1. Today’s Trading Playbook
KEY THEMES
The figures announced by Commercial International Bank [COMI] today for 2020 just falls into place when it comes to foreseeing 2021. Despite a double-digit slippage in net earnings, COMI achieved a considerable earnings beat (i.e. 10%) against our projections. From a sequential lens, COMI’s bottom line surged 21%, as credit provisions receded notably.
When compared against 2020, it’s fairly obvious how higher credit provisions, coupled with higher effective tax rate, teamed up to dent profitability. Going into 2021, it’s highly probable that credit provisions have created a strong base in 2020, which should be reflected positively in 2021 profitability. Moreover, lower effective tax rates should be driven by reflation in lending, so that income from Treasury investments has a lighter contribution to the bank’s interest income. COMI is currently traded at 1.5x P/BV, with Q4 2020 ROAE scoring 20.5% vs. 18% in the previous quarter.
Positive
COMI: Q4 2020 results promise a better 2021 on the profitability front.