ProCredit Holding - Well-positioned for further loan book expansion

ProCredit Holding (PCB) posted a c 21% EPS decline to €0.70 in FY20, but we believe it has navigated the COVID-19 crisis well, with strong 9.5% y-o-y growth in the loan book (driven mainly by investment and green loans), a 57bp cost of risk in FY20 (below its closest peers) and a solid capital base with the end-2020 CET-1 ratio at 13.3% (vs a regulatory requirement of 8.2%) and total capital ratio of 14.7% (12.6%). We believe the bank is well-positioned to continue growing its loan book by c 10% pa, in line with its target. Gradually declining loss allowances, and fee and commission income rebounding to pre-COVID-19 levels should help PCB reach its mid-term ROE target of 10%, which we model in FY23.