Citigroup Hellenic Bank target at EUR 7.50

Citigroup has reiterated its Buy rating and EUR7.5 target price on Hellenic Bank Pcl (HB) following the release of its nine month results and after the Bank revised its 2007 targets with ROE now set at 29.1% from 25.1% previously and in line with Citi estimate of 30%. Citi however, is forecasting ROEs of 27% for both 2008E and 2009E as it assumes lower trading/other income.

Citi analysts say that compared to current levels of EUR 4.86 per share, the expected total return including expected dividend yield of 4.7% amount to 59.1% if the target price of EUR 7.5 per HB shares is achieved.

Citi analysts say the HB3Q results include a couple of “funnies”: trading/gains lower than expected due to IRS swap losses (offset by balance sheet gains) and Greek bond losses, while taxes were lower (ie better). Otherwise, the 3Q results appear to be a solid, high-quality set of results.

3Q lending volumes increased by 21% yoy, in line with 2Q07 lending growth. Cyprus loan growth was 21% yoy, Greece 24% yoy. HB noted that there was no change in pricing trends in Cyprus, while competition remained tough in Greece.

3Q deposit growth fell back to 17% yoy from 22% yoy in 2Q07. Cyprus deposit growth was 14% yoy (18%, 2Q) Greece 36% yoy (51% yoy). In Cyprus, foreign currency deposit growth remained faster than local growth: +23% yoy (though down from 28% yoy at 2Q07).

The Greek business moved from a EUR1.4 million profit over 1H07, to a EUR1.4 million loss for 9M07. HB states that reorganisation and structural changes have been effective, but the result was pulled down by a fixed income trading losses.