Bank of Greece Has A Leg Up On Its Peers Amid Capital Requirements


Equities research firm Auerbach Greyson published an investment report on the National Bank of Greece (ADR) (NYSE:NBG) last week. AG analyst Nick Koskoletos maintains his Hold rating on the stock, but noted several positive developments for BOG in upping his target price from $3 to $3.50.

National Bank of Greece (ADR) (NYSE:NBG) is down about 10% in active trading today, dropping to around $4.70 per share as of 9:40 AM EDT.

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The National Bank of Greece (ADR) (NYSE:NBG) reported that the Greek bank regulator will impose a 2.2 billion euro capital requirement on the bank. This is a significant 77% adjustment, given the bank had only planned on a capital requirement of 1.5 billion euro over the next three and a half years (as of June 2013).
The report points out, however, that management of BOG immediately responded to the news by stating they will not seek an equity injection. The bank instead intends to undertake internal methods to meet the requirements. These steps might include divesting of non-core assets, optimizing risk weighting and possibly the sale of international operations.

Some media sources are suggesting that the National Bank of Greece (ADR) (NYSE:NBG) is actually planning 14 separate initiatives to come into compliance with the new regulatory standards. Sources say the bank regulator wants to see the plans by mid-April, while the required actions can be phased in over a reasonable period of time.

The AG report suggests that the success of the BOG’s plan depends on how much time the regulator gives them for implementation. “We feel the time allotment regarding the implementation is key to the successful outcome of management’s targeted initiatives.”

Higher fee generation and improved operations reason for increase in price target

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Koskoletos highlights higher-than-anticipated fee generation and generally improved operational margins as the primary reason he upped his price target on National Bank of Greece (ADR) (NYSE:NBG from $3 to $3.50).

On a related note, German Chancellor Angela Merkel is visiting Athens today. Political analysts have commented that this trip is to show support to the Greek government and its ongoing restructuring efforts. The Greek PM is also expected to request a more detailed timetable for the disbursement of Greece’s debt relief funds during their discussions.