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Alpha Bank’s Q1 2025 earnings call revealed a robust financial performance with profits reaching $239 million, translating to $0.09 per share. This figure marks a significant milestone, achieving 28% of the annual target. The bank, currently valued at $6.15 billion by market capitalization, has shown strong momentum with a 54% price return over the past six months. Despite the strong earnings, the stock experienced a slight dip of 0.76%, closing at $2.23, reflecting investor concerns over broader market trends. According to InvestingPro analysis, the stock is currently trading near its Fair Value, with 11 additional exclusive insights available to subscribers.
Key Takeaways
- Alpha Bank reported a 28% achievement of its annual profit target in Q1 2025.
- The company completed a strategic acquisition of Akcea Ventures.
- Performing loans increased by 13% year-on-year.
- Dividend accruals amounted to €111 million, representing 50% of profits.
- Stock price decreased by 0.76% in pre-market trading.
Company Performance
Alpha Bank demonstrated strong financial health in Q1 2025, with profits hitting $239 million. With a return on equity of 7% and revenue growth of 7.58% in the last twelve months, the bank’s performance reflects its operational efficiency. The bank’s strategic initiatives, including the acquisition of Akcea Ventures, are expected to bolster its investment banking and capital markets services. The company also reported a 13% year-on-year increase in performing loans, showcasing its robust lending activities. For a deeper understanding of Alpha Bank’s financial health, InvestingPro subscribers can access comprehensive analysis through the exclusive Pro Research Report, part of our coverage of 1,400+ top stocks.
Financial Highlights
- Revenue forecast: $538.93 million
- Earnings per share: $0.09
- Dividend accrual: €111 million
- Normalized return on tangible equity: 15.4%
- Core equity Tier One ratio: 16.3%
Earnings vs. Forecast
Alpha Bank’s earnings per share of $0.09 met market expectations. The revenue forecast was set at $538.93 million, aligning with analysts’ predictions. This consistency with forecasts indicates a stable financial trajectory for the bank.
Market Reaction
Despite solid earnings, Alpha Bank’s stock fell by 0.76% in pre-market trading, closing at $2.23. This movement contrasts with its 52-week high of $2.35, suggesting investor caution amid broader market uncertainties. The stock’s performance also reflects concerns about potential indirect effects of US trade developments on the European economy.
Outlook & Guidance
Looking ahead, Alpha Bank maintains a positive outlook, projecting an EPS of over $0.45 for 2024, a 7% increase. With a current P/E ratio of 9.88x and a beta of 1.52, the stock shows higher volatility than the market average. The bank is committed to generating €3 billion in capital and anticipates an 8% annual EPS growth. Its net interest income guidance remains at least €1.65 billion for 2025, underscoring its confidence in sustained financial growth. InvestingPro data reveals the company’s overall financial health score is GOOD, with particularly strong momentum metrics that could interest growth-focused investors.
Executive Commentary
CEO Vasilis Pesaldis emphasized strategic actions to enhance profitability: "Our strategic actions along our balance sheet positioning will allow us to maintain an upward trajectory to our bottom line from 2025." He also highlighted disciplined acquisition strategies, stating, "We continue to deliver bolt on acquisitions with strict discipline."
Risks and Challenges
- Potential indirect impacts from US trade developments on European growth.
- Fluctuations in interest rates affecting loan disbursement.
- Macroeconomic pressures in the Eurozone.
- Integration challenges with UniCredit across multiple areas.
- Adapting to potential macro parameter adjustments for IFRS 9.
Alpha Bank’s earnings call provided insights into its strategic direction and financial health, with a strong performance in Q1 2025. However, the slight decline in stock price indicates investor caution amidst broader economic uncertainties.
Full transcript - Alpha Bank SA (ACBB) Q1 2025:
Jyoti, Chorus Call Operator: Ladies and gentlemen, thank you for standing by. I am Jyoti, your Chorus Call operator. Welcome and thank you for joining the Alfa Services and Holdings Conference Call to present and discuss the First Quarter twenty twenty five Financial Results. All participants will be in a listen only mode and the conference is being recorded. The presentation will be followed by a question and answer session.
At this time, I would like to turn the conference over to Alfa Services and Holdings Management. Gentlemen, you may now proceed.
Iasan Kevapsoglou, Head of Investor Relations, Alfa Bank: Good morning, everyone. This is Iasan Kevapsoglou, Alfa Bank’s Head of IR. Thank you for joining us today for the presentation of Q1 results. We’ll try to keep this nice and brief as you’ve all had a long week and probably a late night yesterday. Vasilis Pesaldis, our CEO, will lead the call, summarizing Q1 and providing you with a few updates on the outlook.
And then Vasilis Kosmas, our CFO, will go through this quarter’s numbers in some detail. As ever, we will take Q and A in
Vasilis Pesaldis, CEO, Alfa Bank: the end and should finish within the hour. Vasilis, over to you. Thank you, Yassin. Good morning from my side as well, and thank you for joining. Let’s start with the first quarter result on Slide four, please.
Delivery against our stated objectives has continued at a steady pace. First quarter profits of $239,000,000 or 9% per share, up 28% of the target for the year. This translates into a 15.4% normalized return on tangible equity. Our solid operating performance is a testament of the defensive nature of our top line, the strong progress we have made in diversifying fee income generation and the solid management of operating leverage and asset quality. We continue to grow our loan book and customer funds and to position the business to maximize the recurring value we can create for our shareholders in a sustainable way.
Our capital buffers remain strong with 71 basis points of organic capital generation allowing our core equity Tier one to land at 16.3% in Q1. This is flat versus the previous quarter despite having incorporated the fully loaded impact of Basel IV and while increasing our dividend accrual to 50% of profits or €111,000,000 Vasilis will give you more detail on the first quarter results, so allow me to spend some time on the wider macroeconomic context here starting with Slide five. Starting with the first order effects on the Greek economy from the most recent trade related developments, the impact appears to be limited. Trade with The U. S.
Accounts for circa 1% of GDP and 5% of exports with one quarter of that attributable to fossil fuels and thus unaffected. Foreign direct investments from The U. S. Is just 2.6% of the total and three quarters relate to real estate. The tourism channel subject to a U.
S. Slowdown and given the dollar weakness is probably the most relevant as it accounts for just over 7% of total receipts, although it mainly relates to high end vacationers and is thus generally price elastic. The indirect effects, however, could complicate the picture and appear more substantial as we highlight on Slide six. Firstly, the European continent as a whole will likely be affected. As such, the respective slowdown in economic growth due to a weakening in exports to The U.
S. Will impact Greece indirectly. Secondly, the global diffusion of trade protectionism is creating a high level of uncertainty. A potential trade war and a corresponding decline in global demand are also expected to have a negative effect on exports. Thirdly, a resurgence in inflation or at least inflation expectations would slow down or hold the process of monetary policy normalization at least in The U.
S. Now against this background, global monetary policy cycles are expected to be less synchronized as central banks need to balance inflation targets with the impact on energy costs and import prices from trade tensions and the imposition of new tariffs. As a result, growth in the Eurozone is expected to deviate lower from the baseline scenario by a range of zero five to one percentage points. However, the respective impact on the growth rate in Greece is expected to be somewhat less significant and thus GDP growth in Greece will remain firmly in positive territory and materially above the European average. The transmission channels for our businesses are largely identified on slide seven.
We are the least sensitive to lower rates amongst our close domestic peers. But as rates will likely come down faster than previously anticipated, this could also have a small impact in our profitability for this year. Base rates are still expected to land close to 2% and this is in line with our business plan assumptions, while the steepening of the yield curve is P and L positive as it allows reinvestments of securities and the rollover of hedges to occur at better yields than initially expected. So overall, we don’t envisage any impact on our guidance from net interest income. Now the effect on lending volumes if any remains largely uncertain at this point.
The aforementioned demand shock and persistent volatility could have clearly negative consequences for loan growth. But the policy response both on the monetary as well as on the fiscal front could very well counteract that. In any case, we have no evidence thus far for a slowdown in our disbursements pipeline and we continue to see the structural opportunity to invest into Greece far outweighing any temporary turbulence. Similarly on asset quality, we have a very elaborate set of early warning indicators that would highlight potential signs of distress in our loan book, but we don’t see any pockets of vulnerability for the first four months of the year. Our risk models under IFRS nine may be adjusted later during this year when there will be more feasibility for any management overlays.
In terms of sectors, drybulk shipping exposures linked to The U. Are 1% of the loan book and are relatively unlevered. The book consists of long term clients who have proven over time and again that they can handle the storm while they enter this era with strong balance sheet and on the back of a series of record years. Also, the hospitality sector is very well prepared and most direct effects can be counteracted through the scalability of their business as any impact will only be observed from 2026 as this year is already shaping up nicely with strong booking momentum and higher levels of arrivals. To make life easier for you, we have summarized the main sensitivities for our earnings per share on Slide eight.
In practice and based off the evidence so far, we expect rates to diverse from the business plan assumption by circa 10 basis points, so less than half of the 1% impact on EPS that you see here at the top right. Volumes and cost of risk appeared to be thus far unaffected. Hence the numbers we present here are likely worse than our base case scenario. Overall, there is some degree of uncertainty versus what was the case at our full year results. But given the small variances witnessed to date, we don’t see a reason to revisit our guidance for the year that remains firm.
Turning now to Slide nine. At the year end stage, we highlighted that our excess capital provides us with strategic optionality to accelerate the delivery of our strategy and create value for our shareholders. We continue to deliver on that promise at pace, most recently with the acquisition of Akcea Ventures. The upcoming combination of Akcea with Alpha Finance and Alpha Bank’s investment banking unit will create the largest investment banking and capital markets service provider in the region. It will also be the only fully fledged vertically integrated investment bank in Greece and Cyprus.
Akcea’s entrepreneurial mindset and talented team that has unique expertise and enjoyed long term success in financial advisor and capital markets will complement Alfa Bank’s existing services providing the most comprehensive suite of clients, providing innovation, holistic solutions and supporting long term growth strategies. Our strategic partnership with UniCredit will further enhance the combined entities international presence and credentials. As a result, the Group’s revenues from investment banking services are estimated to triple from current level of $1,015,000,000 dollars to over $45,000,000 per annum by 2027. The transaction is projected to be EPS accretive by approximately 1.4% with an estimated ROI north of 20%. This will add 15 basis points to group return on tangible equity for a less than 20 basis points impact of capital.
Therefore, this further demonstrates that we continue to deliver bolt on acquisitions with strict discipline to the strategic and financial criteria we have set. As we have now announced a series of bolt on acquisition, it is important to recognize that their cumulative impact leads to an upgrade of our previous guidance. The focus remains on delivery on earnings per share, profitability, capital generation and distributions with a bar now standing higher. As you can see on slide ten, 2024 EPS is now expected to land above $0.45 some 7% higher than before with reported profitability jumping by one percentage points to circa 13%. Our commitments for 3,000,000,000 of total capital generation and payouts of at least 50% remain unchanged.
Our story also remains intact as you can see on slide 11. Our strategic actions along our balance sheet positioning will allow us to maintain an upward trajectory to our bottom line from 2025 despite the impact from falling rates. As previously stated, we have a defensive NII profile, which we manage dynamically. We capture the tailwinds of loan growth. We’re stepping up on our efforts for fee income generation and we see the partnership with UniCredit accruing additional benefits quarter after quarter.
The structural growth potential of the regions where we operate will allow us to maintain a pace of net credit expansion above the $2,000,000,000 mark. At the same time, our franchise is strongly positioned to benefit from the long term uplift in the penetration of fee generating banking services, which coupled with the partnerships we have put in place allow us to improve the profitability of our business. These factors will work even more so in our favor beyond 2025 where we see earnings now growing by 11% on an annual basis and that’s three percentage points higher on account of the recent acquisitions, but still notwithstanding the impact of any share buybacks. Turn to Slide 12 please now. The trends for 2025 and beyond allow us to maintain a differentiating positive EPS growth trajectory in the medium term, which which we believe differentiates us from our domestic and European peers.
EPS is expected to grow by 8% per annum over the planning period, materially above consensus estimates even before accounting for the effect of any buybacks. And then lastly from my side on Slide 13, please. We have been diligent and clear on how we intend to allocate capital and our hierarchy remains unchanged. Our first and foremost priority is to fund profitable loan growth. Our capital generation capacity suggests that we ought to be paying north of 50% of profits on an ongoing basis.
And last but not least, our excess capital provides us with significant power to do more. The pace of capital generation and our strong capital position mean that we are comfortably able to fund both an acceleration in loan growth as well as more generous distribution and bolt on acquisition to maximize shareholder value. And with that, Vasily, the floor is yours.
Vasilis Kosmas, CFO, Alfa Bank: Thank you, Vasily, and hello to everyone from my side as well. Pretty straightforward set of results, so let’s try to be brief and start with Slide 15, please. There’s a small number of one off items, mainly relating to the small top up of an existing NPE transaction totaling €12,000,000 after tax. With that, reported profits to €223,000,000 or 5% higher year on year, with normalized profits of €239,000,000 up 8% versus Q1 twenty twenty four. It might feel a bit uneventful, but the reported number is the highest ever figure printed since the third quarter of twenty twenty seven to 02/2007 and the onset of the global financial crisis, so a record year quarter for profitability.
Next slide on the main P and L items. Operating income is slightly down, as expected, given the lower net interest income on account of lower rates, day count as well as seasonally lower fees. Costs were down versus seasonally high Q4, but importantly, they are flat year on year due to the benefits from the completed voluntary separation scheme during 2024 and the full amortization of certain IT undepreciated assets. In the coming quarters, we expect to see an uptick in staff costs and G and As as we continue to invest in our people and the business. On impairments, Q1 came almost in line with full year guidance of 50 basis points as we’re actively trying to front load some management actions on restructured exposures, but the environment remains benign overall.
Lastly, on the bottom line, mentioned this on the previous slide as well, encouraged to see that we have been able to grow our bottom line despite seasonally weaknesses. Next slide on balance sheet items. Performing loans up 1% in the quarter and a 13% jump from last year. Customer funds also up 0.3% in the quarter. Typical seasonal weakness in deposits fully offset with solid AUM growth, with a year on year increase of plus 8%.
Tangible book value was up 3% in the quarter, with the annual growth rate of 11% when we adjust for payouts. And then on capital, we stand at 16.3% in terms of CET1, with the quarter impacted by the first time adoption of Basel IV, almost 17% IF1 accounts for yet to be closed NPA transactions. On Slide 18, we show the two main components of revenues. Net interest income was down to $395,000,000 this quarter, mainly on account of circa €9,000,000 negative calendar days effect. Excluding this, NII would have been essentially flat, as is the case for our full year guidance.
This is despite the fact that average three month Euribor was down another 43 basis points sequentially on top of 55 basis points decline we saw in Q4. On the commercial side, higher average loan balances counterbalanced about half the impact from lower rates for loan NII. On the liability side, higher deposit volumes partly offset the repricing benefit, leading to a £6,000,000 lower interest expense in the quarter. We remind you that there is some timing effect as term deposits reprice lower than loans. As such, there should be a further decline in future quarters that would benefit NII.
On to the non commercial asset side, the securities portfolio contribution increased slightly when you adjust for the lower day count. And then funding and other NII improved by 18,000,000 due to the effect of lower rates and our net interbank position as well as, of course, our hedging. Q1 has been a very strong quarter, somewhat stronger than we had anticipated. As such, we expect to slightly higher levels in Q2, also when accounting for the faster decline in rates, with Q1 being the bottom of the year and second half growing nicely. Looking forward, higher volumes and better rates on reinvestments due to the steepening of the yield curve should grow the quarterly number further, leading to our full year guidance.
On the fee and commission income, we saw a decline of 6% in the quarter. However, if one takes into account the circa €5,000,000 negative impact from the government measures announced back in December, first quarter is flat versus Q4 twenty twenty four. Mind you that the first quarter is typically a seasonally soft quarter for the year. Otherwise, underlying trends remain healthy as the quarter has ended up 11% above the equivalent level of last year or 16% notwithstanding the effect of the government measures. The highlights of the quarter relate to mutual funds, with a lot as demonstrated by the emerging market benefits of our UniCredit partnership.
Let’s move to Slide 19 on the two main assets we have. Performing loan balances reached €33,700,000,000 with €600,000,000 of net credit expansion in the quarter. This means 1% growth versus the previous one, accounting for the negative effects from weaker U. S. Dollar, impacting primarily our shipping book.
We witnessed another quarter of strong disbursements of €2,500,000,000 in the quarter. Corporates, including SMEs, were once again at the forefront in different sectors such as trade, manufacturing, transportation, energy and tourism. As previously stated, we remain disciplined in our underwriting criteria. As such, we will not pursue deals or refinancing that do not meet our own credit criteria and are not attractive to our shareholders, even if that creates some quarterly volatility. Net credit expansion of Q1 was one quarter of the annual target, meaning we’re well on track to meet our guidance.
But we need to remind you that the net credit expansion tends to be lumpy. As such, large projects or potential refinancings could create quarterly volatility, but not materially change the positive momentum and direction. We do, however, expect the rest of the net credit expansion to be relatively backloaded given our pipeline. Turning to customer funds. We’ve seen the customary reversal over the fourth quarter seasonal strength in customer deposits, whereby deposits are 7% up year on year.
On AUMs, despite the volatile capital markets, we have been able to outpace redemptions with stronger sales while also generating positive performance. The dominant product in our palette has been the One Markets Fund offering that has been particularly popular with our affluent clients. Slide 20 on asset quality shows that the NPE ratio remained stable at 3.8%, while our coverage ratio stood at 50%. Cost of risk came in at 53 basis points. There’s nothing major to report here as the environment remains benign.
We’re, of course, monitoring the situation very closely and might need to revisit our macro parameters when we have more clarity, potentially in Q2 results. Finally, Slide 21 on capital to finish up with the results. As mentioned by Vasilis, we’ve had 71 basis points of capital generation organically in the quarter, and this includes everything that is business as usual, so P and L, DTAs, the usual DTC amortization, RWA growth as well as the AT1 coupon. Probably worth noting that the impact from RWA growth was mild this quarter, even when accounted for the small increase in loans. This reflects a great quality of our disbursements as well as the work we’ve done on capital optimization.
The other big ticket in the quarter is a negative one off 27 basis points impact from the adoption of Basel IV, which came to Europe with CRR III. What we show here is the fully loaded impact, including our estimates for the fundamental review of the trading book and spanning out to the end of the transitional arrangements in 02/1933. So be mindful when you make peer comparisons. Transitional ratios stand some 20 basis points higher than 16.3%. And then, of course, there was a dividend accrual of £111,000,000 for the quarter, as Vasilis mentioned.
But when we account for the impact it creates on DTCs, costs us about 47 basis points. With that, let’s open the floor for questions.
Jyoti, Chorus Call Operator: The first question comes from the line of Kemeni Kabol with Autonomous Research. First,
Kemeni Kabol, Analyst, Autonomous Research: just a clarification on your NII outlook, please. Did I hear you correctly saying that in the second quarter, you do expect a slightly weaker NII relative to the first quarter?
Iasan Kevapsoglou, Head of Investor Relations, Alfa Bank: Vasilis will take that, but it was slightly higher. If you want to talk about the NII outlook of that?
Vasilis Kosmas, CFO, Alfa Bank: The numbers expect to be slightly higher in the second quarter than the first quarter. The dynamics here obviously are that on the one hand, the rates we expect more softer rates in the second quarter than we initially anticipated. So we now are budgeting for two rate cuts, rather than one. But on the other hand, this is fully offset by the lower sensitivity interest rate sensitivity that we have, time deposit cost, which is priced at a lag versus the Euribor, and then the uptick on our securities book given the steeper yield curve.
Kemeni Kabol, Analyst, Autonomous Research: Okay. Okay. That’s that’s helpful. Thank
Vasilis Kosmas, CFO, Alfa Bank: higher we’re guiding for higher q two versus q one.
Kemeni Kabol, Analyst, Autonomous Research: Okay. Very clear. Thank you. And just in light of this lower interest rate trajectory for what markets are suggesting, I believe, below 2% rates, euro short term rates for next year. How do you feel about your ability to grow grow your NII above, 1,700,000,000?
And that’s that’s one question. And the and the other question I will have is, you you have made good progress on passing on the falling grades to your deposits. Can you give us an update on how you are repricing the front book relative to the back book and what dynamics you expect here going forward? Thank you.
Vasilis Kosmas, CFO, Alfa Bank: Sure. Thank you. On NII, our guidance was for at least €1,670,000,000 for 2025, and we remain firm on that. As mentioned, there’s two mild tailwinds on that. Rates has been more volatile and so has the US dollar.
So that’s basically a couple of headwinds. Thankfully, our rate sensitivity is relatively low, so these are not big numbers. So on average, our starting assumption was an average arrival of 2.3 for the year, and that’s not a million miles where we currently sit. On the other hand, there’s time deposits. We need to keep an eye on how spreads evolve.
We expect time deposits to further cost to further decrease in the coming quarters. There are tailwinds from refinancing of securities book, given the yield curve is now steeper, and obviously, the loan growth that steps in towards the second half of the year. So overall, as I said, we’re pretty confident on the guidance that we have provided for the year.
Iasan Kevapsoglou, Head of Investor Relations, Alfa Bank: Just to clarify, the guidance is at least 1.65.
Kemeni Kabol, Analyst, Autonomous Research: Tor, I was asking about 2026, where I believe your guidance is 1.7 at least.
Vasilis Kosmas, CFO, Alfa Bank: Correct. No, no, that’s fair, Gabor. I mean on 2026, we remain firm on our guidance. We would not expect rates to be materially lower than our current projections. And loan growth, which is driving the NII growth in 2026, the pipeline that we currently have seems intact.
Kemeni Kabol, Analyst, Autonomous Research: Got it. Thank you.
Jyoti, Chorus Call Operator: We have a question from the line of Negro Alberto with Mediobanca. Please go ahead.
Negro Alberto, Analyst, Mediobanca: Yes. Thanks for taking my questions. The first one is, I think it’s clear that you are rebuilding the product factories of the bank by adding the factor business and investment banking now. So my question will be, which product factory you would like to add now? And can you give us a sense of the upside risk that you can generate by scaling up these, these platforms?
The second one is on UniCredit partnership, and in particular, when the integration of the platform for corporates will be finalized finalized this year? And what kind of upside do you expect from this? And if I may, the last one, do you have any sensitivity on the IFRS nine model updates from lower unemployment or GDP? Thank you.
Vasilis Pesaldis, CEO, Alfa Bank: Well, I’ll I’ll take them. Starting on with the first one, indeed, the actions that you see are part and parcel of a strategic mapping that we have done across the product factories. And it’s not that we are not offering them. It’s just that we have identified a few areas where we can do more. That’s why you have seen us engaging both in terms of product factories as in the case of Flexfin as well as in the case of Axia Ventures as well as geographies as in the case of the acquisition of Astrobank.
Now there may be more and we are working across the functionalities that we can improve organically. But indeed, there may be a few cases that we may want to further accelerate our plan by bolt on. Now obviously, these are areas that will only surface when they actually happen. So in the meantime, I think please keep in mind that we are firmly looking at increasing our fee generating business. That’s a premise.
Now on your second one, as far as the UniCredit Corporation is concerned, indeed, we’re growing it in leaps and bounds. There are more than fifty, sixty people on each organization that are working across 30 areas that we have identified in order to bring the two organizations together and identify opportunities to start latching on them. In certain areas like capital markets, this has already happened. We’re putting ourselves jointly in front of customers. There are other areas where in order to do so, we need to complete integration work and that is in the case of payments.
I think that is going to be an important milestone when we plug ourselves fully into the payment systems of UniCredit so that our clients and UniCredit clients conversely will have a seamless experience across the 13 plus one countries that they would be able to trade on. Finally, on the sensitivities of the IFRS, I think Vasilis mentioned that we would need to have some more visibility on this one. Therefore, we’re going to be revisiting that next quarter. On on unemployment, for example, de facto Greece is working on a full employment basis. I mean, yes, we we are registering some unemployment.
But if one takes into account what one witnesses in the market and what clients are telling us practically, we are at natural unemployment level.
Dmitry O’Alex, Analyst, Jefferies: Thank you.
Jyoti, Chorus Call Operator: The next question comes from the line of Nemiso Glozman with Abrosia Capital. Please go ahead.
Nemiso Glozman, Analyst, Abrosia Capital: The time and the presentation. Just following up on your comment, you mentioned you may need to revisit macro parameters potentially in q two. Just wondering if you could elaborate a bit more what stands out at this point. Is there anything specific that comes to mind? And related to that, are you still comfortable with the NPE ratio guidance?
Or is it more of a denominator factor with long growth backloaded in H2, it will come down from 3.8 to 3.5% organically? Thank you.
Vasilis Kosmas, CFO, Alfa Bank: Sure. Thank you. I think currently, I mean, we’re not ready to give a number for the PMA models. I mean, as mentioned, we see limited impact direct impact from Greece from the turmoil, if you like, on the tariff discussion currently taking place. We do need to assess the indirect impact of that in the years to come, but not something that we can give you guidance right now and nothing that stands out, if you like, in terms of shipping or dry or any sort of sectors that expect to be heavily affected by that.
Now on the NPE ratio, we remain firm on our guidance for the year. As you rightly mentioned, this is primarily a matter of the denominator. I think the denominator has been moving pretty well Q1, and we expect the same to happen primarily in the second half of the year. This should not be news to you. I mean, this is, you know, sort of a deja vu of what happened last year.
Nemiso Glozman, Analyst, Abrosia Capital: Understood. Thank you.
Jyoti, Chorus Call Operator: The next question comes from the line of Skir Lanze Salome with Bloomberg Intelligence. Please go ahead. Thank you for the presentation. I think partially it was covered, but still again on net interest income. You say that this deepening is the profit and loss positive for you in this year.
Just to have a better idea on the medium run once the effect of the hedging and short term factors wane, what’s left and what could be the impact from the lower terminal rate than currently implied? And the second question on the quantifying the sensitivity of NII, if you could give us the updated number if you have. Thank you.
Iasan Kevapsoglou, Head of Investor Relations, Alfa Bank: I’ll take the second one. It’s CHF 15,000,000. It’s also on the slides as well for every 25 basis points. It hasn’t really changed since the last quarter. And maybe on the interplay between the hedging strategy and ALM, since we have our CIO with us, Jose Dine, maybe you want to take that on the effects on the medium term.
Jose Dine, CIO, Alfa Bank: Yes. Thank you, Jason. So the effects are not actually only for 2025, but they go beyond. As we have communicated before, there are a lot of maturities happening in 2025 as much as in 2026 in securities, so that’s €1,500,000,000 So from the initial assumptions of reinvestment yields in our business plan, now we can comfortably say that those will be 25 basis points or more better. So this tailwind is gonna carry carry us on for the next three to five years, given that those securities have a weighted average life above seven years.
On top of that, lending volumes is something that is gonna be a dynamic factor, also helping NII in the outer years once we reach neutral level. And on top of that, the rollovers of the hedging strategy in swaps also will be achieved at 25 basis points or better than initially assumed given the stiffness of the curve.
Jyoti, Chorus Call Operator: Miss Kirlaja, are you done with your questions? Yes. Yes. Thank you. Thank you.
The next question comes from the line of Dmitry O’Alex with Jefferies. Please go ahead.
Dmitry O’Alex, Analyst, Jefferies: Hi. Just on costs, so they came in lower during the first quarter and you commented that you expect this to grow throughout the year. Can you just provide some color on how we should think about the movement sequentially and any seasonality impacts throughout the year? Sure.
Vasilis Kosmas, CFO, Alfa Bank: Maybe you recall that our cost target for the year is EUR $870,000,000, and that remains changed. Obviously, if you do the math, that means that the EUR $2.00 4 that we printed for Q1 is a bit of a long number and implies that future quarters will pick up. First quarter, as we mentioned, has the impact the positive impact of our voluntary separations scheme, plus the end of the amortization of certain IT assets. So when you look out our depreciation number, you should lock in maybe another couple million euros per quarter, and and and that should one or two, and that should be it. So the pickup will be in two areas in particular.
The first area relates to our people. So this is not only recruiting in growth areas, but also retaining our top talent. We need to keep incentivizing people to to meet very challenging targets outperforming the business panel. And the way we measure them has to do with high revenues, more cost savings, sustainability, and obviously, all these are things that are naturally flowing to to our shareholders. Now given, you know, Greek economy is running at a very low unemployment rate and the economy is flourishing, we do expect to invest on them.
The latter, obviously, you know, has to do with picking up people who are repatriated from from from places like UK, Switzerland, and everything. I mean, people talking in the in in in this call are a testament, if you like, of these. The second area that unsurprisingly we keep investing is our IT capabilities with our digital offering at the forefront. We have already announced an array of apps to improve the experience, the customer experience, to allow to do more cross selling, not only in retail, which is, if you like, more quantitative, but also introducing tools in wholesale banking to capitalize on our UniCredit partnership, be it trade finance and negotiations or cash pooling. So these are the two areas.
So all in, as I said, you should expect an uptick in both staff and G and A. But at the same time, we’re very close in monitoring all these items. And we remain firm on our CHF $870,000,000 guidance for the year.
Dmitry O’Alex, Analyst, Jefferies: Thank you. Maybe just one more follow-up. Can you provide any comments at the moment on how you’re seeing the kind of My Home two program pan out in terms of applications or people withdrawing, dispersing on that, please?
Vasilis Kosmas, CFO, Alfa Bank: Can you is is this the program? Okay. Sure. Yeah.
Dmitry O’Alex, Analyst, Jefferies: Yeah.
Vasilis Kosmas, CFO, Alfa Bank: Sorry. Yeah. No. No. It’s fine.
No. I think what we see on that one is that there’s a program which started early Jan or mid Jan this year with a lot of expectations from the market. Applications do come in and do come in very dynamically, if you like. But on the other hand, disbursements have not yet come. So our first quarter in mortgages is still a soft quarter as pretty much the rest of the past five, six quarters, both for us and for the market.
And we hope the situation will be better in the coming quarters. But much of our retail budget is built on consumer loans and small businesses, where we see net loan additions for consecutive quarters being on the positive side. So new loan additions picking up more than repayments and materially market share gains, in small business.
Dmitry O’Alex, Analyst, Jefferies: Thank you very much.
Jyoti, Chorus Call Operator: We have a question from the line of Garido Lewis with Bank of America Merrill Lynch. Please go ahead.
Garido Lewis, Analyst, Bank of America Merrill Lynch: Yes, hello. Thank you for the presentation. I have two questions. The first on corporate loan growth. I was wondering if there are any segments that you think you’re targeting in particular when you think about loan growth for corporates in the years ahead and whether this load mix is changing in the way you think about it in this new economic environment?
And then secondly, I was wondering if you could comment a little bit on the Greek mortgage market. There was a very small uptick in NPEs and Greek mortgages this quarter. It’s still extremely small in the overall context, but I was surprised that there was any uptick at all given rapid economic growth. So is there anything going on in Greek mortgages? What is what are you seeing on the ground?
Thank you.
Vasilis Pesaldis, CEO, Alfa Bank: Yes. I’ll take the first one. I think zooming out a bit because you appreciate that what you see currently being dispersed are loans that have been discussed, originated, underwritten already for some time. Now you see just the execution, given that we’re speaking mostly about investment loans. I think the one trend that we will see more and more happening is a bit of a shift from services into manufacturing.
There is a very good work that has taken place over the last couple of years. And you see it now becoming a broader based cluster in terms of manufacturing. Alfa Bank has been traditionally been very close to that. And I think that is one trend that we do see as those corporates are the ones that, on the one hand, are leading the way towards the internationalization. But at the same time, also they are the ones that are procuring the greatest multiplier effects for the economy.
Now Vasily for the second question.
Vasilis Kosmas, CFO, Alfa Bank: Thank you, Vasily. No, that’s a good catch. Indeed, the mortgage formation has been bit higher in this quarter compared to other quarters. But what you see there is mostly a proactive management of stage two exposure. So we are initiating a program to find more sustainable solutions for some of our stage two exposures.
This is most likely going to continue. But having said that, this is already budgeted for, so this is not affecting neither the cost of risk nor the NPE guidance for the year.
Garido Lewis, Analyst, Bank of America Merrill Lynch: Understood. Thank you.
Jyoti, Chorus Call Operator: The next question comes from the line of Novoselski Elijah with Bank of America. Please go ahead.
Iasan Kevapsoglou, Head of Investor Relations, Alfa Bank0: Hi. Just one quick question for me. Now that we’ve seen that you’re doing some M and A activity with Axia Ventures and Astra Bank recently, do you have any more plans for expansion possibly internationally or something more within the country to diversify your peoples? Thank you.
Iasan Kevapsoglou, Head of Investor Relations, Alfa Bank1: Hello, this is Lazarus. Our M and A strategy, as we have explained on previous encounters, is focusing on either enhancing product factories or further penetrating into core markets. And as far as product factories are concerned, Vasilis explained that we’re looking after fee business and product areas with higher margins. That’s why we have acquired Flexfin to also modernize our factoring operations as well as our investment banking business and capital markets looking to almost grow by three times the revenues in the next few years. In Cyprus, which is one core market in our international operations, we have targeted to double our presence in essence by reaching at least 10% market share, which is what Astrobank offers to our international operations.
Currently, there’s no plan to expand into other markets. We have a smaller footprint in The United Kingdom, a digital operation for communities. And we also have a branch in Luxembourg, which we are expanding in terms of operations to also address offshore wealth aspirations.
Iasan Kevapsoglou, Head of Investor Relations, Alfa Bank0: Thank you.
Jyoti, Chorus Call Operator: Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to management for any closing comments. Thank you.
Vasilis Pesaldis, CEO, Alfa Bank: Well, thank you very much for participating on our call at this very busy results week. We’re very much looking forward to speaking to you again on the August 1 in presenting our first half result, hopefully just before your summer vacation begin for which we hope that you choose Greece and come and visit us. Well, thank you very much.
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