WOOD Flash – PKO BP: 2025E strategic targets sensible and quite conservative, but too little to inspire the market
PKO BP has published a new 2023-25E strategic horizon, with a key target ROE of at least 12%. We do not see the strategy announcement as a share price moving event in the near term; at first glance, it may even be considered slightly disappointing. However, we also see it as sensible and not threatening for our current outlook for the bank, and we note that we forecast a 2024E ROE of 15%+, while the market consensus has a ROE of just below 15%. We remain more positive with regards to the ROE, but we note that this is a function of the benchmark rate, which is reflected in the cost of equity with regards to our valuation and 12M PT. We stress the very conservative targets, below the current market expectations, but we do not believe that the market’s expectations are likely to drop as a result. The key conservative assumption is the 2025E reference rate of 3% vs. the current Bloomberg consensus 2024E eop reference rate of 5.45% and our 2024E average annual benchmark rate of 4.5%. Our 2024E assumption is in line with PKO BP’s macro outlook on that front, but sees further rate cuts. The CFO hinted that, while the 2025E strategic targets have been set against cautious background assumptions, he does not exclude a much higher ROE in the medium term. The management board also stressed, strongly, the high level of geopolitical, macroeconomic, and regulatory (first and foremost) risks persisting in the new strategy’s horizon period. We like the strong stress on setting ESG-related targets and the significant attention paid to this aspect in the strategic presentation. Improvements on this front were promised, with quantifiable targets.PKO Bank Polski is a universal commercial bank offering services to both domestic and foreign retail, corporate and other clients. Co. is licensed to hold foreign exchange and currencies and sell/buy them, as well as perform a full range of foreign exchange services; open and hold bank accounts abroad and to deposit foreign exchange in these accounts. In addition, Co. conducts activities relating to leasing, factoring, electronic settlements via payment cards, as well as renders other financial services. As of Dec 31 2009, Co. had total assets of Zl156,478,685,000 and total deposit of Zl124,628,562,000. Co. operates in the Republic of Poland, Ukraine and Sweden.
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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