UBS cut prices for 6 banks

In its report dated December 4, 2009 under the title “Fiscal turbulence”, UBS reduced the TP of six Greek banks.

The TP of Eurobank is cut from €16.5 to €13.5, of Alpha Bank from €14.1 to €12.8, of Marfin from €4.3 to €3.5, of National Bank from €31 to €23, of Piraeus Bank from €16 to €11 and of ATE Bank from €1.5 to €1.4.

The recommendations are buy for Eurobank, Alpha Bank, Marfin, neutral for Ntaional Bank and sell for ATE. The recommendation of Piraeus Bank was downgraded from buy to neutral.

According to the report, “The Greek banks have underperformed the European sector by c12% during the last month, on fears of: (a) uncertainty over Greece's fiscal position; (b) the banks' reliance on the ECB discount window; (c) credibility issues owing to a spill-over effect from consecutive public finance restatements”.

“Following the misinterpretation of recent statements by the Governor of the Bank of Greece, the market became concerned regarding (a) the ability of the Greek banks to wean-off from the ECB; (b) the impact this may have on their earnings”, it said.

“Liquidity at the Greek banks is good, therefore gradual ECB disengagement is not a major issue and the related earnings impact will be small, in our view, the report added.

According to UBS, fiscal consolidation will have an impact, though We believe this is by far the most impactful factor and the main justifiable reason for concern. The Greek fiscal deficit now stands at 12.7%. The new government is both willing and able to bring this below the 9.1% target in 2010, in our view.

“We adjust our estimates for the factors mentioned above but remain cautiously optimistic on the sector. We downgrade Piraeus to Neutral. Eurobank remains our top pick given its high pre-provision earnings and attractive valuation. We remain buyers of Alpha and Marfin given recent underperformance”, the report said.

For Eurobank UBS reduced its forecasts for the EPS 2009 by 9.4% and for 2010 by 29.5%, for Alpha Bank by 6.2% and 3.3%, for Marfin by 10.7% and 14.4%, for NBG by 6.9% and 10.2%, for Piraeus Bank by 8.9% and 31.2% and for ATE Bank by 7.9% and 9.5%.