A Weak Endorsement for National Bank of Greece (NBG)

National Bank of Greece SA (NYSE: NBG) is trading higher this morning on a key analyst upgrade.  The problem is that the upgrade is hardly an endorsement.  Goldman Sachs raised the rating on the troubled Greek bank and ADR to “Neutral” from “Sell” in its research call.

The report noted that mergers and acquisitions in the Greek banking sector, something that is being pressed by Greek regulatory bodies (Finance minister) as we speak, is actually priced in at the current levels.  Goldman Sachs even went on to note that the M&A activity in the sector is not a game-changing event as Greek banks are trading at only a minimal discount to their European counterparts per the Goldman Sachs earnings and book value estimates.

The Motley Fool is often not thought of for deep research, but it recently listed that National Bank of Greece trades at about 0.7-times book value.

Our own caveat emptor on investing in troubled banks, particularly when they are foreign… book value discounts mean little to nothing in these situations.  That discount is just there because the book value may keep dropping for quarters and quarters.  In some cases, it is like evaluating the book value of a troubled biotech that trades down under its cash value.  That cash will be eaten up faster than the shareholder can often realize any rewards.

Seeing a “Sell” turn into a “Neutral” is hardly an upgrade.  Still, it is better than nothing.  At least it removes a “Sell” recommendation.  NBG shares are trading up 2.8% at $2.58 on more than 700,000 shares. Average volume is 3.6 million shares and the 52-week trading range is $2.11 to $8.37.

JON C. OGG