BUSINESS

Local bank stocks regain global appeal

By Yiannis Papadoyiannis

One after another, 13 foreign credit institutions and investment firms have announced their predictions for a rise in the share prices of Greece’s systemic banks that averages out at 18 percent above the current levels, reflecting their strong expectations for the country and foreign investors’ ever-growing willingness to expose themselves to Greek risk.

The estimates on the future prices of the stocks of the country’s four main lenders point to a 18 percent rise on average in the case of Alpha Bank, National Bank and Eurobank, and 12 percent growth for Piraeus Bank shares.

Investment firm Goldman Sachs stressed in a report issued on Thursday that the recovery of the Greek banking sector is based on strong groundwork, adding that domestic lenders are very well capitalized. The US firm revised its target prices for all systemic banks, noting that they are showing significant growth potential.

Goldman Sachs singles out a number of key points on which investors must focus as they will determine the course of the sector: They are the quality of loan portfolios, the macroeconomic environment, funding conditions, net interest rate margins, political risk and the state’s bank holdings.

At the start of the week Morgan Stanley announced the resumption of Greek stock coverage after having quarantined local securities due to the fiscal crisis. In its report it stressed that valuations remain attractive as the stocks in the sector are showing growth margins from 11 up to 47 percent: Morgan Stanley analysts set their target prices for Alpha at 1 euro, National at 3.70 euros, Eurobank at 0.42 euros and Piraeus at 1.95 euros.

All major investment firms are expressing a preference for Greece among the European periphery countries while offering a vote of confidence in Greek lenders. In their reports they stress that they are now strongly capitalized and ready to return to profit, thanks to the country’s economic recovery and the concentration observed in the sector, which favors reductions in the cost of deposits and should lead to significant synergies due to economies of scale.

In their forecasts they acknowledge that the most important risk is the possible upset of political stability and the negative impact which that might have on the application of the program to restructure Greece’s economy.

They went on to pick Alpha and National as their top investment choices in the local credit sector.

Online