Alpha Services and Holdings S.A.

Ladies and gentlemen, thank you for standing by. I am Jota Yokoru's call operator. Welcome and thank you for joining the Alpha Services and Holdings conference call to present and discuss the full year 2023 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. Should anyone need assistance during the conference call, you may signal an operator by pressing star and zero on your telephone. At this time, I would like to turn the conference over to Alpha Services and Holdings Management. Gentlemen, you may now proceed.

Hello, everyone. This is Yaron Kevatsovlou, Alpha Bank Head of IR. Thank you for joining us. Slightly different format this time, as we have a lot of ground to cover. Vasilios Psartis, our CEO, will lead the call, focusing on the main elements of the strategic and financial progress made during 2023. Our CFO will then update us on the financial performance over the coming three years. Q&A will follow, and we aim to finish within the hour.

Vasily, over to you. Thank you, Ashwin, and good morning, everyone. Thank you very much for joining. Let's go straight to slide five, please, to look at last year's performance. 2023 has been, by all accounts, a strong year. Like others, we, too, have benefited from higher interest rates and a benign retail funding environment. We have used this opportunity to ensure two things. One, that we accelerate the delivery of our strategic objectives, and two, that we continue to position the business and our balance sheet to maximize the recurring value we can create for our shareholders. Our actions have translated into tangible results. Our profitability exceeded the 12% target for 2025, that we set in our investor day, and as Lazaros will highlight, we aim to drive it higher. The same is true for EPS. And on capital, if we include the impact of the deal we closed with Unicredit last October, we have delivered in one year close to 60% of the three-year target for capital generation. Top-line growth has been coupled with the repositioning of our balance sheet to ensure that we can shield our profitability in a falling rate environment. We continue to expand our fee generation capacity through internal actions as well as by expanding collaborations. We reduced our cost base for yet another year, extracting further efficiencies from the business and helped by a smaller resolution fund contribution. Our cost of risk has remained stable despite the challenging environment and whilst ensuring that we continue to deliver on the convergence of our assets quality with the European average. And last but not least, Beyond organic capital generation, we have expanded our total capital and embryo buffers on the back of a solid issuance plan to ensure that we are at the forefront of optimizing our capital stack. We are proud of the progress we have made during 2023 and of the solid foundations we have set to increase the value we can create and deliver to our shareholders. Strong 2023 delivery, the normalization in profitability, Capital generation and accelerated conversions to European asset quality levels make us confident of our recommencement of dividend payments, rewarding our shareholders for their patience. We have accrued two equivalent of five stamps per share out of 2023 profits, payments of which will need, as usual, the approval of the AGM and the regulator. Our results for 2023 have exceeded even our own expectations, as you can see on next slide, on slide 6. We present here a light-for-light comparison between the guidance we originally gave you alongside our full-year result last March and then our updated guidance last November, as well as the much better results that we have delivered. We have every intention to continue to build upon this track record of delivering on our promises. Let's now look at the progress we have been able to make on the strategic pillars of our plans starting with a summary on slide 7. Our four commercial engines have delivered on their strategic mandates, bringing benefits from a structural improvement in efficiency and through recurring profitable growth as necessary. At the same time, we have enhanced the resilience of our balance sheet and have seen tangible results on our ESG agenda. Let's start now with retail on page 8, please. Our aim is to fully digitize everyday banking needs, which should free up our people to further increase the time that is allocated to addressing more complex customer needs. During 2023, we roll out a new service model to more than 80% of our branch network, limiting transaction hours, operating branches by appointment only, training our clients to use digital channels, and thus, allowing our relationship managers to focus more on higher-value advisory work. We launched our priority relationship manager services for both the emerging affluent personal and retail business banking, with more than 400 AMMs and over 500,000 clients. At the same time, we launched the MyAlphaAdvisor tool for our business relationship managers. We have extended the daily banking functionalities that are offered via digital channels, including payroll account opening and fully digital credit card sales, and have also completed the first wave of our subscription bundles offering. Our heightened focus on the retail segment of the wealth business has translated into tangible results, with retail accounting for more than 25% of the total inflows into Alphabank's Greek non-money market mutual fund during 2023, while LifeBank Assurance Premium Production captured more than 25% of the total market. While retail profitability on allocated capital improved in 2023, mainly due to higher rates, the actions we have taken will deliver tangible results in the coming years, helping us maintain client servicing and revenue momentum, notwithstanding lower rates. Cross-telling into our retail client base has been an important contributor to the growth of our wealth business, while at the same time, we have been scaling our wealth engine and customizing our investment proposition flow segments, as you can see on slide 9. We have initiated the homogenization of our operational model by implementing a new organizational structure, strengthening our infrastructure within an integrated wealth management ecosystem. We have expanded training, for our relationship managers on new investment product categories, introducing advanced training for the affluent distribution networks. E-wealth services are already available to private and most gold clients, with automated acceptance of investment orders, dynamic portfolio appraisal, and online orders for mutual funds. Our clients are increasingly interacting with us through digital channels. allowing us to grow our assets under management for private bankers by 15% during last year and increasing the penetration of the affluent segment by 6 percentage points, which is on track to meet our ambition on both counts. We have expanded our offering, being by introducing alternative investment funds for our private banking clients, also enhancing thematic, liquid alternatives and energy offerings of third-party mutual funds. And at the same time, we have also upgraded our in-house product suite. We have launched new investment products, resulting in a substantial increase of circa 1.3 billion in assets under management, representing a growth of close to 44%, and greatly exceeding our target for the year. Thus, securing the top position in terms of net inflows into mutual funds. That means capturing a 30% market share. The operationalization of our agreement with Unicredit is ongoing, and we are launching a new structured market link deposit targeted to our grown customers. Our strong position in wealth is a key differentiator for our franchise. As rates decline, we are strategically very well positioned to capture capital light fees as clients reposition their savings pool. Moving on to wholesale, that is on slide 10. Our strategic objective is to leverage our leadership position to capture the potential of the Greek market and do so while maintaining our robust profitability by focusing on sectoral know-how, innovative products, and client service. We continue to invest in industry knowledge and have redesigned our teams to ensure we bring specialized advisory and financing knowledge through industry group experts. We are revamping our transaction banking, upgrading the sales process and adding more experienced and purpose sales personnel, instituting a customer support team and enhancing collaboration with other business units to improve product penetration through shared targets. We also continue to expand and market our digital product palette, introducing new modules, including on payments and trade finance, whilst conducting client workshops focused on transaction banking products and services. As a result, We have increased our net loan additions with disbursements reaching 6.6 billion in 2023. And of course, we have started working more closely with Unicredit in trade finance, as well as in open issuance for the time being, and that's on BCM products. Let's now move to slide 11 and speak about international. Well, our aim was to improve the return on the capital that we deployed on international business. Operationally, 2023 has been an excellent year. Loans grew by 7.5% while deposits grew by 15% and the profitability of the segment has vastly improved. Undoubtedly, however, the year was dominated by the strategic moves that we have decided. In Romania, the conduction of the unit credit through the merger of our respective subsidiaries vastly improves the return on the capital that we deploy. The merger unlocks the profitability benefits of having critical scale, whilst allowing us to retain our presence in a capital-efficient way. The transaction has allowed us to realize the value of our franchise in Romania in an accelerated manner, whilst limiting the risk from the investment that would have been required otherwise. In Cyprus, we have put a new management team in place and ended resourcing to implement an ambitious plan leveraging on our core strength. 2023 has been a strong year for Cyprus, delivering good returns on allocated capital and a bottom line of 10% of our group profit. Now, on to slide 12. Throughout the year, we have continued to grow our loans selectively by focusing on a diversified and prudently priced performing book. We have strengthened our liquidity, expanding our diversified, granular and sticky deposit base and focusing on high-quality liquid assets when it came to expanding our non-commercial book in order to rebalance the interest rate profile of our balance sheets. We have further improved our asset quality profile, reducing our NTE ratio and improving coverage. We have expanded our capital buffers and have worked to release risk-weighted assets through two synthetic securitizations and through the introduction of external ratings for our corporate long book. Overall, we have enhanced the resilience of our balance sheets to ensure we can create and deliver value to our shareholders. Finally, a few words on sustainability on the next slide, on slide 13. We have started a journey in 2019 to progressively integrate ESG in our business strategy and operating model. In 2023, we became the first big bank to join the Net Zero Banking Alliance. We have completed the full measurement of finance emissions and defined science-based targets for operations and portfolio. We have reduced our environmental footprint further and have made 800 million of sustainable disbursements. We continue to support diversity and inclusion, both internally and in society, and have expanded the female representation at both levels. And now, let's turn to slide 15, please. Later, we will walk you through the financial building blocks of our updated three-year plan. But allow me to provide you with a few key takeaways. Our revenues, our earnings, our profitability, and our capital will all be on an upward trajectory throughout the business plan horizon. Sure enough, we will need to work hard to expand our fee income, to widen our operating door, and to deliver improvements in asset quality. These are fundamental outputs of our strategic operating pillars. Importantly, the expansion of our key metrics is predicated on the evolution of our top line. and the expected trends there are mostly an outcome of our positioning, and that should be in light of the expected normalization of the interest rate environment. Our profitability should thus converge towards a return on tangible equity of around 14%, whilst we continue building solid capital buffers throughout the plan, allowing us to maximize the value we can deliver to our shareholders. And with that, Lazare, the floor is yours.