Last close As at 05/08/2026
EUR8.32
▲ 0.12 (1.46%)
Market capitalisation
EUR491m
Research: Financials
In light of the recent developments in Ukraine, we have temporarily suspended our forecasts and fair value estimate for ProCredit Holding (PCB) until further notice. The conflict is likely to have a significant impact on PCB’s operations in Ukraine (gross loan book of €732m or c 13% of the total loan portfolio at 30 September 2021). Potential effects are likely to include 1) a spike in default rates (although this could be mitigated by credit moratoria), 2) a decline in interest and fee income, 3) a collapse in lending volumes, and 4) a negative FX impact from the depreciating Ukrainian Hryvnia (although we note that PCB normally matches the foreign currency exposure of its assets and liabilities). The local banking system is now operating under Ukraine’s martial law (introduced on 24 February), which should help to mitigate the short-term impact. We note that PCB has no exposure to Russia and thus the sanctions imposed on Russia will have no meaningful impact on PCB’s business.
ProCredit Holding |
Impact of war in Ukraine |
Temporary suspension of forecasts |
Banks |
1 March 2022 |
Share price performance
Business description
Next events
Analysts
ProCredit Holding is a research client of Edison Investment Research Limited |
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In light of the recent developments in Ukraine, we have temporarily suspended our forecasts and fair value estimate for ProCredit Holding (PCB) until further notice. The conflict is likely to have a significant impact on PCB’s operations in Ukraine (gross loan book of €732m or c 13% of the total loan portfolio at 30 September 2021). Potential effects are likely to include 1) a spike in default rates (although this could be mitigated by credit moratoria), 2) a decline in interest and fee income, 3) a collapse in lending volumes, and 4) a negative FX impact from the depreciating Ukrainian Hryvnia (although we note that PCB normally matches the foreign currency exposure of its assets and liabilities). The local banking system is now operating under Ukraine’s martial law (introduced on 24 February), which should help to mitigate the short-term impact. We note that PCB has no exposure to Russia and thus the sanctions imposed on Russia will have no meaningful impact on PCB’s business.
Year end |
Net interest income (€m) |
EPS* |
DPS |
P/BV |
P/E |
ROE |
Yield |
12/19 |
194.5 |
0.89 |
0.00 |
0.3 |
5.2 |
6.9 |
N/A |
12/20 |
201.6 |
0.70 |
0.53 |
0.3 |
6.6 |
5.3 |
11.4 |
Note: ProCredit Holding. Note: *From total operations.
No new capital needed even in a worst-case scenario
We calculate that PCB Ukraine had total equity of c €123m at 30 September 2021. This compares with the group’s CET-1 capital and total regulatory capital at 30 September 2021 of c €772m and c €840.6m respectively. Moreover, based on our conversation with the management, we understand that the risk weighted assets (RWA) of PCB Ukraine are around €850m (vs total group at c €5.6bn at end-September 2021). Consequently, we estimate that even in a hypothetical worst-case scenario of a defaulting PCB Ukraine, the capital ratios of PCB group would change only marginally (as the decline in regulatory capital would be offset by declining RWA) and remain well ahead of its regulatory requirements. The group’s CET-1 ratio and capital adequacy ratio was 13.8% and 15.0% at end-September 2021, respectively, versus the regulatory requirement of 8.2% and 12.6%, respectively.
Potential write-down of PCB Ukraine already priced in
For illustrative purposes, we estimate that even a complete write-down of the equity in PCB Ukraine would reduce our previous FY21 forecast of PCB’s tangible book value from €14.2 per share to €12.7. While this is a considerable decline, we note that PCB’s share price is currently well below book value per share at c €4.63 (although this may also discount geopolitical risks around Georgia and Moldova). That said, we note that in 9M21, PCB’s Eastern Europe segment (where 57% of the loan book is in Ukraine versus 30% in Georgia and 13% in Moldova) recorded net interest income of €51m (32% of group) and net profit of €28m (vs PCB group at €62m).
Ukraine’s banking system under martial law
PCB has extensive experience navigating in political and military unrest. For instance, it was one of the last banks to stay open in several countries during the global financial crisis of 2008/09 and the military conflict in Georgia in 2008, according to the company. However, Russia’s invasion of Ukraine is hardly comparable with any of the previous conflicts in the region. The Ukrainian banking system is operating under martial law based on a resolution implemented on 24 February 2022. Consequently, Ukraine’s central bank (NBU) will grant unlimited and unsecured loans to banks with a maturity of up to one year (and an option to extend to another year). Moreover, among other things, the official Ukrainian Hryvnia exchange rate has been fixed and a moratorium on cross-border payments has been introduced. Experts from the International Monetary Fund view positively all the measures taken by NBU and are in discussions with the NBU on possible support measures, including assistance under the Rapid Financing Instrument.
PCB Ukraine has seven branches, of which three are in Kyiv (currently closed), and five 24/7 self-service branches (which are still open). PCB’s successful digitalisation and physical branch reduction strategy (see our June 2020 initiation note for details), should help it to operate as normally as possible.
Exhibit 1: Financial summary
Year ending December (€000s) |
FY18 |
FY19 |
FY20 |
Income Statement |
|
|
|
Net interest income |
186,235 |
194,533 |
201,561 |
Net fee and commission income |
52,172 |
51,972 |
47,380 |
Loss allowances (-) |
(4,714) |
(3,327) |
28,600 |
Operating income |
245,394 |
252,603 |
223,514 |
Operating expenses |
167,866 |
175,737 |
171,430 |
PBT |
77,528 |
76,866 |
52,085 |
Net profit after tax |
54,479 |
54,305 |
41,396 |
Reported EPS (€) |
0.90 |
0.89 |
0.70 |
DPS (€) |
0.30 |
0.00 |
0.53 |
Balance sheet |
|
|
|
Cash and balances at Central Banks |
963,714 |
1,081,723 |
1,405,349 |
Loans and advances to banks |
211,592 |
320,737 |
236,519 |
Investment securities |
297,308 |
378,281 |
336,476 |
Loans and advances to customers |
4,267,829 |
4,690,961 |
5,131,582 |
Property, plant and equipment and investment properties |
130,153 |
138,407 |
140,744 |
Intangible assets |
22,191 |
20,345 |
19,316 |
Other assets |
73,396 |
67,106 |
59,315 |
Total assets |
5,966,184 |
6,697,560 |
7,329,301 |
Liabilities to banks |
1,014,182 |
1,079,271 |
1,235,763 |
Liabilities to customers |
3,825,938 |
4,333,436 |
4,898,897 |
Debt securities |
206,212 |
343,727 |
266,858 |
Subordinated debt |
143,140 |
87,198 |
84,974 |
Other liabilities |
33,076 |
50,436 |
63,080 |
Total liabilities |
5,222,549 |
5,894,068 |
6,549,573 |
Total shareholders' equity |
743,634 |
803,492 |
779,728 |
BVPS |
12.5 |
13.5 |
13.2 |
TNAV per share |
12.1 |
13.1 |
12.9 |
Ratios |
|
|
|
NIM |
3.30% |
3.10% |
2.90% |
Costs/income |
69.7% |
70.5% |
68.0% |
ROAE |
7.6% |
6.9% |
5.3% |
CET1 ratio |
14.4% |
14.1% |
13.3% |
Tier 1 ratio |
14.4% |
14.1% |
13.3% |
Capital adequacy ratio |
17.2% |
15.7% |
14.7% |
Payout ratio (%) |
33.3% |
0.0% |
33.3% |
Customer loans/total assets |
73.6% |
71.6% |
71.7% |
Loans/deposits |
114.8% |
110.7% |
107.3% |
Source: Company data
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|
Research: TMT
In H122, EML Payments saw recovering demand in its Gift & Incentives (G&I) division as COVID risk recedes, strong underlying demand in its GPR division, and the inclusion of Sentenial in Digital Payments from Q222. EBITDA and NPATA were affected by EML’s investment in strengthening its compliance function and undertaking the remediation plan to meet the Central Bank of Ireland’s requirements. The company expects a stronger performance in H222 with the benefit of rising interest rates, and action taken to reduce certain costs and introduce new sources of revenue. Our forecasts continue to sit at the lower end of unchanged guidance for FY22.