Bank Pekao – It's just getting started
We are lowering our target price to PLN 121.00 per share, but we leave the buy rating unchanged. The price of Bank Pekao shares has decreased by 5.6% vs. the decline of WSE Banks by 1.9%. Pekao's discount partly results from the expected correction of the consensus caused by over double increase of the BFG fee, and partly from rumors indicating the possibility of Pekao's takeover of Idea Bank. In fact, the increase in the BFG contribution and the reserve for collective redundancies, in our opinion, will result in a 4% decrease in consensus for 2019 and 3% & 6% for 2020-21. Nevertheless, it should be emphasized that the BFG contribution should decrease next year due to the change in the structure of deposits, and collective redundancies will cause a significant decrease in the C/I ratio, which will result in a 14% increase in net profit. In addition, Bank Pekao, likewise Bank Handlowy, is still to payout a good dividend in the amount of PLN 6.60 per share (DY >6%), which date was set for July 10th. On the 2020/21 P/E index, Bank Pekao is listed at 7% % 5% discount to the average and with 4% & 5% discount to PKO BP. Taking into account the upcoming dividend, good outlook for results, post-election stabilization, low probability of acquiring banks in trouble and an attractive valuation, we believe it is a very good moment to invest in Pekao.
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.
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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