EGFEY - Eurobank

[muscleman]

I guess what is confusing me is that the ECB will not provide ELA if the recipient institutions are insolvent. I'm sure the ECB is aware of the solvency position of the greek banks. If they were insolvent, ELA would have have been cut off, correct? Also, it appears that the Bank Recovery and Resolution Directive (BRRD) is utilized only after a determination that an institution is insolvent and cannot be recapitalized via private methods. If the greek banks are solvent, would BRRD still be utilized? This would not make sense in light of its mandate.

 

I know that a review of the banks solvency will follow the signing of the 3 yr. deal, which at the moment, looks likely to be agreed upon prior to August ECB loan maturities. Perhaps we won't know until then which banks are considered insolvent or how they will be recapitalized. I do find it interesting that Wilbur Ross, who has to know about EFGEY's solvency, believes EGFEY is solvent. I heard him state that in an interview a few days ago when asked whether EGFEY would be taken over or combined with another bank. BRRD did not come up in the interview. 

 

Obviously time will tell. Meantime, I would expect investor sentiment to be quite negative with everyone guessing that shareholders will be wiped out. Maybe they will be. At the same time, I believe many of these same people were also predicting Grexit a short time ago. Will be interesting to see if Wilbur or Prem get wiped out. Anyone recall either one be handed a goose egg recently?

 

 

Can you please show me the link to the Wilbur Ross interview about Eurobank's solvency?

 

"Anyone recall either one be handed a goose egg recently?" What does this mean?

[Eye4Valu]

I'll try to find a link to the interview with Wilbur Ross. He was a guest on CNBC World. It was on real late at night since I live in US. Believe the program was Worldwide Exchange or Squawk Box Europe. Carolin Roth was asking him about the news article that had come out saying that the Greek banks will be nationalized or taken over by other greek banks. This was shortly before the most recent article on Bank Recover and Resolution Directive, which has everybody talking about shareholder wipeouts and bail-ins. Wilbur made the point that EGFEY was not insolvent, but had a liquidity problem due to bank run. While his opinion can obviously change, the interview was a few days ago. I was just thinking to myself that he did not appear concerned about getting wiped out. But if I had a $50 million investment that could be wiped out, I think I would be somewhat concerned, even if it represented a small amount of my portfolio.

 

Goose egg just means "zero" or total loss.

 

For sake of information, here are some criteria for BRRD:

 

What are the objectives of resolution and the conditions to trigger it?

 

The main aims of a bank resolution are to: 1) safeguard the continuity of essential banking operations, 2) protect depositors, client assets and public funds, 3) minimise risks to financial stability, and 4) avoid the unnecessary destruction of value.

 

The authorities may determine that a bank needs to be resolved if:

 

    it has reached a point of distress such that there are no realistic prospects of recovery over an appropriate timeframe,

 

    all other private sector or supervisory intervention measures have been proved insufficient to restore the bank to viability, and

 

    winding up the institution under normal insolvency proceedings would risk prolonged uncertainty or financial instability and therefore resolving the bank would be better from a public interest perspective.

 

Entry into resolution will thus always occur at a point close to or at insolvency. Authorities nonetheless will retain a degree of discretion to ensure that they can intervene before it is too late for resolution to meet its objectives. 

[Eye4Valu]

Here is a video from yesterday with Wilbur Ross on Fox Business: http://www.msn.com/en-us/money/video/wilbur-ross-greece-will-stick-to-its-austerity-plan/vp-AAdiT9g

 

Again, he never mentions the possibility that his investment will be wiped out. He does mention being in Greece the past couple of days.

[Eye4Valu]

It appears that the Bank Recovery and Resolution Directive's provisions regarding bail-ins does not become effective until January 1, 2016. Euclid Tsakalotos mentioned in a speech yesterday in Parliament that the banks will be recapitalized prior to January 1, 2016, perhaps sidestepping the bail-in provisions.

[TwoCitiesCapital]

Here is a video from yesterday with Wilbur Ross on Fox Business: http://www.msn.com/en-us/money/video/wilbur-ross-greece-will-stick-to-its-austerity-plan/vp-AAdiT9g

 

Again, he never mentions the possibility that his investment will be wiped out. He does mention being in Greece the past couple of days.

 

He also mentions that he would be a buyer at 6 cents - not something that someone who just lost a ton of money would likely say about the same investment at the same price that it has traded at in the past 6 months. I certainly see the possibility of a shareholder wipeout at this point; however, I'm not sure how likely it is.

 

All that is necessary to return to the situation that pervaded prior to February/March is for consumers to regain confidence in the banks to return deposits. This isn't so much of a capitalization issue given that they have already been recapped once AND there are already provisions in place for converting the DTAs into cash so it's more of a liquidity issue. That could be in part solved by dilution via the forfeit for DTAs for upfront cash OR the Greek government can move slowly over the next 3-6 months to rebuild confidence in the banks to return deposits.

 

That being said, the economy has been thrown into a tailspin and I don't think we'll being seeing a positive trend in defaults/earnings for a few quarters.

[TwoCitiesCapital]

The Greek exchange opens on Monday. Going to be very interesting to see what happens here.

[randomep]

 

I'll be staying up till 12:30am (PST) to see the market open.

 

I'll buy if they get cheap enough..... my investments are non-banking though

[meiroy]

You may want to dig a little deeper into what capital controls actually mean.

 

Current foreign currency denominated exports (tourism, goods, services, migrant labour earnings repatriation) less than/equal to foreign currency imports (oil, gas, food, service and manufacturing components). Encourage tourism, promote youth working abroad, dump product for FX earnings, domestic versus foreign suppliers will all help. But they really need some subsidization – discount energy, drugs, & somebody else to pay the cash cost of their NATO security commitments. 

 

Capital outflows on foreign sourced debt maturity + interest greater/equal than domestic sourced debt issuance and internal foreign currency investment (assume everything is Euros). Lots of possibilities here ranging from debt defeasement via direct subsidy, direct debt forgiveness, extending term, recapitalizing Greek banks with a transfer of ECB owned Greek bonds, and growing their way out. The more they can reduce the net annual drain of capital to creditors outside of Greece, the quicker they can come out from under their capital controls.

 

We think that a recap via a transfer of the ECB Greek bond holding (& then continuously rolling them) has to be very high on the list.

 

We also think that having one euro member under capital controls, when the rest are not; is not politically sustainable for any protracted period. You cannot claim to be a free trade zone within the euro umbrella – and then not practice it so publicly.

 

It really means a priority upgrade to Euro 2.0, and the pending retirement of dumber.

 

SD

 

Why do you give higher probability for Germany's proactive adjustment, than for Germany delaying the inevitable thus causing the final breakup of the Eurozone? So far there have been no signs they are willing to adjust, the German elite/bankers have too much depending on the cheap Euro and current local structure in Germany. Even if current politicians leave, another possibility is that more extreme politicians rise in their place (or extreme political parties) and then it goes even quicker to a breakup (where upon Germany goes through a brutal adjustment anyhow.. but hey, what can you do, people are people).

 

[Sunrider]

What are you buying and with which broker?

Thanks - C.

 

 

I'll be staying up till 12:30am (PST) to see the market open.

 

I'll buy if they get cheap enough..... my investments are non-banking though

[tombgrt]

It seems impossible to buy more Intralot through the German listing. :(

 

edit: No wonder, the stock is recovering from the lows under €1.30 to €1.45-1.50 and I was watching delayed information. Too bad!

[TwoCitiesCapital]

I've had a limit order out at 0.035 USD that hasn't been filled yet. The OTC listing has traded up as high as $0.08....I certainly wasn't expecting it to trade up today :/

[TwoCitiesCapital]

The swing in value today is insane!!!! U.S. shares have trades as low as $0.04 and as high as $0.10 just today. The bid-ask was $0.03/$0.07 when I last checked on Scottrade. Insane!

 

IB won't trade it to accumulate more shares though and Scottrade limit orders have always been extremely hit and miss (but mostly miss) for me, so I don't think I'll get to benefit from the action, but holy cow!

[Eye4Valu]

Ya, was surprised to see it trade up and down so much today. Really strange stuff.

[TwoCitiesCapital]

According to Google Finance, 10k shares trades yesterday at $0.38. Look like someone didn't use a limit order or forgot a zero after the decimal....

[TwoCitiesCapital]

I bet traders are having a field day with this. Traded between 0.04 and 0.05 all day today. Scoop it up and 0.04 and limit-sell at 0.05. Rinse and repeat. I'd be doing that myself with a portion of my position if my work didn't have a 30-day minimum between opposing trades in the same CUSIP.

[Eye4Valu]

More recent commentary from Wilbur Ross.

 

http://money.cnn.com/video/news/2015/08/06/greece-banks-wilbur-ross.cnnmoney/

 

Wilbur is concerned with whether the asset quality review will be fair given the recent tumult and liquidity events.

 

May be prepared to participate in a rights offering.

[Eye4Valu]

http://finance.yahoo.com/news/exclusive-greek-bank-bailout-funds-depend-business-plan-112736777--sector.html

 

Restricted access to funds until recapitalization following stress tests. Recapitalization to occur prior to 2016 to avoid bail-in. Existing shareholders will be diluted, but may participate in recapitalization.

[TwoCitiesCapital]

ELA was reduced today as liquidity has improved. Eurobank has traded down to $0.02. I understand that there is likely to be dilution - but how much? Wilbur Ross was confident that the banks were well reserved and that is just a liquidity issue from the pulled deposits. There is already a mechanism in place to convert the DTAs into cash in exchange for a dilutive issuance of warrants if needed, so is another massive share sale really necessary if deposits are returning as the ELA reduction suggests?

 

Would the recapitalization take place at higher prices than the current market price recognizing that any players who want a large position would necessarily drive the current price up or is it likely to undercut the current price in an attempt to get enough supporters to raise necessary funds?

 

 

[muscleman]

Please let me know if you see any additional Wilbur Ross interviews. I found Google to be not very helpful in searching for his latest interviews.  :)

[muscleman]

https://www.washingtonpost.com/world/europe/greek-premier-resigns-calls-snap-elections-to-shore-up-support/2015/08/20/c6f5398e-4752-11e5-9f53-d1e3ddfd0cda_story.html

 

What the fuck is going on?

This guy implemented the unpopular bailout deal and resigned right away?  :o What is this clown thinking about? Or maybe I am too simple and naive that I can't understand his strategic moves?

[gary17]

I think he probably made enemies going through with the deal. So you call an election hoping the nation is on your side.

 

The election would kick the opposition out of office. 

 

Normal strategy is a parliamentary democracy. 

[TwoCitiesCapital]

I think he probably made enemies going through with the deal. So you call an election hoping the nation is on your side.

 

The election would kick the opposition out of office. 

 

Normal strategy is a parliamentary democracy.

 

Yea - I'm quite confused by the whole thing. It seemed like Greece had all of the leverage, a national vote, and the IMF saying no to bailout arrangement without necessary debt relief. He won a ton of concessions, but then kept pushing until he eventually folded and gave the Greeks a way worse deal than what was originally on the table. Now he resigns.

 

I would be surprised if the Greeks re-elect him with the about-face he took in the negotiations. I'm just floored and confused by this whole thing. I've got limit orders out for more shares of EGFEY just because if this ever unwinds in a semi-positive way, then there's no reason it should be trading in the $0.02 range. After averaging down at $0.06, $0.04, and hopefully at $0.02 I'll be done building a 2-3% position in the name and will just hold and wait for whatever outcome results from the recapitalization that is coming.

 

 

[MrB]

I think he probably made enemies going through with the deal. So you call an election hoping the nation is on your side.

 

The election would kick the opposition out of office. 

 

Normal strategy is a parliamentary democracy.

 

Yea - I'm quite confused by the whole thing. It seemed like Greece had all of the leverage, a national vote, and the IMF saying no to bailout arrangement without necessary debt relief. He won a ton of concessions, but then kept pushing until he eventually folded and gave the Greeks a way worse deal than what was originally on the table. Now he resigns.

 

I would be surprised if the Greeks re-elect him with the about-face he took in the negotiations. I'm just floored and confused by this whole thing. I've got limit orders out for more shares of EGFEY just because if this ever unwinds in a semi-positive way, then there's no reason it should be trading in the $0.02 range. After averaging down at $0.06, $0.04, and hopefully at $0.02 I'll be done building a 2-3% position in the name and will just hold and wait for whatever outcome results from the recapitalization that is coming.

 

Greece can always be trusted to do the worst thing, once all good opportunities have been squandered.

[muscleman]

I think he probably made enemies going through with the deal. So you call an election hoping the nation is on your side.

 

The election would kick the opposition out of office. 

 

Normal strategy is a parliamentary democracy.

 

Yea - I'm quite confused by the whole thing. It seemed like Greece had all of the leverage, a national vote, and the IMF saying no to bailout arrangement without necessary debt relief. He won a ton of concessions, but then kept pushing until he eventually folded and gave the Greeks a way worse deal than what was originally on the table. Now he resigns.

 

I would be surprised if the Greeks re-elect him with the about-face he took in the negotiations. I'm just floored and confused by this whole thing. I've got limit orders out for more shares of EGFEY just because if this ever unwinds in a semi-positive way, then there's no reason it should be trading in the $0.02 range. After averaging down at $0.06, $0.04, and hopefully at $0.02 I'll be done building a 2-3% position in the name and will just hold and wait for whatever outcome results from the recapitalization that is coming.

 

I would be cautious to buy any bank shares right now. We know capital increase is coming, and the further the current share price drops, the more damage the capital increase will do to current shareholders, and the more the share price will drop in expectation of a massive dilution. Therefore it is a self fulfilling prophecy at this moment.

 

 

[TwoCitiesCapital]

I think he probably made enemies going through with the deal. So you call an election hoping the nation is on your side.

 

The election would kick the opposition out of office. 

 

Normal strategy is a parliamentary democracy.

 

Yea - I'm quite confused by the whole thing. It seemed like Greece had all of the leverage, a national vote, and the IMF saying no to bailout arrangement without necessary debt relief. He won a ton of concessions, but then kept pushing until he eventually folded and gave the Greeks a way worse deal than what was originally on the table. Now he resigns.

 

I would be surprised if the Greeks re-elect him with the about-face he took in the negotiations. I'm just floored and confused by this whole thing. I've got limit orders out for more shares of EGFEY just because if this ever unwinds in a semi-positive way, then there's no reason it should be trading in the $0.02 range. After averaging down at $0.06, $0.04, and hopefully at $0.02 I'll be done building a 2-3% position in the name and will just hold and wait for whatever outcome results from the recapitalization that is coming.

 

I would be cautious to buy any bank shares right now. We know capital increase is coming, and the further the current share price drops, the more damage the capital increase will do to current shareholders, and the more the share price will drop in expectation of a massive dilution. Therefore it is a self fulfilling prophecy at this moment.

 

You might be right. There's no way for me to know. The stock is so illiquid it's difficult for any sizeable investor to get a toe hold without significantly moving the market. There is the possibility that whatever recap comes is actually at a premium to the current value as a recognition of that fact and the panic selling that seems to be happening. There's nothing that says the recap price has to be based off of recent trading activity. Anyways, the price could easily recover to $0.04-$0.06 in that period of time at which case you kick yourself for not picking it up at $0.02.

 

I think $0.02 is ridiculous and am comfortable with the uncertainty surrounding the recap.