Citi downgrades Greek Postal Bank to hold

Citigroup is downgrading Greek Postal Savings Bank SA to hold (2H) and reducing its target price to EUR15.0 per share from EUR17.0 before. Citi analysts are removing the EUR2 take-out premium previously included in the target price, in order to take into account the uncertainty over the bank’s future ownership. Going forward, Citi expect the new CEO’s strategy to be naturally inward-focused.

Future of State Ownership Unclear — Citi analysts remain unclear over the Greek government’s intention with respect to its 34% ownership. Recent public announcements suggest a preference for a non-Greek bank to take over, if a controlling stake is to be sold. In the meantime, Citi expect the current ‘salami’ tranche placings to continue. As a result, we believe a take-out premium is not currently justified.

Meeting the New CEO in Athens — Citi analysts recently met the company’s new Chairman Angelos Filippidis. Although his background is not in retail banking, he is a very experienced manager. He joined Postal Savings Bank only a week ago, but shared some preliminary thoughts on the bank’s medium-term strategy.

The CEO’s preliminary plan includes unwinding the alternative assets portfolio, which underperformed during the credit crunch, and does not fit with the risk profile of the bank. He also highlighted the need for the bank to take a step back from accelerated growth, to focus on compliance and the enhancement of its IT systems. Current financial targets remain unchanged.