Siauliu Bankas: Solid buffers in place (stays BUY)
We have updated our model on Siauliu Bankas, in order to take into account the COVID-19 impact. We now expect the net profit in 2020E to decline by c.50% yoy, driven mainly by softer lending growth, lower fees and higher provisions. Despite this challenging environment, we believe that the current valuation levels (the stock is -24% ytd and now trades at 0.7x on our 2020E P/BV) are appealing, on the back of high NIMs (c.3.0%), healthy efficiency ratios (C/I below 45%), solid pre-provision profitability (c.330bps over gross loans) and high capital buffers (a CAR of >19%). Although we expect an increase in the cost of risk (COR) during 2020E, to c.140bps (more than double 2019), we still forecast a ROE of close to 8%, with an uplift of above 10% from 2021E-onwards. We maintain our BUY rating on the stock, and set our new price target (PT) at EUR 0.57/share (from EUR 0.67 previously).Siauliu bankas AB is a Lithuania-based company engaged in the provision of commercial banking and financial services to private and corporate clients. It offers such services as provision of bank accounts, offering the debit and credit cards and safety deposit boxes, cash and non-cash money transfers, operations with securities, currency exchange, lending and investment services, Internet banking, financial brokerage and real estate development. It also issues monetary warranties, guarantees and other warranty liabilities, as well as performs operations with payable documents, such as checks and others. The Bank has several branches, numerous client service units and subsidiaries.
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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