Domestic banks see mood improving
Local banks seem to be experiencing a favorable climate recently after a long period of worries and decline. One after another, the international credit rating agencies have been revising their estimates on Greek banks’ profits, setting higher target prices for the sector’s stocks. Of course, there is a prevailing school of thought that urges restraint, considering that the current jump in stock prices is not justified by the fundamentals. The current stock gains are seen as excessive by several analysts, especially in Greece, where the domestic economy is seen as being under the continuing threat of declines over the next few years. This widespread optimism and the return to normality in markets was reflected by last week’s oversubscription of the bond issues by National Bank and EFG Eurobank. Strong foreign investor interest in local bank issues also appears to mirror the confidence of the international investment community in the state and the capabilities of Greek banks. Last week Cheuvreux revised upward its forecast for the profits of Greek banks due to an apparent improvement in the net interest margin, expectations for an increase in the credit growth rate from 4 percent in 2010 to 6 percent in 2011, as well as the improved revenues expected from non-basic banking activities. There were similar assessments made a few weeks ago by Merrill Lynch, while UBS and Goldman Sachs made such forecasts at the end of August.
