2023-11-21 23:59:16
BTG has now downgraded its recommendation for Inter from ‘buy’ to ‘neutral’ following the share rose 26% this month and 155% since the beginning of the year.
Saying that the rise was “too fast, too furious,” analyst Eduardo Rosman noted that the stock is now trading at 1.55x book and 11.9x the estimated profit for next year, despite Inter having an ROE of just 5.6% at the end of the third quarter.
Rosman — one bull of Inter that never blinked — continues to expect Inter to grow its ROE for several quarters, reaching close to 15% at the end of next year and potentially above that from 2025 onwards.
The bank maintained its target price of R$31, a upside just 10% off the screen price. The stock closed today at R$28.22.
BTG began to reiterate its purchase on paper at the end of March, when it was trading at R$7.40 and 0.42x bookand repeated his recommendation in several reports.
Rosman said the valuation current does not seem so expensive when taking into account the growth estimates, the falling cost of equity and the prospect of an ROE exceeding 15% at the end of 2024 and close to 20% a few years later – but remember that the ROE is still of just 5.6%, and that the valuation already prices the level of 15% next year “as a given.”
And while there is a good chance of this happening, “the execution risk exists,” he said.
The credit portfolio needs to accelerate, the NIM (net interest margin) needs to continue growing, operating expenses need to be diluted and, most importantly, provisions for doubtful debts need to fall.
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