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My suggestions are aimed at getting some structure to trading this particular share, which is and can be a very profitable share given its abnormal volatility.
I have just noticed that a number of the contributors to this chat page are unhappy when the SP goes down and never seem to have a view on when to buy and then when we have a good run up in the SP they look for the impossible, calling for 8+ and even 10+. I can appreciate there are a number of historical holders here, hoping for a return of 2005/6, but that's not going to happen and at some stage one has to reset and get on with trading the realistic range.
European Banks in the past two years have traded against their NAV. There has been no growth in banking and therefore there is no PE ratio or NAV premium. The reversion to value analysis is through NAV and therefore one can run with a range, once you have cleared your historical positions and hope!
Check out the play and tell me if you lose money in the next year. I certainly haven't in the past year!!!
So now the believers should be long at 6.55, 6.45, 6.35 and maybe some at 6.25 (I failed to fill in full down there late yesterday). With the reversal today the plan changes a little. Accumulation is likely done for now (unless intraday we move back to 6.25 or lower....in which case continue the accumulation). First point of reflection in an up run will now be the 61% reversal from the recent high (6.95) and the low (6.25 yesterday). So look for 6.68 as the first point to take some profit. This is technical, so one can allow for some fundamentals to creep in as to whether to hold on. I personally like to play the full range or say 90% of it which means NAV 0.75-85 on the downside and NAV 1:1 on the up side.
For the laggards, repeat the starting strategy at 6.55.
There has been great trading opportunities in this share in the past month or so. You have to play it off a NAV basis (I have been preaching on this for over a year) or lose money hoping for the impossible or perhaps praying to a history that is gone forever.
Based off the interims the NAV is 7.70 (up from 7.59 at end 17). Basically you need to sell at NAV 1:1 and look to buy between 0.75 (5.78) and 0.85 (6.55). If you look at the moves in the past month we got up to 7.59 (perhaps the message that NAV had got up to 7.70 was missed by some) and down as low as 6.45. If you play a lot shorter then on can buy in at the suggested levels and if one get a fast pullback in price (like we got last week from 6.45 to 6.95) then look at pitching a sale at 61% of the high and low (in this classic case it meant 7.08, which wasn't actually achieved this time).
So to suggest to the converted: Start buying in at 6.55 and take more each 10c decline till you get to 5.78. At that point (if reached) buy whatever value you intend to allocate to the share. Sit back and wait to exit on the basis described above. You will get rich.....and if most subscribers on this platform did the same we would stop the complete nonsense we are subjected to on an almost continuous basis.This includes the rubbish about Brexit and its impact on BIRG!!
Anyone know anything about this notice of a pre stabilisation number being introduced on BKIR by UBS? Supposed to be to manage manipulation!! I have never come across this before (I believe it to be illegal in the US). Seems to be an odd way to go about things when the weakness in the SP is a direct function of the inability to grow. One wonders if Davy didn't know something about it and if the government is not in the wings somewhere, needing to offload their piece before much longer!!!.
If it is anything like these share buybacks in the States, the outcome is 90% downside, not upside as the conditions for natural share appreciate are not there and the use of artificial support is a very good reason to sell into it. Should be interesting!!! Who takes the shares of UBS.....I am sure they aren't standing up to be counted, after all they are bankrupt themselves!!!!
The projections and growth rates that Davy mention are aggressive, which in turn gives rise to the SP9.5 in 2020 they suggest. The point is whether they are realistic given that the same projections made by Davy on this share in the past three years have not been met, being significantly over optimistic. A SP of 9.50 would equate to a NAV of 1.25:1, compared to current NAV 0.92:1. This would require a growth rate of 25% for 2018 to 2020. This is rosy and for sure to be strived for...but is it realistic.
The Sunday Independent of 4 August pasted comment on the interims:
BoI announced an increase in net loan book of E500m. This equated to loan growth of 0,65% in the year to end 2018. Positive yes but real growth no!
The article concludes: " if the banks can't grow profits and lending when the economy is growing like the clappers, the property market has largely recovered from the crash and employment is running at record levels,when can they?"
Food for thought!
The market rarely gets things wrong which probably explains why the share price is going lower, not higher! Trade the facts not the hope!!
Well at 36% overall NPL there is no sense in selling to a VF. The write off is almost 2/3s done, the bank has little reason to build more capital via release of an asset and no doubt they have a fully functioning recovery department doing as much as they can to resolve whatever is there to resolve. Let them keep going and start questioning when the NPL number stops going down or reverses its trend.
I think the use of the wording "put by" is not right Jmcc. If the amount of Eur8billion was a number back in the day, or cumulatively since 2006/7 then it is a write off and if declared came through the income statement. The State had to come to the party with significant rights issues (ended up with about 50% of the bank, I think), NAMA took out a huge parcel of their loan book when it was formed (paid something like 50c in the Euro), the State took the whole off the original CoCo Bond (Eur1 billion). All this added up to the contra which was the total of the write off. At the end of it all the share was valued at 9/10c (from something like Eur10) and the Bank had significant liabilities. As I recall they announced a schedule of legacy loans which I seem to think were written off annually from about 2010 to 2015/16 (these were approved by the ECB)? I have to say for myself, the one big positive was that the BoI balance sheet was reorganised early and upfront. Unlike any other European Bank at the time (and even now in many many cases) you knew what you were buying. You may not have been happy (certainly if you were a shareholder at Eur10) but once the wipeout had happened it was transparent and you could be a believer or otherwise!
Interesting Jmcc but not convincing.
Your example may put some light on the conundrum I noted yesterday, that roughly 50% of NPL comprise buy to rent properties. Perhaps this category could extend to builder financing against completion and sale. In the crash your scenario was likely prevalent, hence the link to NPLs still on the books. For a bank to leave their asset to rack and ruin, well that's another story.
Your comment suggests that with your example such a property may realise 50% value via a VF, even though in your mind it may be worth zero. This is simply wrong. A VF would work through each and every property being offered in the parcel and certainly would not be offering 50c in the Euro for something worth very little, if anything. I imagine that the parcels now being offered to the VF by certain banks are the dregs of the portfolio, hence the rumour of 20c in the Euro. The logic of BIRK retaining such a portfolio on its books and working it out over time (including ultimately a total write off) still stands. For as long as confidence holds in the institution (and I think it does for now with BKIR) then it benefits for the extended length of management and write off allowed under European banking rules. No reason to take the up front hit between 20% and what I think their NPL book is marked at at present, around 60% (Senator suggests 80%) of book. What it does mean in a BRIK is that there will continue to be an annual writedown of "legacy"loan, thereby detracting from the income level and by definition the dividend payout. No Irish bank is out of the woods and this will act as an ongoing hindrance on any premium being attached to their share price. A share price equal to NAV of 1:1 must be viewed as a bonus, not a stepping stone to greater things.
Senator makes very valid points re NPLs and BKIR. If the market can live with their current level (7.5% noted) and that is in a downward trajectory then deal with it yourself. Yes it is more costly but rumour has it that the parcels being traded off into the American vulture funds presently are changing hands at 20c in the Euro!! The banks going this route at present, 1) have a very high NPL number (I think well above 10% in all cases) and 2) a very negative market perception on their business. The route they are going is quick and necessary to remove the level above 10%. No one is going to buy their shares with this problem persisting. I fully subscribe to Senator's number logic and BKIR should hold its course. Indeed they were the ones who actually bought a parcel of partially performing loans from a couple of banks exiting the Irish market. This too makes a lot of sense in their present position.
One thing that I don't get is the number that shows that roughly 50% of the NPLs are buy to rent mortgages. If we are to believe that rents have done what they have done, countrywide then why would this type of lending be in default, or if it is why the banks have not taken back the asset in a far more aggressive basis. Maybe someone in the know can explain this conundrum?
Re Irish bank share prices one should read the article that was in the Sunday Independent week before last. Very good comment on the actual growth levels of loans and margins thereon, following the interim results of BKIR and AIB. Again it is very clear that bank shares are not going anywhere (that is Europe in total) and Irish banks are not growing, nor have the balance sheets right now to justify a premium to NAV. In the case of BKIR you are not going to break through a NAV of 1:1 for the foreseeable future (and definitely not before you get rid of Draghi and his lunacy policies). So at interim stage BKIR claimed a NAV of 7.70 (up from 7.49 at year end). Note that in this uptick there was not a trade above 7.60.The pullback now makes absolute sense as the Euro comes under dollar pressure, inflation rises and energy prices kick high (all the while the lunatic Draghi sits and dreams about sub libor rate into 2019, when thank the lord he finally disappears). The SP can get back to a 6.50-75 level without too much problem and this should be the point for decent accumulation. Play the range not the hope!!!
Blackrock has played an ownership stake between 4.85% and 5.1% for the past couple of years. This is its trading position, roughly 1.5m shares. It runs this piece actively and fairly well, enhancing returns for its investors. It built its most recent trading position at around 6.5 and started offloading from about 7.75. It missed the bottom at 6.20 and the top at 8.15 in the most recent cycle. Try joining their logic and you will all be better off!!
We are heading for 6.20 - 6.50 (maybe a sneak peek at 6.00) now, compounded by the emergence of the State as a potential seller of its 15% stake. Long time coming and this will be the bottom price achieved in this cycle. Blackrock just airing its cupboard ahead of the play!!!
Exchange rate variance does not impact this proposed capital charge. Actual lending increases from base year end, whether it is in GBP or Euro is measured and charged. A flat Sterling loan book, year on year, combined with a shift in GBP-EUR X rate (up or down), no impact on the capital buffer. An increase/decrease in Sterling loan book, valued at end of year GBP-EUR X rate, results in an increase in the capital buffer capital charge/decrease in the capital buffer capital charge (assuming there has been a reserve created.
Any increases in loan grown are positive (the capital buffer capital charge is largely irrelevant) and therefore the share price will react, on the margin, at an incrementally faster rate than any negative impact caused by a charge against reserves.
The SP reacted perfectly overnight having gone ex div. Closed at 7.465, 0.115 dividend, opened at 7.35. From here its all its own again! What is making perfect trading sense at present and has for the past 12 months is the Bank's NAV range. European banking is trading at a range of 0,75 to 1.00. Very few banking shares with any decent float (unlike say AIB which is 85% government still) is or has been trading above 1:1 NAV. With BIRG this places the range at 5.99 (0,75) to 7.49 (1:1). Very simple, at 5.99 (or lower) sell your house and buy the share, at 7.49 (or higher), sell the share and buy back a better house!! In the last run we bottomed out at 6.20 (huge buy) and topped out at 8.15 (huge sell). The action of the edges is the froth....use it but don't fall for it. This is how to get rich on this share and stop the absurd bleating that seems to go on and on in this forum.
The results today were solid but unimpressive....not the formula to galvanize a move much above present NAV of 7.50. A NAV of 1,1:1 at around 8.10 is not attainable in the current environment of European banking. The market is spooked by the miss in NIM (3.5% off) which implies that Dec saw a sharp deterioration to NIM of 2.24%. FY 18 is expected to be lower than FY17. This is a growth problem and without the prospect of growth you cannot run at a premium to NAV. NPLs are ok but remain a drag. Capital levels are not a market issue at the moment....in fact they need to bring their capital cover down by pushing their balance sheet. This seems unlikely. Dividend was below expectations and not at all great. 18% of NI against a target of 50%. We will all be gone by the time they get up there and given their lack of growth prospects the dividend is the only thing that can/should differentiate this share. Figure out the trading ranges and look to play the ranges. there is no straight line in this share in the foreseeable future!!
ChrisMeyers is a light amongst the gloom of sick economics! The destruction of basic economics (what exactly do they now teach in Econ 101 these days), started by Helicopter Bernake, compounded by dove Yellen and taken over by arch liberal monetarist Draghi has created the most blatant distortion of asset allocation ever! This is social engineering at its worse and no different to Communist era economics where society was suppressed to the will of the government decision taking. Heavy handed distortion that will end in misery and most likely depression when all is said and done! It was the first time that we have been presented with Central Bank action that allowed bankrupt governments (led by the UK in the G5 space) to finance at zero rates. The inevitable creation of bubbles across all asset classes and offering the consumer a false sense of security in an already grossly over indebted society was nothing more than a Central Bank Ponzi scheme. These people should be heading to jail, not lauded as saviours of the world. There was reason to offer a basic support in liquidity back in 2007-08 when Western Banking implosion meant that liquidity had ground to a halt and the mechanism of exchange was threatened ....but that soon translated to the biggest creation of bonds ever. Has any country that went with the self induced lunacy reduced its artificial expansion of debt? The answer is no. They have wasted the money on endless misconceived social consumption expenditure that will never be repaid. Let the current crop of Central Bankers be fired. They have destroyed the system, the savers and ultimately society. Bring the Germans in to run the ECB and wish the nutcases at the BOE and the Fed good luck. They are unlikely to ever come right. The US is/has moved into the single biggest twin deficit nation in the world with their tax policy and the market is still asking why the dollar is going down...can you believe it! We can be thankful that the Euro has figured out the end result of this all and provided us with some value relief going forward. We will need it before we git rid of the Italian lunatic in 2019! Coming back to BIRG. The price targets, based off NAV have been reached in the magnificent 20% price rise since mid November. At 8.10 we achieved a 1.1:1 NAV, a massive jump from the low of 0.75:1 back in November. Do not dream of 9,10 and 20 euro SP for BIRG. In this cycle we are done! Study European banking and understand that we have peaked. Take 80% of your profit from the rise off the table and sit back! My belief is that you will not have to wait long ....the break in global equities is not far off and BIRG, for all its value (and you know my views on this) will not withstand the break. Look for your spot between 8.00 and 8.20 and walk away. Be happy...it been a great run!
Well,well, well here we are in the early days of 2018 enjoying the fruits of some great pump and play in BKIR!! Nerves of steel and a firm grip on the strategy of the institutions now offers instantaneous gratification of maximum accumulation at 6.30-35, a mouth watering 20.55% return inside of 6 weeks!! Consider the institutional strategy: 1) Pump the share down to insane value levels around 6.30. This a NAV level of 0.75 on a balance sheet that is in the top three cleanest balance sheets in Europe; the top Irish bank trading at a 50% discount to AIB, profitability in the top 10 European banks, Basel 3 Capital levels above 13%, dividends forthcoming after 10 years absence, ect ect ect. 2) Clean out the non believers by absorbing all the odd lots (anything below 10000 shares) at any level down to 6.30. Note how many days the shares sold were less than the shares bought on the way down and vice versa on the way up. Classic tactics when the objective is to move price not volume. Note the classic burn close to the turn when 6.6m shares changed hand in one transaction...the only one. Some idiot institution got legged! 3) Create the value levels that allow the entry of a new shareholder, at a sale price that also acknowledges the government shareholding of 15%....for surely this is the prize up for grabs, supplemented by the odd 5% from one or more of the big guys. So what is that level: We know that the State was taken out of a piece of its AIB holding at an over inflated NAV of 1.1:1 in a market that was at best trading at 0.8:1, but then who cared it was only divved up to he Irish institutions, not the international boys who ran screaming laughter at the old boys club in Dublin! We know that the State was not going to play at the lower reaches (6.30 and NAV 0.75), but they were prepared to lose a piece of AIB at NAV of 1.1:1. What is 1.1:1 in BIRG? 8.20 is the number. Guess what Davy is calling in BIRG.....8.20 off course. Is this the number to bring one of the German lenders in....why not. Finest platform in Ireland at a cost of nothing over what it would cost to establish....maybe a small premium if the State has the balls to negotiate! So happy punters and some jaded holders why join the misinformed at 7.55, why not 8.20 giving the brave (and wealthy) a 30% return from the depths of despair a mere 6 weeks ago?? Interesting times as nothing has leaked but only the small punters play on. Game on. Just watch the volume and the size of the deals. If the big hitters come in before a deal announcement and at a level below 8.20 then think carefully. We all know from the Art of the Deal it is only done when it is done!! Enjoy!
Positive trade on the information given. CET increase outweighs 2bp give up on NIM. In this environment the market is seeking high CET. However what has to happen is the redeployment of "released capital'' going forward into better marginally credit opportunities, essentially Irish based mortgage lending. Will this happen, can it happen in the present competitive lending environment with limited growth opportunities. Investors won't have the answer to this, but it is dividend positive if one assumes that non deployment should reflect via release of capital back to shareholders. Here's hoping!!
It is bizarre but is a function of present shareholding, not economics! The AIB IPO was cleverly handled: small share float (the State is still massive in here); distribution only into Irish institutions who were told to take one for the boys and a valuation significantly above any peer group in European banking....I think NAV of 1.1 or 1.2. Barclays were at a NAV of 0.6 at the time and BKIR at 0.85 I think. So no economics in this one, just a cash con by the State. BKIR on the other hand has the State at 15%, and non Irish Institutions at another 25%. Looking at the position and viewpoint of these shareholder right now they are not going to add....by the same token they are not going to sell either. So we have stagnation with a greater than normal influence from the small shareholders, a lot of which are really p..... off by management and their inherent inability to sell a success story. All very sad for now. Anyway don't confuse the two shares right now based on economic valuation. AIB's time will come but only when the State ups it sale of shares. BKIR simply offers value that must be taken now when it is on offer, not later when thinks realign and the going NAV valuations move back up to a 1.3/1.5 mark!!