JP Morgan: Overweight in the Greek banking industry for 2022 – The most impressive story of RoE growth

Her Eleftherias Kourtali

JP Morgan sees further significant growth margins for the shares of the banks of the region of Central Europe, the Middle East and Africa (CEEMEA) in 2022, and especially in the Greek banks which, as it characteristically notes, present the most impressive story of growth of the index. return on equity RoE.

He says revenue remains a key driver of future ROE performance, offsetting costly inflation pressures and risk mitigation costs, and he believes ROE rates can reach new highs by providing further support to valuations.

On average, JP Morgan sees 35% growth margins for CEEMEA banks and much higher for Greek banks which puts it at 44% -52%, and believes that the dynamics in ROE, the increase in book value and the Dividend yields remain key pillars of potential overperformance.

It is worth noting that for Alpha Bank it gives an overweight recommendation with a target price of 1.56 euros and a growth margin of 52%, for Eurobank it gives a target price of 1.3 euros and a growth margin of 44% and also an overweight recommendation, for the National Bank gives overweight recommendation also a 45% margin while the target price is at 4 euros and for Piraeus maintains a neutral stance with a target price of 2 euros and a margin of 51%.

In terms of portfolio options for 2022, as he points out, balancing current valuations, further ROE-based re-rating, book value growth and dividend yields, he sees the most upside margin over fair value. , in the banks of emerging markets in Europe, followed by the banks of South Africa and the Middle East.

It also maintains overweight positions in the Greek banking sector as 2022 as it emphasizes is the year when the adjustment of the cost of equity for the cleaning and recovery of banks’ NPEs in the balance sheets, is replaced by strong ROE indicators based on commissions and costs. Alpha Bank, Eurobank and NBG seem to be the most attractive, he points out.

“We expect that the construction of ROE indicators will be more impressive in Greece”, as noted by JP Morgan. While net interest income from Greek banks is under pressure from lower NPEs and lower lending rates, it maintains its positive view that the additional boost in growth from investments related to the Recovery Fund and the government program “Greece 2.0” “will contribute to the compensation. “We are also very positive about the increase in supplies and cost-effectiveness gains. This, combined with the smoothing of risk costs to 50-80 bp, should raise the ROTE to 8-10% from the lower levels. from zero in recent years “, concludes JP Morgan.