Alpha Bank’s shipping division grows as market moves rapidly

After Greek banks’ successful entry into the shipping financing sector, their next challenge comes in expanding cooperation with shipping firms to domains such as private banking, so that some of the capital from Greek shipping activity abroad is invested in Greece. Alpha Bank’s shipping division was born in 1997 and has since created a portfolio of $1 billion, leading in the sector along with the National Bank of Greece. In an interview with Kathimerini, Marinos Yiannopoulos, Alpha group’s managing director, and Christos Kokkinis, head of the division, explain why shipping firms have now turned to domestic banks for financing. What changes has the growth of shipping brought to the banking market? Yiannopoulos: The shipping boom of the last couple of years has certainly had effects on corporate financing, the greatest of which was the demands for premature payment of existing loans. Kokkinis: Indeed, it is the first time we have witnessed such a rise and I believe we are all learning from it in the sector – about how to respond in these new conditions. For example, the prepayments of loans due to ship sales or refunding are a sign of the times. After all, ship prices are very high, hence many companies are using this to maximize their profits. Yiannopoulos: This is not the rule but several shipowners who sell a vessel do not need to keep a loan anymore. Along with the requests for new loans, we have noticed an intense movement in the market. The good news for us is we have secured excellent quality for our portfolio, so that our predictions are at historically low levels. How do you select your clients? Kokkinis: We focus on the sector’s traditional names with a history in shipping stretching beyond one generation. Our portfolio then gradually expands to other companies, but very carefully at that. The bank can boost its presence, creating a portfolio of as much as $2 billion in the next two years. But it certainly is not concerned about securing more loans and their size, as we believe we must be more conservative. The most important thing when choosing our clients is their name. Otherwise, we would not proceed with even the easiest of loans, say 10 percent of funding. Are you trying to expand cooperation with shipowners to other sectors? Kokkinis: Our philosophy as a whole is based on the relations we cultivate so that they expand to other sectors, too. Our bank is a developed credit group with leasing, private banking and credit card services. Greek shipping’s deposits in 2004 reached $17.5 billion. We aim for a portion of this to stay in the country through investments, although it is hard to persuade a client who has worked with a foreign bank for years. Still, we see this mentality changing gradually, since it is easy to check the domestic reality as in the case of loans from Greek banks. So is the shipowners’ attitude to local banking system changing? Kokkinis: We have certainly seen this with the clients’ response to the banks’ first steps into shipping funding, such as Alpha Bank, Piraeus Bank, Emporiki Bank and others. They realized we are as competitive, friendly and flexible as foreign competitors, but crucially we are next door. Greek banks further offer a more direct communication, even with the bank manager who will look into the problem, unlike in foreign banks, where the loan process is much more impersonal. We also have the know-how, as most of the Greek banks’ staff possess experience from working for foreign banks. How did you approach your clients? Kokkinis: Manning the division with experienced staff as well as my personal contacts from my career at similar divisions of foreign banks in Greece played a crucial part. The name of the bank and its president, Yiannis Costopoulos, also helped. Besides the quality of service on offer, we placed emphasis on the speed of loan approval, which foreign banks lack. In many cases we have said ‘yes’ to loans within 24 hours. We then had our clients as our advertisers in the beginning. Who was your first client? Kokkinis: That was Common Progress of G. Pateras, a week after we began our activity. Today we fund some 60-65 clients. We also have other clients whom we serve in other domains (e.g. deposits) from our Piraeus branch. What activities do your loans fund? Kokkinis: Mainly ship purchases and new ship orders. We were lucky to be present during the Greek shipowners’ turn to new ships in the 1999-2000 period, which boosted our portfolio and clientele considerably. Has risk risen for banks, due to the high prices for existing ships and for new ones? Kokkinis: Yes, that is true. In the last six months we have noted a further rise in prices by 20 percent, particularly in used ships, because of the new stock market listings. Companies draw foreign capital and have the liquidity to invest in shipping, raising prices. In such an environment we try to support our clients, but without making any extreme moves. How do the recent listings in the New York stock market affect banks, regarding lending? Yiannopoulos: I believe such moves can only have positive effects, as with enterprises growing and liquidity secured, the needs for loans are multiplied, funding the firms’ expansion. Are the high revenues and profits of the last few years invested by domestic firms in shipping or channeled to other activities? Kokkinis: I think Greek shipowners follow a very sensible policy; they save capital, creating a «piggy bank.» In the last year such deposits have nearly tripled, exceeding 500 million euros. The capital earned has not entirely been reinvested in shipping, either due to overly large demand in shipyards or because the conservative strategy by many shipowners stops them from purchasing ships at these prices. So when prices go down they will be able to buy at much lower cost, having saved capital. Yiannopoulos: A large portion of funds has also been channeled to the real estate market both in Greece and abroad. In fact, some of the capital invested in properties in Greece comes from foreign investors with stakes in listed domestic shipping firms. How do you see the shipping credit sector developing this year? Kokkinis: We are already noticing a rising trend from last year, partly due to high prices of ships, both used and newly built. The credit figures for Greek companies will keep rising this year, too. We at Alpha Bank are expecting a small rise, but I repeat we will not move aggressively in the market because prices are quite high.