Alpha Finance predicts another positive year for Greek banks, with 8% dividend yields expected from 2024 profits, despite recent Athens Stock Exchange declines.
In a landscape characterized by economic fluctuations, Alpha Finance remains steadfastly optimistic regarding the trajectory of Greek banks, projecting yet another year of commendable performance. The brokerage anticipates an impressive uptick in dividend yields, forecasting an enticing 8% return stemming from profits accrued in 2024. However, amidst this optimism, the Athens Stock Exchange has recently experienced its second consecutive decline, prompting a flurry of sellers to gravitate toward banking stocks.
In a strategic move, Alpha Finance has revised its target prices upward, reflecting a nuanced understanding of the market dynamics at play. The target price for Eurobank has been elevated to €3.00, a notable increase from the previous €2.50. Similarly, the target for National Bank of Greece (NBG) has been adjusted to €9.70, up from €9.50, while Piraeus Bank now sees its target rise to €5.30 from €5.23. These adjustments underscore a robust return on equity, projected to remain above 13% for 2025, further bolstered by the anticipated higher dividend yields.
The newly established target values suggest a potential upside margin of 30% from current levels, reinforcing the brokerage’s buy recommendations. The valuation of Greek banks, particularly compelling at this juncture, reveals trading ratios of 0.75 times the price-to-tangible book value (P/TBV) and 6.0 times the price-to-earnings (P/E) ratio, based on 2025 estimates. This valuation framework takes into account not only profitability metrics but also the promising outlook for enhanced dividend distributions, which are poised to significantly bolster the investment appeal of Greek banks.
The anticipated positive performance of Greek banks is expected to be catalyzed by further re-ratings as the market begins to appreciate the earnings potential over the medium term. The brokerage posits that increased dividends and share buybacks will play pivotal roles in fortifying the investment case for these institutions. Alpha Finance projects a rise in payout ratios to between 35% and 45%, a substantial increase from the previous range of 10% to 30% observed last year. This shift is attributed to favorable earnings trends, robust capital buffers, and accelerated depreciation of deferred tax credits (DTCs), culminating in projected returns of approximately 8% from 2024 earnings, with a portion potentially realized through buybacks.
The estimates put forth by Alpha Finance, which it deems conservative, are expected to yield return on tangible equity (RoTE) profitability ratios in double digits over the medium term. This projection is underpinned by the expansion of loan portfolios, low funding costs, disciplined cost management, and supportive trends in asset quality. As the Greek banking sector navigates the complexities of the current economic landscape, the insights provided by Alpha Finance offer a compelling narrative for investors seeking opportunities within this dynamic market.