Greece’s return to developed markets is creating new dynamics for banks and listed companies, expanding the pool of international capital available for investment in Greece.
The development is not only about access to more capital, but also about meeting the expectations of the international investment community, as Greek companies are now being compared with peers with a long track record in international markets. The new reality is also reflected in the experience of banks’ Investor Relations departments. The Alpha Bank team was recently recognised in three categories, while the group’s Head of Investor Relations, Iason Kepaptsoglou, was named a top IR Professional for the third consecutive year. Against the backdrop of the changing investment environment, Naftemporiki spoke to him about investors’ new expectations, the outlook for banks and the transition from the recovery investment story to one centred on growth.
“Returning to developed markets puts us in front of a different audience,” Kepaptsoglou said. Some investors are known from previous periods, while others are coming into contact with Greece for the first time. They compare us with companies that have a long track record in the markets, deep and long-standing relationships with the international investment community, and a fully established investment profile,” he noted and added: “That raises the bar for us as well.” Investors now expect greater clarity and precision, as well as more convincing answers on how Greek banks will continue to grow and create value for their shareholders. The portfolios that look at developed markets are more than ten times larger, and the pool of capital to which we are gaining access is many times bigger.”
The increased international interest in Greece, however, is not confined to the banking sector. “International investors’ engagement with Greece inevitably starts with the banks, mainly because of their size and liquidity. But I don’t think it stops there,” according to Kepaptsoglou. An increasing number of investors are looking for opportunities beyond the financial sector. “The critical criterion may not even be so much the sector in which a company operates, but rather its size, international orientation and ability to attract international capital.” In terms of the issues being discussed, the Alpha executive does not see a radical change, “but rather a new perspective through which the questions are being asked”. For banks, questions are increasingly focusing on competition, the prospects for further sector consolidation and the impact of new technologies on business models. The upcoming elections are also making the political environment more important.
However, “whether we are talking about the Greek economy, lending growth, the expansion of fee-generating activities or, ultimately, rising profitability, investors are primarily looking for answers about how sustainable this growth momentum is”. The discussions point to “genuinely impressive interest”, which in some cases has already translated into investment.
The shift in the investment perspective is also affecting how banks are assessed. “A few years ago, the answer for European banks would have been fairly straightforward: the investment community was primarily looking for capital returns,” Kepaptsoglou stated. Today, “if you can demonstrate that you are using your capital productively, generating higher and more sustainable profitability, then distributions cease to be the sole criterion for valuation”.
This does not mean investors have stopped caring about capital returns. The key is finding the right balance between growth and distributions. In Alpha Bank’s case, however, Kepaptsoglou does not see a trade-off between growth and distributions: “We can do both”, thanks to improved profitability and capital generation capacity, as well as the bank’s starting position, which includes excess capital. The trade-off would, of course, be welcome, as “it would mean that the growth opportunities ahead of us are even greater than we currently estimate”.
“Execution consistency will determine what comes next”
“The market has not yet been fully convinced of the expected pace of earnings growth for European banks, let alone Greek banks and perhaps Alpha Bank even more so,” he said.
“For more than a decade, the earnings of European banks remained essentially stagnant.” This experience has shaped the expectations of an entire generation of investors. “The transition from a valuation logic based on recovery to one based on growth does not happen overnight.”
In Alpha Bank’s case, he believes the market has not fully factored in the moves made in recent years. “The discussion is no longer just about credit growth,” he said. It includes the expansion of fee-generating activities, the broadening of revenue sources, as well as the partnerships and acquisitions that have taken place. “The most effective way to convince the market is consistency in execution. To continue delivering growth, meeting the targets you set and demonstrating in practice that your profitability can increase at a healthy and sustainable rate.”
At the economic level, the challenge is broader: to demonstrate that returning to developed markets means not only access to more capital, but also the ability to meet the demands of a much larger and more demanding investment community. “If there is one thing that will determine what comes next, it is consistency in execution,” Kepaptsoglou concluded. “That is what we want to continue building on as we strengthen Alpha Bank’s credibility.”
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