Bank Handlowy – Best dividend yield in years
We are maintaining a buy rating for Bank Handlowy while lowering the target price to PLN 60.00 per share. The valuation of the bank has dropped by 24% since the beginning of the year. The values discount was triggered by the announcement of a dividend cuts and followed by the announcement of an unsatisfying strategy, higher BGF restructuring fees (doubled), problematic credit exposures (possible write-offs in Q2) and exclusion from the MSCI Poland index. We believe that the most of the abovementioned factors should be a one-off effect and only a higher BGF fee will have the greatest negative impact on the valuation. At the same time, the market ignores one of the highest DY ratio on the market. The bank is prior to the date of setting the right to dividend for 2018 (DY >7%). In addition, we believe that the dividend for 2019, despite very poor results, may surprise positively. If Bank Handlowy decides to allocate 25% of the net profit from 2018 to the undivided portion (currently as reserve capital) and to pay it out in 2020, then DY may reach over 8% next year. Despite a very high dividend and improving profitability in the following years, we value the bank at 1.0x on the fair P/BV ratio, ie with a 15% discount to the sector.
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.
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.
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