Alpha Bank — Q1 beat, buy-back proposal

Alpha Bank (ALPHA.AT)

Last close As at 18/06/2024

EUR1.55

0.03 (1.97%)

Market capitalisation

EUR3,643m

More on this equity

Research: Financials

Alpha Bank — Q1 beat, buy-back proposal

Alpha Bank’s Q124 profit after tax reached a record €211m, up by 90% y-o-y, 75% q-o-q and 8% above consensus. The beat was driven by better trading gains and impairment losses, with net interest income (NII) and operating expenses largely in line. Adjusted return on tangible equity (RoTE) was 13.5%, ahead of the full-year target of 13%. Alpha also announced a change in proposed FY23 profit distribution. The previously indicated €0.05 dividend (€122m distribution) is now proposed to be split 50:50 into a €0.025 dividend and €61m buy-back, subject to regulatory approval. Any buy-back would be value enhancing as the shares trade at only 60% of tangible book value per share (TNAV).

Written by

Robert Murphy

Managing Director, Financials and Investment Trusts

Financials

Alpha Bank

Q1 beat, buy-back proposal

Financials

Spotlight - Flash

20 May 2024

Price

€1.67

Market cap

€4bn

Share price graph

Share details

Code

ALPHA

Listing

ATH

Shares in issue

3.51bn

FL CET1

14.6%

Business description

Founded in 1879, Alpha Bank is the one of the largest Greek banks with assets totalling €74bn in FY23. Aside from Greece, the bank has operations in Cyprus, Romania, Luxembourg and the United Kingdom, providing an array of financial services including retail and corporate banking, life insurance, investment services and real estate management.

Bull

Alpha continues to beat market expectations on earnings.

Guidance on earnings and capital have been maintained.

Strong capital generation plan with a shareholder-friendly capital return policy.

Bear

NPE ratio is relatively high within the European banking industry.

Net interest margin is expected to decline in FY24, pressuring revenues.

The Athens Stock Exchange is less liquid than other exchanges.

Analyst

Rob Murphy

+44 7900 484 805

Alpha Bank is a research client of Edison Investment Research Limited

Alpha Bank’s Q124 profit after tax reached a record €211m, up by 90%
y-o-y, 75% q-o-q and 8% above consensus. The beat was driven by better trading gains and impairment losses, with net interest income (NII) and operating expenses largely in line. Adjusted return on tangible equity (RoTE) was 13.5%, ahead of the full-year target of 13%. Alpha also announced a change in proposed FY23 profit distribution. The previously indicated €0.05 dividend (€122m distribution) is now proposed to be split 50:50 into a €0.025 dividend and €61m buy-back, subject to regulatory approval. Any buy-back would be value enhancing as the shares trade at only 60% of tangible book value per share (TNAV).

Consensus estimates

Year
end

Revenue
(€m)

PBT
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/22

1,888

644

0.17

0.00

9.8

0.0

12/23

2,370

977

0.25

0.00

6.7

0.0

12/24e

2,092

973

0.29

0.00

5.8

0.0

12/25e

2,136

1,055

0.31

0.09

5.4

5.4

Source: LSEG. Note: *EPS is basic statutory at 16 May 2024.

Alpha reported another solid result in Q124 as earnings beat consensus despite headwinds to costs and NII. The underlying RoTE of 13.5% was above the full-year target of 13%. NII declined 4% q-o-q due to hedging costs, calendar effects, loan repricing, preferred debt issuance and modest deposit migration, but was in line with market expectations. Trading gains rose 84% q-o-q, limiting the drop in operating income to just 1%.

The cost-income ratio fell to 38.4% versus 43.3 % in Q123, but recurring costs were up 3% q-o-q. Thus, pre-provision profit was down 6% q-o-q. Impairments were much better than expected and they fell by 30% q-o-q with non-performing exposures (NPE) remaining flat at 6%. The resulting 5% q-o-q rise in PBT was 11% ahead of consensus.

Performing loan growth, excluding the Romania deconsolidation, was strong at 6% y-o-y and the fully loaded CET1 ratio edged up to 14.6% (FY23: 14.3%) after accruing for dividends at 35% of profit (FY23: 20%). The pro forma CET1 (post NPE transactions) was 16.2%, ahead of the full-year target of 16%, which, along with the higher dividend accrual rate, bodes well for future capital returns to shareholders.

FY24 guidance has been confirmed: EPS of c €0.31 and adjusted RoTE of 13%. Pressure on NII is expected to ease through FY24 and FY25 from lower interest rates and growth in the securities portfolio. Management continues to guide to further expanding returns post FY24. The adjusted RoTE is expected to improve to 13.5% in FY25 and to exceed 14% in FY26.

The introduction of a buy-back at this stage confirms management’s commitment to shareholder value creation, in our view. At 0.6x TNAV and less than 6x P/E in FY24, the market appears to give little credit to Alpha’s successful execution of its strategy to date.

General disclaimer and copyright

This report has been commissioned by Alpha Bank and prepared and issued by Edison, in consideration of a fee payable by Alpha Bank. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

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New Zealand

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United Kingdom

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London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

General disclaimer and copyright

This report has been commissioned by Alpha Bank and prepared and issued by Edison, in consideration of a fee payable by Alpha Bank. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2024 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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