We are initiating coverage of four Polish
banks: BRE (Overweight, PLN 695 price
target), BZ WBK (Underweight, PLN231
price target), PKO (Underweight, PLN 50
price target) and Pekao (Neutral,
PLN278 price target)
 In addition to local liquidity, Polish
banks’ high valuations have been
supported by positive earnings
surprises, but the intensifying
competition could have an adverse
effect, in our opinion
 We like BRE's aggressive market share
expansion, but think BZ WKB relies too
much on mutual funds, while PKO and
Pekao are more exposed than their
peers to potential margin erosion
Polish banks – a luxury product?
Just like for some luxury consumer products, it seems that
the market has accepted paying high prices for Polish banks.
It is generally accepted that these high valuations are a result
of the expectation that the abundant liquidity of local
institutional investors (ca. 46% of WSE free-float) will
always support these banks’ prices. However, we think that
this argument is overplayed and a more important role has
been played by recent positive earnings revisions, on
average 6% per quarter. Looking forward, we see less
likelihood of positive earnings surprises.
In the face of the higher base reducing relative volume
growth for the sector and intensifying competition, we
expect the incumbents such as PKO and Pekao to see
greatest margin erosion from 3.29% and 3.89% on loans
respectively in 2006 to 2.69% and 2.74% in 2011e. In
contrast, we believe that BRE, which is still restructuring
into a retail bank and has the lowest margins in the group,
can only show further improvement. We fear that the market
is extrapolating BZ WBK’s recent excellent mutual fund and
brokerage performance into perpetuity, with which we do
not agree - their AuM are already 90% of deposits.
Challenging valuations
On our 2008e forecasts current PEs for the four banks range
between 16.1 and 18.6x. We like those with the best growth
prospects. We initiate on BRE with an Overweight, Pekao with
a Neutral, and PKO and BZ WBK with Underweight ratings.

目录

Investment summary 7
Valuation 11
Macro situation in Poland 18
Volumes 20
System trends 28
Company section 35
Pekao 36
PKO BP 43
BRE Bank 49
BZ WBK 54
Disclosure appendix 59
Disclaimer 63