Release Date: November 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Alpha Services and Holdings SA (ALBKF, Financial) reported strong recurring earnings of EUR 666 million, translating into a 14.4% return on tangible equity.
- The company has shown resilience in its top line with strong net interest income and progress in fee income generation.
- Capital buffers have grown steadily, reaching a level of 16.5% in the third quarter, with expectations to rise to 17.1% after pending transactions.
- The company has upgraded its guidance for the year, citing better net interest income, lower provisioning expenses, and stronger risk-weighted asset optimization.
- Alpha Services and Holdings SA (ALBKF) has initiated a buyback program, reflecting confidence in superior earnings growth and significant capital generation.
Negative Points
- The company faced a EUR 31 million provision for a voluntary separation scheme, impacting short-term financials.
- There was an EUR 18 million provision related to NP transactions, indicating ongoing challenges in managing non-performing exposures.
- Despite strong performance, the company is cautious about the impact of falling interest rates on future earnings.
- Loan growth, particularly in corporate loans, is described as bumpy, which may lead to volatility in performance.
- The company is still working on optimizing capital consumption, which could affect future profitability and capital ratios.
Q & A Highlights
Q: Could you please confirm the outlook for payouts for this year and the next given the BBC amortization? Also, what is the 35% payout ratio based on, is it on a reported or a normalized profit?
A: We've accrued EUR210 million in our capital base for dividends this year. This should give you a good basis for understanding how the ratio is calculated. Regarding payouts, dividends are a derivative of many factors, including capital levels and sustainable profitability. We are confident in our ability to meet our payout targets, subject to regulatory discussions.
Q: Can you give us a sense of how you think about loan growth, especially with the strong 2024 starting base? Also, how concentrated is the new corporate demand?
A: Our estimate for the year is around EUR2 billion in net additions, which is higher than expected. The growth in Q3 was not concentrated; it involved 445 clients across various industries. We expect similar levels of loan growth in 2025.
Q: What is stopping you from upgrading your dividend payout assumption given the improved capital position and business plan?
A: We are focused on ensuring strong capital levels and sustainable profitability. While we are confident in our ability to increase payouts, we must also consider regulatory discussions. We prefer to approach these discussions with humility and respect.
Q: Can you provide an update on how quickly you expect to reduce your CET1 ratio towards the 13% target? How does this interact with maintaining your MREL buffer?
A: The 13% CET1 target considers the full issuance of the AT1 bucket. We have significant excess equity, which provides flexibility for asset growth and improved payouts. We aim to optimize our capital stack to support higher payouts while maintaining regulatory buffers.
Q: Regarding the recent AT1 issuance, was it done to increase dividend payout ability, or were there other motivations?
A: The AT1 issuance was part of optimizing our capital structure to operate with a CET1 ratio of 13% and increase payouts. This aligns with our strategy to leverage the capital structure effectively.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
