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Research: Financials
Alpha Bank’s Q124 profit after tax reached a record €211m, up by 90% y-o-y, 75% q-o-q and 8% above consensus. The beat was driven by better trading gains and impairment losses, with net interest income (NII) and operating expenses largely in line. Adjusted return on tangible equity (RoTE) was 13.5%, ahead of the full-year target of 13%. Alpha also announced a change in proposed FY23 profit distribution. The previously indicated €0.05 dividend (€122m distribution) is now proposed to be split 50:50 into a €0.025 dividend and €61m buy-back, subject to regulatory approval. Any buy-back would be value enhancing as the shares trade at only 60% of tangible book value per share (TNAV).
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Alpha Bank |
Q1 beat, buy-back proposal
Financials |
Spotlight - Flash
20 May 2024 |
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Alpha Bank is a research client of Edison Investment Research Limited |
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Alpha Bank’s Q124 profit after tax reached a record €211m, up by 90%
y-o-y, 75% q-o-q and 8% above consensus. The beat was driven by better trading gains and impairment losses, with net interest income (NII) and operating expenses largely in line. Adjusted return on tangible equity (RoTE) was 13.5%, ahead of the full-year target of 13%. Alpha also announced a change in proposed FY23 profit distribution. The previously indicated €0.05 dividend (€122m distribution) is now proposed to be split 50:50 into a €0.025 dividend and €61m buy-back, subject to regulatory approval. Any buy-back would be value enhancing as the shares trade at only 60% of tangible book value per share (TNAV).
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Consensus estimates
Source: LSEG. Note: *EPS is basic statutory at 16 May 2024. |
Alpha reported another solid result in Q124 as earnings beat consensus despite headwinds to costs and NII. The underlying RoTE of 13.5% was above the full-year target of 13%. NII declined 4% q-o-q due to hedging costs, calendar effects, loan repricing, preferred debt issuance and modest deposit migration, but was in line with market expectations. Trading gains rose 84% q-o-q, limiting the drop in operating income to just 1%.
The cost-income ratio fell to 38.4% versus 43.3 % in Q123, but recurring costs were up 3% q-o-q. Thus, pre-provision profit was down 6% q-o-q. Impairments were much better than expected and they fell by 30% q-o-q with non-performing exposures (NPE) remaining flat at 6%. The resulting 5% q-o-q rise in PBT was 11% ahead of consensus.
Performing loan growth, excluding the Romania deconsolidation, was strong at 6% y-o-y and the fully loaded CET1 ratio edged up to 14.6% (FY23: 14.3%) after accruing for dividends at 35% of profit (FY23: 20%). The pro forma CET1 (post NPE transactions) was 16.2%, ahead of the full-year target of 16%, which, along with the higher dividend accrual rate, bodes well for future capital returns to shareholders.
FY24 guidance has been confirmed: EPS of c €0.31 and adjusted RoTE of 13%. Pressure on NII is expected to ease through FY24 and FY25 from lower interest rates and growth in the securities portfolio. Management continues to guide to further expanding returns post FY24. The adjusted RoTE is expected to improve to 13.5% in FY25 and to exceed 14% in FY26.
The introduction of a buy-back at this stage confirms management’s commitment to shareholder value creation, in our view. At 0.6x TNAV and less than 6x P/E in FY24, the market appears to give little credit to Alpha’s successful execution of its strategy to date.
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Research: Healthcare
With Mendus’s Q124 results, management recapped its clinical priorities, which are all progressing as expected. The focus remains on the AMLM22-CADENCE trial for lead cancer vaccine vididencel, in combination with oral azacitidine as a maintenance treatment for acute myeloid leukaemia (AML). R&D expenses came in slightly ahead of expectations with the ramp up in clinical activity, including preparation for the subsequent pivotal Phase III trial, with large-scale manufacturing of vididencel (planned initiation in H225) through Mendus’s alliance with NorthX Biologics. The second clinical-stage asset, ilixadencel, is being prepared for a new Phase II trial in soft tissue sarcomas (STS) and is scheduled to launch in Q224. The end-Q124 net cash balance of SEK87.3m was bolstered by the SEK69.1m realised through warrant conversions in April, which we estimate will provide a runway into Q325. Our overall valuation increases slightly to SEK2.11bn (from SEK2.05bn), but the per share valuation declines to SEK2.09, from SEK2.38, with the higher share count.