Wood: Buy recommendation and higher target prices for Greek banks

Buy recommendation for Greek banks by Wood, which in today’s report recalls that the shares of Greek banks have recorded a rise of 32% since the beginning of 2023, outperforming the European banking index (+19%).

As Wood’s analysts report, the valuation gap has narrowed, but it estimates that Greek banks are still not fully priced in by the market in terms of their prospects.

Wood also emphasizes that, on average, they trade at an estimated P/E of 6x for 2023 (discount of around 25% compared to European shares) and with a P/TBV of 0.6x (discount of around 10%).

Given the Greek macroeconomic success story, the positive impact of interest rate hikes, healthy corporate loan growth and the positive trend in asset quality, Wood expects Greek banks to continue to outperform.

It is also noted that although the buy recommendation is adopted for all banks, it places Alpha Bank and Piraeus Bank in the top picks due to the biggest discounts. It also increases the target price.

Particularly:

For Alpha Bank, the recommendation is buy while the target price is at 1.80 euros from 1.50 euros
For Piraeus Bank, the recommendation is buy and the target price at 3.40 euros from 2.5 euros
For Eurobank, the recommendation is buy and the target price at 1.80 euros from 1.50 euros
For NBG, the recommendation is buy and the target price at 6.2 euros from 5.20 euros

Wood is also revising upwards its estimates for Greek banks‘ core operating profits in 2023 by around 10%. The main driver is net interest income (NII). In its previous forecasts, it predicted an increase in NII of around 10-12%, on average, while now it expects growth rates close to 18-20%, due to rising interest rates.

The Greek GDP

According to Wood, the current environment remains favorable and the Greek GDP growth rate will exceed the Eurozone averages, due to higher investments and a stable tourist season. In the baseline scenario, Wood & Company expects Greek GDP to be in positive territory this year at 1%-2%, even if the eurozone sinks into recession.