Comments 5-year Government Bond Yields 2006 2007 2008 2009 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 2010 13 10 3-1 17 9 5 4 77 44 32 26 67 51 43 Delays in implementation of public sector reforms 2006 2007 2008 2009 as of 1/6/09 Source: Bloomberg Note: Spread on 5-year government bond yield Greece Austria Spain Portugal 4
High sovereign spreads reflected in wider corporate spreads Wholesale Wholesale Funding Funding Spreads Spreads Senior Senior Debt Debt (in (in bps) bps) 285 75 30 27 29 30 2004 2005 2006 2007 2008 2009 Note: Illustrative spread relative the ECB rate on wholesale funding raised Corporate Bonds CDS* Ratings History 350 300 250 200 Baa3 Baa1 BBB A3 BBB+ A1 A- A2 BBB+ 150 BBB- 100 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 1995 1997 1999 2000 2007 2008 2009 Europe US S&P Moodys *i-traxx 5yr Euro Main CDS Index CDX N.America IG 5yr CDS Index 5
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 9,104 918 8,055 131 51 24 42 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
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 +265 1 Euribor Euribor +55 2-65 (in bps) Euribor +295 Euribor Euribor +110 2 +15 97 (in m) (in m) 760 (1,528) 1,6 2 5 1,14 8 389 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 225 197 172 127 100 113 94 36 28 Sep. 08 Oct. 08 Nov. 08 Dec. 08 Jan. 09 Feb. 09 Mar. 09 Apr. 09 May. 09 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 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
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
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) 32.1 14.1 6.0 3.7% 3.9% 4.3% 70% 33% 10% 2006 2007 2008 Mar. 09 2009E Business Loans Mortgages Consumer Loans Proactively Enhancing Coverage Group Impairment Losses Coverage 136% 130% 140% 139% (in m) (in bps) 254 83 227 542 157 114 121 < 130 78% 79% 79% 77% 60 58% 53% 61% 60% 2006 2007 2008 Mar. 09 2006 2007 2008 Mar. 09 2009E On-Balance Sheet Provisions Collaterals 9
Actively re-pricing the asset side Consumer Credit Spread (in bps) 12% [ ] Mortgages Spread (in bps) 27% 106bps 9bps 678 668 660 699 784 134 134 135 136 143 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Small Business Loans Spread (in bps) 12% Medium & Large Business Loans Spread (in bps) 49% 162bps 41bps 528 511 519 563 690 152 158 159 163 193 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Note: Indicated spread refer to Greece only 10
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 2004 614 1.39% 1.21% 2005 2006 2007 2008 Q1 09 Addition of Branches 1.39% 1.74% 252 1,069 0.90% 153 458 105 101 1 2 Alpha Bank Greek Peers International Peers Dec. 2004 2005 2006 2007 2008 Mar. 2009 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
Putting the individual pieces together: margin expansion does offset credit risk Liabilities Spreads Build-up (in bps) 40 130 (265) 5 120 25 45 25 2007 Q1 09 2007 Q1 09 2007 Q1 09 (180) Q1 09 (105) Q1 09 1 Sovereign Spread Bank Rating Spread Cost of Platform for Attracting Deposits 1 2007 2007 Liability Mix Spread Liabilities Margin Loans Spreads Build-up (in bps) 125 150 50 265 295 60 120 55 2007 Q1 09 2007 Q1 09 2007 Q1 09 2007 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
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
Appendix
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 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 Operating Income 231.2 315.5 106.3 105.1 123.7 111.1 53.7 27.6 12.2 23.7 14.3 8.0 541.4 591.0 Net Interest Income 186.8 271.4 83.9 82.8 98.9 73.9 29.3 7.8 3.0 4.3 0.5 1.8 402.6 442.0 Net fee and Commission Income 42.5 41.1 20.2 20.6 14.7 22.2 7.0 12.7 8.7 19.1 (0.2) (0.4) 92.8 115.3 Income from Financial Operations 1.7 2.9 1.5 1.1 7.3 12.5 13.7 5.2 0.3 0.3 5.3 (5.0) 29.8 17.1 Other Income 0.1 0.1 0.8 0.6 2.8 2.5 3.6 1.9 0.2 0.1 8.7 11.5 16.2 16.7 Operating Expenses 140.6 141.3 31.5 29.3 72.5 59.2 9.6 10.0 9.3 13.0 15.3 10.8 278.8 263.5 Staff Costs 70.9 72.7 20.0 18.3 32.5 31.0 4.7 4.7 4.7 5.5 6.0 7.1 138.9 139.3 General Expenses 60.9 59.4 9.0 8.6 33.6 23.0 4.5 4.4 4.1 7.0 5.0 1.5 117.1 104.0 Depreciation 8.8 9.1 2.5 2.4 6.4 5.2 0.3 0.9 0.5 0.5 4.3 2.1 22.8 20.3 Impairment Losses 72.1 48.7 61.5 9.8 23.6 9.0 0.0 0.0 (0.0) (0.0) 0.0 (0.0) 157.3 67.6 Profit before tax 18.5 125.5 13.3 66.0 27.6 42.9 44.0 17.6 2.9 10.7 (1.1) (2.8) 105.3 259.9 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 Q1 08 15
Alpha Bank Group ( million) Q1 2009 Q4 2008 Q3 2008 Q2 2008 Q1 2008 % Change Q109-Q108 Operating Income 541.4 523.2 607.4 624.2 591.0 (8.4%) Net Interest Income 402.6 436.2 464.5 455.9 442.0 (8.9%) Net fee and commission income 92.8 111.1 119.4 118.5 115.3 (19.5%) Income from Financial Operations 29.8 (45.0) (2.2) 23.2 17.1 74.7% Other Income 16.2 20.8 25.6 26.5 16.7 (3.0%) Operating Expenses 278.8 333.5 294.5 286.7 263.5 5.8% Staff Costs 138.9 153.0 151.3 146.0 139.3 (0.3%) General Expenses 117.1 156.4 120.7 118.9 104.0 12.7% Depreciation and amortization expenses 22.8 24.2 22.6 21.9 20.3 12.3% Ιmpairment losses 157.3 275.7 124.1 74.4 67.6 132.7% Profit before tax 105.3 (86.1) 188.8 263.1 259.9 (59.5%) Income Tax 20.0 30.0 34.1 53.3 54.7 (63.5%) Net Profit after tax 85.3 (56.1) 154.7 209.7 205.1 (58.4%) Net Profit attributable to shareholders 85.7 (55.8) 153.7 209.1 205.0 (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
Investor Relations Contacts Mr. Marinos Yannopoulos, General Manager and CFO, +30210 3262 366, myannopoulos@alpha.gr Mr. Michael Massourakis, Group Chief Economist, +30210 3262 828, mmassourakis@alpha.gr Mr. Vassilios Psaltis, Head of Group Investor Relations & Corporate Development, +30210 326 4 009, vpsaltis@alpha.gr Mr. Dimitris Kostopoulos, Assistant Manager, Investor Relations, +30210 3264 195, dkostopoulos@alpha.gr Ms. Elena Katopodi, Investor Relations Officer, +30210 3264 184, ekatopodi@alpha.gr Ms. Maria Chatzi, Investor Relations Officer, +30210 3264 112, mchatzi@alpha.gr Ms. Stella Traka, Investor Relations, +30210 3264 182, straka@alpha.gr ALPHA BANK 40, Stadiou Street, 102 52 Athens, Greece Internet Reuters Bloomberg : www.alpha.gr : ACBr.AT : ALPHA GA 17