HSBC: Fixed ‘bull’ for Greek shares – Overweight in Greece and in 2022, Buy for all banks

Her Eleftherias Kourtali

HSBC remains positive for Greek stocks, according to the strategy report for the first quarter of 2022, as it continues to believe that they will be strengthened thanks to the combination of strong cyclical recovery and cheap valuations, with the shares of Greek banks at epicenter of the powerful Greek story.

It is worth noting that HSBC proceeded shortly before Christmas to upgrade its forecast for the growth of the Greek economy, placing it at 8.8% from 7.5% that had “raised” it in October, while at 4.5% ( from 5% before) sees growth in 2022 and 4% in 2023. In the fourth quarter of 2021 it estimates that growth will move to 8.4%, while in the first quarter of 2022 will move to 4.2%, in the second quarter at 4.5%, in the third quarter at 4.1% and in the last quarter of the following year at 5.2%.

As he emphasizes, the growth of Greece in the next two years will continue to move above the trend and at about 4%, receiving a boost from tourism and the Recovery Fund.

Tourism was mild in the first part of the season, but recovered very strongly from July to October, the British bank points out. The government’s goal of returning tourism to over 50% of the 2019 level has been achieved. With COVID-19 vaccination levels in Greece high and those in much of the developing world lagging behind, Greece could see a very strong tourist season in 2022 with the potential for the first half of the tourist season to be also strong.

In the context of the rapid cyclical recovery, the valuation / profit mix of the Greek stock market looks attractive – with P / E ratios significantly lower than those in emerging markets, but at a faster rate of profit growth.

Based on the average market forecasts, the P / E in the whole Greek market is placed at 10.9x for 2021 and at 9.4x for 2022. The increase in profitability is placed at 15.4% for 2022. It is also worth It should be noted, HSBC points out, that the yield on Greek bonds is very low compared to most other bonds in emerging markets, which is an additional support for valuations.

In terms of liquidity, HSBC reiterates that, unlike many other small markets, the Greek market is not a “crowded” trade. The average fund of global emerging markets has a neutral position in Greece. Recently, investment interest in Greek stocks has also been low, which suggests that if a positive story develops, there is plenty of room to support and enhance liquidity.

HSBC continues to emphasize that clearly, a significant part of Greece’s story is related to banks – they represent about 35% of FTSE Greece. The total P / E of the industry is placed at 6.5x for 2021 and at 6.6x for 2022, while the price index to book value P / B for both years is 0.45x.

The decline in NPEs and asset sales lead to a significantly improved capital position. The growth of the Growth Fund, adds the British bank, could lead to strong growth of new loans and a significant improvement in profitability.

As he notes, the discount compared to European banks is around 40% despite the fact that the return on ROTE equity is at similar levels. HSBC emphasizes that it gives buy ratings to all four systemic Greek banks, noting that their valuations do not reflect the improvement they have noted. The economic recovery should also allow the consumer and tourism sectors to perform well, which will further strengthen the banks’ operations. For all these reasons, HSBC, as it notes, remains overweight in Greece.