Eurobank Equities: The shares of Greek banks have significant rally margins

Her Eleftherias Kourtali

Eurobank Equities remains positive about the prospects of Greek banks both in terms of their fundamental size and the course of their shares on the ATHEX board, after the nine-month results and thus maintains its estimates, if and stresses that the current low valuations leave a lot of room for growth.

It is noted that Eurobank Equities recommends hold for Alpha Bank with a target price of 1.37 euros, while it maintains a buy recommendation for National Bank and Piraeus Bank with a target price of 3.48 euros and 1.84 euros respectively.

As he points out, the shares of Greek banks are trading just over 0.4x in P / TBV terms for 2022, with a discount of another 25% compared to the banks of the EU region. Taking into account the positive profit prospects, believes that some further convergence of valuations is possible in the future, while expecting that the increase in book value and the shift of market focus to profitability indicators, will lead their shares to higher levels. In this context, the stock exchange emphasizes that the share of the National Bank remains the preferred choice given its attractive valuation combined with a strong set of fundamental figures.

In the near future, he estimates, investors will focus much more on profitability prospects for 2022 and beyond, which will be the main lever of their performance. Greek banks forecast RoTEs return on equity between 5% and 10% for 2022, with the positive macroeconomic background providing significant support to their operating performance. In addition, as the stock market points out, possible valuation upgrades could also attract more investor interest.

Commenting on the fundamental size of the banks, he points out that the administrations have reported significant progress in the strategic plans with most of the actions being carried out on time and within the budget. The rapid implementation of strategic plans transforms the balance sheets and operations of banks, on the one hand, and sends a strong message to the market about their determination to return to normalcy as soon as possible.

In terms of third quarter results that ended a few days ago, the stock market finds significant discrepancies. As he points out, it was another quarter with several extraordinary data that distort the underlying trends and significant differences between the individual banks. The impact of the effort to clear banks’ balance sheets was evident in both net interest income (NII) and forecasts, while rising commission income, operating expenses trends and the quality of organic assets were among the key positive third quarter profitability for the industry as a whole.

The managements of the Greek banks appeared optimistic about the quality of the assets and the increase of the loans. They highlighted the better-than-expected trends on the organic asset quality front, alleviating concerns about a new wave of pandemic-related NPEs. In addition, they expressed the belief that the increase in loans will be much stronger than next year, which, combined with the expected increase in commission income, will support revenue trends.