Thursday, May 2, 2024

Vogon Today

Selected News from the Galaxy

StartMag

Here are the strengths and weaknesses of Creval in the sights of Crédit Agricole

3 years ago babelfish

Here are the strengths and weaknesses of Creval in the sights of Crédit Agricole

The results of Credito Valtellinese (Creval), the takeover bid launched by Credit Agricole Italia and the comments of analysts.

Creval's accounts at 30 September 2020, which showed a fully loaded Cet1 at 17.2%, demonstrate the success of a bank that has left behind a troubled past by implementing, among other things, a substantial process of reducing the risk. But if on the one hand the data exceeded analysts' expectations, on the other they left some perplexity on the front of the low profitability of the credit institution. A "sin" emerged on November 6 that may already be the solution after the news today: Céedit Agricole Italy has launched a ' Opa with cash consideration on the totality of the Credito Valtellinese shares. For analysts, the totalitarian voluntary takeover bid makes sense both from a strategic and financial point of view, and Creval shareholders should join the transaction.

THE RESULTS OF CREVAL

Creval achieved a net profit of 65.6 million euros in the first nine months of 2020 (a figure almost doubled compared to that recorded in the first nine months of 2019 of 33.4 million euros), receiving a strong contribution from profit for the third quarter of € 24.6 million (+ 57% quarter on quarter). Direct deposits for the nine months amounted to € 17.4 billion, compared to € 19 billion at 31 December 2019, while indirect deposits amounted to € 10.1 billion, compared to € 10.4 billion. euro of 31 December 2019.

The interest margin for the nine months of 2020 was equal to 251 million euros compared to 262.7 million euros in the corresponding period of last year. In the third quarter of 2020 the figure settled at 89.5 million euros, an increase of 10.7% compared to the previous quarter (80.8 million euros). In the nine months net commissions amounted to 169 million euros, down compared to 186 million euros recorded in the corresponding period of last year, due to the health emergency connected to Covid-19 which impacted customer operations. . In the third quarter of 2020 the figure was 57.4 million euros, up by 7.5% compared to the previous quarter.

With reference to credit quality, in the nine months of 2020 gross impaired loans amounted to € 1.038 billion, down by 45.6% compared to the corresponding period last year (-32.4% compared to the end figure 2019), mainly thanks to the sales made since the beginning of the year of various portfolios made up of non-performing positions and Utp for over 800 million euros, which made it possible to complete the sales target envisaged in the Plan in advance. Net impaired loans amounted to € 545 million, down 30% compared to 30 September 2019 and 25.7% from the beginning of the year. The coverage of impaired loans therefore stood at 47.5% at 30 September 2020. The gross NPE ratio went from 11.3% as at 30 September 2019 to 6.4%, below the target set for the 2023 (less than 6.5%).

Cet1 capital, calculated on a phased-in basis, is equal to 1.838 billion euro against risk-weighted assets (Rwa) for 8.564 billion euro. The Bank's capital ratios, excluding the profit for the period, showed values ​​higher than the minimum Srep requirements: 21.5% the Cet1 ratio compared to a minimum Srep requirement of 8.55%; 21.5% Tier 1 ratio against a minimum Srep requirement of 10.05%; 23.4% Total Capital ratio compared to a minimum Srep requirement of 12.05%. The fully loaded Cet1 ratio at 30 September 2020 is equal to 17.2%, an increase compared to the figure of 30 September 2019 (14.7%) and the figure of 30 June 2020 (16.7%) .

THE COMMENT OF EQUITA SIM TO THE ACCOUNTS

In a report published a few days after the results were released, Equita Sim declared that it appreciated Creval's accounts "higher than expected" and highlighted, among other things, the good performance of the interest margin and the lower cost of risk .

THE OPINION OF MEDIOBANCA SECURITIES

Mediobanca Securities in the wake of the accounts pointed out that Creval is a bank with a troubled past that has worked without ever giving up to take another direction by implementing, among other things, a strong risk reduction process. Analysts think the bank was successful considering the level of Cet1 ratio and NPE ratio. However, the experts continue, the bank remains unprofitable (3% Rote in 2020 with a normalized cost of risk) and the return on capital is struggling to see the light. Therefore Mediobanca Securities stressed that the way to “cash in” the efforts made was M&A, a process to which Creval has been open since 2017.

CREDIT AGRICOLE ITALIA LAUNCHES A OPA ON CREVAL

The wait for Creval was long, but the M&A knocked on the door. Credit Agricole Italia, a company 75.6% controlled by Credit Agricole, launched a voluntary public tender offer, with a cash payment on all the shares of Credito Valtellinese. In detail , the consideration for the Offer entirely in cash is equal to 10.5 euros for each Creval share, a price that is equivalent to a total investment of 737 million euros by Credit Agricole Italia to get to hold 100% of the shares. shares of Credito Valtellinese.

The takeover bid has a strategic and financial sense

For Céedit Agricole, writes Mediobanca Securities, the transaction makes strategic and financial sense.

For Jefferies, the takeover also makes sense from a strategic point of view since it will allow for cost and revenue synergies and presents limited execution risk.

AGREES TO JOIN THE OPA

Equita Sim (hold recommendation, target price of 10.5 euros on Creval) believes that Crédit Agricole's offer is “attractive” for the shareholders of Credito Valtellinese, who for analysts should join the takeover bid. Equita Sim points out that the total voluntary public purchase offer incorporates a premium of 21.4% compared to the market price of Creval on November 20 and 53.9% compared to the weighted average price of the last 6 months. A valuation of € 10.5 per share corresponds to a Price / Tangible equity 2022 multiple of 0.42 times (0.35 times current values) and a Price / Earnings multiple of 10.9 times (9.1 times today ).

This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/ecco-pregi-e-difetti-del-creval-nel-mirino-di-credit-agricole/ on Mon, 23 Nov 2020 14:16:26 +0000.