Egnatia lifts Laiki target to CYP 3.40

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Egnatia Financial Services has lifted its price target on the shares of Laiki Bank to CYP 3.40 from the previous CYP 2.11 per share level following the release of the 2005 results. Based on the stocks’ latest price, this implies a 35% upside potential leading Egnatia to change its recommendation from Accumulate to Buy.

Laiki Bank delivered another strong set of FY05 results with Net Profit reaching CYP 42.8 mln (+102.7% YoY). Profitability was driven primarily by the strong growth in Net Interest Income (+12.2% YoY) amid a 24.3% YoY in the growth of the Greek loan book coupled with improved asset mix towards the retail products, as well as the reduction in the cost/income ratio from 58.6% in FY04 to 55.6%, and lower provision charges.

Management reiterated its commitment to its 2006/08 business plan released towards the end of 2005, whilst at the same time the management seeks for a revised target set to be released within 2Q/3Q06.

“We believe that the revision in CPB’s targets regarding profitability and ROE will head north. We proceeded with the upgrading of our previous estimates underpinned by robust volume increases, an improved asset mix towards higher yielding retail products, and successful containment of costs in Cyprus. We have thus revised upwards our EPS figures for 2006, 2007 by 20% and 17% respectively to 19.5 and 22.8 cent respectively, yielding a 3-year CAGR for EPS s at 48.9%.”

“We choose to value CPB at a higher PER multiple compared to Greek peers given the stronger EPS growth stemming from robust volume increases primarily in Greece as well as the restructuring potential in Cyprus. We therefore adopt a target PER’07 of 15x (vs a target PER 14x for Greek peers). We add back the excess capital per share assuming an optimal Tier 1 ratio of 7.5%,” Egnatia concluded.