Greek banks remain cheap and more profitable compared to their European peers, both in terms of return on tangible equity (ROTE) and loan growth, according to an analysis by US investment bank Keefe, Bruyette & Woods (KBW). The latter, which caters to investors in developed markets, initiated coverage of the stocks forecasting an upside of 6%-20%, underscoring how different Greek banks are compared to the past, no longer carrying any "Trojan horse."
The positive factors
Specifically, they now command greater economic weight (75%) compared to the 2013 downgrade period. Even greater, however, is their market capitalization of $50 billion as they entered developed markets, compared to $27.9 billion in 2001 when Greek banks were previously included in developed markets. The US investment firm highlights that Greek banks offer the best loan growth in the sector, leading to a high compound annual growth rate (CAGR). While two-thirds of loan growth stems from corporate lending, additional support will come from households and mortgages, narrowing the gap with residential investments and improving wealth flows both domestically and from abroad. Regarding the cost-to-income ratio, it stands at 30% (compared to 50% in Europe), with National Bank being among the few banks to have fully replaced its core banking platform. KBW acknowledges that the volume of earnings upgrades in the second half stems from expectations of higher interest rates; however, commission income is gaining increasing importance following a series of bancassurance acquisitions and a jump in assets under management. Greek banks have improved their capital ratios, boasting an average CET1 capital ratio of 15%, and are no longer at the extreme lows of the past. While they remain reliant on deferred tax assets (DTAs), the pace at which these are being amortized will reduce them to zero over the 2031-2033 period. KBW considers that returns on tangible equity (ROTE) for 2027 will remain high (between 12.8% and 18%), yet the shares are trading at a 5% discount—a factor hard to justify given cleaner balance sheets, shareholder returns, potential acquisitions, and steady loan growth supported by the macroeconomic environment.
Piraeus Bank (Outperform, target price €12.8)
Piraeus Bank represents the cleanest domestic investment choice and a dominant bank in Greece, already offering a high return on tangible equity, stable efficiency, and strong positioning for higher interest rates as one of the banks most sensitive to rate hikes. The bank also offers a high dividend yield (up to 7.1% by 2028) and the sector's most attractive growth in tangible book value and dividends, backed by improved asset quality and capital strength. The stock's strong performance this year has narrowed its discount against peers, but its valuation remains compelling as the share trades at 9.2x 2028 earnings, targeting a 16.8% ROTE and aiming for 18% by 2030. The bank also provides the "cleanest" entry point for any foreign entity interested in a potential takeover target.
National Bank of Greece (Outperform, target price €20.9)
National Bank is the fastest-growing bank in Greece, boasting the lowest cost of capital due to its sticky deposit base. Its balance sheet is equally conservative, with the bank posting a capital ratio of 17.3% in the second half of 2026 (which already includes a pro forma €300 million for a special distribution), aiming for under 16% by 2028, signaling significant shareholder distributions before even considering an acquisition. KBW expects details on how surplus capital will be deployed in a new business plan at the beginning of 2027, alongside productivity gains from the new banking platform. Historically, the stock traded at a premium relative to other banks, but a rerating this year represents an attractive entry point for KBW.
Eurobank (Market Perform, target price €5.2)
Eurobank is the most geographically diversified among Greek banks, holding second position in Cyprus and a market share in Bulgaria. In KBW's view, this reduces the pool of potential buyers strictly to those seeking exposure beyond Greece. The bank appears weaker in efficiency and more oriented toward time deposits. Nevertheless, the business delivers consistent profitability and is well-positioned to improve capital flows through private banking and acquisition capabilities as a buyer in Bulgaria. The stock remains cheap, targeting a return on equity close to 17% for this year while offering solid tangible value and dividends.
Alpha Bank (Underperform, target price €5.1)
The US bank expects the Investor Day in November to focus on pillars for boosting return on equity, where it trails its peers. Consensus estimates point to a return on equity of 13.6% (compared to 12% in 2026) and double-digit earnings growth by 2028—excluding acquisitions—underscoring the hurdles the bank faces. Management has already made significant progress on profitability and is cutting costs more aggressively than competitors. To outperform peers, it needs to raise its return on equity, increase fees, and boost capital flows. The valuation is not cheap, and UniCredit's presence does not provide a significant premium, making takeover options better elsewhere.
Bank of Cyprus (Outperform, target price €12.2)
The bank is dominant in its domestic market across loans, deposits, payments, and insurance. It is expected to benefit from interest rate expectations, backed by loan growth supported by the broader macroeconomic climate. Its capital ratio remains solid at 20.9%, with management targeting sustainable return on equity against 19.6% in the second half of 2026. Market capitalization is no longer cheap at a price-to-earnings ratio of 9.4x; however, the valuation remains compelling on an adjusted capital basis, driven by M&A catalysts.
Dimitris Pafilas
dpafilas@yahoo.com
www.bankingnews.gr
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