Post 2Q26, upgrade EPS, PT increases to €12
Guidance raised, but still looks conservative, raise EPS by ~3%
Q2 results beat consensus with both NII and fees surprising positively. Despite higher revenue guidance, the stated EPS guidance was retained at 90cps, while we were already ahead of this at 92cps and raise further to 95cps. At the adj. EPS level, we upgrade FY26E by ~3% to 99cps (vs. VA consensus at 95cps). With the adjusted ROTE reaching a record of 16.9% in Q2, which we forecast at 15.8% for FY26E, well above its current guidance of ~15%. We believe its guidance remains conservative with further upgrade potential to FY26 and also the medium-term. It is the biggest bank in Greece by loans and deposits, a strong franchise with rising profitability, re-iterate our Buy rating.
Strong top line performance, both NII and fees
Sequential NII growth of 6% qoq stood out (+7.4% yoy) despite slower performing loan progression in Q2 (+1.1% qoq) than Q1 (+3.5%), although we still see it reaching its FY26E growth target of >€3bn (UBSe €3.2bn or +8.7% yoy). The NIM at 2.28% was ahead of expectations, resulting in raising its NIM guidance for FY26E to 2.2% (from 2.1%). Continued strong growth of the securities book (+20% yoy, +4% qoq) also supported NI. NII guidance was therefore increased to ~€2bn (from €1.9bn) vs. UBSe revised €2.1bn. Net fees increased by a remarkable 52% yoy as insurance fees increased from €43m to €70m, with Ethniki is running ahead of schedule with fees of €46m in Q2 vs. €20m in Q1 and guided €110m for FY26E.
ROTE to continue to lift, capital accreting, CET1 back above 13% by year-end
We expect to see some one-off costs in H2 and in the medium-term to implement the Ethniki acquisition and optimise group headcount, but it is on track to deliver a CTI ratio of <35% for FY26E (UBSe 33.6%) as it targets ~32% by FY28E. We see the adjusted ROTE increasing from 15.2% in FY25 to 15.8% in FY26E as it is on track to reach its target of 16.5% by FY28E. The CET1 ratio accreted by 20bps to 12.8% resulting in raising guidance to >13% by year-end (from ~13%). It could upstream excess capital within Ethniki, which could underpin its CET1 ratio. The risk to payout is therefore to the upside (UBSe 57% FY26E, 62% FY27E).
Valuation: Remains relatively attractive, 1.5x TNAV, ROTE >16% medium-term
The shares are on a FY27E PE of 8.7x on our revised numbers, >10% ahead of European banks on ~10x. We see adj. EPS growth of ~10% pa over three years with stated EPS +14% pa. Our two-stage GG derived price target increases by 4% to €12 (Figure 3 within). We assume a sustainable ROTE of 16.5% on a CET1 of 13.5%, COE 11.75%. The dividend yield of 7.3% (FY27E) is attractive, while it has potential to raise payout further as we forecast its CET1 ratio to increase to reach 14% by FY28E.
