Investment bank UBS has issued an optimistic update on the Greek banking landscape, pointing out that it is no longer a monolith but a tale of two distinct investment paths, following a robust start to the year.

The bank, whose report was shared by Greek business outlet Newmoney, maintains a buy recommendation for both Eurobank and the National Bank of Greece (NBG), citing robust profitability and strategic upgrades.

Eurobank remains a case study for regional presence and resilient income, while the National Bank of Greece has secured a new upgrade catalyst through its recent bancassurance agreement with Allianz.

The price target for the National Bank of Greece was upgraded to €18.20 from €17.50, whereas the target for Eurobank was held steady at €4.70.

Limited revisions to the valuation model meant the target for Eurobank remained unchanged, yet the report suggests there is upward margin against management goals for net interest income and fees.

Adjusted earnings per share for Eurobank in 2026 are forecast at €0.43, representing a 14 per cent increase, alongside a return on tangible equity of 16.7 per cent.

By 2028, this return is expected to rise to approximately 18 per cent, which is higher than the official guidance of approximately 17 per cent.

The geographical depth of Eurobank shows that while Greece remains the core with 58 per cent of assets, Cyprus now accounts for 27 per cent of assets and 29 per cent of profits.

Bulgaria contributes a further 13 per cent of assets and 16 per cent of profits, with net interest income in Southeast Europe beginning to trend upwards.

A critical observation from the report is that the net interest margin in Southeast Europe stands at 2.77 per cent, which is notably higher than the 2.23 per cent recorded in Greece.

Credit expansion in the region is currently at 8.5 per cent annually, but UBS predicts an average annual increase of 11 per cent for the period between 2025 and 2028.

In Cyprus, a voluntary exit scheme that reduced staff by 200 people and the expected merger of banks in early 2027 are creating conditions for improved efficiency.

The adoption of the euro in Bulgaria could further support loan growth, while lower reserves are expected to add an annual benefit of approximately €20 million to net interest income.

The National Bank of Greece reported first-quarter results that exceeded estimates, bolstered by high trading income and a 2 per cent quarterly rise in net interest income.

Annual loan growth of 12 per cent indicates a performance that is currently ahead of the bank’s strategic plan.

The essential new element is the deal with Allianz, which has led UBS to upgrade adjusted earnings per share by 5 per cent to 6 per cent for the next three years.

There is significant room for growth in insurance for the National Bank, as it currently generates only about €17 million per year from related commissions.

With the exclusive bancassurance agreement and a 30 per cent stake in Allianz Greece, UBS is incorporating annual revenues of approximately €65 million into its models through to 2028.

This transaction is estimated to add about 4 per cent to earnings per share and 50 basis miles to the return on tangible equity at a minimal capital cost.

While valuations are no longer low by historical standards, the report links them to the high quality of profitability observed in both institutions.

Eurobank is trading at 9.3 times its 2026 earnings, with a projected dividend yield of approximately 7 per cent for 2027.

The National Bank of Greece is trading at 10 times its 2026 earnings, with prospects for high distributions to shareholders.

The National Bank shows prospect for high distributions, as the model incorporates a 60 per cent normal distribution and special distributions of €150 million for 2026 and 2027, the report concluded.