Komercni Banka cut to HOLD, TP CZK 1,040 - Huge capital base limits better ROEs
We raise our 12m TP to CZK 1,040 on the wings of improving earnings outlook (rate hikes, lower risk costs) but given < 15% upside room downgrade the recommendation from BUY to HOLDStrong capitalization with CET1 ratio seen above 23% by 2023 on assumed 60-65% payouts justifies consideration of excess capital into our 12m TP with CZK 122 per share (was CZK 91 before) as a compensation for ROE potential in the 12% territory vs. 15% management target
We model growing NIM as a result of faster than initially anticipated monetary tightening cycle but see current reference rate levels approaching the peak unlike some other markets (PL, RO, even HU) which may stand ahead of further hikes.
Komercni banka is a universal banking group based in the Czech Republic. Co. is engaged in the provision of a range of financial services in retail, corporate and investment banking. Co.'s operating segments include: Retail Banking, the provision of products and services to individuals, such as among others building savings, pension insurance, overdrafts, credit card and personal loans and mortgages; Corporate Banking, the provision of products and services to corporate entities such as foreign currency and derivative products, syndicated and export financing, and guarantee transactions; and Investment Banking, which involves trading in financial instruments.
The Institutional Equity Research team of Raiffeisen Bank International AG covers 85 stocks from Austria, Central & Eastern Europe with sell-side research and thus levers our local broker status with excellent company relationships. For corporates in Austria, CEE and Western Europe, we offer co-sponsored research, which includes research coverage and marketing activities to investors. Additionally, through our Spotlight Research product we also shed light on leading European small and micro-caps, seeking greater visibility with investors.
The Institutional Equity Research team consists of roughly 15 analysts, both in Vienna and the CEE countries. Our analysts provide long-standing sector expertise in tandem with profound local market know how and a sectoral approach across the entire region.
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