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On Monday, UBS analyst Alvaro Fernandez-Garayzabal adjusted the rating for Banco Comercial Portugues (BCP:SW) (OTC: BPCGF), moving it from Buy to Neutral. The price target set by UBS now stands at EUR0.56. The downgrade comes after a period of significant outperformance by the bank, which has seen its stock rise approximately 300% since the end of 2021, compared to the sector’s average of around 80%.
The analyst noted that Banco Comercial’s impressive performance was fueled by a robust turnaround, evident in both its earnings, with an expected return on tangible equity (ROTE) of around 14-15% for 2023-2024 compared to an average of about 3% in the previous five years, and its balance sheet strength, highlighted by a non-performing loan (NPL) ratio of around 3.2% and a Common Equity Tier 1 (CET1) ratio above 16%.
Despite these strong fundamentals, which include a defensive profit and loss profile, growth potential in Poland, and robust capital levels, UBS suggests that the stock’s current valuation no longer presents a compelling buy opportunity. The bank’s price-to-earnings ratio for 2026 estimates, prior to fourth-quarter results, was approximately 9.5 times, in contrast to the sector’s average of about 8 times.
UBS also pointed out that the consensus for the bank’s earnings per share (EPS) for 2025 had seen a slight decline year-to-date, falling by 1%, versus a 7% average increase among its peers. For 2026, the EPS consensus remained unchanged, while peers saw an average increase of 8%. The analysis concluded that with the absence of near-term catalysts to further drive positive EPS revisions, the current stock valuation adequately reflects Banco Comercial’s fundamentals.
Fernandez-Garayzabal remarked on the timing of the downgrade, stating that having initiated coverage with a price target of EUR0.23 in July 2023, it is now time to take a break until new positive EPS catalysts emerge.
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