Credit Suisse, Intesa: European Banks at Attractive Valuations

Francesco Castelli of Banor Capital discussed European banks and presented his in-depth investment theses on Credit Suisse (Switzerland: CSGN) and Intesa (Italy: ISP) at Wide-Moat Investing Summit 2019.

Thesis summaries:

Credit Suisse successfully transitioned from restructuring to restructured story and is now less reliant on investment banking. With an inexpensive valuation (P/B of 0.7x), the bank is ready to exploit its attractive mix of business and geographies: away from trading activities and more focused on wealth management and private banking in the Asia/Pacific unit. The business plan is ambitious but credible: current ROTE of 8% is expected to increase into the double digits and exceed 12% after 2020. The bank should continue to reward shareholders via dividend and buybacks.

Intesa is the largest bank in Italy, with market share close to 25%. Intesa survived the great financial crisis and the sovereign crisis without a need for a capital increase. The bank has been executing an aggressive workout plan and will bring its NPL exposure back to 6% in the next two years. It offers a bank assurance business mix, gradually decreasing reliance on lending and aggressively increasing its presence in wealth management and insurance. Capital levels are strong (13%) and remain compliant with regulatory requirements even after a stress test (ECB 2018 simulation). The company offers a 10% dividend yield, with cash payments expected to growth over the business plan horizon.

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About the instructor:

Francesco Castelli is the Head of Fixed Income at Banor Capital and manages the Banor SICAV Euro Bond and Aristea SICAV Enhanced Cash funds. With over two decades of experience, Francesco previously worked with groups such as Zurich Investments, Sanpaolo IMI and Kairos Partners. He has an Economics degree from Università Luigi Bocconi in Milan and qualified as a Chartered Financial Analyst in 2003. He specialises in financial bonds and capital securities.