European investment banking and asset management group Wood & Company this week published an analysis of Greek and Cypriot banks, focusing on valuation, profitability and shareholder distributions.

The report, whose findigns were shared by Greek business outlet Newmoney, argued that the market has begun to value Greek banks for their recurring profitability and sustained capital returns.

Wood & Company maintained buy ratings across all banks under coverage, but stressed that the sector can no longer be viewed as a single trade, as National Bank of Greece, Eurobank, Piraeus Bank, Alpha Bank, Optima Bank and the Bank of Cyprus each present distinct risk and return profiles.

The investment house added that valuations are no longer deeply discounted, with the average Greek and Cypriot banking group expected in 2026 to trade at 1.4 times tangible book value, a return on equity of 15.2 per cent, a price to earnings ratio of 9.8 times and a dividend yield of 5.1 per cent, compared with 1.6 times, 15.3 per cent, 10.2 times and 5.4 per cent respectively for its European peer group.

The analysis suggested that the next phase of upside cannot rely on the historical narrative of cheap valuations, but must instead be supported by evidence of sustainable earnings generation, consistent capital distribution and high returns on tangible equity even in a lower interest rate environment.

The National Bank of Greece was described as the cleanest quality and lowest risk option, with its target price raised to €17.80, implying 22 per cent upside and 28 per cent total expected return.

The bank’s strong capital position, low-cost deposit base, distribution visibility and its partnership with Allianz were highlighted as supporting what Wood described as one of the clearest capital return stories in Greece.

The report also pointed to the bank’s new core banking system as a potential long-term competitive advantage in the age of artificial intelligence.

Eurobank was presented as the most balanced quality play, with a target price of €4.90, implying 23 per cent upside and 29 per cent total expected return.

Wood argued that the market continues to apply an excessive complexity premium due to exposure in Cyprus and Bulgaria, the integration of Hellenic Bank and insurance activities, but stressed that Eurobank combines high profitability, low deferred tax asset intensity and one of the strongest recurring fee platforms in the sector.

Alpha Bank was identified as the most aggressive total return opportunity, with a revised target price of €4.60, implying 25 per cent upside and 32 per cent total expected return.

However, Wood cautioned that Alpha Bank remains a story of execution rather than maturity, with acquisitions, its relationship with UniCredit, rising fees and a 60 per cent payout ratio needing to be translated into tangible results.

Piraeus Bank carried a target price of €10.30, implying 19 per cent upside and 26 per cent total expected return, with the group’s strategy described as credible through balance sheet growth, improved fees via National Insurance, tight cost control and high return on equity targets.

At the same time, the bank was seen as having a smaller margin for error due to its lower starting capital base compared with peers.

Optima Bank was highlighted for growth, with a target price of €11.50 and 21 per cent expected total return, described as the purest credit expansion and high profitability story without legacy burdens.

The Bank of Cyprus, also with a target price of €11.50 and 25 per cent total expected return, was positioned as the clearest income play, with potential to maintain 90 per cent to 100 per cent payout ratios while retaining meaningful capital buffers.

The macroeconomic backdrop was described as supportive, with credit expansion in Greece driven by business and investment rather than consumption, making it more resilient to short-term geopolitical and energy shocks.

The Recovery and Resilience Facility was expected to cover 30 per cent to 37 per cent of cumulative net loan growth in 2026 to 2028, supporting projected credit growth of 5 per cent to 5.5 per cent.

The report further stated that the sector does not need to become cheap again to deliver returns, but must remain disciplined, continue distributing capital without undermining growth, and generate more transparent and predictable earnings.

It added that stock selection is becoming more important than the broader banking sector trade, as differentiation between institutions widens.

Finally, Wood highlighted that capital return is central to the investment case, arguing that while the market focuses on immediate dividend yield, it may underestimate the second-order effects of sustained distributions.