ALPHA BANK: AGENDA 2010 REVISITED Retail Banking G. Aronis, Executive General Manager Capital Markets Day Bucharest, April 20, 2007
Strategic Emphasis on Retail Banking Rationalize product offering Apply sales oriented approach Leverage on branch network: competitive advantage Streamline multi-channel banking Improve risk management Centralize credit approval Further enhance customer service quality 2
Action Plan is Already Paying Off in Household Lending Mortgages & Consumer Credit Balances ( billion) 5.3 3.9 30% CAGR 2004-2006 6.9 5.0 11.6 9.4 8.4 6.8 1.4 1.9 2.7 3.2 2003 2004 2005 2006 Consumer Credit Mortgages 3
Which is Further Evidenced by a Very Strong Q1 in 2007 (yoy growth) ( million) 126 21.4% 153 4.6% 160 30% 208 Q1 2004 Q1 2005 Q1 2006 Q1 2007 Consumer Credit (yoy growth) ( million) 174 83.9% 320 2.2% 327 17.8% 385 Q1 2004 Q1 2005 Q1 2006 Q1 2007 Mortgages 4
Setting the Stage for Meeting the 2010 Targets CAGR 20% - 22% ( billion) 3.2 2006 2010 Consumer Credit ( billion) 8.4 CAGR 17% - 19% 2006 2010 Mortgages 5
Mortgages: Rapid Growth From 9.5% market share in 2001 to almost 15% in 2006 Outstandings and Growth (yoy) - Greece - Main points 2006 - Market Market growth peaked at the end of 2005 and has been declining since (spreads bps)(*) 236 235 233 31.2% 219 27.3% 197 23.8% Aggressive competition from smaller players attempts to shift market balance Competition focused on mortgage refinancing ( billion) 36.3% 6.8 34.2% 7.1 7.5 7.9 8.4 Customer preference shifts to fixed rates Dec. 2005 Mar. 2006 Jun. 2006 Sep. 2006 Dec. 2006 (*) Quarter ending in month indicated Alpha Bank Maintained market share in the face of fierce competition 24.0% Market Shares (2006) Avoided excessive margin reduction despite market trend 14.7% 13.8% Capitalized on its strong corporate image of Reliability 9.5% 7.4% 7.1% Started to exploit systematically its advantage of a large under-penetrated customer base Alpha Bank National Eurobank Emporiki Piraeus Agricultural 6
Mortgages: The Way Forward Sales & Market Share Growth Regular offering of innovative products Emphasis in maintaining existing portfolio Continuous advertising Cross-selling through promotional offers, direct marketing Staff performance evaluation & incentives Further growth of direct sales (i.e. sales agreements with developers, brokers, etc) Efficiency Business Process Re-engineering Full centralization of credit approval & operations Review of collections operations Simplification of branch operations to increase productivity 7
Consumer Loans Market Overview Highly competitive environment Emphasis on balance transfer programs New entries Alpha Bank Outstanding Balances have doubled in the last two years ( 2.2 vs 1.1 billion) Focus on improving / transforming the business Personal Loans ( million) Consumer Loans Disbursements Market leading customer propositions (All in One - Effie award) 400 Multi channel lender (Branch Network - Direct mail SMS Gate Telemarketing ) 300 200 100 0 Q1/03 Q2/03 Q3/03 Q4/03 Q1/04 Q2/04 Q3/04 Q4/04 Q1/05 Q2/05 Q3/05 Q4/05 Q1/06 Q2/06 Q3/06 Q4/06 Q1/07(est) Auto Loans Development through diversification of our strategic business model in order to focus and approach quantity and quality loan volumes among middle size auto dealers Expansion with full installation of Bank s sales representatives all over Greece (starting with large cities) 8
Consumer Loans Key Initiatives Consumer Loans Business Results Maintain a profitable growth model Retain and grow our market share Maintain low rates in delinquencies flows and arrears level NII ( mn) Average Balance ( mn) 2005 2006 change 107 147 37.3% 1,360 1,880 38.3% Spread (bps) 778 782 Growing in the most profitable segment Outstanding Balance Origination Auto Loans 11% Auto Loans 14% Auto Loans 15% Personal Loans 72% Retail Factoring - Other 17% Personal Loans 75% Retail Factoring - Other 11% Personal Loans 76% Retail Factoring - Other 9% 2004 2005 2006 9
Consumer Credit Risk: Quality is Top Priority Flow Rates Credit Cards (Probability to default 4 months forward) Ten scorecards for credit applications of new customers 2.0% Internal rating system, based on behavioral data Probability 1.5% 1.0% Application fraud detection tool Overall acceptance rate at 63% in line with prudent credit policy 0.5% Dec-04 Mar-05 Jun-05 Sep-05 Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 Credit strategies for each type of distribution channel risk (Instant credit, Auto loans, Branches, Merchants) 2.0% Flow Rates Consumer Loans (Probability to default 4 months forward) Delinquencies on a declining trend (flow rates charts) Probability 1.5% 1.0% 0.5% Dec-04 Mar-05 Jun-05 Sep-05 Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 10
Cards: A Comprehensive Portfolio for All Market Segments Sole Issuer & Acquirer of all three major international brands (Visa, MasterCard, American Express) Co-Branded Cards Tim Premium Market Carrefour Store Cards Kalogirou Gold- Silver Nutrimetics Amway Debit Products Mass Market Entry Level 11
Cards: Fast Growing Business Issuing Market Share 20% (Billed Business and CIF) Growth focus on credit through carefully designed portfolio mix Business growth outpacing the market (9.4% in balances vs. market 3.2%) The largest Visa Issuer in the country Sole American Express issuer Acquiring Market Share 28% 9.1% growth in 2006 while maintaining premium in commissions over competition One of the largest merchant networks (110,000 merchants 45,000 POS) Sole acquirer of American Express products EMV rollout on-going Credit Cards In Force by Brand 1 million cards (year end 2006) Acquiring Business by Brand 1.75 billion in 2006 AM EX 37% AMEX 22% VISA 49% MASTERCARD 14% VISA 62% MASTERCARD 16% 12
Cards: Fast Growing Business High Profitable Sector Continuous increase in revenues and balances High retainable spreads (900 bps) Card Business Income Key Actions Innovative Product Development Value proposition reinforcement with latest technology chip based loyalty schemes Customer Segmentation niche segments ( million) 2005 2006 % change Increase penetration though cross selling Total Income -NII 117.0 77.3 138.0 86.2 17.9% 11.5% Accelerate sales through more efficient use of alternative channels - Commissions 39.7 51.8 30.5% Average Card Balance 845.2 950.0 12.4% Gross Revenue Margin 13.9% 14.6% 13
The BonuS Loyalty / Reward Scheme Instant rewards Points collection One scheme for all Technologically innovative Focussed on customer insight Customer Loyalty Merchant Loyalty Card Loyalty Scheme Partners Other Participating Merchants Leading Private Retail Bank Leading Mobile Phone Operator Leading Fuel Retailer Leading Grocery Retailer Leading Greek Airline Leading Car Rental Agency 14
The BonuS Loyalty / Reward Scheme BonuS achieves a win-win-win situation between all participants Merchants 6 Partners, 100+ Retailers Generate higher turnover Acquire new customers Higher business profile Better customer knowledge Customers 360,000 customers/cards to date Instant rewards Relevant promotions Convenience & Simplicity Alpha Bank Amex, Visa, MasterCard Increased credit card volumes, spend & activation Reduced attrition Strengthening the Acquiring business Greater value to merchants 15
The Business Market in Greece Approximately 880.000 businesses operating in the Greek market SBL targets a large group of professionals such as doctors, dentists etc., who are not included in the 880,000 businesses Greek Companies Allocation (by Turnover) Greek Companies Allocation (by Legal Status) 14% 1% 5% 11% 85% 84% < 150.000 150.000-1.500.000 1.500.000-5.000.000 Sole Proprietors SA & LTD Partnerships & Joint Ventures 16
Small Business Lending Key Drivers For Success Customer Segmentation Establishment of Small Business Financing Division, targeting: Small Businesses (turnover up to 2.5 million or credit limits of up to 1 million) and Self-Employed Professionals Advertising Launch of a new Advertising Campaign focused on SBL Targeted Promotional Activities (direct marketing) Targets and performance evaluation for key products New Product Development Growing use of alternative channels Emphasis on third party salesforce Collaboration with the Credit Guarantee Fund of Small & Very Small Enterprises Centralization of operations Standardized process Effective credit administration support Small business advisors in Branches Specialised department to handle financing for pleasure boats 534 2,928 Small Business Loans (credit limits < 1 million) Outstanding and Growth 578 576 565 555 3,473 3,562 3,726 3,801 3,926 2,904 2,908 2,901 2,909 545 658 818 900 1,017 Dec. 2005 Mar. 2006 June 2006 Sept. 2006 Dec. 2006 New loan facilities to businesses with turnover up to 1 million Spreads (quarter ending in month indicated) 17
Deposit & Investment Products: Dynamic & Innovative Approach Deposit Products Asset Management Offer an array of privileges and potentials Full complement of competitive deposit accounts with high cross selling potential - Alpha 1 2 3 Youth Line: Build loyalty to future active customers (children & young people) and increase cross selling potentials to guardians (bps) 79 19.4% 93 21.3% 103 22.0% 115 25.0% - Alpha Payroll: Dynamic launch of new competitive product to increase deposit market share. Develop new long standing relationships and Cross selling potential - E-Savings: Drive digital innovation capitalizing on Alpha s predominant Web Banking position Investment Products Develop Integrated Investment Solutions for Customers Profiles Deliver wealth management solutions to satisfy the increasing risk appetite of retail investors Pioneer unique investment products to domestic market - Alternative Investments - Mutual Funds with preservation of capital product range - Emerging Market Mutual Funds Offer Bundled/Life Event propositions Further increase market share and average management fees ( million) 2004 205 2006 2010F Market Share in Non-Money Market Mutual Funds Gross Revenue Margin (quarter ending in month indicated) 3,350 2,309 Alpha Private Bank 4,566 3,100 5,356 3,637 856 1,168 1,379 185 298 341 Dec. 04 Dec. 05 Dec. 06 Discretionary Advisory Prime Brokerage 20% 2007-2010 CAGR 18
From Deposits to Investments Customer Assets Stable funding base Successful placement of Alpha Bank bonds with retail Still high liquidity preference despite low returns Gradual shift to higher margin investment products Financial planning advisory services for mass affluent customers (> 60,000) Investment Balances Liquidity Transaction Balances 37.3 bn 4.4 5.2 10.1 14.6 10.4% (3.2%) 31.7% 8.1% 41.2 bn 4.2 13.3 14.6 3.0 4.0 Dec. 2005 Dec. 2006 CAGR 2007-2010 10% - 14% 5.1 Private Banking and Institutional Money Mutual Funds Time Deposits plus Alpha Bank Bonds Savings and Sight Deposits (Domestic) Deposits (abroad) 19
A New Banking Experience Targets the Mass Affluent segment Market size* : 20 bln HNW (300+)** Mass Affluent Market No. Clients* : 200,000 ALPHAPrime Goal 20% of market size Presence in approx. 120 Branches 140 Investment Advisors Levels of Wealth Mass Affluent Retail (60-300)** (0-60)** ** amounts in thousands Approach Offering & Infrastructure Present Status & Future Deployment The establishment of long term relationships with clients Specialized personnel in selected branches (Investment Advisors) Excellence in customer experience (Convenience & Flexibility) Specialized area in the Branch hosting the Service Specially designed Investment Offering with products targeting the specific market aiming at higher profitability Specially designed Banking Offering enriched with preferential terms Use of the Private Banking infrastructure (Sales Approach, Back Office, IT, MIS- Client Profitability, Specialized Intranet Applications) Use of a specialized call center Continuous training of Investment Advisors 30 Branches already operational aiming at a total of 70 Branches operational by the end of 2007 Full deployment by mid 2008 *source: ALPHA PRIVATE BANK estimates 20
Bancassurance: Significant Growth Opportunities Sale of Insurance subsidiary to AXA Long term (20 years) cooperation agreement in Bancassurance Agreement covers both Greek and SE Europe operations Benefit form the support and expertise of one of the major international insurance companies Redesign of products processes personnel training Substantial margin for increase in insurance cross selling ratio for Consumer Credit, Mortgages and SME loans Substantial margin for increase in Pensions Savings Target to achieve 30 million in insurance fees by 2010 (Bank and Asset Management) ( million) Insurance Fees & Commissions 5.9 6.4 CAGR 2007-2010 ~50% >30 2005 2006 Target 2010 21
Retail Branch Network (Greece): Types, Size & Distribution Branches per Area 2006 2007 Athens and suburbs 171 180 Salonica 37 42 Other areas 167 173 Total 375 395 Key Points Ideal Country size Strong urban concentration GIS optimized (next slide) BRANCH STRUCTURE: A modular approach SMALL ENTERPRICES (selected branches) INDIVIDUALS Prime Banking (selected branches) Non - Teller Branches are currently under consideration TRANSACTIONS 22
Retail Branch Network (Greece): Planning BRANCHES & STAFF DISTRIBUTION ANNUAL GOALS Geographical Information Systems & Methodology Competition data Product specific data Demographic data Economic data 23
Retail Branch Network (Greece): Annual Targets & Evaluation ANNUAL TARGETS are set for: Deposits (per category) Loans (per category) Mortgages Credit cards Prime & Private Banking Bonds & Mutual Funds Insurance (per category) Bancassurance Small Enterprises attracted Per product methodology GIS optimized Goals are reevaluated if necessary Performance is monthly monitored Products are weighted according to their importance Specific product campaigns are launched during the year if necessary Branch Evaluation is currently based on annual goals achievement APPLICABLE within 2007 A more detailed evaluation to be based on: Impairments Spreads Quality of Service (complains, internal audit reports, etc.) 24
ALPHA BANK: AGENDA 2010 REVISITED Capital Markets Day Bucharest, April 20, 2007