We are updating our valuation of Piraeus following the publication of its third-quarter 2026 results, in which the bank reported net profit 11% below market expectations, Goldman Sachs notes, setting a €12.20 price target and maintaining a ‘Buy’ rating.
The results included strong net interest income (NII), which came in 3% above the bank’s own estimates and rose 7% quarter on quarter, benefiting from higher interest rates and disciplined pricing, while performing loans increased 6% year to date.
Lower operating expenses were offset by weaker trading and other income, as well as higher impairment charges (including increased provisions to cover the sale of a loan portfolio and certain other asset value adjustments).
Looking ahead, we remain positive on the outlook for profitability and capital returns. Our EPS estimates for 2027-28 are revised upwards by around 2%, reflecting higher estimated net interest income, which benefits from strong volumes and a higher-interest-rate environment.
Revenue
Management said there was scope to exceed its target of €2.0bn in net interest income in 2026, as well as its forecasts for the net interest margin, thanks to a favourable environment for volumes, business mix and interest rates.
For 2026, we forecast total net interest income of around €2.1bn, 2% above market consensus. On margins, we expect the ratio of net interest income to total assets to exceed 240 basis points in 2027, against the latest guidance of more than 240 bps, upgraded from around 230 bps.
Piraeus expects corporate loan margins to narrow further by around 20 bps over the next 12-18 months. Based on third-quarter 2026 figures, NII sensitivity is €40m for a 25 bps change.
Deposit trends were one of the key highlights of the third-quarter results, with deposits rising by around 9% year on year and coming in 1% above market expectations. At the same time, we continue to see growth in corporate lending as the main driver of higher net interest income going forward, with further support from the ongoing repricing of the loan book at higher Euribor rates.
Piraeus said the accrued interest rate stood at 2.37% in the quarter, compared with the current Euribor rate of 2.60%.
Operating expenses and cost of risk
Following a cost-to-income ratio (CIR) of 32% in the third quarter, we expect it to remain in the low-30% range going forward, with positive jaws between revenue and cost growth continuing through 2028E.
In the near term, we expect Piraeus to book a charge of around €25m in the fourth quarter related to the school renovation programme (the “Marietta Giannakou” programme), rather than in the third quarter, as we had previously expected.
Although the cost of risk rose significantly in the third quarter due to a planned sale of non-performing loans (NPLs), we remain positive on the outlook for credit costs and expect the CoR to fall gradually below 50 bps in 2027.
Capital and distributions
Piraeus announced an interim dividend of around €0.10 per share (€124m in total), to be paid in December. Management reiterated its expectation that cash distributions would remain the main form of shareholder returns.
Overall, we forecast a payout ratio of 57%/60%/63% for 2026/27/28, rising to 70% in 2029, with distributions now made entirely through dividends, compared with the previous plan, which also included limited share buybacks in 2027-29E.
Our forecasts put the CET1 ratio at around 13.0% for the year, in line with guidance, rising to 13.6% by the end of 2027, against a target of 13.5%.
Our EPS estimates change by -4%/2%/2% for 2026/27/28, with 2026 affected by higher impairment charges and 2027-28 benefiting from the higher net interest income now incorporated in our model.
We value Piraeus using a P/E multiple of 10.25x, with a 25%/75% weighting on 2027/28 EPS estimates, compared with a previous 50%/50% weighting, giving a 12-month price target of €12.20, up from €12.00. We maintain our Buy rating.
The main downside risks to our rating and price target include: slower loan growth or significant net interest margin compression; higher-than-expected operating expense growth or increased strategic investment; any notable rise in the cost of risk, which our model continues to show improving modestly; and lower capital generation, resulting in reduced shareholder returns.