Goldman Sachs: The new target prices for Greek banks after the new scenario for the economy and energy

Her Eleftherias Kourtalis

Greek banks continued to show progress in optimizing NPEs and building capital and capital buffers in the first quarter of the year, delivering better-than-expected results on key operating trends, and Goldman Sachs expects the strong trends to continue into the second quarter. ‘ Semester.

Meanwhile, the degree of macroeconomic uncertainty has increased over the past three months: Greek inflation accelerated to 12% in June 2022 (from 11%/10% in May/April) while consensus estimates for GDP fell to 3% /3% for 2022/2023 (from 4%-5%/3.5% at the beginning of the year). The yield on the 10-year Greek government bond reacted to these macroeconomic developments, rising to around 3.5%-4% in July.

The US bank also says that its commodity analysts recently revised their natural gas price forecasts (TTF) to reflect a weighted scenario regarding Nord Stream 1 flows after the completion of maintenance projects – specifically, they raised forecasts for Q1 2022/Q4 2022/Q1 2023/Summer 2023 to €153/121/77/138/MWh from €104/105/76/75 previously.

With the above in mind, Goldman analyzes the impact of accelerating inflation, the aggressive interest rate environment and increases in natural gas prices on Greek banks. While pointing to strong bank-specific trends in Greece, increased macroeconomic uncertainty translates into more conservative COE cost of equity assumptions (mainly resulting from a 300bp discount on Greek 10-year bond yields to 2021) and also translates into lower estimates (on average reducing EPS estimates by 9% in 2023-24, reflecting the effects of higher inflation and commodity prices).

It now estimates a COE of 15% for Alpha/Eurobank/NBG and 17% for Piraeus (from 12% previously). The higher COE for Piraeus reflects the historical difference between the market-implied COE and the COE of the other three banks.

It also incorporates the impact of bond portfolio revaluations on the CET1 ratio and now uses a capital ratio target of 14% in the capital-adjusted ROTE/COE model (vs. 13% previously).

Regarding the valuations and evaluations of Greek banks, gives a 12-month target price of 3.95 euros for National Bank (33% upside), reduces the target price for Eurobank to 0.92 euros from 1.50 euros before with 23% upside, maintains 1.07 euro in Alpha Bank with a 39% upside margin and reduces to 0.84 euro from 1.80 euro before the target price for Piraeus with an 8% upside margin.

Thus, Goldman restores the rating for National Bank to “buy”. According to its analysis, Ethniki will have the highest level of CET1 and NPE coverage among Greek banks in 2023, close to the average of European banks. It trades at 0.4x 2023E P/TBV, versus an average of 0.7x for European banks and the 0.6x implied by its target price.

At the same time, it downgrades Eurobank to a “neutral stance” due to its relative outperformance compared to other Greek banks. It continues to expect Eurobank to have the highest ROTE in the Greek industry (9% in 2023) and to be one of the first Greek banks to reach average European levels in terms of CET1/NPE ratios. While Eurobank has made significant progress on key operating metrics, it trades at the highest valuation multiples within the Greek bank coverage (at 0.5x 2023 P/TBV vs 0.7x P/TBV for European banks).

It also reaffirms a “buy” recommendation on Alpha Bank, noting an attractive risk-reward profile: it appears similar to Eurobank/NBG on key operational metrics (2024), while trading at a significant discount of 30% to what refers to the 2023 P/TBV.

Finally, it maintains a “neutral stance” for Piraeus. He considers the progress made by the management of Piraeus in reducing the NPE balance, creating reserve provisions, recovering ROTE and restoring capital buffers to be positive. While it acknowledges its valuation discount, in its view, this reflects the gap between the respective “cushions” in CET-1.