Of Four Traded Central Banks, Greece's Is Beating Them All

  • Bank of Greece's dividend yield is higher than the ASE
  • Its shares are the most liquid of the four central banks

Here is a little-known fact: Greece’s central bank is traded, and it’s beating its peers.

Up 6.6 percent this year, the Bank of Greece has managed to buck the trend in a stock market that has lost almost $19 billion in value and in a country that’s still grappling with a banking crisis. The lender, worth about 194 million euros ($212 million), has about 19,000 shareholders, with the state controlling about 8.9 percent.

“Believe it or not, Bank of Greece is one of the most solid and reliable stocks in the Greek stock market,” said Stavros Kallinos, head asset manager at Guardian Trust in Athens. “If we exclude the crisis period, Bank of Greece was always a safe way into the Greek stock market. There aren’t that many shares in the Athens exchange with such a high dividend yield. Investors are mainly Greek citizens with a long-term horizon.” 

The Bank of Greece is one of a handful of central banks that trade on global exchanges. The surprise is that it’s doing better than the other listed ones of Switzerland, Japan and Belgium, even as the benchmark ASE Index has slumped 12 percent this year.

Bank of Greece’s shares have rebounded 28 percent since August, when they reached their lowest price since at least 1992 after the market reopened following a five-week shutdown. That beat the 8.9 percent advance in the Athens exchange. As confidence in the nation slowly returned, deposits at lenders increased for a second month, and a central-bank official said stress-test results due this month will show capital needs will be lower than expected.

Shares of the Bank of Greece, founded in 1927 and listed on the Athens exchange three years later, have lost 90 percent from a peak in 2006. Still, their dividend yield of 6.9 percent is about three times that of the ASE. It’s almost as high as the rate of the two-year government debt, with the spread between the two narrowing since the country missed an exit from the euro area this summer.

Spread between 2-year yields and BOG's dividend yield has narrowed
Spread between 2-year yields and BOG's dividend yield has narrowed

The central bank generates income from the assets it owns, such as gold and European government bonds, as well as by lending to credit providers. Profit in 2014 fell 21 percent to 655 million euros, according to the its annual report.

Even as the Bank of Greece stock is illiquid, with an average trading volume of about 5,200 shares a day this year, that’s much more than the volume for the other central banks.

“I do not know if Bank of Greece is a waiting bomb or not but, if Greece remains in the euro then it will always be a legit long-term investment,” Guardian Trust’s Kallinos said.

Switzerland’s central bank has 60 percent of its shares held by cantons, regional lenders and public institutions, with private shareholders owning the remaining 40 percent. Its dividend is limited to 6 percent of the share capital. Belgium’s central bank has been 50 percent owned by the state since 1948, and also pays a dividend. The Bank of Japan, the biggest loser of the four this year, is listed on Tokyo’s Jasdaq exchange. The country’s finance ministry holds a 55 percent stake, and most private individuals are said to be wealthy investors who view the shares as trophies.

So are central banks a good equity investment? For most, holding a stock with capped dividends and barely any voting rights merely equates to owning a very illiquid bond. Alexander Kyrtsis at UBS Group AG rejects the whole idea.

“Central banks should not be listed,” said Kyrtsis, a banks specialist at UBS in London. “The sheer notion that you can have private investors owning even a fraction of a central bank is wrong at many levels. But there are historical reasons -- in the case of the Bank of Greece, it was to support the Athens Stock Exchange with market cap when it first opened.”

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