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.
Edition: 211
- 16 May, 2025
NBK (NBK KK) KK
Financials
The Kuwaiti lender's lower profitability and dividend yield compared to peers undermines its premium valuation. NBK's 9M 2024 results showed a 6% y/y growth in attributable net profit underpinned by a 7% increase in operating revenues and controlled impairment loss. The decline in non-interest income is quite concerning especially as the monetary policy cycle begins to ease which should put pressure on NIMs. The credit demand in Kuwait is affected by the economic recession and the political crisis in early 2024. Improving NBK’s fundamentals is going to take time. Recall that its Islamic arm, Boubyan Bank and Gulf Bank have decided not to go ahead with a merger, which could have created a single Shariah-compliant bank with US$50bn+ in assets.
Edition: 203
- 24 January, 2025
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.
Edition: 198
- 01 November, 2024
Royal Bank of Canada (RY CN) Canada
Financials
The actions by the OCC reinforce Veritas’ preference for RBC to remain focused on Canadian banking and for the divestiture of its US subsidiary, City National Bank. However, this seems increasingly unlikely as it will take several years for the bank to resolve issues outlined by the OCC. Additionally, further monetary penalties may be levied if sufficient progress is not made. These actions will likely also weigh on CNB's profitability as costs associated with resolving these issues place upward pressure on CNB's efficiency ratio. These actions by the OCC may serve as prelude for potential actions against TD Bank with a substantial monetary penalty and a cease-and-desist order likely in play.
Edition: 179
- 09 February, 2024
Poland: Dismantling PiS
In Poland, the new centrist government led by prime minister Donald Tusk is trying to undo eight years of rule by the right-wing nationalist Law and Justice (PiS) party. Tensions between Tusk and President Andrzej Duda, who hails from PiS, have already reached fever pitch. The stand-off will slow the pace of EU-mandated reform, but Niall Ferguson’s base case is that Brussels will unlock Poland’s frozen COVID-19 recovery funds regardless. Meanwhile, the economy is running hot. Fiscal policy is likely to remain expansionary, providing a boost to household incomes. The National Bank of Poland will ease significantly less than other central banks this year - for political as well as economic reasons. Niall is bullish PLNEUR and Polish sovereign bonds.
Edition: 178
- 26 January, 2024
Qatar National Bank (QNBK QD) Qatar
Financials
QNB delivered a strong FY23 with an 8% increase in net profit despite a QAR 3.5bn loss on hyperinflation in Turkey. AlphaMena remains bullish because of QNB's strong government support (35% of loans), resulting in high asset quality and sound profitably. By maintaining a dominant market share in Qatar and a growing international contribution, its diversifying business mix can sustain its top-line positive momentum amid a rather unfavourable interest rate environment. The sharp plunge in the share price since 2022 offers a great opportunity to buy shares in one of the world's strongest banks. TP QAR 21.0 (30% upside).
Edition: 178
- 26 January, 2024
Saudi Aramco (ARAMCO AB) Saudi Arabia
Energy
EM Fund ownership surges to highest levels on record - of the 371 funds in Copley’s analysis, 53 increased weights in the oil giant and 10 opened new exposure in the last 6 months. ARAMCO has overtaken both China Petroleum & Chemical and PetroChina in recent months to move to the 5th most widely held stock in the sector. In Saudi Arabia, ARAMCO has overtaken both Al Rajhi Bank and Saudi National Bank over the course of 2023 to become the most widely held stock in the country; no other company has more funds positioned overweight. A stock once shunned by EM managers is seeing a definitive change in sentiment.
Edition: 172
- 27 October, 2023
Philippine National Bank (PNB PM) Philippines
Financials
There are few banks like PNB which have seen NPL ratios decline from 10.9% to 6.8% over the past 12 months. Operationally, there are not many with such a robust delta in core NII, NFI, and given relatively pedestrian loan growth (+7% y/y to 1Q23 while NII was +23%). Despite all the positive developments the PNB story still appears hidden within Asian banking. Daniel Tabbush highlights m/cap to assets of several major banks in the region, where PNB is at 2.5% vs. others that are >10x higher. On more traditional metrics like PE and PB, PNB also appears overlooked (or more likely under covered), but with continued strong results Daniel is not convinced that it will remain hidden.
Edition: 162
- 09 June, 2023
National Bank of Greece (ETE GA) Greece
Financials
ResearchGreece raises their 2023/2024/2025 net income estimates by +35%/+15%/+26% on lower deposit costs, higher income from securities and higher ECB deposit rates. They expect the bank to raise its 2023 RoTE guidance closer to their 13.5% estimate. It will be interesting to see if management changes its 2025 RoTE guidance as well (now at >12%). ResearchGreece’s RoTE 2025 stands at 11% as they assume ECB rates go down by 50bps within 2025, impacting loan rates and Eurosystem income. Their TP increases from €5.76 to €7.25.
Edition: 161
- 26 May, 2023
Greek Banks: If not now, when?
Financials
What better time for the Greek state to dispose of its (sovereign crisis) leftover stakes in the country's banks? For totally risk adverse investors ResearchGreece recommends Piraeus Bank; sees ~50% upside based on RoTE/CoE estimated fair 2023 P/TBV of 0.55x. Investors worried about downside risk should go with NBG; sees 30% upside towards fair 2023 P/TBV of 0.80x. For all Greek banks, the current outlook points to RoTE >10% on higher NII offsetting additional MREL costs, controlled CoR (no recession), and the Mitsotakis administration renewing its mandate in the forthcoming elections.
Edition: 153
- 03 February, 2023
Bank of Cyprus (BOCH CY) Cyprus
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.
Edition: 143
- 02 September, 2022
Canadian Banks: Credit risk playbook for a recession
Financials
The coming credit storm - Nigel D'Souza expects provisions for credit losses in the upcoming cycle to match or potentially exceed PCLs during the GFC. Highlights from Nigel’s report include: 1) Household debt service ratio to set a record high. 2) International exposure to skew PCLs higher during a recession. 3) Real estate secured lending portfolios unlikely to drive material credit losses. 4) Wholesale portfolio credit risk likely to be more idiosyncratic than systemic. 5) Of the Big Six banks, Bank of Montreal would experience the highest peak PCL ratio during a recession (1.20% or 6.0x BMO's pre-pandemic level); National Bank the lowest (0.29%).
Edition: 141
- 05 August, 2022
Spotting opportunities in Greek equities
Covering 22 names (80% of total M/Cap), ResearchGreece provides unbiased research, analysis and ideas on Greek (& Cypriot) equities. They offer a clear-cut, binary rating system: Own It (OI) or Do not Own It (DOI). Two stocks they are particularly keen on are…
National Bank of Greece (ETE) - Deserves to be trading at a higher P/TBV multiple than the current 0.50x; enjoys the highest FL CET1 among Greek banks; will benefit the most from a loan rate increase given its low L/D ratio; boasts the lowest combination of NPE ratio and NPE coverage.
OPAP (OPAP) - Q4/FY results comfortably beat expectations on stronger online contribution (Betting and Casino) and GGR/EBITDA guidance for 2022 points to ~40% growth Y/Y. In addition, the dividend was increased to €1.5/share (11% yield).
Edition: 133
- 14 April, 2022
Canadian Banks
Financials
Rising risks trump rising rates - Nigel D’Souza expects market sentiment to shift over the coming months as slowing economic growth and elevated credit risk outweighs the benefit of higher NII. Ahead of this inflection point, Nigel is lowering his sector forward P/E multiple for Canadian banks to 10.6x (NB assuming a pre-pandemic PCL ratio, it currently stands at 13.5x, the highest multiple since the GFC). He downgrades Scotiabank, CIBC, National Bank, RBC and TD Bank to Sell. If you are taking money off the table in banks, consider moving it to the insurers. Nigel continues to pound the table on Manulife Financial and recently upgraded Sun Life and Great-West Lifeco to Buy.
Edition: 129
- 18 February, 2022
National Bank of Greece (ETE GA) Greece
Financials
A standout in Greek banks - ETE is in its third year of a transformation plan which is beginning to show tangible operational improvement including a strong performance in e-banking. Asset Quality ratios continue to make great strides and less than 7% of moratoria beneficiaries are in early arrears (>30dpd). On the capital front, ETE has enhanced its position, delivering CET1 and Total CAD ratios of 16.1% and 17.1% respectively. The share price has risen over 90% in the last 12 months, yet ETE remains attractively valued with a FV of 5%, a PBV of 0.44x, and an Earnings Yield of 12.45%.
Edition: 112
- 11 June, 2021