Course and steps to follow Alfa Bank to increase its profitability in the next period through the production and distribution of innovative products that meet the needs of its customers, explained Alpha Bank Group CFO Lazaros Papagarifalou in a webinar organized by Capital Link. The Greek banking industry.
In his speech, Mr. Papagarifallu emphasized that in the new environment of low interest rates, the Bank is in a profitable position thanks to a series of measures aimed at protecting its balance sheet, while he added that the country’s development will strengthen profitability. banking sector.
The factors that will lead to the growth of the bank’s profitability and the positioning of Alpha Bank
A favorable macroeconomic environment is the basis for the future profitability of banks, emphasized Mr. Papagarifallu, stressing that economic growth will create credit demand, a greater number of transactions and an increase in household financial assets. However, at the same time as the macroeconomic environment, a number of factors will contribute to increasing the profitability of banks, such as: increasing financial literacy, consumers’ transition to private sector solutions, reforms in the insurance sector, strengthening Digitization that will allow banks to reach out to a larger segment of the population, developing new modern and personalized products and the need for insurance coverage against risks caused by climate change.
Analyzing the reasons that will lead to an increase in future profitability, Mr. Papagarifallu emphasized that in this environment the Bank is well positioned, having a leading position in the field of Wealth Management. In fact, he added that the Group’s goal is to further develop the specific sector, emphasizing new products as well as new synergies. In this direction, “during 2024, we will introduce UniCredit onemarkets products to our clients, while our cooperation with the Italian group will help us significantly expand the product offering, allowing us to bring know-how and innovation to the market,” he said. .
He specifically referred, in fact, to the Bank’s agreement with Generali, which not only led to a 35% increase in new product production, but also increased innovation, as demonstrated by the Bank’s new cyber products. safety and ambulatory health. A source of profitability is the shift of depositors to investment products
He also referred to the pace of conversion of ordinary deposits into term deposits, emphasizing that it is developing more slowly than expected, while noting that there is a shift towards investment products. This trend, he noted, may be negative for net interest income, but it also creates a steady stream of fee income, which becomes more important in a low interest rate environment. In fact, he emphasized that Alpha Bank managed to make the best use of this dynamic, as the Bank managed to capture a share of around 30% of the approximately 2.5 billion euros allocated to Target maturity investment products.
A catalytic role in this success was played by Alpha Asset Management, “our own product factory,” as he described it, adding that the Group’s subsidiary was doing very well, “allowing us to maintain our first positions outside of mutual funds. “money market mutual funds”. In fact, giving the stamp of the strategy that the Bank will follow, Mr. Papagarifallu described that “we are building an ecosystem of services and products that can be supplemented with additional non-organic development activities where possible.”
Mr. Papagarifalou emphasized the importance of regulatory approvals for the distribution of dividends by Greek banks. Regarding Alpha Bank in particular, Mr. Papagarifalou confirmed the Group’s commitment to distribute dividends equivalent to 30% of the Bank’s current capitalization until 2026. In fact, he added, even after the distribution of the dividend, the Bank will still have excess capital, which will reach about 40% of its current capitalization, “giving us the ability to do more.”
Regarding the strategy that the Bank will follow in the next period, the CFO of the Group stated that the next steps will depend on the available opportunities and the possibility of earning income. In this context, “we can consider investments in defaulted loans as an alternative to credit expansion,” he said, while not excluding the possibility of targeted acquisitions in Greece or abroad. He emphasized, however, that any steps considered in the future should create greater value for shareholders and be consistent with the Bank’s strategic plan. “Our success or failure will be determined by this element,” he concluded.