Indicators continue to point to a relatively bullish macroeconomic outlook for 2023 and beyond, and banks’ return on tangible equity (ROTE) expansion is set to continue due to favorable lending and deposit interest margins, resilient credit demand, and stable quality asset, JP Morgan said after its recent contacts in Greece.
JP Morgan also referred to the extremely positive messages regarding interest income.
The sector has seen a spectacular performance and has forecast a further 20% jump in share prices compared with its previous forecasts while it considers Alpha and Piraeus as preferred banks.
The key points of the contacts are:
– Economists forecast Greek GDP growth of 2.0%-3.5% in 2023 and 1.5%-2% in 2024, well above the 0.6%-1.0% in the eurozone.
– RRF absorption continues at a good pace, while funds are set to increase. So far, 11.1 billion euros have been disbursed to Greece (out of a total of 30.5 billion euros for the period 2021-2026, divided by 17.8 billion euros in grants and 12.7 billion euros in loans). The government recently applied for the third payment of 1.7 billion euros. The government is seeking to increase the loan amount by an additional 5 billion euros highlighting the success of the program and signaling additional impetus to increase lending to banks (under the RRF). Disbursements are set to accelerate in the second half of 2023, further contributing to credit expansion.
– Bank loan growth is expected to improve after a relatively weak first half while loan growth has been relatively subdued so far this year.
– Higher interest rates and the lending-deposit spread signal that interest income is likely to peak in the third and fourth quarters.
– The revaluation of the loans proceeds as planned with 70%-75% passed on to the borrowers.
– Banks are optimistic about the resumption of dividend distribution, but are still cautious.
– The cost of deposits remains low.
During the visit to Greece, JP Morgan met with representatives of:
Athens Exchange Group
Bank of Greece
GEK Terna / Terna Energy
Hellenic Financial Stability Fund
National Bank of Greece