Alisa Bank - Significant challenges
Alisa Bank’s equity story took a hit from challenges relating to strengthening of the capital structure and growth is delayed. We lower our TP to EUR 0.2 (0.37), rating now SELL (HOLD).
Capital structure strengthening not going as planned
Alisa Bank issued a profit warning on October 24th in terms of its income development. Previously the company expected its income to increase in H2 compared with H1, now estimated to decrease. The bank’s profit before non-recurring items is still estimated to be positive in 2023. Alisa Bank’s procedures aimed at strengthening the capital structure have not progress on schedule due to the unfavourable market situation, earlier aimed for H2/2023. The decrease in income in H2 compared with H1 is due to the bank’s capital adequacy target limiting lending, as well as prudence in lending, especially for business customers, where the weakened economic situation in particular for the construction sector is starting to show.
Clear setback to growth ambitions
The situation is a double-negative for Alisa Bank, as without a strengthening of the capital structure the capital adequacy targets hinder growth in the loan portfolio, while the market situation in itself is further unsupportive of growth. Based on the current outlook we assume that additional financing will be secured in 2024, delaying the growth ambitions significantly. We have as such lowered our coming year estimates notably.
SELL (HOLD) with a target price of EUR 0.2 (0.37)
With the challenges in strengthening the balance sheet, a severe dent is in made in the company’s equity story, as the growth outlook and as such reaching any meaningful levels of profitability is delayed and highly uncertain. The company targets a ROE of over 15% by 2026. Without additional funding and related loan book growth potential, Alisa Bank will have a hard time achieving a ROE figure above the lower single digits. As such the current valuation (2023e P/B ~0.8x) is a stretch and with the uncertainty and risks related to the financing we lower our TP to EUR 0.2 (0.37) and lower our rating to SELL (HOLD).
Alisa Bank issued a profit warning on October 24th in terms of its income development. Previously the company expected its income to increase in H2 compared with H1, now estimated to decrease. The bank’s profit before non-recurring items is still estimated to be positive in 2023. Alisa Bank’s procedures aimed at strengthening the capital structure have not progress on schedule due to the unfavourable market situation, earlier aimed for H2/2023. The decrease in income in H2 compared with H1 is due to the bank’s capital adequacy target limiting lending, as well as prudence in lending, especially for business customers, where the weakened economic situation in particular for the construction sector is starting to show.
Clear setback to growth ambitions
The situation is a double-negative for Alisa Bank, as without a strengthening of the capital structure the capital adequacy targets hinder growth in the loan portfolio, while the market situation in itself is further unsupportive of growth. Based on the current outlook we assume that additional financing will be secured in 2024, delaying the growth ambitions significantly. We have as such lowered our coming year estimates notably.
SELL (HOLD) with a target price of EUR 0.2 (0.37)
With the challenges in strengthening the balance sheet, a severe dent is in made in the company’s equity story, as the growth outlook and as such reaching any meaningful levels of profitability is delayed and highly uncertain. The company targets a ROE of over 15% by 2026. Without additional funding and related loan book growth potential, Alisa Bank will have a hard time achieving a ROE figure above the lower single digits. As such the current valuation (2023e P/B ~0.8x) is a stretch and with the uncertainty and risks related to the financing we lower our TP to EUR 0.2 (0.37) and lower our rating to SELL (HOLD).