Germans may have stolen the country’s stockpile back in World War Two, but analysts at JP Morgan are still mentioning the possibility of the Greek population selling their own gold, to avoid a debt restructuring.
It’s part of their latest Greek banks note, entitled “Playing for time, risk-reward unattractive.”
Here’s the summary:
• With restricted market access as concerns moved from liquidity to solvency, the severity of bank stress has increased to levels that we did not previously anticipate. A longer (2012-13) path to recovery a) stricter fiscal measures impacting asset quality (another >300-500bps over two years extending credit cycle normalization beyond 2011 impacted by 6-7% cum. GDP contraction b) increased funding costs with re-pricing of sovereign risk (new time deposits up 26 bps in March mom, 10 CDS stubbornly at >500bps) c. risk of re-capitalization/consolidation rising (EU-IMF package first step) with d. further risk of change of ownership structure of banking assets.
• Investment case on hold, despite strong share price correction YTD (- 23-44%), risk reward unattractive. We remain cautious on banks, as we believe they are likely to make losses in 2010E, and possibly breakeven in 2011E, with recovery in 12-13E. NBG, EFG, Alpha to UW (from OW); removing NBG from AFL; BOC to N (from OW), Piraeus to UW (from N), keep Agricultural and Postal as UW. A potential 40% GGB restructuring could require euro €10bn-15bn in additional capital and we see >25% downside for the sector with risk of capital injections & change of ownership structure (see table 20)
• If outcome less severe 1) no GGB haircut and 2) NPL stabilization before 2012 with less severe GDP contraction, we expect banks to muddle through and could support sector rebound (>50-100% potential upside on two-year view). This scenario would require ‘out-of-box measures i) collecting gold for the love of Greece campaign (done in Korea post-1998); ii) selling a lot of Government assets quickly or iii) creation of WSF to offset liabilities backed by real assets, 3) EU-IMF support package to succeed both in Greece and the EU.
“Collect gold for the love of Korea,” for those interested, was a grassroots campaign started in the late 1990s to help the country pay back the $55bn or so bailout funds loaned to it by the International Monetary Fund. Such a campaign has already been written about as a possible option for Greece.
The suggestion that people donate to Greece (in general) has also already been made several times, of course, along with more flippant proposals like ‘take fewer holidays.’ In April, the National Bank of Greece, for instance, opened a special “solidarity” account for contributions towards Greek debt.
One wonders how much they’ve raised so far.
Related links:
Bank Grεεkery, the preview – FT Alphaville
Bank Grεεkery – FT Alphaville
Greek-out! - FT Alphaville