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.

What’s new? OTE reported Q3 adjusted EBITDA(L) growth of +1.6% yoy, down from +7.2% in Q2 and +8.0% in Q1. The deterioration was not due to moderate sales growth in H2, as management had predicted back in Q2 results, as sales grew by +3.9% yoy compared to +3.7% in H1. It came mainly on a combination of lower margin sales (ICT, handsets) and higher costs (seasonal personnel provisions).
Cash flow guidance reiterated at E600m (reported), despite higher capex (+E20m to E640m) to support increased FTTH spending. Which demonstrates OTE cash flow management ability, in our view. Out of the E500m in annual remuneration to shareholders, E250m has already been paid in cash and E210m in buybacks. We will repeat our Q2 comment that, notwithstanding a reversal in working capital during Q4, OTE’s E600m cash flow can be reconciled only via lower cash vs. accounting taxes.
Conclusion: we fine tune our 2022-2024 adjusted EBITDA(L) estimates to account for the weaker fixed retail revenues (-4.5% yoy) reflecting the expiry of state subsidies (fast internet) and/or the migration from voice to data.

What’s new? Jumbo released its October trading statement showing +12% sales growth yoy, with the 10-month sales growth rate at +11% yoy. Greece was the only single digit growing country in October, as CY maintained its impressive +24% yoy rate but more importantly BUL and ROM grew by +37% and +21% yoy after many months of volatile but overall anemic growth. ROM 10M sales growth turned positive (from -2% in 9M) and BUL 10M growth climbed to +5% (from +3% in 9M).
We are now convinced that a good part of sales growth comes from price increases, which the company passed onto consumers successfully, thanks to their post lockdown revenge spending and generous government handouts during the pandemic and following energy crisis (tourism and system deposits are telling). This also explains the gross margin uplift by +500-600bps in H2 2021 and H1 2022, which cannot be attributed solely to depleting old inventory. But can be attributed to depleting old (and gradually new) inventory at higher prices.
Conclusion: No, Jumbo did not revise its FY 2022 guidance following the impressive sales growth in the first 10 months of the year. They have probably retired it altogether. With 10-month sales (83% of the year) growing at +11% yoy, it would take a -25% drop in Nov-Dec sales for FY upper guidance of 5% sales growth to be met. We consider this impossible despite the challenges. Xmas is Jumbo’s strongest season of the year (25%-30% of full year sales) while the cost of shipping containers has come down from a few months ago.