WOOD Flash – Georgian banks: margin blues – sub-20% ROEs in sight already
During the bank’s 2Q19 conference call on Monday (29 July), TBC’s management guided that it expects another 30-50bps NIM contraction in 2H19E. This took us by surprise, as the 2Q19 NIM came off by 50bps qoq, which was a compression far sharper than the bank expected initially. Adjusting TBC’s 2Q19 figures with a 40bps lower NIM and a 10% normalised tax rate, we reach a c.19% ROE for the quarter and believe that the Georgian banks’ (both TBC and BGEO) >20% ROE targets may be meaningfully challenged in this backdrop much quicker than we thought. We retain our cautious stance on both TBC (HOLD, PT GBP 17.1/share, 5.8x P/E and 1.1x P/TBV for 2019E, on our estimates) and BGEO (SELL, PT GBP 15.8/share, 6.2x P/E and 1.3x P/TBV for 2019E, on our estimates).
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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