The analysts of JP Morgan single out Eurobank's share, as they say it has strong growth prospects. They say "we maintain our overweight recommendation on the stock, as the upcoming consolidation with Hellenic Bank in Cyprus will add value to the group. The exact contribution of the company will focus market attention on future synergy opportunities."  

OVERWEIGHT FOR THE 4 BANKS

Of course, as JP Morgan analysts explain, the overweight recommendations are for all four Greek banks, but tactically they prefer Eurobank and Piraeus Bank in the short term.  As for Piraeus Bank, the proforma CET1 ratio improved by 50 basis points to 14.2%, including a 30% dividend forecast, already meeting the company's target of 14% for this year. "We consider this to be a significant comfort level for both management and investors and an important trigger for narrowing the valuation gap with better-rated peer banks (ETE and Eurobank)," the analysts said.

 DEFERRED TAX

A factor keeping the cost of equity (CoE) high, according to JP Morgan analysts, could be concerns about the potential impact of deferred tax credits (DTCs) on future return on capital. "However, as they believe the market is very conservative in viewing DTCs as a barrier to higher capital distribution. Moreover, 11 they question the application of a higher Cohen to Greek banks due to DTCs and prefer a quantifiable economic value method. We expect remaining concerns about DTCs to diminish as banks receive ECB approval for progressively higher payments," the report notes.  

CAPITAL RETURN

On the return on capital, JP Morgan says it is attractive as credit expansion will offset losses from interest rates. In a monetary policy easing regime, analysts believe the earnings outlook for the sector is promising and interest rates will reach around 2%.  "We assume," they say, "that the ECB rate will be 2% for 2025 and 2026. Until that point, we believe that steady loan growth (5%-7% growth rate in 2026), strong fee yields (10%+ per annum) and improving risk costs will largely offset the impact on margins and support the bottom lines from the highs of 2024. Q3 earnings should broadly reflect these trends."