#Hefty rise for Alpha Bank H1 profit on retail credit growth

Alpha Bank reported a hefty rise in first-half profit, as expected by analysts, thanks to a rapidly expanding retail credit wave at home and strong business in the Balkans. Greece’s second-largest lender by assets said yesterday first-half group net earnings after minorities reached 305.9 million euros ($387 million), up 37.7 percent, against a median forecast of 300 million in a Reuters poll of analysts. «In the second quarter the bank continued to experience strong volume growth with margins remaining robust,» Alpha Chief Executive Dimitris Mantzounis said in a statement. He said profits grew despite the bank’s rapid investment abroad, with 33 new branches added, and intensifying competition in the domestic retail banking market. The group’s net interest income grew 19.6 percent to 697.2 million euros, in line with forecasts. Analysts were expecting a rise to 697. «Results were strong, in line with forecasts, generated mainly from core lending activities. There was improvement in the cost-to-income ratio,» said analyst Dimitris Apistoulas at EFG Securities. Net interest margin was stable at 3.1 percent in the second quarter on the back of fast-growing higher spread business. Alpha said lending to individuals and credit in Southeast Europe continued to grow at a rapid 30 percent annual pace. «These two loan categories, which bear the strongest positive impact on profitability, represent 45 percent of total loans, up from 42 percent in the same period in 2005,» it said. Organic growth Like other Greek lenders, Alpha has steadily expanded in the Balkans – Bulgaria, Romania, Serbia and Albania – buying banks and setting up branches to secure new areas of growth before expansion at home peaks. «If growth in Greece and Southeast Europe continues, we are certain to meet our target for 90 new branches outside Greece this year,» Alpha’s Chief Financial Officer Marinos Yannopoulos told Reuters. He said the group was pursuing organic growth outside Greece, with Bulgaria being a market where Alpha is interested in further consolidation opportunities. Turkey and Ukraine were being looked at as regards expansion with nothing imminent. Alpha said its cost-to-income ratio shrank by 400 basis points to 46 percent. Operating expenses were up 10.4 percent on higher advertising costs in Greece and organic expansion in southeast Europe. «Our aim is to be the most efficient producer of banking services in Greece,» Yannopoulos said. «There is competition but also volume growth. Profitablity per product has come down.» Mortgages grew 31.3 percent to 7.5 billion euros, ranking Alpha at number two in the market. Consumer credit was up 27.7 percent despite softening demand. Personal loans, which carry higher returns, showed the fastest growth – up 44.3 percent. Alpha trades at 13.6 times 2006 earnings, at a discount to a 15 multiple for the Greek banking sector. (Reuters)