02/11/2005 11:02
Two weeks after the positive revision of its initial estimates, Deutsche Bank revised up its estimates for the middle-term profitability of the Bank of Cyprus and the possible performance of its share. Although BOC published group net income of £19 m for the 3rd quarter of 2005, which is by £2m less than estimations (DB estimated £21m), BOC management’s intention to decrease the bad debt expenses to 1% by the end of 2007 from 1.28% that stands today, satisfies the analysts.
According to its BOC company alert, which was released today, DB notes “The main disappointment was a lighter NII partially compressed by trading gains. However, NII is up 10% YoY and loan growth remains strong up 12% YoY with 22% growth rate in Greece. Cyprus loan volumes were only up 5% due to a write-off of NPL’s of £169m. Excluding this, loans would have been up 10%, close to our estimate for FY 2005 of 8%. Costs were in line with estimates, suggesting that investment costs related to the Greek operations are offset by efficiency gains in Cyprus”.
Deutsche Bank also refers to the management’s intention to upgrade the bank’s 2007 targets at the beginning of next year. “The current 2007 targets are a cost-income ratio below 58% (DBe 55%) and a ROE above 13% (DBe 15%)”, the memo reported.
Deutsche Bank expects that the BOC earnings for 2005 will stand at £69m (DB previous estimate was £72m), for 2006 at £88m (DB previous estimate was £87m) and for 2007 at £115m (DB previous estimate was £100m).
“To reflect our earnings upgrades, we have revised up our TP from £2.83 to £3.14”, Deutsche Bank reported, reiterating a BUY rating stressing however that “the main risk relates to the economic environment in Cyprus and Greece, where GDP has been growing at a rate above that of W Europe”.
According to its BOC company alert, which was released today, DB notes “The main disappointment was a lighter NII partially compressed by trading gains. However, NII is up 10% YoY and loan growth remains strong up 12% YoY with 22% growth rate in Greece. Cyprus loan volumes were only up 5% due to a write-off of NPL’s of £169m. Excluding this, loans would have been up 10%, close to our estimate for FY 2005 of 8%. Costs were in line with estimates, suggesting that investment costs related to the Greek operations are offset by efficiency gains in Cyprus”.
Deutsche Bank also refers to the management’s intention to upgrade the bank’s 2007 targets at the beginning of next year. “The current 2007 targets are a cost-income ratio below 58% (DBe 55%) and a ROE above 13% (DBe 15%)”, the memo reported.
Deutsche Bank expects that the BOC earnings for 2005 will stand at £69m (DB previous estimate was £72m), for 2006 at £88m (DB previous estimate was £87m) and for 2007 at £115m (DB previous estimate was £100m).
“To reflect our earnings upgrades, we have revised up our TP from £2.83 to £3.14”, Deutsche Bank reported, reiterating a BUY rating stressing however that “the main risk relates to the economic environment in Cyprus and Greece, where GDP has been growing at a rate above that of W Europe”.
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