Bank of Cyprus: Wait and see (downgraded to HOLD)
In this report, we have lowered our earnings estimates for Bank of Cyprus by 40-45% to take into account the sale of the NPL portfolio (Helix) and the UK business. Although both transactions were a step in the right direction and have aided the bank’s de-risking process, they have also made its ROE profile less appealing due to lower NII and a higher C/I ratio. This implies sustainable ROEs in the range of 5-6% (vs. 8-10% previously), even on the assumption of a relatively low cost of risk of >80bps. We therefore prefer to keep our wait-and-see stance and revisit our investment thesis after management presents the medium-term targets in late-February. We downgrade our rating to HOLD (from Buy) and cut our price target (PT) to EUR 2.0/share (from EUR 3.7/share previously).
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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