Emirates NBD limit down

[sam111sam]

I wonder why is it on limit down today ?
This deducted 13 points from DFM Index which could have closed green otherwise

ENBD has a high exposure to DW bonds. But it seems these will be paid on time now.

May be because of the high exposure to Dubai Gov other entities like DEWA ?

The stock is now trading at an estimated P/E of 4.5-5...

Anyone aware of a possible 4Q bomb ?

Please share your views.

[Sunilkhaitan]

Sam,
I hope we would hear some good news after todays meeting between DW and creditors and stock may limit up from tomorrow.

[sam111sam]

[bandakok]

Up todate ENBD has not disclosed their loans to DW.
Is that a hint that the amount is over and more than any other bank ?
Central bank should force a figure out and dfm should hold trading.

[sam111sam]

[thajuddeen]

ENBD may fall upto around 2.66 before flying higher.

UAE cann't afford to fail DP or ENBD.

Whatever the exposure, ENBD could get the money with the finance charges.

With high oil price, big brother will extend help as and when necessary.

I would say accumulate ENBD below 3.00.

This stock is reminding me of EMAAR at 2.27 before peaking to 5.00.

On positive turn around ENBD could rally and peak around 5.85.
_________________
Take your own decision; and you decide your destiny

[sam111sam]

[ixtira]

It depends how you define failure:

I agree that ENBD is unlikely to go bust with the depositors losing out (like Lemans Brothers or Ice Save) the federal government would probably not let that happen. However …

A failure where the bank survives but share-holders lose their equity (for example if the bank is nationalised or taken on by another bank) is possible. Remember Amlak

I agree that in all probability ENBD is a good buy at these prices, but like all good deals it’s not risk free.

[thajuddeen]

[ixtira]

ENBD’s share price is very much linked to the DW, Nakheel debt repayment story. PE is not really a factor at the moment.

For example EFG-Hermes Holding’s gave this stock a far value of 7.2 on the 29th Oct 2009. Just two months later on the 29th of December EFG Hermes gave a fair value of 3.2 AED per share… Yet the key ratios had not changed significantly.

[sam111sam]

[ixtira]

I agree its a monster sized drop in two months!

The most recent fair values are available at the Mubasher website (english.mubasher.info) … Unfortunately no explanations relating to the fair value is given.

The best I can find is press release from EFG-Hermes on the 6th of Dec

EFG-Hermes 06 December 2009:

For the banking sector, even in the absence of concerns over the capital position, we believe that concerns over the solidity and value of the implicit state guarantee will raise borrowing costs. In addition, we previously relied on state entities to absorb systemic volatility, and the discovery that they can actually be the source of systemic volatility rather changes that equation. Our banking analyst believes that provisioning forecasts will need to be revised upwards, and the rate of recovery downwards. We assign a ST/LT Sell recommendation on ENBD and ADCB: both have the highest exposure to Dubai public lending.

[fayesloan]

ENBD has lots of problems aside from DW and Co.
Can someone here say with confidence the bank has several avenues for revenue growth?
The buy signal for investors to buy ENBD shares (because this is not a classic tradable stock) is when the bank lays off 40% of its employees and quite possibly makes a change or two in executive management. The lay offs would translate into a 20% workforce cut reported in the newspapers.
The bank does not have the money, nor the managerial prowess, to compete for business elsewhere in the Gulf, let alone elsewhere in the Arab World or the Subcontinent. It's no secret that the overall strategy to "expand" was based on the bygone days of easy access to credit on the money markets, to be used to gobble up other banks in the UAE and the Gulf. The bank has kissed those days goodbye.
If you are looking to trade, then trade a liquid stock where you don't get burned because of wide spreads and illiquidity. Chances are in this small market that if ENBD goes up, it will drag the liquid stocks with it.
But as an investment it seems like this bank is due another good down leg. So at the minimum if you like this stock it is best to phase in over several quarters and achieve a nice average cost price.
But the bank is living in some fantasy land where everything is miraculously OK. That's a managerial problem.
I also reread the EFG Hermes paragraph in *ixtira's* post above. It is hilarious, referring to state funds, i.e. bailout, as a reason for their high previous fair valuation.
History is clear on all this. Enterprises that rely on state bailouts are usually terminally ill and take several years to recover. Wait for the next credit boom and hope you survive by then. This is the lesson learned all over the world.
ENBD, being a state owned bank (majority), will benefit from Dubai government business, but the governmenet debt situation does not bode well for this bank for several years.

[sam111sam]

[bandakok]

ENBD in my openion is the worst sevice minded with regards to corporate accounts. i use many banks , i agree Mashreq is worst with regards to personal account and credit cards, but try Citi service then u can compare they r the best for corporate account and have no problem withdrawing 3M in 1 day but ENBD 2 times tried to withdraw 50k and they did not have it, had to wait for few customers to make deposits b4 the cashier could give me my money.Now after the merger is complete i hope the service will be better.

[fayesloan]

ENBD's main profit drivers outside retail banking are government and corporate and wholesale banking like syndication. It has never been a purely retail bank but it looks like they are trying to change that. Now they don't have the money to gobble up something like RAK Bank to beef up their retail revenue. Yes, NBD was supposedly a conservative mortgage lender but there is little doubt both banks' corporate sectors were heavily involved in Real Estate.
If you think the banks, especially Emirates Bank, were sticklers for Central Bank guidelines and regulations on controlling property related lending, then think again.
You can categorise a loan any which way you want. Ultimately it does not matter when some 20% or more of GDP has been wiped out. Banks will suffer regardless. Their 5 year plans would have to go back into the future of year 2000, to begin to look realistic.
Retail barely used to constitute 35% of revenue, maybe around 30% around 2004 and 5. It might be proportionally more nowadays as I have not followed up on their revenue structure.
Retail's situation is bad as it is already, and they have got competition here in the UAE to deal with. The other revenue drivers have more room for downside.
The situation looks awful for a bank that generally IS awful in service. They are going to have work awfully hard at pleasing customers and offering good, quality service at competitive rates to make further inroads into the retail sector.
I am still waiting for the day that this bank, or any bank, actually declares a quarterly loss, not just writedowns or provisions. Maybe ADCB has done that? When a few banks report full quarterly losses for a 2-3 quarters I believe it would be a good idea to begin buying shares.
Growth is possible from low levels but likely to be timid for some +5 years.

[sam111sam]

[fayesloan]

sam111sam
I can't answer that question because who knows how they decide to massage the numbers.
Like I said earlier, I am waiting for the day when they announce Losses and not Profits all the time. But somehow banks here always manage to brush aside bad decisions as belonging to some other universe by calling them provisions.
but to answer yourQ anyway it should be less than last year, last quarter but it's pointless for me to venture into giving a number, loss or profit, and talk about per share figures when I find their shenanigans so unpredictable. Emirates Bank has always been agreat bank stock to hold for the regular dividends they offer.

[fayesloan]

But the real problems which are making it a bad business nowadays may pressure the stock price much further. The accounting used to produce their reports is like photoshopping pictures.

[default_invetor]

Hi All,
I have checked with ENBD about the prospect to announce 4Q and they have informed me that most probably by 1st or 2nd week of Feb also got the info from some other sources that ENBD expected to post 80M profit
So I think this is good time to accumulate the shares
What you guys think on this?

[ixtira]

[default_invetor]

Hello ixtira,
so do you have any idea that whats the right time to buy ENBD shares?

[ixtira]

Alloha Default_Investor,

If I knew the answer to that one I wouldn’t be on this forum, I’d be chilling out on a Caribbean beach

ENBD is either an opportunity to make or loose lots of money, I’ll be honest and say I don’t know which it is! … Unfortunately, by the time it is clear what is happening the price will have altered accordingly.

Personally I would recommend UNB if you want to get some bank action, its also cheaply priced but has less of the exposure problems.