Eurobank’s outlook brightens with gains in Cyprus and Bulgaria

Bank of America (BofA) Securities confirmed its positive stance on the Greek banking sector this week, stating the banks are undergoing a transitional period as markets focus on the trough for net interest income and the formation of a new merger and acquisition (M&A) cycle.

Despite an expected 19 per cent quarterly fall in net profits in the third quarter, BofA believes investors will concentrate on the medium-term outlook and strategic catalysts for the sector.

The analysis, shared by Greek business outlet Newmoney, stressed that valuations remain attractive and the medium-term prospect is improving due to strong capital bases, the gradual recovery of loans, and the prospect of increased distributions.

Moreover, according to BofA’s report, Greek banks continue to trade at a significant discount compared to European groups, with BofA forecasting a gradual increase in total shareholder returns, primarily through higher dividends in the coming years.

Eurobank remained BofA’s top pick in the Greek banking sector, carrying a “Buy” recommendation and a price target of €4.64, representing a 38 per cent upside potential.

BofA’s analysis estimates the bank’s return on equity for 2026 to be 17.6 per cent, which is highlighted as one of the highest in Europe.

Furthermore, the bank’s valuation remains attractive, with a price-to-book value ratio of 1.2 and a profitability index below the European average.

BofA highlights the diversification of Eurobank’s activities both geographically, through its strong presence in Cyprus and Bulgaria, and operationally, with growth in insurance and wealth management sectors.

The recent acquisition of 80 per cent of Eurolife by Fairfax significantly enhances profitability and offers additional synergies.

Eurobank is expected to maintain its balanced policy between dividends and share buybacks, with BofA predicting a shareholder return exceeding 8 per cent by 2027.

Estimates place the bank’s net profits at €1.36 billion in 2025, €1.62 billion in 2026, and €1.82 billion in 2027, supported by a stable increase in fee income and continuous improvement in asset quality.

Piraeus Bank also received a “Buy” recommendation from BofA, with a price target of €8.01 and an upside potential of 13 per cent.

The bank is expected to be the biggest winner of the third quarter, exhibiting faster credit expansion and gaining market share, particularly in corporate lending.

BofA considers Piraeus to be in the most privileged position to benefit from the housing market recovery, as it will be the first to record a net increase in mortgage loans after over ten years.

The bank’s return on equity is forecast to remain close to 15 per cent, with a gradual improvement in total income and a significant increase in shareholder distributions.

BofA estimates that net profits will reach approximately €1.1 billion in 2026, while dividend yield is expected to reach 6 per cent to 6.5 per cent over the next two years, as the cost-to-income ratio declines and net interest income stabilises.

Elsewhere, BofA maintained a “Buy” recommendation for Alpha Bank stock, with a price target of €3.90, projecting an upside potential of 9 per cent from current levels.

The analysis notes that even though the stock has more than doubled on an annual basis, there is still room for revaluation, as the return on equity is expected to steadily increase in the coming years, reaching approximately 14 per cent by 2027.

Alpha Bank shows stable net interest income, with BofA predicting a mild rise from 2026 onwards, thanks to improved lending margins, new financing through the Recovery Fund, and increased non-interest income from fees and investment services.

Furthermore, Alpha’s ability to leverage its strong capital buffer for future acquisitions or higher dividend distributions is highlighted.

BofA expects 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 and a price target of €13.04, leaving an upside potential of approximately 2 per cent.

Although the National Bank of Greece remains the most capital-strong bank in Greece, with a capital adequacy ratio exceeding 15 per cent, BofA estimates that the investment momentum of the stock has been limited following the strong rally of the past year.

The bank is expected to continue reporting high profitability of approximately 14 per cent to 15 per cent, contained cost of risk, and a low non-performing exposure ratio.

However, BofA notes that its portfolio shows less diversification compared to its competitors, while opportunities for further growth in interest income are limited.

BofA stressed that potential M&A moves or increased distributions to shareholders could serve as new catalysts for the stock, but warns that the bank risks falling behind if it does not utilise its surplus capital in time.