EGFEY - Eurobank

[gary17]

I don't know much about banks but I got into this because Prem & Wilbur are at it again -

This was a state-owned bank & they did a capital raise and Prem & co got in at 0.30 euro / share or about 0.2 USD for EGFEY based on 2:1 ADR to common ratio & 1.38 exchange rate.  At 0.30 this is below book - I believe 50% of book value.  Has anyone bought this?  I have been loading the ADR as it is trading at about a 17% discount....  The shares are 0.37 euro right now on Athen's exchange... or about 0.255USD.... the way I see it is buy EGFEY at 0.20 you are paying the same price FFH is paying and there's a potential for this to converge to the Athen share prices -

 

Prem and Wilbur both got seats on the board so if they can replicate what they did at Bank of Ireland this should at least be a double.

 

Gary

[PJM]

Hi Gary

 

This seems to be almost the same investment as Bank Of Ireland by Prem & WR club.

 

I spent some time today understanding the financials of EuroBank, and it does look interesting. The situation in Greece is definitely improving so it wont be surprising to see PPI and NIM improving as a result of lower deposit spreads and reduced 90dpd, which peaked over last few years. Not sure if 21% CLP estimates are conservative enough.

 

After the new capital offering (which will start trading today) i think the BV should be around 7b which translates into 0.46euro, so the stock is trading 0.8x of BV. Not a very big margin of safety imo, unlike Bank of Ireland.

 

Are you investing just to replicate Prem & Wilbur, or you have any other investment thesis?

 

 

[phil_Buffett]

I don't know much about banks but I got into this because Prem & Wilbur are at it again -

This was a state-owned bank & they did a capital raise and Prem & co got in at 0.30 euro / share or about 0.2 USD for EGFEY based on 2:1 ADR to common ratio & 1.38 exchange rate.  At 0.30 this is below book - I believe 50% of book value.  Has anyone bought this?  I have been loading the ADR as it is trading at about a 17% discount....  The shares are 0.37 euro right now on Athen's exchange... or about 0.255USD.... the way I see it is buy EGFEY at 0.20 you are paying the same price FFH is paying and there's a potential for this to converge to the Athen share prices -

 

Prem and Wilbur both got seats on the board so if they can replicate what they did at Bank of Ireland this should at least be a double.

 

Gary

 

i also bought Shares here. i believe the Situation in greece will become gradually better. so it is Long term. the same as with ireland years ago.

 

i buy more next month when i have cash

[gary17]

 

Hi PJM

Thanks, you get 0.8 book for the commons right? The otm shares are cheaper by another 17% so would give us slight better margin of safety.

 

Hi Gary

 

This seems to be almost the same investment as Bank Of Ireland by Prem & WR club.

 

I spent some time today understanding the financials of EuroBank, and it does look interesting. The situation in Greece is definitely improving so it wont be surprising to see PPI and NIM improving as a result of lower deposit spreads and reduced 90dpd, which peaked over last few years. Not sure if 21% CLP estimates are conservative enough.

 

After the new capital offering (which will start trading today) i think the BV should be around 7b which translates into 0.46euro, so the stock is trading 0.8x of BV. Not a very big margin of safety imo, unlike Bank of Ireland.

 

Are you investing just to replicate Prem & Wilbur, or you have any other investment thesis?

[PJM]

 

Hi PJM

Thanks, you get 0.8 book for the commons right? The otm shares are cheaper by another 17% so would give us slight better margin of safety.

 

Hi Gary

 

This seems to be almost the same investment as Bank Of Ireland by Prem & WR club.

 

I spent some time today understanding the financials of EuroBank, and it does look interesting. The situation in Greece is definitely improving so it wont be surprising to see PPI and NIM improving as a result of lower deposit spreads and reduced 90dpd, which peaked over last few years. Not sure if 21% CLP estimates are conservative enough.

 

After the new capital offering (which will start trading today) i think the BV should be around 7b which translates into 0.46euro, so the stock is trading 0.8x of BV. Not a very big margin of safety imo, unlike Bank of Ireland.

 

Are you investing just to replicate Prem & Wilbur, or you have any other investment thesis?

 

ADR normally trade at a discount or premium and they stay, so you can assume ADR will always stay at 15-17% discount. This is at least what i've seen with other ADRs. Also have you checked on the annual fees for ADR as they can be quite steep sometimes.

[oddballstocks]

 

Hi PJM

Thanks, you get 0.8 book for the commons right? The otm shares are cheaper by another 17% so would give us slight better margin of safety.

 

Hi Gary

 

This seems to be almost the same investment as Bank Of Ireland by Prem & WR club.

 

I spent some time today understanding the financials of EuroBank, and it does look interesting. The situation in Greece is definitely improving so it wont be surprising to see PPI and NIM improving as a result of lower deposit spreads and reduced 90dpd, which peaked over last few years. Not sure if 21% CLP estimates are conservative enough.

 

After the new capital offering (which will start trading today) i think the BV should be around 7b which translates into 0.46euro, so the stock is trading 0.8x of BV. Not a very big margin of safety imo, unlike Bank of Ireland.

 

Are you investing just to replicate Prem & Wilbur, or you have any other investment thesis?

 

ADR normally trade at a discount or premium and they stay, so you can assume ADR will always stay at 15-17% discount. This is at least what i've seen with other ADRs. Also have you checked on the annual fees for ADR as they can be quite steep sometimes.

 

There shouldn't be any ADR discount.  You can convert your ADR shares into ordinary local shares and capture the spread.  I've inquired about this with Fidelity in the past.  There is a per share fee of $.01-.05 depending on the size of the trade.

 

The better trade here in my mind is to buy up as many ADR's as humanly possible (maybe levered), and then short the common.  Convert the ADRs into the common and satisfy the short.

[gary17]

Yes there's a ADR fees but that is still a wide margin after one takes that into consideration. This happened with bank of Ireland before , bit it was the commons that was mispriced. This time around it is the ADR ! Interesting strategy. Not sure if IB let me short Athens shares.

[PJM]

 

Hi PJM

Thanks, you get 0.8 book for the commons right? The otm shares are cheaper by another 17% so would give us slight better margin of safety.

 

Hi Gary

 

This seems to be almost the same investment as Bank Of Ireland by Prem & WR club.

 

I spent some time today understanding the financials of EuroBank, and it does look interesting. The situation in Greece is definitely improving so it wont be surprising to see PPI and NIM improving as a result of lower deposit spreads and reduced 90dpd, which peaked over last few years. Not sure if 21% CLP estimates are conservative enough.

 

After the new capital offering (which will start trading today) i think the BV should be around 7b which translates into 0.46euro, so the stock is trading 0.8x of BV. Not a very big margin of safety imo, unlike Bank of Ireland.

 

Are you investing just to replicate Prem & Wilbur, or you have any other investment thesis?

 

ADR normally trade at a discount or premium and they stay, so you can assume ADR will always stay at 15-17% discount. This is at least what i've seen with other ADRs. Also have you checked on the annual fees for ADR as they can be quite steep sometimes.

 

There shouldn't be any ADR discount.  You can convert your ADR shares into ordinary local shares and capture the spread.  I've inquired about this with Fidelity in the past.  There is a per share fee of $.01-.05 depending on the size of the trade.

 

The better trade here in my mind is to buy up as many ADR's as humanly possible (maybe levered), and then short the common.  Convert the ADRs into the common and satisfy the short.

 

Theoretically you are right !!

 

All the Indian ADRs are always trading at a constant high single digit premium/discount. Maybe it is coz its difficult to short in India.

 

I tried the arb strategy for HRTPY (brazilian adr) but found that IB doesnt do the conversion and the fees were quite high if I transferred the shares to depository manager and then converted it.

[Cunninghamew]

On Schwab it is 5 cents a share, so that wipes that out

[gary17]

Ok... It just went up 9% from down 3% a few minutes ago .... And I haven't finished buying ....

[LowIQinvestor]

I thought the ADR/Ordinary ratio was 2:1 ?

 

http://www.adrbnymellon.com/dr_profile.jsp?cusip=26844B209

 

"Ratio DR:ORD 2:1"

 

Am I missing something?

[gary17]

It is...

 

so ADR = 0.205 this morning (earlier)

 

1 common based on ADR = 2 x 0.205 / 1.38 = 0.30 

 

but the real commons are trading at 0.35 

 

Gary

 

 

[TwoCitiesCapital]

Large spreads can occur between ADR securities and the underlying shares because often times people are unable to take advantage of the arbitrage.

 

This happened with Bank of Ireland a year or two ago. Melon Trust "closed the book for issuance" which means that common shares weren't convertible to ADRs or vice versa for an extended period of time. The spread collapsed the day the book was reopened and spread shortly after it was closed again. My guess is that it's a similar dynamic here or you're simply dealing with a liquidity premium.

[gary17]

So the higher liquidity provides premium?

 

in Bank of Ireland's case the ADRs were at a premium - in fact, they are still at a slight premium today, although the gap did close.  It was much wider before.

 

In this case the ADRs are at a discount. 

 

Gary

[gary17]

the price difference is not the thesis here.... btw.... 

 

the thesis is it's a private bank , very well capitalized, in Greece, with Prem and Wilbur on the board, and a turn around story.......  the discount is just a nice thing to have...

[TwoCitiesCapital]

So the higher liquidity provides premium?

 

in Bank of Ireland's case the ADRs were at a premium - in fact, they are still at a slight premium today, although the gap did close.  It was much wider before.

 

In this case the ADRs are at a discount. 

 

Gary

 

Yes. Higher liquidity is sold at a premium to shares that have no liquidity. It doesnt have to be the same as the bank of Ireland ADRs just because it appears similar. I have no idea why the spread between the two grew so large but I definitely know why it didn't close in a short period of time.

[jrallen81]

dumb question, but how do you check the ratio of ADRs to common?

[jrallen81]

also, if you buy right now at 0.23, that's only a $0.02 discount to the ADR price from the close, 8% isn't bad, but not -15%, so watch the pennies!

 

 

[gary17]

Yes, I got a large limit order at about 0.205 for the last few days - i have not been loading up as fast as I'd like to.  Oh well.

 

some more points:

 

i believe all other Greek banks are trading well above book...  so this is the only one below book...

 

Gary

[Hielko]

This probably should trade at a discount to the shares in Athens. You most likely incur a ADR fee of 0.02 dollar/year which is 8.5% in fees every single year and a conversion probably costs 0.05 dollar which is 21%. There is absolutely no way I would want to own this ADR at a 15% discount; it's overvalued relative to the Greek shares instead of undervalued!

[gary17]

There's no annual fees based on my discussion. Pick up the phone and call your broker.

[Hielko]

Are you very sure about that? Who is the depository? Have you talked to them?

[gary17]

I believe bny mellon

I should call them but the info below indicates no custodian... this is OTC

https://www.adr.com/DRDetails/Overview?cusip=26844B209

[PJM]

I did bit more research on EuroBank over the weekend. I also did some comparative analysis with its peers, mainly NGB and Piraeus.

 

From financial perspective, Eurobank seems to be in the same shape as other banks. In fact NGB and Pireaus are performing better on many metrics. Especially NGB - it is the only bank with net positive income post provision in 2013, has a higher CASA ratio, better L/D ratio etc. It also has Finansbank in turkey which is performing very well (contributing more than 50% to PPI) on the back of strong Turkish economy. I think Pireaus bank is best capitalised and probably the only bank among the three to have 10% Basel III fully loaded ratio after redeeming the preference shares.

 

I think EuroBank is attractive for two reasons

1. It generates substantial non-interest income (>20%) with its strong positioning in insurance, asset management, private banking, equity brokerage etc. This fee income/assets is low at 0.35% as compared to pre-crisis level of 0.9%. As economy improves fee income should back to normalized level of approx 0.7%

2. It is trading below BV (0.8x BV) whereas other banks are trading marginally above BV.

 

However any investment in greek banks has to be based on the assumption that Greek economy continues to improve and NPL will continue to come down. If that assumption holds true, investors in either bank are poised for good returns.

[gary17]

There is currently not an annual fee on this name.

 

Many thanks

 

Mark

 

Mark Lewis

BNY Mellon Depositary Receipts

Tel: +44 207 163 7407

mark.lewis@bnymellon.com

The Bank of New York Mellon (International) Ltd. acts as arranger for the full range of securities services offered by The Bank of New York Mellon and its affiliates in EU countries other than the UK.