Commercial International Bank: Coping Mechanisms
12MPT upped, yet downgraded to N/M on recent rally
Commercial International Bank [COMI]
Egypt / Banks / Core Coverage Update
12MPT: EGP59.4
(was EGP54.5) set on 14 May 2023
Investment Rating: Neutral | Risk Rating: Medium
The fact that Commercial International Bank – Egypt [COMI] is the largest private-sector bank in Egypt comes at a high cost, just like it comes with benefits. The bank had to be the first to make several changes in its strategy to cope with market conditions, launching new products at a high cost to fend off fierce competition. In turn, other private-sector banks followed suit, which changed the whole sector’s dynamics. However, the distinction here is that these changes, which are usually negative for any bank, only made COMI stronger. Indeed, COMI already had enough space and flexibility to withstand the market conditions and even make the best out of it. This confirms COMI’s strength and leadership in such a volatile economic environment. That said, we update our valuation for COMI, raising our 12MPT by 9% to EGP59.4/share but downgrading our rating to Neutral / Medium Risk.
We up our 12MPT by 9% to EGP59.4/share yet downgrade our rating to N/M
Our residual income-based fair value came out as EGP52.2/share, assuming a long-term ROE of 23% and a terminal COE of 15%. However, we set our 12MPT at EGP59.4/share based on a historical average P/E of 8.5x applied to 2023e earnings. This offers an upside potential of 15%, which is still lower than COMI’s COE. Hence, we downgrade our rating from Overweight to Neutral with the same Medium Risk. Our new 12MPT implies a 2023e P/BV of 2.1x.
Key catalysts
Higher-than-anticipated corporate lending with improving economic conditions. Higher-than-expected earnings growth.
Key risks
Persisting competition from state-owned banks affecting COMI’s deposits. Deterioration in asset quality.
For the full report, please click here.
Amany Shaaban
Equity Analyst
T +202 3300 5720
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