CITI’S TAKE
Eurobank reported a 2Q26 net profit of €407m, up +23% qoq, +8% yoy, and +7% above company-collected mean consensus and +8% above Citi forecast. 2Q26 ROTE Underlying profit excluding one-offs was higher at €425m. Reported 2Q26 ROTE stood at 16.6% and a higher 18% on an adjusted basis. The beat was driven by better trading & other income, higher income from associates, and better net interest income (NII). The bank increased its guidance, raising its targets for organic loan growth, NII growth, and fee growth and now targets a ROTE of c17%, up from its previous target of c16%. EPS growth this year is now targeted at >10%. A solid result.
+5% PPOP beat in 2Q driven by better trading income and NII — Pre-provision operating profit in 2Q26 grew +10% qoq, +15% yoy exceeding company-collected mean consensus and Citi estimate by +5%. This was driven by +3% better-than-expected revenues which grew +6% qoq, +12% yoy, led by strong trading and other income of €37m vs. €11m in 1Q26 and +3% qoq growth in NII or +1% vs. consensus and +2% vs. Citi expectations. Fees grew +4% qoq, +8% yoy supporting revenue growth but came in -1% below consensus and -4% vs. Citi estimates. OPEX was flat qoq (+7% yoy) and was in-line with both consensus and Citi forecasts. NIM on average assets expanded 2bp over the quarter to 2.48%.
Solid asset quality trends — The NPE ratio fell c10bp qoq to 2.5% although provision coverage of NPEs declined to 82.4% from 94.1% at end 1Q26. Loan loss impairment declined -7% qoq, -10% yoy and was -6% below consensus and -10% vs. Citi estimate. Risk cost declined to 50bp from 55bp at end Mar-26.
Loans, funding, capital — Net customer loans grew +2% qoq, +9% yoy driven by growth in corporate lending (+4% qoq, +15% yoy) and consumer lending (+3% qoq, +9% yoy) while mortgage lending (-1% qoq, +2% yoy) was subdued with contraction in Greece (-4% qoq, -5% yoy) offset by growth in mortgages in Bulgaria (+6% qoq, +23% yoy) and Cyprus (+1% qoq, +3% yoy). Customer deposits grew +5% qoq, +11% yoy. The CET1 ratio was unchanged over the quarter at 15.4%
Guidance revised upwards — The bank revised upwards its outlook, increasing its organic loan growth target to €4.5bn up from €3.8bn, also increasing its NII growth guidance +7% up from c+2.5% previously, increasing its underlying fee growth guidance to +10% from +7%, increasing its core operating profit (e.g., ex. trading income) to c€2bn from €1.9bn and increasing its ROTE target (based on adjusted underlying profit) to close to 17% from c16% previously. Management now targets EPS growth this year to >10%.
Implications — A solid set of results which combined with upgraded guidance is likely to lead to some modest upward revisions to consensus earnings estimates.
Valuation
Risks
(1) Better- or worse-than-expected revenue development trends, driven by margins, interest rate developments, volume trends, ability to impose fees to clients, changes to the competitive environment as well as domestic and global macro conditions.
(2) Inability to achieve planned cost savings from internal efficiency measures and reduction in NPE related management costs.
(3) Higher/Lower provisions due depending on performance of the economy.
(4) Unexpected regulatory initiatives that impact earnings.
(5) Better or worse execution of recent M&A.
If the impact on the company from any of these factors differs from our base case expectations, the stock could have difficulty achieving our target price or could increase more than we expect.
