GREEK BANKS | Big steps towards normality
New strategic plans: faster clean-up while maintaining capital buffers… - As expected, all banks opted to accelerate their clean-up efforts targeting single digit NPE ratios over the next 12 months on the back of ca € 25bn NPE transactions, something which makes their plans quite reliable. Banks’ projections suggest that regulatory capital will remain comfortably above regulatory requirements, with average CET 1 ratio shaping at c14% at sector level in 2022 on a post clean-up basis.…bringing earnings recovery in sight: Importantly, the fast reduction of NPEs is expected to reduce the CoR substantially starting from 2022, allowing banks to achieve a decent level of profitability after many years, with RoE estimated above 5%. The anticipated loan growth, coupled with managements’ efforts to generate more F&C income while maintaining cost discipline, should bring RoEs at around 10% levels over the medium term, in our view.
EU RRF a major opportunity for the economy and the banks – “Greece 2.0” is expected to boost GDP by 7% by 2026, with the Greek government aiming at a paradigm shift via reforms and investments towards an extrovert, competitive, green and digital growth model. Greek banks stand to benefit both directly and indirectly from the Recovery Fund, as the implementation of the related projects is to fuel demand for credit (by € 18bn according to AB Economic Research) while generating opportunities for other sources of revenues.
Q1 2021 earnings - Core PPI came in at an aggregate €832mn (+8% y/y, +4% q/q), on higher core revenues and lower opex, while several one-off items led to wide divergence in reported bottom lines. Asset quality and liquidity were stable while regulatory capital was under pressure due to quarterly losses and IFRS 9. Managements teams stressed that C-19 NPEs should shape lower than previously estimated, while loan disbursements are on track to achieve the yearly targets.
No change in our estimates, risk skewed to the upside – We leave our numbers unchanged following the release of Q1 2021 earnings. If anything, we believe 2021 will be a transition year, given the anticipated sizable NPE transactions and other restructuring costs. We believe our estimates remain on the conservative side, suggesting that risks lie mostly to the upside. NPE reduction and the achievement of profitability targets are the key catalysts ahead, in our view.
Re-rating to continue, tactically we are more cautious – Greek banks trade at 0.4x P/TBV on 2022 estimates remaining at c40% discount to EU periphery peers. We have long argued that the acceleration of the clean-up efforts will lead to a gradual narrowing of the relative valuation gap. Taking into account banks’ commitments relating to NPEs and profitability (RoEs between 5% and 10% for 2022), we see room for Greek banks to move higher in the valuation spectrum. Having said that, given the sharp re-rating in recent months, we believe momentum in the very short-term is likely to wane.
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.
Eurobank Ergasias and its subsidiaries are organized in the following reportable segments: Retail. which incorporates customer current accounts, savings, deposits and investment savings products, credit and debit cards, consumer loans, small business banking and mortgages; Corporate, which incorporates direct debit facilities, current accounts, deposits, overdrafts, loan and other credit facilities, foreign currency and derivative products; Wealth Management, which incorporates private banking services; Global and Capital Markets, which incorporates investment banking services; and International, which incorporates operations in Romania, Bulgaria, Serbia, Cyprus, Ukraine and Luxembourg.
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.
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 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.
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.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.