The only reason that BNBG's are so heavily discounted is the fact that "the credit crisis" is being seen to impair asset values leaving BNB with vast debts to service out of diminishing asssets.
Is this view accurate ... no, it is not.
We are currently seeing massive, global de-leveraging by banks and hedge funds. These entities can either "get more tier 1 capital" or "reduce total assets funded by this capital". (Banks are focused on doing both, as fast as possible).
How will we know when the "credit crisis" is over?
The crisis will endure as long as high quality assets fail to attract investment interest. (Note the complete collapse of the SIV ...). We will know when it is over when the price for high quality/performing assets begins to rise.
My view is that BNB will be a bellweather indicator for the end of the crisis. They have desirable assets, these assets are generally performing well, these assets will be the first to recover - well before the banks, themselves (who will have profitability issues for many years to come).
Buying BNBG is a bet that the beginning of the end of the credit crisis is near.
There is no shortage of liquidity in the banking system. Money is available, if you can demonstrate a low risk profile. BNB is in the process of coming up with exactly this demonstration. If they can detail the asset, prove the viability of the asset; they will get funding.
This is the reason why BNB will survive. (Unless, of course, that they fail to deliver on this simple demonstration).
I believe they will "pass the test" - that is why I hold BNBG.
BNB
babcock & brown limited
