Athens, Greece. Banks operating in Cyprus, including Eurobank and Alpha Bank Cyprus through their Greek parent groups, may benefit from improving conditions in the Greek banking sector, according to separate assessments by Fitch Ratings and UBS. The assessments pointed to stronger growth prospects, resilient profitability and further lending expansion despite lingering structural risks.
Fitch upgrades operating environment
Fitch said its decision to upgrade Greece’s operating environment score to BBB from BBB- reflects improved business prospects for banks, resilient economic growth and favourable funding conditions.
The ratings agency said the stronger operating environment supported its recent upgrades of the National Bank of Greece and Eurobank to BBB with stable outlooks, while also underpinning the positive outlook assigned to Piraeus Bank, which remains rated BBB-.
Structural risks remain
Fitch cautioned that structural weaknesses persist, particularly the large stock of legacy distressed assets that remain outside the banking system and pockets of risk within retail banking.
Economic growth and funding support
Greek banks are expected to continue outperforming much of Europe, with Fitch forecasting economic growth of just over 2 per cent annually between 2023 and 2025 despite geopolitical tensions and global trade uncertainty.
Growth is expected to ease slightly in 2026, mainly because of the impact of the conflict in the Middle East, although the economy should continue to benefit from the final year of investment funding under the NextGenerationEU programme.
Over the medium term, Fitch expects Greek income levels to continue converging towards those of the eurozone, while estimating potential economic growth at around 2 per cent, supported by stronger household finances, continued employment growth and higher investment.
Lending expansion continues
The agency also expects loan growth to remain in the high single digits during 2026 and 2027, following growth of 10 per cent in 2025, driven primarily by corporate lending.
Corporate borrowers are generally considered financially healthy, with moderate leverage, although banks remain significantly exposed to sectors including energy, shipping, manufacturing, services and tourism.
Retail lending is also showing signs of recovery from a low base, with mortgage lending expanding for the first time since 2008.