03/12/2009 12:07
Goldman Sachs maintains its negative stance for the Greek banks and does not recommend a ‘buy’ for none of them. In its report dated December 2, 2009 under the title “Past performance is no guarantee of future returns”, GS cut the TP for six Greek banks, left the TP unchanged for one and increased its for one too.
The TP for Alpha Bank is cut to €8.9 from €12.1, for Eurobank to €10 from €10.9, for the Postal Savings Bank to €3.8 from €4.5, for Marfin to €2.3 from €2.5, for National Bank to €22.8 from €24.7 and for Piraeus Bank to €8.1 from €9.2.
The TP of Bank of Cyprus remains at €4.70 and of ATE Bank is increased from €1.3 to €1.11.
For all Greek banks, the recommendation is neutral except for Piraeus and ATE, which is “sell”.
According to the report, “solid 3Q results were driven by lower than expected provisions with flat coverage, with NPL formation showing the first signs of a slowdown. Loan growth remained low, while net interest income was strong”.
“Historically Greek banks’ profitability has been driven by strong volume growth, subsequently increasing net interest income and loan related fees”, the report said.
“Over the past few years, the market was very supportive to loan growth as the economy was expanding strongly. We see this as structurally changing owing to pressure on public finances as well as from macro headwinds in Greece resulting in subdued forecast loan growth for the next years”, it added.
According to GS, “despite low volume growth, Greek banks showed strong net interest income growth over the last two quarters driven by: 1) a substantial increase in securities portfolios financed by ECB liquidity and interbank funding, 2) time deposit repricing, and 3) asset repricing”.
“Given that the ECB has communicated that its liquidity support is not a permanent measure and repricing of time deposits is not a fully structural issue, we expect this to partly revert over the coming years. In our view, this will further limit the growth potential of the Greek banks””, it noted.
“Another key risk is higher tax rates in Greece, which we incorporate in our 2011 estimates”, the report said.
“All Greek banks are now well capitalized and, on our estimates, they will be allowed to repay the government preference shares by May 2010 offsetting earnings pressure from higher tax charges”, it concluded.
The TP for Alpha Bank is cut to €8.9 from €12.1, for Eurobank to €10 from €10.9, for the Postal Savings Bank to €3.8 from €4.5, for Marfin to €2.3 from €2.5, for National Bank to €22.8 from €24.7 and for Piraeus Bank to €8.1 from €9.2.
The TP of Bank of Cyprus remains at €4.70 and of ATE Bank is increased from €1.3 to €1.11.
For all Greek banks, the recommendation is neutral except for Piraeus and ATE, which is “sell”.
According to the report, “solid 3Q results were driven by lower than expected provisions with flat coverage, with NPL formation showing the first signs of a slowdown. Loan growth remained low, while net interest income was strong”.
“Historically Greek banks’ profitability has been driven by strong volume growth, subsequently increasing net interest income and loan related fees”, the report said.
“Over the past few years, the market was very supportive to loan growth as the economy was expanding strongly. We see this as structurally changing owing to pressure on public finances as well as from macro headwinds in Greece resulting in subdued forecast loan growth for the next years”, it added.
According to GS, “despite low volume growth, Greek banks showed strong net interest income growth over the last two quarters driven by: 1) a substantial increase in securities portfolios financed by ECB liquidity and interbank funding, 2) time deposit repricing, and 3) asset repricing”.
“Given that the ECB has communicated that its liquidity support is not a permanent measure and repricing of time deposits is not a fully structural issue, we expect this to partly revert over the coming years. In our view, this will further limit the growth potential of the Greek banks””, it noted.
“Another key risk is higher tax rates in Greece, which we incorporate in our 2011 estimates”, the report said.
“All Greek banks are now well capitalized and, on our estimates, they will be allowed to repay the government preference shares by May 2010 offsetting earnings pressure from higher tax charges”, it concluded.
Related Articles
