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Buy Greek Banks
Financials
ResearchGreece remains bullish on Greek banks following Q1 results, citing strong economic growth, fiscal discipline and resilient asset quality that support lending, fee growth and capital generation. Higher 2026-27 RoTE estimates have led to raised price targets: NBG (€12.3), Eurobank (€3.5), Piraeus (€7.8) and Alpha (€3.1). Distribution yields range from 7.5%-10.0%, with payout ratios lifted to 70% for NBG and 60% for Eurobank. NBG, with CET1 above 19%, has the highest payout potential and deploying its €2bn in excess cash is a key catalyst. ResearchGreece favours a mix of bolt-on, fee-generating acquisitions and increased shareholder returns.
Why are the share prices of Greek banks falling?
Financials
Recent weakness relates to investors pricing in steeper ECB rate cuts and lower rates in 2025 and 2026 than both before the central bank's Oct 17th meeting and compared to what banks have plugged in their RoTE guidance. However, ResearchGreece believes the market is overreacting to the potential earnings downgrade. If market expectations materialise, their earnings estimates are facing a 3%-7% downgrade in 2025 and 4%-6% in 2026. While a 40-100bps hit to their 2025-2026 RoTE estimates is not pleasant, it is not game changing either. ResearchGreece estimates P/TBV 2026 multiples at c.0.80x for Alpha and c.0.90x for NBG, Piraeus and Eurobank, implying 30% (NBG) to 90% (Alpha) upside from current levels.
Financials
Doubles its stake in Hellenic Bank to 26% to become the largest shareholder in Cyprus’ second biggest bank - valuation wise, EUROB is paying a higher multiple than when it bought its original stake (July 2021), but the truth is the outlook has improved a lot, thanks to higher rates by the ECB and HB’s enormous cash balance of €5.3bn (excl. TLTRO) equal to 27% of its total assets. ResearchGreece expects HB to revise its RoTE target >10% from c.7% previously. Using 12% CoE they find the fair P/TBV to be closer to 1.0x, which implies EUROB bought the stake at a 50% discount to fair value.
Financials
Not for turning - Board rejects Lone Star’s latest €1.51 per share offer. What should shareholders do? If you believe BoC’s RoTE will not exceed 5% by 2024 you are better off selling at any price close to €1.50. However, ResearchGreece’s base case scenario is that BoC’s RoTE will reach 7.5% in 2024 and rise to 8.3% in 2025 (both of which are below management guidance) and calculates the equity is worth €2.08-€2.19 per share (60%-70% upside). Sees no reason for the bank to trade below the average 0.43x P/TBV 2023E of its Greek peers or even below the 0.50x-0.54x of best NPE/CET1 positioned Eurobank and National Bank of Greece.
