BofA warns of risk of dilution in Greek banking sector

Bank of America Merrill Lynch has argued in a report on Greek banking that the local banking sector still runs the risk of dilution, which is why the company has kept the sector’s recommendation unchanged as “underperform.”

It does raise target prices for the stocks of the four systemic lenders (Alpha at 1.36 euros, National 0.25 euros, Eurobank 0.65 euros and Piraeus 3.26 euros) but they are still below their trading level at the Athens Exchange. BoA Merrill Lynch notes in its report that the results of the stress tests on local lenders by the European Banking Authority will not identify serious problems, which means any capital shortfall exposed will not be sizable.

However, the firm estimates it will take some political will for Greece to have “clean banks” before Greece’s exit from the bailout program in August, so that they are able to tackle any problems in the management of nonperforming loans.