Report
Andreas Souvleros, CFA
EUR 200.00 For Business Accounts Only

GREEK BANKS | Banking on dividends again

ECB approval and EPS upgrades likely to catalyze a re-rating – The ECB has approved Greek banks' requests to pay the proposed dividends out of 2023 profits, signaling a return to normality after 16 years. The announced payouts correspond to shareholder remuneration of €0.063 for Piraeus (1.7% DY), €0.052 for Alpha Bank, equally split between a cash dividend of €0.026 (1.6% DY) and a buyback (3.2% total yield), €0.0933 for Eurobank (4.6% DY), and €0.36 for NBG (4.6% DY). Following a period of >15% underperformance since March vs EU periphery banks, which resulted in the widening of Greek banks’ relative 2024e P/TBV discount to over 20% due to concerns over domestic banks’ sensitivity to the rate-cutting cycle and uncertainty over the size of dividends, we believe that the SSM approval and the likely commencement of guidance upgrades, starting with Piraeus Bank, for FY’24—based on superior fee generation similar to Q1 2024, a defended cost base, and reduced cost of risk—may catalyze a relief rally. This could be especially beneficial for Piraeus Bank and Alpha Bank, which have lagged compared to NBG and Eurobank.

Piraeus Bank new guidance… – PB has kicked off Greek Banks’ guidance upgrades for FY’24, now projecting a normalized 2024 EPS of €0.85 (vs. €0.80 previously and our estimate of €0.81), implying a RoTE of 15%. This upgrade is based on a lower-than-expected deposit beta, superior fee generation similar to Q1 trends, a defended cost base, and a reduced cost of risk (0.7% on net loans vs. 0.8% previously). PB’s business plan is now based on an average 3M Euribor of 3.6% for 2024 (vs 3.8% previously), with mgt expecting NII to reach €2bn (vs €1.9bn anticipated previously), implying a NIM of 2.7%. Regarding the growth of performing loans, the bank now guides for a balance of €31.7bn (vs €31.5bn previously) for FY’24. In terms of fee generation, PB now anticipates fees over assets at 0.8% vs. 0.7% before. Regarding dividend distribution, the bank will accrue 25-30% of net profits to be paid next year, subject to regulatory approval, converging gradually to European peers.

... drives a 5% increase to our 2024-26 EPS estimates; PT lifted to €5.78 – In the light of the improved outlook, we have fine-tuned our 2024-26e for PB to factor in the new guidance and Q1’24 trends. We now expect adjusted net profits of €1.01bn in 2024e (up from €0.97bn). This upgrade is mainly due to higher NII, attributed to lower migration to term deposits (27% vs. 34% envisaged previously), offsetting hedging costs and rate cuts. We also model lower underlying CoR at 0.7% (vs. 0.8%), and higher fee generation. We end up with a c5% upgrade to our 2024-26e EPS, corresponding to adjusted RoTE of 15.0% in 2024e, normalizing to 12.5% by 2026. We thus lift our PT for Piraeus Bank to €5.78 from €5.40.

Valuation: Piraeus staying top pick – Despite broadly similar trends in term deposit migration, loan spreads, and CoR across the banks in our coverage, we are conservatively holding off on earnings upgrades for Alpha Bank and NBG at this time, despite seeing significant upside risks to their existing guidance. The three banks in our coverage are still trading at just c5x 2024e PE and 0.7x P/TBV incorporating a CoE in the mid-teens, which looks excessive given the revenue resilience, significant capital optionality, and improved asset quality. With all this in mind, we reckon that the combination of conservative estimates (2025e RoTE around 12%), attractive valuations, and upcoming catalysts (further earnings upgrades) constitute a compelling investment case. We therefore reiterate our “Buy” rating for all banks with higher PT for Piraeus Bank, reiterating Piraeus as our top pick due to its solid execution and attractive risk/return.
Underlyings
Alpha Bank AE

Alpha Bank is a banking and financial services group which is based in Greece. Co. is engaged in offering a range of services including retail, SME and corporate banking, credit cards, asset management, investment banking, private banking, brokerage, leasing and factoring. Co. is also active in international financial market, with a presence in Cyprus, Romania, London, Serbia, Albania, Jersey (Channel Islands), Bulgaria, former Yugoslav Republic of Macedonia and New York. Co. maintains a focus on retail banking in Greece and particularly loans to individuals and small business loans, and overall expansion in Southeastern Europe. Co.'s activities are divided into retail and wholesale banking.

National Bank of Greece S.A.

National Bank of Greece is a financial institution based in Greece. Co. maintains operations in the retail banking sector, with 509 branches and one premium banking branch, and 1,448 ATMs. Co. offers its customers a range of integrated financial services, including: corporate and investment banking; retail banking (including mortgage lending); leasing and factoring; stock brokerage and asset management; insurance; and real estate and consulting services. Co. is also involved in other businesses, including hotel and property management. Co. operates in Greece, U.K., South Eastern Europe which includes Bulgaria, Romania, Albania, Serbia, as well as, in Cyprus, Malta, Egypt and South Africa.

Piraeus Financial Holdings S.A.

Piraeus Bank is a banking institute. Co. and its subsidiaries provide services in the Southeastern Europe, Egypt, as well as Western European markets. Co. and its subsidiaries operate in four main business segments: Retail Banking, which includes the retail banking facilities; Corporate Banking, which includes facilities related to corporate banking; Investment Banking, which includes activities related to investment banking facilities of Co. and its subsidiaries, including investment and advisory services, underwriting services and public listings, and stock exchange services; and Asset Management and Treasury, which includes asset management facilities for clients.

Provider
Eurobank Equities
Eurobank Equities

Eurobank Equities is a Greek-based firm offering research, sales and trading services to institutional, corporate and private clients. The company is wholly owned by Eurobank, one of the 4 systemic banks in Greece.

Research is the backbone of Eurobank Equities' platform, with a team of 4 professionals committed to generating actionable investment ideas by providing timely research products. We are committed to offering value-added services to clients by filtering market noise and providing insights on the multiple sectors that we cover. Our universe includes 26 - large, medium and small cap - companies whose market capitalization amounts to 80-85% of the total market capitalization of the Athens Stock Exchange. Our research team also maintains the capacity to generate ad-hoc research for micro-cap listed companies.

Our team has consistently gained recognition among institutional investors for its quality research, having ranked No. 1 team in Greece at the Extel Surveys of 2013-2016 and 2018. We have also been named Leading Brokerage Firm in Greece over 2014-2016 and in 2018.

Analysts
Andreas Souvleros, CFA

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