GREEK BANKS | Deblurring
In our sector update note we focus on the NPE reduction which remains a key challenge for Greek banks and a key concern for the market. Specifically, we ran a sensitivity analysis to show that their loss absorbing capacity remains significant and adequate to absorb the necessary costs and we discuss some additional factors that make us optimistic, such as the potential new tools to underpin balance sheet repair, the accommodative regulators’ stance, the secondary NPE market which has gained traction during 2018, the new protection framework for primary residencies as well as the real estate prices which appear to have bottomed out.Following a vicious cycle in H2’18, the ytd rebound (+26% ytd) in our view is rectifying the overly gloomy viewpoint previously associated with Greek banks. We see further upside from current levels of ca 50%, as multiple pieces are falling into place to boost confidence and valuation remains attractive (at 0.23x P/TBV). Although our trimmed estimates lead to new TPs lower by 20% on avg, we maintain a ‘Buy’ recommendation for NBG and Alpha given the relatively stronger fundamentals coupled with their attractive valuation, while we retain our ‘Hold’ recommendation on Piraeus Bank.
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 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.
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