Capital Calls: Greek bank relaunch relies on same old fuel source

Coronavirus disease (COVID-19) outbreak in Athens
A Greek national flag flutters as people visit a beach, following the coronavirus disease (COVID-19) outbreak, in Athens, Greece, April 28, 2020. REUTERS/Goran Tomasevic

LONDON, May 24 (Reuters Breakingviews) - Concise insights on global finance.

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GALAXY BRAIN. Alpha Bank (ACBr.AT) Chief Executive Vassilios Psaltis on Monday announced plans to raise 800 million euros of “growth capital” as part of his strategy to reach a 10% return on tangible equity (ROTE) by 2024. Investors nudged the lender’s shares up by one-tenth, reversing some of Friday’s losses, but they’re still sceptical. If Psaltis’s targets were achievable, Alpha’s market value in 2024 should roughly match its projected 6.7 billion euro tangible book value. In today’s money, using a 10% discount rate, that’s 5 billion euros. Yet the lender is worth less than a third of that sum.

One explanation is that Psaltis’s revenue targets look punchy. They assume that cash from the European Union recovery fund effectively doubles the growth in Greek business lending by 2024. Another reason for caution is that the biggest share of Alpha’s hoped-for ROTE uplift comes from a continued bad-debt cleanup. In other words, Psaltis’s “Project Tomorrow” plan has an eerie ring of yesterday read more . (By Liam Proud)

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