Goldman Sachs updated its estimates for Greek banks. The reason is the need to integrate the financial results of the second quarter but also the prospects, after the talks with their managements.
The US investment bank is setting higher price targets (9% on average) for the four systemic banks for the next twelve months, reflecting higher earnings per share estimates and increased regulatory capital reserves.
“We are updating our assessments of Greek banks to incorporate revised corporate guidance and the latest market trends. We raise our EPS guidance by 6% on average for 2023-24 and more significantly for this year, reflecting hedging/trading gains in the second quarter,” the bank said.
Target prices
The new target prices are: National (NBG) 4.10 euros from 3.95 euros before, Alpha Bank 1.19 euros from 1.07 euros before, Eurobank 1.04 euros from 0.92 euros before and finally Piraeus Bank 0 .96 euros from 0.84 euros previously. At the same time, the new recommendations are: buy for NBG and Alpha Bank and a neutral recommendation for Eurobank and Piraeus Bank.
It is worth noting that Goldman Sachs continues to differentiate banks based on: (1) core capital reserves, (2) credit quality, (3) cost optimization potential, and (4) return generation (ROTE). GS maintains buy on National Bank (NBG), as the company will have the highest level of CET1 and NPE among Greek banks in 2023, close to the average of European banks, and reiterates a buy recommendation on Alpha, as the company will appear similar to Eurobank/NBH in key operating metrics in 2024.
The rationale
The rationale for the changes in estimates is similar for all banks and reflects the key points: (1) net interest income (NII) growth of 4% on average in 2022-2024, reflecting stronger than expected net credit growth in Q2 (about 3% higher than the bank’s expectations) and updated corporate guidance and (2) forecast growth of 2% on average in 2022-2024, reflecting stronger-than-expected loan portfolio performance.
Market reaction to Q2 results was positive for all four Greek banks, and shares rose an average of 15% over the past month, reflecting three key benchmarks: (1) stronger-than-expected expansion of NII and NPLs, (2) the favorable development of assets in terms of trends and quality and (3) improved CET1 regulatory capital ratios.
Loans and provisions
On a corporate basis, stronger loan expansion was recorded by Eurobank and Piraeus (+4.5%/+4.4% on a quarterly basis), the most significant improvement in Core PBT was achieved by NBG and Piraeus (+24%/+15% on a quarterly basis), while the strongest CET1 improvement was recorded by Alpha (+80 bp on a quarterly basis).
Companies upgraded forecasts for this year mainly on the revenue side, while leaving forecasts for the next two years unchanged. “We upgrade earnings per share (EPS) by 6% on average for 2023-2024, reflecting the stronger-than-expected Q2 trend and updated corporate outlooks,” explained Goldman Sachs.
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