CFG Bank is the first bank to list on the stock market since BCP Group in 2004. This operation will be carried out through a capital increase of MAD 600 Mn equivalent to a floating rate of 15.6%. This involves the issuance of 5,454,545 new shares at a unit price of MAD 110.
At the end of our own analysis, we recommend subscribing to this operation since we have a positive opinion on the stock. Our Recommendation is based on the following arguments:
(1) We believe that the dynamics of CFG Bank post-IPO would be largely driven by the strong interest of investors in Morocco towards the “Banking” thematic. 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. At the international level, banks’ IPOs since 2021 have generally posted positive stock market performances after the first six months of their IPO. An observation which would further support foreign investors’ sentiment;
(2) CFG Bank will be listed at its full development stage through an AAGR of its NBI and Profits of +17% and +22% respectively according to the Management during the forecast period 2023E-2027E. With a market share of around 1.0% in terms of loans in Morocco, CFG Bank would have an interesting room for growth. However, the bank's recapitalization taking into account this high growth is an important issue to be monitored very closely;
(3) Taking into account its 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, we believe that over time the bank's ratios should gradually 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 tariffs and a more sustained recapitalization effort;
(4) The positive growth prospects of CFG Bank over the MT combined with its risk profile are reflected positively on its valuation multiples on the MT. This is an average P/E of 13.0x over the period 2024E-2027E compared to a normative level for the listed banking sector in Morocco of 15.0x according to our estimates.
