Bank of America (BofA) reports Greek banks are becoming more appealing as the volume of loans is expanding, with the Greek banking sector posting stronger yields and lower valuations.
In its analysis, BofA highlights that while the net interest income (NII) in the Greek banking sector is facing pressure, the annual 7-10% uptick in loans constitutes a convincing distinction vis-à-vis the mild credit growth in Europe.
Bank of America (BofA) recently increased its target prices for several Greek banks, with the target price for Eurobank raised to €2.84 from €2.76.
The National Bank of Greece (NBG) was raised to €8.44 from €8.06, and for Piraeus Bank to €5.32 from €5.30. The target for Alpha Bank remains at €2.06. BofA maintains a “buy” recommendation for all these banks except for NBG, which has an “underperform” rating.
While pressure on earnings per share (EPS) from net interest income (NII) has yet to occur, BofA believes that the erosion of return on tangible equity (RoTE) is already reflected in the valuations.
The Greek banking sector has proactively sought to mitigate NII pressure through hedging strategies and increased bond holdings. Additional support could come if loan growth remains robust in the coming quarters.
While investor focus has largely been on revenue in recent quarters, cost management is becoming increasingly important. After years of streamlining, including staff and branch cuts, cost bases are beginning to rise.
BofA projects a 6% and 5% increase in costs for 2025 and 2026, respectively, driven by necessary salary adjustments and capital investments.
