Alisa Bank - Boost in earnings ahead

Completed the combination with PURO Finance
Alisa Bank completed the combination with the Finnish Fintech company PURO Finance and issued approx. 58.9m new shares as consideration (40% of new total outstanding). The company also issued a guidance for 2024. If synergies from the combination are realized, total income is expected to increase y/y and PTP (excl. one-offs) to be 0.5m-1.5m in 2024 and 0.5m-1.5m negative in H1/2024. The target for the total capital ratio is 16 percent. 

Growth limited but earnings set to improve
Based on our preliminary estimates for the combined entity, the only larger change relates to the one-offs related to the combination, with our preliminary estimate for PTP (excl. one-offs) in 2024 within the guidance range (Evli 2024e PTP incl. one-offs EUR -0.5m). We expect PTP to improve to EUR 2.6m, driven mainly by PURO Finance and the synergies from the change to Alisa Bank’s cheaper source of financing. We have also further lowered our expectations for loan book growth, offset by an expected increase in the share of higher margin lending. The capital structure is expected to remain a limiting factor, with the expected improvements in profitability in 2025 bringing some relief, but faster growth still requires additional measures to strengthen the capital structure. 

HOLD with a target price of EUR 0.20 
The combination with PURO Finance is in our view a step in the right direction for Alisa Bank. There is, however, only so much that can be achieved by the primary earnings growth driver of transitioning towards higher margin lending, without notable loan book growth to benefit from the scalability of the operating model. Without further growth, we expect mid-term ROE potential to remain in the upper single digits. We retain our target price of EUR 0.20 and HOLD-rating.