Digital Transformation Will Improve Efficiency And Client Experience

Key Takeaways

• Ongoing digital transformation and enhanced operational efficiency are expected to lower costs, improve margins, and enable better product offerings and customer experience.
  
• Diversified fee income, reduced credit risks, and robust capital reserves position the bank for resilient growth, shareholder returns, and strategic expansion.
  
• Demographic shifts, digital competition, economic and regulatory pressures could constrain growth, erode profitability, and heighten revenue volatility for National Bank of Greece.

Catalysts

Provides financial products and services primarily in Greece, Cyprus, North Macedonia, Romania, Bulgaria, Luxembourg, the Netherlands, and the United Kingdom.

• The substantial progress in digital transformation, notably the near-complete overhaul of the core banking system, positions National Bank of Greece (NBG) to deliver new products faster, improve operational efficiency, and enhance client experience. This technological edge is expected to lower operating costs and drive improved cost-to-income ratios, supporting long-term net margin expansion and profitability.
  
• Continued acceleration of Greece's economic convergence with core EU countries, underpinned by robust GDP growth, higher household incomes, and significant public investment inflows (including RRF funds), is likely to expand NBG's addressable lending and fee-generating customer base, boosting future revenue and earnings growth.
  
• The strategic focus on fee-generating activities-including rapid growth in investment product distribution, higher card/deposit fees, and expansion into mutual/bond funds-leverages the ongoing shift towards digital and cashless transactions in Greece, which should provide sustained growth in non-interest income and thereby diversify and strengthen overall earnings.
  
• Successful reduction in non-performing exposures, strict provisioning discipline, and sector-leading balance sheet coverage have lessened credit risk and provisioning needs, positioning NBG favorably to absorb shocks and maintain higher net margins through credit cycles.
  
• Strong capital buffers (CET1 ratio nearly 5 percentage points above internal targets) not only de-risk the bank but also enable increased and potentially front-loaded shareholder payouts; this optionality improves returns to shareholders while providing resources for bolt-on acquisitions or strategic investments that could accelerate long-term earnings growth.

National Bank of Greece Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming National Bank of Greece's revenue will grow by 4.4% annually over the next 3 years.
• Analysts assume that profit margins will increase from 41.8% today to 43.8% in 3 years time.
• Analysts expect earnings to reach €1.3 billion (and earnings per share of €1.45) by about August 2028, up from €1.1 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 11.9x on those 2028 earnings, up from 10.9x today. This future PE is greater than the current PE for the GB Banks industry at 10.7x.
• Analysts expect the number of shares outstanding to decline by 0.14% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 10.92%, as per the Simply Wall St company report.

National Bank of Greece Future Earnings Per Share Growth

Risks

• Persistent demographic decline and population aging in Greece could limit long-term credit demand and deposit growth, thereby capping future loan expansion and fee revenue growth for National Bank of Greece.
  
• Accelerating adoption of digital and fintech alternatives by younger and tech-savvy customers may erode NBG's traditional market share, putting pressure on net fee income and future revenue streams, despite recent digitalization projects.
  
• The bank's high reliance on the Greek domestic market leaves it exposed to potential domestic macroeconomic shocks, fiscal uncertainty, and political risk, which could introduce revenue volatility and earnings instability over time.
  
• Prolonged low or declining interest rates in the Eurozone, as highlighted by ongoing NII declines and guidance for further pressure, may structurally compress NBG's net interest margins, limiting core earnings and profitability even with strong lending growth.
  
• Intensifying regulatory requirements and capital deployment restrictions-especially as excess capital accumulates and payout ratios are subject to regulatory approval-could raise compliance costs and constrain the bank's ability to reinvest in growth or return capital to shareholders, impacting net margins and future returns.

Valuation

• The analysts have a consensus price target of €12.605 for National Bank of Greece based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €14.5, and the most bearish reporting a price target of just €10.2.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €3.0 billion, earnings will come to €1.3 billion, and it would be trading on a PE ratio of 11.9x, assuming you use a discount rate of 10.9%.
  
• Given the current share price of €13.24, the analyst price target of €12.61 is 5.0% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.