JP Morgan Remains ‘Bullish’ on Greek Banks

JP Morgan remains “bullish” on Greek banks, stressing stock buybacks and accelerated amortization of Deferred Tax Credits (DTC) will act as catalysts.

Citing solid third-quarter earnings and announcements from Piraeus Bank, the American multinational financial services firm estimates that the Greek banking sector’s overall yields could exceed 10% by 2025.

Piraeus Bank recently announced an increase in the distribution of net profits, aiming for 35% in 2024 and 50% in 2025. Share buybacks will be the primary capital distribution method next year, which JP Morgan believes will boost returns for the sector. It anticipates that every 10% distribution in the form of share buybacks could add an average of 2.1% to earnings per share, with similar plans expected from other Greek banks.

Two other Greek banks, Eurobank and Alpha Bank have both followed this strategy in the recent past, and the National Bank of Greece has announced plans to repurchase part of the Financial Stability Fund’s holdings. Piraeus Bank also confirmed that a buyback plan is in place as part of its 2024 distribution strategy.

JP Morgan reiterated its analysis of DTCs, prompted by Piraeus Bank’s plan to accelerate their amortization. Greek banks face annual limits on the DTCs they can use to offset tax payments, with the existing schedule extending to 2041.

In addition, bank managements plan to voluntarily deduct additional DTC amounts from their supervisory capital, aiming for complete amortization from Common Equity Tier 1 (CET1) by 2034—well ahead of the 2041 deadline.

In the short term, this strategy won’t alter balance sheet trajectories but signals capital quality confidence, according to JP Morgan, which continues to view the market as overly conservative in perceiving DTCs as an obstacle to higher capital distribution.

Source: tovima.com