UBS gives a margin of 28% to 40% for Greek bank stocks. The analysts of the investment house maintain a buy recommendation for the banking sector's shares, while the target prices are as follows:
- Eurobank: €3 (upside margin 28%)
- National Bank: €11.2 (upside margin 38%)
- Piraeus Bank: €5.7 (up 36%)
- Alpha Bank: €2.42 (upside 40%)
VALUATIONS AND RISKS
UBS notes that having initiated its sector assessment in July last year with buy recommendations for all four systemic banks, it sees further potential for reassessment, with valuations remaining attractive.
At the same time, analysts believe that updated business plans revealed in the second quarter results could be a further catalyst.
SHAREHOLDER REWARD
The potential for higher distributions is significant, including share buybacks that could support earnings per share going forward.
"We are positive on European banks as we believe they are priced for cyclicality. National Bank is on our top pick list. Greek banks offer lower risk and attractive valuations, in our view. The implied cost of equity is very high, considering the 10-year bond yield at around 3.5%," the UBS analysis said.
LOANS
According to UBS the focus will remain on loan yield dynamics and funding costs in this cycle of cuts. As expected, total corporate loan yields have begun to compress since they peaked in January 2024, falling 12 basis points in November. Household loan yields remained more stable at 6.1%.
DEPOSITS
The overall loan-to-deposit spread fell only 7 basis points in November to 5.25%. Overall funding costs remain low at 50 basis points given the high proportion of household demand deposits costing only 3 basis points.
