Goldman Sachs: Raises target prices of Greek banks – The three catalysts

Her Eleftherias Kourtali

Goldman Sachs is raising target prices for Greek banks, after the results of the fourth quarter of 2021, which, as it notes, exceeded the estimates with all banks making significant progress.

Specifically, it increases to 1.75 euros the target price for Alpha Bank from 1.68 euros before with an increase margin of 56%, to 1.80 euros for Piraeus Bank from 1.70 euros before with an increase margin of 27%, for Eurobank keeps it at 1.5 euros, seeing a growth margin of 42%, while for Ethniki it still does not set a target price. At the same time, it maintains the buy recommendation for Alpha Bank and Eurobank, and the neutral recommendation for Piraeus.

As Goldman points out, the industry’s NPE index fell to 10% in 2021 from 28% in 2020, indicating a significant improvement in the CET1 capital ratio to return on ROTE equity. In the fourth quarter, the most significant decrease in the NPE index was recorded by Alpha (-8%) and National Bank (-5%), thanks to the securitization of NPEs of 3.4 billion euros and 1.1 billion euros, respectively.

In her view, the three issues most discussed during the results were (1) the resumption of dividend distribution (2) interest rate hikes and (3) the direct / indirect risks associated with geopolitics.

Goldman raises its EPS earnings per share estimates of Greek banks (excluding Eurobank for which it recently updated its forecast) by 2% in 2022 and 4% in 2023-2024 on average, reflecting the results of d ‘ 2021 and also incorporating the effects of interest rate policy.

The catalysts behind the changes in the American bank’s estimates are three, as he notes, the following:

1) the increase of net interest income NII by 3% on average in the period 2023-2024, reflecting some positive effects in relation to interest rate prospects and the positive adjustment in interest rates for Greek banks,

2) the increase in CoR risk costs by 5 basis points on average in 2023-2024, incorporating some headwinds from the environment at higher interest rates, and

3) Slightly reduced operating costs (by 1% on average in 2022-2024) reflecting the updated outlook on cost optimization capabilities.

Goldman expects that Eurobank and Ethniki will start paying dividends from the profits of 2022, Alpha from the profits of 2023 and Piraeus from the profits of 2024, assuming a payment ratio of 20%.