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Capital Deployment Emerges As Key Growth Driver For Greek Banks

UBS highlighted Eurobank and Alpha Bank in a report shared by Greek business outlet Newmoney, as investors increasingly focus on the lenders’ regional footprints, including Cyprus. Greek banks remain among the clearest beneficiaries of the country’s economic recovery, while more disciplined capital deployment could create further value for shareholders.

Despite recovering from lows during the Middle East crisis, Greek banks continue to trade at a discount to European peers. UBS sees potential for a rerating as lenders combine selective acquisitions with higher shareholder distributions.

Strong Fundamentals Support The Outlook

UBS expects performing corporate lending to grow about 8% annually between 2025 and 2028, while net interest margins are believed to have reached their low point. Improving net interest income and fee income should support earnings, while non-performing exposures and the cost of risk have fallen more than expected.

Greece is also expected to sustain GDP growth of roughly 2% annually, supported by investment backed by the EU’s Recovery and Resilience Facility. The country has received around €25 billion of the €36 billion available, while UBS forecasts a primary surplus of up to 3.5% of GDP in 2025 and public debt falling to 138% of GDP in 2026 and 133% in 2027.

Eurobank And Alpha Bank Stand Out In Cyprus

Eurobank drew particular attention following its acquisition of Hellenic Bank in 2025, which expanded its presence in Cyprus. UBS sees further growth potential across south-eastern Europe and considers the Hellenic Bank and Eurolife acquisitions positive for profitability and return on tangible equity.

Eurobank received a buy rating and a €5.10 price target, implying 11.7% upside. Alpha Bank also received a buy recommendation, with a €4.90 target implying 8.7% upside, supported by improving profitability, value-enhancing acquisitions and its share buyback program.

Piraeus And National Bank Offer Further Upside

Piraeus Bank was UBS’s top pick, with a buy rating and a €12 price target implying 18.8% upside. The bank cited long-term growth prospects, improving return on tangible equity and the expected acquisition of National Insurance, which would expand its financial services and bancassurance platform.

National Bank of Greece received a buy recommendation and an €18.70 target, implying 12.7% upside. UBS cited its profitability, capital position and credit quality, while its agreement with Allianz could provide further support to earnings and return on tangible equity.

Capital Discipline To Shape The Next Phase

UBS expects stronger lending, fee income, lower credit risks and continued economic growth to support Greek banks. However, the report argues that capital allocation will increasingly determine performance as lenders move beyond balance-sheet expansion.

For Eurobank and Alpha Bank, regional expansion, acquisitions, improving profitability and shareholder returns are expected to drive the next phase, while UBS sees further upside across the sector as lending and capital distributions strengthen.

Cyprus Government Surplus Rises To €1.61 Billion In First Nine Months Of 2026

Cyprus recorded a general government surplus of €1.61 billion in the first nine months of 2026, equal to 4.0% of gross domestic product, as revenue growth outpaced the rise in public spending. Higher receipts from income taxes, social contributions and value-added tax (VAT) drove the improvement, while lower capital expenditure helped restrain spending.

Preliminary figures released Tuesday by the Statistical Service of Cyprus show the surplus rose to €1.17 billion, or 3.0% of GDP, up from € 442.1 million in the same period of 2025.

Total government revenue increased 6.5% to €12.09 billion, while expenditure rose 2.9% to €10.48 billion.

Key Fiscal MeasureJanuary–September 2025January–September 2026
Total revenue€11,353.9 million€12,091.8 million
Total expenditure€10,186.2 million€10,482.1 million
Government surplus€1,167.6 million€1,609.7 million
Surplus as a share of GDP3.0%4.0%

Income Taxes And VAT Lead Revenue Growth

Taxes on income and wealth made the largest contribution to the increase in revenue. Receipts in this category climbed by €442.2 million, or 15.3%, to €3.34 billion, compared with €2.89 billion a year earlier.

Social contributions rose by €235 million, or 6.6%, to €3.78 billion. Taxes on production and imports increased by €251.5 million, or 7.2%, reaching €3.77 billion.

Net VAT receipts, after refunds, totalled €2.64 billion, up €293.1 million, or 12.5%, from €2.35 billion in the first nine months of 2025.

Some Revenue Streams Decline

Not all revenue categories moved higher. Capital transfers fell by €74.6 million to €96.7 million, while current transfers declined by €71.6 million, or 20.5%, to €278.2 million.

Revenue from services slipped 1.0% to €743.5 million. Interest and dividend receipts dropped by €37 million, or 28.6%, to €92.4 million.

Social Benefits And Personnel Costs Increase

On the expenditure side, social benefits rose by €199.6 million, or 4.9%, to €4.27 billion. Compensation of employees—which includes imputed social contributions and public-sector pensions—increased by €108.3 million, or 3.8%, to €2.99 billion.

Intermediate consumption, covering goods and services used in the delivery of public services, rose by €114.3 million, or 11.0%, to €1.16 billion. Interest payments increased by €8.7 million, or 2.6%, to €340.7 million. Current transfers were up €68.7 million, or 10.6%, at €714.7 million.

Lower Capital Spending Limits Expenditure Growth

The overall increase in spending was tempered by a decline in capital expenditure. Capital-account spending fell by €189.9 million, or 16.9%, to €936.2 million from €1.13 billion in the same period last year.

Investment in fixed capital declined by €94.1 million, or 12.1%, to €686.4 million. Other capital transfers fell by €95.8 million, or 27.7%, to €249.8 million. Subsidies also decreased, dropping by €13.9 million, or 15.5%, to €75.8 million.

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