Moody’s argues that Alpha Bank’s strategic partnership with Unicredit in Romania and Greece is credit positive 

“The deal is credit positive for Alpha Bank because its tangible capital and profitability will be enhanced, offsetting the somewhat reduced geographic diversification of its group assets and revenues,” Moody’s said. 

UniCredit also submitted an unsolicited binding offer for Alpha’s own 9% stake held by the Hellenic Financial Stability Fund. 

Pro forma for the deal, Alpha Bank's capital position will improve by around 100 basis points because of roughly 2 billion euros of risk- weighted assets (RWAs) relief in Romania and the capital gain from selling its stake in its Romanian subsidiary at around 1.2x book value compared with Alpha Services and Holdings' roughly 0.4x book value trading on the Athens Stock Exchange as of 24 October.

“We estimate that the additional capital will increase Alpha Bank's pro forma Common Equity Tier 1 (CET1) capital ratio to 14.6% from 13.6% as of 30 June, well above the 9.9% minimum regulatory requirement,” Moody’s said.

The excess capital is credit positive for bondholders because it enhances the bank's loss-absorbing buffer, and will likely allow the bank to pay dividends to shareholders for the first time in more than a decade.

Moody’s also said Alpha Bank's profitability is likely to benefit from the deal, which compensates for the loss of earnings from its existing Romanian subsidiary. 

Alpha Bank will receive dividends for the 9.9% stake it retains in the joint entity, which will have around a 12% market share versus Alpha Bank Romania's roughly 3% market share, giving it advantageous scale in the country's growing banking system and economy. 

Alpha Bank's funding needs and costs to meet minimum requirement for own funds and eligible liabilities (MREL) will reduce because its RWAs will decline and its CET1 ratio will be higher, which will lower the volume of high-cost MREL-eligible debt issuance needed by the end of 2025. 

“It can also reinvest the deal's 300 million euros of cash proceeds in the current high interest rate environment, potentially yielding a high return,” Moody's reckoned.

Given the combined anticipated cost and yield benefits, Alpha Bank expects to enhance its return on tangible equity (RoTE) by around 50 basis points, from 12.2% in the first half of this year and in excess of its 12% key financial target. 

Finally, “UniCredit's planned acquisition of the 9% stake in Alpha Services and Holdings from the HFSF will bring onboard a strategic shareholder that has significant know-how and a strong presence in other EU markets. The deal also allows UniCredit to capitalise on growth opportunities in Greece, which is positioned as an important connection point for the bank's operations in Central and Eastern Europe. The interest from a large European bank to invest in Alpha Bank also supports positive market sentiment in the Greek banking system,” Moody’s concluded.