Pantelakis Securities: Overweight in Greek banks, room for significant further rally

Her Eleftherias Kourtali

Pantelakis Securities says overweight for all four systemic banks, as their current low valuations do not reflect the progress made by the industry and thus offer significant room for further re-rating, while estimating that the increase in lending and the completion of the planned NPEs and other equity operations, will be further catalysts for their shares.

The stock exchange gives a target price of 1.4 euros for Eurobank seeing a growth margin of 38%, for the National Bank the target price is set at 4.4 euros with a growth margin of 37%, for Alpha Bank the target price is at 1, 7 euros with an increase margin of 38% and for Piraeus Bank the target price is set at 1,950 euros with an increase margin of 39% from the current levels on the board.

As he points out, he maintains an overweight attitude for all four as now (after the capital increases and the reduction of the risk) there is a much smaller dispersion of future returns compared to the past. Eurobank deserves to be “credited” for the faster recovery of RoTE, but trades with a premium, NBG has huge surplus funds, but has more to prove in terms of adjusted returns, Piraeus is still the high beta trade, while Alpha seems to be in the best position to lead the recovery of the Recovery Fund. As risk reduction on balance sheets comes to an end, investors will increasingly focus on P / E ratios rather than P / B ratios.

According to Pantlelakis Securities, further re-rating is “guaranteed”. Judging by the low returns of the industry (+ 11%), investors may have thought that 2021 was a non-exciting year for Greek banks. In fact, it was anything but fascinating, he points out. Having raised private equity for the first time since 2014, Piraeus and Alpha have significantly accelerated de-risking: the NPE index of the industry as a whole will fall to single digits in early 2022, from 30% in 2020. The price index to The book value of P / TBV stands at 0.46x after the “clearing” of the balance sheets on average, with the industry not yet assessing this progress and lagging behind the rally of European banks.

Increasing the return on RoTE equity is, in the stock market, the new focus of the market. In addition to de-risking, the ground is prepared for a new phase of development for Greek banks. The Greek economy (which is already recovering strongly from the Covid disaster) is going to receive a huge boost from the NGEU inflows: the country is the largest relative recipient of RRF funds, while banks will play a central role in leveraging and mobilizing investment. .

In addition, fees / commissions have very good prospects, operating cost savings seem largely guaranteed and the cost of risk, which is already below 1%, is reaching the target of 60 basis points. “We estimate that all these drivers will launch RoTE close to the 10% limit in the next 2-3 years,” the stock exchange notes. It is true that the market may not be fully ready to “believe” in Greek banks yet, as he adds, especially in relation to net lending and spreads, but he believes that the current valuations leave enough room for security.

Finally, as Pantelakis Securities points out, Greek banks are a trade closely linked to macroeconomic trends – which will receive a significant boost thanks to the Recovery Fund – and real estate prices, as the pandemic unfolds, especially with the Omicron variant, however, is an uncertainty.

In addition, investors will clearly monitor lending trends (volume / spread) after a sluggish 2021, default rates on the final leg of moratoriums and other support programs, and the execution of outstanding NPE trades and internal capital operations.

At the same time, the focus will be on the first dividend payments, with Eurobank and Ethniki being the first to proceed in mid-2023, the planned reform of the HFSF and the plan that will help deal with DTCs.