Optima Bank expects another strong quarter for Piraeus Bank with slightly higher fee income, lower operating expenses and provisions for bad debts, despite one-off costs weighing on the bottom line.
Piraeus Bank is one of the top choices in the industry with a target price of €5.00 per share, implying a 25% potential upside.
As noted by the brokerage, net interest income (NII) is expected to be slightly lower on a sequential basis but higher on an annual basis. We also expect net credit growth to remain positive, deposit volumes to be lower and asset quality dynamics to be stable.
“We believe investors will focus on management’s outlook for the remainder of the year and primarily on developments in net credit growth, term deposit mix and cost, NII as well as asset quality. The stock trades at 0.71 times the P/TBV ratio for this year, with a substantial 35% discount compared to European banks and a 16% discount compared to Greek banks.
Piraeus Bank is one of our top sector picks with a target price of €5.00 per share, implying 25% upside potential. After the announcement of the first quarter results we will review and update our estimates for the financial year, our target price and our recommendation”, explains the Optima Bank analyst.
“We forecast reported net profit to be €219.9m (+4% qoq and +22% yoy) in Q1 2024, below the market estimate of €239m as we expect higher extraordinary expenses from consensus.
Overall, we expect the bottom line to be burdened by one-off costs of €73 million. We expect normalized net profit (excluding non-recurring items) to be 292.9 million euros (-10% quarter-on-quarter and +44% year-on-year), in line with the consensus estimate of 295 million euros.
We estimate net interest income to reach EUR 531.3m (-1% qoq and +19% yoy), mainly thanks to the loose term deposit mix and beta (system term deposits at 19.5% of of private sector deposits in January – February).
We also forecast commission income to be €145m (+1% qoq +19% yoy), supported by positive market conditions during the quarter. Core revenues are expected to reach 676.3 million euros (-1% quarterly and +19% annually). We also expect non-core losses of EUR 43 million due to the fees paid for the placement of the HFSF participation.
Overall, we forecast total revenue to come in at €633.3m (-12% QoQ and +10% YoY), below the market estimate of €643m. On the cost side, we forecast operating expenses to be limited to €202.2m (-22% QoQ and -2% YoY), in line with the market estimate of €203m. Our estimate incorporates an extraordinary charge of €10 million for the quarter.
As a result, income before provisions is expected to reach €431.1m and we also forecast provisions for claims to be €92.9m, assuming an organic cost of risk (CoR) of 78 bp. for the quarter and lower than the consensus estimate of 105 million euros”, concludes the brokerage.
