Keefe, Bruyette & Woods (KBW) has published its third-quarter previews for Piraeus, Eurobank and Alpha Bank. It expects Greek banks to post another strong quarter, despite the “painful” sessions of recent days. The firm favours stocks with the greatest sensitivity to interest rates: Piraeus and National Bank. Its reasoning is that interest rate expectations have shifted significantly since the banks announced their business plans.
Analysts now expect the ECB deposit rate to reach 3% by mid-2027. Bank management teams are using a rate of 2.25-2.5% in their guidance. KBW also prefers Greece’s margin dynamics to those in the rest of Southern Europe, citing faster credit growth and lower deposit betas.
New price targets
- Piraeus (Outperform): The price target rises to €13.6 from €12.8, implying upside of about 49% from €9.10. EPS estimates for 2026-28 are revised by -0.6%, +3.8% and +6.3%, respectively.
- Eurobank (Market Perform): The price target rises to €5.5 from €5.2, implying upside of about 33%.
- Alpha Bank (Underperform): The price target rises to €5.3 from €5.1, implying upside of about 29%.
- National Bank (Outperform): The price target is €20.9, implying upside of about 39%.
Valuations are based on a Gordon Growth model using 2028 earnings discounted to September 2027. The cost of equity is 11% for Piraeus and 11.75% for Eurobank and Alpha. The long-term growth rate is 2%, and the target CET1 ratio is 13%.
What to expect in the third quarter
KBW forecasts high-single-digit credit growth and an improvement in customer margins, supporting quarter-on-quarter growth in net interest income. Fees are expected to benefit from the strong tourist season.
A quarter-on-quarter decline is nevertheless expected, due to seasonality and one-off income in the second quarter. Recent volatility in bond markets is expected to have minimal effect on CET1 ratios, but could put pressure on trading income.
- Piraeus: Net interest income is estimated at €529 million (+4% quarter on quarter and +12.3% year on year). Net profit is forecast at €305 million, compared with consensus of €310 million, and the CET1 ratio at 12.8%.
- Eurobank: Net interest income is estimated at €704 million (+2.8% quarter on quarter). Net profit is forecast at €394 million (+13.6% year on year) and the CET1 ratio at 15.2%.
- Alpha Bank: Net interest income is estimated at €448 million and net profit at €238 million. Adjusted earnings of €222 million are 8% below consensus.
The impact of acquisitions will be reflected in the fourth quarter: Eurolife for Eurobank and Universal/Altius for Alpha Bank. Alpha will book a donation of about €25 million for the “Marietta Giannakou” school in the third quarter. Eurobank and Piraeus will record it in the following quarter.
Still “underweight” on Alpha
KBW maintains its Underperform rating on Alpha Bank, which will hold an Investor Day in early November. The firm does not expect the event to excite the market, as much of the “heavy lifting” to improve profitability has already been done.
It also notes that Alpha is less sensitive to interest rates and has the greatest exposure to wholesale funding. It is also more reliant on fees, where the outlook has worsened as market sentiment has deteriorated.
Loans are up
August data show that business loans account for more than two-thirds of the portfolio. They rose 9.2% year on year, slightly below the 10.2% recorded in June. Household loans increased by 2.6%.
The cost of deposits rose to 37 basis points, up 2 bps from June. Loan yields increased faster: up 10 bps to 4.43% for businesses and up 6 bps to 5.75% for households. As a result, customer margins widened by 7 bps on business loans and by 5 bps on household loans.
Based on KBW’s detailed margin models, net interest income in 2027-28 could exceed consensus by 8-14%. The firm notes, however, that these models are highly sensitive to assumptions.