I agree that Greece badly needs a stable political situation. If the 20th gave a surprise ND win & gov with help of To Potami and Pasok, I could easily see NBG and Euro triple from current levels. If somehow Poular Unity were to win then the banks go to zero.
Senator - thanks - I see the lie of the land in terms of the banks there in a very similar position. For me, a dual Euro & NBG long, incremental position over medium term is flashing at me to start dipping my toes.
John - I would consider this currently high risk too but it looks like some of the main mechanisms are now in place for a lot of that risk to be mitigated if the people give a strong mandate.
Greece changed to DTC a year or so ago from a DTA. All Europe's banks use DTAs in their capital calculation (incl Bkir!!!) but there is a deduction over time that doesnt apply to DTCs. So if this stress test in Greece changes the rules it will also apply to Italian, Spanish & Portuguese banks. Also in Greece remember it was not a banking crisis originally but a sovereign crisis caused by politicians overspending & under collecting. Also most of DTCs are a result of the sovereign write down of 2012 which allows the banks to utilise the losses over a 30 year time period. So, given the history and the knock on effect I think it would be silly to address now. Its totally legitimate to use previous losses against future profits before you pay tax. This is an asset with the sovereign as your debtor. If Greece is financed to 2018 under the 3rd bailout why worry about this now?
On profitability, would it surprise you if I told you NBG was profitable in FY 2014 & FY2013 and only went in to a loss in 1Q 2015 by just over 100 million and this was caused by a one off trading loss of rougly the same amount and yet NBG currently trades at one sixth of BV!!!
Yes. The Greeks have been shambolic but I think a large part of what we saw over the latter months is what happens when a country loses all hope and confidence - everything seemed hopeless to them - even the life lines!
A strong pro EU & Reform mandate would be a precursor for success for the country. Anything less than that strong mandate from Greece will be unforgivable.
I dont know alot about the Greek banks because I just can't bring myself to see them as a hugely risky punt never mind investment. after what has gone on there lately and what has still to come, the ability of the banks make a profit is questionable. that's assuming there isn't a rights issue that halves any investors holding to start with.
would i be right in saying that the banks there are using a lot of deferred tax to make up the capital ratios and that it is very possible this will be discounted during new stress tests? I know the ECB may fudge the issue to get Greece over the line but is it not just one more risk on a high pile of other risks.
Eurobank is interesting as it is in majority private ownership & so if Ross & Co play then it will survive in private hands. alpha and Piraeus are both 67% owned by Gov with little valuable to sell & so if they have to raise 2.5-3bn then the 33% private shareholders might decide that it would be better to support one of Euro and NBG and let Alpha and Piraeus go to 99% state ownership. This will be a big benefit for Euro and NBG in a recovering market as Greek business will be shy of dealing with state run banks
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