This is from the macropolis article "Bank of Greece decision bolsters Greek lenders’ capital ratios." Especially the a) clause referring to a tender offer to from the HFSF to buy back the bank warrants (I'm guessing at a premium.) I know your a bear on NBG so I want to hear your interpretation cause mine is automatically skewed to the bull side.
"The next important developments for Greek banks involve: a) the new legal framework for bank recap and privatisation, amendments in the warrants exercise process, potentially including the HFSF’s ability to proceed to voluntary tender offers for warrants and b) the announcement by BoG regarding Greek banks’ capital needs following the outcome of Blackrock loan diagnostic and BoG stress test. The two parallel processes coincide and announcements are due to be made within January."
What get me is usually when a possible dilution is even whispered the stock tanks, even if its mentioned after hours. In this case, the BOG comments on additional capital were released a week ago and we're still within range.. just an observation, not saying it actually means one thing or the other. See back in May 2013 Prem Watsta from Fairfax Capital tried to put up 1.5 billion euro for NBG, but got blocked because he wanted "changes in the framework of the recap that are beyond Nat Banks control**." Now certain "legal frameworks for bank recaps" are being discussed with the Troika (as it was the Troika who probably blocked it before). Also interesting is the tender offer for the bank warrants.. See my mind automatically thinks good things...What do you think? (By the way not insinuating in any way they're doing this for Prem or Fairfax has anything to do with this, just looking to interpret the things going on behind the scenes with the little info I can find along the way)
**reuters "Greece's NBG path to Fairfax deal hits roadblock"
Now the big picture I see here is I think most people see the EU chocking on the extremely high EURO, and with the Germans locking in account surplus's higher than China it's getting ridiculous, but in all this PIIS 10 year bonds are at multi year lows. At some point, probably the end of Q1 Draghi is probably gonna have to do some sort of QE. It could be OMT, it could be LTRO with the stipulation that money be used for SME and MSE loans or many other things...Either way I like NBG here because it stands to gain a lot in that situation..Again I might just be totally wrong..
Now I'm not taking a shot at you Krim cause you're stating valid points, and if anything here I'm the one more on the side of speculating, but I missed the meat of the IRE move (got out at 8.50) because I wasn't being speculative enough, although I still think that #$%$ is BS, but it taught me that even a #$%$ty bank, as long as it has plenty assets, will grow in price (in this era of MOAR) as long as the bank can issue its own bonds. IRE was issuing 10 years with like 8% interest as it ascend in stock price was beginning.
Also on my mind is how miserable the warrant exercise went. Now Ive been hearing through the same articles on Ekath and elsewhere that the warrant negotiations have been underway. Investors were looking for quicker ways to take over the bank and not have to wait till 2017 for all the warrants to be exercised. I wonder what changes they would ask for but it could be something like changing some warrants to CoCo's or something that would have put more upward pressure on the stock price. I've been looking for the Ekath article but I can't find it..It mentions a bank bill submitted by Greece to the Troika and in it is Warrant renegotiations and the decrease from 9 to 8 %. I would imagine the Greeks are fighting hard for the private bank investors because these are big time players...I guess we'll see
Ill admit the case for NBG is a slim one, and especially after Turkey getting smashed I wonder how that will reflect on their books, but if disposable assets are taken into account they have Finansbank and more importantly Titlos PLC, although I doubt Titlos will be allowed that is an enormous variable...I believe NBG hasnt used their entire DTA either, with another 2 billion there. I think it just comes down to whether the Greek banks are being held to use the 9% or 8% capital ratio. I would imagine they (Stournaras and friends) are including this in their budget negotiations with the Troika. Notice the reconciliation of the budget and the release of the Stress tests (and the agreement of the capital ratio parameters) are both being delayed are now overlapping. Now I agree with you that they dont give a &(&% about Greek equity holder, but the May 2013 recap was done with Bigboy money and I feel like under the table promises may have been made. I feel like betting with the Bigboys is always a good way to go, although by no means would I be shocked if I woke up on Monday to a share dilution, Im just saying I thats where i placed my bet
Although I hear you, NBG does have the lowest tier one capital ratio.. Only thing is them and Alpha have lower npl compared to the total portfolio and I believe Piraeus has almost a 10% higher ratio, so if these tests are supposed to measure worst case scenarios against loans out standing it might not be as cut and dry as the one with lowest tier one capital....
Good one krim...what about the paragraph before it..
At this point, the market expects the results of the second round of diagnostic tests on loan portfolios conducted by BlackRock (BlackRock II) to be announced soon and the Greek central bank’s verdict on the capital needs of each core bank in early 2014. The outcome is unknown but past press reports suggest that total capital needs should range between 4.5 and 6 billion euros. Eurobank was supposed to be the only credit institution requiring a share capital increase of 2 billion euros or more to meet the capital adequacy ratio requirement. The other three core banks could rely on non-core asset disposals and liability management exercises, and Piraeus Bank along with Alpha Bank on their fat Core Tier I ratio to absorb some losses.
Furthermore, in that article youre referring to, it talks about Eurobank having a 2 billion $ share offering, which the HFSF may or may not take part in, implying that when the HFSF puts money into an ailing bank it does so in exchange for freshly issued shares..Now if the remaining 8 billion $ was a result of previous share dilution, then they wouldn't have to offer any new shares and they would just take what they needed from the 8 billion. Otherwise they'd be unnecessarily diluting shareholders for no reason....Your input is appreciated, thanks
Alright Evang, let me apologize in advance but I'm still not fully getting this from the articles Ive been reading...From what I get from the reuters article "Greek Bank Rescue Fund has spent 38 billion euro so far," it sounds like the 50 billion was from the original 240 billion troika loan. This 50 billion was separated and put into the HFSF. Now, the article states 13 billion was spent to wind down now closed banks, 25 billion split up between the Big 4 banks.....Now I gather the 25 billion was split up 4 ways, and whatever % went to nbg from the HFSF was in exchange for shares making up the 84% they currently own...Now weren't these shares that the HFSF bought for 84% ownership of NBG diluting the shares outstanding (later to take effect when the warrants were exercised, although I have read recently that warrant holders were trying to renegotiate the warrant terms and include the changes with the bank bill currently waiting for troika approval, but thats another story)? Now following this line of reasoning, the remaining 8 billion now on reserve wasn't raised through share dilution but just money left over from the troika loan. If another 3 billion (for example) were to go to NBG, wouldnt it be in exchange for additional shares, thus dilution? (like it was done previously)
Now it sounds like you're saying is the entire 50 billion was raised through share dilution of the 4 banks, when I believe the article is saying that it is just a loan from the troika, and whatever % of the 25 billion (of the original 50 billion) went to NBG accounts for the MAY 2013 share dilution, but if NBG were to tap into the remaining 8 billion then that would be in exchange for even more shares, thus raising the current HFSF ownership%. Otherwise the HFSF would just be giving away free money, which as Krim said, they didnt do the first time around. Granted they wouldnt use the full 8 billion but im just saying.
I'm confused myself but you cleared that up with #1of your reply..thanks..With your reply #2 though, they are now accepting the full 4.6 billion? I thought it was less, something like 1.9 and they weren't sure about the rest yet?
Evang...I see what you wrote about the HFSF covering it and that means no shrholder dilution...but isn't that how NBG was diluted in the first place...By receiving $ from them for 84$ of the shares outstanding?? Or was that from the 10% private capital raise...Im confused here
Does this automaticaly mean sharholder dilution?After all, doesn't the HFSF already own 84% of the bank.Wouldn't this be hurting themselvs? Only things I could come up with is some kind of Titlos PLC purchase with HFSF $, which I doubt the troika would go for...What other ways are there to raise capital without shareholder dilution??? Thoughts