Bank stocks re­vert to lev­els last seen dur­ing share cap­i­tal in­crease

Kathimerini English - - Focus - BY YIAN­NIS PAPADOYIANNIS

The com­ple­tion of the sec­ond bailout re­view has led credit sec­tor stocks to 12-month highs. The new agree­ment be­tween Athens and its cred­i­tors has put bank­ing stocks back on in­vestors’ radar screens as ex­pec­ta­tions that this could mean the cri­sis is bot­tom­ing out have strength­ened.

Hav­ing suf­fered huge losses in re­cent years, as the re­cap­i­tal­iza­tions sent old shares down to zero, bank stocks could be at the fore­front of the mar­ket re­ac­tion should ex­pec­ta­tions for an eco­nomic re­cov­ery prove cor­rect. The gains of the last few months ef­fec­tively con­sti­tute the re­cov­ery of ground lost rather than real gains, as bank stocks re­main more or less at the price lev­els dur­ing the last re­cap­i­tal­iza­tion of late 2015.

Na­tional Bank closed at 0.344 eu­ros yes­ter­day – i.e. above the 0.30-euro level of the share cap­i­tal in­crease, and Al­pha closed at 2.18 eu­ros, against 2 eu­ros upon re­cap­i­tal­iza­tion. Eurobank and Pi­raeus are close to their share cap­i­tal in­crease level, with the for­mer at 0.97 eu­ros yes­ter­day from 1 euro upon re­cap­i­tal­iza­tion, and the lat­ter at 0.221 eu­ros against 0.30 eu­ros when it in­creased its shares.

The low val­u­a­tions of Greek lenders com­pared to their Euro­pean peers are an at­trac­tive fea­ture that could lead to a strong rise in prices, par­tic­u­larly if the econ­omy of­fers some pos­i­tive de­vel­op­ments.

An­a­lysts es­ti­mate that do­mes­tic bank stocks will trade on a price-to-book ra­tio of 0.2-0.4 in 2018, while the ra­tio for Euro­pean lenders is al­most twice as high. On the other hand the huge pile of non­per­form­ing loans is a ma­jor headache, be­cause if banks fail to meet their tar­gets for re­duc­ing NPLs they may find them­selves in trou­ble ahead of the 2018 stress test.

Al­pha Bank’s stock price at the clos­ing yes­ter­day was 2.18 eu­ros, against 2 eu­ros upon re­cap­i­tal­iza­tion. Na­tional Bank has also topped its share cap­i­tal in­crease prices, climb­ing to 0.344 eu­ros (against 0.3 eu­ros).

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