Morgan Stanley forecasts new international expansion for Eurobank and a catalyst for upgrades for Alpha Bank, as the former possesses liquidity from its countries of operation, while the latter will increase revenues and fees through recent acquisitions. Yesterday's report by the American investment bank points out that Greek bank stocks are still trading at a discount, despite boasting a high return on equity of 15-19% and a 9.6% increase in tangible book value and earnings per share (2026-2028), compared to just 7% for European banks. Greek banks have surged 40% since the beginning of the year, a rally supported by expectations of high interest rates, credit growth, and the stock exchange's upgrade from emerging to developed market status.
According to the US bank, the discount relative to European peers stands at 10%, despite a positive macroeconomic environment, sustainable growth from corporate lending, deposit growth of 3-4%, and increased commissions from loans, insurance, and higher assets under management. Additionally, interest rate hikes support net interest income and earnings per share, as Greek financial institutions are among the most sensitive in Europe, maintaining high margins due to a sticky deposit base. Morgan Stanley maintains its preference for Alpha Bank, Eurobank, and Piraeus Bank, which represent the institutions with the highest beta metrics.
Alpha Bank (target price 5.5 euros):
Morgan Stanley views the business plan to be presented during Investor Day (November 5) as a catalyst for upgrades, as it will include increased revenues and fees stemming from the bank's recent acquisitions. The American firm considers the stock undervalued, citing a P/E ratio of 8x for 2028 and a P/TBV of 1.4x for a return on equity of 15%. Investor exposure remains among the lowest across Greek banking stocks, providing flexibility for potential mergers and acquisitions given UniCredit's public statements regarding the possibility of acquiring full control. The institution also holds the highest sensitivity to market fluctuations due to its reliance on wholesale funding, making it the least interest-rate sensitive bank in Greece.
Eurobank (target price 5.4 euros):
Morgan Stanley believes that Eurobank's exposure to fast-growing markets (Greece, Bulgaria, Cyprus) alongside its strong liquidity position can serve as a launchpad for further international corporate expansion. Its business model has gained greater diversification following the acquisition of the life insurance company Eurolife. Over the next three years, the US firm estimates that Eurobank will achieve a compound annual growth rate (CAGR) of 26% in dividend per share (DPS) for the 2025-28 period, as well as a CAGR of approximately 14% in earnings per share (EPS) and 11% in tangible book value per share (TBVPS), metrics that significantly exceed management's official guidance. Furthermore, it considers that the stock trades at attractive valuation multiples (7.9x P/E, 1.8x P/TBV) relative to a projected return on tangible equity (RoTE) of 19% for 2028 (excluding excess capital). Although Morgan Stanley recognizes the absence of an immediate catalyst to trigger a substantial valuation re-rating, it believes the bank will outperform market consensus and management targets, achieving leading performance across European banking in overall growth metrics while trading at the deepest discount of approximately 15% on a P/E basis compared to European peers.
Piraeus Bank (target price 12.3 euros):
The institution is considered the quintessential domestic-focused lender, featuring a diversified business model and strong interest rate sensitivity. Morgan Stanley projects that 2028 fee income will come in 5% higher than market consensus and 13% above management targets, driven by asset management, loan origination, and leasing revenues. Furthermore, its robust deposit base could support further credit expansion at higher profit margins given its low loan-to-deposit ratio. With an estimated 2028 P/E ratio of 8.6x or a P/TBV of 1.7x for a return on tangible equity (RoTE) of 18% (excluding excess capital and the 2025 dividend per share), the valuation is deemed attractive—though no longer exceptionally cheap.
National Bank of Greece (target price 13.3 euros):
It is regarded as the safest pick for exposure to the Greek market, as the institution has been managed with high conservatism and has already invested more heavily in technology relative to its competitors. However, given the robust expansion of the Greek economy, Morgan Stanley prefers lower-valued stocks with higher beta metrics. National Bank trades at a P/E of 9x and a P/TBV of 2.1x (for a return on equity of 18.5%, excluding excess capital) and remains the most widely held Greek bank within institutional investor portfolios. Despite significant prospects for utilizing its excess capital of approximately 0.7 billion euros, an Equal-weight rating is maintained on the stock in favor of titles with lower valuations and higher beta profiles.
Dimitris Pafilas
dpafilas@yahoo.com
www.bankingnews.gr
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