ING BSK – Extreme Premium Vis-à -Vis Peers
We downgrade ING BSK ("ING") two notches from hold to sell, and we cut our target price to PLN 170.00 per share. ING BSK is currently trading at respective premiums of 27% and 52% to the average 2020E P/E and P/B ratios of Polish banks, and relative to CEE peers the gaps are even wider at 49% and 52%, respectively. ING is rightfully seen as a safe haven, but what is unfair is that it has not been de-rated along with all other banks as part of the correction over the last few years. Having been spared, today the Bank at 12M forward P/E is valued at 1.6x price-to-book against a WIG-Banks average of 1.0x (the historical average is 1.3x). Neither the Bank's dividend yields (at 2% vs. 9% topmost in the peer group), nor its ROE (12% vs. an 18% peer high) are superior enough to justify today's outperformance. Note also that a major part of ING’s record-high premium comes from low liquidity (with 3M ADTV of just PLN 1m) ? a product of 85% of free float shares being held by pension funds. Worse still, we still see upside risk in the premium looking at ING’s current 2020-2021 earnings consensus, which in our opinion is overestimated by about 4%. Under these circumstances, any share selling by the institutional holders, and any M&A activity, might trigger an abrupt and massive de-rating of ING's multiples. In short, an investment in ING cannot earn as good a return over 2020 as its de-rated peers. As an alternative, we see more compelling opportunities in Bank Handlowy, PZU, and Komercni Banka.
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.
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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