Czech Banks: picking the stronger one (Komercni Banka stays BUY, MONETA Money Bank stays HOLD)
In this report, we present our updated forecasts for the Czech banks under our coverage, Komercni Banka and MONETA Money Bank. Our key points are the scale of the potential windfall tax hit, and our early attempt to grasp the potential COR growth expected in 2023E. We have screened both banks with regards to their valuation, capital position, dividend potential and COR volatility through the cycle, as these seem to be the key differentiating points currently, while the windfall tax is negative for both. We have a clear preference for Komercni Banka over MONETA. Komercni should offer better dividends in the course of the next 12 months, in our view, and it has stronger capital ratios and a track record of one of the least volatile CORs through the cycle. All this comes at a deeply discounted valuation (our 2023E P/BV and P/E of 0.9x and 8.6x) vs. its historical trading averages and MONETA. At the same time, we see MONETA as one of the least undervalued banking stocks in the CEE financial space (our 2023E P/BV of 1.3x) and our 12-month return potential relies on its dividend yield. Also, should the macro crisis take a harsh turn, we see MONETA’s COR track record as far more vulnerable and volatile. We maintain our BUY on Komercni Banka (new price target (PT) at CZK 913) and our HOLD on MONETA Money Bank (new (PT) at CZK 87.2).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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