If you have invested in or traded around news in the lands of the PIIGS, Greece is perhaps the prominent problem child and National Bank of Greece SA (NYSE: NBG) is just about the only proxy ADR that American investors can use outside of shipping companies which derive most revenues internationally.  The bank just reported earnings a while ago and it offers some key insight into what is going on Greece.

The earnings report itself shows a 39% gain in net income to 157 million euros.  Reuters has a report that expectations were “only” 116 million euros, with a range of 97 to 134 million euros.  This sounds great when you consider all of the woes coming out of Greece.  Unfortunately, it is NBG’s subsidiary Finansbank in Turkey that is saving the day.  If you try telling a Greek that Turkey may have saved the day, chances are high that you’ll probably not be greeted with a smile.

We have seen similar gains in earnings of late from Alpha Bank and Eurobank in Greece, but these were also on exceptions.  Fitch also recently cut these three and other banks in Greece on sovereign ratings concerns.  If you evaluate the 157 million euros that were earned by NBG, 151 million euros of the earnings were attributed to Finansbank in Turkey.  The company’s loss provisions in the first quarter were listed as 381 million Euros.

The news today may just remain a distraction to investors as the world continues to believe that a Greek default in some form is likely.  The news is also for the first quarter, before some of the latest waves of problems surfaced.  The bank has since cut its ECB borrowings and its Core Tier-1 ratio came in at 11.8% while operating expenses are down only 1%.

What is being seen here is a situation similar to medieval warfare.  Farmers can bring in all the abundant foods in to share with the people inside the castle, but what good does it do if the castle walls are close to toppling.  The real question that American (and European) investors need to ask is a complex one… What happens to NBG and its other large Greek bank rivals when Greece enters into what is being called a technical default (rather than a formal default)?

At 1:15 PM EST, NBG shares are down $0.01 at $1.32 and the 52-week trading range is $1.27 to $3.23. 

JON C. OGG

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