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UBS Cuts Target-Price For Six Greek Banks

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UBS said it reduced the target price of six Greek banks, as it considers that they remain hostage to the macro. 

In a report, UBS said that lower than expected GDP growth and a lacklustre performance on the fiscal front have led government debt to GDP to exceed 160%, while the deficit remains at around 10% of GDP. As acknowledged at the 26 October EU summit, Greece is in need of a new, more realistic plan to tackle its fiscal issues.

According to the Swiss bank, the markdowns arising from the PSI+ (which calls for a 50% nominal haircut on GGBs), the suggested EBA sovereign capital cushions and the Blackrock review suggest that the banks will soon be looking to recapitalise, potentially by a total of €12 bn for the banks under our coverage. In the event that the banks are eventually called to mark-to-market their GGBs, this number could grow to c€18 bn.

Liquidity is getting tighter and the banks migrate from the ECB (€78 bn) to the Bank of Greece’s ELA (€27 bn). Excluding the deposit outflows (est. c4% q/q), UBS expects underlying second quarter results to be resilient, considering the circumstances.

The bank cut earnings estimates substantially for the Greek banks to reflect higher loan impairments of 275 bp, up from 240 bp (on average). It also incorporates a 50% nominal haircut on GGBs in its valuations. 

As a result, UBS cuts price targets for National Bank to €2.7 from €4 and Eurobank to €0.86 from €2.5. Recommendation remains unchanged (“neutral”). 

Alpha Bank was downgraded to “neutral”, with price target of €1.2 from €3.2, while Piraeus remains a “sell” recommendation with price target of €0.15 from €0.5. 

Marfin Popular Bank gets a “sell” recommendation with price target of €0.2 from €0.3, while ATEbank remains “sell” with price target of €0.15 from €0.3.

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