Czech Banks: Staying strong, despite the risk of tax (Komercni Banka and MONETA Money Bank stay BUY)
In this report, we present our updated financial forecasts for Komercni Banka and MONETA Money Bank. In general, there are not many changes in our medium-term outlooks for both banks, but we have taken the opportunity mainly in order to discuss and reflect, in our 12M price targets (PTs) for both banks, the rising risk of special sector charges, which has bounced back into the Czech banking sector. The key swing in the current episode of sector charges in the newswires is that, this time, the prime minister has brought the topic back to investors’ attention. Historically, he has spoken rather reluctantly on the matter. While this is clearly a negative, should a sector tax materialise, we keep both banks BUY rated. In our view, the recent share price reactions of both already reflect the potential charges in their current valuations (unless the Czechs follow the harsh route of the Polish politicians, which resulted in ROE cuts of above 300bps when introduced). We see it as very unlikely however.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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