Czech Banks: Welcome to Dividend Land (upgrading Komercni Banka to BUY; MONETA Money Bank stays BUY)
On our forecasts, Komercni and MONETA are trading at 2018-19E P/E ratios of 13.7-13.2x and 12.0-12.2x, respectively. We admit that the discounts on 2018E P/E multiples to their regional peers (7% for Komercni and 18% for MONETA) almost disappear in 2019E (Komercni trades at an 8% premium, while MONETA trades at par), as we are forecasting much slower progress for the Czech banks’ earnings. At the same time, we want to strongly highlight their much more generous dividend flow. The cumulated 2017-20E dividend yield for MONETA is around 27% and Komercni is c.20%. We also note that our forecasts for Komercni and MONETA are on the conservative side, in our view, and there are upside risks which we would like to highlight here: i) a bigger impact from higher market interest rates on the banks’ NIIs and NIMs, as was the case in 4Q17 results, due to attractive interbank market conditions; and ii) the end of a “warzone†competitive environment in retail consumer lending, which we continue to factor into our forecasts. We upgrade Komercni to BUY (from Hold) and set our new 12M PT at CZK 1,140, offering 23% upside potential. We set our new 12M PT for MONETA at CZK 96.8/share (up marginally from CZK 96.4), offering 18% upside potential, and remain BUYers of the stock.Komercni banka is a universal banking group based in the Czech Republic. Co. is engaged in the provision of a range of financial services in retail, corporate and investment banking. Co.'s operating segments include: Retail Banking, the provision of products and services to individuals, such as among others building savings, pension insurance, overdrafts, credit card and personal loans and mortgages; Corporate Banking, the provision of products and services to corporate entities such as foreign currency and derivative products, syndicated and export financing, and guarantee transactions; and Investment Banking, which involves trading in financial instruments.
Moneta Money Bank as is a Czech Republic-based retail and expanding small and medium enterprises (SME) bank. The Company holds an universal banking licence and provides a range of retail and SME-focused financial products and services. The Company operates through a national distribution network of 229 branches and through alternative distribution channels, such as the internet, its call centre, auto dealers, brokers and approximately 4,700 leasing partners. The Company together with its controlled subsidiaries offers current accounts, savings accounts, term deposits and transactional banking products including payment services and debit cards, consumer loans, credit cards, overdrafts, mortgages and auto loans, auto leases and other complementary products such as bancassurance and sales of investment funds.
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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