Bank of Cyprus: tightening triumph (BUY - transfer of coverage)
We transfer coverage of Bank of Cyprus (BOCH), with a BUY rating. After years of economic struggles and subpar profitability, the tide has turned, and BOCH has become a major beneficiary of the ECB tightening. BOCH's extraordinary profitability should normalise as rates go down, but not as quickly as the market multiples imply, in our view. We have kept our valuation conservative and still believe that the 2023-25E bottom-line trajectory warrants higher multiples (3.7x P/E and 0.7x P/TBV for 2024E at fair value on our estimates vs. the 2.9x P/E and 0.5x P/TBV market multiples). Our new price target (PT) is GBP 3.20/share (28% upside). We also see BOCH as a good regime hedge: the bank should continue to enjoy ROE windfalls in "higher for longer" scenarios. In our view, the bank also has an opportunity to return capital more aggressively than management’s 30-50% payout ratio target and optimise its balance sheet for reduced liquidity (316% LCR in 2Q23). We believe the stock’s liquidity is an issue, as it trades only EUR 300k daily.
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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