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GREEK BANKS | Recharged by results, lifted by M&A

Q1 results spark 6% outperformance in Greek banks, led by Alpha – Q1 results triggered an 6% outperformance of Greek banks vs their EU periphery peers (and 8% vs SX7E), led by Alpha Bank (+27% since 28 Apr), followed by Optima (+22%), NBG (+14%), Piraeus (+13%), and Eurobank (+10%). The rally was earnings-driven—Alpha (+24% vs cons) and NBG (+17%) delivered standout beats—while Alpha’s momentum was further fuelled by the Astrobank and AXIA bolt-ons and, primarily, by the UniCredit stake increase (which could potentially go up to 29%), which injects a strategic M&A dimension to the narrative. Sector systemic RoTE (excl Optima) landed at c15% in Q1 (vs c16% periphery avg), with NBG (16.4%) and Eurobank (16.2%) leading, followed by Piraeus (14.7%) and Alpha (12.8%), while Optima printed a standout 24%. For the four systemic banks, NII came broadly in line (–5% qoq; NIM –14bps), absorbing the 100bps Euribor drop, calendar drag, and low deposit beta—partially offset by loan growth, structural hedges, and reinvestment yields. Customer spreads were resilient (–6bps qoq vs –20bps FY est), costs surprised positively (OpEx below cons), while trading income cushioned the bottom line. Fees held up well despite regulatory cap, underpinned by +10% qoq AuM growth. Asset quality remained solid (CoR ~50bps) and CET1 was stable at 16.3% (–10bps qoq), absorbing dividend accruals, extra DTC amortization and a 10–40bps Basel IV hit. Optima’s profitability was underpinned by strong credit expansion (+€0.3bn in Q1), resilient fees, and a best-in-class cost efficiency profile, helping offset NIM compression (i.e. -20bps) from lower rates.

Modest forecast changes on lower rates and M&A – We revise our models to reflect a lower rate environment (ECB terminal rate at 1.75% in 2025–26, rising to 2.00% in 2027), alongside recent M&A activity. While 2025 guidance was broadly reaffirmed, Piraeus raised its fee income target to €650mn (from €600mn), in line with our €670mn forecast, while Alpha Bank lifted its 2027 EPS target to >€0.45 (from €0.42), citing the Astrobank and AXIA deals. The former was already captured in our estimates (as was Piraeus's Ethniki Insurance transaction); we now also incorporate AXIA in our AB model. We also factor in a €150mn Tier II issuance for Optima. Other modelling updates include: marginally lower deposit beta (slower passthrough), flat loan spreads through 2027, slightly lower CoR, and higher securities allocation to reflect steeper curve dynamics. Minor mark-to-market adjustments have also been embedded. These result in modest changes to our adj. net income forecasts: +1.0% / +1.6% / +1.3% for 2025–27e for systemic banks, and +1.1% / -3.6% / -1.4% for Optima. In short, we project 4% NII decline for systemic banks in 2025e followed by a 2% recovery in 2026e filtering through to net income of -7% and +3% respectively.

Valuation – We proceed with PT upgrades for our entire banks universe, notwithstanding the recent geopolitical flare-up in the Middle East, which we flag as a tail risk to sentiment. The upgrades are driven by structurally lower CoE assumptions (–40bps for systemic banks and –80bps for Optima), reflecting enhanced earnings visibility, improved capital return prospects (and a lower size premium for Optima). Our average CoE for the three systemic banks/Optima Bank now stands at 12.4%/14% respectively, still materially above the SX7E-implied 10%. Despite a >40% YTD rally with GR banks at 15Y highs, sector valuations remain undemanding at 0.95x 2026e P/TBV and 7.01x P/E (vs. 1.2x / 8.7x for peers), for c14% RoTE and c8% shareholder yield. While we acknowledge elevated geopolitical risks, we see scope for further upside on earnings upgrades (and potential DM market reclassification). We reiterate our Buy on the sector, with Piraeus remaining our top pick.