Going through the numbers, we reach the same conclusion as for Piraeus and NBG. Greek banks have a challenging task to replace NPE and TLTRO income via new loans and higher fees; and together with normalized CoR move to high-single digit RoTE (as per their guidance). On our calculations, Alpha Q2 NPE & TLTRO Income accounted for 38%/66% of clean NII/PPP against 26%/56% for NBG and 44%/61% for Piraeus. These items will be -gradually- lost going forward, which explains the lower FY 2021 guidance compared to the H1 run rate.

The next time you feel like mocking equity analysts on the ambiguous and/or arbitrary valuation assumptions backing their stock recommendations, do yourself a favor and go through the equity valuation of Cairo Mezz (CM) and Phoenix Vega Mezz (PVM) performed by Big 4 accounting/consulting firms. In the context of NPE securitizations, Eurobank and Piraeus Bank (respectively) established entities with the objective to hold mezzanine and junior notes that were not sold to third parties; they distributed the shares of these entities to their shareholders for free; and they floated them into the Greek stock market. Following PVM’s recent floating, investors asked our opinion about these entities and what we believe their worth is. Our view is they are not worth much (if anything at all). Investors should treat them as highly speculative trades. CM trades 0.64x TBV while PVM trades 0.82x TBV; the former at par with Eurobank’s own P/TBV; the latter at a huge premium to Piraeus P/TBV. We find this simply inconceivable.

As per www.energypress.gr, PPC may receive a cool E1bn for disposing a 49% stake in Dedie, the electricity distributor. PPC currently owns 100% of Deddie. If confirmed it will be positive news for the shares which have upped 25% over the last month. Perhaps there is more upside in the cards. If the abovementioned sale crystalizes, at the current market cap, we would ‘value’ PPC’s electricity production and supply at an EV of E2bn; this would comprise of 1. conventional generation of 11GW of which 31% in lignite, 29% in hydro, 24% in CCGT, 16% in fuel-based and 2. electricity supply of 29 TWh. We find the abovementioned implied valuation (E2bn) perhaps a steal for equity investors, assuming…

In our latest note for Piraeus Bank, we analyzed Q2 results, trying to reveal the underlying performance. We will do the same with NBG. After going through the numbers, including the full IFRS report (unlike Piraeus), we reach the same conclusion. Underlying numbers look decent only thanks to NPE income (to be lost) and TLTRO income (to be gone as well). The stark difference with Piraeus is that NBG is not cheering about its core pre-tax performance. Probably because it did not have any trading gains to inflate them with (on the contrary, it showed trading losses – not included in core PPP). Which explains the muted share price reaction, along with the wildfires surging in half of the country.

Piraeus reported Q2 results communicating a strong set of numbers, especially on P&L and loan disbursements. After going through the numbers, and although we do not yet have the full IFRS report (will be available on August 8), we conclude the numbers do not look as great. In fact, were it not for NPE income (to be lost), TLTRO income (to be gone as well) and trading gains…there is not much left to cheer about. Only strong fee generation, which nevertheless is within short- and medium-term guidance. Not to mention Piraeus is incorporating a lower quarterly number in the short term.