Her Eleftherias Kourtali
The aggressive turn of the ECB led Greek bond yields to the highest levels since April 2020, shifting the market focus to bank capital and the course of net interest rate costs (NII), as JP Morgan points out.
With the yield on the Greek 10-year bond hovering close to 2.5% (from 0.9% in September 2021), the American bank estimates that the negative impact on banks’ CET1 indices is 40 basis points from the third quarter 2021 to date – an unhelpful impact of the current interest rate environment, especially in a European context.
However, Greek banks are relatively focused on raising interest rates and, based on JP Morgan’s expectations of four ECB rate hikes by the end of 2023, expect a 10% increase in earnings per share (EPS) by 2024 from the additional NII.
Although counterproductive, this is enough to offset the continuing pressure on bond yields on capital, with the potential for additional benefits from further interest rate hikes in 2024.
Thus, JP Morgan points out that it continues to be bullish for Greek banks as single-digit NPE indices are now firmly on the horizon and the prospects for increasing lending and ROTE equity have improved significantly.
After gaining 27% per annum, the shares of the four Greek systemic banks are now trading with P / TBV at 0.56x against 0.90x of the Eurozone average and could make a further re-rating as market confidence in growth increases. of ROTEs at 8-10%.