Interim Results
08 August 2003 - 9:17AM
UK Regulatory
RNS Number:4741O
Alpha Bank A.E.
08 August 2003
ALPHA BANK - FIRST HALF 2003 RESULTS
62.3% GROWTH IN NET EARNINGS
UNDERPINNED BY STRONG RETAIL BANKING PERFORMANCE
"During the first half of 2003 Alpha delivered another strong performance.
In-line with our strategy, core retail and commercial banking operations grew
rapidly boosting operating income and earnings. This performance was supported
by powerful marketing initiatives implemented and the strength of our brand. Our
products are some of the most competitive and certainly the most innovative in
the Greek marketplace today. That this growth was achieved in an environment of
disciplined and highly successful cost and credit control, gives us real
confidence in Alpha's ability to grow its core business and deliver high quality
earnings growth and shareholder returns going forward. "
Yannis S. Costopoulos, Chairman and Managing Director, Alpha Bank A.E.
FINANCIAL SUMMARY
* Net Interest Income increased by 16.6% to Euro 425 million. (C1 2002.:
Euro 364.5 million)
* Net profit after tax and minorities of up 62.3% to Euro 118.3 million (H1
2002: Euro 72.9 million)
* Cost to income ratio reduced to 55.5% (H1 2002: 62.7%)
* Return on Equity improved to 24.1% (H1 2002: 15.1%)
KEY HIGHLIGHTS
* Growth in retail and commercial lending continues, following extensive
investment in distribution and product development
Retail and SME lending grew by 46.8% and 16.5% respectively year-on-year,
with earnings in Retail and Commercial Banking Business Unit rising by 24%.
Alpha's share in the key mortgage market increased from 11.6% to 14.4%
year-on-year.
* Continued focus on operational efficiency
Strong progress has been achieved in branch restructuring and in the
streamlining of middle - office processes.
Network consolidation continues with merging branches, as well as opening
new ones in key locations. Staff numbers to decline by more than 6% in 2003
as the well received early retirement scheme earlier this year takes effect.
Operational costs increased only by 1.9%, despite significant marketing and
IT- related expenses.
* Profitable growth underpinned by prudent risk management
Provisions for bad and doubtful debts coverage reached 69% of non-performing
loans, which amounted to 3.2% of total loans.
* Further improvement to capital position
Capital position further strengthened with Total and Tier I capital adequacy
ratios standing at 10.2% (vs 9.3% in H1 2002) and 7.1% ( vs 6.5% in H1 2002)
respectively, well ahead of targets, and able to accommodate even more
ambitious growth.
* Powerful marketing initiatives leveraging existing brand competence
Consumer and customer loyalty schemes, Epathlon and Pentathlon, and a highly
innovative youth segment integrated offer, Alpha 1I2I3 , launched to attract
new customers and strengthen business continuity.
TABLE 1
ALPHA BANK: FIRST HALF 2003 RESULTS
On a consolidated basis On a stand-alone basis
In million Euro 2003 2002 A% 2003 2002 A%
Net interest income 425.0 364.5 16.6% 368.0 307.9 19.5%
Other income excluding interest 204.8 182.1 12.5% 169.5 153.4 10.5%
Operational costs & amortization 349.3 342.9 1.9% 304.2 294.8 3.2%
Provisions 94.9 80.6 17.6% 80.4 67.1 19.8%
Net profit before tax and after
minorities 180.2 115.1 56.6% 155.8 101.8 53.0%
Net profit after tax and minorities 118.3 72.9 62.3% 105.9 70.7 49.8%
TABLE 2
ALPHA BANK: SECOND QUARTER 2003 RESULTS
On a consolidated basis On a stand-alone basis
In million Euro Q2 Q1 A% Q2 Q1 A%
Net interest income 214.9 210.1 2.3% 186.5 181.5 2.8%
Other income excluding interest 103.9 100.9 2.9% 82.4 87.1 -5.4%
Operational costs & amortization 177.3 172.1 3.0% 154.2 150.0 2.8%
Provisions 47.1 47.8 -1.4% 41.0 39.4 4.1%
Net profit before tax and after
minorities 88.4 91.8 -3.6% 74.1 81.7 -9.3%
Net profit after tax and minorities 58.2 60.1 -3.2% 50.9 55.0 -7.4%
* PROFITABILITY
Alpha Bank first half 2003 net profit after tax and minorities on a consolidated
basis rose to Euro 118.3 million, as against Euro 72.9 million for the first
half 2002, representing a 62.3% increase. Overall profitability was underpinned
by robust growth in retail and business lending, spread widening and strong bond
trading activity. Net profit declined in Q2 2003 by 3% vs Q1 2003 on account of
increased advertising costs related to the introduction of new products and
lower bond trading gains from the high level in the first quarter.
For comparison purposes, first half 2002 results have been restated to reflect
the treatment of leasing as finance lease-adopted in the first quarter of 2003-
and the elimination of Ionian Bank good-will amortisation due to the write-off
effected in year-end 2002. First half 2003 imputed taxes do not include the 5%
reduction that will become effective following the absorption of Alpha
Investments by Alpha Bank before end-2003.
* CORE INCOME
Core income (net interest and fee and commission income) in the first half of
2003 increased by 11% compared to the same period 2002. Net interest margin
improved markedly from 2.56% in H1 2002 to 2.90% in H1 2003 and from 2.85% in Q1
2003 to 2.90% in Q2 2003. Despite consecutive European Central Bank rate cuts,
spread pressure has been felt only marginally in deposits, whereas loan spreads
have benefited from maturing mortgages granted with first year low introductory
rates and a more efficient pricing structure for business loans.
In the first half of 2003, fee and commission income retreated by 3.7% as
compared to the same period in 2002, as mortgage growth decelerated (compressing
loan application fees) from last year's high levels and market conditions
deteriorated due to geopolitical uncertainties especially in Q1 2003. Indeed, on
a quarterly basis, fees and commissions showed an increase of 6.2% as between
the two quarters of 2003, a trend which is expected to continue as markets
improve.
* CUSTOMER FINANCING
Over the 12-month period to 30 June 2003, overall lending grew by 17.4%, with
retail lending expanding by 46.8% representing 23.4% of our loan portfolio (30
June 2002: 18.7%).
Lending to small and medium-size enterprise (SME) recorded an annual increase of
16.5%, with loans to small enterprises boosted by a 10% discount on interest
payments if not in arrears shooting up to Euro 120 million since inception of
the program in September 2002 (7,500 new loans granted). Large corporate lending
(including shipping) grew at 3%, affected mostly by the strengthening of the
Euro (shipping loans are in USD). Finally, leasing and factoring volumes grew by
more than +7% and 30% respectively, representing 5% of the loan book.
* CREDIT QUALITY
Non-performing loans (NPLs- defined as those in arrears for more than 90 days)
reached 3.2% of total lending (H1 2003). It is Alpha Bank's policy to write-off
against profits the bulk of bad loans during the period. As a result, our NPLs
do not contain bad debts except small amounts arising for technical reasons. In
the event, bad debts at end-June 2003 represented 0.31% of total lending.
Provisioning charges, increased in line with lending growth at the tax efficient
rate of 1%, after write-offs, led to an expansion of our provisions for bad and
doubtful loans by 33.3% to Euro 428 million,representing 2.2% of total loans.
This is being more than prudent provisioning, as NPLs not covered by collateral
stood at Euro 311 million. Alpha Bank follows a sectoral provisioning policy,
providing adequately for different categories of loans according to risk.
* DEPOSITS AND CUSTOMER ASSETS UNDER MANAGEMENT
Over the 12-month period to June 2003, on and off- balance sheet client assets
under management (including deposits, repos, bonds, mutual funds, private
banking e.tc.) increased 2.5% to Euro 30.7 billion from Euro 30 billion on 30
June 2002, as the outflow of funds from repos (-37.2%) was more than compensated
by inflows into, among others, money market mutual funds (+63.7%), portfolio
management accounts (+45.7%) and bond sales (+1.9%).
Alpha Bank has begun a process of offering customers Alpha Bank bonds in lieu of
other short-term placements with a two-fold aim of improving returns to
customers while securing funding for financing business expansion without tying
up resources in government bonds under repos arrangements.
* COST CONTROL
Costs, including amortisation, remained under tight control during the period,
increasing 1.9% year-on-year, whilst staff costs declined by 0.9% and general
expenses increased by only 1.1%. On a cost-to-income basis, there was a
noticeable improvement to 55.5%, from 62.7% for the first half of 2002. This
improvement is to a great extent related to the cost containment program
underway, which include staff reductions and branch consolidation. More
specifically:
i. Since the beginning of 2003, the branch network has been rationalized by
merging operations in 27 locations and opening nine more branches in Greece
and abroad. Moreover staff numbers have been significantly reduced by 229 at
Bank level and by 169 at the Group level on a net basis. These departures
represent progress in the early retirement program, through which, 470
employees are expected to leave Alpha during 2003.
ii. Despite the 18.1% surge of advertising spend and 11.5% increase in
IT-related expenses, general expenses increased only marginally by 1% in H1
2003 vs H1 2002, due to cost cutting actions undertaken across the board. In
particular, cost control measures applied in subsidiaries led to a drop in
their general expenses of 12.9% year-on-year as well.
iii. Cost control measures are expected to yield additional results in the
months ahead, when a number of initiatives enter the implementation phase.
Ongoing projects directly related to cost control include: payment systems
upgrade, standardisation of products in cash management, custody services
and letters of guarantee, electronic management and filing of documents
(image processing), centralisation of check book issuance operations,
introduction of a single technological platform for the international network
operations, full automation of customer transactions, electronic warehouse
management e.tc.
* STRATEGIC FOCUS - POWERFUL MARKETING INITIATIVES WITH CUSTOMER ORIENTED
APPROACH
Alpha's focus on retail and SME banking services is showing strong results, and
during the second quarter 2003 these services have been further strengthened
with the introduction of innovative marketing initiatives, namely, Alpha 1I2I3
Youth Line, Pentathlon and Epathlon.
Alpha 1I2I3 is an integrated offer of banking and insurance products and
services (savings accounts, cards, insurance and loans) adapted to the life
cycle needs of children, adolescents, young adults and their families. Apart
from its pricing, the offer includes gifts, shopping discounts, promotions etc.
Pentathlon is a loyalty - reward scheme for small businesses and professionals
that use at least five Alpha Bank products (Loans, Insurance, Deposits,
Electronic Services, Cards) consistently.
The Epathlon multi-retailer loyalty scheme developed to combine the forces of
Olympic Sponsors, Alpha Bank , OTE and COSMOTE (national telecom and mobile
operators), aims to tap on powerful customer databases of its partners, to
expand Alpha's credit card business and create cross-selling opportunities.
Already mailings have been sent out to a first batch of prospective clients, 35%
of which responded favourably.
Finally, the Panorama of Olympic Sports marketing programme is on a tour for the
third consecutive year of a large number of Greek cities with a two-fold aim to
increase public awareness of the least known Olympic Sports and to exploit
opportunities for promoting our products and services. Since the beginning of
May,15 events have been staged in various cities during which more than 25,000
Epathlon cards have been sold, and more than 2,000 accounts of the Alpha 1I2I3
product line have been opened, of which 1,000 by new customers.
Athens, August 8, 2003
This information is provided by RNS
The company news service from the London Stock Exchange
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