JP Morgan Revised Greece Outlook to ‘Overweight’

JP Morgan has revised its outlook for Greece to “overweight” from “neutral,” citing improved economic performance including an expanding GDP and the enhanced balance sheets of Greek banks.

The investment bank notes that Greece is showing the strongest GDP growth in the Eurozone. Additionally, efforts to clear up bank balance sheets are anticipated to yield increased capital returns.

JP Morgan highlighted that, according to Bloomberg analysts’ forecasts, if current estimates hold, 2025 would represent the fourth consecutive year of 2% real GDP growth in Greece. The growth rate is dubbed “remarkable” by considering the post-crisis recovery, with the 2025 GDP projected to exceed 2020 levels by more than 20% in real terms.

The US-based investment bank pointed out that Greek 10-year bond yields are now 40 basis points lower than those of Italy and earlier this year even approached those of France.

Despite recent upgrades based on third-quarter results, Greek banks’ valuations remain below Eurostoxx averages. Key drivers of this improvement include enhanced capital returns and better management of deferred tax credits (DTCs).

The growth in Greek bank valuations has been bolstered by confidence in dividends. Historically, earnings held little weight due to weak balance sheets and the absence of dividends. However, this has changed, with certainty now surrounding dividend payments and banks increasing their payout ratio guidance.