Currency in EUR
Last close As at 26/05/2023
EUR6.04
▲ 0.14 (2.37%)
Market capitalisation
EUR356m
Research: Financials
ProCredit (PCB) maintains its market position as an impact-oriented bank for small and medium-sized enterprises (SMEs) in Southeastern (SEE) and Eastern Europe (EE) as well as Ecuador. It has navigated the COVID-19 crisis well and posted strong 7.7% loan book growth in H121, a 10bp cost of risk (below its closest peers) and a solid capital base (CET1 ratio of 13.7% at end-H121 versus a regulatory requirement of 8.2%). Management has confirmed its FY21 guidance and medium-term targets, but plans to update the latter in March 2022 as the targeted 10% ROE and 20% share of green loans in loan book are already within reach in FY21.
ProCredit Holding |
Well-positioned to achieve its targets
Banks |
Deutsches Eigenkapitalforum 2021
27 October 2021 |
Share price graph Share details
Business description
Bull
Bear
Analyst
ProCredit Holding is a research client of Edison Investment Research Limited |
ProCredit (PCB) maintains its market position as an impact-oriented bank for small and medium-sized enterprises (SMEs) in Southeastern (SEE) and Eastern Europe (EE) as well as Ecuador. It has navigated the COVID-19 crisis well and posted strong 7.7% loan book growth in H121, a 10bp cost of risk (below its closest peers) and a solid capital base (CET1 ratio of 13.7% at end-H121 versus a regulatory requirement of 8.2%). Management has confirmed its FY21 guidance and medium-term targets, but plans to update the latter in March 2022 as the targeted 10% ROE and 20% share of green loans in loan book are already within reach in FY21.
Strong H121 in the 2021 macro recovery
PCB’s net income came in at a strong €20.7m in Q221 (versus €8.0m in Q220), translating into an annualised return on equity (ROE) of 10.2% (and 9.1% in H121). This was assisted by a favourable cost of risk development (with a net positive P&L impact of €0.9m), solid loan book growth (4.5% quarter-on-quarter in Q221) and stable year-on-year net interest margin (NIM) of 2.9%. PCB’s business progress has been coupled with economic recovery across its markets. In October 2021, the IMF updated its forecasts for real GDP growth in emerging and developing Europe to 6.0% in 2021 (from 4.9% previously) and to 3.6% in 2022 (unchanged). It expects real GDP growth in Ecuador of 2.8% in 2021 and 3.5% in 2022.
On track to scale the business further
In October 2021, management confirmed its FY21 guidance (c 10% loan portfolio growth, 8.0–9.5% ROE, c 65% CIR, >13% CET1 and >9% leverage ratio, a one-third dividend payout) and medium-term targets (c 10% loan portfolio growth pa, c 10% ROE, a CIR below 60%, a 20% share of green loans in total loan book and one-third dividend payout). PCB’s emphasis is now on realising scalability effects from its tailored digital platform (developed by its in-house IT company Quipu) and lean branch structure, which would contribute to a further decline in CIR and enhance ROE. PCB’s performance should be supported by its conservative approach to credit risk management, translating into lower credit default rates than the levels seen in the countries where it conducts operations.
Valuation: Offering 59% upside potential
PCB’s shares currently trade at a FY21e P/BV multiple of 0.6x versus an average 1.3x for a group of local and Austrian banks active in SEE and EE, which we believe is only partially justified by PCB’s lower ROE. Our P/BV-ROE valuation currently stands at €12.60 per share, implying c 59% upside.
Edison estimates
Source: ProCredit, Edison Investment Research. Note: *From total operations. |
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Research: TMT
While Germany’s 3U HOLDING (3U) reported declines in H121 top-line revenue, both its information and telecom technology segment (ITC) and sanitary, heating and climate segment (SHAC) showed organic growth. The growing cloud computing and e-commerce industries should boost 3U’s prospects, although shortages continue to hamper its SHAC business. To justify multiple expansion, 3U needs to return to growth in its higher-margin renewable energy areas and improve margins in its SHAC segment.
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