Citigroup lifts Ethniki target to EUR 50 per share

Citigroup has raised its price target on the shares of National Bank of Greece SA (NBGr.AT) to EUR 50 and reiterated its “Buy” recommendation having increased its EPS forecasts by 3% for 2007E, 2% for 2008E and 2% for 2009E.

“NBG remains our top pick in Greece with a target price of EUR50. NBG offers gearing to the strong Greek banking market, exposure to rising deposit spreads and a high-growth SEE franchise,” noted Citigroup analysts.

NBG Group 1Q07 net profit amounted to EUR381 million, 6% ahead of CIR estimates, although partly boosted by a low tax rate (15%). GOP came in at EUR531m and was identical to our forecast. NIMs expanded by 8bps, to 4.19%, helped by a strong increase in deposit margins. Finansbank continued to gain market share and to report increasing margins.

In Greece: Lending Spread Pressure Easing, Deposit Spreads Up — Total loan growth of 19% yoy is stable on 4Q06 (slightly above system trends). Mortgages grew at 20% yoy and Small Business lending by a healthy 37% yoy. Lending spreads fell 4bps qoq (vs down 11bps qoq in 4Q06). In addition, the core deposits spread increased further by +25bps to 2.82%. Importantly, mortgage spreads are down only 4bps qoq. NII was very strong, up 24% yoy.

Finansbank Business Still Very Strong — Total loans are up 47% yoy (in local currency), driven mainly by household lending (+55% yoy). Importantly, Finansbank still gains market share with mortgage share up to 9.3% from 9% in 4Q06. Margins continue to expand, with reported NIM at 7.09% (vs pro forma 2006: 6.66%). Further branch openings are on track, with c1.5 new branches per week in 1Q07. Finansbank now accounts for 1/3 of NBG’s net profit.

SEE Volumes Strong, Bottom Line Improving — Business volumes in the SEE operations remain healthy, with retail loans +56% yoy (from +52% yoy in 4Q06) and corporate loans +49% yoy. Romania is growing fastest (lending volumes +72% yoy). NII growth lags volume growth: +15% yoy. SEE ‘core profit’ (like for like) up 15% yoy, weighed down by investment in the region (especially Romania).