PL Banks: Selective approach
We are becoming more cautious on Polish banks and recommend a selective approach with our top picks being banks with more balanced portfolio growth and offering decent DYs, i.e. PKO BP, Bank Handlowy and Bank Pekao. The biggest risk appears to be a shortage of capital at the smaller banks (NBP estimates that the capital deficit amounts to PLN 5.7bn; 10 banks). The major concern is Idea Bank (Tier 1 0.53% in 1Q19) with some PLN 1.3bn capital shortage, and less so GNB (Tier 1 8.7% in 1Q19) with capital needs of at least PLN 1.6bn (to comply with KNF minimum requirements). Both banks (having a single major shareholder) are in the process of looking for investors. The market is also concerned about capital-rich banks’ possible involvement in the resolution procedures and whether it would consequently push the required BFG contribution up. The recently announced creation of a BFG bridge bank as well as GNB revealing 2 non-binding bids from private equity investors have been warmly welcomed by the market. Although the probability is high, our base scenario does not include additional costs related to resolution in the sector, nor any covered bank being involved in the process. However, it includes a persistently high BFG contribution in due course. We lower our interest rate forecasts and now expect flat rates versus a +25bps hike in 1Q’20, which is partly offset by higher deposit spreads and faster loan portfolio growth. Incorporating a higher BFG contribution (+27% YoY), and higher employment restructuring costs (SPL, PEO) and a higher cost-of-risk we have cut our NI forecasts by an average of 1%/6%/4% in 2019E-21E and we expect covered banks’ NI to increase by +3%/+14%/+11%. This is 3% below consensus in 2019, but in line for 2020-21E. We believe the CHF mortgages issue (currently completely ignored by the market) may return to the agenda soon. One reason may be autumn general elections, the other risk would be the final ruling of the Court of Justice of the EU (CJEU). YTD the WIG Banks index has risen 7.0% and the WIG Index 3.6%. The sector seems to be approaching its fair value with limited upside potential, on a 2020E P/E of 12.3x, a 25% premium to CEE banks on 9.8x (on BBG cons)Alior Bank is a universal lending and deposit-taking bank which renders services to individuals, legal persons and other entities which are Polish and foreign persons. Co.'s core activities include maintaining bank accounts, granting loans and advances, issuing banking securities and purchasing and selling foreign currency. Co. also conducts brokerage activities, consulting and financial agency services and renders other financial services.
Bank Handlowy W Warszawie is a Polish bank holding company engaged in a wide range of banking services for individuals and corporate customers in the domestic and foreign markets. Additionally Co. operates in brokerage operations, lease services and investment operations. Customers have access to these services at the branches, ATM's, telephone services and electronic banking services.
Bank Millennium provides various banking products and services to individual clients, small businesses, corporate, and public sector entities in Poland. Co. offers current account, custody account, and escrow account; standard deposits, negotiated deposits, millenet deposits, and automatic overnight deposits; debit and charge cards; funds management; professional cash services; and management of balances of current and auxiliary accounts. Co. also provides current account overdraft facility, real estate loans, revolving credits, working capital loans, investment loans, energy financing facility, sureties, line of guarantees, letters-of-credit, preferential loans, and bid bond guarantees.
Bank Polska Kasa Opieki (the Bank) is a commercial bank providing a range of banking services, mainly in Poland. The segments of the Bank are as follows: Retail banking, which comprises all banking activities related to retail customers and small and micro companies; Private banking, which comprises all banking activities related to the affluent individual customers; Corporate and Investment banking, which comprises all banking activities related to the companies, interbank market, debt securities and other instruments; and Assets and Liabilities Management and other, which is engaged in the supervision and monitoring of fund transfers, and other activities centrally managed.
ING Bank Slaski is a bank holding company. Through its subsidiaries, Co. is engaged in providing a range of banking services rendered for individual and institutional clients in line with the scope of services outlined in Co.'s charter. Co. runs operations both in the home currency and in foreign currencies. Co. is also active on the domestic and foreign financial markets. The subsidiary, ING Bank Hipoteczny S.A., also runs banking business, including loans secured with mortgage. Additionally through subsidiaries, Co. operates brokerage services, real estate, leasing of real estate and advisory and acts as a financial intermediary as well as provides other financial services.
mBank is a provider of comprehensive corporate banking services in Poland. Co. and its subsidiaries make up the mBank Group which is engaged in offering financial services. Co.'s service offering includes a comprehensive financial offer tailored to the needs of corporate clients, Private Banking clients, and retail clients. The business activities of Co. is conducted in the following business segments: Retail Banking and Corporates and Markets.
PKO Bank Polski is a universal commercial bank offering services to both domestic and foreign retail, corporate and other clients. Co. is licensed to hold foreign exchange and currencies and sell/buy them, as well as perform a full range of foreign exchange services; open and hold bank accounts abroad and to deposit foreign exchange in these accounts. In addition, Co. conducts activities relating to leasing, factoring, electronic settlements via payment cards, as well as renders other financial services. As of Dec 31 2009, Co. had total assets of Zl156,478,685,000 and total deposit of Zl124,628,562,000. Co. operates in the Republic of Poland, Ukraine and Sweden.
Bank Zachodni is a bank seated in Poland. Co. and its subsidiaries provide a range of banking services for individual and business customers and operate in domestic and interbank foreign markets. Additionally, Co. provides also the following services, including intermediation in trading securities, leasing, factoring, asset/ fund management, insurance services, trading in stock and shares of commercial companies, and brokerage activity. Operational activity of Co. and its subsidiaries has been divided into five segments: Retail Banking, Business and Corporate Banking, Global Banking and Markets, ALM (Assets and Liabilities Management) and Centre, as well as Santander Consumer.
Haitong is the first international Chinese investment bank and our goal is to be the primary channel for capital flows into and out of China. During 2015 the Senior Management Team in London was expanded significantly to focus on this objective and to provide a full-service cross-asset markets business coupled with sector-focused investment banking. We work closely with our world-wide network of offices to bring a true depth of understanding to all client situations.
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