Bank Pekao: Relatively fewer issues on the horizon
We maintain our BUY on Bank Pekao. The stock is down 6% since mid June but outperforming the WIG Banks index as its exposure to FX mortgage risk is much lower vs peers. The bank stopped granting FX loans in 2003 and acquired most of the portfolio in 2007 from BPH. The total portfolio is some PLN 3bn now with a negligible share of CHF-indexed loans (less than 3%). We believe the bank is well positioned to outperform the market with its strong capital position, dividend prospects (75% payout) and strategy implementation, which should start to bear fruit shortly. 2Q19 results were slightly above expectations on interest income, but some one-offs were also booked in the cost of risk. We revised 2019-21E NI by 2%/1%/-1%. We forecast 2019E-20E NI of PLN 2.23bn (-2% YoY), PLN 2.73bn (+22% YoY) and PLN 2.91bn (+7% YoY), respectively. Our earnings expectations differ from consensus by -2%/+3%/1% in 2019-21E. PEO trades at a 2020E P/E of 10.3x, a 5% discount to PL banks at 10.9x. We appreciate PEO’s restructuring potential, retail targeting strategy, strong capital position with an above-avg dividend and negligible exposure to CHF lending. Our new PLN 125.3 FV (was PLN 130.3) (including an expected CHF portfolio loss at PLN 1.7ps, i.e. 1.3%) offers +17% upside potential.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.
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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