HSBC is reducing the target price for the shares of Greek banks in a new report, while maintaining the buy recommendation, while stating that this is the preferred share of Eurobank.
As he points out, the results of the banks for the fourth quarter and their updated medium-term plans, revealed some problems bigger than expected in the net interest income.
HSBC adjusts estimates for performance pressures and slightly slower credit growth.
He estimates that the rationalization of CoR, the key ROTE improvement factor, with moderate non-performing exposure (NPE) and the termination of NPE clearing remains on track.
It also cuts estimates for sustainable ROTEs in the system by 50 basis points to around 7.5%, and cuts target values by 3% on average.
Despite the recent recovery in prices, valuations are 14% lower than they were before the start of the war and as he notes: “we consider that a slight impairment in the sustainable ROTE is more than discounted”.
He also points out that delays in investing in geopolitical risks, pressures on disposable household income from inflation and the initial repayment of corporate loans due to ample liquidity in the system, have led some banks to restrict ambitious developers.
However, HSBC estimates need to be changed as they are already conservative. Therefore, the decline in interest rates on business loans in the fourth quarter of 2021, surprised negatively and given the liquidity situation and that most of the growth will come from short-term low-yield working capital loans, HSBC reduces its forecasts for net interest income for the year 2022/2023 by 4.3%, and for the year 2022 reduces the estimates for profits by 2%.
It restates the buy for all four Greek banks, with Eurobank remaining its first choice.
It estimates that banks are attractively valued and trade 0.5 times the 2022 P / TBV, which is a 40% discount on bonds in EEMEA despite the better ROTE when adjusted for higher risk premiums and lower currencies in EEMEA.
In addition, it expects that all four banks will have positive published profits in 2022, for the first time in many years, and their estimated PE for 2023 at 6.6 times, is a discount of 35% compared to the average GEMs .
In terms of target prices, the new price for Alpha Bank is 1.45 euros from 1.60 euros, for Eurobank 1.40 euros from 1.45 euros, for the National Bank 3 , 45 euros from 3.90 euros, and for Piraeus Bank 1.90 euros from 2.10 euros which was the previous target price.