ProCredit Holding — On track to meet FY23 ROE guidance of 8–10%

ProCredit Holding (XETRA: PCZ)

Last close As at 17/07/2024

EUR8.48

−0.06 (−0.70%)

Market capitalisation

EUR503m

More on this equity

Research: Financials

ProCredit Holding — On track to meet FY23 ROE guidance of 8–10%

ProCredit Holding (PCB) produced another strong set of quarterly results with a net income of €34.6m in Q223, implying an annualised return on equity (ROE) of 15.0% (and 14.2% in H123). Importantly, most of PCB’s regional banks contributed to the solid profitability, including ProCredit Bank Ukraine, which posted a 39.7% ROE in H123. This makes the company well positioned to meet management’s FY23 ROE guidance of 8–10%, despite headwinds in the Ukrainian agricultural sector, further deposit repricing and personnel cost inflation. Still, PCB’s shares currently trade at just 0.46x our FY23e book value per share.

Milosz Papst

Written by

Milosz Papst

Director, Financials

ProCredit Holding_resized

Financials

ProCredit Holding

On track to meet FY23 ROE guidance of 8–10%

Q223 results

Banks

23 August 2023

Price

€7.56

Market cap

€445m

Total assets (€bn) at end-June 2023

9.0

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

4.7

25.2

119.1

Rel (local)

7.9

29.3

84.6

52-week high/low

€7.88

€2.56

Business description

Based in Germany, ProCredit Holding operates regional banks across South-Eastern and Eastern Europe and Ecuador. The banks focus on SMEs and private middle-income and high earners.

Next events

Equity Forum Fall Conference 2023

4–5 September 2023

Q323 results

14 November 2023

Deutsches Eigenkapitalforum

27–29 November 2023

Analyst

Milosz Papst

+44 (0)20 3077 5700

ProCredit Holding is a research client of Edison Investment Research Limited

ProCredit Holding (PCB) produced another strong set of quarterly results with a net income of €34.6m in Q223, implying an annualised return on equity (ROE) of 15.0% (and 14.2% in H123). Importantly, most of PCB’s regional banks contributed to the solid profitability, including ProCredit Bank Ukraine, which posted a 39.7% ROE in H123. This makes the company well positioned to meet management’s FY23 ROE guidance of 8–10%, despite headwinds in the Ukrainian agricultural sector, further deposit repricing and personnel cost inflation. Still, PCB’s shares currently trade at just 0.46x our FY23e book value per share.

Year end

Net interest income (€m)

EPS*
(€)

DPS
(€)

P/BV
(x)

P/E*
(x)

ROE
(%)

12/21

222.0

1.35

0.00

0.52

5.6

9.7

12/22

264.6

0.28

0.00

0.51

27.0

1.9

12/23e

304.0

1.55

0.52

0.46

4.9

10.0

12/24e

312.5

1.71

0.57

0.43

4.4

10.1

Note: *EPS as reported by the company

Still benefiting from a high net interest margin

PCB’s net interest margin (NIM) remained high at 3.6% in Q223 (Q222: 3.1%), supported by base rates that further increased or remained at levels visibly above last year in most of its countries of operations. PCB’s NIM also benefited from an improved funding mix, with customer deposits up 2.7% in H123 and the deposit-to-loan ratio up to 104.9% at end-June 2023 versus 103.1% at end-2022. Despite a focus on margin optimisation and targeted loan reduction in some countries, PCB’s loan book increased by 0.8% in H123 (Q223: 1.6%). Together with a 9.1% yoy growth in net fee and commission income, this led to an 18.8% y-o-y rise in operating income (above the growth in operating expenses), resulting in a cost income ratio of 59.7% in Q223 (Q222: 61.0%). PCB’s cost of risk was minimal at 2bp in H123.

Management reiterated its FY23 guidance

Management still guides to an ROE of 8–10% for FY23, which at first glance may seem conservative given the 14.2% ROE in H123. However, PCB may have to book additional loss allowances due to Russia’s recent withdrawal from the grain deal and its air strikes on Ukrainian port and grain storage infrastructure. Moreover, PCB’s deposit base is yet to fully reflect the higher base rates, and the group sees pressure on wages, which will lead to higher personnel expenses in H223. That said, even after factoring in the above headwinds (including FY23 cost of risk at the upper end of its guidance, ie 45bp), we expect an FY23 ROE of c 10%.

Valuation: Remaining underappreciated

We have raised our fair value estimate in our base scenario (which assumes a sustainable return on tangible equity, RoTE, of 10%) to 11.40/share (from 10.30 previously) due to updates to the country risk premiums and regression P/BV multiple used in our valuation model, as well as higher FY23 forecasts. Assuming an RoTE in line with PCB’s mid-term guidance (12%), PCB would be valued at 13.40/share. Finally, in a worst-case scenario of full write-off of the local bank in Ukraine, we would value PCB at 10.00/share.

Q223 annualised ROE at 15.0%

PCB reported a strong €34.6m net income in Q223 (vs €9.4m in Q222, see Exhibit 1), translating into a 15.0% annualised ROE in Q223 and bringing the H123 annualised figure to 14.2%. This is well above PCB’s current FY23 guidance of 8–10% (raised in May 2023 from 6–8% communicated earlier this year) and ahead of the medium-term guidance of around 12%. Encouragingly, most of the regional banks contributed to the healthy profitability, with all Southeastern European (SEE) banks reporting an annualised ROE of 11–13% (except for Kosovo at 23% and Albania at 7%), while banks in Ukraine, Georgia and Moldova reported ROEs of c 40%, 19% and 20%, respectively. Ecuador was again an outlier with a slight loss in H123 (see more details on Ecuador below).

Exhibit 1: Q223 and H123 results highlights

€m, unless otherwise stated

Q223

Q222

y-o-y change

H123

H122

y-o-y change

Net interest income

80.2

64.7

24.1%

155.7

124.8

24.7%

Net interest margin (annualised)

3.6%

3.1%

47bp

3.5%

3.0%

49bp

Expenses for loss allowances

-1.3

21.7

NM

0.5

57.3

NM

Cost of risk (annualised, bp)

-9

141

-150bp

2

188

-186bp

Net fee and commission income

14.9

13.7

9.1%

28.9

26.3

9.9%

Pre-tax profit

40.8

10.4

292%

76.7

6.6

NM

Net income

34.6

9.4

267%

64.1

7.7

NM

ROE

15.0%

4.4%

1066bp

14.2%

1.8%

NM

Cost income ratio

59.7%

61.0%

-129bp

59.7%

60.1%

-41bp

CET-1 ratio

14.2%

13.7%

0.4pp

14.2%

13.7%

0.4pp

Deposit-to-loan ratio

104.9%

91.2%

13.7pp

104.9%

91.2%

13.7pp

Gross loan portfolio growth (q-o-q)

1.6%

4.4%

-2.5pp

3.9%

6.2%

-2.3pp

Customer deposits growth (q-o-q)

2.1%

4.1%

-2pp

2.7%

3.6%

-0.9pp

Source: ProCredit Holding

NIM still strong, CIR below 60%

The solid set of results was assisted by a continuously high NIM (3.6% in Q223 vs 3.1% in Q222) amid interest rate normalisation across most countries of PCB’s operations (despite some rate cuts in the Eastern European countries), see Exhibits 2 and 3. It is worth noting that almost all local PCB banks contributed to the sequential NIM expansion. The stronger interest income was driven by customer loans, but also by central bank balances and investment securities.

Exhibit 2: Central bank policy rates in the SEE region

Exhibit 3: Central bank policy rates in the EE region

Source: Local central banks

Source: Local central banks

Exhibit 2: Central bank policy rates in the SEE region

Source: Local central banks

Exhibit 3: Central bank policy rates in the EE region

Source: Local central banks

NIM was also assisted by the improving deposit-to-loan ratio (104.9% at end-June 2023 vs 91.2% at end-June 2022 and 103.1% at end-2022), on the back of a 2.7% increase in customer deposits, as well as the fact that customer deposits are yet to fully capture the base rate hikes (see Exhibit 4). Together with a slight sequential increase in the loan book (up 0.8% during H123, down c 2.2% yoy due to targeted loan book reduction and local currency devaluation in July 2022 in Ukraine), this resulted in a 24.1% y-o-y rise in net interest income to €80.2m in Q223. In Q223 alone, the loan book rose by 1.6% as PCB experienced gradually improving sentiment among SMEs to pursue new investments.

Exhibit 4: PCB’s net interest income H123 versus H122 (m)

Source: ProCredit Holding

PCB’s earnings were further driven by 9.1% y-o-y growth in net fee and commission income to €14.9m (assisted by a focus on adding private individual and non-loan business clients), translating into an 18.8% y-o-y improvement in operating income in Q223 to €98.0m, outpacing the 16.3% yoy growth in operating expenses to €58.6m. This allowed PCB to keep the cost income ratio (CIR) under control at 59.7% in both Q223 (vs 61.0% in Q222) and H123, ahead of the 62–64% management guidance for FY23. After adjusting for extraordinary items, PCB’s CIR was 58.3% in H123, 1.5pp below H122 and close to PCB’s medium-term target of c 57%.

H123 cost of risk at a low level

PCB booked a €1.3m net release of loan loss provisions in Q223 (or 9bp of the gross loan book), resulting in an H123 cost of risk of 2bp. The H123 net provisioning was driven by €6.7m in recoveries of written off loans and a €6.2m positive impact from model parameter updates. This has more than offset new loss allowances from stage transfers (€11.0m) and some minor incremental management overlays (€1.5m). Total management overlays for macroeconomic risks as at end-June 2023 reflected in PCB’s loan loss provisions stood at €41.0m (of which c €11.1m was attributable to ProCredit Bank Ukraine). The share of credit-impaired loans in PCB’s loan book outside of Ukraine stood at a moderate 2.3% at end-June 2023 (12.4% in Ukraine, with a 130% coverage ratio of the default portfolio).

Capital base remains sound

PCB’s CET1 ratio stood at 14.2% at end-June 2023 versus 13.5% at end-2022 and the current regulatory requirement of 9.2%, assisted by the full attribution of FY22 profit and continued improvements to risk-weighted asset (RWA) efficiency (see our last outlook note for details). Two-thirds of the H123 result will be attributed to the CET1 capital in Q323, which on a pro-forma basis translates into a CET1 ratio of 14.8%.

PCB’s Multilateral Investment Guarantee Agency (MIGA) collaboration was broadened to include an additional agreement for Ukraine (signed in June 2023), with the latter resulting in a €35m RWA release, bringing the combined MIGA collaboration effect to €140m (or 25bp in CET1 ratio improvement year-to-date). Moreover, PCB embarked on a securitisation project with the European Investment Fund in Bulgaria, with a positive RWA impact of €180m (or a 32bp contribution to the year-to-date CET1 ratio improvement). PCB’s total capital ratio reached 15.3% at end-June 2023 versus 14.3% at end-2022 and the current regulatory requirement of 14.2%.

Environmental and governance milestones achieved

PCB achieved an important milestone on its carbon neutrality agenda (see the key takeaways from PCB’s Impact Report 2022 in our previous update note for details) by commissioning its 3MW photovoltaic park in Kosovo, which will compensate for 85–90% of its stage 1 and 2 emissions. We also note that PCB’s 2023 AGM resolved with a large majority to change its legal form to a stock corporation (with conversion expected to be completed in Q323).

PCB adjusting to the uncertainty caused by political and social unrest in Ecuador

Ecuador successfully completed the Sixth Review under the Extended Arrangement under Extended Fund Facility of the International Monetary Fund (IMF) in December 2022 and the IMF expects the economy to grow by 2.9% in 2023 with consumer price inflation at a moderate 2.5%. However, the country has been experiencing a challenging internal situation marked by political instability and criminal gang violence, culminating recently with the assassination of a presidential candidate.

The associated uncertainty is likely to weigh on SMEs’ willingness to commit to new investments and in turn on demand for PCB’s loans. This applies especially to larger SMEs and therefore PCB shifted its focus to small SMEs (with an individual loan size of c €100k vs PCB’s general focus on €50k to €1.5m), also because the lending rate caps imposed by the government are higher in this segment (PCB’s NIM in Ecuador declined to 3.2% in H123 from 4.6% in H122). The share of credit-impaired loans at PCB’s local bank stood at 6.6% at end-June 2023.

While PCB managed to grow its customer deposits in Ecuador by 12.8% y-o-y in Q223, these have remained broadly flat year-to-date (lagging behind other regional banks), which was partly due to local liquidity being moved to safer jurisdictions (the US in particular), a phenomenon typical in periods of rising US dollar interest rates. That said, as the local loan book declined slightly in H123, PCB’s deposit-to-loan ratio improved slightly to 69.4% at end-June 2023, versus 68.9% at end-2022 (and 62.8% at end-June 2022), though below management ambitions in this respect. The local bank posted a slight €0.4m loss in H123.

Why has management not raised its FY23 guidance further by now?

We estimate that, following the strong H123 results (14.2% ROE), the management’s current FY23 ROE guidance of 8–10% implies an H223 annualised ROE of c 2–6%, which at first glance looks conservative. However, there are several factors that may lead to lower profitability for PCB in the second half of the year:

War in Ukraine: while the bulk of portfolio reclassification at ProCredit Bank Ukraine was completed as at end-June 2023, PCB’s provisions are yet to reflect the impact of Russia’s recent withdrawal from the grain deal and its air strikes on the Black Sea and Dnipro port and grain storage infrastructure across Ukraine. The share of agricultural loans in PCB’s local loan book is substantial, ahead of group level of 18% at end-June 2023. That said, management highlighted that the upper end of the FY23 cost of risk guidance of 45bp covers an even more adverse scenario than what is currently unfolding in Ukraine. We note that ProCredit Bank Ukraine contributed €12.4m of net profit in H123 (above the pre-war H121 net profit of 10.7m). This represented a 39.7% annualised ROE, though boosted by the equity decline from c €130.0m at end-2021 to €67.7m at end-June 2023. Management cautiously assumes in its current FY23 guidance ‘zero’ bottom-line group contribution from ProCredit Bank Ukraine.

Contracting NIM: PCB’s management expects a continued repricing of deposits, as most of the growth it has seen recently has come (unsurprisingly) from term deposits rather than sight deposits. This should result in a reduced NIM compared to H123.

Wage inflation: salary reviews are now being carried out throughout the year rather than at a single point during the year. PCB’s management highlighted that average wages went up by 9% y-o-y in H123 and it expects a further increase in Q323. The H123 rise was accompanied by a c 10% y-o-y headcount increase, as PCB continues to expand the teams across local banks (including in Ukraine).

Seasonal factors: the fourth quarter of each year is often characterised by additional operating expenses (eg payments for untaken leave).

Forecast revisions

However, given the encouraging H123 results, we have raised our FY23 net income forecast by 7.6% to €91.2m, primarily on the back of higher net interest income assumptions, especially for assets other than customer loans. This implies an FY23 ROE of 10%, which is at the upper end of management’s FY23 guidance (vs our previous forecast of 9.3%) and also translates into an FY23 CIR ratio of 63.8% (ie within management guidance of 62–64%). We have slightly reduced our longer-term ROE assumptions though, as we now cautiously do not assume that PCB’s Ecuadorian bank will return to sustainable profitability in the medium term. Therefore, our FY27 ROE forecast is now 11.4% versus 11.5% previously and management’s medium-term target of around 12%.

Exhibit 5: Forecast revisions

 

2022

2023e

2024e

€m, unless otherwise stated

Actual

Old

New

Change

Growth
y-o-y

Old

New

Change

Growth
y-o-y

Net interest income

264.6

296.5

304.0

2.5%

14.9%

305.6

312.5

2.2%

2.8%

Net interest margin (%, annualised)

3.1%

3.3%

3.4%

0.1pp

0.2pp

3.2%

3.2%

0pp

-0.1pp

Expenses for loss allowances

104.6

28.5

28.0

-1.7%

-73.2%

29.1

24.1

-17.4%

-14.0%

Cost of risk (annualised in bp)

174

46

45

-1bp

-129bp

45

37

-8bp

-8bp

Net fee and commission income

54.7

59.4

59.6

0.3%

8.9%

62.5

63.2

1.1%

6.0%

Operating expenses

217.4

237.2

241.7

1.9%

11.2%

242.7

248.4

2.4%

2.8%

Pre-tax profit

17.8

102.8

109.2

6.3%

512.0%

109.8

118.9

8.2%

8.9%

Net income

16.5

84.7

91.2

7.6%

452.8%

92.5

101.0

9.1%

10.7%

ROE

1.9%

9.3%

10.0%

0.7pp

8pp

9.4%

10.1%

0.7pp

0.2pp

CET1 ratio (%)

13.5%

14.4%

14.6%

0.2pp

1.1pp

14.2%

14.3%

0pp

-0.4pp

Total capital ratio (%)

14.3%

15.6%

15.8%

0.2pp

1.5pp

15.4%

15.4%

0pp

-0.4pp

CIR (%)

64.0%

64.4%

63.8%

-0.6pp

-0.2pp

63.6%

63.5%

-0.1pp

-0.3pp

Gross loan portfolio

6,103.2

6,258.6

6,250.3

-0.1%

2.4%

6,674.7

6,633.8

-0.6%

6.1%

Net loan portfolio

5,888.3

6,056.6

6,030.5

-0.4%

2.4%

6,491.4

6,433.6

-0.9%

6.7%

Customer deposits

6,289.5

6,910.2

6,777.9

-1.9%

7.8%

7,583.0

7,390.9

-2.5%

9.0%

Source: ProCredit Holding, Edison Investment Research

Our revised forecasts, together with new country risk premiums (based on updated data published by Aswath Damodaran in July) and updated FY23e P/BV-ROE peer analysis (see below) now imply a fair value in our base scenario (assuming a 10% sustainable ROE) of €11.40/share. Assuming an RoTE in line with management’s mid-term guidance (12%), PCB would be valued at 13.40/share. Finally, in a worst-case scenario of the full write-off of the local bank in Ukraine, we would value PCB at 10.00/share.

Exhibit 6: P/BV versus ROE – PCB’s peers (2023e)

Source: Refinitiv consensus at 23 August 2023

Exhibit 7: Financial summary

Year ending 31 December, €000s

2018

2019

2020

2021

2022

2023e

2024e

2025e

2026e

2027e

Income statement

 

 

 

 

 

 

 

 

 

 

Net interest income

186,235

194,533

201,561

222,021

264,634

304,004

312,455

320,733

345,830

370,534

Net fee and commission income

52,172

51,972

47,380

50,855

54,731

59,609

63,195

67,738

72,177

76,944

Operating income

240,678

249,275

252,114

281,881

339,848

378,896

391,365

405,499

436,692

467,932

Operating expenses

167,866

175,737

171,430

180,859

217,428

241,690

248,391

257,660

269,148

281,186

Loss allowances

(4,714)

(3,327)

28,600

6,490

104,573

27,975

24,066

17,750

17,936

20,023

PBT

77,526

76,865

52,084

94,532

17,847

109,231

118,908

130,090

149,608

166,723

Net profit after tax

54,477

54,304

41,395

79,641

16,497

91,191

100,960

110,519

127,488

142,238

Reported EPS (€)

0.90

0.89

0.70

1.35

0.28

1.55

1.71

1.88

2.16

2.41

DPS (€)

0.30

0.00

0.53

0.00

0.00

0.52

0.57

0.63

0.72

0.80

Balance sheet

 

 

 

 

 

 

 

 

 

 

Cash and balances at Central Banks

963,714

1,081,723

1,405,349

1,545,523

1,939,681

2,278,533

2,534,082

2,783,457

2,992,523

2,788,761

Loans and advances to banks

211,592

320,737

236,519

252,649

280,453

280,453

280,453

280,453

280,453

280,453

Investment securities

297,308

378,281

336,476

410,400

480,168

480,168

480,168

480,168

480,168

480,168

Loans and advances to customers

4,267,829

4,690,961

5,131,582

5,792,966

5,892,796

6,030,516

6,433,593

6,942,131

7,489,844

8,012,527

Property, plant and equipment and investment properties

130,153

138,407

140,744

137,536

133,703

134,943

134,943

134,943

134,943

134,943

Intangible assets

22,191

20,345

19,316

18,411

17,993

19,236

19,236

19,236

19,236

19,236

Other assets

73,396

67,106

59,315

58,416

81,330

80,076

81,038

80,076

81,038

80,076

Total assets

5,966,184

6,697,560

7,329,301

8,215,901

8,826,124

9,303,926

9,963,512

10,720,464

11,478,205

11,796,164

Liabilities to banks

1,014,182

1,079,271

1,235,763

1,313,666

1,318,647

1,199,969

1,175,969

1,234,768

1,284,159

834,703

Liabilities to customers

3,825,938

4,333,436

4,898,897

5,542,251

6,289,511

6,777,901

7,390,925

8,012,212

8,629,914

9,297,587

Debt securities

206,212

343,727

266,858

353,221

191,988

181,296

181,296

181,296

181,296

181,296

Subordinated debt

143,140

87,198

84,974

87,390

93,597

113,660

113,660

113,660

113,660

113,660

Other liabilities

33,076

50,436

63,080

63,059

62,946

68,395

68,395

68,395

68,395

68,395

Total liabilities

5,222,549

5,894,068

6,549,573

7,359,587

7,956,689

8,341,221

8,930,245

9,610,331

10,277,424

10,495,641

Total shareholders' equity

743,634

803,492

779,728

856,314

869,435

962,704

1,033,267

1,110,133

1,200,782

1,300,523

BVPS

12.5

13.5

13.2

14.5

14.8

16.3

17.5

18.8

20.4

22.1

TNAV per share

12.1

13.1

12.9

14.2

14.5

16.0

17.2

18.5

20.1

21.8

Ratios

 

 

 

 

 

 

 

 

 

 

NIM

3.30%

3.10%

2.90%

2.90%

3.11%

3.35%

3.24%

3.10%

3.12%

3.18%

Costs/Income

69.7%

70.5%

68.0%

64.2%

64.0%

63.8%

63.5%

63.5%

61.6%

60.1%

ROAE

7.6%

6.9%

5.3%

9.7%

1.9%

10.0%

10.1%

10.3%

11.0%

11.4%

CET-1 ratio

14.4%

14.1%

13.3%

14.1%

13.5%

14.6%

14.3%

14.3%

14.6%

15.5%

Tier 1 ratio

14.4%

14.1%

13.3%

14.1%

13.5%

14.6%

14.3%

14.3%

14.6%

15.5%

Capital adequacy ratio

17.2%

15.7%

14.7%

15.3%

14.3%

15.8%

15.4%

15.4%

15.6%

16.4%

Payout ratio (%)

33.3%

0.0%*

33.3%*

0.0%

0.0%

33.3%

33.3%

33.3%

33.3%

33.3%

Customer loans/Total assets

73.6%

71.6%

71.7%

72.1%

69.1%

67.2%

66.6%

66.6%

66.9%

69.6%

Deposits/loans

87.1%

90.3%

93.2%

93.5%

103.1%

108.4%

111.4%

112.3%

112.4%

113.3%

Source: Company data, Edison Investment Research. Note: *In 2021, PCB distributed one-third of the accumulated profits from 2019 and 2020.


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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 2023 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.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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 2023 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.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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