WOOD Flash – Alpha Bank: 4Q17 – solid reversal of asset quality trends
Alpha Bank reported its 4Q17 results yesterday (20 March). We were positively surprised by: 1) the solid drop in both NPEs and NPLs during the last quarter, reversing the negative trends seen in previous quarters; and 2) the 50bps improvement in capital, with a fully-loaded CET1 ratio of 15.9% post-IFRS 9. On the negative side, we highlight the soft NII trends (in 2018E, management expects a high single-digit drop) and the deterioration in NPE coverage due to the sale of NPLs and write-offs (which will be offset by the implementation of IFRS 9, but will place Alpha below its peers).Alpha Bank trades at a P/TBV of c.0.35x for 2017 (post the IFRS 9 impact), which still implies that the market is assuming the probability of a capital increase after the EBA stress test in May 2018. In view of the strong capital buffers, we believe that Alpha is well-placed to avoid any capital action, and we retain our BUY rating on the stock.
Alpha Bank is a banking and financial services group which is based in Greece. Co. is engaged in offering a range of services including retail, SME and corporate banking, credit cards, asset management, investment banking, private banking, brokerage, leasing and factoring. Co. is also active in international financial market, with a presence in Cyprus, Romania, London, Serbia, Albania, Jersey (Channel Islands), Bulgaria, former Yugoslav Republic of Macedonia and New York. Co. maintains a focus on retail banking in Greece and particularly loans to individuals and small business loans, and overall expansion in Southeastern Europe. Co.'s activities are divided into retail and wholesale banking.
WOOD & Company is the leading investment bank in Emerging Europe. Founded in 1991 and head-quartered in Prague, our footprint spans the region and touches investors around the globe.
A pioneer in Emerging Europe, WOOD executed many of the first CEE equity trades and landmark investment banking transactions. Our electronic trading platform was the first in the region, and remains the best. We are continually expanding our relevance and reach in these ever-evolving markets.
Our equity market share reflects our stature: 7% in Warsaw, 20% in Bucharest, 16% in Hungary, 40% in Prague and 5% in Vienna. Our distribution is unparalleled, with the largest salesforce in the region, servicing a uniquely diverse investor base.
We couple local expertise with a truly international perspective. With offices on the ground in the region, and in key financial hubs such as London and Milano, we are never far from our clients and we remain at the forefront of what’s afoot in the CEE emerging and frontier landscape.
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