Capital calls: Greek bank revival relies on same old source of fuel
(The author is a Reuters Breakingviews columnist. The opinions expressed are their own.)
LONDON (Reuters Breakingviews) – Concise information on global finance.
GALAXY BRAIN. Alpha Bank Managing Director Vassilios Psaltis on Monday announced plans to raise € 800 million in “growth capital” as part of its strategy to achieve a 10% return on tangible equity (ROTE) by 2024. Investors have pushed the lender’s shares up by a tenth. , reversing some of Friday’s losses, but they are still skeptical. If Psaltis’ targets were achievable, Alpha’s market value in 2024 should roughly match its expected tangible book value of € 6.7 billion. In today’s currency, using a 10% discount rate, that’s 5 billion euros. Yet the lender is worth less than a third of that amount.
One explanation is that Psaltis’ revenue targets seem impactful. They assume that liquidity in the European Union’s recovery fund will effectively double the growth of Greek corporate loans by 2024. Another reason for caution is that most of Alpha’s expected increase in ROTE comes from continuous cleaning up of bad debts. In other words, Psaltis’ “Project Tomorrow” plan has a weird ringtone from yesterday. (By Liam Proud)
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