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ING Groep N.V. Message Board

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  • jpomper jpomper Aug 27, 2011 2:28 PM Flag


    Hi Sam aand Dustin,

    never trust any opinion in investment decisions but yours only.
    I give my outlook to help you forms yours.

    1) Greece is indebted 150% ratio to GDP. History tells us not all country was able to get out from debt over this ratio (maybe except Japan)
    So, forget any positive outcome for now, (I still think there might be a chance of 50% other outcome too) and consider Greece defaulted.

    2) Greece's debt is mostly in the hands of other EU country's banks, and at their home banks. So I think the EU wants a controlled Greece default, and keep them in Euro zone. And for this purpose EU with ECB started a rescue package. This way they will know who has what size of problem, and can work out the best solution. The package for now means they lend cash against GGBs (to any bank, including NBG).

    3)The added problem for greek banks is that they are losing business and deposits, so they first used up mostly their GGB's for cash, and are now getting short of them.

    4) This is why the GreekCentralBank opened a new facility Emergency Lending to keep the country's banks solvent for a time.

    5) I think those 2 cash sources should be enough to keep NGB liquid and solvent for the necessery time, like 6-12 more months, when the controlled default could be arranged, with all information in the hand, by ECB, without any banks to go bankrupt.

    6) I estimate this time is necessary preparation time for all banks, to withstand the shock to lose a min. 30%, or max. of 50% of their GGBs value to lose. In the US media this effort is called "kick the can down the road". I consider this reasonable effort to buy time and get more precise info about the details of the problems.

    7) NGB has 13.2B GGB asset according to 1Q2011 report, so after default they might lose 30-50%, a total of 4.0 - 6.6B on their GGBs. Against this loss they have equity cca. 10-10.5B.

    8)This is clearly a huge loss, but not lethal. This alone can not bankrupt NGB and probably any greek banks, if some rules are suspended or circumvent.

    NGB and other Greek banks probably will get
    a) a temporary relief, from EU, to ignore the Basel rules for 3-10 years, so they can recapitalize by issuing new shares (very preferably to current owners) and/or new rights issue.

    b) greek banks get a Greek state equity injection, or subordinated loan, or some special bonds, etc. to get close to Basel rules after writing down the above loss.

    9) So, in 2 years we might get a dilution. I dont know how big that could be, but from the above numbers I estimate it 40-60%. If it is a subordinated state loan, then NGB will pay it back just like ING does pay the Dutch state.

    10)After this reorganisation NGB could be again a healthy bank in a healthy country, with 10-12B equity and cca. $1B yearly earnings, and a $3-4 stock, in 3-4 years.

    I consider this a high probability sequence of events; all other is more pain, more loss. There could be better solutions;
    for now I consider this the worst outcome.

    Again, this is just my dream. Trust only your own opinion.

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