Alior Bank – In Shape For Spring
Alior's valuation has been cut in half over the past year, following on the heels of pared-back earnings expectations, and at the current level the stock more than prices in our worst-case profit scenario, which assumes high cost of risk and a lack of margin growth in the next two years due to charges related to possible refunds of prepaid loan fees under last year's CJEU ruling. Despite the conservative view, we upgrade Alior to buy because we see upside potential from the current valuation of 0.5x book value Alior will most likely deliver solid results for Q4 2019, but it will take several more quarters of consistent improvement for the Bank to regain the full confidence of investors. We expect cost of risk for Q4 2019 to have been reduced to 200bp – a level which, when extrapolated over the full FY2020, implies room for us to raise our net profit forecast for the year by as much as 25%. We believe Alior is capable of trimming recurring risk costs further from approximately 174bp expected in 2019, when the provisioning-to-NPL ratio for the corporate loan portfolio at long last also aligned with industry averages. Our outlook for 2020 also anticipates a likely beat on net interest income after a reduction in financing costs, which today are among the highest in the sector, combined with faster-than-anticipated lending growth facilitated by healthy capital levels. We leave intact for now the conservative assumptions underlying our models, but we do see upside risk to our view. Finally, if any of the rumors circulating lately about Alior being targeted for takeover by another bank prove true, a deal like this would be beneficial for the Bank's minority shareholders whoever the buyer may be because for Alior's current owner, PZU, divestment at the current market price would entail a massive write off.
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.
Set up in 1986, mBank (originally BRE – Export Development Bank) is Poland’s 4th largest universal banking group in terms of total assets and 5th by net loans and deposits at the end of June 2019. mBank has one of the oldest brokerages in Poland – we have been providing brokerage services since 1991 - and the biggest, serving about 300 ths clients.
We provide all brokerage services available in the Polish capital market (i.e. Warsaw Stock Exchange, non-public markets and forex) in a way that meets the expectations of all groups of investors, both individual and institutional. Participating in the dynamic growth of the Polish capital market since its inception, we have acquired competences and experience needed to provide the highest quality of service and we have won the trust and satisfaction of our Clients.
Over the past decade, mBank's Equity Research Team has been consistently ranked among the top research teams in Parkiet's annual institutional investor surveys (Parkiet is Poland's leading daily business newspaper). mBank analysts provide coverage on an extensive list of companies, mainly in Poland but also elsewhere in the CEE region: Austria, Czechia, Portugal, Ukraine and Hungary.
Clients get access to a comprehensive selection of research products including daily market insights, monthly roundups, macroeconomic views, industry- and company- specific analyses, investing strategies, earnings comments, etc.
We give our institutional clients numerous opportunities to connect with industry professionals, top executives, and leading analysts:
- Get direct access to senior management teams at listed companies (over 30 meetings in 2018),
- Engage in our many industry events, featuring listed Polish and global firms (in 2018, we hosted sector-themed conferences around industrials, chemical companies, telecoms, retail, and financials, and co-hosted a Best of Poland investors' with Commerzbank and the Warsaw Stock Exchange),
- Stay informed through an array of enlightening discussion panels, workshops, and briefing sessions with regulatory officials.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.