New higher target prices for Greek banks – buy or correction opportunity

Ha Eleftherius Courtalis

Alpha Finance raised its target prices for Greek banks, noting that their profitability in 2023 jumped thanks to somewhat favorable pricing trends due to interest rates and the internal structure of the market, as well as thanks to the positive macroeconomic environment.

Indicatively, return on equity for FY2023 reached 16.8% (18.3% in Q4 2023), net interest margin increased to 265 basis points and by 95 basis points year-on-year, while net profit fell to 4.2. % Net core capital (CET1) stabilized at 15.6%, well above internal requirements and targets.

The new target prices are about 25% higher than before on average, the brokerage explains, as earnings estimates are higher and equity costs are lower after Greece returns to investment grade.

Therefore, Alpha Finance maintains a buy recommendation for all three systemic banks The best choice is Eurobank Because of its development and giving initiatives Target price 2.45 euros.

At the same time, he points out, he still sees plenty of room for growth Piraeus Bank Because of the attractive earnings/valuation mix, which gives good results Target price 4.90 euros.

For the National Bank Due to its strong profitability and excess capital options, The target price is set at €9.10.

According to the stock market, despite the strong rise in their stocks since the beginning of the year and year-on-year, the valuations of Greek banks remain attractive. In particular, as Alpha Finance points out, it trades at around 70% of tangible book value and at high levels of profitability, while its return on equity (ROE) will remain in the double digits (>10%) until 2026.

Alpha Finance's updated forecast includes better-than-expected organic revenue momentum, increasing revenue and profitability by 11% and 10%, respectively. In terms of management targets, the new forecasts are in line for 2024 and slightly more conservative for 2025-2026, with Alpha Finance maintaining a more cautious approach to revenue forecasts.

According to stock market analysts, the banks' new business plans for 2024-2026 show that profitability will remain close to 2023 levels in absolute terms, as the deterioration in margins – with the expected reduction in interest rates – will be offset by higher credit expansion and economic growth. High commissions.

In addition, operating expenses are expected to increase slightly during the period, offset by lower loan provisions. Strong profitability will enhance capital, making it easier to reward shareholders through dividends and potential share repurchases.

Overall, she stresses, she maintains her constructive stance on the sector and sees any correction as a buying opportunity. He adds that the expected dividend announcements will represent a return to normal for Greek banks.