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National Bank of Greece Undervalued

August 18, 2014 | About:
cody56

cody56

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National Bank of Greece (ETE),(NBGA),(NBG) is a global banking and financial service company with its headquarters in Athens, Greece. The bank offers financial products, and services, brokerage, insurance, asset management, shipping finance, leasing and factoring markets. It was founded by Swiss banker Jean-Gabriel Eynard and George Starvros in 1841 as a commerical bank. From its inception until the establishment of the Bank of Greece in 1928, it had the right to issue banknotes. The bank listed on the Athens Stock Exchange right after its founding in the 1880s.

Company history and operations

The bank was formed in 1841 in Athens, making it the oldest bank in the country. It wasn't government owned from its inception, but it had the right of note issue, which it lost in 1928 when Greece established its own central bank. The bank in 1899 aquired the Privileged Bank of Epirus and Thessaly. At the beginning of the 20th century, the bank began its international expansion. In 1953 the bank aquired the Bank of Athens, which was at the time the second-largest bank in Greece. The bank in 1965 aquired the Greek Tapeza Epagelmatikis Pristis (Professional Credit Bank). In 1966 bank governor Georgios Mavros founded the National Bank of Greece Cultural Foundation. Since 1999 the bank has been listed on the New York Stock Exchange. It sold all its operations in Canada to the Bank of Nova Scotia in 2005. The next year the bank sold its U.S. arm, Altantic Bank of New York, to New York Community Bancorp for $400 million (EUR 331 million) in cash. It used the proceeds from these sales to finance aquisitions in Southern Europe. The National Bank of Greece has suffered since the the Greek Government Debt Crisis. It had to write off more then $19 billion in debt. The bank has over 500 branches in Greece, Australia, Egypt and the United Kingdom. It has banking subidiaries in Albania, Bulgaria, Cyprus, South Africa, Turkey, etc.

Finances

The bank has an 8% capital adequacy ratio and new additional limits of 9% and 6% for Core Tier I and Common Equity ratio in accordance with the new rule established by the Central Bank of Greece. In June 2013 the bank recapitalization was completed through the share increase of EUR 9.756 million of which EUR 1.079 million was contributed by private investors and the rest by HFSF. The bank's deposits increased by EUR 5 billion in 2013, but because of the Greece Debt Crisis the bank is restricted from access of liquidity from other Financial Institutions. That means the Eurosystem remains a major source of liquidity for the Bank. As of November 25, 2013, funding the European Central Bank has decreased to EUR 21.9 billion.

Balance Sheet

2013

31/12

2012

31/12

2011

31/12

2010

31/12

Total Current Assets - - - -
Total Assets 106841 104798.77 106731.93 118731.88
Cash & Due from Banks 5301 4499.85 4082.15 1436.16
Other Earning Assets, Total 26991 21755.91 21617.64 31213.28
Net Loans 65484 69135.39 71496.22 75863.04
Property/Plant/Equipment, Total - Net 1418 1968.72 2022.68 1221.99
Property/Plant/Equipment, Total - Gross 2778 3406.14 3312.99 2392.54
Accumulated Depreciation, Total -1360 -1437.42 -1290.31 -1170.55
Goodwill, Net 2186 - - -
Intangibles, Net 333 2137.73 2136.82 3958.97
Long Term Investments 152 158.65 42.48 50.09
Other Long Term Assets, Total 134 1297.94 1309.61 1087.28
Other Assets, Total 4842 3844.59 4024.33 3901.07
Total Current Liabilities - - - -
Total Liabilities 104514 106928.27 107455.05 111078.82
Accounts Payable - - - 1445.16
Payable/Accrued - - - -
Accrued Expenses 4087 - - 486.98
Total Deposits 85594 92694.27 93651.88 94033.49
Other Bearing Liabilities, Total - - - 534.12
Total Short Term Borrowings 4738 3771.5 3439.94 4649.95
Current Port. of LT Debt/Capital Leases - - - -
Other Current liabilities, Total - - - 196.08
Total Long Term Debt 4260 - - 3805.95
Long Term Debt 4260 - - 3805.95
Capital Lease Obligations - - - -
Total Debt 8998 3771.5 3439.94 8455.9
Deferred Income Tax - 84.1 62.67 -
Minority Interest 289 241.93 470.1 1087.61
Other Liabilities, Total 5546 10136.46 9830.46 4839.47
Total Equity 2327 -2129.49 -723.12 7653.06
Redeemable Preferred Stock, Total 1354 - - 357.5
Preferred Stock - Non Redeemable, Net - - - -
Common Stock, Total 719 6137.95 6137.95 4780.45
Additional Paid-In Capital 17859 3326.06 3326.06 3883.46
Retained Earnings (Accumulated Deficit) -15007 -11593.49 -10187.02 2022.14
Treasury Stock - Common -2 -0.02 -0.11 -4.9
ESOP Debt Guarantee - - - -
Unrealized Gain (Loss) - - - -2651.55
Other Equity, Total -2596 - - -734.04
Total Liabilities & Shareholders' Equity 106841 104798.77 106731.93 118731.88
Total Common Shares Outstanding 2396.39 95.61 95.6 95.53
Total Preferred Shares Outstanding 282.64 295 295 70

Cash Flow Statements

2013

31/12

2012

31/12

2011

31/12

2010

31/12

Period Length: 12 Months 12 Months 12 Months 12 Months
Net Income/Starting Line 69 -2517 -14507 -308
Cash From Operating Activities 1066 -1711 -343 1331.62
Depreciation/Depletion 111 114 122 129.31
Amortization 100 110 99 79.91
Deferred Taxes - - - -217.87
Non-Cash Items 456 337 10058 -147.62
Cash Receipts - - - -
Cash Payments - - - -
Cash Taxes Paid 203 124 128 207.82
Cash Interest Paid - - - -
Changes in Working Capital 330 245 3885 1795.89
Cash From Investing Activities 3667 2546 6302 -9455.22
Capital Expenditures -200 -133 -144 -165.57
Other Investing Cash Flow Items, Total 3867 2679 6446 -9289.65
Cash From Financing Activities -4820 -406 -5610 8121.47
Financing Cash Flow Items -5715 -872 -4283 5060.37
Total Cash Dividends Paid - - -24 -63.79
Issuance (Retirement) of Stock, Net 674 -121 -168 1718.21
Issuance (Retirement) of Debt, Net 221 587 -1135 1406.68
Foreign Exchange Effects -102 9 -66 7.9
Net Change in Cash -189 438 283 5.78

For the three months ending in March 2014, interest income decreased 8% to EUR 1.29 Billion and net interest income after loan loss provision decreased 17% to EUR 384 million. Net interest income after loan loss provision reflects Turkey Operations segment decrease 24% to EUR 254 million and retail banking segment decrease 19% to EUR 142 million.

Valuation

Earning per share Over the Last 10 years

Earnings Per Share (EPS)
12/03 2.96
12/04 6.36
12/05 15.54
12/06 18.45
12/07 25.65
12/08 16.00
12/09 9.34
12/10 -4.46
12/11 -152.19
12/12 -26.55

The banks average 10-year EPS of -9 per share. 2013 EPS of 3.48 euros is an improvement from the last two years of losses. But the bank's earning per share over the last 10 years has been all over the map. It has a Return on Equity of 48.65% and a Return on Assets of 0.52%. The price-to-book value of 0.80 reasonable for the simple reason that no financial institution should sell above book value when its return on assets are below 1.0. For this reason the bank is undervalued and should trade up to at least book value giving the investors at least a 20% return. It sells for about 2.0 times earnings which reflects the state the Greek banking sector is in. This is an opportunity for investors to make the kind of profits and returns that Prem Watsa (Trades, Portfolio) and other investor made when they invested in the bank of Irland.


Rating: 5.0/5 (1 vote)

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