S&P ups Alpha

Standard & Poor’s Ratings Services said yesterday that it has raised its long-term counterparty credit rating on Greece-based Alpha Bank to A- from BBB+. The A-2 short-term counterparty credit rating was affirmed. The outlook is stable. «The upgrade recognizes Alpha’s successful implementation of its strategic plan, which has led to the consolidation of a strong position in Greece, greater business diversification, enhanced geographic diversification through expansion into Southeastern Europe, and strong and sustainable financial results exceeding original expectations,» said Standard & Poor’s credit analyst Elena Iparraguirre. Although Standard & Poor’s feels that there is room for further improvement in risk management practices, the upgrade also reflects the bank’s progress in reducing its level of problem loans and keeping the quality of recent production under control, as well as steps taken to ensure better functioning of the credit underwriting, surveillance, and collection processes. In addition to the positive factors mentioned above, the current ratings also reflect Alpha’s still high credit risk profile, the challenge of adequately managing expansion abroad, and only moderate capitalization for the bank’s risk profile and growth plans. «We expect Alpha to stick to its current strategic plan, but moderate its original growth plans if necessary because of a deterioration in economic expectations or the persistence of pressures in the capital markets,» said Iparraguirre. Alpha’s success in implementing its business plan has led management to revise upward its strategic goals, embarking on a more aggressive branch expansion strategy as a way to achieve faster growth and further strengthen profitability. At this point, Standard & Poor’s does not expect Greece and its neighboring economies to suffer to the same extent as other countries from the effects of current market turmoil, and credit demand should therefore remain supportive for the bank’s plans. «Nevertheless, we believe that the lack of liquidity in the capital markets could challenge Alpha’s execution of its current strategic plan, given the bank’s reliance on such wholesale funding to finance its growth,» said Iparraguirre. That said, Standard & Poor’s expects Alpha to continue reporting high returns and making progress on the asset quality front, keeping the quality of future production under control. Capitalization will decline to tight levels by 2010, as the bank does not plan to raise capital in the years ahead. «We have not, however, incorporated weaker solvency measures than management’s disclosed targets into the ratings. We do not envisage further rating upside in the medium term. «Such a move would require more solid risk management practices and a better credit record. In contrast, factors that could have negative rating implications include a significant setback in Alpha’s international expansion, substantial capital leverage, a compression of risk-adjusted profitability to moderate levels, or asset quality deterioration.»