It is impossible to estimate the outcome of the ECB/EBA AQR & Stress Test exercise on Greek banks. We believe there is a good chance Greek banks will not need to raise more capital given their recent recap and restructuring plans (approved by DG Comp); the results will be announced in late October. We have constructed a plug-and-play spreadsheet where readers can impose their own AQR assumptions on 2013 numbers and further stress 2014-2016 NPL and coverage ratios for each systemic GR bank (adverse and baseline scenario). …to access this report and spreadsheet contact ResearchGreece at contact@researchgreece.com

Nothing really changed post Q1; all drivers (deposit spreads, cost cutting, NPL formation) in place; we revisited our 2013-2016 bridges making small changes to our pre-provision and bottom line forecasts. We stick to our normalized RoTE estimates and valuation assumptions; we reiterate our rating on each bank; cannot exclude a market re-rating…

1/ Eurobank: OWN IT based on 0.9x P/TE and 7.4x P/E 2016E pro-forma for E3bn capital increase; 2/ Earnings: bridging 2013 to 2016; 3/ Price Target sensitivities based on different RoTE/CoE; 4/ Asset quality update – 2013; 5/ Warrants: fair value estimates; biggest catalyst: asset quality; on a like-for-like basis we favor Eurobank given the valuation gap with peers; Need normalized RoTE >15% for Alpha and Piraeus and >20% for National for risk/reward to pay off, in our view…to access this report  contact@researchgreece.com

With this research note we attempt to address the following issues surrounding the sector: a) what is the market discounting at current levels? b) Impact from the DTA forbearance, c) changes in the recap framework, d) a closer look at Eurobank’s capital increase and d) an update on warrants’ pricing and valuation..to access this report  contact@researchgreece.com

PPP in Q3 was down 16% qoq on weaker other income/higher general costs; NII +8% qoq on reduced funding costs. NPL formation -60bps (incl. write-offs); CoR +10bps to maintain coverage at 52% (Q2 51%). EBA CT1 at 13.5% which combined with our PPP forecasts for the next two years provide a capital cushion of E4.3bn above 9% CT1 – enough to deal with an implied NPL or 50% (now at 33%; restructured loans at 7%) assuming 50% coverage target. Asset quality remains the main issue for Alpha and the sector. We reiterate DOI with a new PT of E0.58 (was E0.51) after pushing valuation to 2014….to access this report  contact@researchgreece.com