NBG among top Citigroup picks in Europe

Citigroup has reiterated its “Buy” recommendation on the shares of National Bank of Greece (NBG) and its price target of EUR50 per share placing NBG among its top European bank picks with a good possibility to revise higher its forecasts following a presentation by the Bank in London.

NBG presented its new business plan and financial targets in London on 22 February, following on the heels of the 2006 results announced after market close 21 February. The stock market reacted positively to both events and NBG’s share price, already strong year to date, was up almost 4% on the day.
Strong, Diversified Profit Growth – NBG targets a minimum profit growth of 30pct CAGR to 2009 from a base of EUR1.0 billion in 2006. This implies a minimum net profit of EUR2.2 billion or an EPS of about EUR4.65 in 2009E. Citigroup forecasts EUR2.3 billion net profit and an EPS of EUR4.85 in 2009E. We believe our estimates are well above consensus.
Comprehensive Business Plan – The Greek banks are all in the midst of presenting business plans, but NBG’s published plans seem to be the most comprehensive. It provides detailed bottom-up plans, such as doubling the cross-sell ratio in Greek retail banking, and significantly boosting retail market share in SEE and Turkey, and Citigroup analysts would recommend that investors look at the slides on www.nbg.gr.
Regional Champion – In 2009, NBG expects to derive 55 percent of its profits from Greece and 45 percent abroad, of which Turkey is expected to be 31 percent. Faster revenue growth is targeted overseas: Greece 10%+ CAGR 07-09, Turkey 23%+, SEE 30%+. Loan volume growth: Greece 16%+, Turkey 35%+ and SEE 40%+. Profit growth: Greece 20%+, Turkey 25%+, SEE 35+. Expanding Footprint – NBG aims to grow its Turkey + SEE footprint from 680 branches at end 2006 to more than 1,300 at end 2009, with Finansbank up from 310 to 550. Cost growth in Greece will be c4pct pa vs c20pct pa in Turkey + SEE. Almost two-thirds of group headcount will be outside Greece as staff in Turkey + SEE rise in line with branch expansion.
“We will update our estimates once the detailed Finansbank and NBG 2006 financials have been released,” Citigroup concludes. The market cap of NBG is now EUR 19.7 bln at a current price of EUR 41.46 per share.