Accelerated balance sheet clean-up
Launching one of the largest NPE securitizations in the European market to accelerate balance sheet clean-up. Euro 12 billion transaction to reduce Greek NPL stock by c. 73% and drive NPE and NPL ratio down to 20% and 10% from 44% and 28% respectively.
Efficient use of capital to resolve NPE stock. Capital position post transaction to retain comfortable buffers above regulatory minimum requirements with management targeting a CET1 ratio > 15% and a total CAD ratio > 17% by 2022, as it intends to fully utilise its Tier 2 bucket of 2%. No dilution to shareholders.
Hellenic Asset Protection Scheme (“HAPS”), recently introduced by the Greek Government, to act as a catalyst for balance sheet clean up initiatives. Alpha Bank intends to apply for up to Euro 3.7 billion guarantees under the scheme.
Positive tailwinds supporting the transaction. The Bank will capitalize on the positive outlook for the Greek economy supported by the declining uncertainty, pro-growth fiscal rebalancing, intensified reform efforts and a recovery in the real estate market. Increasing appetite by international investors for Greek risk, evidenced by successful NPE transactions effected to date in the market.
Reorganization of the Bank’s NPE management platform through a partnership with a strong international player. A carve out from the Bank of relevant infrastructure into Cepal Hellas and the creation of a new servicer (“New Cepal”) combining the skills of both platforms, to support an accelerated buildup of servicing capacity for remedial actions on non performing portfolios.
Turning page for the Bank to support the economy and restore profitability
Significant de-risking of the balance sheet leading to a normalized Cost of Risk of <100bps going forward and supporting bottom line.
Operating model transformation to drive group Cost/Income below 48% and counterbalance income erosion from balance sheet deleveraging. Cost efficiency efforts accelerated, with tangible results in 2019 through our successful VSS, and the forthcoming transaction-led NPE management outsourcing which is expected to contribute significantly by 2022.
New loan disbursements of Euro 14 billion until 2022 to support retail and business segments of focus. Emphasis on infrastructure, energy, real estate, hospitality, manufacturing and shipping.
Intensify efforts to further develop business segments that are less capital intensive and have high potential in the Greek market, capitalizing on our competitive strengths. Further penetration of our c.3.1 million customer base.
Restore profitability of international operations with emphasis on growth potential of our Romanian operations.
Setting up a dedicated Transformation Office to deliver the Strategy Plan. Commitment to deliver our targets through appointment of a Chief Transformation Officer (CTO) as an Executive Committee member, and setting up a Transformation Office of 10-15 senior members with the appropriate technical expertise to support the CTO.
Changes in top management and governance
New, high-energy, management team. Following management changes in early 2019, with the election of a new CEO, appointment of new members in the Group Executive Committee. Proven experience and track record to give confidence on strategy delivery.
Effective and transparent Governance. Redefined structure and role of Governance committees to enable faster and more efficient decision making. Clear delegation of authorities across the organization.
Rigorous focus on performance and accountability. Promote a meritocratic culture across the organization and support talent management. Provide proper employee incentives to meet targets through newly introduced variable remuneration framework.
Key financial targets for 2022
Bank NPE ratio of <10% and NPL ratio of <5% in Greece
Steady-state Cost of Risk of <70bps in 2022
Strong capital position with an envisaged 2022 CAD ratio of ~17% and a CET1 ~15%, well above regulatory expectations.
Cost to Income ratio below 48% and Cost to Assets ratio of below 145bps
New loan disbursements of approximately Euro 14 billion in Greece for the period 2019-2022
Targeted Return on Equity of ~ 9.0%
Alpha Bank’s CEO, Vassilios Psaltis stated: “We are embarking today on a comprehensive transformation plan, designed to leave the financial crisis behind us by dealing decisively with legacy asset quality issues and by improving significantly our profitability going forward.
The confidence we have in the prospects of the Greek economy, coupled with the comfortable capital buffers we enjoy, allow us to launch a landmark Euro 12 billion NPE securitization that will fully utilize the Greek Government’s initiative to set up an Asset Protection Scheme.
In addition, we aim at combining our in-house NPE management platform with that of Cepal Hellas, the largest third-party servicer in the country, with a view to attracting a top-class international partner to upgrade our remedial NPE management efforts.
We can assure our Employees involved in that process of fair treatment and full safeguards for their jobs. This large-scale balance sheet clean-up will not just lead to a much lower cost of risk going forward but will also allow the Bank to transform its operating model, re-focusing on its customers, offering best in class products and services through a more efficient platform.
To ensure appropriate execution capacity in the Bank’s strategic priority areas, we are reforming our organizational structure, with clear areas of responsibility, and we are strengthening our leadership team with full empowerment to achieve the targets, delivering thus a new era for Alpha Bank.”