- We commence coverage of BCC with a ‘Buy’ and a price target of KZT 589 per share.
- Strategic partnership with Kookmin Bank (KB), and later with IFC, is expected to give BCC a new lease on life by strengthening its equity base and reducing the cost of funds at a critical time. We expect this long-term partnership to play a major role in streamlining the bank’s operations and lifting the standards of its services which we think will percolate through the financials for years to come.
- Historically, the retail and SME segments have been BCC’s fortes. We expect BCC to expand to other segments by capitalizing on recent demise of BTA and Alliance Bank. We forecast ROE to rise to double digit in 2011 and grow its lending book at CAGR 12% during EY08A-FY12E.
- We forecast BCC’s NPLs to peak at 12.5% by end 2009 (excluding restructured loans) and subside thereafter. Despite a 40% increase in provisioning charges we expect BCC to stay profitable in 2009.
- BCC currently trades at 2009E P/B of 0.7 and we believe that much of the downside risks have already been priced in while the current discounts of 18% to Kazakh peers and 33% to Russian peers seem unjustified.
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