Fitch affirms Greece's Alpha Bank at 'A-'

Fitch Ratings has today affirmed Alpha Bank's ratings at Long-term Issuer Default (IDR) 'A-' (A minus) with a Stable Outlook, Short-term IDR 'F2', Individual 'B/C' and Support '2'. The Support Rating Floor is affirmed at 'BBB'. The Long- and Short-term IDR and Individual rating reflect Alpha Bank's strengthened position in the Greek banking system, good, resilient operating profitability and cost efficiency, satisfactory capital and improved asset quality. They also consider potential pressure on asset quality from rapid lending growth in the relatively untested Greek retail market and risks associated with rapid expansion in south-east Europe (SEE).

The Stable Outlook reflects Fitch's expectations that Alpha Bank's sound fundamentals will enable it to continue to perform well and expand its business despite the current difficult global capital market conditions. The preservation of Alpha's sound profitability, asset quality and good management of its rapid expansion in SEE could influence its ratings positively. Downside rating risk could be triggered by asset quality problems arising from rapid loan growth in Greece and SEE, notably Romania, or a marked deterioration in its financial ratios or capital due to the bank's aggressive branch expansion plan.

Alpha Bank's 2007-2010 business plan aims to strengthen its retail banking business in Greece and expand its presence in SEE to take advantage of an under-banked region with still high growth potential. It plans to have 1,010 branches in SEE by 2010 and increase the region's contribution to group profits to 25% (16.4% at end-H108) which, in Fitch's view, is ambitious.

Alpha Bank continues to benefit from resilient GDP growth and credit demand in Greece and the parts of the SEE region where the bank operates. In H108, Alpha Bank was able to maintain its good operating profitability, with an operating average return on equity of 30.5%, thanks to increased contribution to profitability of its banking operations in SEE, a strong and stable cost/income ratio in Greece, and improving cost efficiency in SEE. At end-H108, Alpha Bank's credit risk was satisfactory, with a gross impaired loans/total gross loans ratio of 3.59%, almost in line with top domestic peers.

The considerable improvement of its asset quality since 2006 relates to the bank's strong loan growth, which Fitch sees as a major risk - and increased efforts on collection and significant write-offs. The agency views positively the bank's efforts to centralise and improve credit risk management. Alpha Bank's market risk appetite is moderate, with limited interest rate risk. Liquidity is sound, supported by growing customer deposits, relatively diversified funding sources and improved liquidity risk management. Capital is satisfactory and maintaining it at the current level is a prerequisite, given strong and rapid lending growth in Greece and SEE and the risk of a downturn in the credit cycle.

Source: Interactive Investor

Greece interested in Cyprus’ oil and natural gas reserves

Cyprus’ Commerce Minister Antonis Paschalidis announced there have been informal Greek business interests towards participation in the second run for licenses concerning the exploration of crude oil and natural gas reserves in the coastal area of Cyprus.

The Cypriot government has also confirmed its plans for partnerships with countries willing to supply natural gas to the country.

Source: FOCUS Information Agency

Cyprus exports increase by 16%

Imports from Greece have reached 1.1 billion euros, marking a 16% increase, said Commerce, Industry and Tourism Minister Antonis Paschalides.

Speaking at a press conference on Thursday on the sidelines of the 73rd Thessaloniki International Fair (TIF), Paschalides said that the balance of trade between Cyprus and Greece leans against Cyprus since in 2007, the total commercial transactions rose to 1.3 billion euros, marking an increase of 18%, compared to 2006 when it was 1.1 billion euros.

Cyprus exports reached 214.8 m. euros while exports to Greece amounted to 58.2 m. euros, registering a 16.0% increase compared to 50.1 m. in 2006.

Despite the imbalance, said Paschalides, numbers indicate that the Cyprus market prefers Greek products, putting Greece at the top on imports to Cyprus, while Cypriot products rank second in exports to Greece. “We can say that these figures are at a very good level with good prospects for the immediate future”, the Minister added.

Source: Cyprus News Agency

The Cyprus Re-Connection

Cyprus is finally growing closer to unification. For 34 years it has been divided, following a Turkish military invasion in 1974, which split the country in two. But on Wednesday morning, Cyprus President Demetris Christofias arrived at a compound in Nicosia to meet Turkist Cypriot leader Mehmet Ali Talat, in the hope of finding a resolution to the island’s division.

Christofias and Talat will want to concentrate on the larger economic picture in continued discussions over the coming weeks. Unification of the island would likely give rise to a flood of foreign investment, and also provide a big boost to Turkey’s hopes of joining the European Union. It may even reignite last year’s oil and gas study by the Greek Cypriot Government of untapped resources in the Eastern Mediterranean. A 70,000 square kilometer sea area south and south-west of the island could contain reserves of between 6 and 8 billion barrels of crude.

This is the fifth time the two leaders have met in 2008, and the outcome is looking positive for peace. The two moderate figureheads are backed by a pro-unification consensus from all the key international organizations and governments. "All the stars: the United Nations, EU, United States, Turkey, Cyprus and the United Kingdom, are aligned for the first time," said David Lee of specialist risk consultancy, Control Risks.

But challenges will lie ahead as discussions, continuing on Sept 11, turn to the economy. Economic issues caused the termination of talks in 2004, with the Greek-Cypriots unable to see the benefits of unification at that time; many of the Greeks who lost their homes in the North at the time of the division, would not have got them back. Businesses in Cyprus are struggling too--a report in the Cypriot Financial Mirror’s showed this week that profits for companies listed on the Cyprus Stock Exchange tumbled 47.0% year-on-year, to 465.5 million ($669.4 million) in the first six months of 2008.

And the two sides of the island are still economically unmatched. The Greek-Cypriot South is a prosperous, popular holiday destination, which sees over three million tourists per year, and has been on the International Monetary Fund list of the 32 "Advanced Economies of the World" since 2001. The Turkish-Cypriot North, by contrast, is heavily dependent on agriculture and government service, and has a gross domestic product approximately a third the size of the South. The North has suffered from an international trade embargo and little foreign investment as many have been wary of its de facto administration that is recognized by just one country, Turkey.

Lee says that the most important issue for unification is not the economic disparity between the two sides at present, but the "technical issues" central to the country’s reform, the most pressing of which is how a unified government would run on a day-to-day basis. The potentially explosive issue of housing rights also remains. Many families, especially Greeks who lived in the North, are still not convinced they will reclaim their lost homes.

Source: Forbes.com