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Holly LaFon
Holly LaFon
Articles (8060) 

David Einhorn's Top-Five Holding - Greece's Alpha Bank

David Einhorn (Trades, Portfolio)’s Green Light Capital hedge fund was more acquisitive for international stocks last quarter, with half of its new holdings based in countries outside the U.S. In his letter to shareholders, Einhorn also mentioned that one of his top five long positions is now a Greek bank, Alpha Bank (ATH:ALPHA). The investors other top picks as of the first quarter’s end are Apple (NASDAQ:AAPL), gold, Marvell Technology (NASDAQ:MRVL), Micron Technology (NASDAQ:MU) and Oil States International (NYSE:OIS).

Alpha Bank’s share price:


The Greek banking sector received assistance from the European Union and International Monetary fund beginning in 2010. The entities eventually lent €206.9 billion in the Greek bail-out, with the majority directed to the financial sector, in part to recapitalize Greek banks.

The recapitalized banks, including Alpha Bank, have also of late been conducting their own rights issues, raising €5.9 billion last month. In addition, the 18 commercial banks extant in 2009 reduced to four systemic lenders, according to the Financial Times. These entities have recently attracted the interest of such U.S. investors as John Paulson (Trades, Portfolio), Prem Watsa (Trades, Portfolio), Wilbur Ross (Trades, Portfolio) and others.

Increased private investment in the sector is occurring as Greece shows signs of economic recovery. In 2013, the Greek Government Bond yields returned to pre-sovereign debt crisis levels, Greece’s current account and primary budget deficits turned to surpluses ahead of plan. In addition, real GDP growth is expected to turn positive as early as first quarter 2014, with expected real GDP growth for 2014 above IMF estimates.

Einhorn’s chosen investment, Alpha Bank, is the third largest bank in Greece by assets as of Dec. 31, 2013. It has 599 branches throughout Greece, and a presence throughout Cyprus, Romania, Bulgaria, Serbia, Albania, Macedonia and the UK. It was one of the few to raise adequate private-sector participation in its recapitalization on May 5, 2013. It absorbed Emporiki Bank on June 6, 2013.

In March, the bank completed another capital increase, this time for €1.2 billion through private placement. The bank issued 1.8 million ordinary shares at €0.65 each. Following the issue, the share capital of the bank totaled €4.77 billion.

The bank plans to use the funds to increase its capital base, fully repay the €940 million in state aid by the Hellenic Republic, and meet requirements of the Bank of Greece’s diagnostic exercise.

Alpha Bank reported several positive indicators of improvement in its full-year 2013 results. It has a Core Tier 1 capital ratio of 15.9%, and Basel III Core Tier 1 ratio at 9.7% and 12.1%, higher than the average of European banks. Deposits also saw 3% greater Greek inflows, primarily from the private sector, as the bank’s market share grew by 1%.

The bank also took in 7.4% higher revenues, led by increased net interest income due to lower funding costs, as operating expenses were by 6.6%, ahead of the 5% target. It has further plans to reduce costs in the future, with the integration of its Emporiki Bank acquisition, and a decrease of non-performing loans. NPLs fell to 32.7%, a decline of 20 basis points, or €0.4 billion. This marked the first decrease in NPL load since the economic downturn in Greece.

Alpha Bank’s 10-year revenue and earnings history:


An accounting gain from its addition of Emporiki Bank resulted in a profit for Alpha Bank of €2.92 billion. Without the goodwill gain it would have lost €304 million, compared to a loss of 1.087 billion the prior year.

Alpha Bank trades Friday at a share price of $0.26, with shares up 0.77% so far this year. It also has a P/E of 0.1, near a five-year low. It has a P/B of 0.91 and P/S of 1.98, near a three-year high.

See more David Einhorn (Trades, Portfolio) stocks in his portfolio here. Not a Premium Member of GuruFocus? Try it free for 7 days here!

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