National Bank of Greece (ADR): Selling Finansbank A.S To Boost Capital Published by Talfryn Taylor on October 5, 2015 at 11:06 am
National Bank of Greece is reviewing takeover bids for its subsidiary: Finansbank National Bank of Greece (ADR) (NYSE:NBG) is working on a plan to meet shortfall in its capital. It is revising the bids on Finansbank A.S. of Turkey, in which it holds a majority interest.
Reportedly, National Bank of Greece (NBG) plans to sell its complete interest (99%) in the Turkish Bank as part of the report it aims to submit to European Unions (EU) competition authority.
The strategy being adopted by the company for this plan is not clear. Analysts have to wait until the stress test by EU authorities, planned later this year, is completed to get a better picture. The stress test will be done on NBG and other three big lenders by European Central Bank (ECB) to determine the amount of capital injection needed. Most probably, the result of such a test will be disclosed by the end of October.
The $3.6 billion worth of Turkish lender, Finansbank, has been successful in attracting bids from Qatar National Bank and Fibabanka. Bidders are interested in buying whole stake in the bank, however, it’s not certain whether selling whole stake is the right thing to do under the current circumstances. The Doha-based bidder, Qatar National Bank, has been previously buying assets across Africa, Middle-east and Asia. Another interested party is Garanti Bank, Turkey’s second largest private sector bank by assets.
According to the bailout agreement terms, NBG will reduce its 99% stake to less than 60% by the end the year. The proceedings of this order were delayed due to turbulence in the Turkish stock market, where the main index lost around 25% of its value in a period of one year.
Other Greek banks are looking towards the stock market to raise extra capital required for replenishing their lost market cap. On the other hand, NBG can raise enough capital by the sale of Finansbank to cover most of its lost market cap.
It is expected that Finansbank will be able to attract a deal close to its book value of $3.6 billion. In a period of five days, Finansbank has been able to gain 45.68% on its stock price. The net profit margin of the bank is 15.34% for the second quarter (Q2).
The systematic risk (beta) for the company is 0.39 compared to industry average of 1.46, which is considerably impressive. In the first half of the year, its profit rose by around 66.6% to $106.08 million. However, NBG incurred a total loss of $179.43 million.
Last year, Finansbank made a profit of $355 million for NBG. In comparison, NBG made a $319.36 million loss last year in its home playing field. The EPS five year growth rate is 10.97% and the total debt to equity ratio is 215.94, which is less impressive given the industry average of 49.43.
Shedding light on the Turkish banking sector will reveal that it is facing a rising rate of outflow, and HSBC is also considering selling its loss making wing in the country. ING, a Dutch bank, is considering buying the operations of HSBC’s loss making wing. Currently, the geopolitical issues circling Turkey have also contributed in making the stock market risk worse. Upcoming election in the country and worsening political situation in its neighboring Syria and Iraq are some of the events affecting the country's markets.
