Bank of Cyprus and Eurobank shares tipped for growth

The Bank of Cyprus (BoC) and Eurobank are well positioned to benefit from a renewed re-rating of Hellenic banking stocks, according to Cyprus-based investment firm Roemer Capital, with the company upgrading the former to a buy recommendation and reaffirming its positive stance on the latter.

The firm said fading geopolitical risks, resilient economic growth in Greece and Cyprus, declining funding costs and the forthcoming transition of Greece to developed-market status should support another phase of outperformance for regional banks.

Roemer Capital said it had reduced its cost of equity assumptions, aligned its forecasts with first quarter 2026 results and extended its valuation horizon to the end of 2027, resulting in significantly higher target prices across the sector.

The investment firm said investors should remain constructive given what it described as a highly favourable risk and reward profile.

The Bank of Cyprus received the most significant upgrade, with Roemer Capital raising its recommendation from hold to buy and identifying it as the strongest capital-return story among the banks under coverage.

The firm assigned the Bank of Cyprus a target price of €11.10, implying an expected total return of 27 per cent, while highlighting its projected 100 per cent dividend payout as a key attraction for investors.

According to the report, the lender continues to benefit from strong capital generation, robust profitability and an attractive shareholder returns policy.

Roemer Capital also maintained its buy recommendation on Eurobank, assigning a target price of €4.90 and forecasting a 28 per cent expected return.

The report said Eurobank remained well placed to benefit from renewed loan growth, improving operating momentum and synergies arising from mergers and acquisitions.

National Bank of Greece and Piraeus Bank also retained buy recommendations, with expected returns ranging between 25 per cent and 36 per cent, while Optima Bank was upgraded to buy because of what the firm described as exceptional growth and profitability.

Alpha Bank remained on Hold on valuation grounds, although the report said stronger-than-expected execution and additional buying interest from UniCredit could still provide upside.

Roemer Capital argued that growth remains the defining feature separating Greek and Cypriot banks from their western European peers.

The report said Greece and Cyprus continue to offer structurally stronger banking markets than “Old Europe”, supported by faster economic growth, healthier balance sheets, low levels of non-performing exposures, capital buffers approaching 20 per cent and abundant customer deposits.

The analysts expect performing loans across the sector to expand at a compound annual growth rate of between 6 per cent and 8 per cent through 2028, driven by private sector investment, digitisation, green manufacturing, supply chain expansion and the first meaningful recovery in household credit demand for more than a decade.

Roemer Capital believes the expiry of lending under the European Union’s Recovery and Resilience Facility will not significantly affect credit growth because banks have successfully shifted back towards conventional commercial lending.

The report also expects the Euribor to remain within a 2.2 per cent to 2.5 per cent range, allowing banks to preserve healthy margins while supporting continued loan expansion.

The investment firm said improving geopolitical conditions have materially strengthened the investment case for the sector.

It explained that Brent crude oil prices have largely returned to pre-war levels while Greek sovereign bond yields have stabilised close to 3.5 per cent, allowing the firm to remove the geopolitical risk premium previously incorporated into its cost of equity calculations.

Although the report acknowledged that renewed military escalation remains possible, it said the likelihood of a major inflationary supply shock, weaker loan demand or significant pressure on banks’ net interest margins has diminished considerably.

Roemer Capital nevertheless cautioned that a lasting peace agreement in the region cannot yet be taken for granted and warned that renewed military conflict could quickly revive market volatility.

The report also highlighted Greece’s forthcoming promotion to developed-market status by FTSE Russell, STOXX and MSCI over the next three to twelve months as a major long-term catalyst.

Although passive emerging-market funds may initially reduce their exposure, the analysts believe access to a much larger pool of developed-market capital will ultimately improve liquidity, trading volumes and international investor participation.

The report argued that this transition, together with Euronext’s acquisition of the Athens Exchange, should significantly strengthen market infrastructure through improved clearing, settlement and global accessibility.

According to Roemer Capital, these developments should particularly benefit the Bank of Cyprus and Optima Bank by enhancing their visibility among international investors.

For the Bank of Cyprus, the report said its Athens listing already provides direct access to a much larger pan-European liquidity pool, helping compress its risk premium while increasing exposure to global institutional investors attracted by its strong profitability and shareholder returns.

Roemer Capital pointed out that the Bank of Cyprus’ average daily trading value increased from below €400,000 before its migration to the Athens Exchange in September 2024 to almost €6 million afterwards.

The firm also observed that the Bank of Cyprus, Eurobank and National Bank of Greece continue to trade at valuation premiums to Alpha Bank and Piraeus Bank because of stronger capital positions and strategic advantages.

Meanwhile, it said Optima Bank’s comparatively higher valuation multiple still does not fully reflect the pace of its earnings growth.

Beyond banking fundamentals, the report painted an optimistic picture for both the Greek and Cypriot economies.

Roemer Capital said that both countries have successfully evolved from post-crisis recoveries into self-sustaining, private sector-led growth economies.

It added that Cyprus has further strengthened its competitiveness through its first major tax reform in more than two decades and extensive efforts to simplify its legal and regulatory framework.

The analysts added that the absence of significant foreign banking competition leaves domestic lenders well positioned to capture expanding corporate and household lending opportunities.

The report concluded that Greek and Cypriot banks remain in a favourable position to deliver several more years of profitable loan growth, arguing that the sector is entering a multi-year expansion phase capable of outperforming the wider eurozone banking industry.