UBS Upgrades NGB and Alpha Bank Target Prices

Swiss-based UBS investment bank has increased the target price for two Greek banks, Alpha Bank and National Bank of Greece (NBG), maintaining a buy recommendation for both.

The target price for Alpha Bank was set at €2.32 from €2.30 and for National Bank of Greece at €11.20 from €11. The upgrading for the two Greek banks comes after the impressive corporate results of the second quarter for both banks.

UBS revised the EPS (earnings per share) for the National Bank of Greece upwards by approximately 6% for the fiscal year 2024 and 4% for the fiscal year 2026. This comes from a combination of higher net interest income (NII) (2%), higher fee income (1.3%), lower operating expenses (-2.5%), and lower credit loss charges (-7%).

As UBS says the key trend is that NII is holding up better than expected, with NIM now expected around 3.00% from <2.90% previously, leading to an upgrade in NII prospects, with a slight increase for FY24 instead of a previous decline (1%-3%).

The target price was set 2% higher at €11.20, indicating significant capital growth, while also seeing the potential for higher than planned distributions over time as the CET1 ratio continues to accumulate (18.3% after dividend accumulation in H2).

UBS upgraded adjusted earnings per share by 4% to 33c for Alpha Bank in line with the company’s guidance, although medium-term forecast changes are minor.

The weak credit picture in Q2 stands out, with a strong recovery in corporate credit needed in H2 to meet our forecast. The cleanup of non-performing exposures accelerated, with the non-performing exposure ratio dropping from 6% to 4.7% at a cost of under €100 million. Credit quality remains weaker than peers, with lower provision coverage, but credit loss provisions have also decreased. Our target price is only 1% higher at €2.32, indicating significant capital growth.