The international investment houses proceed with a barrage of positive reports for the Greek ones banksgiving particularly high upside from current levels with the Greek banks story still attractive.

Foreign and domestic investment houses increase the target prices for the Greek banks after the results of the first semester, while they consider the upgrades in the guidance of the bank managements to be quite possible.

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

Fitch recently upgraded the four Greek banks. The bank upgraded Piraeus and Alpha Bank to BB with a positive outlook and to BB+ with a positive outlook for Ethniki and Eurobank. The last two are one step before the investment tier in the house. The upgrades mainly reflect Fitch’s improved assessment of the functioning of the Greek economy.

We expect, reports the house, that the Greek economy will continue to perform better than the eurozone average.

This fact combined with falling unemployment and growth should help banks using the Recovery Fund to finance profitable business opportunities. The upgrades also reflect a reduction in non-performing loans and improved profitability. Its rating could improve further if positive macroeconomic trends continue. The credit profile of banks will continue to strengthen.

A few weeks ago, the other rating agency Moody’s highlighted that the four systemic banks recorded strong profits in the first half of 2024, supported by the increase in net interest income, the generation of stable income from fees and the containment of costs and impairments, it points out Moody’s. Through the end of 2025, he expects bank profits to remain strong, despite expected pressure on margins.

The house emphasizes that strong recurring profits and limited provisions support the current credit ratings of the four banks (Baa2 with stable outlook for Eurobank and Ethniki and Baa3 with stable outlook for Alpha Bank and Piraeus), noting that they have managed to further reduce problem loans and maintained high levels of funding and liquidity.

NPEs are declining, albeit marginally, bringing the weighted average NPE ratio down to around 3.6% in June 2024, from 4.1% in 2023. Thus converging on the average of large EU banks (2.3% in March 2024), mainly due to restructurings, an increase in new loans and some small securitizations.

The target prices

Morgan Stanley and Goldman Sachs “vote” Greek banks and in their recent reports increase the target prices of bank shares. The target prices of the Greek banks are 5.51 euros for Piraeus Bank, 2.5 euros for Alpha Bank, 10.43 euros for National Bank and 2.66 euros for Eurobank. “The average margin of increase in the price targets of Greek banks is 39% and we are buyers in all Greek stocks”, explains the house.

Goldman Sachs increased the target prices of Greek banks, reflecting its new estimates for the sizes and performance of the sector, after the better picture it got from the announcement of the second quarter results.

For Piraeus, the new target price is set at 5.90 euros, from 5.30 euros previously, for National at 11 euros, from 10 euros, for Eurobank at 2.70 euros, from 2.50 euros and for Alpha Bank at 2 euros, from 1.95 euros. The recommendation is buy for all three and neutral for Alpha Bank.

Deutsche Bank gives new higher prices for the shares of Greek banks and declares a “buyer”. The new target prices are: Eurobank 2.85 euros from 2.75 euros, National at 9.85 euros from 9.50 euros, Piraeus at 5 .00 euros from 4.70 euros and Alpha Bank 2.30 euros against 2.20 euros.

According to UBS, the banks look attractive at current levels with the period of strong second quarter results and gives target prices at 2.32 euros for Alpha Bank, 2.74 euros for Eurobank, 11.20 euros for National Bank and 5.70 euros for Piraeus.

Optima Bank recently confirmed its buy signal for the shares of all four systemic banks, stating that there is an upward revision of the target prices following the strong figures presented in the six months and the guidance upgrades made by their managements. The prices – targets that Optima Bank has for the banks, which maintains the “buy” signal, are as follows: Alpha Bank at 2.10 euros, Eurobank at 2.41 euros, Ethniki at 10.84 euros and Piraeus at 5. 50 euros.

Are bank stocks cheap?

Although Greek bank shares are up 24% since the start of the year and have outperformed the pan-European Stoxx 600 Banks index (+15%), Goldman Sachs believes they remain undervalued and cheap and that there is room for further re – rating.

Morgan Stanley points out that Greek banks have retreated from their highs of 8% this year, despite a 12% improvement in the second quarter this year and a 9% increase in forecasts for this year’s earnings per share.

Morgan Stanley maintains an overweight recommendation on all Greek banks and estimates that the shares are unreasonably undervalued.

Greek bank shares, according to Optima, are trading at a 21% discount to EU banks, which is not justified based on the estimated average profitability ratio (RoaTBV) of 14.9% in 2024.

The valuation of the Eurobank share is with a price-to-earnings ratio (P/E) of 5.3 and a price-to-book value (P/TBV) ratio of 0.85, National Bank is with a price-to-earnings ratio (P/E) at 5.6 and price to book value (P/TBV) ratio at 0.81.

Piraeus trades at a price-to-earnings (P/E) ratio of 4.4x and a price-to-book value (P/TBV) ratio of 0.6x and Alpha Bank trades at a price-to-earnings (P/E) ratio of 5 times and price to book value (P/TBV) ratio at just 0.48 times.