2023-11-30 19:25:57
AGR recalls, in a note dedicated to the operation, that CFG Bank is the first banking stock to be listed on the stock market since the BCP Group in 2004. This operation will be carried out through a capital increase of 600 MDH equivalent to a rate of float of 15.6%. This involves the issue of 5,454,545 new shares at a unit price of 110 DH. “At the end of our own analysis, we emerge with a favorable opinion regarding the subscription to this operation,” summarize the analysts from the outset.
For AGR, several messages should be remembered alongside this operation. Firstly, the dynamics of the CFG Bank title post-IPO would be driven mainly by the interest of investors in Morocco towards the “Banking” theme. “This is a sector that has outperformed the equity market since 2020 thanks in particular to the resilience of its profit growth and its dividend; Internationally, banking stock IPOs since 2021 have generally posted positive stock market performances after the first six months of their listing. A trend which would strengthen the sentiment of foreign investors”, we can read in this report.
Then, CFG Bank enters the full development phase through a CAGR of its NBI and its profits of respectively +17% and +22% according to Management during 2023E-2027E. With a PDM around 1.0% in terms of loans in Morocco, CFG Bank would have an interesting margin for growth in its activity. However, according to AGR, the recapitalization of the bank in the face of this high growth is an important subject to follow very closely.
Taking into account its relatively “small” size and its positioning in “low-risk” customer segments, CFG Bank displays a relatively better “risk-return” ratio compared to the listed banking sector in Morocco. Nevertheless, writes AGR, “we believe that ultimately the bank’s ratios should converge towards sector averages, i.e. a target ROE of around 13.0% compared to 16.0% currently. At a certain point in its development, CFG Bank could not generate growth without additional risk-taking, pressure on its prices and a more sustained recapitalization effort.”
Most of CFG Bank’s future growth would come from Mortgage Loans (including real estate) and Business Loans. These two segments would represent more than 80% of outstanding loans during the period 2023E-2027E. A development which has a positive impact on the Bank’s risk-return ratio through a CDR of 0.33% and a target ROE estimated according to AGR at 13.0% compared to 0.79% and 10.3% respectively for the sector. listed bank. Under these conditions, the GNP would benefit from a low volatility growth profile driven mainly by recurring revenues. A situation which would justify a beta of the stock below 1.0.
Finally, the Research office suggests that the growth prospects announced by CFG Bank’s Top Management should have a positive impact on its valuation multiples in the medium term. This is an average P/E over the period 2024E-2027E of 13.0x compared to a normative level for the listed banking sector of 15.0x according to AGR estimates.”
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