Most global players have largely ignored south-east Europe, but Alpha Bank and other Greek banks are showing the potential of cross-border retail banking in the region, says Stephen Timewell.

Greek banks are demonstrating that medium-sized institutions can play an important role in European cross-border retail banking and that regional expansion is not just for the global heavyweights. With National Bank of Greece’s $2.3bn bid for 47% of Turkey’s Finansbank in April, NBG became the first Greek bank to enter the Turkish market (see The Banker May 2006, page 78) and it was quickly followed in May by EFG Eurobank with its $182m bid to buy 70% of Turkey’s Tekfenbank. But NBG and EFG are not the only Greek banks significantly expanding beyond their borders; key rival Alpha Bank is rapidly developing its franchise in south-east Europe (SEE) but through an alternative strategy.

In explaining Alpha’s impressive 49.6% growth in pre-tax profits in the first quarter of 2006 to reach €150.7m, general manager Marinos Yannopoulos mentions not only the profitable penetration of the Greek retail market but also Alpha’s strong organic expansion into the SEE region that focuses on Romania, Bulgaria and Serbia, and includes Albania, Macedonia and Cyprus.

Emphasising the traditional strong ties with Greece’s northern neighbours, Mr Yannopoulos and senior manager Michael Massourakis highlight the bank’s strategy to grow organically and its reluctance to pay high multiples for banks such as in the recent purchase of Romania’s biggest bank, Banca Comerciala Romana (BCR) by Erste Bank.

“The price for BCR at near 11 times book is very expensive, we want organic growth. We will entertain acquisitions but only small banks with low valuations,” says Mr Yannopoulos.

Outward growth

Alpha has an ambitious plan to grow in SEE through a radical expansion of its branch network. This year it plans to open 91 new branches outside Greece, mainly in Romania, Bulgaria and Serbia. This will raise the number of branches in SEE from 184 in March to 267 at the end of the year. Mr Massourakis says that already this year 55 locations have been rented and 330 staff have been hired for the new branches.

And that is not all. The bank plans to increase the number of branches to 433 by 2008 as part of its longer term 2010 strategy. This will increase the number of branches in Romania from 35 at present to 150, in Bulgaria from 17 currently to 90, and in Serbia from 89 to 135.

The bank believes that it will be able to increase market share in SEE through the new branches from 2.2% at present to 7.7% in 2008. Mr Massourakis argues: “We spend e250,000 to e350,000 per branch and we will break even after the first 12 months.”

Most branches will have between four and six staff and will plug into the bank’s existing IT systems, making it considerably less expensive than absorbing the high cost of integrating systems after acquisitions.

Alpha believes these SEE markets are in their infancy but there is a strong demand for basic banking products, such as car loans and mortgages. It also believes that household lending will expand rapidly from the current 8%-15% of GDP and move towards Greece’s level of 38% of GDP and the eurozone level of 58% of GDP. The bank is confident about the region and estimates that its share of profits from SEE will rise from 9% today to 20% in 2008.

Way forward

Looking ahead to 2010, Alpha has a clear vision. By then it wants to extend its branch network (both in SEE and Greece) to 1200 branches, with the SEE network achieving a 10% market share and accounting for 25% of the entire bank’s profits. Mr Massourakis believes retail banking in SEE will be an important growth driver for Alpha and the organic growth model provides the most efficient and effective way forward.

Retail accounts for 54% of Alpha’s business with the rest attributed to medium and large corporates. However, Mr Massourakis sees strong profit and growth potential in retail and expects it to expand and account for two-thirds of the bank’s business by 2010. In a region that most global players have ignored, Alpha and others are showing the potential of retail.


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