Morgan Stanley: Continuation of the “rally” of Greek banks

In its report, Morgan Stanley refers to the possibility of the Greek banks’ rally continuing, despite the strong start to the year (10%-25%).

The US investment management and financial services company is embedding a higher line on interest rates, increasing EPS (earnings per share) by around 6% on average for this year, while also starting coverage of National Bank stock.

As it states, Greek banks are positively geared to higher ECB interest rates, given that 85% – 90% of their loan portfolios are floating rate, while around 83% of deposits are current accounts on average.

Morgan Stanley: The decision of the HFSF to divest is a positive message for Greek banks

As Morgan Stanley underlines, the strengthening of net interest margins (NIM) for Greek banks has only just started (in the third quarter of 2022) with Morgan Stanley expecting a further boost in this direction in 2023.

Furthermore, high liquidity for the banking sector (at around 61% is the LDR – loan-to-deposit ratio) means that, so far, repricing pressure on deposits is limited, with an average deposit beta of around 1% from November 2022.

The latter now incorporates a higher “bar” for interest rates, at 3% for 2023 versus the 2.5% previously expected, which results in a boost to its earnings estimates of around 6% on average. At the same time, it assumes a 55% – 60% beta for term deposits for 2023, which it estimates needs further monitoring.

The banks

The firm’s analysts, in addition to these, also begin coverage of National Bank, with an “equal-weight” recommendation, emphasizing that it is the best “play” on the basis of the macroeconomic recovery of the domestic economy, with i) the second lowest NPE ratio in the sector , at 6.1% and the highest NPE coverage reaching around 82%? ii) the strongest capital position, with a CET 1 ratio of 15.2% in the third quarter of 2022 and iii) a ROTE ratio of around 11% for 2023, according to the estimates of the house’s analysts.

As for Eurobank, so for National Bank, Morgan Stanley expects to get back on track to distribute dividends from 2022 earnings, which is expected to be another positive catalyst for these stocks. Although the “rally” for Greek banks is expected to continue, the “equal-weight” recommendation for National Bank is based on the best relative upward movement of the rest (Eurobank and Piraeus Bank).

Morgan Stanley maintains the same recommendation as that of the National Bank (“equal – weight”) for Alpha Bank, increasing the target price to 1.37 euros from 1.34 euros previously (basic scenario – to 1.67 euros in the “bull case” and 0.48 euros in the “bear case”).

On the other hand, for Eurobank it sets an “overweight” recommendation with a target price of 1.45 euros from 1.38 euros previously (baseline scenario – at 1.82 euros in the “bull case” and 0.66 euros in the “bear case” ), as well as for Piraeus Bank with a target price of 2.24 euros more than 1.96 previously (basic scenario – at 2.92 euros in the “bull case” and 0.76 euros in the “bear case”).