Bank of America Confirms Positive Outlook on Greek Banking Sector Amid Transitional Phase

Bank of America (BofA) Securities reaffirmed its optimistic stance on the Greek banking sector this week, highlighting that the industry is currently undergoing a transitional period as markets focus on the trough for net interest income and the emergence of a new merger and acquisition (M&A) cycle. Despite projections of a 19 per cent quarterly decline in net profits for the third quarter, BofA emphasized that investors are likely to concentrate on the medium-term outlook and the strategic catalysts shaping the sector. According to Greek business outlet Newmoney, the report stressed that valuations remain attractive and the medium-term prospects are improving, driven by strong capital bases, the gradual recovery of loans, and the potential for increased distributions.

BofA noted that Greek banks continue to trade at a significant discount relative to their European peers, forecasting a gradual increase in total shareholder returns primarily through higher dividends in the coming years. Eurobank emerged as BofA’s top pick in the sector, carrying a “Buy” recommendation with a price target of €4.64, representing a 38 per cent upside potential. The analysis estimates Eurobank’s return on equity for 2026 at 17.6 per cent, positioning it among the highest in Europe. Furthermore, the bank’s valuation remains appealing, with a price-to-book value ratio of 1.2 and a profitability index below the European average.

BofA highlighted Eurobank’s operational and geographic diversification, including its strong presence in Cyprus and Bulgaria, as well as growth in insurance and wealth management sectors. The recent acquisition of an 80 per cent stake in Eurolife by Fairfax is expected to significantly enhance profitability while providing additional synergies. Eurobank is projected to maintain a balanced approach between dividends and share buybacks, with BofA predicting shareholder returns exceeding 8 per cent by 2027. Net profits are estimated at €1.36 billion in 2025, €1.62 billion in 2026, and €1.82 billion in 2027, underpinned by a steady increase in fee income and continuous improvement in asset quality.

Piraeus Bank also received a “Buy” recommendation, with a price target of €8.01 and an upside potential of 13 per cent. BofA identified Piraeus as the likely third-quarter leader, noting faster credit expansion and market share gains, particularly in corporate lending. The bank is expected to benefit from the housing market recovery, potentially recording a net increase in mortgage loans for the first time in over a decade. Its return on equity is forecast to remain near 15 per cent, supported by gradual growth in total income and higher shareholder distributions. Net profits are projected to reach approximately €1.1 billion in 2026, with a dividend yield of 6 to 6.5 per cent over the next two years, as cost-to-income ratios decline and net interest income stabilizes.

Alpha Bank also retained a “Buy” recommendation, with a price target of €3.90 and a projected upside of 9 per cent. Despite the stock having more than doubled over the past year, BofA sees room for revaluation, with the return on equity expected to rise steadily, reaching around 14 per cent by 2027. Alpha Bank’s net interest income is anticipated to experience a modest increase from 2026 onward, fueled by improved lending margins, new financing via the Recovery Fund, and higher non-interest income from fees and investment services. The bank’s strong capital buffer positions it for potential acquisitions or enhanced dividend distributions. BofA forecasts net profits of €890 million in 2025, €1.07 billion in 2026, and €1.12 billion in 2027, with a price-to-tangible book value ratio close to 1 and a total dividend yield exceeding 7 per cent for 2026–2027.

For the National Bank of Greece, BofA maintained a “Neutral” recommendation with a price target of €13.04, leaving an upside potential of roughly 2 per cent. While the bank remains the most capital-strong in Greece, with a capital adequacy ratio above 15 per cent, BofA noted that the stock’s investment momentum has been limited following a strong rally over the past year. The National Bank is expected to continue reporting high profitability of approximately 14 to 15 per cent, a contained cost of risk, and a low non-performing exposure ratio. However, the bank’s portfolio exhibits less diversification than its competitors, and opportunities for growth in interest income appear constrained. BofA emphasized that potential M&A activity or increased shareholder distributions could provide new catalysts, but warned that the bank risks falling behind if it does not deploy its surplus capital in a timely manner.

Overall, Bank of America underscores a positive medium-term outlook for Greek banks, highlighting strong capital positions, improving loan conditions, and strategic growth opportunities, even as near-term profitability faces pressure.

By fLEXI tEAM