Addiko Bank: A loan book transformation play (BUY - initiation of coverage)
We initiate coverage of Addiko Bank with a BUY recommendation and a price target (PT) of EUR 18.1/share, offering c.44% upside. We highlight the bank’s loan book transformation, which could drive the NIMs up from 2.9% in 2020 to 3.3% in 2025E, on our estimates. The bank’s digitalisation strategy has helped to reduce costs, and we believe this should continue going forward. We expect the C/I ratio to decline to c.54% by 2025E, from the current c.72%. The bank is well-capitalised, as the CET1 ratio is at 20.3% currently, including the paying out of a large “special” dividend, which could yield as much as c.19% on its own. The stock is trading currently at c.0.3x P/BV for both 2021E and 2022E, on our estimates. With the ROEs reaching c.6% in 2025E and long-term ROEs of as much as c.8%, compared to our COE estimate of c.12.8%, the solid capitalisation and the good asset quality, we believe the stock has the potential to trade at higher multiples.
WOOD & Company is the leading investment bank in Emerging Europe. Founded in 1991 and head-quartered in Prague, our footprint spans the region and touches investors around the globe.
A pioneer in Emerging Europe, WOOD executed many of the first CEE equity trades and landmark investment banking transactions. Our electronic trading platform was the first in the region, and remains the best. We are continually expanding our relevance and reach in these ever-evolving markets.
Our equity market share reflects our stature: 7% in Warsaw, 20% in Bucharest, 16% in Hungary, 40% in Prague and 5% in Vienna. Our distribution is unparalleled, with the largest salesforce in the region, servicing a uniquely diverse investor base.
We couple local expertise with a truly international perspective. With offices on the ground in the region, and in key financial hubs such as London and Milano, we are never far from our clients and we remain at the forefront of what’s afoot in the CEE emerging and frontier landscape.
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