With the new year coming, rating agencies and investment banks are beginning to roll out their recommendations to investors. JP Morgan has made a significant upgrade of the Greek economy to an outperform recommendation, from a neutral previously. The catalysts for this move, according to analysts, are:

• the growth that the country is recording, above the Eurozone average
• the fall in debt; and
• the consolidation of the balance sheets of banking institutions

THE ESTIMATES

Analysts cite the estimates that Bloomberg also points out, namely that GDP growth in 2025 will be around 2%, and note that real GDP is more than 20% higher than the 2020 low. In addition, 10-year bond yields are 40 basis points below Italy's and, for the first time, traded lower than France's bonds. 

BANKS

The performance of Greek systemic banks plays an important role in JP Morgan's decision to upgrade the Greek economy to overweight. Analysts note that valuations are cheap compared to Europe, and the outlook is promising. "Faster amortisation of deferred tax combined with strong fundamentals, profitability, dividends and credit expansion make the Greek banks' story attractive," JP Morgan said. 

THE EUROPEAN PICTURE

The only issue that seems to threaten the success story of the domestic banking system is the possibility of a European sell-off in bank shares. "We like Greece's macroeconomic stability, plus the much higher future dividend yields than its European banking peers. Piraeus Bank is the cheapest of the big four listed Greek banks and in our top 10 list of preferred stocks," JP Morgan concludes.