Opportunity Still Knocks in Riskier E.U. Banks (NBG, IRE, AIB, STD)

The recent bank stress tests in the E.U. on July 23 were arguably a greatly watered down test. But the stress test did act as a buffer on the Euro currency even more than the economy. We would even argue that the tests spared the public PIIGS.  The riskier banks have e performed very well in the ADRs from the PIIGS nations  If you look at the ADRs of National Bank of Greece SA (NYSE: NBG), The Bank of Ireland (NYSE: IRE), Allied Irish Banks plc (NYSE: AIB), and Banco Santander, S.A. (NYSE: STD), there is still some  upside for the group .

We took a look at which of these riskier banks have the most room to run and which ones may have already seen their big run.  We have also provided a chart from StockCharts.com for you to see how each of these may have only just started their breakout patterns.

National Bank of Greece SA (NYSE: NBG) has had a stellar gain.  Its ADRs were at $2.83 at the July 22 close before the tests and now are at $3.20 for a gain of 13.7%.  A recent management reshuffling of its upper ranks seems to have added more fuel to the fire.  What is most impressive is that the ADR is up 50% from the lows of $2.11 from the end of June. NBG is not one we’d be looking for a double-digit price in the ADR, but its 52-week high is $8.37.  Based upon some basic retracements on their charts, NBG shares could reach as high as $3.75 to $4.00 per share before real technical resistance and technicians would start locking in all their gains.  If that were breached, then an upside of $4.30 to $4.50 would be the next large objective resistance.  The 200-day moving average today is $4.28, which coincides with those higher numbers.

The Bank of Ireland (NYSE: IRE) ADRs were at $3.93 at the July 22 close before the tests, now shares are at $4.67 for a gain of 18.8%.  This Irish ADR is up just over 50% from its 52-week low of $3.10.  Imagining that this troubled bank will reach double-digits again soon is a stretch, but the 52-week high is $20.18.  Credit Suisse gave this comapany a new “outperform” rating with an upside of more than 25% in Euro terms.  Based upon some basic retracements on their charts, NBG shares could reach as high as $5.50 before real technical resistance and technicians would start locking in all their gains.  A next level that could be seen is $6.00 and then there is a technical no-man’s land all the way up to $7.00.  Its 200-day moving average is $7.62.

Allied Irish Banks plc (NYSE: AIB) has performed despite some caution.  Its ADRs were at $2.44 at the July 22 close before the tests, now shares are at $2.69 for a gain of 10.2%.  This is still up about 30% from the lows of $2.06 per ADR.  AIB has a 52-week high of $10.42, but we won’t be holding our breath for double-digit ADR prices for some time.  Credit Suisse gave this a new “outperform” rating with an upside of more than 30% in Euro terms, but we’d also note that the Royal Bank of Scotland downgraded this one to “hold” this morning.   Based upon some basic retracements on their charts, NBG shares could reach as high as $3.00 before real technical resistance and technicians would start locking in gains with a secondary price objective around $3.50 thereafter.    Its 200-day moving average is $3.77.

Banco Santander, S.A. (NYSE: STD) is one of the ‘less risky’ public banks of all the PIIGS nations and its shares in the recent E.U. malaise never got to the end of the world stage compared to 2009.  ADRs were at $12.80 (dividend adjusted) at the July 22 close before the tests, now shares are at $13.60 for a gain of 6.2%.  Much of the recovery has already been factored in here as shares are up 46% from the 52-week low of $8.65.  Its 52-week high is $17.89.  Based upon some basic retracements on their charts, Banco Santander shares are already at what appears to be real technical resistance.  If recent gains can continue, then this one could see $15.50 before another large round of selling comes into play.  This one seems more of ‘an already-played out’ scenario.

The idea here is not to care about nor to look for a return to the old 52-week highs.  It is not to try to figure out how much higher these banks all were back in the day when there was a banking bubble.  This is looking merely at technical trends to see which banks have the most upside left in them matched by a stabilization of the E.U. and the Euro.  By our chart readings above from StockCharts.com, the questionable of the E.U. PIIGS public banks seem to be in roughly the same place on the charts that U.S. banks were when they were going into the Summer-2009 period.  Trying to get top-tick is a game for suckers, but missing a major move after being left for dead is too.

There is another notion to consider here, and that is the re-stabilization of the Euro.  After the dollar challenged $1.20, the Euro is currently running above $1.32.  So 10% of this run in E.U. ADRs has been currency-related.  There could still be more as currency swings are just like any other volatile market: the swings up and the swings down always go too far. $1.20 was too cheap for the Euro, but the new normal currency band may show that $1.40 is too expensive considering the comparisons between the U.S. and E.U. economies.

The performance of the public E.U and PIIGS bank stocks still has some upside, just don’t be shocked on the days these see pullbacks from profit-taking.  Getting these on those mornings when there is a pullback might just be a gift.

JON C. OGG