Foreign and domestic investment houses raise target prices for the Greek banks after the results of the first quarter, but also the decision of the ECB to give the “green light” to dividend payments for the first time after 16 years, while they consider the upgrades in the guidance of the bank managements to be quite possible, with the Piraeus to make the beginning.

The approval for a dividend stay seals the return to normality for Greek banks. Having traveled a difficult path, the Greek banking system has been led to the point where the supervisory authority recognizes the enormous progress achieved by National Bank, Piraeus, Eurobank and Alpha Bank, which proceed to distribute dividends totaling approximately 875 million. euro.

Analysts see the dividend distribution as a positive catalyst for the course of banking shares and estimate that it will “unlock” value.

The positive outlook for the sector is due to the optimistic business plans presented alongside the 2023 results, which forecast resilience in profitability for the years 2024-2026, despite falling interest rates and dividend distribution from 2023 earnings, expected to increase in the future.

The dividend yield of Greek banks will reach 10% in 2026, as it will align with that of European competitors, Jefferies estimates. Although dividends start at low levels (10-30% of 2023 profits), by 2026 they are expected to reach the European average of 50%. JP Morgan’s view is that distribution ratios will align with European averages by 2025-2026.

At the same time, Greek banks continued to make progress in reducing their Cost of Risk (CoR) levels.

This is reported by rating agency DBRS, highlighting that in the first quarter of 2024, the average CoR ratio for the four systemically important Greek banks fell to 77 basis points, a significant drop from 131 basis points in 2023 and 106 basis points in the first quarter of 2023 , while improving significantly from 182 basis points in 2019.

BNP Paribas, while noting that Greek banks are heading in the right direction, rings two “bells”.

The ECB’s key rate cuts starting on 6 June 2024 will reduce net interest income at Greek banks, given that deposits represent 73% of their total liabilities, thus limiting their internal ability to generate capital.

According to BNP Paribas, this will reduce the rate of improvement in the quality of total capital, which still includes 44% deferred tax credits and 9% deferred tax assets, for which the loss-absorbing capacity is lower than that of CET1 capital.

The target prices

Are bank stocks expensive? According to NBG Securities, Greek banks are trading at an average of 0.82 times the P/TBV ratio for this year compared to 0.99 times for European bank shares, which implies a discount of 17%.

Deutsche Bank raises price targets for Greek banks Although multiples may no longer look cheap, it believes the value Greek banks offer is hard to find elsewhere. The changes in recommendation and target price are for Eurobank a buy recommendation from 2.55 euros to 2.75 euros, National buy recommendation from 8.95 euros to 9.50 euros, for Piraeus at 4.70 euros from 4.20 previously, while upgrading the recommendation to buy from hold and for Alpha Bank maintains the target price at 2.20 euros with a buy recommendation.

AXIA’s investment position is that Greek banks should continue to outperform and that their current pullback makes the entry point more attractive. The targets are for Alpha Bank at 2.30 euros, Eurobank at 2.50 euros, National Bank at 8.80 euros and Piraeus at 5 euros.

NBG Securities raises its target prices for Greek banks, maintaining its outperform recommendations. The new target prices are for Alpha Bank 2.50 euros from 2.00 euros before and a 54% upside margin, for Eurobank 2.85 euros from 2.10 euros before and a 32% upside margin and for Piraeus the 5.30 euros from 4.50 euros before and an upside of 42%.

The target prices given by JP Morgan are 2.40 euros for Alpha Bank, 2.40 euros for Eurobank, 8.30 euros for National Bank and 5.35 euros for Piraeus.

Goldman Sachs gives a target price of 10 euros for Ethniki, 5.30 euros for Piraeus, 1.95 euros for Alpha and 2.5 euros for Eurobank.

Jefferies confirms the buy recommendations for the shares with a target price of 2.60 euros for Alpha Bank, 10.35 euros for Ethniki, 5.25 euros for Piraeus and 2.70 euros for Eurobank.

Eurobank Equities upgrades the target price for Piraeus to 5.78 euros from 5.40 euros. For Alpha Bank the target price is 2.41 euros and for National Bank 10.37 euros.

The British bank HSBC gives a strong “vote” to the Eurobank share, increasing the target price to 3.50 euros from 2.00 euros before, predicting upside margins of more than 60%. The catalysts for the increase in the target price are the increased participation in Hellenic Bank and the favorable conditions prevailing in the Greek market.