Report
Marta Jezewska-Wasilewska

WOOD Flash – Alior Bank: 2022E strategy update – delivery depends on credit risk performance

Alior Bank has published its 2022E strategy update. Its key target is a ROE of above 10%. This is above the current market expectations, but we note that expectations are very cautious at this stage, as the current results are far from such profitability. We have summarised the key targets in the table below, and come to the conclusion that the key upside risk we see vs. our current medium-term outlook (only until 2021E) is in the cost of risk. On the other hand, there may be some downside stemming from a higher admin cost base. In our view, in light of the weak 2019 and 4Q19 results, the market is unlikely to buy into the strategic targets ahead of some real improvement in the recurrent earnings throughout 2020E. This should be, first and foremost, delivered on the net interest income, NIM and COR fronts. An improvement in its reported earnings may be the key to restoring trust in the bank’s long-term targets. As we look at the strategy, assuming that there are no external shocks, we see the strategy as ambitious, but based on reasonable assumptions. The key unknown, for both us and the market, is how the bank is going to lower the cost of risk and dilute the non-performing loans, affecting the final delivery. We highly appreciate that there was a solid amount of time spent on discussing this during management’s strategy presentation. However, until investors see real progress, we believe that they are likely to remain cautious. One of the key catalysts on this front could be the 2020E delivery as, in the 2020E outlook, presented along with the strategic targets, we see a promise from management to cut the COR to 200bps, from almost 240bps in 2019.
Underlying
Alior Bank SA

Alior Bank is a universal lending and deposit-taking bank which renders services to individuals, legal persons and other entities which are Polish and foreign persons. Co.'s core activities include maintaining bank accounts, granting loans and advances, issuing banking securities and purchasing and selling foreign currency. Co. also conducts brokerage activities, consulting and financial agency services and renders other financial services.

Provider
Wood and Company
Wood and Company

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.

Analysts
Marta Jezewska-Wasilewska

Other Reports on these Companies
Other Reports from Wood and Company

ResearchPool Subscriptions

Get the most out of your insights

Get in touch