The banking incidents with SVB and Credit Suisse Group “dynamitize” one of the favorite choices of investors for this year, European banks and of course Greek bank securities. In this climate, the strong story of the Greek banks may be clouded, but it is not overturned.

Everyone agrees that Greek banks are currently in a position to absorb any shocks from the international markets. Banks have cleaned up their balance sheets. Red loans from 44%. today they have fallen to 8%. Banks maintain capital adequacy ratios well above the minimum requirement and have of course returned to profitability after a series of loss-making years.

The qualitative data (capital adequacy and low level of “red” loans), combined with the low loan-to-deposit ratio (at 61.12% in the 3rd quarter, with Private sector deposits at 184.1 billion in January 2023 and loans at 113.5 billion) provide a shield to Greek banks.

At the same time, however, international houses expect the good image of Greek banks to continue in 2023.

Rating agency Moody’s expects stronger profits in 2023 for Greek banks and emphasizes that the Greek banking system has strong liquidity, an increased level of deposits that are a “shield” against crises.

Greek banks reported overall net profits of €3.7 billion in fiscal year 2022, compared to net losses of €4.7 billion in fiscal year 2021. The domestic banking system has deposits of €184.1 billion, is free of “red” loans of almost 80 billion euros, it has a capital adequacy ratio of 18%.

Due to improved capitalization and the expectation of increased domestic capital formation, Greek banks aim to resume dividend distribution in 2023-2024, subject to regulatory approvals. The SSM, while recognizing the progress of the Greek banks, did not give the green light to the banks to distribute dividends for the 2022 financial year.

The four Greek banks had relatively comfortable regulatory capital ratios in 2022 above minimum requirements, while the average CET1 ratio was last year at 13.5% compared to 12.4% in 2021.

The profitability of 2022 was based on the very good performance of interest income, which as a whole sector increased by 5.2%, while a significant boost was also recorded in credit expansion of 5.8%, which mainly related to the provision of business loans.

At the same time, the increase in key interest rates helped the banks to increase their loan interest rates at a faster rate compared to deposit rates.

Goldman Sachs and Deutsche Bank report that European bank stocks are cheap

Goldman Sachs emphasizes that the banking sector is trading near the lowest levels since the global financial crisis. The only time the sector was cheaper was during the European debt crisis and during the outbreak of the pandemic in early 2020.

European banks are down about 16% on market concerns around US regional banks, as well as Credit Suisse, Deutsche Bank explains.

The industry’s valuation of less than six times forward earnings is now close to the lows seen in previous crises, including the global financial crisis, when the industry was in much better shape in terms of profitability, capital, liquidity and asset quality.

As far as Greek banks are concerned, Deutsche Bank maintains a buy recommendation for Alpha Bank, with a target price of 1.6 euros (41% upside). He predicts the stock will trade at a P/E of 5 based on estimates for 2023 and 4.6 in 2024, up from 15.9 in 2022, while he also estimates a dividend yield of 3.9% in 2023, rising to 6.6% in 2023. 2024. The bank’s return on equity is expected to be 8.7% this year and 9.1% in 2024.

For Eurobank, it maintains a hold recommendation with a target of 1.5 euros (17% upside margin). The bank’s P/E is estimated at 6.8 for 2023 and 6.4 for 2024, with dividend yield estimated at 2.9% for 2023 and 4.7% for 2024. Return on equity of the bank is expected at 10.6% this year and 10.9% in 2024.

For Ethniki, he maintains buy and gives a target price of 5.1 euros (13% upside). The P/E is estimated at 6.9 in 2023 and 6.5 in 2024. The firm also forecasts a dividend yield of 3.3% for the stock in 2023 and 5% in 2024. The bank’s return on equity is expected to be 9, 8% this year and to 9.5% in 2024.

For Piraeus, Deutsche Bank maintains a hold recommendation with a target of 1.8 euros. It forecasts the bank’s P/E to strengthen to 4.8 in 2023 and 3.9 in 2024 from 2.3 in 2022. At the same time, it estimates a dividend yield of 3.4% in 2023 and 8.3% in 2024. the bank’s return on equity is expected to be 8.9% this year and 10.6% in 2024.