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Citigroup Sees Orderly Greek Default In Spring 2012


Volatility in Greek bank shares has been remarkable recently, said Citigroup in a report.

The American bank noted that European banks have underperformed the European market by 15% YTD and by 4% over the past month, while Hellenic banks have underperformed the broader market by 50% YTD and 24% over the past month.

The group’s economists believe that Greece would default in an orderly fashion by the end of 2012, and most likely by the spring of 2012 – with a cumulative haircut of 50%-80% depending on the scenario.

Additionally, Citigroup upgrades Bank of Cyprus to “Buy” from “Hold”, as shares start to be attractive on valuation and fundamental bases, while maintains the target-price at €1.45.

It also raises its risk rating on the shares to Speculative (S) from High (H) as a meaningful part of the bank’s activities are conducted in Greece, where its believes there are significant macro risks and elevated risks of an orderly default. 

“While we do not believe that Greece will leave the Euro, such elevated market concerns could also affect the short-term performance of the shares”, it said. 

Additionally, the bank reiterates the Sell ratings on ATEbank, Piraeus, Hellenic Postbank and Marfin Popular Bank, and Hold rating on National Bank. 

It moves the risk rating on all Greek banks to Speculative (S) from High (H) as a meaningful part of the banks’ activities are conducted in Greece.

With the exception of Marfin Popular Bank and Bank of Cyprus, Citigroup also downgrades all target prices: ATEbank to €0.2 from €0.3, Piraeus Bank to €0.32 from €0.45, Hellenic Postbank to €0.45 from €1 and National Bank to €2.5 from €3.5.

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