Her Eleftherias Kourtali
Eurobank Equities maintains its ratings for Greek banks but changes the target prices to incorporate the changes it has made in its estimates for 2022-2023 due to the effects on the economy from the war in Ukraine. In this worse than expected before, but still positive environment, the investment story of Greek banks remains broadly intact, as he emphasizes.
More specifically, the macroeconomic outlook has deteriorated but remains positive, as Eurobank Equities points out. Rising inflationary pressures following recent geopolitical developments and COVID-19 create a more difficult macroeconomic scenario. While uncertainties remain high, initial estimates indicate a manageable impact on the Greek economy of 1-1.5% of GDP, which is still expected to record healthy growth rates in excess of 3% in 2022-2023.
In this worse than previously expected, but still positive environment, the investment story of Greek banks remains broadly intact, notes the stock exchange. Although he expects fundamentals to be somewhat weaker than expected before the war in Ukraine, he believes that Greek banks will still be able to return to sustainable profitability this year, as reflected in the new key of the script.
Change in estimates – Target values
In this context, Eurobank Equities reduces its forecast earnings forecast by an average of 5% for the period 2022-2023, mainly reflecting its estimates for lower basic and net income by 12% on average, as well as for higher forecasts. He reiterated the view that the industry’s profitability will begin to recover from 2022 onwards, albeit at a slower pace than previously expected and at a different pace depending on the situation of each bank. At the same time, the stock market estimate for the return on equity RoTE for 2022-2023 on average, is at 5.0% and 7.1% respectively.
Eurobank Equities is examining an alternative, worse macroeconomic scenario (zero growth for 2022 and mild recovery for 2023) to assess the risks to the Greek banking sector. In this case, he estimates that the forecast profits and net income will be 7% and 40% lower than in the baseline scenario respectively, leading to valuations 20% lower than the target prices. He therefore argues that the downside risks to the industry are limited, apparently precluding a significant escalation of the geopolitical crisis.
Thus, the stock market maintains a regularly cautious attitude, and is constructive for Greek banks in the medium term. The performance of banks during this crisis (positive since the beginning of the year and at the same level as that of banks in the EU region) is indicative of improved market perception, according to Eurobank Equities.
The valuations, which are set at 0.5x in P / TBV terms, remain attractive given the medium-term profit prospects in view of a supportive macroeconomic environment.
Thus, it maintains a constructive stance on the fundamentals of the industry and market performance in the medium term, although it is regularly somewhat more cautious in anticipating increased volatility given the highly uncertain environment and fluctuations associated with geopolitical developments.
The stock market in this context, after the changes in its estimates for 2022-2023, reduces the target prices it gives to Greek banks, except for the National Bank, however it does not change its ratings.
Thus, it reiterates the buy recommendation for the National due to the “exciting combination of strong fundamentals and attractive valuation”, despite its overperformance since the beginning of the year. The target price remains at 4.20 euros.
It also maintains the buy recommendation for Piraeus Bank, as it finds the risk / return profile attractive at this stage, as it is well on its way to completing the liquidation plan and returning to profitability. The target price is reduced to 1.74 euros from 1.91 euros before.
Finally, it maintains the recommendation of hold for Alpha Bank as it estimates that the progress made in the implementation of its strategic plan is already reflected in its valuation, which it considers less attractive than that of other banks. The target price is reduced to 1.31 euros from 1.45 euros before.
Source: Capital

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