HSBC has revised its target prices for Greek banks, with an emphasis on increasing dividends as the main factor attracting investors, even as profitability momentum slows.

For Alpha Bank, the target price is set at €3.05, up from €3, with a “buy” recommendation and a potential upside of 75.3%. Eurobank’s target remains unchanged at €3.50, also with a “buy” rating and a 44% upside potential. National Bank’s target has increased to €9.90, up from €9, with a “hold” recommendation and a 16.2% upside margin, while Piraeus Bank’s target is raised to €7.25 from €6, with a “buy” rating and a 63.7% upside potential.

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HSBC notes that the sector’s main appeal lies in the anticipated rise in dividends, with a forecasted 27% increase in dividends per share by 2026, leading to dividend yields of 7-10%. The outlook is supported by strong nine-month 2024 results, improving capital strength, better credit ratings, and the limited impact of faster DTC amortization, which positions all banks to achieve a payout ratio of 50% by 2026.

Despite profitability declines due to lower interest rates, higher payouts will likely drive further stock appreciation, with HSBC indicating that lower book valuations and high dividend yields leave room for gains. The profitability of Greek systemic banks is expected to decline by 9% in 2025, but this follows a strong base. However, HSBC has revised its 2024/25/26 profit forecasts upwards by 16/14/20% on average, reflecting factors like robust credit expansion in Greece, asset management momentum, and a reduction in the cost of risk.

HSBC has downgraded National Bank to a “hold” from a “buy” due to limited downward adjustment potential in its funding costs, which may result in weaker net interest income (NII) prospects over the next two years. Conversely, Piraeus Bank stands out with a 10% dividend yield for 2026, one of the highest in CEEMEA. Eurobank is favored for its successful capital allocation and attractive valuation, while Alpha Bank is seen as the most accessible exposure to Greek banks, with a positive earnings outlook and a compressed valuation.

While Greek banks are appealing, HSBC also highlights alternatives with better combinations of earnings growth and dividend yield, including PKO, Moneta, and Isbank, particularly due to factors such as reduced mortgage loan provisions and favorable shifts in interest rates.