EFTA01462669.pdf

Subject: Jeffrey - I like Alpha Bank (Greece) listed Call Warrants (ticker ALPHAW GA) to play the Gr eek story from here From: Nav Gupta < Date: Thu, 26 Jun 2014 14:34:09 -0400 To: jeevacation0gmail.com Cc: Tazia Smith < >, Paul Morris < >, Vinit Sahni < >, Nate Gupta < IMI > Jeffrey I like the Greek recovery story, i like Alpha Bank among the banks there and I think the 3.5yr call warrants issued a year ago which have very little time value priced in and priced close to intrinsic , are the best way to buy the stock and the broader story. Background 1. Greece experienced a worse recession than the Eurozone. The wage and unemployment adjustments hav e been far more severe than the Eurozone. Greece's economy is showing signs of return to growth over the next year. IMF forecasts 0.6% GDP growth 2014 and faster growth than broad Eurozone from 2015+. 2. In the short term bank asset quality continues to deteriorate. NPL is 35, double the rate of Ital y and > 3x that of Spain 3. Greek banks raised eur50bn in 2013 to recapitalise losses from Greek Govt bond PSI (private secto ✓ involvement). The sector is now 35-70% state owned. Greek Banks Presently Greek banks rank as some of the least profitable in Europe (ROA <0.5%, ROE 2-2.5%). Lookin g forward to 2018 they should trade at least in line with European banks. Sector consolidation, NC a sset disposal, rapidly declining cost of wholesale funds and efficiency savings will all contribute to that. The Sector comprises Alpha Bank, Eurobank, Nat Bk of Greece and Piraeus. The are no longer distressed and trade broadly in-line with European peers in terms of EPS and TBV multiples. Alpha Bank (ALPHA GA) Of the three, Alpha Bank looks the most interesting. It trades at a discount to the others and has 1 ess complex re-structuring. A recent capital raise increased CT1 to 12%. Most analysts prefer Alpha Bank to its peers for these reasons. Alpha Bank Stock Price (Embedded image moved to file: pic17302.gif) Very recent analyst target prices for Alpha Bank are largely above the current price (Embedded image moved to file: pic32520.gif) Warrants A year ago the bank issued 4.5year call warrants, exercisable every six months into the stock at a p rice schedule (appendix A) that varies over time the relationship between the warrant (which settles physically) and the stock price is: (current stock price (0.69) - next exercise price of warrant (0.4686)] x leverage ratio 7.408 = intr insic warrant px = 1.64. Now, the warrant is offered at 1.83. The value here is that the difference between 1.83 and 1.64, in my view, doesnt compensate for the optionality you get holding the warrant compared to just holding the stock. Warrant price (Embedded image moved to file: pic14979.gif) Were the stock to rise 10% over the next month the warrant would rise in value from 1.83 by approx 2 2%. Conversely if the stock were to fall the warrants would also fall - but its unlikely the warrant price trades at zero anytime soon due to the 3.5years of remaining time value. The warrants are quoted several thousand up ltick wide on exchange. Any qns shout. Appendix A WARRANT ENTITLES HOLDER TO ACQUIRE NEW COMMON SHARES HELD BY HFSF AT A RATIO OF 7.408683070. ISSUE AMOUNT: 1,233,503,482. STEP-UP STRIKE:0.4488 12/10/2013, 0.4576 06/10/2014, 0.4686 12/10/2014, 0.4796 06/10/2014, 0.4928 12/10/2015, 0.506 06/10/2016, 0.5214 12/10/2016, 0.5368 06/10/2017, 0.5544 12/10/2017 EFTA01462669 Nav (Embedded image moved to file: pic04364.gif) Nav Gupta Managing Director Deutsche Bank AG, Filiale London Deutsche Asset a Wealth Management 105/108 Old Broad St (Pinners Hall), EC2N lEN London, United Kingdom Tel. Mobil Email Any proposed ideas are being delivered to you by the DeAWM Key Client Partners ("KCP") London desk f or discussion purposes only, and do not create any legally binding obligation on the part of Deutsch e Bank AG and / or its affiliates ("DB"). These ideas are for the consideration of the intended reci pients of this mail only. The KCP London desk does not provide investment advice. All intended recip ients are Professional investors (as defined by MiFID), who understand the strategy, characteristics and risks associated with any ideas proposed herein and will be able to evaluate it independently. All trades on proposed ideas shall be subject to the relevant internal approvals prior to execution. (Embedded image moved to file: pic15155.gif) This e-mail may contain confidential and/or privileged information. If you are not the intended reci pient (or have received this e-mail in error) please notify the sender immediately and delete this e -mail. Any unauthorized copying, disclosure or distribution of the material in this e-mail is strict ly forbidden. Please refer to http://www.db.com/en/content/eu_disclosures.htm for additional EU corporate and regu latory disclosures and to http://www.db.com/unitedkingdom/content/privacy.htm for information about privacy. EFTA01462670