UBS appears particularly positive about the prospects of the Greek banking sector, maintaining a “Buy” recommendation for all four systemic banks. The Swiss firm believes that the recovery of the Greek economy, strong credit expansion toward businesses and the increasing ability to utilize excess capital create the conditions for further value creation for shareholders.
UBS estimates that Greek banks are entering a new phase of growth, as after the clean-up of their balance sheets, the main catalysts are shifting to loan growth, acquisitions and higher capital distributions to shareholders. At the same time, it underlines that their valuations continue to be attractive compared with the rest of the European banks.
Upside potential of up to 26%
The firm gives target prices:
- Alpha Bank: 4.90 euros from 3.90 euros (+26%)
- Piraeus Bank: 11.20 euros from 8.88 euros (+26%)
- National Bank: 18.20 euros from 15 euros (+21%)
- Eurobank: 4.70 euros from 4.09 euros (+15%)
The reasons for the optimism
UBS believes that Greek banks are among the main beneficiaries of the recovery of the Greek economy. It forecasts GDP growth close to 2% annually in the coming years, with the main drivers being Recovery Fund resources, investments, tourism and shipping.
At the same time, it points to the ongoing fiscal improvement, with public debt following a downward path and unemployment continuing to decline.
The bank forecasts that credit expansion toward businesses will remain strong, estimating average annual growth in performing loans of about 8% in the 2025-2028 period. At the same time, it believes that net interest income has now reached its lowest point, while the further increase in lending and fees will strengthen banks’ overall revenues in the coming years.
An equally important factor, according to UBS, is the normalization of non-performing exposures (NPEs), with credit risk remaining limited, allowing management teams to channel more capital into dividends and acquisitions.
What stands out in each bank
UBS sees different advantages for each of the four systemic banks.
For Alpha Bank it notes that, despite its lower profitability today, it shows the greatest momentum for earnings per share growth over the next three years, with the improvement also supported by recent acquisitions.
Eurobank is described as the strongest regional growth story, as its presence in Southeastern Europe strengthens both growth rates and profitability. UBS believes that the acquisition of Hellenic Bank in Cyprus and the integration of Eurolife create additional value and leave room for even higher distributions to shareholders.
For National Bank, the firm points out that it has the highest profitability in the sector, the strongest capital base and very good asset quality. At the same time, the bancassurance agreement with Allianz is expected to further boost earnings and returns on equity in the coming years.
As for Piraeus Bank, UBS estimates that the new business plan and the acquisition of Ethniki Insurance create an integrated financial services model with significant potential for profitability growth and further upgrading of the stock’s valuation.
Valuations remain attractive
Although Greek banking shares have recovered after the correction caused by geopolitical tensions in the Middle East, UBS believes that they continue to trade at a discount to most European banks, despite the fact that they show returns on equity and growth prospects that are fully comparable to those of Europe’s strongest banking systems.