EUR 300.00 For Business Accounts Only

GREEK BANKS | Rallying with Room to Run

Strong finish to the year, with robust loan growth and earnings resilience – Greek banks delivered another solid quarter in Q4, exceeding both our and consensus estimates, supported by stronger-than-expected fee income (+4% vs cons) and lower impairments (-5% vs cons). Despite ongoing NII headwinds, NIM proved resilient at 2.65%, contracting just 15bps qoq—on faster loan repricing relative to deposits, a low deposit beta (20% on total deposits), stable lending spreads (-18bps ytd), incremental bond reinvestment yields, and strong credit expansion (€8.0bn qoq; c€14bn for FY’24). As a result, NII fell just 2.5% qoq, broadly in line with expectations. Asset quality continued to improve, while fee income remained strong—driven by lending activity and an 18% ytd increase in AuMs—further supporting operational momentum. Efficiency remained a key strength, with the sector C/I ratio at 37%, driving Q4 net profits to €1.2bn (-7.0% qoq) and lifting FY adjusted net profits to c€4.9bn, with a RoTE of c16.8%. NBG and Eurobank led with FY RoTEs of c19%, followed by Piraeus Bank at c18% and Alpha Bank at c12%. Looking ahead, while NII pressure may persist in 2025 (-5% yoy), rising credit demand (2024–27 CAGR >8%) is expected to drive a c2% NII rebound in 2026, with 2027e NII settling c2% above 2024 levels. Fee income from non-banking services (CAGR c7%) will also support revenue stability. Meanwhile, monetary easing and a favourable macro backdrop should drive CoR normalisation toward 40–50bps. Even factoring in a projected 3ppt RoTE decline by 2027e, Greek banks remain well-positioned to deliver solid returns of >13%, broadly in line with peripheral peers.

Capital strength enhances return optionality, including capacity for accretive M&A – Solid capital generation continues to reinforce buffers, allowing greater flexibility in capital allocation. All four systemic banks are now targeting payout ratios of 50% or more from FY’25, with NBG guiding for 60%. Share buybacks are increasingly part of the distribution mix, with Alpha planning to return up to 75% of its FY’24 payout via share repurchases, followed by Eurobank (43%) and NBG (30%), while Piraeus remains an outlier, opting for a 100% cash dividend. In parallel, all four banks have taken proactive steps to accelerate DTC derecognition, targeting DTC-to-CET1 ratios of 15–34% by end-2027 and full derecognition by 2032–34. Additionally, recent M&A activity is also poised to enhance RoTE with manageable capital impact: Alpha’s acquisition of AstroBank will cost c40bps of CET1, while that of Piraeus’s acquisition of Ethniki Insurance will absorb c100–150bps. We forecast shareholder yields of 6–7% in 2024, rising to 7–10% by 2025–26e, placing Greek banks competitively versus their European peers (c.7.5%).

Valuation: Raising PTs, Piraeus staying top pick – Following quarterly earnings beats and updated guidance, we have raised our FY’25/26 net profit estimates by an average of c5%/c9% leading to 7%/14%/16% upgrades in our PT for NBG, Alpha, and Piraeus. Greek banks have rallied >25% ytd, nearly closing the gap with peripheral peers and the SX7E, supported by strong post-Q4 outperformance. Despite this, they still trade at a discount—0.91x 2025e P/TBV and 6.6x P/E—versus 1.3x and 9.0x for periphery peers, despite offering comparable or stronger RoTE and shareholder yields. In our view, the upcoming MSCI review for the placement of the Greek market in the watchlist for potential upgrade to Developed market status, coupled with likely consensus upward earning revisions, could catalyze further rerating. We reiterate our “Buy” for the entire sector, with Piraeus remaining our top pick, thanks to the strong execution and the compelling combination of valuation and returns on offer.