Financial Houses: The prospects of Greek banks are attractive

Despite the negative atmosphere that prevails in the markets, the international investment houses proceed with a barrage of positive reports for the Greek banks, which give particularly high margins of rise from the current levels with JP Morgan pointing out that the “story” of the Greek banks is the most attractive in Europe .

Banks are back in the limelight with their six-month results. The general picture was very positive with estimates now being revised upwards for the entire year, while significant progress in portfolio consolidation was accompanied by a strengthening of profitability in the recurring revenue segment.

They presented strong performance in the first six months the four systemic banks, recording overall net profit of 2.365 billion euros.

Specifically, Eurobank’s first half net profits amounted to 941 million euros compared to 190 million euros in the corresponding half of 2021.

Piraeus recorded a net profit of 635 million euros at the level of 6 months, Alpha Bank announced a net profit of 242.7 million euros, while the National Bank presented a net profit of 546 million euros.

The four systemic banks show a single-digit ratio of non-performing exposures, a target set to be achieved by the end of 2022.

The increase in the key interest rates of the ECB by 75 basis points in September is positive for the worthiness of the banks (credit positive), reports the credit rating agency Moody’s.

Greek banks are expected to have a boost of up to 700 million in interest income due to the new increase in interest rates, by 75 basis points, by the ECB, according to banking agents.

The rise in interest rates will be favorable for Greek banks, with a 15% improvement in interest income for every 100 basis points of interest rate increase, notes Deutsche Bank.

A development that reinforces the intentions of bank managements to distribute dividends for the year 2023.

But the unknown X is how much the “red” loans will increase due to the increase in interest rates.

In presentations to analysts, Eurobank and National Bank have confirmed that the target for dividend distribution for the 2022 financial year remains. Alpha Bank and Piraeus Bank are preparing for one use later.

Target prices for banking stocks

JP Morgan points out that the story of Greek banks is the most attractive in Europe. Even in a recession scenario, their numbers are strong. As she emphasizes, the clean balance sheets, the growth trajectory above the trend, the structural supports such as the higher interest rates as well as the capital return possibilities support her medium-term positive view on the Greek banks.

Valuations at 5.8x P/E are attractive against European and emerging market banks, where P/E valuations will average 12x and 11x respectively.

The adjusted P/E is estimated in 2023 for Alpha Bank at x4.8, for Piraeus at x2.7, for Eurobank at x5.3 and for Ethniki at x6.2.

Regarding Piraeus, JP Morgan gives a target price of 2.20 euros from 1.80 euros previously. For Alpha Bank it is placed at 1.40 euros from 1.50 euros, for Eurobank at 1.50 euros from 1.60 euros before and for National Bank at 4.50 euros.

Goldman Sachs is raising its EPS estimates by 6% on average for 2023-2024, reflecting stronger-than-expected Q2 2022 trends.

The American financial group sets new target prices, which are for National Bank at 4.10 euros from 3.95 euros before, Alpha Bank at 1.19 euros from 1.07 euros before, Eurobank at 1.04 euros from 0.92 euros before and, for Piraeus Bank, to 0.96 euros from 0.84 euros before

Deutsche Bank increases target prices for Greek Banks. National Bank appears with a “Buy” recommendation and a new price target of 5.10 euros, up from 4.40 euros previously and top pick. For Alpha Bank, he maintains the “Buy” recommendation with a new target price of 1.55 euros, from 1.45 euros before. For Eurobank with a “Hold” recommendation and gives a new target price of 1.45 euros, from 1.20 euros before. Finally, for Piraeus, the recommendation is “Hold” with a new target price of 1.60 euros, from 1.35 euros before.

Wood estimates that the outperformance of Greek banks against European banks will continue.

On average, Greek banks are trading at 5.3x estimated P/E for 2022. Discounts to banks in Southern Europe are around 35% in P/E terms.

The positive impact from rate hikes should be evident as early as the second half of 2022, with net interest income growth accelerating in 2023, where average annual growth of 10-11% is expected.

For Eurobank, the target price is set at 1.4 euros, for National the target price is at 4.7 euros, for Alpha Bank at 1.4 euros and for Piraeus it is at 2.2 euros.

“Bull” for Greek banks and Axia and sees significant room for growth.

He notes that the shares of the four banks have unique characteristics that could appeal to different investment styles/preferences, while giving new price targets that suggest more than 50% upside for their shares.

For Alpha Bank the target price is at 1.6 euros from 1.55 euros before, for Eurobank the target price is placed at 1.6 euros also from 1.45 euros, for National Bank at 5.2 euros from 5.5 euros before and for Piraeus to 2.2 euros from 2.10 euros before.

The course of banking stocks

The banking index since the beginning of the year (based on Thursday’s close) has recorded losses against the 8.66% drop of the General Index, while from its highs it has fallen by 27.20%. The total capitalization of the four systemic banks falls by only 436 million euros compared to the end of 2021.

Of the shares of the four stocks, only National has risen since the beginning of the year and is up by 10.6%. Eurbank’s share is down 0.29%, Piraeus is down 26.31% and Alpha Bank is down 18.66%.

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