Greek Banks: Stick to your guns (Alpha and NBG stay BUY; Eurobank upgraded to BUY; Piraeus stays HOLD)
Our view on the Greek banks remains constructive due to: 1) the solid capital buffers ahead of the stress test; 2) decent NPE coverage ratios, with good chances of achieving the SSM targets; 3) a gradual improvement in profitability trends from 2018E-onwards, driven by a reduced cost of risk; and 4) an improving macro outlook, with lower sovereign risk. Although the Greek banks do deserve to trade at a discount vs. their peers in view of the big NPL stockpile, fragile ROTE and weaker quality of capital, we see the current valuation levels as too low (a P/TBV of 0.34x on our 2018E). Our fair value for the sector is closer to a P/TBV of c.0.50x vs. the regional peers at 0.70x, on the consensus. Our best pick is Alpha Bank, due to its best-in-class capital and lower valuation. We also like NBG, and we have upgraded Eurobank to BUY from Hold in this report.
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.
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.
WOOD & Company is the leading investment bank in Emerging Europe. Founded in 1991 and head-quartered in Prague, our footprint spans the region and touches investors around the globe.
A pioneer in Emerging Europe, WOOD executed many of the first CEE equity trades and landmark investment banking transactions. Our electronic trading platform was the first in the region, and remains the best. We are continually expanding our relevance and reach in these ever-evolving markets.
Our equity market share reflects our stature: 7% in Warsaw, 20% in Bucharest, 16% in Hungary, 40% in Prague and 5% in Vienna. Our distribution is unparalleled, with the largest salesforce in the region, servicing a uniquely diverse investor base.
We couple local expertise with a truly international perspective. With offices on the ground in the region, and in key financial hubs such as London and Milano, we are never far from our clients and we remain at the forefront of what’s afoot in the CEE emerging and frontier landscape.
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