Greek systemic banks have been placed among the European banking sector’s strongest performers by UBS, which has issued a buy recommendation on all four major Greek banking groups and identified scope for further gains in their share valuations.

In its report, the fingdings of which were shared by Greek business outlet Newmoney, UBS highlighted Eurobank and Alpha Bank in particular as investors look towards their wider regional operations, including their presence in Cyprus.

UBS said Greek banks were among the main beneficiaries of the country’s continuing economic recovery, while more effective use of their capital could unlock further value for shareholders.

Despite recovering from lows reached during the crisis in the Middle East, the banks’ valuations remain attractive, with Greek lenders continuing to trade at a clear discount to comparable European banks.

The investment house identified capital deployment as a key catalyst for stronger returns, with banks combining smaller strategic acquisitions with increased cash distributions to shareholders.

At the same time, UBS said the sector’s underlying financial performance remained strong.

Performing corporate lending is forecast to grow by around 8 per cent annually between 2025 and 2028, while net interest margins are expected to have reached their lowest point.

As a result, UBS expects net interest income to accelerate, while stronger fee income should provide additional support over the medium term.

The report also found that non-performing exposures have largely normalised, leaving Greek banks with relatively low levels of credit risk.

UBS expects Greece’s economy to maintain GDP growth of around 2 per cent a year in the coming years, driven primarily by a sustained investment cycle supported by the European Union’s Recovery and Resilience Facility.

Greece has already received around €25 billion from the €36 billion available through the recovery fund, according to the report.

The country’s fiscal position is also described as strong, with UBS forecasting a primary surplus of up to 3.5 per cent of GDP for 2025.

Public debt is expected to continue falling, reaching 138 per cent of GDP in 2026 and 133 per cent in 2027.

UBS warned that geopolitical tensions could create upside risks to its forecasts, but said key sectors including tourism and shipping continued to perform strongly.

The Greek banking sector also has some of the lowest deposit sensitivity to interest rates in Europe, alongside effective hedging strategies, according to UBS.

Piraeus and the National Bank of Greece are considered the most sensitive to changes in interest rates, while Alpha Bank has the lowest sensitivity among the four banks.

Credit quality has also improved considerably, with organically generated non-performing exposures falling significantly and the cost of risk performing better than expected.

The National Bank of Greece and Eurobank were seen as having the strongest positions on credit quality, while Alpha Bank lagged slightly in terms of non-performing exposures and provision coverage.

Eurobank is of particular interest to Cyprus because of its expanded presence on the island following its acquisition of Hellenic Bank, which was completed in 2025.

UBS described Eurobank as an attractive regional growth story, with further potential from expansion across south-eastern Europe.

The bank’s acquisitions of Hellenic Bank and Eurolife were described as particularly positive for profitability and return on tangible equity, while UBS said Eurobank had struck a good balance between pursuing further acquisitions and increasing cash returns to shareholders.

UBS gave Eurobank a buy recommendation and a €5.10 price target, representing potential upside of 11.7 per cent.

Alpha Bank also has a direct presence in Cyprus and was given a buy recommendation, with UBS setting a €4.90 price target, implying potential upside of 8.7 per cent.

Although Alpha Bank’s profitability remains lower than that of some of its peers, UBS said it was steadily improving and benefiting from value-enhancing acquisitions.

The bank is also expected to record strong growth in earnings per share over the next three years, supported by its share buyback programme.

UBS gave Piraeus Bank a buy recommendation and a €12 price target, implying potential upside of 18.8 per cent.

Piraeus was identified as the investment house’s top choice because of its attractive long-term growth prospects and expected improvement in return on tangible equity.

Its acquisition of National Insurance is expected to strengthen profitability by creating a broader financial services and bancassurance business.

UBS also highlighted Piraeus’ relatively low price-to-earnings valuation, saying it offered the greatest scope for a re-rating among the four banks.

The National Bank of Greece was given a buy recommendation with an €18.70 price target, representing potential upside of 12.7 per cent.

UBS described the National Bank of Greece as providing the highest-quality exposure to Greece’s economic growth, pointing to its strong profitability, robust capital position and high credit quality.

The bank also has scope to return excess capital to shareholders beyond its planned distributions, while its agreement with Allianz is expected to provide a further boost to earnings and return on tangible equity.

Across the sector, UBS expects banks to benefit from the combination of economic growth, stronger lending, improving fee income and lower credit risks.

The report also argues that the next stage of the sector’s development will depend increasingly on how banks deploy their capital, rather than simply on balance-sheet growth.

For Eurobank, this includes using its enlarged footprint in Cyprus and elsewhere in south-eastern Europe to generate additional growth while maintaining shareholder distributions.

For Alpha Bank, UBS sees the combination of acquisitions, improving profitability and share buybacks as providing support for earnings growth despite its more modest expected share-price upside.

The overall assessment is that Greek banks remain attractively valued despite their strong recovery, with UBS expecting further improvement as economic growth, lending and capital returns strengthen.