Morgan Stanley Names Alpha Bank Among Its Top Greek Banking Picks

Morgan Stanley has reaffirmed its positive outlook for Greece’s banking sector, identifying Alpha Bank as one of its preferred European mid-cap banking stocks and describing the recent decline in bank shares as a potential buying opportunity.

In its latest assessment, the investment bank attributed the recent pressure on European banking shares primarily to deteriorating sentiment in government bond markets and profit-taking, rather than a fundamental deterioration in banks’ financial performance. It maintained an overall favourable view of Greek lenders, citing their valuations, profitability and capital strength.

Alpha Bank received an Overweight recommendation, with a price target of €5.50 against a reference valuation of €4.65. This implies potential upside of approximately 18% based on the figures in the report. The bank is among Morgan Stanley’s preferred mid-cap European lenders.

Morgan Stanley also maintained Overweight recommendations for Piraeus Bank and Eurobank. Piraeus Bank has a target price of €12.30, compared with a reference valuation of €10.65, implying potential upside of approximately 15%. Eurobank’s target price stands at €5.40, against €4.70, also indicating potential upside of around 15%.

The investment bank adopted a more neutral position on the National Bank of Greece and CrediaBank, assigning both an Equal-weight recommendation. National Bank of Greece has a target price of €19.30, implying potential upside of approximately 13%, while CrediaBank has a target price of €1.09 against a reference price of €1.01, representing potential upside of around 8%.

The positive assessment of the Greek banking sector is supported by projected earnings and returns. Morgan Stanley estimates that Greek banks are trading at approximately 9.6 times their expected earnings for 2027 and 8.8 times projected earnings for 2028. Return on tangible equity, a measure of profitability relative to shareholders’ tangible capital, is expected to remain close to 17% over the coming years.

The report identifies rising government bond yields as the main near-term risk for the sector. The spread between Greek and German government bond yields has widened by approximately 42 basis points since the end of June, reflecting increased pressure across European sovereign debt markets.

Higher bond yields can affect banks through changes in the valuation of securities held on their balance sheets and through broader movements in funding costs and market sentiment. Morgan Stanley nevertheless considers the potential effect on bank capital manageable in most cases, estimating that the impact on Common Equity Tier 1 capital ratios would generally be below five basis points. The impact could be greater for certain banks in Greece, Italy and Spain.

The investment bank also examined the historical performance of European bank shares following sharp short-term declines. In comparable instances where the sector fell by between 5% and 7% over three trading days, European banks subsequently generated positive relative returns over the following week in 79% of cases.

Morgan Stanley’s favourable outlook is based on expectations of resilient earnings, continued corporate lending growth, supportive interest rates and strong capital positions. However, it considers stabilisation in government bond markets important for a sustained recovery in bank share prices.

For Greece’s banking sector, the latest assessment reinforces the investment bank’s preference for Alpha Bank, Piraeus Bank and Eurobank over National Bank of Greece and CrediaBank. The price targets represent Morgan Stanley’s estimates rather than guaranteed future share prices, and actual returns will depend on market conditions, bank performance and wider economic developments.

By fLEXI tEAM