Business Review 2015 - page 14-15

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BUSINESS REVIEW 2015
wasprovidedby theHellenicFinancial StabilityFund.
It isworthmentioning that an indicationof the success of
the recapitalisationeffort is the savings achieved in terms
of public funds. Ineffect, the amount usedwas ultimately
much lower than theEuro25billion initiallypredictedby the
Eurogroup inAugust 2015, in the frameworkof the agreement
on the thirdFiscal Adjustment Programme.
Theprolongedeconomic crisis afflicted theGreekbanking
system, whichhad to carry an additional heavyburden
during theprevious year. Apart from the challenging taskof
supporting theGreekEconomy in addressing the sideeffects
of the capital controls, the credit institutions devoted a signi-
ficant part of their capacity to theproductionof numerous
reports anddata, not only for submission to theRegulatory
Authorities in the context of audits, but also in response to
requests from amultitudeof other Authorities.
The relevant tasks typically involve a largenumber of Banking
Services at thebusiness aswell as at the technical level. An
indicativemeasureof theeffort thatwas required is that
during2015 alone, theextraworkput inbyAlphaBank’s IT
services amounted to approximately3,500person-days, while
theexternal costs fromoutsourcing relatedprojects to third
parties, aswas often requiredby theAuthorities, stood at
nearlyEuro3million.
Greece’s new agreementwith its Europeanpartnersmay
mark thebeginningof a newpath that could finally lead the
countryout of the crisis, provided that this agreement is
implementedwithout delay. Late2015 saw the adoptionof
thenew institutional framework for themanagement of non
performing loans, whichupgrades substantially theprocedure
for theout of court settlement of disputes and, at the same
time, specifies the terms for theprotectionof theborrowers’
main residence. In addition, the country’s bankruptcy
legislation ismodernised, acquiring the flexibility required
inorder to reconfigureeffectively thebusiness landscape.
The improvement in the judicial framework in terms of infra-
structure and specialised know-how, in combinationwith the
recent amendment of the legislationwhichestablishes the
conditions for thedevelopment of a secondarymarket for non
performing loans, constitutemajor interventions inorder to
address theproblems concerning the recoverabilityof these
loans.
Yet the singlemost important factor as regards the
effectiveness of the loan arrangements is the recoveryof
theGreekEconomy itself. Given the contractionary fiscal
policy applied, which relies onhigh tax rates, theelimination
of uncertainty is thenecessary and sufficient condition for
bolsteringeconomic activity.
The completionof the first reviewof theFiscal Adjustment
Programme in June2016, although achievedwith adelay, can
act as a catalyst for thegradual discontinuationof thebanks’
relianceon theEmergencyLiquidityAssistance (ELA) facility
of theBankof Greece, for theparticipationof Greekbonds in
theQuantitativeEasingProgrammeof theEuropeanCentral
Bank and for the reinstatement of thebanks’ long standing
relationships of trustwith the savers thatwill ultimately lead
to thegradual easingof the restrictions under the capital
controls.
Against the adverseenvironment of theprevious year and
despite thedeliverydisruption toour business plan targets,
theoperatingperformanceof AlphaBank stood resilient.
At the same time, theBank recorded a significant perfor-
mance in the completionof theComprehensiveAssessment
conductedby theEuropeanCentral Bank, despite the
higher hurdle rateswith regard to theCommonEquityTier 1
(CET1) Ratio and the repayment of Euro940millionof state
preference shares in2014. Inparticular, AlphaBank registered
the lowest adjustment after tax among itsGreekpeers in the
AssetQualityReview, withonly a3.1%CommonEquityTier 1
(CET1) Ratio impact or Euro 1.7billion.
As regards the capital needs recorded in theStress Test,
theBank registered a capital shortfall of Euro263million
under thebaseline scenario andEuro2,743millionunder the
adverse scenario. TheBank achieved thehighest CET1Ratio
in the sector after adjustments inboth scenarios. The capital
shortfall, according to the adverse scenario, was reduced at
a later stage toEuro2,563millionby theSingleSupervisory
Mechanism (SSM), taking into accountmitigating actions of
Euro 180million.
Following theEuropeanCentral BankStress Test, theBank
raised successfully the capital required fromprivate investors.
Inparticular, inNovember 2015AlphaBank successfully
completed aEuro2,563millionShareCapital Increasewith
nouseof State aid, fully addressing the adverse scenarioof
theComprehensiveAssessment andmaterially improving
thequalityof its capital structure. TheBank’sShareCapital
The year 2015was yet another difficult year for Greece, with
thebanking systemoperatingunder adverse conditions. In
a volatileenvironment, theprolongednegotiationswith the
Europeanpartners reigniteduncertainty and causeddeposit
outflows acceleration. This situation led to the impositionof
capital controls and aBankHolidayon June28, 2015.
Under these circumstances, theGreekEconomy in2015
relapsed into recession, drivenby uncertainty and alsoby
theweakening inprivate consumption, following the increase
in tax rates in the secondhalf of the year. Ultimately, the
recessionwasmilder than theone initially estimatedby
theEuropeanCommission,mainly thanks to the sustained
outperformanceof Greek tourism.
Once again, theGreekbanks provedparticularly resilient in
the faceof the conditions that prevailed. During theBank
Holiday, operatingunder extremely adverse conditions, they
secured theprovisionof services to their Customers regarding
cashwithdrawals fromATMs and thepayment of pensions
andwelfarebenefits, aswell as other bankingbusiness such
as the issuanceof cards and security codes for electronic
banking transactions. During the secondhalf of the year,
thebanking system’s exemplaryhandlingof theoperational
difficulties caused for Greek enterprises by the impositionof
the capital controls helpedmitigate their overall impact on the
GreekEconomy.
The relapse into recession, combinedwith thepolitical
uncertainty, intensified the trend against debt repayments,
aggravating further theproblemof nonperforming loans
andestablishing theconditions that necessitated anew
recapitalisationof theGreekbanks, just oneyear after their
recapitalisation in2014,whichhadbeenuniversally acclaimed
as successful.
In the autumnof 2015, another StressTest aswell as anAsset
QualityReviewwerecarriedout anddemonstrated theneed
for strengthening thecapital baseofGreekbanks. Thenew
recapitalisationwas completed successfully inDecember
2015,with increasedprivate sector participation andcreated
solid foundations for thebanking system’spivotal role in the
economic recovery. Foreign investorsplaced approximately
Euro5.3billion in the four systemicbanks. Additionally, around
Euro2.7billionwas raised throughoffers for theexchange
of bondswith shares. Finally, approximatelyEuro5.4billion
of additional capital – for twoof the four bankswhichdidnot
cover all of their capital requirements fromprivate sources –
Letter from
theManaging
Director - CEO
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