NLB Group: a tale of growth and expansion (BUY - transfer of coverage)
In this report, we transfer coverage of NLB Group (NLB), maintaining our BUY rating, but increasing our price target (PT) significantly, to EUR 176.0 (from EUR 100.0), offering potential upside of 56%. NLB has been expanding its position in all its key markets for several years, and is now well positioned to benefit from a supportive regional macro backdrop and, in our view, further market consolidation in the region’s banking sector. Management remains very optimistic about the bank’s future and presented an ambitious strategic plan in May 2024, targeting a doubling in size by 2030E. We expect a normalisation of ROE towards the mid-teens but the strong capital position should enable the bank to continue to reward shareholders with very attractive dividend yields (we expect >10% during our forecast period) and could even unlock additional value through either an extraordinary dividend or accretive M&A. We find NLB’s valuation quite attractive, at this juncture, being one of the cheapest banks within our coverage universe. It trades currently at a discount that we view as excessive, and believe this could disappear in the coming years. On our 2024E figures, the stock is trading at 0.7x P/BV and 4.5x P/E.
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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