Alpha Bank Sa

Ladies and gentlemen, thank you for standing by. I am Gail, your course call operator. Welcome and thank you for joining the Alpha Services and Holdings conference call to present and discuss the first quarter 2024 financial results. All participants will be in 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. I'm Iasson Kepap-Tsoglou, Alpha Bank's Head of Investor Relations. Thank you for joining us. As usual, Vassilios Psaltis, our CEO, will lead the call, summarizing Q1 and providing you with a few updates on the outlook. And then Lazaros Papagarifalou, our CFO, will take the floor. to take you through this quarter's numbers. As ever, we will take Q&A in the end, and we hope to finish within the hour. Vasilis, over to you.

Thank you, Yasson. Good morning, everyone, and thank you for joining. Let's start with the Q1 results on slide four, please. This quarter, We're very proud to have delivered 211 million euros in profit, which is, please note, the highest number reported since the third quarter of 2007 and the onset of the global financial crisis. We have delivered a 13.5% return on tangible equity and 9 cents of earnings per share for our shareholders. Our operating performance has been fueled by growth in our top line, marked progress in fee income generation, solid management of operating leverage, and a continuing improvement in provisions. We continue to grow our loan and AUM balances and position the business to maximize the recurring value we can create for our stakeholders. Our capital buffers continue to grow on 68 basis points of organic capital generation, reaching a reported level of 14.6% in Q1 or above 16% when accounting for the completion of pending transactions. And these numbers are net of a 35% accrual for dividends out of 2024 profits, which is up from the 20% accrual of 2023. Recently, we have also submitted our request to the supervisor for the resumption of dividends out of 2023 profits with an intention to pay 122 million equally split between a cash dividend and a buyback program. We expect to receive a response early in the summer. Moving on to slide five. This is a reminder that we expect to maintain this trajectory of constant improvement across all key metrics over the coming years. Our profitability should grow towards a level of around 14%. Our earnings per share and book value should trend higher whilst we continue building solid capital buffers throughout the plan, allowing us to maximize the value we can deliver to our shareholders. The trends we have experienced in the first quarter reconfirm our outlook for the year. It is still early days, but risks appear to be tilting to the upside. Interest rates are hovering slightly higher than what we have budgeted for. Concurrently, we're experiencing a smaller than anticipated increase in retail funding costs on accounting of a slower than expected transition to time deposits. As a result, we are confident in the full year 2024 outlook for 13% returns and 31 cents of earnings. On to slide six, please. We remain focused on maximizing the value that we can add to our stakeholders. Our balance sheet positioning, our franchise strengths, our partnerships, our focus on operating efficiency, and our efforts on asset quality underpin our promise to deliver profitable, self-sustained growth. This should allow us to deliver 30% of our current market cap to shareholders in distributions subject to regulatory approvals, while still leaving us with 40% of our current market cap in excess capital. In our recent application to the supervisor, we reinstate shareholder remuneration for 2023 profits, we have opted to ask for half of the distribution to be in the form of buybacks. As we are cognizant of the fact that a good part of our investor community puts significant weight on the existence of cash dividends, so we have incorporated that in our decision. At current levels, however, the return on a buyback program indeed far outweighs other possible alternatives, even under the most urgent criteria, making it the best use of funds for our shareholders. And with that, let's move to slide seven, please. Following our investor day in 2023, we have continuously updated you on the progress we are making on the various facets of the plan. On our full year results, we focused on the six main pillars of our strategy. And today, I would like to give you an update on our two enablers, human resources and digital. It is important to remember that our plan hinges on these two critical elements. An increasing portion of our revenue growth and diversification rests upon digital sales of products. Physical sales are also increasingly enabled by our digital capabilities. And then again, we're operating in a competitive job market, and our HR proposition is pivotal in enabling us to attract and retain talent, as well as to ensure that our people have the right skills, the right mindset, and we are aligned to produce the desired outcomes. Moving on to slide eight, as you can see, we have reshaped our HR landscape, introducing a number of new roles, spanning HR strategy, organizational effectiveness, talent management, change management, and more. This redefinition has allowed us to allocate HR business partners across all business units, ensuring strategic alignments and tailored support. Through automation via our new self-service platform, we have embarked on the review and streamlining of processes, enhancing efficiency across the board. Moreover, our focus on attracting and nurturing talent has resulted in circa 400 new hires over the past year, 190 of which were in the front-facing and digital teams. To cement a high-performance culture, we have implemented a combined fireproof plan, introduced a new talent retention scheme, and integrated linked business unit targets with our business plan. Investing in our employees' growth lies at the core of our strategy. we have witnessed a significant uptick in training hours and enrollments, signaling our commitment to learning and development. Flexible career paths have been introduced, offering employees a dual career option, and through the reduction in organizational levels, we further foster agility. Establishing job profiles for all unique roles across the organization and clustering them into job families facilitates seamless internal mobility. Building robust succession pipelines demonstrate our dedication to nurturing future leaders. At the heart of our employer value proposition lies our new culture, as expressed through the Alpha way. We've commissioned a group of senior leaders, what we call champions, and a number of transformative initiatives aimed at embedding our new purpose and values in everything what we do. Our dedication to diversity, equity and inclusion is evident through the implementation of our comprehensive strategy, along with initiatives empowering women and fostering financial inclusion. Additionally, our commitment to employee communities of change is an excellent example of our strong belief in fostering collaboration and driving change from within. Through these three pillars, we're not just transforming HR, We are shaping a future where our employees can thrive and achieve our cascaded business plan goals guided by purpose and inclusivity. On slide nine, please. We have made significant progress in advancing our digital offering. Our products are built upon a core banking system that was transformed as recently as 2018 and is based on modern standards and cloud-native technologies. Our in-house digital factory team is fully established with new processes and new ways of working. Alongside them, we have two centers of excellence for CX UX and advanced analytics. This backbone has allowed us to launch a series of products and services and to redesign existing digital journeys to increase uptake and boost our sales capabilities. Our investments are translated into progress. As of the first quarter of the year, 25% of our sales are made through digital channels, reaching our year-end targets ahead of schedule and paving the way to outperform our target of getting to 30% by the end of next year. More than 80% of daily banking services are currently digitized, and we expect to reach 100% by the end of next year, while active users continue to increase. And of course, transactions are almost fully digitized. Let's briefly look at one practical example on slide 10. We were the first bank in the market with a digital solution allowing parents to provide their kids with pocket money called MyAlphaVibe. Despite its short life, the application has already received numerous awards, and it's not hard to understand why. Teenagers are introduced to banking in a controlled manner. improving financial inclusion, providing them with a solution that is both safer than cash and in tune with the times. Parents have the flexibility of reloading the car remotely while overseeing transactions and placing safeguards around certain types of transaction, such as betting or alcohol. You can find more details on products that we have launched for retail clients and businesses in the appendix of this presentation. Lastly, from my side, a brief update on our partnership with Unicredit on slide 11. The various facets of the transaction remain on track, with Romania expected to close later in the year, the launch of Unicredit's investment product suite won markets in early summer, and Alphalife on track for the first half of 2025. On the wider commercial agreement, we have already completed 14 trades on trade finance guarantees and letters of credit, have launched a structured market-linked deposit targeted to our gold customers, and are working more closely on clearing, trading and treasury, factoring, as well as brokerage. We still have a lot of ground to cover, and we will continue to update you on the progress that we make. As a reminder, we expect the transaction to be EPS neutral, not including any potential upset from the commercial agreement or adding more than 100 basis points to capital. Nazare, the floor is yours.