Higher valuation multiples will be the major gain for listed companies when the Greek stock market is upgraded to a developed market on September 21. The benefit applies not only to the nine stocks included in the European index Europe STOXX 600, but also to the remaining companies entering a Stoxx 600 index. According to fund managers at a Greek bank, this process is gradual and not automatic, given the immense liquidity present in developed markets. JP Morgan estimates that capital inflows will reach 1 billion euros; however, until the upgrade by the MSCI Index, investment and pension fund assets will reach even higher levels.
At a discount
Despite the rally in Greek bank stocks since the beginning of the year (36%), the discount compared to their European peers persists. According to the recent report by UBS (August 24), Greek banks are trading at 10.8 times (P/E) 2026 earnings and have a price-to-tangible book value (P/BV) ratio of 1.56. For 2027, when the profitability of Greek banks will peak, the P/E ratio drops to 9.3 and the price-to-book value ratio to 1.47. As reflected in the Swiss bank's table, in peer markets similar to Greece (Ireland, Portugal), higher multiples are formed, with a price-to-earnings ratio of 12 in Portugal for banks that have revenues and market capitalization comparable to Greek institutions. For example, the stock of Banco Comercial trades at a higher P/E, even though it has lower revenues and earnings per share of 5% compared to 11% for Eurobank. However, Greek banks remain cheap compared to banks in Western Europe as well as Eastern and Central Europe. In addition, Greek banks exhibiting a higher return on equity justify a higher price-to-tangible equity ratio. Both for banks and other businesses, the key element is to demonstrate sustainable profitability in order to justify higher valuations.
Undervalued sectors
The discount, however, also exists in other stocks entering the European index, such as PPC, Motor Oil, Metlen, GEK Terna, and Jumbo. Despite the 30% rise in PPC stock since the beginning of the year, the stock remains attractive when compared to a peer utility company, such as Portugal's EDP, which has a lower growth rate in earnings per share and a lower dividend yield. Furthermore, PPC's entry into data centers can justify a higher valuation, as it will generate revenue and profits over a long-term period through a power purchase agreement. Other sectors, such as retail trade, are also trading at lower multiples. Based on current metrics, Jumbo is trading at 10 times 2026 earnings and has an enterprise value to EBITDA ratio of 6.2 times, whereas the corresponding average ratio in Europe stands at 11. Even at the target price of 35.5 euros for Jumbo stock, the ratio rises to 9 times. Apart from the Stoxx 600 Index, a series of companies is being included in the Eastern Europe Small Index, thus placing them on the radar of European capital where they will be directly compared with their European counterparts. The index includes, among others, the companies Viohalco, Titan, Metlen, Crediabank, GEK Terna, Ideal, Ellaktor, Sarantis, Avax, Ekter, Thrace Plastics, Lamda Development, Lavipharm, OTE, Elvalhalcor, Jumbo, Helleniq Energy, Quest Holdings, Autohellas, Bally's Intralot, EYDAP, Motor Oil, ThPA, Aktor, PPC, Kri Kri, PPA, Profile, Evropi Holdings, Trastor, Aegean Airlines, Performance Technologies, Prodea, BriQ Properties, ADMIE Holding, Real Consulting, Dimand, Optima Bank, Trade Estates, Orilina Properties, Athens International Airport, Alter Ego Media, Fais Group, Qualco Group, Attica Department Stores, Interlife, and Noval Property.
Dimitris Pafilas
dpafilas@yahoo.com
www.bankingnews.gr
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