Collector Bank - Initiation of coverage - Consumption on HOLD
Collector occupies an attractive corporate lending niche, supported by a profit-focused consumer-lending portfolio. We expect dividend payments to begin sooner than is reflected in consensus, but also for profitability to be held back by rising interest rates and declining consumption. On the bright side, Collector’s recent series of cost-saving initiatives should help keep operating margins at c40% over 2022–2024e. Consequently, we initiate coverage with a HOLD and SEK35 target price. Niche lender to an underserved corporate-lending segment. Collector’s lending products primarily target small- and medium-sized companies, which may be sidelined by large and small corporate lenders. Due to less crowding in this segment, as well as relatively high barriers to entry, we see low risk of increased competition. In our view, this should enable the company to achieve greater margins than in more crowded market segments, while retaining market share.Collector AB is a Sweden-based company engaged in the financial industry. The Company provides financial services, credit management and payment solutions primarily in the domestic market, Norway and Finland. It operates through two segments, such as Retail and Corporate. The Retail segment provides personal loans, credit cards and retail financing solutions for e-commerce and retail chains, as well as savings accounts through online services. The Corporate segment is responsible for the factoring and corporate lending to small and medium-sized enterprises, real estate credits and debt collection on behalf of clients, as well as acquires and manages portfolios of overdue or written off receivables.
DNB Markets is the investment banking arm of DNB Bank ASA and is focused primarily on the Nordic region, as well as internationally on niches such as global shipping, energy and related services, and seafood. DNB Markets offers services in FICC, Equities and Investment Banking advisory from offices in Oslo, Stockholm, London, Singapore and New York. Equity research coverage is offered on c250 Nordic companies. DNB was ranked no.2 in Extel Nordic Research 2017. The DNB Markets’ Credit and FICC Macro & FX Research teams are repeatedly highly rated by Prospera Nordic Institutional Investor Surveys.
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