Alpha Bank is expected to deliver strong performance in its fourth-quarter results, with a forecasted upside margin of 33.7%. The bank maintains a positive outlook, setting a target price of 2.5 euros and a buy recommendation for investors.
In a recent analysis, Axia Research has projected a compelling outlook for Alpha Bank, maintaining its positive stance with a target price set at €2.50 and a “buy” recommendation. The brokerage’s forecasts for the bank’s fourth-quarter results suggest that the forthcoming performance will not only bolster market confidence but also reaffirm the bank’s solid fundamentals.
Analysts assert that the fourth quarter of 2024 is poised to underscore the group’s robust fundamentals and significant upside potential. In light of this, Axia reiterates its optimistic perspective on Alpha Bank, with an unchanged target price of €2.50, reflecting a notable upside margin of 33.7% based on the stock’s closing price of €1.87 on February 14.
The stock currently trades at an appealing price-to-earnings (P/E) ratio of 0.57x for 2025, alongside an estimated 11.2% return on tangible equity (RoTE) for the same year, translating to a dividend yield of approximately 10%, as per Axia’s calculations. “Following a commendable performance in the third quarter of 2024, we anticipate Alpha Bank will deliver another impressive set of quarterly earnings on February 28,” the analysts assert.
According to consensus estimates, net interest income (NII) is expected to remain relatively stable on a sequential basis, buoyed by loan volumes despite the prevailing decline in interest rates. Furthermore, Axia’s analysts have factored in the anticipated increase in interest income derived from the securities portfolio. They foresee that fee and commission income will hold steady, in alignment with consensus expectations, driven by lending-related fees, notwithstanding the quarter’s seasonality and robust asset management performance.
On the cost front, a projected increase of 3.4% in the fourth quarter of 2024 is anticipated compared to the third quarter, primarily attributed to seasonal factors (excluding any extraordinary expenses). Additionally, risk costs, inclusive of management expenses, are estimated to be 0.66% in the fourth quarter, aligning with the fiscal year 2024 forecast of approximately 65 basis points.
In light of these considerations, Axia forecasts that Alpha Bank’s non-performing exposures (NPE) ratio will reach 3.9%, excluding NPE formation, as the group continues its trajectory towards further balance sheet consolidation through strategic adjustments and depreciation. This trajectory is expected to yield a RoTE of 12.7%, or 14.5% on normalized profit after tax (PAT), and 13% on the common equity tier 1 (CET1) ratio.
During the forthcoming fourth-quarter conference call, Axia advises investors to seek clarity on several pivotal aspects: (a) the new conditions of the business plan and their implications for the group’s prospects and profitability trends; (b) borrowing trends influencing the group’s credit growth; (c) variations in deposit betas, alongside the deposit mix and evolution of deposits; and (d) insights regarding future capital allocation, including potential buy-back strategies (calculating a dividend distribution rate of 40% from 2024 earnings, equating to a dividend per share of €0.13), as well as any inorganic growth initiatives.
