ProCredit Holding - Profitability not fully rewarded by the market

ProCredit Holding (PCB) reported a strong Q323 return on equity (ROE) of 12.5%, assisted by a significant increase in net interest margin (NIM) to 3.9% (vs 3.2% in Q322 and 3.6% in Q223) on the back of continued positive asset repricing from higher base rates (which more than offset deposit repricing). As a result, operating income grew by 26.5% y-o-y (ahead of operating expenses), bringing PCB’s cost to income ratio (CIR) to 57.1% (vs 61.9% in Q322). This was coupled with a moderate annualised

ProCredit Holding - Impact-oriented SME lender in SEE and EE

ProCredit Holding (PCB) is a Germany based group operating regional banks across South Eastern (SEE) and Eastern Europe (EE) and Ecuador. Its focus is on impact-oriented lending to well established SMEs that foster innovation, local production and the transition to a green economy (SMEs represent more than 90% of PCB’s gross loan book). PCB also offers digital banking services to private clients, mostly to middle income and high earners (SME owners in particular). The group has a strong track re

ProCredit Holding - On track to meet FY23 ROE guidance of 8–10%

ProCredit Holding (PCB) produced another strong set of quarterly results with a net income of €34.6m in Q223, implying an annualised return on equity (ROE) of 15.0% (and 14.2% in H123). Importantly, most of PCB’s regional banks contributed to the solid profitability, including ProCredit Bank Ukraine, which posted a 39.7% ROE in H123. This makes the company well positioned to meet management’s FY23 ROE guidance of 8–10%, despite headwinds in the Ukrainian agricultural sector, further deposit repr

ProCredit Holding - Strong rebound in profitability in Q123

ProCredit Holding’s (PCB’s) strong Q123 net profit of €29.5m implies an annualised return on equity (ROE) of 13.3%. This is a result of a healthy annualised net interest margin (NIM) of 3.4% (vs 2.9% in Q122), a c 11% year on-year growth in net fee and commission income and limited cost of risk at 12bp. Importantly, ProCredit Ukraine returned to profitability with an annualised ROE of 21.7% in Q123. PCB’s ROE may be more moderate in the coming quarters as customer deposit rates are repriced, los

ProCredit Holding - Raising its mid-term targets

ProCredit Holding’s (PCB’s) new mid-term outlook is targeting a return on equity (ROE) of c 12% (previously 10%). We believe this is achievable for several reasons. Loan book growth should help realise further scaling effects. PCB’s net interest margin (NIM) should benefit from higher base rates and an improving deposit to loan ratio. The above should assist a further reduction in the cost-income ratio, with PCB’s mid-term target at c 57% versus 64% in FY22. We also expect PCB to sustain its goo

ProCredit Holding - Operating income up 21% y-o-y in 9M22

ProCredit Holding (PCB) remains profitable despite further loss allowances in Ukraine, with Q322 annualised ROE of 4.4% (2.7% in the first nine months of FY22; 9M22) and 9M22 ROE excluding Ukraine at a solid 9.0% (versus 7.3% in 9M21). The strong 21% y-o-y growth in operating income in 9M22 to €246.6m (15.0% y-o-y in Q322) allowed PCB to absorb recent cost inflation (including high wage pressure and one-time expenses related to the war in Ukraine). As a result, the 9M22 cost-income ratio (CIR) w

ProCredit Holding - Annualised ROE ex-Ukraine of 9.5% in H122

ProCredit Holding (PCB) continues to incur high loss allowances in Ukraine, booking €21.2m in Q222 versus €35.3m in Q122. However, ProCredit Bank Ukraine’s operations are mostly uninterrupted, with its CET-1 ratio 4pp above the regulatory requirement at end-June 2022. PCB’s operations outside Ukraine benefitted from solid loan book growth and a higher net interest margin (NIM), which coupled with a marginal cost of risk translated into an annualised return on equity (ROE) of 9.5% in H122 (close

ProCredit Holding - Long-term story remains intact despite the war

ProCredit Holding (PCB) continued to report good progress in realising its scaling potential with FY21 ROE of 9.7% versus 6.9% in FY19. Despite the risk of a global recession, we believe that monetary tightening (supporting PCB’s net interest margin) and a relatively favourable, regional mid-term outlook should translate into healthy earnings growth in its South-Eastern (SEE) segment (c 70% of PCB’s loan book at end-March 2022). Having said that, the war in Ukraine will weigh on PCB’s local bank

ProCredit Holding - Looking oversold at FY21 P/BV of 0.3x

ProCredit Holding (PCB) has reported a strong set of FY21 results, with net income up 92.4% y-o-y to €79.6m and an ROE of 9.7%. However, this was overshadowed by Russia’s invasion of Ukraine, where PCB had 12.8% of its loan book at end-2021 and generated 27.2% of net profit before allocation of group functions in FY21. While the situation in Ukraine remains difficult to predict, we note that PCB’s loss is limited to the €129.9m equity and €48.8m other funding provided to the local bank by ProCre

ProCredit Holding - Impact of war in Ukraine

In light of the recent developments in Ukraine, we have temporarily suspended our forecasts and fair value estimate for ProCredit Holding (PCB) until further notice. The conflict is likely to have a significant impact on PCB’s operations in Ukraine (gross loan book of €732m or c 13% of the total loan portfolio at 30 September 2021). Potential effects are likely to include 1) a spike in default rates (although this could be mitigated by credit moratoria), 2) a decline in interest and fee income,

ProCredit Holding - On track to reach its mid-term guidance

We now expect ProCredit Holding (PCB) to reach its mid-term ROE target of 10% in FY21, driven by continued scaling of its operations through consistent loan book expansion (we forecast 13% growth in FY21) while maintaining the high credit quality of its portfolio. The group has also benefitted from some recent net interest margin (NIM) expansion. Despite the above, it continues to trade at a significant discount to book value (current FY21 P/BV at 0.6x), which we find hard to justify. 

ProCredit Holding - Well-positioned to achieve its targets

ProCredit (PCB) maintains its market position as an impact-oriented bank for small and medium-sized enterprises (SMEs) in Southeastern (SEE) and Eastern Europe (EE) as well as Ecuador. It has navigated the COVID-19 crisis well and posted strong 7.7% loan book growth in H121, a 10bp cost of risk (below its closest peers) and a solid capital base (CET1 ratio of 13.7% at end-H121 versus a regulatory requirement of 8.2%). Management has confirmed its FY21 guidance and medium-term targets, but plans

ProCredit Holding - Quality of credit portfolio remains high

ProCredit Holding’s (PCB) net income came in at a strong €20.7m in Q221 (versus €8.0m in Q220), translating into an annualised return on equity (ROE) of 10.2% (and 9.1% in H121). This was assisted by a favourable cost of risk development (with a net positive P&L impact of €0.9m), solid loan book growth (4.5% quarter-on-quarter in Q221) and stable year-on-year net interest margin (NIM) of 2.9%. Despite the improved FY21 earnings outlook (as illustrated by the increased management guidance), PCB’s

ProCredit Holding - On track to scale the business further

ProCredit Holding (PCB) improved its profitability in Q121 with an annualised return on equity (ROE) of 7.9% versus 7.0% in Q120, as the impact of central bank rate cuts across the region was offset by growth in customer loans, limited loss allowances and good operating costs control. As macro conditions normalise further and PCB continues to grow its business in the coming years, we expect the company to realise its scaling potential and gradually reach its mid-term ROE target of 10% (which we

ProCredit Holding - Well-positioned for further loan book expansion

ProCredit Holding (PCB) posted a c 21% EPS decline to €0.70 in FY20, but we believe it has navigated the COVID-19 crisis well, with strong 9.5% y-o-y growth in the loan book (driven mainly by investment and green loans), a 57bp cost of risk in FY20 (below its closest peers) and a solid capital base with the end-2020 CET-1 ratio at 13.3% (vs a regulatory requirement of 8.2%) and total capital ratio of 14.7% (12.6%). We believe the bank is well-positioned to continue growing its loan book by c 10%

LIBERUM: Plus500: Strategic progress pays dividends

Tatton Asset Management (TAM LN) - Record net inflows

Tatton, the leading on-platform discretionary fund manager (DFM) and IFA support services Group has released a trading update ahead of its results to 31 March 2024, due on 18 June 2024.

Hardman & Co Insight: 2023 was an annus horribilis for Quoted UK Infrastructure and Renewable Energy

The focus of Hardman & Co Research is on the nine quoted Infrastructure Investment Companies (IICs) and on the 22 Renewable Energy Infrastructure Funds (REIFs): the stocks analysed are all members of the Association of Investment Companies (AIC). We are updating our publication of January 2023, assessing both the lacklustre share price performances during 2023 and the key issues, including interest rates, inflation and power prices. As a 31-strong group, its combined market capitalisation is no

Ondo InsurTech FY24 Trading Update

Ondo InsurTech has released a brief post-YE update revealing its good progress continued through 2H24 and consequently FY24 will be in line with market expectations.

BlackRock World Mining

BRWM’s managers: we see all the classic signs of high commodity prices...

Foxtons Group (FOXT LN) - 1Q24 IMS shows real momentum

Foxtons Group plc first quarter revenue rose 9% to £35.7m (1Q23: £32.9m) with growth delivered across all business segments. Trading is in line with management's expectations.

NextEnergy Solar Fund - Attractive Refinancing

The refinancing of a £135m revolving credit facility and the extension of a similar £70m facility gives NESF firepower as development opportunities for new solar are especially attractive thanks to lower module prices in Europe. They give the fund key financial flexibility at a critical time as it pursues its capital recycling programme.

Morning Note – 18 April 2024

Foxtons Group - FY24 underpinned by market share gains

Foxtons Group’s Q1 revenue grew by 9%, supported by growth in all three divisions as the strategic initiatives continue to gain significant momentum, driven by investment in staff, best-in-class bespoke IT and data platforms. This implies that Foxtons’ medium-term targets are now coming into focus. Market share is being gained in all divisions, which puts Foxtons in a good position as the sales market stabilises. We maintain our valuation of 132p/share and believe that if interest rates stabilis

The Hardman & Co Monthly: April 2024

Feature article: Steady as she goes, but could be better: A review of investment company liquidity since 2016 Liquidity is the lifeblood of equity markets. The measurement of liquid asset availability to a market or company is a way of gauging a market’s health. This article builds on our previous work, which analysed the liquidity data for non-financial trading companies, by applying the same analytical techniques to the investment companies (IC) space. We analyse liquidity for ICs as a whol

Initial Equity Trading Comments - 19 February 2024

M Winkworth+ (WINK, House Stock at 163p) - Solid FY23A results, well placed to grow

Hybridan Research: Sector Review: Artificial intelligence in UK cybersecurity: the human uplift 17/04/2024

Artificial intelligence (AI) is a double-edged sword in cybersecurity. Whilst new AI models, architectures, and innovations are emerging to protect the security posture of organisations, attackers are also benefiting from deepfakes, sophisticated phishing, and automation of malicious codes. To ensure the impact of AI on cybersecurity to be a net-positive, we need to pit good AI against bad AI. Point solutions enhanced with machine learning: Global cybersecurity has been built with point soluti

Resilient FY24, confident long-term outlook

Vp’s full year update highlights sector-leading results, once again benefiting from the diversity of its end markets and the quality of its specialist businesses. With results expected to be broadly in line with expectations, we trim our FY24 PBT forecast by c.5% to £39.0m, a shade below the FY23 outturn (£40.2m). We consider this an impressively resilient performance set against a mixed market backdrop. Under new leadership, a strategic refresh is underway and management is confident in long

AUM up 30% in FY24, record flows, forecasts raised

AUM jumped £3.8bn or +30% in FY24, reaching £16.6bn on 31 Mar 24, 12% above our previous forecast of £14.7bn. Including 50%-owned 8AM Global, Assets Under Influence hit £17.6bn. Investment performance provided a tailwind, adding £1.5bn to AUM. But our key takeaway from Tatton’s hugely impressive last few years, is that it has designed and implemented a superior offering in platform-MPS with net flows consistently far higher than peers. That leadership looks even more pronounced in H2-24 with net