Rating: Buy, P.T.: €11.20
Small upgrades to medium-term EPS, ROTE to continue to increase
1Q26 results showed a strong start to the year, with robust credit growth (+11% yoy), benign credit losses (COR 40bps or 26bps excl. servicing fees) and strong fee generation (93bps) as Etniki started contributing. We fine-tune our numbers, with slight upgrades to EPS estimates (~1% by FY28E). We forecast stated EPS for FY26E of 91cps vs. management’s target of ~90cps (Figure 1 inside). We think the business plan is conservative, balancing risks in the short-term of lower growth due to the Middle East conflict. Piraeus, as the other Greek banks, benefits from higher NIMs should rates rise (for 25bps higher ECB rate, NII would be 2% higher, earnings 3%), although we already factor in the UBS base case of 50bps of hikes in FY26.
Fee generation lifting to 93bps, Ethniki starting to contribute
Ethniki contributed €20m or 10% to total fee income of €210m in the quarter on GWP of €217m, on track to achieve its targeted GWP of €930m for FY26E. Net fees increased by 32% yoy (including Ethniki) with its existing bancassurance operations performing strongly (+30% yoy), with strong growth, also, in asset management fees (+41%). Strong fee generation, now at 93bps of assets, is a key underpin of its ROTE, which we forecast at 15.5% in FY26E (co target ~15%), to reach ~16.5% by FY28E. Cost efficiency is impressive, although the CTI ratio lifted to 37.3% in 1Q26, which we see subsiding to 34.8% for FY26E, and further to 32% by FY28E.
Strong credit trends, returning to NII growth, Q1 COR below FY guidance
Performing loans lifted by 3.5% qoq (+11.1% y/y) in a normally seasonally subdued Q1 for the industry, as its corporate loans (ex notes) increased by 4.4% qoq (13.5% yoy). Management indicated that they remain comfortable with the FY26 performing loans target of >€40bn having already added €1.3bn to the portfolio in Q1 vs. our forecast of €3.4bn for FY26. They have not yet seen any impact from the Middle East conflict on their clients or loans in tourism and shipping, with Greece looking relatively resilient so far. Piraeus sees GDP growth for Greece subsiding from the current base case of 1.9% for 2026 to around 1.5%-1.6% in the current high oil price scenario.
Valuation: On 8.4x PE (FY26E), ~7% discount to European banks
Our price target increases by 2% to €11.20/share, based on our two-stage, capital-adjusted Gordon growth model (see Figure 3 within), assuming a sustainable ROTE of 16.5% (on CET1 of 13.5%), COE of 12% (relatively high vs. our assumptions for other European banks). The shares are on ~1.2x TNAV for a sustainable ROTE of at least 16.5%, while yielding ~7%. We see substantial re-rating potential as it continues to deliver on its long-term integrated financial services plan.
