NLB Banka: a good asset for a very high price (stays SELL)

In this report, we maintain our SELL recommendation on NLB Banka, while reducing our price target (PT) by c.13% to MKD 21,095/share, from MKD 24,158/share. The bank continues to perform well, in the current environment, and its future performance should be supported further by the now growing interest rates in North Macedonia. This is likely to continue, supporting the NIMs, profitability and ROEs further, in our view. We continue to appreciate the bank’s solid asset quality and capitalisation levels. Despite this, we deem the price too high, so we maintain our SELL on the bank, at this stage. The current downside we see in the stock is c.20%. Currently, the bank trades at some 1.2-1.3x P/BVs for 2022-23E, on our numbers. This is a c.58-64% premium vs. its peers, which we see as quite stretched; while, on our PT, the bank would trade closer to the peers’ median. Moreover, if we compare our P/BV multiples for NLB Banka at our PT, they are in line with the median P/BV multiples at the PTs for the bank’s frontier peers under our coverage. Therefore, our valuation call, outlined in our previous report (published in November 2021), remains the same.