Upgrade target prices for shares in Greek banks reserved by foreign and local investment houses after the results of the first quarter.
The decision of the European Central Bank (ECB) to give the “green light” to pay dividends for the first time in 16 years is also the “key” to the increase in the target prices of the bank’s shares, as they consider that it is possible to upgrade the guidance of bank management, with Piraeus starting.
The approval for a dividend stay seals the return to normality for Greek banks. Traveling on a difficult path the banking system of Greece has brought us to the point where the supervisory authority recognizes the great progress achieved by the National Bank, Piraeus, Eurobank and Alpha Bank, which continues to distribution of dividends amounting to approximately 875 million euros.
Analysts see the distribution of the dividend as a positive factor in the flow of banking shares and estimate that it will “unlock” the value.
The positive outlook for the sector is due to the optimistic business plans presented together with the results of 2023, which predicts the stability of profits for the years 2024-2026, despite the reduction in the rates of interest and dividend distribution from the income of 2023, expected to increase in the future.
The dividend yield of Greek banks will reach 10% in 2026, as it will be in line with European competitors, Jefferies estimates. Although dividends will start at a low level (10-30% of 2023 income), in 2026 they are expected to reach the European average of 50%. JP Morgan’s view is that distribution ratios will be in line with European averages in 2025-2026.
At the same time, Greek banks continue to make progress in reducing their Cost of Risk (CoR) levels.
This was reported by the rating agency DBRS, which highlighted that in the first quarter of 2024, the average CoR ratio for the four important system banks in Greece fell to 77 basis points, a significant that is down from 131 basis points in 2023 and 106 basis points earlier. quarter of 2023, improving significantly from 182 basis points in 2019.
THE BNP Paribaswhile noting that the Greek banks are in the right direction, ringing two “bells”.
The key ECB rate cuts starting 6 June 2024 will reduce the net interest income of Greek banks, as deposits represent 73% of their total liabilities, thus limiting their internal ability to generate capital.
According to BNP Paribas, this will reduce the rate of improvement in the quality of the total capital, which still includes 44% of deferred tax credits and 9% of deferred tax assets, where the loss-absorbing capacity is lower than the CET1 capital.
The target prices
Are bank stocks expensive? According to NBG Securities Greek banks are trading at an average of 0.82 times the P/TBV ratio for this year compared to 0.99 times for European bank stocks, which means a 17% discount.
H Deutsche Bank raises price targets for Greek banks Although multiples no longer look cheap, he believes the value offered by Greek banks is hard to find elsewhere. The changes in the recommendation and target price for Eurobank is a buy recommendation from 2.55 euros to 2.75 euros, National buy recommendation from 8.95 euros to 9.50 euros, for Piraeus at 4.70 euros from 4.20 before , while upgrading the buy recommendation from hold and for Alpha The bank maintained the target price at 2.20 euros with a buy recommendation.
Its investment position AXIA so Greek banks should continue to outperform and that their current retreat makes the entry point more attractive. The targets are for Alpha Bank at 2.30 euros, Eurobank at 2.50 euros, National Bank at 8.80 euros and Piraeus at 5 euros.
THE NBG Securities continued to increase target prices on Greek banks, maintaining outperform recommendations. The new target prices for Alpha Bank are 2.50 euros from 2.00 euros before and a 54% upside margin, for Eurobank 2.85 euros from 2.10 euros before and a 32% upside margin and for Piraeus 5.30 euros from 4.50 euros before and an upside of 42 %.
The target values given by JP Morgan it is 2.40 euros for Alpha Bank, 2.40 euros for Eurobank, 8.30 euros for National Bank and 5.35 euros for Piraeus.
THE Goldman Sachs for Ethniki he gave a target price of 10 euros, for Piraeus 5.30 euros, for Alpha 1.95 euros and for Eurobank 2.5 euros.
THE Jefferies confirmed the buy recommendations for the shares with a target price of 2.60 euros for Alpha Bank, 10.35 euros for Ethniki, 5.25 euros for Piraeus and 2.70 euros for Eurobank.
THE Eurobank Equities upgraded the target price for Piraeus to 5.78 euros from 5.40 euros. For Alpha Bank the target price is 2.41 euros and for National Bank 10.37 euros.
The British bank gave a strong “vote” on the part of Eurobank HSBC, raising the target price to €3.50 from €2.00 previously, predicting an upside margin of more than 60%. The reasons for the increase in the target price are the increased participation of the Hellenic Bank and the favorable conditions prevailing in the Greek market