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After 70% Plunge, JPMorgan Cuts National Bank Of Greece From Buy To Sell
This is Wall Street value added at its purest. The day when the stock price of National Bank of Greece (NBG) is trading within millimeters of its all time low set during the March 2009 lows, and following a 70% straight decline from highs hit in September of last year, JPMorgan analyst Paul Formanko has officially submitted his bid for the client wealth destroyer of the century title (despite the guaranteed shoe-in of every Goldman Sachs "sellside analyst" for this title), by downgrading the soon to be insolvent Greek firm (which as even Formanko acknowledges has >200% of core equity exposure to GGBs) from Overweight to Underweight. The stock which now trades at around €10/share was initiated by Paul with an Overweight in May 2008, a rating from which he has never wavered, with just his price target moving up and down. His most recent PT on NBG: €25/share. Yet something happened between yesterday and today: Paul decided that the firm is no longer worth his old price target... or even half of it. His new expected price: €9.80, a 60% discount for all those who were dumb enough to listen to Paul as recently as yesterday, not just when he slapped a €45 price target at initiation in May 2008, or a €36 PT in September of 2009. And just to prove that Paul is man of action, he has also gone and downgraded every single Greek bank in his coverage universe from Overweight or Neutral to Underweight with a comparable price target cut.
And here is Paul's distinguished track record in NBG calls.
So just what is so dire to have caused Paul to finally realize that things in Greece may not be so rosy as to merit a perpetual Overweight rating? His list of concerns should make all those who think that Greece can survive even one more year with or without US support afraid. Very afraid.
On Greek Banks:
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.
And on NBG in particular:
- We downgrade NBG to UW from OW and remove it from our AFL. Given its GGB exposure (>200% core equity), potential risks from restructuring remain significant. We highlight that if restructuring does not materialize, then NBG remains best positioned among the Greek banks to weather the recession - given its robust balance sheet, liquidity and highly profitable Turkish franchise (to compensate for decline in domestic business).
- We expect c.7% share price downside from current levels based on our revised PT of €9.8. Our PT has a Dec-10 year end and is based on Gordon growth model.
- Q1 preview: we expect net profits of €22mn, with NII of 999mn, fees of €155mn, and provisions of €360mn
Key risks- i) Upside risk if GGB restructuring does not takes place ii) Less than expected growth in CESEE countries, in particular Turkey, given Turkey contributes c.54% of 09 group profits
It amusing to watch Wall Street analysts who struggle, just as Paul apparently did, to disclose all the dirty laundry they know of, yet are prevented from acting upon by employer "directives" as heaven forbid the prop desk may have a tougher time offloading its own stash of billions in NBG shares should the general public also hit the sell button at the same time.
Alternatively, it is now time to take a long hard look at the long NBG case: there is no more potent buy signal than a sellside "research analyst" going 100% negative on a stock.
h/t Jeff Matthews Is Not Making This Up, via @Reader_sav
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Now, is that a "strong sell?"
Yahoo financial said it was..And the Yahoo community backed it up as a community bullish on..
No. Is suggests a possible strong BUY.
If Elliot Spitzer were still AG, he'd be all up that ass.
He'd be all up in that ass if JP Morgan were a Jersey girl willing to go premium for some rubberless action.
lol
Cumo needs a victim dont he?
dandyandy needs a victim he can bully w/o having his head torn off.
"Italian sausage, Mr. Morgan sir?"
Speaking of insolvent institutions, last week or so there was a one-day story containing few details of a debt restructuring by Dubai World. Remember them? Restructuring means both parties agree to the default, which also means no one knows what the terms were. Looking at the pictures of the project, however, I have a guess: Creditors today have a quarter of what they had before, and tomorrow it'll be even less. What strikes me as peculiar is that this story is apparently of no interest to the media or the bond market.
DUBAI, United Arab Emirates — The United Arab Emirates state news agency says the head of Abu Dhabi’s sovereign wealth fund — the world’s largest — is missing after his glider crashed in Morocco.
Remember this from late March?
Yes! Need more info...must start Googling!
In Dubai, when you piss off your clients, you don't just retire... you hang-glide your way to the afterlife.
Well, if it was good enough for the pharaohs...
(Why do you think they built those pyramids... tombs? Nah... launching points!)
Well at least it wasn't suicide by multiple gunshot wounds.
ok, time to buy boyz, JPM is LONG
Turdkey is growing like a weed...
FML. ok, guess I will sell now
In the spirit of Farcism ZH needs to have a page devoted to the true heros of the year. I have no idea who these analysts and firms may be but the world needs a means to recognize and acknowledge performance so terrific it sends shivers down the spine and rattles the silver in your fillings. Or put up a forum page where we can vote for and against the insanity of the well bred and well fed.
bloomberg has the analyst's performance on their calls if you've got access. 20k per year.
The coveted Hero of Socialist Capital.
They should jail that scummy JPM fraudsters.
I picked up some shares last week... this has me feeling better already. lol
A downgrade already? Lets not be too hasty.
Maybe its time to git long NBG.
Kettle, meet pot.
Buy, buy,buy
I awoke from a dream 24 years today and realized that everything my parents told me was shit. Their parents told them shit and so on and so on.
I decided back then to short every fucking banker I could. Back then it was tough cause the buggers held the cards, the shres for shorting, etc. However asmall group of us did succeed in a veyr small way in screwing them accosaionally.
What the Internet has esentially done is allowed Tyler and the brothers and Sisters at ZH (Luv ya Marla) and other critical news websites to disseminate critical info to us which we either digest, puke up, or disregard.
We need to thank those people and those before us who risked their friggin lives to get this info out. God speed my brothers and sisters
Gold bitches unite and fuck them bankers up bad by shorting every goddamn reco they make. Look at the squid ! - it's flopping in death throws as we speak.
cheers mates
Thank you JPM, I have been waiting patiently for professional advice on my Greek Bank position. Was not sure after a SEVENTY percent drop if it was a BUY, HOLD or I had just got a fierce ass pounding.
Enron stock was rated as 'Can't Miss' until it became clear that the company was in desperate trouble, at which point analysts lowered the rating to 'Sure Thing.' Only when Enron went completely under did a few bold analysts demote its stock to the lowest possible Wall Street analyst rating, 'Hot Buy.'
Dave Barry
February 3, 2002
Formanko delivers momentous Greek news. In the spirit of Pheidippides, somebody needs to collapse and die.
Paul Formanco here, You guys should know that I've lost interest in anything Greek, This horse has bolted and so have I . Bigger fish to fry because the Spanish banks look to be a current Hot Buy because of Merger activity. Also, If you have any spare change, RBS seem to be a well managed Bank with an excellent track record, Like C, it can only profit because of excellent management and big Name brand. Thats what I like Name brands and mergers - they never fail.
Good punting little fish.
will someone just PLEASSSEEEE unplug this machine. It keeps telling me "launch the missiles. launch the missiles."
People pay for this advice?
Technically, "We The People" pay for this advice, as his salary and UltraBonus come from our childrens' taxes.
I guess JPM finally unloaded all of their Greek bonds.
American education system product? It's "shoo-in", not "shoe-in". Another common error is "rein in spending" (not "reign").
i never heard that one ...Wow...
"officially submitted his bid for the client wealth destroyer of the century title" - well done - i actually LOL'ed - not the fake kind that everyone types, but the real ones - I might have actually pissed off a few of my colleagues - c'est la vie - well done, ZH