By Eleftherias Kourtalis
Citigroup updated its forecasts on the sizes, recommendations and target prices of Greek banks, after the results of the first quarter, while it estimates that they will proceed to a distribution of dividends charged to the profits of the financial year 2023, with the exception of National, which may also manage to pay a dividend from 2022 earnings, although the possibility of not doing so remains high.
According to his estimates, Greek bank shares are expected to rise 12-24% compared to current levels on the AX board, in the baseline scenario, while in a bullish scenario the rise may go to 28-49%. .
So, ahead of today’s announcements of Eurobank’s first quarter results, Citi is reviewing its guidance for Alpha Bank, National Bank and Piraeus Bank.
The US bank updated its valuation models for Alpha Bank following the strong first quarter results announced by the bank. Therefore, it is revising its underlying earnings guidance this year by +11%, mainly due to a more optimistic view of net interest income following strong margin expansion in Q1 2023, partially offset by supplies. slightly lower and slightly higher costs.
Their estimates for the period up to 2025, which is also the time horizon for their forecasts, remain largely unchanged. In particular, Citi expects Alpha Bank’s net profit to reach €589.1 million this year, €579 million in 2024 and €613.9 million in 2025. Return on equity will move this year to 8 .2% and will increase slightly in 2024-2025, while the dividend yield in 2023 will move to 4%, in 2024 to 5.6% and in 2025 to 7.1%.
The target price that he gives for Alpha Bank remains at 1.50 euros and his valuation of the share remains at Buy. To reach this target price, assume a ROTE return on equity of 8.8% through 2025 and a cost of equity of 15.2%.
In a bullish scenario where ROTE is 1% higher and cost of equity is 100 basis points lower, Citi raises the price target to €1.75, up 45% from current levels on the board.
As Citi notes, a number of risks or catalysts could prevent Alpha’s share price from meeting or exceeding its target price, including:
1) Better or worse than expected revenue growth trends driven by margins, volume trends driven by RRF and ability to collect from customers.
2) Inability to achieve planned cost savings and reduced management costs associated with NPEs
3) Higher/lower forecasts due to macroeconomic uncertainties and/or regulatory pressures.
For National Bank, Citi notes that it achieved very strong financial performance in 2022, with a 29% year-on-year increase in profits, supported by rising interest rates, strong fee growth and windfall trading profits (around €310m). It expects continued strong earnings momentum given the positive impact of higher interest rates on the margin, the bank’s focus on raising fees and moderate cost growth as restructuring measures bear fruit.
Citi updated its estimates, raising this year’s earnings forecast by 9% (also due to better margins), but leaving its 2024-2025 estimates largely unchanged.
Despite this increase in its estimates, Citi leaves Nthniki’s target price unchanged at 6 euros, while revising expected dividends downward, he explains, because he believes regulators are likely to take a more cautious stance on distributions given rising macroeconomic risks.
He expects the payout to be 6% of 2022 earnings, though he wouldn’t be surprised if that drops to zero. For 2023 and 2024, Citi now forecasts a payout of 20% and 35%, with a dividend yield of 3.3% this year, 5.5% in 2024 and 6.2% in 2025.
After the strong liquidation due to the collapse of SVB, which has now been “fixed”, upgrade NBG to buy from neutral previously.
In a bullish scenario where ROTE is 1% higher and the cost of equity is 100 basis points lower, Citi raises the price target to €6.9, 28% above current levels on the board.
For 2023, the return on equity is expected to be 9.5%, while in 2024 and 2025 it will be 8.6% and 8.4%, respectively. NGE’s net profits are estimated at €775.3 million this year, €738 million in 2024 and €729.2 million in 2025.
Several factors could prevent Banco Nacional’s share price from reaching or exceeding the target price, as expressed by the following:
1) Better or worse than expected revenue growth trends due to margins, volume trends, interest rates and ability to collect from customers.
2) Better or worse cost savings than expected from internal performance measures
3) Effect of inflation on costs better or worse than expected
4) Higher or lower cost of provisions or other costs as a consequence of macroeconomic uncertainty and/or new regulatory requirements.
End, for Piraeus Bank, Citi reports that it had very good results in the first quarter, with ROTE forming at 13.3%. AT post-coupon normalized earnings per share was €0.15, 25% higher than the prior year, or 9% higher than estimates. This positive evolution is due to a better interest margin (NII), provisions and operating expenses. After a strong start to the year, management has upgraded guidance with the notable exception of net credit growth targets which have been cut.
Citi estimates that Piraeus’ net income will be €636.1 million this year, €701.2 million in 2024 and €715.2 million in 2025, with a dividend yield of 4.9% in 2024 and 7.4% in 2025, while the return on equity will go to 7.7% this year, 8.3% in 2024 and 10% in 2025.
According to Citi models, which assume a sustainable ROTE of 10.4% through 2025 and a return on equity of 15.9%, The Piraeus price target is set at 2.9 euros with a buy recommendation.
However, in the bullish scenario, with a 1% higher ROTE and 100 bp lower costs, the target price is set at €3.55, that is, 49% above the current price on the board.
Among the factors that may lead to a breach of the target price, Citi ranks the following:
1) Worse-than-expected revenue growth trends due to margins, volume trends, and the potential for customer charges.
2) Inability to achieve planned cost savings from internal performance measurement and NPE reduction.
3) Forecasts higher than expected due to macroeconomic uncertainties and/or new regulatory requirements.
4) Execution risk associated with NPE operations.
5) Possible negative effects of political or regulatory initiatives.