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Tuesday, October 20, 2020

Turn Around Time for National Bank of Greece (ADR) (OTCMKTS:NBGGY)

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National Bank of Greece (ADR) (OTCMKTS:NBGGY) is a quintessential example of evidence of a crisis hidden under the surface of the current bull market. Banks in peripheral Europe have been trapped under a mountain of poorly valued assets and subject to a nasty pro-cyclical dynamic as they fail to gain traction in struggling euro states. But recent action suggests things may be starting to turn for the better. However, as we will see below, the reasons for this shift are somewhat less than obvious.

We’ve witnessed 40% on the upside in the stock over the past month of action. And yet, that movement is coming in what might seem like a rocky stretch for EU catalysts. Furthermore, the listing has seen a jump in recent trading volume to the tune of 170% above the average volume levels in play in this stock over the longer term. But, not only is support holding, the stock is thriving. This is important.

National Bank of Greece (ADR) (OTCMKTS:NBGGY) bills itself as a diversified financial services firm.

The company operates in Retail Banking, Corporate & Investment Banking, Special Assets Units, Global Markets and Asset Management, Insurance, International Banking Operations, Turkish Banking Operations, and Other segments. It offers current accounts, deposit multi-products, deposits in foreign currency, savings accounts, sight accounts, and time deposit accounts.

The company’s loan portfolio comprises housing loans; consumer loans; asset financing solutions, such as loans for business premises and equipment, financing solutions for solar power generation, and leasing services; and liquidity financing solutions consisting of working capital financing, factoring, and guarantees, as well as co-funded loans.

It also provides financing for SMEs and renewable-energy-sources, and letters of guarantee and documentary credits; syndicated loans, floating rate loans, and corporate bonds; factoring services, revolving credit facilities, closed-term loans, and loans in foreign currency; project finance; import-export services, trade finance solutions, and guarantee programs for international transactions; investment products and services comprising ascending time deposits, mutual funds, SICAVs, and stock trading services; and child and pension, health, and property insurance products.

In addition, the company provides debit and credit cards; payments through standing orders; bank cheques and orders in euro issuance; foreign currency services; corporate cash management services; and payments and liquidity management solutions, as well as operates in real estate management, hotel, and warehousing businesses.

The company operates in Greece, Turkey, the United Kingdom, Bulgaria, Romania, Albania, Serbia, FYROM, Cyprus, Malta, Egypt, and South Africa. It operates 528 branches and 1,432 ATMs. National Bank of Greece S.A. was founded in 1841 and is headquartered in Athens, Greece.

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As noted above, we make the case that the sun might be starting to shine for peripheral EU banks. But with such political turmoil in the EU at present, one might wonder what we’ve been smoking.

Look at it this way: a lot of these banks are in real serious trouble if we are living in a world where they can’t get support or find a context that allows them to avoid Bail-ins and instead write some bad paper off and get help recapitalizing. This is particularly true in Italy.

However, since Italy just voted “No” on their referendum on Sunday, and Matteo Renzi has resigned – or is in the process – the ECB will probably tell us on Thursday that it will backstop these banks. That allows investors to take bigger risks in those that are starting to see improving business trends.

In other words, business is getting better, and the recent vote in Italy along with other political uncertainty ahead, creates a context that minimizes the risk for new investment flows into banks like NBGGY, which is definitely starting to make some money.

That sparks the virtuous circle so important for financial sector momentum. We also think competitiveness will drive EU governments to pare back on bank regulations if the Trump administration is able to repeal Dodd-Frank. That all spells trouble for society some years down the road, but should foster big bank profits and bonuses in 2017.

Now commanding a market cap of $2.6B, NBGGY has a significant war chest ($10.38B) of cash on the books, which must be weighed relative to an appreciable load ($27.06B) of total accumulated debt.

NBGGY is making real money, with trailing 12-month revenues coming in at 640.94M. In addition, the company is seeing major top line growth, with y/y quarterly revenues growing at an astonishing 2800%, though the comp on this is particularly advantageous for present favorable analysis. You can bet we will update this one again as new information comes into view. For continuing coverage on shares of $NBGGY stock, and other hot stock picks, sign up for our free newsletter today and get our next hot stock pick!

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