by By Eleftherias Kourtalis
Citigroup has updated its guidance on the sizes, recommendations and target prices of Greek banks, following first-quarter results, as it estimates they will distribute dividends from fiscal 2023 earnings , with the exception of National, which could also manage to pay a dividend on 2022 earnings – the possibility of not doing so remains high, however.
According to its estimates, shares of Greek banks are expected to increase by 12-24% from current levels of the AX board, in the base scenario, while in an upside scenario, the rise can reach 28-49%.
Thus, in anticipation of today’s announcements on the results of the first quarter of Eurobank, Citi analyzes its forecasts for Alpha Bank, National Bank and Piraeus Bank.
The US bank has updated its valuation models for Alpha Bank after the good first quarter results announced by the bank. It therefore revises its forecast for underlying earnings this year by +11%, mainly due to a more optimistic view of net interest income after a strong expansion of margins in the first quarter of 2023, partially offset by slightly lower supplies. and slightly higher costs.
Its estimates for the period up to 2025, which is also the time horizon for its forecasts, remain largely unchanged. In particular, Citi expects Alpha Bank’s net profit to reach 589.1 million euros this year, 579 million euros in 2024 and 613.9 million euros in 2025. The return on capital will increase this year to 8.2% and increase slightly in 2024-2025, while the dividend yield in 2023 will increase to 4%, in 2024 to 5.6% and in 2025 to 7.1%.
The price target it gives for Alpha Bank remains at 1.50 euros and its assessment of the stock remains for purchase. To arrive at this target price, he assumes 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 100 basis points lower, Citi raises target price to €1.75, 45% above current board levels .
As Citi points out, a number of risks or catalysts could prevent Alpha’s share price from meeting or exceeding its price target, including:
1) Better or worse than expected revenue growth trends driven by margins, RRF driven volume trends and ability to bill customers.
2) Inability to achieve anticipated cost savings and reduce management costs associated with NPEs
3) Higher/lower forecasts due to macroeconomic uncertainties and/or regulatory pressures.
For the National Bank, Citi underlines to have achieved very solid financial performances in 2022, with earnings up 29% year-on-year, supported by rising interest rates, strong fee growth as well as one-off trading gains (around €310m). It expects the strong earnings momentum to continue given the positive impact of higher interest rates on the margin, the bank’s focus on increasing fees and the 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, as he revises down, he says, he expects dividends because he thinks regulators are likely to take a more cautious stance on distributions given rising macro risks.
He expects the payout to be 6% of 2022 revenue, although he wouldn’t be surprised if that drops to zero. For 2023 and 2024, Citi now expects a 20% and 35% payout, with a dividend yield of 3.3% this year, 5.5% in 2024 and 6.2% in 2025.
After the strong sale due to the collapse of SVB, which has now been “fixed”, improve NBG rating to buy from neutral before.
In a bullish scenario where ROTE is 1% higher and cost of equity 100 basis points lower, Citi raises target price to €6.9, 28% above current board levels .
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 income is estimated at 775.3 million euros this year, 738 million euros in 2024 and 729.2 million euros in 2025.
Several factors could prevent National Bank’s share price from reaching or exceeding the target price, as indicated by it, including:
1) Better or worse than expected revenue growth trends due to margins, volume trends, interest rates and ability to bill customers.
2) Better or worse than expected cost savings from internal performance metrics
3) Better or worse than expected effect of inflation on costs
4) Higher or lower provisioning costs or other costs due to macroeconomic uncertainty and/or new regulatory requirements.
END, for Piraeus Bank, Citi reports having had very good results in the first quarter, with ROTE forming at 13.3%. AT’s post-coupon normalized earnings per share came in at €0.15, up 25% year-on-year, 9% above estimate. This positive development is explained by the improvement in net interest income (NII), provisions and operating expenses. After a good start to the year, management has revised its forecasts upwards, with the notable exception of net credit growth objectives, which have been revised downwards.
Citi estimates Piraeus’ net profit to be €636.1m this year, €701.2m in 2024 and €715.2m in 2025, with a dividend yield of 4.9% in 2024 and 7.4% in 2025, while the return on equity will increase to 7.7% this year, 8.3% in 2024 and 10% in 2025.
According to Citi’s models, which assume a sustainable ROTE of 10.4% through 2025 and a return on equity of 15.9%, the Piraeus target price is set at 2.9 euros with a buy recommendation.
However, in the bullish scenario, with 1% higher ROTE and 100 basis points lower costs, the target price is set at €3.55, which is 49% higher than the current board price.
Among the factors that can cause the target price to fail, Citi places the following:
1) Worse than expected revenue growth trends due to margins, volume trends and the potential for customer fees.
2) Inability to achieve anticipated cost savings from internal performance measurement and NPE reduction.
3) Higher than expected forecast due to macroeconomic uncertainties and/or new regulatory requirements.
4) Execution risk associated with NPE transactions.
5) Possible negative effects of political or regulatory initiatives.
