CFG Bank is the first banking institution to go public in almost 20 years (Groupe BCP in 2004). The operation will involve a capital increase of 600 million dirhams, corresponding to a free float of 15.6%. It includes the issue of 5,454,545 new shares, offered at a unit price of 110 dirhams. Following an in-depth analysis, a favorable opinion emerged as to the appropriateness of subscribing to this operation.
A number of positive elements emerge from this operation. Firstly, the post-IPO momentum of CFG Bank’s shares would be mainly driven by the sustained interest of Moroccan investors in the banking theme, a sector that has outperformed the equity market since 2020, thanks to its resilient earnings growth and dividend. Globally, IPOs of banking stocks since 2021 have generally posted positive stock market performances in the first six months of listing, boosting foreign investor confidence.
Furthermore, CFG Bank is entering the market in the midst of a development phase, with a forecast CAGR of 17% for its net banking income and 22% for its profits from 2023E to 2027E, according to Top Management. With a market share of around 1% in loans in Morocco, the bank enjoys substantial room for growth. However, the need for recapitalization in response to this rapid growth remains an important issue to be closely monitored.
Despite its relatively modest size and positioning in low-risk customer segments, CFG Bank has a relatively favorable risk-return balance compared with the listed banking sector in Morocco. Nevertheless, over time, the bank’s ratios should converge towards industry averages, with a target ROE (return on equity) of around 13%, compared with its current level of 16%. CFG Bank’s future growth is expected to be driven mainly by Mortgage Loans (especially real estate) and Corporate Loans, together accounting for over 80% of outstanding loans during the period 2023E to 2027E. This development will have a positive impact on the bank’s risk-return trade-off, notably its cost of risk and ROE.
In conclusion, the growth prospects announced by CFG Bank’s top management should have a positive impact on its valuation multiples over the medium term, with an average P/E (price/earnings ratio) over the 2014-2027 period of 13x, compared with a normative level of 15x for the listed banking sector.