Emerging Europe Poland
Banking/Finance
24 November 2008
Polish banks
Bottoming out?
Rating/TP/forecast changes
Marcin Jablczynski
Research Analyst
(48) 22 579-8733
marcin.jablczynski@db.com
We believe Polish banks are bottoming out...
…as we see a nearly 20% drop in earnings excessively priced in. We now have
five Buys, three Holds and one Sell, implying a more constructive view on the
sector from an absolute bottom-up standpoint.
Deutsche Bank AG/London
All prices are those current at the end of the previous trading session unless otherwise indicated. Prices are sourced from local
exchanges via Reuters, Bloomberg and other vendors. Data is sourced from Deutsche Bank and subject companies. Deutsche
Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm
may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single
factor in making their investment decision. Independent, third-party research (IR) on certain companies covered by DBSI's research
is available to customers of DBSI in the United States at no cost. Customers can access IR at http://gm.db.com or by calling 1-877-
208-6300. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1.
Forecast change
Top picks
PKO Bank Polski (PKOB.WA),PLN28.50 Buy
Bank Handlowy (BAHA.WA),PLN43.00 Buy
Bank Millennium (BIGW.WA),PLN3.34 Buy
BRE Bank (BREP.WA),PLN171.00 Buy
ING Bank Slaski (SLAS.WA),PLN400.00 Buy
Companies featured
PKO Bank Polski (PKOB.WA),PLN28.50 Buy
2007A 2008E 2009E
DB EPS (PLN) 2.90 3.52 2.96
P/E (x) 18.1 8.1 9.6
P/B (x) 4.4 2.0 1.8
Bank Pekao (BAPE.WA),PLN105.00 Hold
2007A 2008E 2009E
DB EPS (PLN) 10.05 11.70 9.42
P/E (x) 22.6 9.0 11.1
P/B (x) 4.1 1.8 1.8
Bank Handlowy (BAHA.WA),PLN43.00 Buy
2007A 2008E 2009E
DB EPS (PLN) 6.33 5.69 5.34
P/E (x) 15.8 7.6 8.1
P/B (x) 2.3 1.0 1.0
Bank Millennium (BIGW.WA),PLN3.34 Buy
2007A 2008E 2009E
DB EPS (PLN) 0.54 0.62 0.40
P/E (x) 21.4 5.4 8.3
P/B (x) 3.9 1.0 0.9
Kredyt Bank (BKRE.WA),PLN10.19 Sell
2007A 2008E 2009E
DB EPS (PLN) 1.22 1.29 0.50
P/E (x) 19.3 7.9 20.3
P/B (x) 2.8 1.1 1.1
BRE Bank (BREP.WA),PLN171.00 Buy
2007A 2008E 2009E
DB EPS (PLN) 20.68 26.87 23.42
P/E (x) 24.4 6.4 7.3
P/B (x) 4.5 1.1 1.0
Bank Zachodni WBK (BZWB.WA),PLN94.00 Hold
2007A 2008E 2009E
DB EPS (PLN) 13.09 13.78 10.24
P/E (x) 19.2 6.8 9.2
P/B (x) 4.2 1.3 1.2
Getin Holding (GETI.WA),PLN4.50 Hold
2007A 2008E 2009E
DB EPS (PLN) 0.63 0.77 0.38
P/E (x) 23.4 5.9 12.0
P/B (x) 3.4 0.9 0.8
ING Bank Slaski (SLAS.WA),PLN400.00 Buy
2007A 2008E 2009E
DB EPS (PLN) 48.48 58.09 54.72
P/E (x) 15.0 6.9 7.3
P/B (x) 2.5 1.2 1.1
Global Markets Research Company
Post-3Q forecast revision
In this note, we update our view of the Polish banking sector following 3Q08
results and new developments. We expect a gradual easing of stress in the
money market (Polish interbank, swaps, and pricing war in retail deposits) to be a
positive trigger. We would accumulate the sector based on an investment horizon
of longer than 12 months.
Cut average EPS growth from flat to -30% for 2009
We upgrade three banks (Bank Pekao to Hold, and Bank Millennium and Bank
Handlowy to Buy). With a 5-3-1 split of B-H-S ratings, we become more
constructive on the sector on an absolute, bottom-up basis. We do not downgrade
any banks, due to their recently weak stock performance.
Sector is pricey compared to CEE peers but, we argue, with just cause
Polish banks trade on 2009E P/TE of 1.2x and P/E of 10.1x (6.9x 2008E). Risks to
our positive call include negative earnings momentum (20% fall in earnings on
average) and the relative cheapness of some banking peers (although we do not
foresee any dilution to Polish banks’ shareholders). In terms of specific risks to our
earnings forecasts, we believe that further disruptions in the money market (no
liquidity in the swap market and interbank lending), a greater-than-expected
downturn in the economy and credit quality deterioration are the main issues. For
valuation purposes, we use a two-stage Gordon growth model (see page 7).

Table of Contents
Key performance drivers................................................................... 3
Valuation ............................................................................................ 6
PKO Bank Polski................................................................................. 9
Bank Pekao....................................................................................... 12
Bank Zachodni WBK........................................................................ 15
BRE Bank .......................................................................................... 18
Bank Millennium.............................................................................. 21
Bank Handlowy................................................................................ 24
ING Bank Slaski ............................................................................... 27
Getin Holding................................................................................... 30
Kredyt Bank...................................................................................... 33