Alpha Services and Holdings S.A.

Ladies and gentlemen, thank you for standing by. I am Yota Yokoro's call operator. Welcome and thank you for joining the Alpha Services and Holdings conference call to present and discuss the first quarter 2025 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.

Good morning, everyone. This is Yasson Kepap-Tsovilou, Alphabank'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, probably a late night yesterday. Vassilios Psaltis, our CEO, will lead the call, summarizing Q1 and providing you with a few updates on the outlook. And then Vassilios Kosmas, our CFO, will go through this quarter's numbers in some detail. As ever, we will take Q&A in the end and should finish within the hour. Vassilios, 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 million, or 9% per share, are 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 free 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 million. Vasilis will give you more detail on the first quarter results, so allow me to spend some time on the wider microeconomic context here, starting with slide 5. 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 falls unaffected. Orient 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 inelastic. 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 US 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 halt the process of monetary policy normalization, at least in the US. Now, against this background, global monetary policy cycles are expected to be less synchronized 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 0.5% to 1%. 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 7. 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&L positive, as it allows reinvestment 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 9 may be adjusted later during this year when there will be more feasibility for any management overlays. In terms of sectors, dry-bulk shipping exposures linked to the U.S. 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 8. In practice, and based on the evidence so far, we expect rates to diverge 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 appear to be thus far unaffected, and 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 four-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 Axia Ventures. The upcoming combination of Axia with Alpha Finance and Alpha Bank's Investment Banking Unit will create the largest investment banking and capital market service provider in the region. It will also be the only fully-fledged, vertically integrated investment bank in Greece and Cyprus. Axia's entrepreneurial mindset and talented team that has unique expertise and enjoyed long-term success in financial advisory and capital markets, will complement Alphabank'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 entity's international presence and credentials. As a result, the group's revenues from investment banking services are estimated to triple, from a current level of 10-15 million to over 45 million 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. 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 acquisitions, it is important to recognize that the 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 bound outstanding higher. As you can see on slide 10, 2024 EPS is now expected to land above 45 cents, some 7% higher than before, with reported profitability jumping by 1 percentage point to circa 13%. Our commitments for 3 billion 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 long growth. We are 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 billion 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 3 percentage points higher on account of the recent acquisitions, but still not withstanding 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 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 firepower to do more. The pace of capital generation and our strong capital position means 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, the floor is yours.