Eurobank

Where we land

Eurobank is a Greek bank whose income from lending is rising again as euro interest rates climb, and the analysts who follow it have been raising their forecasts far more often than cutting them. Yet the share price, for all its recent climb, assumes the bank's earnings shrink over the next five years. We think that is too gloomy, and we award it gold.

The verdict comes with a condition that belongs at the front. Net income exceeds operating income: the bottom-line profit is being helped by items outside the bank's day-to-day business, while the profit from that business itself has fallen. The case for the shares is that rising rates restore the core. The risk is that they do not do so before the outside support fades.

What the business is

Eurobank is, at heart, a lender. Its European banking business, which takes deposits and makes loans to households and companies, accounts for 86% of revenue. Investment banking and corporate finance, meaning advising companies and helping them raise money, brings in another 10%. Property ownership adds 3%.

After the costs of running the bank, it keeps 23% of its revenue as operating profit, its operating margin. For a bank, the biggest force behind that margin is the gap between what it earns on loans and what it pays to savers. That gap moves with interest rates, which is why Eurobank's story is so closely bound to the European Central Bank.

Why now

The European Central Bank has raised its deposit rate twice this year, to 2.50% from 2.00% a year ago. Longer-term borrowing costs have moved the same way, with the euro-area ten-year government yield up 0.67 points over the year. Much of a Greek bank's lending is priced off short-term euro rates, so when those rise, the interest on loans tends to reset upward faster than the interest paid on deposits, and the gap between the two can widen.

Analysts have responded. Over the past six weeks they made 12 upgrades and a single cut, and their forecasts now point to earnings per share growing by nearly 16%. We have held the shares in our Conviction 10 since September 2026, and they still qualify.

The case for

The strongest argument for Eurobank is that the bad news is already visible in the record while the forecasts have started to turn. On our measure of growth, which tracks how sales and profits have actually been moving, it slid from the middle of the market to the very bottom in six months and now has the weakest growth standing among its peers. The sharpest single fall came on 30 July 2026, consistent with the drop in sales and operating profit. That slide breaks a modestly positive history rather than confirming a long decline: over three years, sales still grew at 4.6% a year.

Against that weak backdrop, analysts' opinion has turned unusually one-sided. The consensus expects earnings per share, the profit attributable to each share, to rise to 0.51 from 0.44, and the revisions are arriving just as interest rates move in the bank's favour. If the pattern holds, the low point for growth may already be behind it. The case depends on rates lifting lending income enough for the core business to carry the profit by itself.

Where the growth could come from

The lever that can move profits fastest is the one already turning. With European banking at 86.4% of revenue, the deposit rate up twice this year and forecasts being raised, the outlook for lending income most likely explains what is driving the shares. This is our reading of the figures rather than something the bank has reported; our figures do not show how much of the banking line is interest income. What would confirm it is net interest income, the difference between interest earned and interest paid, rising quarter on quarter with the lending margin widening. Revenue fell 8% last year, yet earnings are expected to grow 16% next year, and rising rates combined with steady loan growth are what could bridge that gap.

A second leg sits inside the same banking line: growth beyond Greece, notably through its Cypriot bank and its Bulgarian arm. Cyprus offers cheap, plentiful deposits, the raw material of a bank's lending, while Bulgaria offers steady loan growth. Our figures do not separate the country operations, but these markets can lift returns and reduce dependence on a single economy, and investors may value a more diversified bank more highly. The evidence would be a rising share of group profit from international operations, with loans and deposits growing in both countries.

A third source is fees. The bank is pushing to earn more from asset management, from selling insurance through its branches with an insurance partner, and from advisory and capital-markets work. Investment banking and corporate finance already make up 10.4% of revenue; wealth and insurance fees are not separated in our figures. Fee income does not depend on rates, so if it outpaces lending income, earnings become steadier. Fee and commission income growing faster than interest income, alongside rising assets under management, would show it working.

The case against

The most uncomfortable fact is the direction of the core business. In the twelve months to September 2026, operating profit fell to 1.2bn from 1.8bn in the prior years, and sales fell 8.1%. Net income, meanwhile, rose to 1.5bn. The bank's main business is shrinking while its reported profit holds up, and a profit that leans on items outside day-to-day banking is less dependable than one earned from lending and fees.

The margin comparison makes the same point from another angle. Eurobank's operating margin of 23% trails Intesa, ING, CaixaBank, Lloyds and NatWest, so the bank cannot yet claim that its own operations deliver results on a par with Europe's larger lenders.

Nor does the price offer much cushion. At 11 times earnings, meaning the share price is that multiple of a year's profit per share, the shares sit in the middle of a peer range running from 8 to 13 times. Every listed peer ranks well above Eurobank on growth, yet the shares carry no discount for its sharper deterioration; the market is neither punishing the weak figures nor paying up for the recovery the forecasts describe.

The recent rally should also be read carefully. The shares have climbed sharply over three months and sit close to the top of the market for price strength, but they are slightly weaker on that measure than a year ago. The rally restores a previous position rather than breaking new ground: investors are back where they were, betting the recovery arrives.

What the price assumes

One way to judge a share price is to ask what it would take to justify it. Suppose the price stays flat for five years, and that by then the shares trade at 18.5 times earnings, the middle figure for every profitable listed company we cover. On those assumptions, today's price requires Eurobank's earnings to shrink by 9% a year for five years, leaving earnings per share at 0.24.

Over three years, the bank's earnings per share have grown by 8% a year. If that trend simply continued, which is its own past carried forward rather than a forecast, earnings per share would reach 0.60, or 245% of what the price requires. The analysts' forecasts point the same way, upward.

This holds even after the shares' strong run: up 22% over six months and 40% over the past year. The price still assumes a shrinking bank, which is why we think it too gloomy, provided the core business turns as rates suggest it should.

The other side of the medal

The single risk to keep watching is that the core business stays weak while soaring energy costs test the bank's borrowers. It strikes at both halves of the case at once: the bullish view relies on operating profit recovering, and the support propping up net profit sits below the operating line, so it may not repeat.

Energy is what could turn that weakness into a real problem. European gas prices are up 132% over the year and Brent crude oil is at $123 a barrel. Those costs squeeze the Greek and regional households and companies that owe the bank money, and the same rising rates that help lending income also make their debts dearer to carry. If arrears rise, the money set aside for bad loans would land on an operating profit that is already lower, with no guarantee the outside support is there to cushion it, and could slow dividends and share buybacks. The signs would be new bad loans ticking up and provisions climbing while operating profit stays stuck.

What to watch

The confirming signal is lending income rising from quarter to quarter, with the gap between what the bank charges borrowers and pays savers widening, pulling operating profit back toward the 1.8bn of the two prior years while new bad loans stay flat. Ahead of the results, the rates the bank pays on deposits against those it sets on new loans will show whether that gap is opening, and each European Central Bank move tells whether the tailwind is still blowing. Energy prices give an early read on borrowers' strain before any of it shows up as arrears.

The warning would be the opposite. If operating profit keeps falling from 1.2bn and the support behind net income does not recur, the forecast rise in earnings per share would fail, and the upward revisions of the past six weeks would most likely reverse.

The numbers

Qualifications that apply to every figure above: net income exceeds operating income: earnings are supported by something below the operating line.

The same industry, for comparison

Research for information, not personal investment advice or a recommendation to buy, sell or hold any security: see Important information. Data as at 31 October 2026.