Shares had risen sharply at the end of October on news of a potential sale of the bank but lack of further news has seen the stock battered over the past week in particular.
Shares closed at €2.80 yesterday, up on the lows of last week but still well below the €3.20 level hit at the start of this month in the immediate wake of news the bank’s board had tapped Goldman Sachs to seek potential buyers.
PTSB shares had drifted lower as the initial optimism around a sale faded.
Goodbody said the decline had been “largely driven by negative press coverage surrounding the ongoing sales process”.
In its note yesterday, Goodbody said the drop in share price was “overstated relative to fundamentals”.
“While we accept short-term volatility is typical in situations involving strategic events such as this, the share price has now retreated lower than our view on the value of the bank as a standalone entity and excluding any uplift from the IRB model review,” Goodbody’s Denis McGoldrick said in a note to investors.
He reiterated a valuation of €4.23 per share, which reflects PTSB’s normalised earnings power, potential uplift from the Central Bank’s review of the bank’s internal ratings-based (IRB) model and conservative assumptions on cost efficiency, he said.
“The underlying franchise remains well capitalised, with a strong retail banking footprint and improving profitability metrics.”
The dip has attracted some interest.
A stock market announcement last Monday showed investor Eamon Waters’ vehicle Sretaw Private Equity had been active in the market, buying 250,000 shares at €2.7988 each.
That brought his total stake in the bank to 7.08pc.
That is the biggest single holding after the Irish State, which still owns just over 57pc of the bank, and UK lender NatWest, which has a 14pc stake in the bank as part of a wider set of transactions that are linked to the Ulster Bank loan sales.
In terms of the potential sale process, Goodbody said it expects significant interest from private equity firms but also that banks such as Austria’s Bawag and Spain’s Bankinter could find the transaction “highly accretive”.
“Strategic buyers (banks) can unlock meaningful synergies through integration, particularly in technology and funding costs.
“This dynamic positions PTSB as a compelling asset in any competitive process,” the note said.
The Goodbody analysis contrasts sharply with a note in November by analysts at Royal Bank of Canada (RBC), who suggested PTSB could be worth as little as €2 a share.
In a brutal assessment, they said the bank is unlikely to be attractive to an international bank, while a private equity buyer that would be prepared to do the “heavy lifting” of slashing headcount and shutting branches was far less likely to pay a premium given the limited synergy potential.
A price of €2 a share would be lower than where the stock traded (€2.35 each) before its board announced the launch of a formal sale process led by Goldman Sachs on October 30.
The PTSB sale is significant for taxpayers. It will settle the final recovery for the State on the €4bn cost of saving the former Irish Life & Permanent (IL&P).
Taxpayers have recouped around €2.8bn from the bank since then.
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