Pair trade bes vs unicredit 21 nov2012
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Transcript of Pair trade bes vs unicredit 21 nov2012
Pair Trade: Long BES - Short UniCredit
Wednesday, November 21st 2012
Investment Case
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tioned in this document do not constitute (nor should they be interpreted as to form) any kind of counselling, or investment recommendation, or a
record of our trading prices, or an offer or solicitation to trade in any financial instrument. Fincor—Sociedade Corretora, S.A. Will not accept any
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Companies Description
Analysts Recommendations:
Source: Bloomberg
Banco Espirito Santo (BES PL) reported a net profit of €65mn in Q3
2012, well above consensus. There were positive news on the capital
(under the EBA criteria, Core Tier 1 reached 10%, above the 9%
required minimum), and liquidity front. The bank has reduced its ECB
reliance to €9.8bn, -28% from June 2012, and the loan-to deposit
ratio fell to 142%.
BES has been able to present a solid capital position without
resorting to public funds. The bank has got an exposure to the
Portuguese export sector, which could make BES a play on the
country’s economic recovery. BES’s exposure to emerging markets is
increasing, mainly through its subsidiaries in Africa and Brazil. The
bank continues to show an appropriate management of its sovereign
exposure. Stronger asset quality deterioration remains our main
concern. BES was the first Portuguese bank able to tap wholesale
funding markets in the current environment.
Unicredit (UCG IM) reported a 3Q2012 net profit of €335m, above
consensus expectations. Capital improved further, mainly due to
continuing RWAs deleveraging (down c€10.9bn over the quarter
ago). The bank seems to be well positioned from a funding and
capital perspective, in a stable sovereign environment. However,
Unicredit is expected to show a low profitability level, with earnings
risk still probably skewed to the downside.
Asset quality challenges are still a burden on the domestic unit. A
better performance from its foreign units (Germany and Poland)
would be important. Investors are uncertain if the bank´s cost
restructuring will be sufficient to boost its return.
The BES PL / UCG IM relative index has a current value of 0.219 We
will define as our target 0.23. 0.21 will be our stop-loss level.
Market Price Data
Banco Espirito Santo (BES PL)
Last Price (€) 0.759
YTD Change -6.80%
Mkt Cap (€ bn) 3,049.6
UniCredit (UCG IM)
Last Price (€) 3.47
YTD Change -17.94%
Mkt Cap (€ bn) 20,102.9
Source: Bloomberg
Market Multiples
P/B ROE DY EPS
Est. 2013 Est. Est. 11/13e
2013 2013 CAGR
BES PL 0.43 3.27% 1.92% 62.6%
UCG IM 0.32 2.63% 3.12% -9.56%
Source: Bloomberg
Next Report Date & Events
BES PL 2012 Results February 1st, 2013
UCG IM YE Results March 15th, 2013
Source: Companies data