Step forward, Evolution Securities.
Their analysts have reacted to National Bank of Greece’s €2.8bn capital raising — which would come in handy for covering any haircuts on Greek government debt holdings (emphasis ours):
We think the time has come to buy NBG (or its rights). We have been extremely negative since initiation, but we believe enough is enough. NBG is by far the worst performer in our banks universe, down 53% YTD. Our SotP [sum of the parts valuation], which includes a €3bn hit coming from a 30% Greek default, already shows 21% upside. We still think that a default/restructuring is the central scenario but thanks to their rights issue, convertible and partial [Turkish lender] Finansbank disposal, we believe NBG is now ready to withstand it. And, if the market were to take the view that the restructuring is not taking place, and we were to remove the 30% default from our SotP, the potential new TP [target price] would jump to €11.7, leaving a 63% upside…
Well, two points here.
First, if Greek banking cash calls are going to be this well received, NBG might well soon be joined by other Greek banks — say Piraeus, which has just dropped a bid for two state-backed lenders.
Although, second — let’s assume NBG would indeed survive a 30 per cent haircut on Greek government debt. Even then, bear in mind Edgar’s lines from King Lear:
And worse I may be yet: the worst is not
So long as we can say ‘This is the worst.’
…it being rather difficult to call the bottom of a full-blown sovereign debt crisis — the relative attractions of default versus mere haircuts included, even as Greece drafts its austerity budget for 2011.
At least the spread between Greek bonds and bunds has been narrowing lately, as shown in this Bloomberg chart:
Related links:
Beware Greeks bearing game theory – FT Alphaville
It’s all Greek (banks) to the ECB – FT Alphaville