Alpha income hits share

Alpha Bank, Greece’s second-largest lender, reported first-quarter profit in line with forecasts, but its net interest income disappointed, sending its shares down by almost 5 percent yesterday. Alpha reported a 70 percent rise in group net profit, boosted by one-off gains from an asset sale, but analysts said missing forecasts on what the bank earns on core lending was the reason for the share’s slide. «Falling short of net interest income consensus is the main fundamental factor driving the shares lower,» said analyst Nikos Lianeris at Proton Securities. «It reflects growing pressure on lending spreads.» Alpha said group net profit grew to -256.14 million ($348 million) versus an average forecast of -250 million in a Reuters poll of analysts. But the group’s net interest income rose only 6.1 percent year-on-year to -362 million, below an average forecast of -380 million. Net interest margin was stable at 2.4 percent. «Net interest income fell short of market expectations but lower loan-loss provisions and higher trading income offset this,» said analyst Manos Hadjidakis at Pegasus Securities. Growing price competition in the mortgage business and consumer loans was confirmed by Alpha’s executives. «Our performance is supported by rapid volume growth in retail banking and in medium-sized companies and by the expansion of our branch network in Southeast Europe,» said CEO Dimitris Mantzounis in a statement. «The results so far, combined with ongoing focus on efficiency, give us confidence that, despite spread pressures, our profitability remains robust,» he said. The group, present in Turkey, Romania, Bulgaria, Serbia, Albania and Cyprus, sold its insurance subsidiary to French insurer AXA last year, realizing a capital gain of about -80 million. The stock ended down 4.80 percent, at -23.00, underperforming the broader Greek market, which lost 1.28 percent. Alpha has underperformed the market’s gain since the start of the year. Alpha’s outstanding balances of mortgages and consumer loans in Greece rose by 24 and 21 percent, respectively, in the first quarter. It continued to shift toward retail credit «despite compression in lending spreads in the Greek market.» The group is targeting earnings per share growth of at least 20 percent annually as part of its 2007-10 business plan. It is eyeing a 10 percent market share in Southeast Europe, excluding Turkey, by the end of the period. Alpha said it plans to add 132 branches in Southeast Europe and 45 in Turkey by the end of this year after it completes the purchase of a 50 percent stake in Alternatifbank. Alpha shares trade about 12.5 times forecast 2007 earnings, at a discount to European peers with a multiple of 15.

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