Swiss bank UBS estimates the profit distribution payout ratio for National Bank of Greece at 73% with a dividend yield of 4.8% for 2026, while also calculating a special dividend of around 13%. For Piraeus Bank, which has chosen to distribute dividends exclusively in cash, profit distribution will reach 58% with a dividend yield of 5.6%, while for Alpha Bank and Eurobank, the payout ratios will reach 55% with dividend yields of 5.7% and 6% respectively. Overall, UBS recommends a buy rating for all banks, raising target prices by 8.7% (Alpha Bank) to 18.8% (Piraeus Bank).
What UBS views as the catalyst that will "unlock" the value of Greek banks is how they allocate their capital through a combination of bolt-on acquisitions and dividends or share buybacks. The Swiss bank recalls that all four Greek banks recovered from their lows at the start of the Middle East crisis, yet bank valuations remain attractive with price-to-earnings (P/E) ratios trading at a discount compared to European peers. Furthermore, from a cost-of-capital perspective, market capitalization levels for Greek institutions are not demanding compared to their European competitors. In detail, the Swiss bank's valuation for the four systemic banks is as follows:
Alpha Bank (target price €4.9). According to UBS, it has relatively low profitability, though improving, aided by accretive acquisitions, while maintaining a high growth trajectory in net earnings per share over the next three years.
Eurobank (target price €5.10) represents an attractive regional growth story with upside potential from its acquisitions in Southeastern Europe, boosting earnings growth and profitability. The acquisition of Eurolife is also accretive to earnings and return on equity, while potentially increasing shareholder distributions.
National Bank of Greece (target price €18.7) offers quality exposure to Greece's macroeconomic recovery, higher profitability combined with a strong capital position, solid credit quality, and optional returns on excess capital beyond standard distribution plans. Additionally, the announced bancassurance deal with Allianz further enhances earnings and return on tangible equity (ROTE) in the medium term.
Piraeus Bank (target price €12) offers attractive long-term growth potential and an increasing return on equity as it builds a comprehensive financial services model following its acquisition of Ethniki Insurance. It remains at a discount relative to its P/E ratio, offering attractive potential for further re-rating.
The next 3-8 months are critical
What foreign firms have so far avoided detailing is the political risk associated with upcoming elections, as they consider a coalition government the baseline scenario without drastic policy shifts in the economy. Through September and October, opinion polls are expected to shape the political baseline for next spring's elections to a certain degree. However, the challenge for foreign funds is that they hold large portfolios primarily concentrated in banking stocks. Consequently, shifting direction quickly within a short timeframe is difficult. That is why they need to make prompt strategic decisions.
According to a foreign fund manager in Greece, this means that over the next three to eight months at the latest, investors must finalize their decisions regarding the Greek market. Additionally, many market participants recall the bitter experience of January 2015, when political change under SYRIZA triggered violent liquidations on the Greek stock exchange. Therefore, institutional investors do not intend to wait for a worst-case scenario (such as an inability to form a government) and be caught off guard by events. Thus, for foreign investors, there is one prime scenario: If a government is successfully formed following the second round of elections, this outcome will prove highly positive for foreign portfolios. Conversely, if polls indicate fragmentation requiring a third electoral round, developments will turn negative and will likely be priced in advance.
Dimitris Pafilas
dpafilas@yahoo.com
www.bankingnews.gr
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