Greek and Cypriot bank shares are expected to continue outperforming, with investment firm Axia-Alpha Finance raising its target prices and maintaining buy recommendations, while identifying Eurobank and the Bank of Cyprus as its preferred investment choices.

In its latest report, whose findings were shared by Greek business outlet Insider, the investment firm said the positive investment story for Greek and Cypriot banks remains intact, supported by improving fundamentals, resilient profitability and favourable macroeconomic conditions.

According to the analysis, bank shares have gained 24.7 per cent since the beginning of the year, comfortably outperforming the Euro Stoxx Banks Index, which has risen by 12.9 per cent over the same period.

Axia attributed this performance to high and sustainable profitability, strong capital ratios, ample liquidity and increasing shareholder distributions.

The firm identified Eurobank as its top pick, citing the group’s geographical diversification and broad international footprint.

It also singled out the Bank of Cyprus as one of its preferred investments because of its combination of strong profitability and generous shareholder distributions.

Axia increased its target price for Eurobank to €5.30 from €4.50.

The investment firm also raised its target price for the Bank of Cyprus to €11.60 from €10.90.

In addition, it lifted its target price for the National Bank of Greece to €17.50 from €14.50, describing it as particularly attractive for investors seeking dividend income.

The target price for Piraeus Bank was also increased to €10.60 from €8.50, with Axia saying the lender offers greater exposure to the growth prospects of the Greek economy.

The report said the banking sector’s outlook remains positive, as both macroeconomic conditions and institution-specific developments are expected to strengthen core revenues.

According to the analysis, changes in monetary policy should support net interest margins, while allowing credit expansion to continue.

At the same time, recent acquisitions are expected to accelerate growth in fee and commission income.

Against this backdrop, Axia believes bank management teams are likely to revise upwards their 2026 financial targets, potentially leading to higher profitability and larger distributions to shareholders.

The firm has also revised its own forecasts upwards for the 2026 to 2028 period, incorporating the latest business trends and an expectation of two interest rate increases during 2026, which it expects to be reversed in 2027.

Its forecasts for pre-provision profits have been increased by 2.6 per cent, while projected net profits have been raised by 2.9 per cent.

Axia now expects the sector’s average return on tangible equity (RoTE) to reach 16.0 per cent in 2026, 16.1 per cent in 2027 and 16.4 per cent in 2028.

Despite the strong rally in banking shares, the report argued that valuations remain attractive.

The sector is currently trading at around 1.45 times tangible book value (P/TBV) and 9.4 times estimated 2027 earnings, according to the analysis.

Axia also highlighted the expected reclassification of the Greek stock market as a developed market in September 2026 by S&P, Stoxx and FTSE as an additional potential catalyst.

The report said the upgrade could attract increased capital inflows into Greek equities.

However, the investment firm also warned that, given the substantial gains already recorded and the prospect of heightened market volatility, investors should consider building their positions gradually rather than making large allocations at once.