Saturday, May 17, 2014

Piraeus Bank, Marfin Group --- And the Real Greek Economy

I may be a bit prejudicial in this comment and, if so, I apologize. However, when the Cypriot Laiki Bank collapsed, I did a bit of reasearch into its background and I ended up with Andreas Vgenopoulos and the Marfin Group. For all I know, Mr. Vgenopoulos may be the most virtuous entrepreneur in the whole world and his Marfin Group may be solid as a rock. Nevertheless, based on the brief research I made at the time and adding to it my banker's common sense, I am inclined to think that this entrepreneur and his enterprises have a bit of a 'smell' to them. I would define that smell as 'using other people's money (OPM) not primarily for sound economic value creation but, instead, for one's own financial benefit'.

I now read in the NYT that Vgenopoulos and his group are using OPM provided by Piraeus Bank which, in turn, has just taken up a lot of OPM on its own. Frankly, that has an extreme smell to it! I would think that in times like the present ones in Greece, banks which are able to raise OPM would use that OPM for the benefit of the real economy; i. e. for making loans to the productive sector in the Greek economy.

Why do I suggest that the Marfin Group is not part of the productive sector of the Greek economy? Well, I am not really suggesting that. I am sure that parts of the group are indeed active in the real economy of Greece. But my point is the following: it is one thing for a bank to finance a specific project of a specific company. To provide general purpose financing to the holding company of a group (which the buying of convertible bonds is) is quite another thing. It depends on the group.

If the group were Warren Buffett's Berkshire Hathaway, I would have no doubt that Buffett would put that OPM to sound economic use. If it is the Marfin Group and an owner who has demonstrated with Laiki Bank what kind of fast ones one can pull off with OPM, I would suggest not to touch it with a ten foot pole.

When I read that "the deal is the latest in a long line of transactions between Mr. Sallas, CEO of Piraeus Bank, and Mr. Vgenopoulos", the smell gets even worse. If Mr. Sallas owned Piraeus Bank and financed it to 100% with his own equity, he could make deals with anyone he wanted to. As long as he is using OPM, he should not do with OPM what those other people would perhaps not wish to do on their own.

1 comment:

  1. You should probably know that Marfin would encourage via standard marketing approaches eminent businessmen to borrow funds and then buy MIG shares !!!! Furthermore Marfin and Piraeus Bank are entangled in the biggest scandal of the recent banking history in Greece, ie they would borrow from each other and blow their capitalisation indexes....Lavrentiadis (ex-Proton Bank) though is the only one convicted for such practices up to now....Sallas on the other hand is currently the governments favourite child, while Vgenopoulos is lsowly and silently retreating hoping that everything will be covered by the dust of time....