Eurobank Equities: ‘Raises’ the target prices of Greek banks – The industry is in a phase of recovery, valuations are attractive

Her Eleftherias Kourtali

Eurobank Equities is upgrading the target prices of Greek banks, emphasizing that the sector is in a phase of recovery, due to the changes in its estimates for 2022-24, incorporating better leaning trends, mainly in revenues. It upgrades Alpha Bank to “buy” from “hold”, as its risk / return profile has improved since the recent underperformance, while maintaining the “buy” recommendation at both National Bank and Piraeus Bank, given the positive risk outlook- reward, with the National Bank however enjoying fundamental figures of higher quality.

Thus, for Alpha Bank the target price is set at 1.42 euros from 1.31 euros before, for the National Bank at 4.50 euros from 4.20 euros before and for Piraeus Bank at 1.80 euros from 1 , 74 euros before.

As the stock market points out, the profits of the first quarter indicate a good beginning of the year – Greek banks recorded significant net profits (1.2 billion euros) for the first quarter of 2022 due to extraordinary income, lower operating expenses and significant reduction in forecasts. Basic income was lower both on an annual and quarterly basis, as the fall in net interest income NII (-14% per year) overshadowed the impressive increase in commissions (+ 28% per year). Trends in the quality of organic assets were neutral (average NPE at 9.6%, -30 basis points on a quarterly basis), while regulatory capital (fully loaded) improved (average CET 1 at 12.7% , + 60m on a quarterly basis).

The guidance of the administrations, as he notes, was optimistic despite the opposite winds. The management teams were quite optimistic: i) they repeated the profit targets for the year, with some of them even indicating that the risks are mainly upward, ii) they stated that there is a strong momentum for project financing, repeating the annual credit expansion targets ( ranging from € 1.2 billion to over € 2.0 billion) and (iii) said there were no signs of asset pressure, and expressed optimism for the next quarters of level of deposits.

Thus, Eurobank Equities increases its estimates for 2022 mainly due to the significant gains from transactions in the first quarter. Its new overall earnings forecast is revised upwards by an average of 8% for the period 2023-24, mainly reflecting higher core revenue, in part due to the integration of Euribor growth by 50 basis points and higher supplies. Incorporating a further rate hike of 60 basis points (assuming Euribor is around 60 basis points by 2023) will translate into a around 12% increase in profits. The stock market reiterates the view that the industry’s profitability is recovering with the risks, however, remaining increased due to the prevailing external uncertainty.

Finally, he states that he maintains a constructive attitude regarding the evolution of the fundamental figures of the Greek industry, due to the rather positive macroeconomic framework, the much clearer balance sheets that allow the focus on profit creation, the prospect of higher interest rates and the strategic shift of banks to activities. . In terms of market performance, he believes that the biggest risk right now is the volatile and precarious external environment, and therefore maintains a cautious stance on a regular basis, although he sees a decent uptrend in the medium term. Given the profitability prospects, it finds the valuation of Greek banks (0.5x the P / TBV of 2022) quite attractive.