29/10/2009 12:57
In a report released on October 29, Credit Suisse announced the initiation of the coverage of Bank of Cyprus with an Outperform rating and € 7.50 target price.
“We believe that strong margin recovery, limited dilution risk, high liquidity and attractive valuation are reasons to buy Bank of Cyprus shares”, it stressed.
“We believe the recovery in the net interest margin will be stronger and faster than currently anticipated by consensus. Net interest margin in Cyprus hit a low of 1.87% in Q1 2009A and recovered to 2.02% in Q2 2009A. We forecast 2.09% for 2009E. Similarly, in Greece, net interest margin hit a low of 1.54% in Q1 2009A and recovered to 1.93% in Q2 2009A. We expect 2.25% for 2009E”, the report said.
“We believe investors face limited dilution risk as Bank of Cyprus has not used government funds, has not stopped paying dividends and raised €€ 645m in June 2009 through a perpetual convertible with a conversion price of €€ 5.50, which is already in-the-money”, it added.
The catalysts for the third quarter results to be announced on November 4 will be the 4.6% of H1 2009A operating profit derived from Russia. Also, €€ 6.5bn of offshore deposits of Bank of Cyprus are mostly to Russian-related corporates, which could be vulnerable to potential further economic deterioration in Russia.
According to Credit Suisse, the bank’s profits will stand at €326 million in 2009, €417 million in 2010 and €532 million in 2011. The EPS is expected to reach €0.46 in 2009, €0.59 in 2010 and €0.75 in 2011.
“We believe that strong margin recovery, limited dilution risk, high liquidity and attractive valuation are reasons to buy Bank of Cyprus shares”, it stressed.
“We believe the recovery in the net interest margin will be stronger and faster than currently anticipated by consensus. Net interest margin in Cyprus hit a low of 1.87% in Q1 2009A and recovered to 2.02% in Q2 2009A. We forecast 2.09% for 2009E. Similarly, in Greece, net interest margin hit a low of 1.54% in Q1 2009A and recovered to 1.93% in Q2 2009A. We expect 2.25% for 2009E”, the report said.
“We believe investors face limited dilution risk as Bank of Cyprus has not used government funds, has not stopped paying dividends and raised €€ 645m in June 2009 through a perpetual convertible with a conversion price of €€ 5.50, which is already in-the-money”, it added.
The catalysts for the third quarter results to be announced on November 4 will be the 4.6% of H1 2009A operating profit derived from Russia. Also, €€ 6.5bn of offshore deposits of Bank of Cyprus are mostly to Russian-related corporates, which could be vulnerable to potential further economic deterioration in Russia.
According to Credit Suisse, the bank’s profits will stand at €326 million in 2009, €417 million in 2010 and €532 million in 2011. The EPS is expected to reach €0.46 in 2009, €0.59 in 2010 and €0.75 in 2011.
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