S&P Assigns 'BBB-' CP rating to Alpha Credit Bank

Business Wire, Dec 19, 1997

LONDON--(BUSINESS WIRE)--Standard & Poor's CreditWire 12/19/97 -- Standard & Poor's today assigned its triple -`B' - minus long-term counterparty rating and `A-3' short-term counterparty rating to Alpha Credit Bank A. E. (Alpha). The long-term rating outlook is stable. The foreign currency counterparty rating is equivalent to Hellenic State's triple-'B'-minus foreign currency rating. In January 1997, Standard & Poor's assigned a `BBBpi' rating to Alpha based on local-currency denominated obligations. This rating has been withdrawn.

The ratings reflect Alpha's continued stable and comparatively strong financial condition, and its growing importance within the Greek financial system. At year-end 1996, Alpha was the largest private bank group and fourth largest bank in Greece, with an 11.5% market share by assets. The bank was founded more than 100 years ago by the Costopoulos family, which votes 27% of shares. Alpha is a universal banking organization offering a broad range of innovative products and services through its branch network and subsidiaries. First in managing mutual funds and trading government securities, Alpha is also a leader in the emerging derivative, equity and debt markets.

Alpha has sophisticated information systems which are continually being enhanced. The bank also is revamping its risk management systems, and has successfully piloted projects for full implementation in the next few years. Alpha maintains strong liquidity and is likely to be the most profitable Greek bank in 1997, as it was in 1996. It benefits from high noninterest income and low overheads. Its noninterest expense to revenue (efficiency) ratio shows an improving trend, down to 48% in 1996 from almost 50% in 1995. In the first six months to June 30, 1997, this ratio further declined to 44% on increased revenues. There is also some comfort in the bank's current level of capital, which was bolstered in 1997 to support continued growth in the near-term. At June 30, 1997, Alpha's adjusted common equity to assets ratio stood at 9.34%.

The bank has a competitive advantage over local state-controlled banks, which are undergoing restructuring programs but are hindered by inelastic overheads, asset quality problems and other inefficiencies. Over the past few years the Greek banking system has been experiencing rapid deregulation. As a result, a raft of new products such as fixed interest rate instruments and foreign currency lending have emerged and the risk profiles of Greek banks have increased. Alpha has also seen rapid loan growth, primarily to large corporate borrowers. Recent developments in global markets, particularly the Asian crisis, have revived pressure on the Greek drachma, resulting in rising market interest rates. This has forced Alpha and other banks to raise interest rates by 200 basis points to lessen the impact on interest margins.

OUTLOOK: Stable

In the short-term, Alpha is vulnerable to currency and interest rate fluctuations, as are all Greek banks. Standard & Poor's expects a stable financial performance from Alpha as it builds its market share. Alpha's efficiency should also improve due to enhanced management information and risk management systems. In the long-term Alpha is well positioned to benefit from its improving economic environment, Standard & Poor's said. -- CreditWire

CONTACT: Walter Pompliano, London (44) 171-826-3516

John Gibling, London (44) 171-826-3521