National Bank of Greece

Where we land

National Bank of Greece keeps 45% of its revenue as operating profit, what is left after paying the costs of running the bank. That is the widest margin among the big European banks we compare it with, and rising euro interest rates are helping to hold it there. Yet the share price still assumes that profits will shrink over the coming years. Given where rates are heading and what analysts expect for next year, that assumption looks too cautious to us.

We award it silver. Analysts rank it among the very best, and the single reason it misses gold is that its profits are not backed by cash as fully as we require. The risks, the price and the questions over its recent profit record are all part of the case, but none of them is why this is silver rather than gold.

What the business is

This is, overwhelmingly, a Greek bank. Its core banking business in Europe brings in 85% of revenue: taking deposits from savers and businesses, lending that money out as mortgages and business loans, and earning the difference between what it charges borrowers and what it pays depositors. Managing money and giving financial advice adds 12%, property ownership 2%, and banking elsewhere across Europe, the Middle East and Africa the last 1%.

A bank whose income comes mostly from lending lives or dies by two things: the gap between its lending and deposit rates, and whether borrowers pay back what they owe. The 45% margin is the result of getting both right at once. The question is whether that can last.

Why now

The European Central Bank has turned. After a period of cutting rates, which squeezed what banks earn on their loans, it raised its deposit rate in June and again in September, to 2.50% from 2.00% a year ago.

Much of the bank's loan book resets as euro rates move, so higher rates feed through to what borrowers pay fairly quickly. Its deposits, by contrast, are largely cheap, sticky savings and current accounts that tend not to demand higher interest straight away. When lending rates rise faster than deposit costs, the gap widens, and that gap is where most of the profit comes from.

We have held the shares in our Conviction 10 since August 2026, and they still qualify. Not everything has moved in the bank's favour, though: over the past year its standing against every listed company has slipped on both growth and the quality of the business. The case for owning it now rests on the rate turn showing up in profits, not on a record that has been getting stronger.

The case for

The strongest argument comes from the analysts who follow the bank most closely. They expect earnings per share of 1.43 this year and 1.67 next, growth of about 17%. More telling is the direction: over the past 45 days, forecasts were raised 12 times and cut only 3. When estimates are being pushed up rather than down, it usually means those closest to the numbers are seeing the business do better than they had assumed.

Put that alongside the margin and the case is coherent: a bank already turning nearly half its revenue into operating profit, entering a period when the main thing that sets its income is moving in its favour, with forecasters revising upward rather than hedging.

Where the growth could come from

The clearest engine is the shift in euro interest rates. No recent headlines point to anything else, and the figures fit closely. Sales fell 4% over the past year, as you would expect from a lending bank while rates were cut, yet analysts expect earnings per share to rise sharply next year, with upgrades far outnumbering cuts. The likeliest reason is that a bank whose loans largely reprice with the central bank's rate is now on the right side of the rate cycle. That is our inference from the pattern, not something the bank or the news has reported. Confirmation would be the net interest margin, the gap between what it earns on loans and pays on deposits, rising quarter after quarter while deposit costs stay roughly flat, showing it is keeping most of the rate rises rather than passing them on to savers.

Beyond rates, we see three further sources of growth, again our reading of where the business is going rather than anything reported. The first is lending volume. EU recovery funds and a recovering Greek economy are fuelling corporate borrowing for infrastructure, energy and tourism projects. Lending more money, not just earning more on each loan, would add income that does not depend on where the European Central Bank takes rates next. Steady growth in net business lending, with money paid out to recovery-fund projects, would show it happening.

The second is fees. Greek savers are moving money out of deposits and into mutual funds and other investment products, and card and payment use keeps rising; both earn the bank fees that have nothing to do with interest rates. If the asset management and advisory business grew faster than lending, profits would become steadier through the ups and downs of the rate cycle. The sign to look for is fee and commission income outpacing lending income, alongside rising client money under management.

The third is spare capital. The bank has built one of the strongest capital positions among Greek banks, leaving room to hand cash back to shareholders or to fund acquisitions. A higher share of profits paid out as dividends, or buybacks that reduce the number of shares, would lift earnings and cash returns per share even if total profit grew only modestly. Any such announcement would most likely come alongside results.

Set against all of this is the sharp rise in energy costs facing the bank's Greek borrowers, which could undo much of it.

The case against

Start with the very strength the case rests on. At 45%, the operating margin is the widest among the major European banks we compare it with; ING and Lloyds sit at 41%, CaixaBank at 36% and Santander far behind. But a wide margin is not the same as a high-quality business overall. On our broader assessment of quality the bank sits mid-pack: above Santander, Intesa, ING, Lloyds and Nordea, but behind CaixaBank and NatWest. The margin is excellent; the business around it is solid rather than exceptional.

Next, the price. At 13 times earnings the shares match CaixaBank at the top of the peer range, against a peer median of 11, making them the second most expensive of the eight banks in their group. NatWest trades at 8 times and Santander at 9. Across the whole market, the shares' standing as good value has dropped noticeably over six months. Whatever bargain there was has largely been taken.

The profit record gives the most reason for caution. Operating profit climbed strongly from 690m in the year to June 2021 to 1.7bn by June 2024, then slipped back to 1.5bn, where it has stayed in both years since. Net profit has been flat at 1.1bn, and sales fell 4.1% over the past year. The rebound analysts are forecasting has not yet appeared in the bank's own results; it is still a forecast.

The share price has moved ahead of that rebound. The shares have climbed strongly over the past three and six months and now sit near the top of the market for recent price gains, yet that climb has only brought them back to roughly where they stood a year earlier on that measure. The rally has restored lost ground while making the shares more expensive, which leaves less room for disappointment if the profit recovery is slow to come.

Finally, the same economic shifts that help the bank also threaten it. Higher euro rates feed straight into a euro-area lender's income, but over the same year Brent crude oil is up 88% and European gas 132%. Those costs land on the bank's own customers, and the question is whether they can keep repaying their loans.

What the price assumes

One way to read a share price is to ask what it needs to come true. Suppose the shares stay where they are for five years, and that by then the market values the bank's earnings the way it typically values profitable listed companies today, at 18.5 times earnings. On those assumptions, today's price is consistent with earnings per share shrinking by about 7% a year for five years, to 0.85.

The bank's earnings have moved too unevenly to show a trend we would want to project, so we offer no forecast of our own. But the bar is undemanding. Even the bank's recent run of falling earnings, carried forward at about 4% a year, would land at 1.02 a share, 120% of what the price requires. Analysts, meanwhile, expect earnings to grow next year, not shrink.

This is the heart of our view that the price is too cautious. The shares have risen 26% over the past year and 17% over six months, yet the price still embeds a decline in profits that neither the analysts' forecasts nor the bank's own recent history quite supports.

The other side of the medal

The one risk we would keep in view above all others is an energy shock in Greece. If higher oil and gas prices strain the bank's borrowers, the extra income it is earning from higher rates could be eaten away by losses on loans that are not repaid.

This risk matters because it strikes at the exact mechanism the case rests on. The bank's profits have been helped not only by lending margins but by years of cleaning up bad loans, which kept charges for loan losses low. Energy costs fall hardest on households and energy-hungry businesses, borrowers who owe the bank in euros. A wave of defaults would reverse that support just as rates were meant to lift profits. The price, at a premium to peers, offers little cushion, and growth is no safety net: the bank sits around the middle of the companies we rate on growth.

What would show it arriving is a rise in new non-performing loans, meaning loans whose borrowers have stopped paying, especially among small businesses and mortgage holders. The other early tell is the bank's cost of risk, the share of its lending it sets aside each year for expected losses. If either starts climbing while energy prices stay high, the shock is reaching the loan book.

What to watch

The single most useful signal is whether the net interest margin keeps widening while new unpaid loans stay low. Those two numbers move before annual profits do, and together they show whether the bank is keeping the benefit of higher rates without paying it back in bad debts. Deposit costs are the early warning on the first: if savers start demanding more, the margin gain will be thinner than hoped. Energy prices are the early warning on the second, because they set the pressure on borrowers before defaults appear. Yearly operating profit holding at or above 1.5bn would confirm that the margin has survived the energy squeeze.

The thesis would be shown to be wrong if the next twelve months simply repeat the last two: net profit stuck around 1.1bn, sales still falling, and analysts beginning to cut their forecasts rather than raise them. In that case the rebound the analysts expect, and the reason the price looks too cautious to us, would not have arrived.

The numbers

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.