Last close As at 05/08/2026
EUR8.32
▲ 0.12 (1.46%)
Market capitalisation
EUR491m
Research: Financials
ProCredit (PCB) has extensive experience in supporting small and medium-sized enterprises (SMEs) in emerging economies (coupled with a strong environmental, social and governance (ESG) profile), with a focus on Southeastern (SEE) and Eastern Europe (EE) and banking operations in Ecuador. Its impact-oriented relationships with the SME borrowers (94% of loan book at end-H120), prudent credit risk management (share of credit impaired loans in the total loan book was 2.5% at end-H120) and solid capital base (CET-1 ratio of 14.1% at end-H120) should help reduce the impact of macro headwinds and underpin its long-term growth prospects.
Written by
ProCredit Holding |
Impact-oriented SME lender in SEE and EE
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Banks |
Deutsches Eigenkapitalforum 2020
6 October 2020 |
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Analysts
ProCredit Holding is a research client of Edison Investment Research Limited |
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ProCredit (PCB) has extensive experience in supporting small and medium-sized enterprises (SMEs) in emerging economies (coupled with a strong environmental, social and governance (ESG) profile), with a focus on Southeastern (SEE) and Eastern Europe (EE) and banking operations in Ecuador. Its impact-oriented relationships with the SME borrowers (94% of loan book at end-H120), prudent credit risk management (share of credit impaired loans in the total loan book was 2.5% at end-H120) and solid capital base (CET-1 ratio of 14.1% at end-H120) should help reduce the impact of macro headwinds and underpin its long-term growth prospects.
Actively seeking to expand client base
PCB grew the gross loan book by 4.4% in Q220 by seizing the opportunity that arose from the more subdued activity of its competitors amid the pandemic (even if somewhat assisted by credit moratoria). Customer deposits grew by 4.2% with no sign of a widespread liquidity crunch. As a result, management raised its full-year forecasts for gross loan book growth of 8–10%. PCB’s P&L was clearly affected by COVID-19 in Q220 (as was the whole sector), mainly through higher risk provisions and net interest margin pressure. Nevertheless, management still guides to a lower y-o-y but positive annualised return on average equity (RoAE) in FY20, a CET-1 ratio above 13% and aims for a dividend payout ratio of 1/3 from FY19 profits.
Focused on long-term value creation
Management reaffirms its mid-term targets of a c 10% annual growth for its loan portfolio, CIR of less than 60% and RoAE of c 10% (vs our forecast of 4% in FY20). We believe that these aspirations should be backed by a gradually declining cost of risk starting from FY21, future loan book and deposit base growth, as well as efficiency measures that PCB has completed in recent years, including optimisation of its regional exposure and branch network as well as implementation of a digital direct bank strategy for private clients (leveraging its in-house tech company Quipu). Meanwhile, PCB continues to expand its green loan portfolio, which represented c 17% of its loan book at end-H120 vs the medium-term target of 20%.
Valuation: Looking undemanding
PCB’s shares currently trade at a FY20e P/BV multiple of 0.4x vs an average 0.8x for a group of local and Austrian banks active in SEE and EE, which we believe is only partially justified by PCB’s lower return on equity (ROE). Importantly, ROE was relatively stable throughout the cycle and has remained positive since 2005. Our P/BV-ROE valuation currently stands at €7.75 per share, implying c 49% upside.
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Edison estimates
Source: ProCredit, Edison Investment Research. Note: *From total operations. |
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Research: TMT
Riber’s H120 results show the impact of a delay in completing a production MBE system because of issues in obtaining key components during the pandemic. While management expects FY20 revenues of €30m, based on the existing order book, we are reducing our FY20 gross margin estimate, which cuts our FY20 PBT estimate from €0.3m to break-even. Noting the delays in closing orders, we model fewer deliveries of MBE systems during FY21, which reduces our FY21 PBT estimate by €0.8m to €2.0m.