NLB Group confirmed at BUY, TP EUR 89 - Downside risks priced in ahead of a (faster) rate hike cycle
- We confirm our BUY call at marginally lowered 12m TP to EUR 89 (was EUR 91) following the mix of model adjustments to account for higher interest rates but also economic and regulatory headwinds as well as increasing geopolitical sparks in the region.- We reiterate our expectations for a gradual mid-term risk costs normalization towards 50 bps area and consider a 65 bps assumption in the terminal value.
- After digesting takeovers of KB in Serbia and N Banka in Slovenia (former Sberbank) and given dividend commitments we expect NLB to put a temporary brake on M&A activities. Conservatively speaking, the capital structure requires some optimization and the management recently indicated interest for AT1 issue.
- Attractive valuation multiple of 0.5x 2023e BV against the ROE potential of 11% is well supported by the >10% dividend yield.
- The upcoming Q2 22 should reflect sound business environment across the region, still low risk costs and the effect of full consolidation of N Banka.
NLB dd is a Slovenia-based company, which is primarily involved in the financial services industry. The Company operates as a parent company of NLB Group and has a number of subsidiaries, such as NLB Banka Banja Luka, NLB Banka Sarajevo, NLB Banka Prishtina, NLB Nov penziski fond Skopje, NLB Tutunska Banka Skopje, NLB Bank Podgorica, Bankart, Nova ljubljanska banka, NLB Skladi, NLB Vita, NLB Banka Belgrade, NLB Srbija Beograd, NLB Leasing Sarajevo, Prvi Paktor Sarajevo, NLB Leasing Sofia, Optima Leasing Zagred, among others. The Company operates in such countries, as Slovenia, Bosnia and herzegovina, Kosovo, Macedonia, Montenegro, Serbia, Bulgaria, Croatia, Czech Republic, Germany, Italy, Switzerland, among others.
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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