Citi initiates Marfin Popular Bank coverage

Citigroup has commenced coverage on Marfin Popular Bank with a Buy (1H) rating and EUR12 target price. MPB is the product of a 2006 three-way merger. It is run by an entrepreneurial management team focused on making money. Dubai is the core shareholder and an enthusiastic financial sponsor.

Marfin raised EUR400 million in 2005 with a mandate to play an aggregator role amongst the tail of Greek banking. In 2006, it snapped up stakes in Egnatia and Laiki Bank. In 2007, its sister company, MIG, raised EUR5.2bn to invest in Greece and the Balkans, primarily non-financials.

MPB is growing rapidly: at end 1H07, group lending increased 41% yoy, deposits 40% and group NII increased 47%. Robust growth is driven by attractive markets and aggressive management. Strong current results should lead to revised financial targets by MPB.

Marfin paid about EUR200 million for a c20% stake in Laiki Bank in early 2006. The value of the investment had almost doubled by late 2006 and Citigroup analysts estimate the equivalent stake is worth 4x the original investment. This was either a brilliant move or a stroke of good fortune.

Marfin has made its backers money by being opportunistic and aggressive. The buoyant Hellenic and Balkan markets offer further opportunities to make money in banking and investing. Equally, the unpredictability inherent in their businesses may not appeal to all investors.