Morgan Stanley bullish on Greek banks despite years of gains

Morgan Stanley has initiated coverage of Greece’s banking sector with a positive stance, arguing that the investment case for Greek lenders remains compelling despite the strong rally recorded in recent years. The American investment bank maintained overweight recommendations for Alpha Bank, Eurobank and Piraeus Bank, while adopting a neutral stance on the National Bank of Greece and CrediaBank. Morgan Stanley said the Greek economy continues to offer one of the strongest growth profiles in Europe. In the report, whose findings were shared by Greek business outlet Newmoney, the investment bank stated that the Greek economy remains supported by robust domestic demand, investment activity and inflows of European funds, creating particularly favourable conditions for the country’s banking sector. The bank forecasts Greek gross domestic product growth of 2.1 per cent in 2026 and 2.0 per cent in 2027. Investment is expected to increase by around 5 per cent annually, while Greece is also projected to maintain high primary surpluses. Morgan Stanley estimates that the country’s debt-to-GDP ratio will decline to 131.5 per cent by 2027. The report said the favourable macroeconomic backdrop should translate into continued growth in corporate lending, annual deposit growth of between 3 per cent and 4 per cent, and stronger fee income through the expansion of asset management and insurance activities. It also noted that the tight labour market should help keep credit risk costs at low levels. Morgan Stanley further highlighted that Greek banks are among the most interest rate-sensitive institutions in Europe, a characteristic that continues to support net interest income. Their strong deposit bases, the report said, also allow them to maintain high profit margins. Despite the strong outperformance of bank shares over recent years, Morgan Stanley believes valuations remain attractive. Greek banks are trading at around a 10 per cent discount in terms of 2028 price-to-earnings ratios compared with their European peers. At the same time, they are expected to deliver stronger growth in tangible book value and higher dividends. In terms of preference, Morgan Stanley ranks Alpha Bank first, followed by Eurobank, Piraeus Bank, the National Bank of Greece and CrediaBank. For Alpha Bank, the investment bank assigned a target price of €4.90 and reiterated its overweight recommendation. Morgan Stanley said the lender’s new business plan, recent mergers and acquisitions and the prospect of additional capital strengthening could lead to upward revisions to earnings forecasts. The bank noted that Alpha Bank currently trades at around 6.5 times projected 2028 earnings and approximately 1.1 times tangible book value, levels it considers undervalued. The target price implies upside potential of roughly 25 per cent. Morgan Stanley also assigned Eurobank an overweight rating and a target price of €4.90. It highlighted the group’s geographical diversification across Greece, Bulgaria and Cyprus, as well as the diversification of its business model through insurance operations. The report argued that the market underestimates Eurobank’s future profitability despite expectations for a return on tangible equity approaching 19 per cent by 2028. For Piraeus Bank, Morgan Stanley described the lender as the purest investment play on the Greek economy. The investment house set a target price of €11.30 and predicted that fee income in 2028 would exceed both market expectations and management targets. This, it said, would be driven by growth in asset management, lending and property-related revenues. Morgan Stanley maintained a neutral recommendation for the National Bank of Greece, accompanied by a target price of €17.20. Although the bank acknowledged the lender’s conservative management, strong capital buffers, ample liquidity and significant investments in technology, it argued that other Greek banks currently offer a more attractive combination of valuation and growth prospects. Similarly, Morgan Stanley assigned CrediaBank a neutral rating and a target price of €1.16. The report recognised that CrediaBank possesses the strongest growth profile in the sector, with loan growth around twice that of competitors, earnings per share growth approaching 70 per cent, and tangible book value expanding by 25 per cent annually through 2028. However, Morgan Stanley said current valuations already reflect these growth prospects. The investment bank also expects Greece’s transition from an emerging market to a developed market to act as an additional catalyst for Greek equities. It recalled that both STOXX and FTSE Russell are expected to upgrade Greece to developed market status in September 2026, while MSCI is projected to follow in May 2027. According to Morgan Stanley, this process should gradually attract greater capital flows from institutional investors in developed markets and provide further support for investment interest in Greek banking shares.