The Bank of Cyprus and National Bank of Greece are first and seventh, respectively, in the list of the top 10 European bank stocks recommended by Swiss bank UBS, a report released yesterday shows. The others, in order of preference, are Barclay’s, Credit Agricole, CS Group, HSBC, KBC, Reiffeisen International, SEB and UCI. «Our equity strategists recommend an overweight stance toward the European banks sector, based on bottom-up earnings growth of 10 percent plus next year and the potential for upgrades. We overweight Austrian, Greek, Italian, Swiss and domestic UK banks in line with our positive view on asset management, private banking and EM exposure,» the report says. Moreover, UBS includes Emporiki and Alpha banks on another list of preferred stocks due to the likelihood of their participation in merger and acquisition activity. The Greek government has decided to sell its remaining stake in Emporiki by December and it is likely that France’s Credit Agricole will buy that stake and undertake the bank’s management. The government opposes mergers among big Greek banks, preferring takeovers by, or strategic partnerships with, foreign banks, in order to stimulate competition and avoid creating an oligopolistic market. UBS bases its positive outlook on Greek banks on their very good earnings prospects «at least through 2008» and on the larger scope of growth for retail banking services. «The Greek market is among the most profitable in Europe and return on capital is expected to exceed 25 percent in 2007,» the report remarks.