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Cheuvreux initiates HB coverage

21/11/2008 10:31
Cheuvreux initiated coverage on Hellenic Bank with a 3/Underperform rating. The rating firm maintained outperform 2 for Bank of Cyprus and Marfin with a TP of €5 and €2.8 respectively.

In its report dated November 20, Cheuvreux proceeded with a second downgrade of the Greek banks in one month due to worse macros. “GDP growth in 2009 is expected to slow to 1% in Greece (from 1.9% previously) and 1.5-2.0% in the SE Europe region (from 3.0-3.5% previously)”, the report said.

“We think a rise in NPLs is unavoidable in the following quarters”. “We believe that the challenging environment in 2009 and the lower ROEs could lead to M&A activity in the Greek banking sector. Consolidation will help banks achieve economies of scale and a more diversified revenue base. Still, the consolidation process will not be easy and could take time to complete”. It added.

As for the share prices, “Greek banks are down ~69% YTD (EU peers down 66%, local market down 62%). Valuations look very attractive and at historical lows (P/E of 5.5x and a P/BV of 0.9x on 2009E), indicating a buy opportunity. However, visibility is very limited and we are just at the start of the credit cycle. A sustainable recovery in stock prices could take some time and volatility could remain high until visibility improves”, the report noted.

Cheuvreux downgraded Eurobank and Piraeus to 3/Underperform. “We continue to like the long-term story but think that these two banks may continue to underperform in the short term due to the lack of positive catalysts and the deteriorating environment in emerging Europe”, the report concluded.