A 134 Year Old Bank Selling at 0.49 Times Earnings

Alpha Bank S.A. (ALPHA),(ALBKY), is a Greek bank that was founded in 1879 by the Costopoulos Family, which still controls the company. Alpha offers wide range of services including retail banking, SME and corporate banking, credit cards, asset management, investment banking, private banking, insurance, brokerage, and leasing and factoring. It operates a subsidiary in London, and has branches throughout the Balkans. In March 05, 2013, the bank successfully completed a recapitalization which allowed it to keep its private charter.

Company History & Operations

Founded in 1879 was a small commercial bank in the city of Kalamata, Greece. In 1918 the institution changed its name to the bank of Kalamata. Then in 1924 the bank moved its headquartered to Athens and then changed their name to Banque de Credit Commercial Hellenique. The bank kept changing its names over the course of its history. In 1960 Alpha established a subsidiary in Cyrus, which may later has been sold or closed. In the early 1990's the firm started to international expansions, especially in the Balkans. Alpha in 1999 acquired 51% of the shares of the Ionian Popular Bank. One year later the firm completely absorbed Ionian Popular Bank and changed its name to Alpha Bank. Throughout the 2000's the firm continued to expand its bank through acquisition of bank in new markets. In 2012 the firm acquired Emporiki Bank from Credit Agricole for EUR 1. In the following year Alpha took over deposits of Cooperative Bank of Dodecanese, Cooperative Bank of Western Macedonia and Cooperative Bank of Evia.

Alpha Bank Financials

The company had net profit after tax at Euro 126.7 million with shareholders' equity at Euro 7.9 billion following a successful recapitalization in Q2 2013. Alpha has a Core Tier I capital ratio at 13.9% and a Leverage ratio at c.9.4% according to Basel III, which is more than three times the expected minimum threshold. Alpha has a Total Capital Adequacy ratio of 14.2%.The company tender offer to buyback outstanding hybrid and subordinated securities completed in May 2013. Increase in deposits with private sector inflows of Euro 1 billion in Q2 2013. Alpha deposits stood at Euro 42 billion at the end of June 2013, with a loan to deposit ratio of 127%. Net interest income at Euro 412.8 million in Q2 2013, up 26% quarter-on-quarter.

Valuation Compared to Wells Fargo

Alpha Bank	Wells Fargo
P/E of 0.50	P/E 12
P/B of 1.1	P/B of 1.56
Return on Equity of 58.31%	Return on Equity of 13.35
Return on Assets of 2.99%	Return on Assets of 1.46
Tier I Capital Ratio of 13.9%	Tier I Capital Ratio of 10.82%

Alpha Bank is undervalued based on its earnings, balance sheet, return on equity, and return on assets. The compared valuation to Wells Fargo show the bank is undervalued. If Alpha sold at the same P/E ratio of 12 would give you a share price of $17 per share. Alpha also has a high Tier I Capital Ratio then Wells Fargo, it has more then enough capital. There is no reason for this bank to sell at a Lower valuation then Wells Fargo.