What’s new? With this note, we are making a case in favor of Greek banks, considering recent banking developments in the US and Europe, namely the collapse of SVB and Signature Bank, the rescue of First Republic Bank, and the acquisition of Credit Suisse by UBS, including the wipe out of AT1 holders. We reiterate our OWN IT ratings on NBG, Eurobank and Piraeus Bank.
We should also flag Bank of Cyprus, which can now boast about its huge cash balance of 30% to total assets (earning 3% yield @ ECB’s DFR) and low unrealized losses in its HtM securities portfolio.

What’s new? BoC announced strong Q4 2022 results, beating our NII/PPP/pre-tax estimates by +17%/+17%/+11%. Management updated 2023 guidance to RoTE >13% (from >10% previously and 11% in 2022), on the back of +15% stronger NII; NPE ratio and CoR reiterated at <5% and 50-80bps, along with the intention to resume dividend payments in 2023. Conclusion. The latter is what’s missing for BoC to make it in the top league of EUR banks with RoTE 12.5%-14.1% rewarded with a median 0.93x TBV 2023. We expect BoC will pay a dividend yield of 3.5% (or higher) in 2023 out of 2022 earnings.

What’s new? Following Q3 results and the higher, NII-driven, guidance for 2022-2023, we increase our estimates by a huge 60%-120% in 2022-2025, we raise our PT to E4.0 (from E2.1, not a typo) and reiterate our OI rating. European banks with the same RoTE (11%-13%), dividend yield (5%-7%) and fully loaded CET1 (13.5%-14.5%) trade on a median 0.75x TBV 2023. Which places BoC at a c.50% discount to peers. But an even higher 60% discount to its own RoTE/CoE fair multiple of 1.0x TBV 2023, on our estimates.
Conclusion. The completion of ‘Helix 3’ NPE sale (E550m) brings the NPE ratio down to 4.5%/E500m and essentially concludes the NPE clean-up of the bank; combined with our RoTE 2023 estimate of 12% (bank guides for >10%), pro forma fully loaded CET1 of 14.5%, and resuming dividend payments (2023 yield @ 5%), we conclude BoC is a highly efficient, profitable bank, worth trading much higher than its current 0.40x TBV 2023 multiple.

What’s new? As more and more Investors are asking about the work done so far by loan servicers on Greek NPEs, managed either on behalf of the banks or on behalf of third parties, we are compiling all available performance data in this note. The numbers available are not always straightforward or sequentially comparable. The primary source is Bank of Greece.
Although the bulk of NPEs do not belong to banks anymore, the issue remains important because a) banks have kept senior notes from NPEs securitized on their balance sheets; b) the sovereign and its debt are on the hook for those senior notes because they are guaranteed by the state under the ‘Hercules’ scheme; c) cured NPEs could find their way back to banks’ balance sheets (if regulators/authorities approve) and from there to cash NII.
Market Snapshot & Conclusions. Our main findings are outlined below…

What’s new? Q3 was the first quarter out of many with strong underlying growth in NII (+9% qoq); combined with solid lending growth (Stage 1 up +E3bn following +E5bn in Q2) and contained costs (-2% qoq), it explains why all 4 systemic banks raised their FY 2022 guidance. The weird part is that none of them feels comfortable enough to share any sort of guidance for 2023. Which is even weirder considering they have not witnessed any deterioration in asset quality so far, thus maintaining their previous 2022 CoR estimates and hinting towards flat CoR in 2023.
Conclusion. Excluding Alpha, banking stocks have re-rated after Q2 results and are now trading 0.45x TBV 2023 on our estimates, with our TBV input essentially unchanged. Incorporating Q3 trends, we revised our models: we reiterate our OI in NBG, raising our PT to E5.5 (from E4.8) and upgrade Eurobank to OI with our PT at E1.5 (from E1.2). We see >40% valuation upside in both names which makes it worthy enough to own them, especially once adjusted for risk, thanks to their superior fully loaded CET1 and S3 coverage.