Patria Bank: profitability set to grow, but valuation remains fair (stays HOLD)

We have had Patria Bank as a HOLD since our initiation in 2020. In this report, we keep our price target (PT) almost unchanged, at RON 0.100/share, and maintain our HOLD recommendation, as the outlook seems to have been priced in by the market. On the positive side, we highlight the tightening monetary cycle and our expectation of the rate increases continuing, the strong loan growth, and the improving profitability and asset quality. On the negative side, we highlight the presently low scale of Patria’s operations and the current valuation levels, which are unlikely to allow the stock to rerate significantly to the upside. At 0.8-0.9x P/BVs, on our numbers, for 2022-23E, Patria Bank trades at a discount of 40% to its Romanian peers. We believe that a discount is justified, due to the bank’s scale vs. its Romanian peers, its loan book composition, with a higher risk profile, and budgeted growth rates that we consider rather aggressive. On our PT, which offers upside of c.11.4%, the discount would narrow, albeit not completely, to 33%, which we see as more justified, especially in view of the profitability potential we see at Patria, going forward.