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GREEK BANKS | Strong Q1 Delivery, Valuation Still Stuck in Catch-Up Mode

Q1 Results Beat Estimates – Greek banks kicked off 2025 with a strong set of Q1, reporting net profits of €1.26bn, down just 4% qoq but coming in 5% above our expectations and 8% ahead of consensus, with Alpha Bank and NBG leading the beat (24% and 17% vs cons, respectively). Results were supported by resilient NII (in line), tight cost control (OpEx slightly below), and a solid trading line beat. Credit quality remained stable, with average CoR broadly in line at c50bps. Sector-wide NII fell 5% qoq (NIM –14bps), in sync with estimates, reflecting a 100bps Euribor drop since Q3’24, calendar effects, and early-stage deposit repricing, still low beta—though banks’ mgt flagged a gradual uptick ahead. Customer spreads held up better than forecast (-6bps qoq vs. -20bps FY EEe), while stronger loan growth, in-the-money hedges, and higher reinvestment yields helped cushion the drag. Alpha stood out, with NII down just 3% and NIM -3bps (both in line). At the core PPI level, results were broadly in sync with expectations (-4% qoq / -6% yoy), with Alpha again the outlier (+3% qoq). Operating expenses fell 10% qoq (-1.1% vs our forecast), offsetting a 2.7% qoq drop in core income amid softer NII and fees—partly due to the cap on transaction charges. Still, fee momentum was underpinned by strong AuM growth (+10% qoq) and increased investment product penetration. As expected, RoTE was highest at NBG and Eurobank (c.16.4% and 16.2%), followed by Piraeus (14.7%) and Alpha (12.8%). Capital remained robust, with pro-forma CET1 at 16.3% (-10bps qoq), as higher-than-envisaged profitability—albeit flattered by volatile trading income—helped absorb dividend accrual and a 10–40bps Basel IV impact. Banks kept FY guidance unchanged, pending greater visibility in Q2.

We keep forecasts unchanged despite the Q1 beat – Notwithstanding Q1 eclipsing our estimates, we leave our forecasts unchanged, as the upside was driven mainly by volatile trading gains. Management teams largely reaffirmed 2025 guidance, with two exceptions: 1) Piraeus raised its fee income target to €650mn (from €600mn), in line with our forecast of €670mn, while maintaining bottom-line guidance; 2) Alpha Bank lifted its 2027 EPS target to >€0.45 (from €0.42), citing the Astrobank and AXIA transactions—with Astrobank already incorporated in our model. Sector-wide loan growth exceeded expectations by c15%, while more favorable deposit dynamics, relative to our conservative 20% beta assumption, along with the steepening yield curve, which supports both hedge deployment via swaps and reinvestment of the securities book at higher yields, help offset our lower end-2025 rate forecast of 2% (vs. market pricing of c1.5%).

Valuation – Following a sharp correction post-Liberation Day, with GR banks shedding 22% from late-March highs, the sector has fully rebounded—now trading at 15-year highs and delivering c34% YTD performance. Despite this, Greek banks still underperform peripheral peers by c8% YTD and trade at a notable discount (0.96x 2025e P/TBV, 7.0x P/E vs. 1.3x and 9.1x for peers), even though they offer comparable or stronger RoTE (>14% for 2025e) and similar shareholder yields (c8%). This valuation gap implies a cost of equity of c14%, well above the EU average (SX7E) of c10%, and fails to reflect resilient earnings, significant capital optionality (>€5bn excess capital, above the 13% CET1 threshold), and ongoing asset quality improvement. In our view, the upcoming MSCI review—potentially placing Greece on the Developed Market watchlist—alongside likely upward consensus revisions, could act as a catalyst for further rerating. We reiterate our “Buy” on the sector, with Piraeus remaining our top pick, supported by strong execution and a compelling risk/reward profile.