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BofA: Negative view on Greek banks - the challenge remains formidable


Greek banks have made a lot of progress, but big challenges remain, BofA Merrill Lynch notes stressing that it takes a broadly negative view on the sector.

BofA points to the importance of having the pace of e-auctions improve but also that this process merely postpones further drops in real estate prices. While there has been some improvement to the Greek banks’ funding, in part this has been due to less funding need as borrowers deleveraged. The bank thinks that more work is needed on costs particularly as revenues are likely to continue to shrink further.

BofA refines the estimates and POs post Q118 results, It rates at Neutral NBG (PO EUR0.31 old: EUR0.32) and Eurobank (PO EUR1.17 old: EUR1.14) and at Underperform Alpha (PO EUR1.60, unchanged) and Piraeus (PO EUR3.23 unchanged).

The e-auction completion rate appears low with the banks noting several aspects which hamper the process including real estate prices being set too high at auction and poor property documentation, BofA notes. As it says, a house price recovery is not expected in Greece over the next few years, and even sees risks to the downside as banks shift real estate off their books. Unlike Ireland, the bank does not expect the Greek real estate market to be supported by a supply shortage and low property taxes. While Spain saw a mild house price recovery in recent years, the recurrent property taxes there are much lower than in Greece.


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