Alpha Bank Strategy Update 2020 – 2022 Investor presentation November 2019
Our vision for the future Vassilios E. Psaltis, CEO 2
From To Real GDP restored to stable and 0.7% ~2.0% positive growth rate The Greek economy has Real GDP average annual growth, % 2015-2018 2020-2022 entered a sustainable 25% 14.5% Declining unemployment growth trajectory Unemployment rate, % 2015 2022 0.4% 2.5-3.0% Disposable income on the rise Disposable income, average annual growth % 2015-2018 2020-2022 -1.7% 3.5-4.0% Real estate market restarting House Price Index, average annual 2015-2018 2020-2022 growth % SOURCE: ELSTAT, Economist Intelligence Unit, ECB,EC 3 3
New policy mix and reforms aim to push for faster economic growth Key areas of reform Market momentum Net FDI 1 in Real Estate Commercial Real Estate prices 22% average reduction in the real estate tax (ENFIA) Already Index 2010 = 100 EUR bn completed Corporate income tax rate from 28% to 24% 1.1 100 1.2 Net FDI 1 in RE Retail price index Office price index 95 1.0 Dividend tax rate reduced by half to 5% 90 0.8 86 85 0.6 0.4 Elimination of capital controls 79 80 0.4 0.2 0.2 0.2 75 0.2 0.1 0.1 0.1 A new growth (investment incentives) law 70 0 2010 11 12 13 14 15 16 17 18 19 20 21 2022 To be 40% discount on building upgrades Greek 10year bond spread and ASE index completed Bond spread, bps (LHS) ASE, index (RHS) 500 1,000 soon Asset Protection Scheme for NPLs (Hercules) 800 400 +42% 600 300 60% 400 Flagship investments and privatizations 200 200 100 0 3-year VAT suspension on new building permits Jan Mar May Jul Sep Nov 1 Foreign Direct Investments 4
Negative interest rate environment over the medium term At the same time, we are Pressure on spreads, especially for large corporates that operating in a challenging can access capital markets directly market context Rising expectations for better customer experience that is seamless across all channels Commoditization of banking services, with digital attackers competing for part of the profit pools of banks Increased regulatory and compliance pressure 5 5
Alpha Bank will build upon a set of strong assets to return to sustainable profitability Utilize our market-leading capital position 1 in quantum and quality for decisive NPE resolution, within comfortable capital envelope Empower our committed, loyal and motivated Mobilize change with a new, talented management team employees, to drive innovation and execution Capitalize on our brand which stands for credibility and Drive the NPE resolution agenda leveraging our proven reliability 2 , combining with a unique customer experience expertise in successful transactions 3 offering Further penetrate our large customer base of ~3.1mn Increase cost efficiency, building on our successful track customers, increasing average product holding from 1.3 to record and expertise in cost reduction , achieving 20% 2.5 in line with European peer average reduction over the past 5 years Build on our competitive advantage in selected customer segments and products ▪ Award winner for best Private Banking and Affluent Banking offering ▪ Market leader in credit cards ▪ Proven expertise in Structured Finance ▪ Traditionally the bank of choice for Corporate customers 1 Based on CET1 2019 Q2 disclosed figures 2 Based on customer survey among Alpha Bank customers, March 2019. "Reliability" ranks as the top attribute that customers relate to the Alpha Bank brand 3 EUR 3.5bn of successfully executed NPE portfolio transactions to date 6
Our vision for Alpha Bank for 2022 Customers Be the preferred Bank in Greece for our target segments, offering best-in-class customer experience Shareholders Achieve market-leading efficiency and profitability, through a combination of targeted growth and cost efficiency Employees Strengthen our organizational effectiveness by developing a strong meritocratic culture and appropriate governance structures 7
From To Q3 2019 2022 44% <10% NPE ratio 1 Decisive de-risking of the balance sheet and Cost of Risk 2 ~200bps CoR de-escalation <70bps Where we want to be in 2022 55% <48% Cost/ Income Continuously improving efficiency ~170bps <145bps Cost/ Assets Return on Equity 2,3 <1% ~9% Creating shareholder value and meeting 18% ~17% regulatory expectations CAD 1 Bank perimeter in Greece; basis for ratio includes senior notes 2 9M 2019 annualized 3 Equity calculated on 15% CET1 ratio 8 8
We have identified tangible value creation levers, which we will use to deliver value to our shareholders 1 2 3 Project Galaxy Operating model Customer-centric growth ~EUR 120mn (>10%) reduction in ~Up to EUR 12bn NPE Increase penetration from 1.3 to total Group cost from 2019E to securitization, ~EUR 7bn ~2.5 products per customer 2022 through branch network and servicing outsourcing, and NPE central function optimization, NPE platform carve-out to Increase NPS 3 by 15-20p.p. ~9% cost reduction and G&A discipline independent entity Group CoR from 200bps 1 in 9M EUR 14bn of new disbursements 2019 down to <70bps by 2022 ~18% targeted reduction in branch Net F&C income increase of ~EUR NPE ratio 2 from ~44% in Q3 footprint 110mn in Group , focusing on 2022 ROE 2019 to <10% by 2022 investments and bancassurance ▪ ▪ ▪ Transaction to take place in 1H 2020 Successfully completed 2019 VSS Recovering market ▪ ▪ Detailed action plan in place providing a significant head start in Strong momentum from 2019 ▪ ▪ Experienced team, with proven track reducing expenses Specific opportunities identified through record, leading the project detailed customer segmentation RoE 5.0 – 5.5% ~1.5% 2.0 – 2.5% impact Organizational Strengthened corporate governance 4 effectiveness and focus on performance culture 1 Annualized 2 Bank operations in Greece; basis for ratio includes senior notes 3 Net Promoter Score 9
We will decisively reduce NPEs through a large scale transaction within a comfortable capital envelope i ii iii Project Galaxy Front-loaded, substantial NPE reduction Carve-out of NPE platform and outsourcing of Hive-down of core banking assets and through a large securitization transaction servicing to independent entity in order to liabilities to a new Banking entity support Galaxy and business model efficiency ▪ Creation of Holdco and spin off of banking ▪ Securitization of up to EUR 12 bn Retail and ▪ Cepal Hellas as carve-out vehicle 2 business into a new entity in line with market Wholesale NPEs using the Hercules Asset ▪ Appropriate execution capacity and precedents Protection Scheme (HAPS) expertise deployed on the NPE book resolution ▪ Immediate de-risking of the balance sheet ▪ Management team with proven track record and strong positive effect on Cost of Risk ▪ Compliance with SRT 3 requirements post de-consolidation 1 ▪ Enhanced flexibility in NPE cost management, ▪ Transaction execution well within a due to the outsourced servicing of the NPE controlled capital envelope platform ▪ Execution within the first half of 2020 NPL 1 ratio NPE 1 ratio CAD ratio CoR ~10% ~20% ~16% <100bps Post Targets transaction Pro forma for Galaxy <5% <10% ~17% <70bps 2022 1 Bank perimeter in Greece; basis for ratio includes senior notes 2 Cepal Hellas to become 100% owned by Alpha Bank control prior to the sale to a 3rd party investor 3 Significant Risk Transfer 10
Our operating model will be transformed to radically improve productivity and efficiency Operating Recurring Group Opex EUR mn model NPE management a ▪ NPE operations carved-out ▪ Achieve cost reduction in line with NPE deleveraging 1,077 Operating model efficiency ▪ New cost governance framework -11% ▪ Zero-based end-to-end process re-engineering/ Automation 2 ▪ Internal demand management b ▪ Outsourcing ~960 ▪ Further reduction of our property and facility management expenses ▪ Reduction of outsourcing costs Branch network ▪ Complete the successful transaction migration program c ▪ Shift simple sales and servicing activities to alternative channels ▪ Remove administrative tasks from branches 2019E 1 2022 ▪ Further rationalize footprint 1 Annualized 9M 2019 Group OpEx 11
We will put our customers at the center of what we do … what we will do to cover their Customer- What our customers need… centric growth needs Key targets a Fast and reliable service Highest NPS 1 among Make customer satisfaction a strategic priority Greek banks Redesign our back-office operations to Reduce onboarding time Seamless omnichannel increase efficiency and reduce response b by ~85% experience with digital times product and service offering 3 Digitally transform key customer Significantly reduce journeys time-to-yes and time-to- Proactive, customized value c money through STP 2 and proposition to individual machine-assisted digital needs Remove non-value-added activities, underwriting increasing client-facing time Deep expertise and high- Migrate majority of Instill cross-functional, agile collaboration d quality relationship products and servicing to models to enable fast delivery and quick management for digital channels response to client needs complex needs 1 Net Promoter Score 2 Straight Through Processing 12 12
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