Alpha Bank yesterday predicted that its competitors would soon follow its lead and increase interest rates in the next three months despite the outcry over its controversial move last week. The second-largest bank took the market by surprise when it jacked up interest rates for mortgage loans, consumer loans and credit card borrowing, reversing a trend of rate cuts sparked off by Greece’s convergence with the eurozone. It attributed the rate increase to price and cost rationalization. The rate boost was soundly condemned by the government, which denied that its issuance of popular savings bonds this week had motivated Alpha Bank’s move. Consumer bodies and companies have been equally critical of the bank. Stung by the criticism, other banks have adopted a wait-and-see stance. «We won’t be alone for long,» Ioannis Costopoulos, Alpha Bank governor, said, indicating that other banks are likely to follow suit. Manos Giakoumis, banking analyst at P&K Securities, agreed with the assessment. With mortgage rates at historically low levels and other sources of income drying up, he said it was an opportune time for the sector to rectify interest rates. «They can’t increase revenues from other sources and they can’t cut costs, especially personnel costs,» he said. The rate hike is estimated to generate slightly more than 20 million euros in additional revenues for Alpha. Costopoulos dismissed speculation of loss of market share as a result of the interest rate increases. With average mortgage loans amounting to 50,000-60,000 euros, borrowers would only pay an additional 11 euros monthly, a minor sum that is not likely to drive them to another bank. He also took a shot at the Post Office Savings Bank and its intended move into the mortgage market with significantly lower borrowing costs and the government’s popular savings bonds, calling the two «scrappy intervention.» Alpha yesterday reported a 28.4 percent drop in 2002 pro forma consolidated net profits to 172.5 million euros on the back of severely curtailed trading gains. Income from trading activities fell by 40 percent to 71.7 million euros as the bear market posted its third consecutive decline in 2002. Results were also affected by a 17.8-million-euro payment to its employees’ pension fund. Net interest income rose 3.1 percent to 731.9 million euros as the bank strengthened its market share in mortgages and consumer lending, up by 101 percent and 25 percent respectively. The government’s reimposition of a tax on depos had a negative impact on deposits and repos, which fell 6.6 percent to 23 billion euros. The bank also wrote off 611.3 million euros of good will related to its takeover of Ionian Bank three years ago. Alpha plans to recommend a dividend of 40 cents per share to shareholders.