ProCredit Holding — Operating income up 21% y-o-y in 9M22

ProCredit Holding (XETRA: PCZ)

Currency in EUR

Last close As at 02/02/2023

EUR5.08

−0.12 (−2.31%)

Market capitalisation

EUR306m

Research: Financials

ProCredit Holding — Operating income up 21% y-o-y in 9M22

ProCredit Holding (PCB) remains profitable despite further loss allowances in Ukraine, with Q322 annualised ROE of 4.4% (2.7% in the first nine months of FY22; 9M22) and 9M22 ROE excluding Ukraine at a solid 9.0% (versus 7.3% in 9M21). The strong 21% y-o-y growth in operating income in 9M22 to €246.6m (15.0% y-o-y in Q322) allowed PCB to absorb recent cost inflation (including high wage pressure and one-time expenses related to the war in Ukraine). As a result, the 9M22 cost-income ratio (CIR) was 60.7% versus 62.4% in 9M21. PCB still guides to an FY22 ROE substantially below the FY21 level of 9.7%, while expecting 10% in the medium term (which we consider achievable). Its shares are trading at a very undemanding P/BV FY22e ratio of 0.24x.

Milosz Papst

Written by

Milosz Papst

Director, Financials

Financials

ProCredit Holding

Operating income up 21% y-o-y in 9M22

Q322 results

Banks

18 November 2022

Price

€3.56

Market cap

€210m

Total assets (€bn) at end-Q322

8.7

Shares in issue

58.9m

Free float

38.7%

Code

PCZ

Primary exchange

Frankfurt Prime Standard

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

8.9

(1.1)

(55.5)

Rel (local)

(3.5)

(5.5)

(49.3)

52-week high/low

€8.6

€2.56

Business description

ProCredit Holding is a Germany-based group operating regional banks across South Eastern and Eastern Europe and Ecuador. The banks focus on SMEs and private middle-income and high earners.

Next events

Deutsches Eigenkapitalforum 2022

28–30 November 2022

Analyst

Milosz Papst

+44 (0)20 3077 5700

ProCredit Holding is a research client of Edison Investment Research Limited

ProCredit Holding (PCB) remains profitable despite further loss allowances in Ukraine, with Q322 annualised ROE of 4.4% (2.7% in the first nine months of FY22; 9M22) and 9M22 ROE excluding Ukraine at a solid 9.0% (versus 7.3% in 9M21). The strong 21% y-o-y growth in operating income in 9M22 to €246.6m (15.0% y-o-y in Q322) allowed PCB to absorb recent cost inflation (including high wage pressure and one-time expenses related to the war in Ukraine). As a result, the 9M22 cost-income ratio (CIR) was 60.7% versus 62.4% in 9M21. PCB still guides to an FY22 ROE substantially below the FY21 level of 9.7%, while expecting 10% in the medium term (which we consider achievable). Its shares are trading at a very undemanding P/BV FY22e ratio of 0.24x.

Year end

Net interest
income (€m)

EPS
(€)

DPS
(€)

P/BV
(x)

P/E
(x)

ROE
(%)

Yield
(%)

12/20

201.6

0.70

0.53

0.3

5.1

5.3

14.9

12/21

222.0

1.35

0.00

0.2

2.6

9.7

0.0

12/22e

260.6

0.38

0.00

0.2

9.5

2.5

0.0

12/23e

278.3

1.45

0.48

0.2

2.5

9.0

13.5

Note: EPS as reported by the company.

NII up by a healthy 15.5% y-o-y in Q322

The €9.6m in group net income in Q322 (€25.7m in Q321) was driven, among other things, by further expansion in annualised net interest margin (NIM) to 3.2% (3.0% in 9M22) vs 3.0% in Q321 (2.8% in 9M21), assisted by the rise in base rates across the region and 8.4% y-o-y growth in gross loan book (which however remained stable vs Q222). This resulted in a 15.5% y-o-y increase in net interest income (NII) in Q322 to €67.2m. Further support came from a 7.7% increase in net fee and commission income, a higher result on foreign exchange transactions and limited cost of risk ex-Ukraine (slightly up vs H122, but still at a rather low 15bp in Q322).

Share of credit-impaired loans in Ukraine at c 10%

PCB’s loan loss provisions in Ukraine stood at €16.6m in Q322, below €21.2m in Q222 and €35.3m in Q122. PCB’s management aims to provision currently identified credit risks until end-2022 as much as possible. Having said that, it does not expect Q422 loss allowances to be considerably above Q322 (we assume €18.5m in the Eastern Europe segment in Q422 vs €16.8m in Q322). Provisions in Ukraine at end-Q322 covered c 13% of the entire local loan book vs the share of credit-impaired (ie stage 3) loans at 9.8% (stage 3 coverage ratio in Ukraine was c 75% excluding any collateral at end-Q322). Management expects that at this stage, the default rate in Ukraine will not increase by more than 1–2pp until end-2022.

Valuation: Offering c 200% upside potential

We reiterate our view that PCB’s current market capitalisation captures only a small part of its value. Our PCB fair value estimate in the base scenario stands at €10.80 per share (vs €10.60 previously). Assuming a default of ProCredit Bank Ukraine (which at this stage we consider unlikely), our fair value per share stands at €8.60 (vs €9.40 previously).

9M22 ROE at 2.7%, excluding Ukraine at 9.0%

PCB reported a net profit of €9.6m in Q322 (vs €25.7m in Q321), as strong growth in operating income of c 15% y-o-y to €86.4m (excluding provisions for credit losses) was again offset by loss allowances of €21.8m (implying an annualised cost of risk at 139bp), mainly related to its operations in Ukraine (€16.6m). Excluding ProCredit Bank Ukraine, PCB’s cost of risk in Q322 would have been a quite limited 15bp and annualised ROE in 9M22 would have been 9.0%. This reflects the strong improvement in profitability in the Southeastern Europe (SEE) region with an annualised ROE of a solid 11.4% in 9M22 vs 8.6% in 9M21. The other two local banks in the Eastern Europe (EE) region, in Georgia and Moldova, have also delivered a robust 9M22 ROE of 15% (broadly stable vs 9M21) and 19% (up vs 9M21), respectively. Finally, the bank in Ecuador improved its ROE to 5.1% in 9M22 (from 0.4% in 9M21).

Exhibit 1: Q322 results highlights

€m, unless otherwise stated

Q322

Q321

y-o-y change

9M22

9M21

y-o-y change

Net interest income

67.2

58.2

16%

192.1

161.4

19.0%

Net interest margin (%, annualised)

3.2%

3.0%

15bp

3.0%

2.8%

23bp

Expenses for loss allowances

21.8

0.5

N/M

79.1

3.2

N/M

Cost of risk (annualised, bp)

139

4

135bp

173

8

165bp

Net fee and commission income

14.0

13.0

8%

40.2

37.1

8.6%

Pre-tax profit

11.1

30.3

-63%

17.7

73.6

-75.9%

Net income

9.6

25.7

-62%

17.3

62.0

-72.0%

ROE (annualised)

4.4%

12.3%

-788bp

2.7%

10.1%

-745bp

CIR (%)

61.9%

59.0%

283bp

60.7%

62.4%

-171bp

CET-1 ratio (%)

13.6%

13.8%

-0.2pp

13.6%

13.8%

-0.2pp

Gross loan portfolio growth (% q-o-q)

0.0%

2.6%

-2.6pp

6.2%

10.4%

-4.2pp

Customer deposits growth (% q-o-q)

4.2%

5.0%

-0.8pp

8.0%

7.6%

0.4pp

Source: ProCredit Holding, Edison Investment Research

Exhibit 2: PCB’s annualised ROE in 9M22 by country outside of Ukraine

Source: Company data. Note: Share of PCB’s total loan book at end-September 2022 indicated in brackets.

Management has reiterated its mid-term ROE target of 10%

While PCB still expects its FY22 ROE (including Ukraine) to be substantially below the FY21 level of 9.7%, its medium-term guidance remains at 10%. We consider this achievable once the headwinds in Ukraine diminish, ie the Russian invasion comes to a standstill. While the local banks in Bulgaria and Kosovo seem to have reached a sustainable ROE level of c 11–12% (11% in 9M22) and 12–15% (21% in 9M22), respectively, PCB sees strong potential to further improve the profitability of several other banks in the SEE region. This includes Serbia, the second-largest bank in the SEE segment (22% of the SEE loan book at end-September 2022), which is benefiting from ongoing optimisation of funding costs (as the bank has already reached significant critical mass in terms of assets). Moreover, PCB puts an emphasis on further scaling its banks in Romania, Bosnia and Albania (with positive effects already materialising in Romania and Bosnia so far this year). Albania (PCB’s smallest loan book in the region) has experienced elevated loan loss provisions in the past, although these have been contained in the last two years.

Net interest income assisted by further NIM expansion

NII came in at €67.2m in Q322 (up c 16% y-o-y and 4.0% q-o-q), driven by an increase in annualised NIM to 3.2% (vs 3.1% in Q222 and 3.0% in Q321). This was despite an NII decline in Ukraine of c 20% q-o-q resulting from local currency devaluation of 25% in July 2022 and higher funding costs, as the National Bank of Ukraine (NBU) raised its key policy rate to 25% at the beginning of June 2022. NIM excluding Ukraine was up by 19bp in Q322 after increasing by 18bp in Q222, assisted by base rate hikes across the SEE and EE regions and PCB’s improved funding structure, with further growth in deposits of 4.2% q-o-q in Q322. Management expects NIM in the coming quarters to be stable, partially due to less pronounced loan book growth but also as further base rate hikes are somewhat offset by a likely increase in term deposits in the overall deposit base (leading to higher deposit expenses).

NII growth y-o-y was also driven by the 8.4% y-o-y gross loan book expansion in Q322. However, loan portfolio value remained broadly stable vs Q222, as the loan book in Ukraine was reduced by €130m (€80m from FX effects, €50m from loan repayments) and PCB prioritised the improvement of margin and deposits/loans ratio across other countries of operations (Q322 growth excluding Ukraine was 2.3%). PCB is particularly focusing on improving the deposits/loans ratio in those regional banks where it is below 100%. A good example is Ecuador with a ratio of c 63.1%, where PCB’s management described the liquidity situation as tight amid rising US$ interest rates. In 9M22, PCB’s loan book grew by 6.2%, with green loans expanding by 10% (bringing their share of PCB’s portfolio to 19.7% at end-September 2022 vs 19.0% at end-2021).

Around 13% of Ukrainian loan book now covered by provisions

Credit provisions in Ukraine booked ytd amounted to €71.3m and brought the total stock of provisions to €87.4m or 13% of the entire Ukrainian portfolio (€686m). At the same time, the share of stage 3 loans at ProCredit Bank Ukraine reached 9.8% of the total loan book, with the entire portfolio in occupied areas at the beginning of November (c 8% of the total loan book in Ukraine) considered in default. In this context, we also note that the nationwide credit moratoria in the country expired in July 2022.

PCB’s management highlighted during the Q322 earnings call that its intention is to provision the risks it sees today as much as possible until the end of the year. At present, assuming that the situation does not deteriorate further, it expects the incremental default rate on the Ukrainian portfolio until end-2022 to be limited to a maximum of c 1–2pp over the end-September 2022 level. While loan reclassifications have largely been completed at this stage, further loss allowances in Q422 may arise from the need to increase the coverage ratio of defaulted loans, which currently stands at c 75% on average (excluding any collateral) across the Ukrainian loan book. Nevertheless, assuming that the situation does not deteriorate further, PCB’s management does not expect a significant increase in provisioning at the local bank in Q422 vs Q322.

Provisions outside of Ukraine amounted to €4.8m in Q322, with management overlays of c €5.5m. The share of stage 3 loans across the PCB group reached 3.1% at end-September 2022, or 2.2% excluding Ukraine (slightly down from 2.3% at end-2021) and the stage 3 coverage ratio outside of Ukraine reached 48% (vs 49.6% at end-2021). Stage 2 loans reached 7.5% of total loan book or 3.7% excluding Ukraine (vs 3.6% at end-2021).

9M22 CIR down despite a 17% y-o-y rise in operating expenses

PCB’s CIR reached 60.7% in 9M22 compared to 62.4% in 9M21, which we believe illustrates efficiencies stemming from the group’s growing scale of operations, as well as improving NIM. Q322 CIR was somewhat higher y-o-y at 61.9% (vs 59.0% in Q321), but management highlighted that Q322 operating expenses include €1.4m of net negative one-time effects. Management expects Ukraine-related one-off expenses to decline markedly from Q422 onwards.

PCB’s cost base was also influenced by c 5% y-o-y growth in headcount and continued wage pressure arising from a combination of an inflationary environment and tight labour markets, resulting in personnel expenses rising by 13.1% y-o-y to €72.5m in 9M22 (16.2% y-o-y in Q322), with a small part (€1.2m or 1.9pp y-o-y) coming from one-off salary payments. Moreover, some negative effects on CIR came from the devaluation of the Ukrainian hryvnia which, according to PCB, had a greater impact on operating income than on ProCredit Bank Ukraine’s operating expenses. For FY22, management guides to a CIR of 60–63% (below 64.2% in FY21), suggesting that the ratio is likely to be close to the midpoint of this range or slightly above it (we assumed 61.9%). PCB’s medium-term target remains at below 60%.

PCB’s CET-1 and TCR buffers of 5.4pp and 1.9pp, respectively

PCB’s capital base remains robust with a fully loaded CET-1 ratio (excluding 2022 ytd profits) of 13.6% at end-September 2022 (vs 14.1% at end-2021 and a regulatory requirement of 8.2%), although its capital buffer in terms of total capital ratio (TCR) is somewhat lower with the end-September 2022 ratio at 14.4% (vs 15.3% at end-2021 and a regulatory requirement of 12.6%). PCB’s risk-weighted assets (RWA) went up by 11% y-o-y to €6.2bn in Q322 due to a combination of loan book growth and the sovereign downgrade of Ukraine. Management now guides to an end-2022 CET-1 ratio of above 13.0% (vs c 13.0% previously) and a leverage ratio of 9.0% (vs 9.3% at end-September 2022 and at end-2021).

Importantly, despite the heavy loss allowances at ProCredit Bank Ukraine, its CET-1 ratio remained broadly stable vs the pre-war level at c 12% (5pp above the regulatory requirement). This is the result of the local bank reflecting guarantees from international financial institutions (which it obtained before the onset of the war) in its RWA. Management highlighted that ProCredit Bank Ukraine saw a further improvement in liquidity indicators and that it has sufficient liquidity (including a significant amount of excess liquidity in hard currency, which can be pledged with the NBU to obtain local currency liquidity) to meet customer demand and other liabilities. This is in line with the situation across the Ukrainian banking sector, which recently saw record-high liquidity, encouraging the NBU to suspend unsecured refinancing transactions with local banks at the beginning of November (while continuing to provide access to conventional secured refinancing loans).

With respect to changes to the cross-default clauses in PCB’s debt arrangements related to ProCredit Bank Ukraine (see our previous note for details), PCB announced on 23 August that the consent rate across the creditors of its €289.5m debt instruments (bearer bonds, registered bonds, promissory notes and a senior loan) stood at 76%. This includes majority resolutions of holders of bearer bonds with a nominal value of €95m (out of the total c €173m for which ProCredit Holding seeks to amend the cross-default clauses). The company highlighted at the time that it was in discussions with further creditors regarding additional consents.

We also note that Fitch reaffirmed ProCredit Holding’s Long-Term Issuer Default Rating of BBB with a stable outlook in October 2022. The credit rating agency also reaffirmed its Viability Rating at BB and removed ProCredit Holding from the Rating Watch Negative, which reflects its belief that PCB has moderate headroom under Fitch’s baseline scenario to absorb losses from its operations in Ukraine and second-round effects of the military conflict in its operations in other countries.

Organisational changes

PCB has also embarked on some organisational changes. This includes conversion of the parent company into a stock corporation in the next two years (it is currently a partnership limited by shares managed by ProCredit General Partner). Moreover, the company is introducing changes to the ProCredit Holding management board structure and responsibilities, involving 1) Hubert Spechtenhauser being appointed as chair of the management board, 2) Dr Gabriel Schor finishing his term by end-2022 (after close to 30 years with the company and its predecessor) and 3) the intention to nominate Christian Dagrosa (who has been responsible for investor relations, as well as reporting and controlling at PCB) as a management board member in January 2023.

Forecast revisions

We apply only minor changes to our forecasts, including slightly higher loss allowances in the near term. We expect PCB’s loan book to increase by 7.5% in FY22 (vs 6.2% in 9M22). Management expects PCB’s loan book to increase at a medium single-digit percentage rate in 2022 (after adjusting for currency effects), compared to previous expectations of high-single digit percentage growth (FX-adjusted growth in 9M22 was 5.1%). PCB still sees potential for an annual loan portfolio growth rate in the mid- to upper single-digit percentage range in the medium term (assuming a stable political, economic and operating environment). This should be underpinned by continued strong mid-term prospects in the SEE/EE economies (despite global macroeconomic challenges), with median real GDP growth forecast for PCB’s countries of operation (excluding Ukraine) of 3.0% in 2023 and 3.8% on average in 2024–26, according to the World Economic Outlook from October 2022 released by the International Monetary Fund. However, in the short term, we expect loan book growth to decelerate due to macroeconomic headwinds affecting loan demand in the region, as well as PCB’s stronger emphasis on improving profitability and deposit/loan ratios. We therefore forecast gross loan book growth in FY23e of 3.0%, followed by 9.1% in FY24e.

Exhibit 3: Forecast revisions

 

2021

2022e

2023e

€m, unless otherwise stated

Actual

Old

New

Change (%)

Growth
y-o-y (%)

Old

New

Change (%)

Growth
y-o-y (%)

Net interest income

222.0

254.7

260.6

2.3

17.4

279.5

278.3

(0.4)

6.8

Net interest margin (%, annualised)

2.9

3.0

3.1

0pp

0.2pp

3.2

3.1

0pp

0pp

Expenses for loss allowances

6.5

94.2

104.1

10.6

N/M

26.6

31.1

17.2

(70.1)

Cost of risk (annualised in bp)

12

152

169

17bp

N/M

41

48

7bp

(121bp)

Net fee and commission income

50.9

55.8

54.3

(2.6)

6.8

59.0

58.1

(1.6)

7.0

Pre-tax profit

94.5

25.0

22.5

(10.1)

(76.2)

98.9

100.1

1.3

345.6

Net income

79.6

23.4

22.1

(5.6)

(72.3)

83.6

85.1

1.8

285.3

CET1 ratio (%)

14.1

13.5

13.7

0.1pp

(0.5pp)

13.5

13.8

0.3pp

0.2pp

Total capital ratio (%)

15.3

14.4

14.5

0.1pp

(0.8pp)

14.4

14.6

0.3pp

0.1pp

CIR (%)

64.2

63.0

61.9

(1.1pp)

(2.2pp)

63.0

61.9

(1.1pp)

0pp

Gross loan portfolio

5,924.4

6,431.3

6,367.2

(1.0)

7.5

6,622.0

6,560.6

(0.9)

3.0

Net loan portfolio

5,793.0

6,211.4

6,147.6

(1.0)

6.1

6,427.9

6,359.4

(1.1)

3.4

Customer deposits

5,542.3

5,964.8

6,125.3

2.7

10.5

6,267.7

6,452.7

3.0

5.3

Source: ProCredit Holding, Edison Investment Research

Regression lines based on FY22e and FY23e P/BV and ROE indicators for PCB’s peers imply a P/BV (for PCB’s sustainable return on tangible equity of 10%) at 0.70x (see Exhibits 4 and 5), which is slightly below the 0.71x in our previous note. As a result, we have assumed a fair value multiple of 0.73x (0.74x previously), which is the average of the 0.77x multiple derived from our capital asset pricing model and the regression analysis (see our previous outlook note for details). This implies a fair value per PCB share of €10.80 (versus the current share price of €3.56). Here we acknowledge that the peer group is quite scattered across the P/BV-ROE map, making the regression line less reliable. We believe this may be due to a number of non-financial factors, such as the political risk perceived by investors.

Assuming a default by ProCredit Bank Ukraine, we value PCB at €8.60 per share (vs €9.40 previously). The main reason for the decline is an adjustment for PCB’s maximum potential incremental exposure to ProCredit Bank Ukraine beyond its FY21 exposure of up to €50m over the 24 months from 1 July 2022, which PCB’s creditors agreed on as part of the recent changes to the terms and conditions of PCB’s debt instruments. We conservatively deduct the maximum amount from our estimate of PCB’s fair value under this scenario.

Exhibit 4: P/BV versus ROE – PCB’s peers (2022e)

Exhibit 5: P/BV versus ROE – PCB’s peers (2023e)

Source: Refinitiv consensus at 18 November 2022

Source: Refinitiv consensus at 18 November 2022

Exhibit 4: P/BV versus ROE – PCB’s peers (2022e)

Source: Refinitiv consensus at 18 November 2022

Exhibit 5: P/BV versus ROE – PCB’s peers (2023e)

Source: Refinitiv consensus at 18 November 2022

Exhibit 6: Financial summary

Year end 31 December, in €000’s unless otherwise stated

2018

2019

2020

2021

2022e

2023e

2024e

2025e

2026e

INCOME STATEMENT

 

 

 

 

 

 

 

 

 

Net interest income

186,235

194,533

201,561

222,021

260,562

278,324

290,483

307,004

331,426

Net fee and commission income

52,172

51,972

47,380

50,855

54,314

58,091

61,983

65,875

69,972

Operating income

240,678

249,275

252,114

281,881

332,360

344,338

358,680

380,386

410,427

Operating expenses

167,866

175,737

171,430

180,859

205,785

213,089

224,085

235,498

247,502

Loss allowances (-)

(4,714)

(3,327)

28,600

6,490

104,109

31,148

18,945

15,359

15,449

PBT

77,526

76,865

52,084

94,532

22,466

100,101

115,650

129,529

147,476

Net profit after tax

54,477

54,304

41,395

79,641

22,092

85,115

97,975

109,825

125,090

Reported EPS (€)

0.90

0.89

0.70

1.35

0.38

1.45

1.66

1.86

2.12

DPS (€)

0.30

0.00

0.53

0.00

0.00

0.48

0.55

0.62

0.71

BALANCE SHEET

 

 

 

 

 

 

 

 

 

Cash and balances at Central Banks

963,714

1,081,723

1,405,349

1,545,523

1,757,979

1,797,609

1,890,615

1,982,099

2,075,174

Loans and advances to banks

211,592

320,737

236,519

252,649

252,649

252,649

252,649

252,649

252,649

Investment securities

297,308

378,281

336,476

410,400

410,400

410,400

410,400

410,400

410,400

Loans and advances to customers

4,267,829

4,690,961

5,131,582

5,792,966

6,147,558

6,359,435

6,979,100

7,688,053

8,470,868

Property, plant and equipment and investment properties

130,153

138,407

140,744

137,536

144,121

144,121

144,121

144,121

144,121

Intangible assets

22,191

20,345

19,316

18,411

18,336

18,336

18,336

18,336

18,336

Other assets

73,396

67,106

59,315

58,416

82,175

70,988

82,175

70,988

82,175

Total assets

5,966,184

6,697,560

7,329,301

8,215,901

8,813,218

9,053,538

9,777,396

10,566,645

11,453,723

Liabilities to banks

1,014,182

1,079,271

1,235,763

1,313,666

1,392,486

1,218,425

1,315,899

1,329,058

1,355,639

Liabilities to customers

3,825,938

4,333,436

4,898,897

5,542,251

6,125,314

6,452,652

7,009,432

7,708,356

8,480,371

Debt securities

206,212

343,727

266,858

353,221

232,450

232,450

232,450

232,450

232,450

Subordinated debt

143,140

87,198

84,974

87,390

92,451

92,451

92,451

92,451

92,451

Other liabilities

33,076

50,436

63,080

63,059

70,536

70,536

70,536

70,536

70,536

Total liabilities

5,222,549

5,894,068

6,549,573

7,359,587

7,913,237

8,066,514

8,720,768

9,432,851

10,231,447

Total shareholders' equity

743,634

803,492

779,728

856,314

899,980

987,024

1,056,627

1,133,794

1,222,276

BVPS

12.5

13.5

13.2

14.5

15.3

16.8

17.9

19.2

20.8

TNAV per share

12.1

13.1

12.9

14.2

15.0

16.4

17.6

18.9

20.4

Ratios

 

 

 

 

 

 

 

 

 

NIM

3.30%

3.10%

2.90%

2.90%

3.06%

3.12%

3.09%

3.02%

3.01%

Costs/Income

69.7%

70.5%

68.0%

64.2%

61.9%

61.9%

62.5%

61.9%

60.3%

ROAE

7.6%

6.9%

5.3%

9.7%

2.5%

9.0%

9.6%

10.0%

10.6%

CET1 Ratio

14.4%

14.1%

13.3%

14.1%

13.7%

13.8%

13.2%

13.1%

13.1%

Tier 1 ratio

14.4%

14.1%

13.3%

14.1%

13.7%

13.8%

13.2%

13.1%

13.1%

Capital adequacy ratio

17.2%

15.7%

14.7%

15.3%

14.5%

14.6%

14.0%

13.8%

13.7%

Payout ratio (%)

33.3%

0.0%*

33.3%*

0.0%

0.0%

33.3%

33.3%

33.3%

33.3%

Customer loans/total assets

73.6%

71.6%

71.7%

72.1%

72.2%

72.5%

73.2%

74.5%

75.6%

Loans/deposits

114.8%

110.7%

107.3%

107.0%

103.9%

101.7%

102.1%

102.1%

102.1%

Source: Company data, Edison Investment Research. Note: *In 2021, PCB distributed 1/3 of the accumulated profits from 2019 and 2020.


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This report has been commissioned by ProCredit Holding and prepared and issued by Edison, in consideration of a fee payable by ProCredit Holding. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

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Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

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New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

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This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

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Frankfurt +49 (0)69 78 8076 960

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London +44 (0)20 3077 5700

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United Kingdom

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United States of America

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by ProCredit Holding and prepared and issued by Edison, in consideration of a fee payable by ProCredit Holding. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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