Greek Banks: Why they are outperforming the ATHEX this year

With shares up about 30% this year, bank shares outperform the Athens Stock Exchange, while with money markets still pricing with a 90% chance of raising euro interest rates by 50 basis points by December, analysts estimate that the industry will benefit from the further increase in net interest income, as the ECB will raise interest rates in the coming years, thus offsetting any impact from rising bond yields.

Morgan Stanley “sees” as a positive catalyst the increase in net interest income of Greek banks, as euro interest rates will rise, which is an additional growth story for the industry. It estimates that for every 50 basis points increase in the ECB reference rates, net interest income for Alpha Bank and Piraeus increases by 2% and for Eurobank by 4%.

JP Morgan remains positive for Greek banks, while the negative effects on CET1 indices from the increase in bond yields, estimated at 40 basis points, are offset by the estimated additional increase of 10% in earnings per share by 2023 from expected interest rate increases. Maintains an “overweight” recommendation for the shares of Alpha Bank with a target price of 1.60 euros, Eurobank with a target price of 1.30 euros and National Bankwith a target price of 4 euros and a “neutral position” with target price 2 euros for the share of Piraeus.

AXIA Ventures Group estimated that if the ECB raises interest rates by 100 basis points, Eurobank with Alpha Bank will be more profitable than Piraeus and NBG due to the different levels of deposits. On the other hand, it estimates that the increase in bond yields will reduce the CET1 capital ratios of Greek banks by 27 to 67 basis points in the first quarter of 2022 at manageable levels. It recommends a “market” for the shares of Alpha Bank with a target price of 1.80 euros, Eurobank with a target price of 1.50 euros, National Bank with a target price of 6 euros and Piraeus with a target price of 2, 15 euros.

Discounted shares

For Optima Bank, the Greek banking shares trade 0.39 times to 0.67 times their book value for 2023, with a discount of 30% to 50% compared to the respective banks of the European region, even expecting distributions dividends, with Eurobank and NBG distributing around € 100 million each for the 2022 fiscal year.

Recommends “market” for the shares of National Bank with a target price of 5.42 euros, Eurobank with a target price of 1.38 euros, Alpha Bank with a target price of 1.77 euros and Piraeus Bank with a target price of 2, 01 euros. From 2023, the increase in interest income will return with the help of loans, while the increase in interest rates will strengthen the net interest income.