Eurobank Equities: 4 + 5 catalysts that will enhance the rally of Greek banks

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Her Eleftherias Kourtali

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Eurobank Equites “sees” a further increase in the valuations of Greek banks, emphasizing that the outlook of the sector is significantly improved now, while maintaining its recommendations and increasing the target prices in Alpha Bank and Piraeus.

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More specifically, he emphasizes that Greek banks are trading with an estimated P / TBV index for 2022 at 0.5x with a 15% discount compared to the banks of the EU region. The relevant discount has decreased significantly compared to the recent past, mainly as result of the remarkable consolidation of the balance sheets. Looking to the future, the stock exchange believes that the shares of Greek banks will move higher due to the following factors: 1) further convergence in the banks of the EU region as a result of the positive profit prospects, 2) re-rating of the EU banking sector due to of the prospect of higher interest rates, 3) increasing TBV book value from 2022 and 4) increasing market focus on profitability valuations.

Eurobank Equities confirms the “buy” rating at the National Bank, as it believes that it still offers a very exciting combination of strong fundamentals and attractive valuation, despite its strong recent performance. It also maintains the “buy” recommendation for Piraeus Bank, as it considers the risk / return profile attractive at this stage, as the group is well on its way to completing the liquidation plan. It also maintains the “hold” rating in Alpha Bank as, despite the progress made in the implementation of its strategic plan, it trades at a less attractive valuation compared to the other systemic ones.

Thus, it gives a target price of 1.45 euros for Alpha Bank from 1.37 euros before, 3.23 euros for the National Bank from 3.48 euros before and 1.91 euros for Piraeus Bank from 1, 84 euros before.

2021 was a milestone year for the Greek banking sector, which was characterized by remarkable progress in the consolidation of balance sheets, as the stock market points out. Following the decisive implementation of their ambitious strategic plans, the banks achieved a sharp reduction in NPEs (approximately 11% from 45% in 2018), while through a series of actions they managed to maintain comfortable supervisory capital “cushions” which formed above the regulatory requirements.

Eurobank Equities reiterates its view that the market is clearly shifting its focus to profitability, in contrast to the situation of previous years when the balance sheet dynamics were at the center of investors’ discussions. A sharp decline in loan losses combined with lower operating costs and higher commissions should make all banks profitable in 2022. In this context, trends in net interest income (NII) will be closely monitored given their importance and of the expected weakness as a result of the reduction of NPEs.

During the stock market, there are four very important positive catalysts for the prospects of Greek banks, which are: 1) the strong recovery of Greece will support the investment climate, 2) the possible rating upgrades that will lead Greece to an investment grade status , thus attracting more investors, 3) the recent decision of the ECB on Greek bonds was quite supportive and can support the upgrades, 4) the HFSF can launch the de-investment plan that will lead to a possible complete revitalization of the banks and 5 ) In addition to domestic factors, Greek banks may benefit from the international exchange in value shares pending higher interest rates.


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