In order for shares in Greek banks to be investable, they must meet 6 painful criteria… otherwise Bitcoin

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If at least 3 of these 6 basic conditions are not met, you better turn to Bitcoin… although we would say that Bitcoin will be the new king of investment in the near future…

When there are estimates that Bitcoin may reach $ 4,000,000 from $ 58,200 in the current period (21/2/2021) or an increase of 70 times, obviously talking about doubling prices in Greek banks may not excite…
E.g. Bitcoin rose from $ 14,000 to $ 58,200 in almost a month and a half, an increase of 400% in a month and a half; the time required for Greek bank shares to double could be 12 to 18 months.

For quadrupling will take many – many … many years….

Cryptocurrencies are the future of investment … as long as central banks, for fear of losing power and controlling global money, impose extreme restrictions on cryptocurrencies over digital currencies.
The digital currencies will be the official ones e.g. euro, dollar, yen.
Cryptocurrencies will be the unofficial ones of the many institutional and non-institutional, private and speculators where they are leading today.

When will Greek banks acquire value? – How will they become investable?

The key question here is to answer how will banking stocks in Greece become investable?
6 basic conditions must be met

First condition NPEs ratio 5% or 6 to 7 billion 

In order for Greek banks to become investable, the NPEs ratio, the non-performing exposures ratio, must fall to 5%.
What does 5% mean?
That problematic exposures, ie loans that show delays in their payments and less than 90 days should fall to 6-7 billion euros compared to 63 billion in the current period.
They definitely need Hercules 2 which helps to reduce problem loans.
With Hercules 2, another 30 billion problem openings will be securitized.

Hercules 1 and Hercules 2 prove to be life-saving solutions for Greek banks, not just necessary but life-saving solutions.
Iraklis 3 may be needed for the banks to reach 6 to 7 billion NPEs or many aggressive organic moves will be required.
Unfortunately, this is also a fact, banks can not securitize aggressively but methodically and partially and this is related to the capital required.

Making the 63 billion NPEs – or 53 billion with Alpha bank Galaxy – 6 or 7 billion NPEs requires a reduction of 47 billion to 50 billion along with the 5 or 6 billion new NPEs that the crisis will create of the crown.

Suppose there are 50 billion left to be reduced based on the securitization, forecasting and capital requirements model of Alpha bank and Eurobank and not the National Bank’s accounting tricks to spend 8-10 billion capital.
There are no 8 to 10 billion new funds to spend.

Second condition – Capital buffer 10 billion after stress tests

Today, Greek banks have a capital cushion of about 9 billion, but this does not reflect reality.

The 9 billion came because the minimum overall capital adequacy ratio decreased from 13.75% to 14.25% to 11.25% and this reduction … helped to strengthen the capital cushion, ie the surplus capital from 4, 5 to 9 billion
Piraeus 2.2 billion euros
National Bank 1.8 billion
Alpha bank 3.4 billion
Eurobank 1.55 billion
Total capital cushions 9 billion euros but this does not fully reflect reality.
However, if we take into account that
1) Banks will be pressured in the unfavorable scenario of the Stress Tests that will be announced at the end of July 2021.
They could potentially lose 60% of their capital cushion or 5 to 6 billion out of a total of 9 billion
2) The minimum requirement for own funds and eligible liabilities ( Minimum Requirement for own funds and Eligible Liabilities ) must be met by 2025 or MREL ) there is a deficit of about 10 billion
3) With the ongoing securitization of non- performing loans at least 5 billion euros of capital will be spent with a conservative approach .
The sum of these 3 parameters leads us to the safe conclusion that in the Greek banking system there is a capital deficit, not a surplus.
If today the banks should have NPEs ratio 5% would have to spend 8-10 billion. Chapters and with the adverse scenario stress tests and not even counted the index MREL … would create a deficit of 5 billion system.
This international investors know, they know that there is a capital deficit in the Greek banking system.

Third condition – Improving the ratio of DTC to equity to 25% of capital instead of 60%

Greek banks have a peculiarity, it is not the only one but this peculiarity is important.
In a total of 27 billion funds, they have 15.4 billion DTC deferred tax assets, ie the state has an obligation to the banks that offsets it with taxes.
When banks make a profit the DTC decreases by the amount of the tax corresponding to the profit, when they make a loss it is offset by a capital increase in favor of the public at the amount of the tax corresponding to the loss.

Also as a measure of comparison the DTC amounts to 15.4 billion while throughout Europe it amounts to 105 billion Greek banks have the highest ratio of DTC to equity in Europe and internationally.

While the DTC is supervised as capital, it is not recognized by investors and stock exchanges, they consider it lower capital.
This means that always, always be careful Greek banks will negotiate with discounts against other banks.
They can not have the same valuation as European banks as the DTC is so high…

This is an equally serious problem that should not be treated superficially, Greek banks drag a weight with them, as long as the DTC exists they can not become protagonists.

We can sometimes write nice texts for Greek banks, because from 106 billion NPEs they reduced them to 18 billion at the end of 2021 or mid-2022, but in practice they carry burdens that continue to affect the reliability of their balance sheets.

Essentially DTCs deferred tax receivables should account for 25% of their capital and not 60% or 65% of the current period with upward trends to 72% due to the reduction of capital from securitizations.

Fourth condition – Serious, organic and recurring profit with a target of 1.5 billion – Dividend distribution

Greek banks have not yet been able to achieve consistently recurring profits.

In 2020 e.g. Ethniki will show a profit explosion but this is not attributed to organic profitability but to a percentage of 80% in extraordinary profits with Titlos, swaps with Greek government and other banks.

In total , Ethniki from extraordinary profits can achieve 1.3 to 1.4 billion profits, welcome because it can spend them for consolidation but… the next day Ethniki and every Greek bank will be judged by its organic profitability.

If the banks in 1.222 achieve profits of 1.2 billion organically without extraordinary will be a success but there are serious questions, we will find out at the end of 2022.

In order for the banks to attract investment interest, the 4 big ones must achieve annual profits after taxes of 1.5 billion euros. .
Also, all this should be translated into a mechanism of return to the shareholders, ie the banks should distribute a dividend.
It is estimated that the banks will distribute a dividend for the fiscal year 2023, ie they will announce it in March 2024.

Fifth condition – Fixed credit expansion, without the creation of new NPEs

Banks play an institutional role, converting deposits into loans and this process is the contribution of banks to society.
This relationship was disrupted for many years not through the fault of the banks but due to the bankruptcy of the Greek economy.
In 2021 and until the middle of 2022 we will have a credit contraction because the loans that come out of the system (securitizations) are more than those that enter the system (new loans)

But in order for the banks to convert the deposits into loans – today the deposits are more than loans so there is a primary liquidity surplus and along with the 46 billion liquidity they have received from the ECB through various programs – there is a lot of liquidity in the system.
In order for banks to be able to finance the economy, they must have funds for growth and, above all, they must ensure that no new NPEs are created.

Banks lose large customers , large companies issue bonds and turn to small and medium-sized companies.
The medium-sized companies are healthy, but the small companies were the gravestone of the Greek banks, they gave up to 70% NPEs…

Sixth condition: The Greek state should leave

Although the presence of the Greek government and the Financial Stability Fund (FSF) had a positive effect on the banks as they were recapitalized and systemic stability was ensured.

However, the exit of the HFSF within the next 2 years from the banks must be planned in such a way as to win the Greek state.

Greek banks are entering a growth perspective There should be no discount on what the Greek government should gain by leaving – investing in Greek banks.

Conclusion

In order for Greek banking shares to become investable, these 6 criteria must be met.

Painful criteria and within these 6 criteria we did not include the continuing reduction of operating costs and the investments of 1 to 2 billion euros required for new technologies.

Greek banks need capital, the faster the capital is invested, the faster normalcy will come.

Unfortunately these are fixed positions of bankingnews since 2013… we have to change everything if we want to hope for better days.

If at least 3 of these 6 basic conditions are not met, you better turn to Bitcoin… although we would say that Bitcoin will be the new king of investment in the near future…

A lot of money will come from cryptocurrencies as long as you are involved in knowing the steps you will take…

Investing in banks is a traditional approach, the new trend is cryptocurrencies there is a loss and this investment loss will continue.

Source: https://www.bankingnews.gr/

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