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First of all, Eurobank is significantly undervalued relative to the other three major Greek banks. When we look at tangible book value, and adjust for capital raises that each of the banks will likely have, Eurobank’s P/TBV ratio is less than half of the other banks’ average. With each of these Greek banks, tangible book value could vary significantly as losses from loans have the potential to grow. Even with this possibility, the drastic difference between Eurobank’s P/TBV vs the rest will not likely change. Currently, Eurobank has the second lowest percentage of non-performing loans in the top four Greek banks.
Based on operational metrics, Eurobank also looks cheap relative to comparable Greek banks. If we look at pre-provisional income (PPI) in relation to market value, operational income in relation to market value, or a few other metrics, Eurobank is about 50% cheaper than the top four banks. Comparisons based on profitability do not make sense yet since all of the top four banks are incurring losses.
Also, based on deposits (or loans), the other banks are trading at levels double to that of Eurobank.
We will not even attempt to discount future cash flows since there is 0% probability of our predictions to be accurate. However, we do expect cash flows to improve significantly in the next 2-4 years. The turnaround plan, with Prem Watsa and Wilbur Ross calling the shots, will drastically change the company as described in a previous section. Every year, the bank will likely move closer to what it was back in 2007. Also, the Greek economy is projected to continue its improvement and, according to most financial institutions, the national GDP should grow in 2014 for the first time in a few years. An improvement in the economic scenario will not only increase business, but it will also lower the cost of capital. An investor should not rely on GDP growth, but it is a possible bonus.
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Gerade vom Urlaub zurück und eine erfreuliche Kursentwicklung, na da ist ja der nächste Urlaub schon wieder gesichert,
