JPMorgan: The 4 catalysts that give impetus to the Greek banking rally

JP Morgan gives a vote of confidence in the Greek banking sector, underlining its overweight position.

In particular, the investment bank states in today’s report that the recent results of Greek banks reinforce its optimism for the course of Greek shares. It also foresees the continuation of the rally due to four factors:

• The stable dynamic in the banks
• Attractive valuations
• The small placement of investors in Greece, which offers a technical rise
• The strong macroeconomic backdrop.

JPMorgan believes that the rally recorded by the Athens Stock Exchange since the beginning of the year has a long way to go and even adds that it shares the market’s expectations that the investment grade will come this year and further strengthen the sentiment.

The investment bank’s analysts report that the strong results announced by Greek banks for the second quarter reinforce its choice to consider Greece as a top choice in the emerging markets region.

Optimism from the results

They also emphasize that it is important that the guidance of administrations continues to be revised higher. With an estimated 12-month P/BV ratio of 0.6x, Greek banks are among the cheapest banks in emerging Europe. With a strong return on equity ROE (10.6%) relative to underperforming markets such as the Euro Stoxx Banks index (10.2%), Piraeus was added to the MSCI EMEA in the house’s recent quarterly review in August.

JP Morgan points out that what will further boost Greek shares are US growth upgrades for the second half of 2023, which have already led European region economists to raise their forecasts for the euro zone. For now, Greece is expected to grow close to 2% this year, significantly above the 0.7% predicted by the American bank for the euro zone. A soft landing or no landing in global growth in 2023 will lead investors to increase risk, given Greece’s superior growth rate covered by the support of the Recovery Fund. The reforms will support the re-rating of Greek equity valuations, JPM estimates.

The MSCI Greece index trades at attractive levels compared to the 5-year average and based on P/E (6x) and P/BV (0.7x), with a discount of 49% and 45% compared to emerging markets internationally and against the emerging markets region of Europe, the Middle East and Africa.