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KBW: BOCY - CPB among recommended titles

08/01/2008 10:20
In a report dated January 7, Keefe Bruyette & Woods (KBW) said that they are downgrading the sector to Underweight as they expect European economic growth to slow in 2008. However, KBW recommended certain titles, including Bank of Cyprus and Marfin Popular Bank.

“We are cutting estimates again and now have -2% 2008 sector EPS growth. We see further downside risk to earnings, particularly due to a meaningful deterioration in asset quality. Given the lack of earnings visibility, the sector’s cheap valuation is unlikely to be a positive driver for share price performance”, the report said.

“We recommend stocks that have earnings momentum and that are least likely to see downgrades / hits. The Outperforms in this category include Bank of Cyprus, Unicredito, Raiffeisen, Marfin, NBG, DnB and Santander”, it added.

For BOCY, the P/E is expected to reach 14.1 in 2007, 11.7 in 2008 and 9.6 in 2009, while for Marfin it will reach 15.1 in 2007, 11.3 in 2008 and 9.0 in 2009.

According to KBW, the outlook for BoC remains strong, driven by the maturing Greek network, the benign Cypriot operating environment and continued growth in the international business in Cyprus. The new initiatives in Russia and Romania, and potential efficiency gains from integration between Cyprus and Greece could offer additional upside to earnings.

As for Marfin, “our strong outlook is driven partly by the immature and expanding branch network in Greece, the growing potential of Cyprus as an international business hub, the new international initiatives in emerging Europe, and revenue synergies from MIG. We reiterate our Outperform and €12.0 target price”, the report concluded.