08/01/2010 12:08
In its report dated January 7, 2010, Citigroup reaffirmed the TP of €7 and the buy recommendation for Bank of Cyprus.
According to the report, “the shares have partially ‘suffered’ from the November- December Greek sovereign fears, despite the relatively small part of its earnings and valuation being derived from Greece”.
“For 2010 onwards, economic growth in Cyprus is expected to exceed that of Greece. And it should outpace the Euro average. Cyprus is supported by its international financial services sector. It is geared to a recovering Russia and it does not face the fiscal consolidation challenges of Greece. As the Cypriot national champion, BoC should be supported by this relatively attractive macro environment. Also, it doesn’t have a material exposure to Greek government bonds or other sovereign risk issues”, the report said.
“BoC Cypriot and Greek margins have been recovering since their 1Q09 trough. But competition is picking up and its sub-scale Greek franchise may suffer NIM / NII headwinds. Cypriot margin pressure will be partly offset by the benefits from higher rates in 2011 onwards (Cyprus LDR 83%, 3Q09; c45% of Cypriot deposits in low cost ‘offshore’ deposits). Russian growth will also help margins via the mix shift”, it added.
Citigroup readjusted its estimates to reflect the lower provisions from the yields in Greece and the bigger profitability in the Russian market.
For 2009, Citigroup expects that the bank will achieve profits of €370 million, of €432 million in 2010 and of €498 million in 2011. The EPS will stand at €0.62 in 2009m €0.72 in 2010 and €0.79 in 2011.
According to the report, “the shares have partially ‘suffered’ from the November- December Greek sovereign fears, despite the relatively small part of its earnings and valuation being derived from Greece”.
“For 2010 onwards, economic growth in Cyprus is expected to exceed that of Greece. And it should outpace the Euro average. Cyprus is supported by its international financial services sector. It is geared to a recovering Russia and it does not face the fiscal consolidation challenges of Greece. As the Cypriot national champion, BoC should be supported by this relatively attractive macro environment. Also, it doesn’t have a material exposure to Greek government bonds or other sovereign risk issues”, the report said.
“BoC Cypriot and Greek margins have been recovering since their 1Q09 trough. But competition is picking up and its sub-scale Greek franchise may suffer NIM / NII headwinds. Cypriot margin pressure will be partly offset by the benefits from higher rates in 2011 onwards (Cyprus LDR 83%, 3Q09; c45% of Cypriot deposits in low cost ‘offshore’ deposits). Russian growth will also help margins via the mix shift”, it added.
Citigroup readjusted its estimates to reflect the lower provisions from the yields in Greece and the bigger profitability in the Russian market.
For 2009, Citigroup expects that the bank will achieve profits of €370 million, of €432 million in 2010 and of €498 million in 2011. The EPS will stand at €0.62 in 2009m €0.72 in 2010 and €0.79 in 2011.
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