Citigroup upgrades Ethniki target to EUR 52 per share

Citigroup Global Markets Equity Research has upgraded its price target on the shares of  National Bank of Greece SA (NBG) to EUR 52 per share from EUR 50 previously reiterating its Buy/Medium Risk (1M) rating.

NBG reported net profit of EUR508 mln, 5% ahead of consensus. NII came in at EUR 735 mln, in line with consensus and up 4% qoq (due to the Finansbank acquisition, yoy comparisons are not meaningful).

Encouragingly, group NIM was up 3bps qoq, helped by expanding margins in Turkey and rising deposit spreads in Greece. Expenses came in at EUR 544 mln, up 9% qoq and slightly higher than expected, mainly due to one-off charges.

Greece: NII Strong, Deposit Margins Increasing — NBG reported strong growth in its domestic operations. NII increased by 21% yoy, with net income up 35% yoy. Volume growth remains robust, with total lending up 21% yoy (mortgages up 20% yoy; small business up 34% yoy). Lending spreads remain under pressure (total lending and mortgages down 8bps qoq), though domestic deposit spreads remain strong (up 16bps qoq), as shown in Figure 2.

Turkey Trends Strong, Although Results Light — Finansbank reported 2Q07 revenues of TRY 476 million and PBT of TRY 246 million. PBT was 5% below forecast in euro terms. However, NII increased by 5% qoq (in euro), with total revenues also up 5% qoq. Volumes are still very strong: total lending increased 34% yoy (ex-exchange), driven by 52% yoy growth in retail. Margin trends remain positive, with NIM increasing 15bps qoq. High cost growth is the result of branch expansion.

SEE Growing Strongly — SEE operations reported NII growth of 28% yoy and 22% qoq. Lending growth remains very strong, with total loans 60% higher yoy. Retail loan growth remains the driver (up 67% yoy and 20% qoq). Bulgaria and Romania stand out, with both reporting sharp increases in revenue (both +20% qoq). NBG continues to gain market share across the region.

Reiterate Buy, Upgrading Target Price — Citigroup modestly increase their EPS estimates by 1% for 2008E and 2009E, factoring in strong SEE numbers and an upbeat outlook for Turkey. We reiterate our Buy/Medium Risk (1M) rating and upgrade the target price to EUR52 from EUR50 following the earnings revisions. In the current credit market environment, NBG’s deposit geared franchise coupled with strong SEE growth remains an attractive proposition.