greek banking — The Greek banking sector is experiencing a significant turnaround, as renewed investor confidence emerges amid a transitional period. Bank of America (BofA) Securities recently affirmed its positive outlook, suggesting that banks are nearing a low point for net interest income while entering a new cycle of mergers and acquisitions.
Greek banking: Quarterly Profit Projections
Despite an anticipated 19 per cent decline in net profits for the third quarter, BofA believes investors will focus on the sector’s medium-term potential and strategic developments. According to a report by Greek business outlet Newmoney, valuations remain attractive, bolstered by solid capital bases, a gradual recovery in loan portfolios, and the likelihood of increased shareholder distributions.
Eurobank’s Promising Position
Among Greek banks, Eurobank stands out as BofA’s top recommendation, holding a “Buy” rating with a price target set at €4.64, which indicates a potential upside of 38 per cent. BofA anticipates the bank achieving a return on equity of 17.6 per cent by 2026, positioning it as one of the most competitive in Europe.
Eurobank’s attractive valuation is underscored by a price-to-book ratio of 1.2, with profitability metrics trailing below the European average. The bank’s geographical diversification, highlighted by its strong operations in Cyprus and Bulgaria, alongside growth in insurance and wealth management, further enhances its prospects. Recent strategic moves, such as acquiring 80 per cent of Eurolife from Fairfax, are expected to drive profitability and create synergies.
Piraeus Bank: A Leader in Growth
Piraeus Bank has also garnered attention, receiving a “Buy” recommendation with a price target of €8.01, reflecting a 13 per cent upside potential. BofA predicts that Piraeus will be the biggest beneficiary in the third quarter, showcasing rapid credit expansion and gaining market share, particularly in corporate lending.
The bank is poised to capitalise on the housing market recovery, with expectations for a net increase in mortgage loans for the first time in over a decade. BofA forecasts a return on equity close to 15 per cent and a rise in net profits, estimating figures of approximately €1.1 billion by 2026, alongside a dividend yield projected between 6 per cent and 6.5 per cent in the coming years.
Alpha Bank’s Steady Rise
BofA’s analysis maintains a “Buy” rating for Alpha Bank, with a price target of €3.90, anticipating a 9 per cent upside. The bank has seen its stock more than double over the past year, yet there remains potential for further valuation increases. Return on equity is expected to trend upwards, reaching around 14 per cent by 2027.
Alpha Bank’s steady net interest income, coupled with improved lending margins and new funding from the Recovery Fund, positions it favourably. The bank’s robust capital buffer is also set to facilitate future acquisitions or increased dividend distributions, with net profits projected at €890 million for 2025 and €1.12 billion by 2027.
National Bank of Greece: Steady Yet Cautious
Meanwhile, Bank of America has assigned a “Neutral” recommendation to the National Bank of Greece, with a price target of €13.04, indicating a modest upside of about 2 per cent. Despite being the capital-strongest bank in Greece, boasting a capital adequacy ratio exceeding 15 per cent, growth momentum appears to have plateaued following a significant rally over the past year.
The bank is expected to maintain high profitability levels between 14 per cent and 15 per cent, alongside a low ratio of non-performing loans. However, BofA’s report notes that the bank’s portfolio lacks diversification compared to its competitors, and opportunities for enhancing interest income may be constrained. Potential mergers or increased shareholder distributions could serve as catalysts for renewed interest, albeit with the risk of falling behind if surplus capital is not effectively utilised.
