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Citi cuts TPs

07/07/2008 14:29
In its report dated July 4, 2008, Citigroup said that Greek and Cypriot banks stocks declined 36%, while European bank stocks declined 33% over the same period. “We believe the fundamentals of Greek banks – growth profitability and balance sheets - to be far better than European peers. We see no reason to change our fundamental view. While challenges exist for Hellenic banks, we believe they are manageable and their 1H stock price declines more than discount these headwinds”, the report noted.

Citi maintains the recommendations for the Greek and Cypriot banks but reduces the TPs by 14%. Specifically, The TP of BOCY has been reduced to €13 from €15, of Marfin to €8 from €10.5 and of Hellenic Bank to €4 from €5.25. The recommendation for all three banks is buy.

According to Citi, “We think Greek and Cypriot economic activity in 2008E will slow versus 2007, but banking growth rates still look strong. Latest system loan growth in Greece is 19% yoy and deposit growth 14% (March), while in Cyprus it is 35% and 25% respectively (April). 2Q08 results season should reflect this strong volume growth, some margin stabilisation and weak capital markets income”.

“We believe the large declines in stock markets do have a negative implication, however, for both earnings estimates and valuations. In this note, we factor in reduced fees and trading income from capital market activity. Our average estimate cut is -7% for 2008E and for 2009E (calculated on a market cap weighted basis)”, it added.

“2Q08 results season should reflect this strong volume growth, some margin stabilisation and weak capital markets income. Most Greek bank senior executives have reiterated their commitment to existing public guidance. 2Q08 results season starts 30th of July”, it concluded.