National Bank of Greece (ADR) (NBG), Lloyds Banking Group PLC (ADR) (LYG): Two Different Financial Situations for Two European Banks

Back in 2009, the largest American banks could be had for share prices in the low single-digit range as fears of financial collapse spread around Wall Street. But those share prices recovered (or in the case of Citigroup Inc (NYSE:C) underwent a reverse split) and now sit in at least the low double-digit range. However, while both of these two foreign banks still trade for under $4 per share, they have very different financial situations.

Lloyds Banking Group PLC (ADR) (NYSE:LYG)

The risky play

Greece’s people, economy, and banks have all been hit hard by the economic crisis that forced the nation to accept bailout funds from other European countries. The only one of Greece’s pillar banks that trades with a significant volume in the United States is National Bank of Greece (ADR) (NYSE:NBG), a bank that has lived through two world wars as part of its long history.

To keep the banking system on more stable ground, National Bank of Greece (ADR) (NYSE:NBG), along with the other Greek banks, recently underwent a recapitalization. In National Bank of Greece (ADR) (NYSE:NBG)’s case, the bank raised part of its funds from existing investors, but the remainder would have to come from the government itself. As a result, National Bank of Greece (ADR) (NYSE:NBG) shares were significantly diluted and saw a 1 for 10 reverse split to keep them out of the sub $1 range.

The prospects for National Bank of Greece (ADR) (NYSE:NBG) are largely based around how the Greek economy responds over the next few years. Real estate prices have dropped off and unemployment has skyrocketed, pushing the economy into recession. But some groups are predicting a small amount of growth for 2014 with growth accelerating after that. If this is the case, Greece could stop its economic bleeding and National Bank of Greece (ADR) (NYSE:NBG) could recover alongside a growing economy. Of course this is all still an “if” situation. NBG still remains a high-risk play. Investors with less of a risk tolerance may be more interested in the bank described below.

The safer play

Britain’s politicians are still managing the fallout from the bank rescue from the financial crisis. While Royal Bank of Scotland Group plc (ADR) (NYSE:RBS) still remains 81 percent owned by the government, Lloyds Banking Group PLC (ADR) (NYSE:LYG) represents a less politically dependent member of the British banking industry. Being around 40 percent government owned, Lloyds Banking Group PLC (ADR) (NYSE:LYG) still has government ties but its fate is less in the hands of politicians than that of Royal Bank of Scotland Group plc (ADR) (NYSE:RBS).