25/08/2009 06:50
The quality of the loan portfolios and the improvement of the margins of profit will determine the future course of the bank results, with most analysts anticipating that it will take about two years before the profitability reaches previous years’ levels. In view of the announcement of the six-month results, the foreign firms’ analysts express their restrained optimism, warning at the same time that the course of the banks will depend not only on the increase in interest rate margins but also on the course of the bad debts.
According to Deutsche Bank, “the key trends of the quarter will likely be: (1) a recovery in customer NII due to a reduction in funding costs and a change in funding structure; (2) solid trading results due to strong equity/credit markets; (3) further cost of risk increases (pace of NPL formation might have slowed down though); and (4) a recovery of Greek bank AFS reserves due to the strong performance of Greek government bonds. The market should also focus on the evolution of credit quality metrics, coverage ratios, capital adequacy, and on potential changes in the regulatory front (i.e., in LLP policy and/or the treatment of minorities in capital)”.
National Bank is still among its top picks. “We maintain our cautious view on Greek/Cypriot banks, and although our main area of concern is still Emerging Europe, we remain fundamentally negative, albeit to a lesser extent, on their domestic markets”, the report said.
UBS also expects an improvement in the bank revenues, stressing that time deposit pressures in Greece are receding, term funding is becoming more affordable, and loan re-pricing and the falling Euribor will benefit most banks.
According to UBS, “our impairment breakdown analysis for the major Greek banks shows that impairments are likely to peak at c175bp on average, and remain elevated for the next couple of years. The Greek banks are due to report earnings this week. We expect Q2 sector net earnings to be up c20% on the quarter despite higher impairments, with likely consensus beats by Alpha and Piraeus”.
More profits in the second quarter…
In almost all cases, the foreign firms expect a three-month improvement in the banks’ profitability.
According to DB, Bank of Cyprus will record profits of €75 million against €63 million in the first quarter (€138 million in first half).
Marfin is expected that it will enjoy profits of €70 million in the first half, NBG of €631 million, Alpha Bank of €159 million, Eurobank of €155 million and Piraeus Bank of €119 million (UBS forecast).
…due to improved revenues…
The improved results are attributable to the three-month improvement of the revenues and it is believed that there will be a dispute in the significant increase in bad debts.
DB expects that the net revenues of BOCY will reach €378 million in the first half and those of MPB €270 million. Bank of Cyprus is expected to have €16 million more revenues in the second quarter (€197m against €181m), while MPB will increase its revenues by €24 million (€123m against €147m).
…and dispute for bad debts
The Cypriot banks are currently favoured by the low provisions for bad debts. The bad debts of Bank of Cyprus are exceptionally impressive, since it is 45 points lower than the next bank, which is MPB. Both the DB and UBS analysts expect that the bad debts of BOCY will remain lower than those of the market in the next few years.
DB anticipates that the BOCY bad debts will increase to €55 million in the second quarter from €35 million in the first quarter to €90 million. For MPB, it is expected that they will reach €131 in the first half.
The biggest charge for bad debts will be included in the results of Eurobank, due to its larger exposure to SE European markets, which were hit by the crisis. The provisions to loans ratio is expected to reach 193 points for Eurobank compared to 81 points for Bank of Cyprus and 126 points for Marfin.
New TPs
In its latest report for the Greek and Cypriot banks (Aug 20), Deutsche Bank increased its estimates for NBG and Agricultural Bank, pushing the TP up to €24.5 from €22 for NBG (buy recommendation), to €10.9 from €9.5 for Alpha Bank (buy recommendation), to €7 from €6 for Eurobank (sell recommendation), to €2.6 from €2.3 for Marfin (hold recommendation), to €1.2 from €0.7 for Agricultural Bank (sell recommendation) and to €4.2 from €3.7 for BOCY (hold recommendation).
UBS increased the TPs for National Bank, Alpha Bank, Eurobank and Marfin Popular and upgraded the recommendation of Piraeus Bank to buy.
For NBG, the TP increased to €24 from €19.9, for Alpha Bank to €13 from €9.5, for Eurobank to €10.8 from €7.2 and for Marfin Popular to €1.9 from €1.4.
UBS does not cover Bank of Cyprus and UBS does not cover Piraeus Bank.
Alpha Bank will announce its results today, while Piraeus Bank will announces its own results on August 26, Eurobank and Marfin on August 27, NBG on August 28 and Bank of Cyprus on August 31.
According to Deutsche Bank, “the key trends of the quarter will likely be: (1) a recovery in customer NII due to a reduction in funding costs and a change in funding structure; (2) solid trading results due to strong equity/credit markets; (3) further cost of risk increases (pace of NPL formation might have slowed down though); and (4) a recovery of Greek bank AFS reserves due to the strong performance of Greek government bonds. The market should also focus on the evolution of credit quality metrics, coverage ratios, capital adequacy, and on potential changes in the regulatory front (i.e., in LLP policy and/or the treatment of minorities in capital)”.
National Bank is still among its top picks. “We maintain our cautious view on Greek/Cypriot banks, and although our main area of concern is still Emerging Europe, we remain fundamentally negative, albeit to a lesser extent, on their domestic markets”, the report said.
UBS also expects an improvement in the bank revenues, stressing that time deposit pressures in Greece are receding, term funding is becoming more affordable, and loan re-pricing and the falling Euribor will benefit most banks.
According to UBS, “our impairment breakdown analysis for the major Greek banks shows that impairments are likely to peak at c175bp on average, and remain elevated for the next couple of years. The Greek banks are due to report earnings this week. We expect Q2 sector net earnings to be up c20% on the quarter despite higher impairments, with likely consensus beats by Alpha and Piraeus”.
More profits in the second quarter…
In almost all cases, the foreign firms expect a three-month improvement in the banks’ profitability.
According to DB, Bank of Cyprus will record profits of €75 million against €63 million in the first quarter (€138 million in first half).
Marfin is expected that it will enjoy profits of €70 million in the first half, NBG of €631 million, Alpha Bank of €159 million, Eurobank of €155 million and Piraeus Bank of €119 million (UBS forecast).
…due to improved revenues…
The improved results are attributable to the three-month improvement of the revenues and it is believed that there will be a dispute in the significant increase in bad debts.
DB expects that the net revenues of BOCY will reach €378 million in the first half and those of MPB €270 million. Bank of Cyprus is expected to have €16 million more revenues in the second quarter (€197m against €181m), while MPB will increase its revenues by €24 million (€123m against €147m).
…and dispute for bad debts
The Cypriot banks are currently favoured by the low provisions for bad debts. The bad debts of Bank of Cyprus are exceptionally impressive, since it is 45 points lower than the next bank, which is MPB. Both the DB and UBS analysts expect that the bad debts of BOCY will remain lower than those of the market in the next few years.
DB anticipates that the BOCY bad debts will increase to €55 million in the second quarter from €35 million in the first quarter to €90 million. For MPB, it is expected that they will reach €131 in the first half.
The biggest charge for bad debts will be included in the results of Eurobank, due to its larger exposure to SE European markets, which were hit by the crisis. The provisions to loans ratio is expected to reach 193 points for Eurobank compared to 81 points for Bank of Cyprus and 126 points for Marfin.
New TPs
In its latest report for the Greek and Cypriot banks (Aug 20), Deutsche Bank increased its estimates for NBG and Agricultural Bank, pushing the TP up to €24.5 from €22 for NBG (buy recommendation), to €10.9 from €9.5 for Alpha Bank (buy recommendation), to €7 from €6 for Eurobank (sell recommendation), to €2.6 from €2.3 for Marfin (hold recommendation), to €1.2 from €0.7 for Agricultural Bank (sell recommendation) and to €4.2 from €3.7 for BOCY (hold recommendation).
UBS increased the TPs for National Bank, Alpha Bank, Eurobank and Marfin Popular and upgraded the recommendation of Piraeus Bank to buy.
For NBG, the TP increased to €24 from €19.9, for Alpha Bank to €13 from €9.5, for Eurobank to €10.8 from €7.2 and for Marfin Popular to €1.9 from €1.4.
UBS does not cover Bank of Cyprus and UBS does not cover Piraeus Bank.
Alpha Bank will announce its results today, while Piraeus Bank will announces its own results on August 26, Eurobank and Marfin on August 27, NBG on August 28 and Bank of Cyprus on August 31.
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