Citigroup remains bullish on Cyprus banks outlook

…reiterates buy ratings on Bank of Cyprus and Hellenic

 

After spending two days in Cyprus meeting senior executives at the Cypriot banks, real estate developers and the Church, Citigroup analysts came away with an upbeat message: the environment for Cypriot banks remains very good. “We reiterate our Buy ratings on Bank of Cyprus and Hellenic Bank,” state Citigroup analysts on an investment update on Cypriot banks dated September 5, 2007.

Citi maintains its Buy target on Bank of Cyprus shares at EUR 17 per share, which compared to current levels of EUR 11.94 implies an upside potential of 42%. Citi’s target on Hellenic Bank remains EUR 7.50 per share, which compared to current levels of EUR 5.01, implies an upside potential of 50%.

The comparative return targets on other Greek banks range from 6% to 31%, placing the two Cypriot banks as best positioned to attract investments. Citi analysts base their optimistic projections on the following.

Onshore Cyprus Growth — The positive comments on current banking trends by bank managements are echoed in the latest Central Bank of Cyprus data, which indicates accelerating banking volume growth continuing into 3Q07: loan growth +24% yoy (May), +25% (June), +27% (July).

Cypriot Property Boom — Loan growth is being driven by the housing sector, with 50-60% yoy mortgage growth at the leading banks. Rapid price growth is leading to concern at the Central Bank. But we believe that the Cypriot property market is still attractively valued by European standards and sources of demand remain strong.