Sovereign doubts still linger for Greece: Earnings/ratings changes as tough times continue

- Economic uncertainties continue to weigh on investment case "Despite the progress being made by the Greek government on deficit reduction, risks and uncertainties still lie ahead. The recession has intensified and bond markets remain sceptical (as shown by the continued high bond spread/yields). In this context, and although on cheaper valuations and having significantly underperformed peers, we remain cautious in our outlook for Geek banks relative to the sector."
- Waiting for consolidation "The IMF stability fund of EUR 10bn, to help strengthen Greek banks, and potential consolidation among the major Greek banks means there could be significant changes in the structure of the Greek banking sector in the coming months. We estimate that some mergers could generate value of up to 40% of the combined market caps."
- Rating changes/earnings downgrades "We remain negative on Greek banks relative to European peers. We downgrade our earnings estimates by c. 48% over the period 2010-12.
Upgrading Alpha to Buy. Based on valuation and exposure to Greek bonds we upgrade Alpha Bank to a Buy rating from Reduce. New price target EUR 7.0 per share.
Downgrade NBG to Neutral. Independently of the rights issue, but based on our outlook for profitability we reduce our rating on NBG from Buy to Neutral, new price target EUR 9.0 per share (price target reflects rights issue)."

Nomura Greek Banks 20100909

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