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The IPO window in Europe is opening with some difficulty, if German Douglas's decline in stock market returns is any indication. But in one European country, stocks flew off the shelves.
Last month, the Greek Bank Rescue Fund sold 27 percent of Piraeus Bank for 1.35 billion euros. It received enough demand to cover the secondary sale shortly after the book opened, and priced the deal at a slight premium to the stock price before announcing it. This followed the initial public offering of Athens Airport in February. At the end of last year, the government sold stakes in the National Bank, Eurobank and Alpha Bank.
Greece is unlikely to be popular with the market. But the country has seen a remarkable recovery in the wake of the financial crisis, with lower wages, improved competitiveness, and healthy GDP growth. The local stock market index, the ASE, has risen nearly 40 percent over the past year, outperforming the S&P 500. Its 10-year debt yield is 3.2 percent, much lower than Italy's 3.6 percent, and the United Kingdom's 3.6 percent. It is 4 percent.
This recovery has benefited its banks, in particular. The sector has reduced its cost base to well below the European average. Non-performing loans fell to 5 percent, after peaking at 40 percent. Returns on stocks are in the double digits, trending towards the European average.
This, coupled with valuations of around six times expected forward earnings, and a 15 per cent discount to the European average, explains why investors have been keen to sell shares recently.
Greek banks, which offer floating loans and fixed deposits, have benefited from higher interest rates. They may be less sensitive to the next down cycle. There are signs that some hedging has been put in place, pushing the pain point outwards. In fact, net interest income is expected to be flat this year, Jefferies says. It can be said that Greek banks, which operate in a single market with four major operators, deserve a structural premium compared to their banking counterparts.
This, of course, assumes that the Greek economy continues to perform well. The country remains heavily indebted and relies on tourism revenues, which have boomed after Covid-19. But with EU funds worth 17% of GDP allocated to reconstruction and recovery, and a highly regarded government, the country could produce a sunny stream of news next year too.
camilla.palladino@ft.com
