The American Jeffery and Alexandros Dimitriou updated their forecasts for Alpha Bank regarding market trends for the second quarter of 2024 and made marginal changes to their estimates.
“We see Alpha on track for this year, with system-level data as expected. We leave our target price of €2.60 unchanged and maintain a buy rating on the stock.
In a positive scenario for the stock, the target price rises to EUR 3.60 per share, or 120% higher, and even in a negative scenario, the target price of EUR 1.70 is 4% above the current price of the AX board,” explains Dimitriu.
Alpha Bank’s Q2 highlights are as follows:
– Net interest income (NII) will be reduced on a quarterly basis. The analyst expects NIIs to decline sequentially (4%) as Alpha sees a number of headwinds this quarter.
For context, Alpha has guided the NII to decline 5% this year (JEF Estimate -3% and VA Consensus -4%).
– System data shows negative net credit flows in April and May, indicating that historically there is a large recovery in June. As a result, it expects stable loan balances and NIH contribution this quarter.
– Deposit costs will be higher on a rolling basis as older issues are valued higher. In this quarter, the same indicator as in the first quarter is expected (7 million euros).
– On the financing side this quarter, it estimates higher costs from the €500m T2 issue that took place in early June, as well as the full impact of the €400m senior bond that took place in February.
– Fees will be slightly higher on a quarterly basis. It predicts a higher investment in asset management fees this quarter (higher buying levels and further deposit conversions), while lending fees should be flat.
– Spending will be higher on a quarterly basis and expects spending to increase sequentially, but lower on an annual basis. For 2024, it projects a cost-to-income ratio of 39% (the guidance is around 40%).
– Impairments will be higher with risk costs at 78 basis points or 70 million euros (vs. 69 bps in Q1). It continues to forecast a CorR of 75 bp for the current year. according to the instructions.
– NPEs will be lower. In its Q1 results, Alpha Bank commented that it has €500m of NPEs available for sale. It assumes a €150m transaction in the second quarter, which will reduce the NPEs ratio to 5.6% (from 6% in the first quarter with a target of 5% this year).
– For funds, it projects a CET1 ratio of 15.1% or a 40 bp increase. on a sequential basis as the index will benefit from organic revenue generation and solid RWAs driving growth in the quarter.
– Anticipates a €15m charge for the second quarter, which includes a €30m charge from the liquidation of non-performing loans and a €15m allowance from the Romanian business, now included in discontinued operations following the agreement with UniCredit.
– Makes marginal changes throughout the outlook and as a result leaves the target price unchanged at €2.60 and maintains a Buy rating.
