4 Greek Alternatives To National Bank Of Greece

by: The Unhooded Falcon


NBG is often treated as the investment to represent Greece for American investors.

Other Greek investments also have major upside but with less risk.

I discuss four Greek investments for investors bearish on NBG or just wanting to diversify their Greek investments.

For many U.S. based investors, National Bank of Greece (NBG) is the only Greek investment to consider. But with NBG likely to face challenges as the latest round of stress tests is completed, investors looking to benefit from Greece's broad recovery may want to diversify with some of the alternatives discussed below.

Dividend airline

Adding the risks of an airline to those of investing in Greece may seem like financial suicide to many investors but this is not necessarily the case.

Greece's Aegean Airlines (OTCPK:AGZNF) has been facing major domestic headwinds but international tourism is keeping the airline profitable. In fact, it could be argued that Aegean is actually a beneficiary of the Greek crisis since the crisis allowed Aegean to acquire Olympic Airways, a previously blocked transaction due to the fact that the merged carrier would control roughly 90% of the Greek air travel market.

Aegean is also unlike other airlines in that it pays a fat 10% dividend, well above the 1% range where most U.S. based airlines fall. In contrast, U.S. based airlines have put more capital into share buybacks which are less preferred by income investors.

But while Aegean's shares have outperformed those of NBG, they still trade at only 7.2x est. 2015 earnings and 6.5x est. 2016 earnings. This, combined with the dividend, makes Aegean Airlines a dividend value play worth considering for a Greek investment portfolio.

Aegean Airlines shares trade with little volume in the U.S. but with greater volume on the Frankfurt and Athens stock exchanges.


While Aegean has been able to weather the Greek crisis so far, an exit from the Euro and return to the Drachma would drive up the costs for aircraft and oil from foreign nations although this may be partially balanced out through a boost to tourism.

Aegean also faces competition risk from European discount airlines, especially Ryanair Holdings (NASDAQ:RYAAY) as these carriers try to move into the Greek market. Aegean's position should help it retain business travelers but discount carriers could put pressure on unit revenue.


Folli Follie (OTCPK:FLLIY) represents an interesting investment in Greece because the company does a significant amount of business outside of Greece. Although it is Greek based, Folli Follie sells its products throughout Europe and North America.

Selling luxury goods such as jewelry, handbags, and watches, the company has a wide array of products that sell outside of Greece. Yet, Folli Follie is only valued at 8.0x est. 2015 earnings and 7.0x est. 2016 earnings, well below the valuations typically given to large consumer products companies in this market.

Folli Follie may also reinstate a dividend in the near future as profits are remaining strong and it would show the company is rewarding investors. This move would be bullish for the stock by helping to attract dividend investors and funds.

Folli Follie, or FF Group as it is referred to in certain cases, has little volume in the U.S. but has greater volume on the Berlin and Athens stock exchanges.


The company is still subject to the risks of consumer products companies including changing fashions, demand, and input costs. A sharper downturn in the Greek market could also negatively impact the company's domestic sales.

While Folli Follie has markets beyond Greece, demand could be negatively impacted by a global economic slowdown. Lower profits stemming from weaker demand could also delay the reinstatement of a dividend.

Preferred option

Investors looking at National Bank of Greece may also be interested in a different part of the bank's capital structure. The preferred shares of the bank trade at $4.23 or 17% of liquidation value.

The dividends on National Bank of Greece Series A Preferred (NBG-A) were suspended in 2011 and are non-cumulative. However, NBG is likely to resume preferred dividends if it returns to financial health since banks need a regular access to capital and a strong credit rating is important.

The preferreds also have a fixed liquidation value, which protects them from share dilution if new common stock is used to raise capital as has occurred in previous bailouts. With a coupon of 9%, the preferreds would also provide a 53% yield on cost if the dividend is ever reinstated.

The preferred shares of NBG are simple for U.S. based investors to purchase since they trade on the NYSE alongside the common shares.


While NBG preferreds avoid the risks associated with common stock dilution, they would likely face significant losses if not a total wipeout in the event of a restructuring or bail-in. At this point, haircuts to senior bondholders are being considered although they may be harder to implement than first thought. Regardless, any plan that forced losses on senior or junior bondholders is likely to negatively impact preferred shareholders since preferred stock is lower in the capital structure.

Diversified approach

For investors just looking to bet on Greece's recovery as a whole, the Global X FTSE Greece 20 ETF (NYSEARCA:GREK) offers a large basket of 31 companies.

GREK includes companies involved in banking, energy, consumer products, materials, and telecommunications giving it a wide group of Greece's economy. Since GREK is geared towards U.S. based investors, it is one of the easiest Greek investments to purchase since it trades on the NYSE.

Since many of the companies in GREK pay dividends, the ETF has a distribution yield of 1.4% although this is likely to change as companies adjust dividend policies. At the same time, the ETF has a gross expense ratio of 0.65%. While I am always concerned about excessive expense ratios and fees, I see this expense ratio as reasonable given the amount of diversification offered in a more difficult to access market.


GREK reduces company specific risk but it still has industry related risk. With about 25% of the ETF's assets in the financial sector, GREK would be negatively impacted if the recapitalization of the banking industry comes in the form of a bail-in method.

GREK is also at risk if Greece's economy begins to slip again since many of the companies in it are primarily domestic focused.

Greece takeaway

While NBG may be the best-known Greek investment for U.S. based investors, there are other alternatives worth considering, if nothing else for diversification purposes.

Aegean Airlines, Folli Follie, NBG preferred, and GREK are some of my top picks but a further list can be found by examining the holdings of GREK.


I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: The author does not guarantee the performance of any investments and potential investors should always do their own due diligence before making any investment decisions. Although the author believes that the information presented here is correct to the best of his knowledge, no warranties are made and potential investors should always conduct their own independent research before making any investment decisions. Investing carries risk of loss and is not suitable for all individuals.

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